UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
No. )
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to §240.14a-12
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Carter’s,
Inc.
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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 the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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Fee
computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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April 3,
2009
Dear
Shareholder,
It is my
pleasure to invite you to attend our 2009 Annual Meeting of Shareholders on May
14, 2009. The meeting will be held at 8:00 a.m. at our offices
located at 1170 Peachtree Street NE, 6th Floor,
Atlanta, Georgia 30309.
The
attached Notice of 2009 Annual Meeting of Shareholders and Proxy Statement
describe the formal business to be conducted at the meeting. Whether
or not you plan to attend the Annual Meeting, your shares can be represented if
you promptly submit your voting instructions by telephone, over the internet, or
by completing, signing, dating, and returning your proxy card in the enclosed
envelope.
On behalf
of the Board of Directors and management of Carter’s, Inc., thank you for
your continued support and investment in Carter's.
Sincerely,
Michael
D. Casey
Chief
Executive Officer
1170
Peachtree Street NE, Suite 900
Atlanta,
Georgia 30309
Tel: (404)
745-2700
Fax: (404)
892-3079
NOTICE
OF 2009 ANNUAL MEETING OF SHAREHOLDERS
Notice is
hereby given that the 2009 Annual Meeting of Shareholders of Carter’s, Inc.
(the “Annual Meeting”) will be held at 8:00 a.m. on May 14, 2009 at our
offices located at 1170 Peachtree Street NE, 6th Floor, Atlanta, Georgia
30309. At the Annual Meeting, we will address all business that may
properly come before the meeting and vote on the following matters:
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1.
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The
election of three Class III
Directors;
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2.
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The
approval of the Company’s Amended and Restated 2003 Equity Incentive Plan;
and
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3.
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The
ratification of the appointment of PricewaterhouseCoopers LLP as the
Company’s independent registered public accounting firm for fiscal
2009.
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Shareholders
of record at the close of business on March 27, 2009 are entitled to receive
notice of, attend, and vote at the Annual Meeting. Your vote is very
important. Whether or not you plan to attend the Annual Meeting, to
ensure that your shares are represented at the Annual Meeting, please complete,
sign, date, and return the proxy card in the envelope provided or submit your
voting instructions by telephone or over the internet.
If you
plan to attend the Annual Meeting and are a registered shareholder, please bring
the invitation attached to your proxy card. If your shares are
registered in the name of a bank or your broker, please bring your bank or
brokerage statement showing your beneficial ownership with you to the Annual
Meeting or request an invitation by writing to me at the address set forth
above.
Important
Notice Regarding the Availability of Proxy Materials for the
2009
Annual Meeting of Shareholders of Carter’s, Inc. to be held on May 14,
2009:
The
proxy materials and the Annual Report to Shareholders are available at
www.carters.com.
By order
of the Board of Directors,
Brendan
M. Gibbons
Vice
President, General Counsel, and Secretary
Atlanta,
Georgia
April 3,
2009
PROXY
STATEMENT
TABLE
OF CONTENTS
Why
am I receiving this proxy statement?
The Board
of Directors of Carter’s, Inc. (“we,” “us,” “our,” “Carter’s,” or the
“Company”) is soliciting proxies for our 2009 Annual Meeting of Shareholders on
May 14, 2009 (the “Annual Meeting”). This proxy statement and
accompanying proxy card are being mailed on or about April 3, 2009 to
shareholders of record as of March 27, 2009 (“record date”).
You are
receiving this proxy statement because you owned shares of Carter’s common stock
on the record date and are therefore entitled to vote at the Annual
Meeting. By use of a proxy, you can vote regardless of whether or not
you attend the Annual Meeting. This proxy statement provides
information on the matters on which the Company’s Board of Directors (the
“Board”) would like you to vote so that you can make an informed
decision.
What
is the purpose of the Annual Meeting?
The
purpose of the Annual Meeting is for our shareholders to address all business
that may properly come before the meeting and to vote on the following
matters:
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1.
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The
election of three Class III Directors (see page
9);
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2.
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The
approval of the Company’s Amended and Restated 2003 Equity Incentive Plan
(the “Plan”) (see page 32); and
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3.
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The
ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”) as
the Company’s independent registered public accounting firm for fiscal
2009 (see page 38).
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Who
is asking for my vote?
The
Company is soliciting your proxy on behalf of the Board. The Company
is paying for the costs of this solicitation and proxy statement.
Who
can attend the Annual Meeting?
All
shareholders of record, or their duly appointed proxies, may attend the Annual
Meeting. As of the record date, there were 56,667,490 shares of
common stock issued and outstanding.
What
are my voting rights?
Each
share of common stock is entitled to one vote on each matter submitted to
shareholders at the Annual Meeting.
What
is the difference between holding shares as a shareholder of record and as a
beneficial owner?
If your
shares are registered directly in your name with the Company’s transfer agent,
American Stock Transfer and Trust Company, you are considered the shareholder of
record for these shares. As the shareholder of record, you have the
right to grant your voting proxy directly to persons listed on your proxy card
or vote in person at the Annual Meeting.
If your
shares are held in a brokerage account or by another nominee, you are considered
the beneficial owner of shares held “in street name.” These proxy materials are
being forwarded to you together with a voting instruction card. As a
beneficial owner, you have the right to direct your broker, trustee, or nominee
how to vote, and you are also invited to attend the Annual
Meeting. Because you are a beneficial owner and not the shareholder
of record, you may not vote your shares in person at the Annual Meeting unless
you obtain a “legal proxy” from the broker, trustee, or nominee that holds your
shares. Your broker, trustee, or nominee should have enclosed or
provided directions for you to use to instruct the broker, trustee, or nominee
how to vote your shares.
If the
brokers do not receive timely instructions from the beneficial owner regarding
how the beneficial owner wants the shares voted, brokers holding shares of
record for a beneficial owner have discretionary authority to vote on Proposal
Number One, Proposal Number Two, and Proposal Number Three.
1
What
are my choices when voting on the election of Class III Directors, and what vote
is needed to elect the Director nominees?
In voting
on the election of Class III Directors (Proposal Number One), shareholders
may:
1.
vote for all nominees,
2.
vote to withhold authority for all nominees, or
3.
vote for all nominees, except specific nominees.
The three
nominees for election as Class III Directors who receive the greatest number of
votes will be elected as Class III Directors. Votes that are withheld
will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes for each nominee, and, therefore, will not affect the
outcome of the vote on this Proposal.
What
are my choices when voting on whether to approve the Plan, and what vote is
required to approve the Plan?
In voting
on the Plan (Proposal Number Two), shareholders may:
1.
vote for the Plan,
2.
vote against the Plan, or
3.
abstain from voting on the Plan.
The
approval of Proposal Number Two requires the affirmative vote of the holders of
a majority of the shares of common stock present or represented at the meeting
and voted on the Proposal at the Annual Meeting. Votes to abstain
will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes for this Proposal, and, therefore, will not affect the
outcome of the vote on this Proposal.
What
are my choices when voting on the ratification of the appointment of PwC as the
Company’s independent registered public accounting firm for fiscal
2009?
In voting
on the ratification of PwC (Proposal Number Three), shareholders
may:
1.
vote for ratifying PwC’s appointment,
2.
vote against ratifying PwC’s appointment, or
3.
abstain from voting on ratifying PwC’s appointment.
The
approval of Proposal Number Three requires the affirmative vote of the holders
of a majority of the shares of common stock present or represented at the
meeting and voted on the Proposal at the Annual Meeting. Votes to
abstain will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes for this Proposal, and, therefore, will not affect the
outcome of the vote on this Proposal.
What
constitutes a quorum?
A quorum
is the minimum number of shares required to be present to transact business at
the Annual Meeting. Pursuant to the Company’s by-laws, the presence
at the Annual Meeting, in person, by proxy, or by remote communication, of the
holders of at least a majority of the shares entitled to be voted will
constitute a quorum. Broker non-votes will be counted as shares that
are present at the meeting for purposes of determining a quorum. If a
quorum is not present, the meeting will be adjourned until a quorum is
obtained.
How
does the Board recommend that I vote?
Unless
you give instructions on your proxy card, the persons named as proxy holders on
the proxy card will vote in accordance with the recommendations of the
Board. The Board recommends a vote:
FOR the election of the
nominees for Class III Directors (Proposal Number One);
FOR the approval of the Plan
(Proposal Number Two); and
FOR the ratification of the
appointment of PwC (Proposal Number Three).
2
How
do I vote?
If you
are a shareholder of record, you may vote in one of four ways. First,
you may vote by mail by signing, dating, and mailing your proxy card in the
enclosed envelope. Second, you may vote in person at the Annual
Meeting. Third, you may vote over the internet by completing the
voting instruction form found at www.proxyvote.com. You will need
your proxy card when voting over the internet. Fourth, you may vote
by telephone by using a touch-tone telephone and calling 1-800-690-6903 and
following the instructions.
If your
shares are held in a brokerage account or by another nominee, these proxy
materials are being forwarded to you together with a voting instruction
card. Follow the instructions on the voting instruction card in order
to vote your shares by proxy or in person.
Can
I change my vote after I return my proxy card?
Yes. Even
after you have submitted your proxy card, you may change your vote at any time
before your proxy votes your shares by submitting written notice of revocation
to Brendan M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting, or by submitting another proxy card bearing a later
date. Alternatively, if you have voted by telephone or over the
internet, you may change your vote by calling 1-800-690-6903 and following the
instructions. The powers of the proxy holders will be suspended if
you attend the Annual Meeting in person, although attendance at the Annual
Meeting will not by itself revoke a previously granted proxy. If you
hold your shares through a broker or other custodian and would like to change
your voting instructions, please review the directions provided to you by that
broker or custodian.
May I
vote confidentially?
Yes. Our
policy is to keep your individual votes confidential, except as appropriate to
meet legal requirements, to allow for the tabulation and certification of votes,
or to facilitate proxy solicitation.
Who
will count the votes?
A
representative of Broadridge Financial Solutions, Inc. will count the votes and
act as the inspector of election for the Annual Meeting.
What
happens if additional matters are presented at the Annual
Meeting?
As of the
date of this proxy statement, the Board knows of no matters other than those set
forth herein that will be presented for determination at the Annual
Meeting. If, however, any other matters properly come before the
Annual Meeting and call for a vote of shareholders, the Board intends proxies to
be voted in accordance with the judgment of the proxy holders.
Where
can I find the voting results of the Annual Meeting?
We intend
to announce preliminary voting results at the Annual Meeting and publish final
results in our quarterly report on Form 10-Q for the second quarter of
fiscal 2009.
How
may I obtain information about the Company?
A copy of
our fiscal 2008 Annual Report accompanies this proxy statement and is available
on our website at www.carters.com. Shareholders may also obtain a
free copy of our Annual Report on Form 10-K by visiting our website or by
sending a request in writing to Mr. Gibbons at the Company’s address set forth
in the Notice of the Annual Meeting.
When
are shareholder proposals due for consideration in next year's proxy statement
or at next year’s annual meeting?
Any
proposals to be considered for inclusion in next year’s proxy statement must be
submitted in writing to Mr. Gibbons at the Company’s address set forth in
the Notice of the Annual Meeting, prior to the close of business on December 4,
2009. There are additional requirements under our by-laws and the
proxy rules to present a proposal, including continuing to own a minimum
number of shares of our stock until next year’s annual meeting and appearing in
person at the annual meeting to explain your proposal. Shareholders
who wish to make a proposal to be considered at next year’s annual meeting,
other than proposals to be considered for inclusion in next year’s proxy
statement, must notify the Company in the same manner specified above no earlier
than January 14, 2010 and no later than February 13, 2010.
3
Who
can help answer my questions?
If you
have any questions about the Annual Meeting or how to submit or revoke your
proxy, or to request an invitation, contact Mr. Gibbons at the Company’s address
set forth in the Notice of the Annual Meeting.
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Board
of Directors
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Bradley M. Bloom
became a Director in August 2001. Mr. Bloom is a
Managing Director of Berkshire Partners LLC, (“Berkshire Partners”) which he
co-founded in 1986. He is or has been a director of several of
Berkshire Partners’ consumer and retailing companies. Mr. Bloom
is a current director of Bare Escentuals, Inc., Citizens of Humanity Holding
Company LLC, and Gordon Brothers Group, and a former director of Acosta, Inc.,
Sterling, Inc., America’s Best Contacts and Eyeglasses, L.P., and Miami
Cruiseline Services Holdings I.B.V.
Michael D.
Casey became a director in August 2008. Mr. Casey joined the
Company in 1993 as Vice President-Finance. Mr. Casey was named Senior
Vice President-Finance in 1997, Senior Vice President and Chief Financial
Officer in 1998, Executive Vice President and Chief Financial Officer in 2003,
and Chief Executive Officer on August 1, 2008. Prior to joining the
Company, Mr. Casey was a Senior Manager with Price Waterhouse LLP,
predecessor to PricewaterhouseCoopers LLP.
A. Bruce Cleverly
became a Director in March 2008. Mr. Cleverly retired as
President of Global Oral Care from Procter & Gamble Company/The Gillette
Company in September 2007, a position he held since 2005. Mr.
Cleverly joined The Gillette Company in 1975 as a Marketing Assistant and held
positions of increasing responsibility in product management. In
2001, Mr. Cleverly became President of Gillette’s worldwide Oral Care
business. In October 2005, Mr. Cleverly was elected President of The
Procter & Gamble Company’s Global Oral Care division. Mr.
Cleverly is a director of Rain Bird Corporation and a member of the Board of
Fellows of the Harvard School of Dental Medicine.
Paul
Fulton became a Director in
May 2002. Mr. Fulton retired as President of Sara Lee
Corporation in 1993 after spending 34 years with the company. He
is currently non-Executive Chairman of the Board of Bassett Furniture
Industries, Inc. and Premier Commercial Bank. Mr. Fulton
was previously a director at Bank of America Corporation, where he served from
1993 to 2007; Lowe’s Companies, Inc., where he served from 1996 to 2007;
and Sonoco Products Company, Inc., where he served from 1989 to
2005.
William J.
Montgoris became a Director in August 2007. Mr. Montgoris
retired as Chief Operating Officer of The Bear Stearns Companies, Inc. in 1999,
a position he held since August 1993. While at Bear Stearns, Mr.
Montgoris also served as the company’s Chief Financial Officer from April 1987
until October 1996. Mr. Montgoris is currently a director of Stage
Stores, Inc. and Office Max Incorporated.
David Pulver
became a Director in January 2002. Mr. Pulver has
been a private investor for more than 25 years and is the President of
Cornerstone Capital, Inc. Mr. Pulver is a current director
of Hearst-Argyle Television, Inc., where he has served since August of
1997. Mr. Pulver was a founder of The Children’s
Place, Inc., and served as its Chairman and Co-Chief Executive Officer
until 1982.
John R. Welch
became a Director in February 2003. Mr. Welch
retired as President of Mast Industries (Far East) Ltd. in April 2002
after spending 18 years with the company. Mr. Welch also
served as Executive Vice President of Operations at Warnaco Knitwear, a division
of Warnaco, Inc. from August 1978 to
December 1983. Mr. Welch is currently a director of Brandot
International Ltd.
Thomas E. Whiddon
became a Director in August 2003. Mr. Whiddon
retired as Executive Vice President-Logistics and Technology of Lowe’s
Companies, Inc. in March 2003, a position he held since
2000. From 1996 to 2000, Mr. Whiddon served as Lowe’s Chief
Financial Officer. Since his retirement, Mr. Whiddon has worked
as a consultant, serving various companies in executive capacities on an interim
basis. Mr. Whiddon is currently a director of Sonoco Products
Company, Inc. and of Dollar Tree
Stores, Inc. Mr. Whiddon has been an Advisory Director of
Berkshire Partners since October 2005 and previously served as a director
of Bare Escentuals, Inc.
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Board
Meetings
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Our
Corporate Governance Principles require Carter’s to have at least four regularly
scheduled Board meetings each year, and each Director is expected to attend each
meeting. The Board met five times during fiscal 2008. In
fiscal 2008, no Director participated in less than 75% of the aggregate number
of all of the Board and applicable committee meetings. Although the
Company does not have a policy regarding Director attendance at annual
meetings, each Director attended the Company’s annual meeting in fiscal
2008.
4
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Executive
Sessions
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Executive
sessions of non-management Directors are held at least four times a year, and
executive sessions of independent, non-management Directors are held at least
once a year. Any non-management Director can request that an
additional executive session be scheduled. The Chairman of the
Nominating and Corporate Governance Committee, currently Mr. Welch, has been
chosen to be the presiding Director at the executive sessions of non-management
Directors (the “Presiding Director”).
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Board
Committees
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Our Board
has a standing Audit Committee, a Compensation Committee, and a Nominating and
Corporate Governance Committee. The Board may also establish other
committees to assist in the discharge of its responsibilities. For
example, in June 2008, the Board established a Transition Committee, chaired by
Mr. Cleverly, to assist our Chief Executive Officer in the transition into his
new role.
The
current members of each Board committee and the number of committee meetings
held during fiscal 2008 are listed below.
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Name of Director
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Audit
Committee
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Compensation
Committee
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Nominating and
Corporate
Governance
Committee
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Bradley
M. Bloom
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x
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A.
Bruce Cleverly
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x
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Paul
Fulton
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x
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*
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William
J. Montgoris
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x
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David
Pulver
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x
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*
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John
R. Welch
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x
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x
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*
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Thomas
E. Whiddon
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x
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x
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Number
of Meetings in Fiscal 2008
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8
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6
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4
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*
Chairman
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Audit
Committee
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The
primary responsibilities of the Audit Committee include:
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·
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oversight
of the quality and integrity of the consolidated financial statements,
including the accounting, auditing, and reporting practices of the
Company;
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·
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oversight
of the Company’s internal control over financial
reporting;
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·
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appointment
of the independent registered public accounting firm and oversight of its
performance, including its qualifications and
independence;
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·
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oversight
of the Company’s compliance with legal and regulatory requirements;
and
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·
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oversight
of the performance of the Company’s internal audit
function.
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The Audit
Committee operates pursuant to a written charter that addresses the requirements
of the New York Stock Exchange’s (“NYSE”) listing standards. The
charter is available on our website at www.carters.com or in print by
contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting. The Board has determined that each member of the
Audit Committee is independent and meets the financial literacy requirements set
forth in the NYSE’s listing standards. The Board has also determined
that each member of the Audit Committee is an “audit committee financial expert”
as defined by the Securities and Exchange Commission (“SEC”).
The Audit
Committee Report is included in this proxy statement on
page 37.
5
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Compensation
Committee
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The
primary responsibilities of the Compensation Committee include:
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·
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establishing
the Company’s philosophy, policies, and strategy relative to executive
compensation, including the mix of base salary and short-term and
long-term incentive compensation within the context of stated guidelines
for compensation relative to peer
companies;
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·
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evaluating
the performance of the Chief Executive Officer and other executive
officers relative to approved performance goals and
objectives;
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·
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setting
the compensation of the Chief Executive Officer and other executive
officers based upon an evaluation of their
performance;
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·
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assisting
the Board in developing and evaluating candidates for key executive
positions and ensuring a succession plan is in place for the Chief
Executive Officer and other executive
officers;
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·
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evaluating
compensation plans, policies, and programs with respect to the Chief
Executive Officer, other executive officers, and non-management
Directors;
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·
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monitoring
and evaluating benefit programs for the Company’s Chief Executive Officer
and other executive officers; and
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·
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producing
an annual report on executive compensation for inclusion in the Company’s
annual proxy statement. This years Compensation Committee
Report is included in this proxy statement on
page 21.
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The
Compensation Committee operates pursuant to a written charter that addresses the
requirements of the NYSE’s listing standards. The charter is
available on our website at www.carters.com or in print by contacting Brendan M.
Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc.,
at the Company’s address set forth in the Notice of the Annual
Meeting. The Board has determined that each member of the
Compensation Committee is independent.
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Compensation
Committee Interlocks and Insider
Participation
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None of
the members of our Compensation Committee serving during fiscal 2008 has been an
officer or other employee of the Company. None of our executive
officers has served as a member of the board of directors or compensation
committee of any entity that has one or more executive officers serving on our
Board or the Compensation Committee.
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Nominating
and Corporate Governance Committee
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The
primary responsibilities of the Nominating and Corporate Governance Committee
include:
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·
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identifying
and recommending candidates qualified to become Board
members;
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·
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recommending
Directors for appointment to Board Committees;
and
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·
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developing
and recommending to the Board a set of corporate governance principles and
monitoring the Company’s compliance with and effectiveness of such
principles.
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The
Nominating and Corporate Governance Committee operates pursuant to a written
charter that addresses the requirements of the NYSE’s listing
standards. The charter is available on our website at
www.carters.com or
in print by contacting Brendan M. Gibbons, Vice President, General Counsel, and
Secretary of Carter’s, Inc., at the Company’s address set forth in the
Notice of the Annual Meeting. The Board has determined that each
member of the Nominating and Corporate Governance Committee is
independent.
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Consideration
of Director Nominees
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The
Nominating and Corporate Governance Committee regularly assesses the
appropriateness of the size of the Board of Directors. In the event
that vacancies occur or are anticipated, the Committee will identify prospective
nominees that come to its attention through current Board members, professional
search firms, or shareholders who hold more than 1% of our common
stock. The Board believes that it is appropriate to limit the group
of shareholders who can propose nominees due to time constraints on the
Nominating and Corporate Governance Committee. The Committee will
consider persons recommended by shareholders who hold more than 1% of our common
stock for inclusion as nominees for election to the Board if the names of such
persons are submitted to Brendan M. Gibbons, Vice President, General Counsel,
and Secretary of Carter’s, Inc., at the Company’s address set forth in the
Notice of the Annual Meeting. This submission must be made in writing
and in accordance with our by-laws, including mailing the submission in a timely
manner and including the nominee’s name, address, and qualifications for Board
membership.
6
When
evaluating a potential candidate for membership on the Board, the Committee
considers each candidate’s skills and experience and assesses the needs of the
Board and its committees at that point in time. In connection with
this assessment, the Committee will determine whether to interview prospective
nominees, and if warranted, one or more members of the Committee, and others as
appropriate, will interview prospective nominees in person or by
telephone. Once this evaluation is completed, if warranted, the
Committee recommends candidates to the Board for nomination, and the Board
determines whether or not to select the nominees after considering the
recommendation of the Committee.
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Interested
Party Communications
|
A
shareholder or other interested party may submit a written communication to the
Board, non-management Directors, or Presiding Director. The
submission must be delivered to Brendan M. Gibbons, Vice President, General
Counsel, and Secretary of Carter’s, Inc., at the Company’s address set
forth in the Notice of the Annual Meeting.
The
Board, non-management Directors, or Presiding Director may require the
submitting shareholder to furnish such information as may be reasonably required
or deemed necessary to sufficiently review and consider the submission of such
shareholder.
Each
submission will be forwarded, without editing or alteration, to the Board,
non-management Directors, or Presiding Director, as appropriate, on or prior to
the next scheduled meeting of the Board. The Board, non-management
Directors, or Presiding Director, as appropriate, will determine, in their sole
discretion, the method by which such submission will be reviewed and
considered.
|
Corporate
Governance Principles and Code of
Ethics
|
Carter’s
is committed to conducting its business with the highest level of integrity and
maintaining the highest standards of corporate governance. Our
Corporate Governance Principles and our Code of Business Ethics and Professional
Conduct provide the structure within which our Board and management operate the
Company. The Company’s Code of Business Ethics and Professional
Conduct applies to all Directors and Company employees, including the Company’s
executive officers. Our Corporate Governance Principles and Code of
Business Ethics and Professional Conduct are available on the Company’s website
at www.carters.com or in print by
contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of
Carter’s, Inc., at the Company’s address set forth in the Notice of the
Annual Meeting.
|
Director
Independence
|
The
Company’s Corporate Governance Principles require a majority of the Company’s
Directors to be independent. For a Director to be considered
independent, the Board must determine that the Director has no direct or
indirect material relationship with Carter’s. The Board considers all
relevant information provided by each Director regarding any relationships each
Director may have with Carter’s or management. To assist it in making
such independence determinations, the Board has established the following
independence tests, which address all the specific independence tests of the
NYSE’s listing standards. A Director will not be considered
independent if:
|
|
·
|
the
Director is, or within the last three years has been, employed by the
Company; or an immediate family member of the Director is, or within the
last three years has been, employed as an executive officer of the
Company;
|
|
|
·
|
the
Director, or an immediate family member of the Director, has received,
during any twelve-month period within the last three years, direct
compensation from the Company exceeding $120,000, other than Director or
committee fees and pension or other forms of deferred compensation for
prior service (provided such compensation is not contingent in any way on
continued service);
|
|
|
·
|
(a) the
Director, or an immediate family member of the Director, is a current
partner of a firm that is the Company’s internal auditor or independent
registered public accounting firm; (b) the Director is a current
employee of such a firm; (c) the Director has an immediate family
member who is a current employee of such a firm and who participates in
the firm’s audit, assurance, or tax compliance (but not tax planning)
practice; or (d) the Director, or an immediate family member of the
Director, was, within the last three years (but is no longer), a partner
or employee of such a firm and personally worked on the Company’s audit
within that time;
|
7
|
|
·
|
the
Director, or an immediate family member of the Director, is, or within the
last three years has been, employed as an executive officer of another
company where any of the Company’s present executive officers serve or
served on that company’s compensation
committee;
|
|
|
·
|
the
Director is a current employee, or has an immediate family member who is
an executive officer, of another company that has made payments to, or
receives payments from, the Company for property or services in an amount
which, in any of the last three fiscal years, exceeds the greater of $1.0
million, or 2%, of such other company’s consolidated gross
revenues;
|
|
|
·
|
the
Director, or an immediate family member of the Director, is, or within the
last three years has been, employed by a company that has a director who
is an officer of the Company;
|
|
|
·
|
the
Director serves as an officer, director, or trustee, or as a member of a
fund raising organization or committee of a not-for-profit entity to which
the Company made, in any of the last three fiscal years, contributions in
excess of the greater of (i) $50,000, or (ii) 2% of the gross annual
revenues or charitable receipts of such entity;
or
|
|
|
·
|
the
Director is, or within the last three years has been, an executive officer
of another company that is indebted to the Company, or to which the
Company is indebted, and the total amount of either company’s indebtedness
to the other exceeds 1% of the total consolidated assets of such
company.
|
Applying
these standards, the Board has determined that all of our non-management
Directors are independent. In the course of making these
determinations, the Board considered the following:
|
|
·
|
Mr.
Bloom’s status as a director of Gordon Brothers Group. From
June 2006 to May 2007, the Company made payments totaling $151,061 to
Gordon Brothers Group. Because Mr. Bloom is not an employee of
Gordon Brothers Group, the Board determined that he does not fail to meet
the independence tests listed above, and does not otherwise have a
material relationship with the
Company.
|
8
ELECTION
OF CLASS III DIRECTORS
The Board
proposes that the three Class III Director nominees be re-elected to the
Board to serve until 2012. The Company’s Board is divided into three
classes with each Director serving a three-year term or until his or her earlier
resignation, death, or removal. In addition to the three
Class III nominees, the Company’s current Class I and Class II
Directors are listed below. Each nominee currently serves as a
Class III Director.
|
Class III
Nominees—Terms Expiring at the Annual
Meeting
|
|
Name
|
Age
|
|||
|
Paul
Fulton
|
74 | |||
|
John
R.
Welch
|
77 | |||
|
Thomas
E.
Whiddon
|
56 | |||
The
individuals who will continue to serve as Class I and Class II
Directors after the Annual Meeting are:
|
Class I
Directors—Terms Expiring in 2010
|
|
Name
|
Age
|
|||
|
William
J.
Montgoris
|
62 | |||
|
David
Pulver
|
67 | |||
|
Class II
Directors—Terms Expiring in 2011
|
|
Name
|
Age
|
|||
|
Bradley
M.
Bloom
|
56 | |||
|
Michael
D.
Casey
|
48 | |||
|
A.
Bruce
Cleverly
|
63 | |||
The
Board recommends a vote FOR the election of Paul Fulton, John R. Welch, and
Thomas E. Whiddon as Class III Directors.
|
Vote
Required
|
The three
nominees for election as Class III Directors who receive the greatest
number of votes will be elected as Class III Directors. Votes
may be cast in favor of all nominees, withheld for all nominees, or for all
nominees, except specific nominees. Votes that are withheld will be
counted toward a quorum, but will be excluded entirely from the tabulation of
votes for each nominee, and, therefore, will not affect the outcome of the vote
on this Proposal. Proxies that are granted without providing voting
instructions will be voted FOR the election of the three
Class III Director nominees.
9
Each of
our non-management Directors receives an annual retainer and meeting fees, and
each committee Chairman receives a separate retainer. In fiscal 2008,
each Director’s annual retainer was comprised of a $20,000 cash payment, except
for Mr. Cleverly who received a pro-rated amount upon joining the Board in March
2008, and a grant of our common stock valued at approximately
$90,000. Effective at the Annual Meeting, the equity portion of our
Directors’ annual retainer will be increased to $100,000. Each
Director also received meeting fees of $2,500 for each regularly scheduled Board
meeting, $1,000 for each special Board meeting, and $1,000 for each regularly
scheduled or special meeting of our standing Board committees. In
addition, for meetings of our Transition Committee held in connection with our
Board or standing Board committee meetings, or Transition Committee meetings
held telephonically, each Director received meeting fees of
$1,000. For special, in-person meetings of our Transition Committee,
our Directors received meeting fees of $2,500.
In fiscal
2008, the Chairman of our Audit Committee received a $20,000 retainer, and the
Chairmen of our Compensation, Nominating and Corporate Governance, and
Transition Committees each received $10,000 retainers. In addition,
as a new non-management Director, Mr. Cleverly was granted a one-time grant of
restricted common stock valued at approximately $100,000. This
restricted stock “cliff vests” after three years following the date of
grant.
We
reimburse Directors for travel expenses incurred in connection with attending
Board and committee meetings and for other expenses incurred while conducting
Company business. We pay no additional compensation to Mr. Casey for
serving as a Director. There are no family relationships among any of
the Directors or our executive officers.
The
following table provides information concerning the compensation of our
non-management Directors for fiscal 2008.
FISCAL
2008 DIRECTOR COMPENSATION TABLE
|
Name
|
Fees
Earned
or
Paid in Cash
(b)
|
Stock
Awards
($)
(c)
|
Option
Awards
($)
|
Total
($)
|
||||||||||||
|
Bradley
M. Bloom (a)
|
$ | 31,000 | $ | 90,000 | $ | -- | $ | 121,000 | ||||||||
|
A.
Bruce Cleverly
|
$ | 49,500 | $ | 118,215 |
(d)
|
$ | -- | $ | 167,715 | |||||||
|
Paul
Fulton
|
$ | 53,000 | $ | 90,000 | $ | -- | $ | 143,000 | ||||||||
|
William
J. Montgoris
|
$ | 39,000 | $ | 123,846 |
(e)
|
$ | -- | $ | 162,846 | |||||||
|
David
Pulver
|
$ | 65,000 | $ | 90,000 | $ | -- | $ | 155,000 | ||||||||
|
Elizabeth
A. Smith (f)
|
$ | 35,000 | $ | -- | $ | -- | $ | 35,000 | ||||||||
|
John
R. Welch
|
$ | 50,000 | $ | 90,000 | $ | 716 | (g) | $ | 140,716 | |||||||
|
Thomas
E. Whiddon
|
$ | 43,000 | $ | 90,000 | $ | 11,234 |
(h)
|
$ | 144,234 | |||||||
|
(a)
|
All
compensation earned by Mr. Bloom was paid to Berkshire
Partners.
|
|
(b)
|
This
column reports the amount of cash compensation earned in fiscal 2008
through annual cash retainers and meeting
fees.
|
|
(c)
|
On
May 8, 2008, we issued each of our non-management Directors 6,198
shares of common stock with a grant date fair value of $14.52 per
share.
|
|
(d)
|
Upon
joining the Board in March 2008, the Company issued Mr. Cleverly
6,481 shares of restricted stock, which “cliff vest” in March
2011. These shares had a grant date fair value of $15.43 per
share. In accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS
123R”), we assume these shares will vest in March 2011 and record the
related expense ratably over the vesting
period.
|
|
(e)
|
Upon
joining the Board in August 2007, the Company issued Mr. Montgoris 4,583
shares of restricted stock, which “cliff vest” in August
2010. These shares had a grant date fair value of $21.82 per
share. In accordance with SFAS 123R, we assume these shares
will vest in August 2010 and record the related expense ratably over the
vesting period.
|
|
(f)
|
Ms.
Smith resigned from the Board effective December 31,
2008.
|
|
(g)
|
On
April 5, 2003, Mr. Welch was granted 16,000 stock options with
an exercise price of $4.94 and a Black-Scholes fair value of
$1.54. The amount disclosed in this column equals the Company’s
expense for such stock options in accordance with SFAS 123R recorded
ratably over the vesting period through April
2008.
|
|
(h)
|
On
September 17, 2003, Mr. Whiddon was granted 16,000 stock options
with an exercise price of $6.98 and a Black-Scholes fair value of
$4.88. The amount disclosed in this column equals the Company’s
expense for such stock options in accordance with SFAS 123R recorded
ratably over the vesting period through September
2008.
|
For stock
options, the SFAS 123R fair value is calculated based on assumptions summarized
in Note 6 to our audited consolidated financial statements which are included in
our Annual Report on Form 10-K. For complete beneficial
ownership information of our common stock for each of our Directors, see heading
“Securities Ownership of Beneficial Owners, Directors, and Executive Officers”
on page 30.
10
The
following table sets forth the name, age, and position of each of our executive
officers as of the date of this proxy statement.
|
Name
|
Age
|
Position
|
|||
|
Michael
D. Casey
|
48
|
Chief
Executive Officer
|
|||
|
Joseph
Pacifico
|
59
|
President
|
|||
|
David
A. Brown
|
51
|
Executive
Vice President and Chief Operations Officer
|
|||
|
James
C. Petty
|
50
|
President
of Retail Stores
|
|||
|
Richard
F. Westenberger
|
40
|
Executive
Vice President and Chief Financial Officer
|
|||
|
Charles
E. Whetzel, Jr.
|
58
|
Executive
Vice President and Chief Sourcing
Officer
|
|||
Michael D. Casey
joined the Company in 1993 as Vice President-Finance. Mr.
Casey was named Senior Vice President-Finance in 1997, Senior Vice President and
Chief Financial Officer in 1998, Executive Vice President and Chief Financial
Officer in 2003, and Chief Executive Officer on August 1, 2008. Mr.
Casey became a Director on August 7, 2008. Prior to joining the
Company, Mr. Casey was a Senior Manager with Price Waterhouse LLP,
predecessor to PricewaterhouseCoopers LLP.
Joseph Pacifico
joined the Company in 1992 as Executive Vice President-Sales and
Marketing. Mr. Pacifico was named President of Marketing in 1997 and
President of Carter’s, Inc. in 2004. Mr. Pacifico began his
career with VF Corporation in 1981 as a sales representative for The HD Lee
Company, Inc. and was promoted to the position of Vice President of
Marketing in 1989, a position he held until 1992.
David A. Brown
joined the Company in 1992 as Senior Vice President-Business Planning and
Administration. Mr. Brown was named Executive Vice
President-Operations in 1997, and Executive Vice President and Chief Operations
Officer in 2005. Prior to 1992, Mr. Brown held various positions
at VF Corporation including Vice President-Human Resources for both The HD Lee
Company, Inc. and Bassett-Walker, Inc. Mr. Brown also
held human resource positions with Blue Bell, Inc. and Milliken &
Company earlier in his career.
James C. Petty
joined the Company in 2007 as President of Retail
Stores. Prior to joining the Company, Mr. Petty served as President
and Chief Executive Officer of PureBeauty, Inc. from 2005 to
2006. From 1997 to 2004, Mr. Petty held various positions at Tween
Brands, Inc., formerly Too, Inc., including President, General Manager – Limited
Too Division, Executive Vice President, Stores and Real Estate; Senior Vice
President, Stores; and Vice President, Stores, Limited Too
Division. Prior to 1997, Mr. Petty held various positions at Gap,
Inc.
Richard F.
Westenberger joined the Company in 2009 as Executive Vice President and
Chief Financial Officer. Prior to joining the Company, Mr.
Westenberger served as Vice President of Corporate Finance and Treasurer of
Hewitt Associates, Inc. from 2006 to 2008. Prior to Hewitt, Mr.
Westenberger was Senior Vice President and Chief Financial Officer of Land’s
End, Inc., a specialty apparel division of Sears Holdings
Corporation. During his ten years at Sears, Mr. Westenberger held
various other senior financial management positions, including Vice President of
Corporate Planning and Analysis and Vice President of Investor
Relations. Prior to Sears, Mr. Westenberger was with Kraft Foods,
Inc. He began his career at Price Waterhouse LLP, predecessor to
PricewaterhouseCoopers LLP, and is a certified public accountant.
Charles E.
Whetzel, Jr. joined the Company in 1992 as Executive Vice
President-Operations. Mr. Whetzel was named Executive Vice
President-Manufacturing in 1997, Executive Vice President-Global Sourcing in
2000, and Executive Vice President and Chief Sourcing Officer in
2005. Mr. Whetzel began his career at Aileen, Inc. in 1971
in the Quality function and was later promoted to Vice President of
Apparel. Following Aileen, Inc., Mr. Whetzel held positions
of increased responsibility with Health-Tex, Inc., Mast
Industries, Inc., and Wellmade Industries, Inc. In 1988,
Mr. Whetzel joined Bassett-Walker, Inc. and was later promoted to Vice
President of Manufacturing for The HD Lee Company, Inc.
11
Overview
This
Compensation Discussion and Analysis, or CD&A, is intended to provide
information regarding the Company’s executive compensation program and
practices. This CD&A covers a variety of topics, including: the
Company’s compensation philosophy regarding executive compensation, the role of
our Compensation Committee in setting the compensation of our named executive
officers, and our executive compensation decisions for fiscal 2008.
During
fiscal 2008, the Company announced that Frederick J. Rowan, II was retiring as
Chief Executive Officer and resigning his position as Chairman of the Company’s
Board of Directors, effective August 1, 2008. The Company agreed to
treat Mr. Rowan's retirement as a termination for "good reason" under the terms
of his employment agreement. The Company also announced that Michael D.
Casey, the Company’s sitting Chief Financial Officer, was being promoted to
Chief Executive Officer effective August 1, 2008. In addition, the
Board of Directors appointed Andrew B. North, the sitting Vice President of
Finance, to serve as interim Chief Financial Officer effective August 1,
2008. On August 7, 2008, Mr. Casey was elected to the Company’s Board
of Directors. Richard F. Westenberger joined the Company as Executive
Vice President and Chief Financial Officer on January 19, 2009.
Compensation
Philosophy
The
Company is committed to achieving long-term, sustainable growth and increasing
shareholder value. The Company’s compensation program for our named
executive officers is designed to support these objectives and encourage strong
financial performance on an annual and long-term basis by linking a significant
portion of our named executive officers’ total compensation to Company
performance in the form of incentive compensation. The principal
elements of the compensation structure for our named executive officers, which
are discussed in more detail below, are base salary, annual performance bonus,
and equity incentives.
Together,
we refer to these three elements as total direct compensation. In
addition, the Company offers perquisites and other personal benefits to our
named executive officers. Our named executive officers may also
receive special bonuses, in recognition of special circumstances or for superior
performance.
The
Company’s compensation philosophy is to set our named executive officers’
compensation at levels that will attract, motivate, and retain superior
executive talent in a highly competitive environment. To be
consistent with this philosophy, our Compensation Committee aims to set our
named executive officers’ total direct compensation between the fiftieth and
seventy-fifth percentiles of compensation paid to similar executive positions at
companies in the Total Remuneration Survey (the “Retail Survey”) conducted by
the Hay Group, an independent compensation consultant engaged by our
Compensation Committee, with maximum total direct compensation targeted in the
top quartile if superior performance is achieved. We also reference
the proxy compensation data of companies in our peer group.
The
Retail Survey is comprised of approximately 100 companies in the retail and
wholesale industry and provides comparable compensation information by
controlling for differences in companies’ revenue size and the differences in
the scopes of responsibility of different executives. Our peer group
is comprised of 14 companies in the retail or wholesale industries that
primarily conduct business in apparel or related accessories, have revenues
between $900 million and $3.8
billion. In fiscal 2008, our peer group was comprised of the
following companies:
|
Abercrombie
& Fitch
|
Gymboree
|
|
|
Aeropostale
|
J.
Crew
|
|
|
American
Eagle Outfitters
|
Oxford
Industries
|
|
|
Chico’s
|
Pacific
Sunwear
|
|
|
The
Children’s Place
|
Quicksilver
|
|
|
Coach
|
Timberland
|
|
|
Coldwater
Creek
|
Tween
Brands
|
12
Role
of the Compensation Committee
Our
Compensation Committee sets the total direct compensation of our named executive
officers. Our Compensation Committee also sets the financial
performance targets for our named executive officers’ annual performance bonuses
and the performance vesting terms for their equity awards. Our
Compensation Committee has engaged the Hay Group to advise it on executive and
director compensation matters and provide the Committee with data to benchmark
the base salary, annual performance bonus, and long-term equity incentive
compensation of our named executive officers. The Hay Group serves at
the direction of the Compensation Committee, and meets privately with the
Compensation Committee and with its Chairman.
To
maintain the effectiveness of our executive compensation program, and to keep it
consistent with our compensation philosophy, our Compensation Committee
regularly reviews the reasonableness of our named executive officers’
compensation and compares it with compensation data from the Retail Survey and
our peer group.
In making
compensation determinations for our named executive officers, our Compensation
Committee principally takes into account:
|
(i)
|
the
nature and scope of each officer’s
responsibilities;
|
|
(ii)
|
the
Company’s performance; and
|
|
(iii)
|
the
comparative compensation data of companies in the Retail Survey and our
peer group.
|
Our
Compensation Committee also considers the recommendations of our Chief Executive
Officer regarding the base salary, annual performance bonus, and long-term
equity incentives of our named executive officers, other than
himself. In addition, our Chief Executive Officer makes
recommendations to the Compensation Committee regarding the structure of our
executive compensation program generally.
Total
Direct Compensation
In
setting a total direct compensation target for each named executive officer, our
Compensation Committee considers both objective and subjective factors,
including the scope of each officer’s responsibilities, Company performance,
prior equity awards, potential future earnings from equity awards, retention
needs, and comparative compensation data of companies in the Retail Survey and
our peer group. The Company’s compensation philosophy is to set total
direct compensation for each of our named executive officers between the
fiftieth and seventy-fifth percentile of similar executive positions at
companies in our peer group, and to set our named executive officers total
direct compensation in the top quartile if superior performance is
achieved.
In fiscal
2008, as set forth in more detail in the Fiscal 2008 Summary Compensation Table,
the total direct compensation of each of our named executive officers was as
follows:
|
Total
Direct
Compensation
|
||||
|
Chief
Executive Officer
|
$ | 2,058,187 | ||
|
Vice
President of Finance and Interim Chief Financial Officer
|
$ | 433,573 | ||
|
President
|
$ | 1,749,079 | ||
|
President
of Retail Stores
|
$ | 1,588,487 | ||
|
Chief
Sourcing Officer
|
$ | 1,215,830 | ||
|
Former
Chief Executive Officer
|
$ | 4,829,092 | ||
Although
no changes have been made to the Company’s overall compensation philosophy or
structure, the Company has taken measures in fiscal 2009 to control and reduce
costs in response to current global economic conditions that will impact
executive compensation in fiscal 2009. These measures include holding
our employees’ base salaries consistent with 2008 levels, exclusive of employee
promotions, including the salaries of our named executive officers, and
suspending the Company’s 401(k) matching program, effective April 17,
2009.
13
Base
Salary
The
Company’s compensation philosophy is to set our named executive officers’ base
salaries at approximately the fiftieth percentile of the base salaries paid to
similar executive positions in the Retail Survey and our peer group, while
making adjustments in light of the objective and subjective factors discussed
above.
The
following table details the base salaries we provided in fiscal 2008 to each of
our named executive officers and their corresponding base salaries for fiscal
2009:
|
Base
Salary
|
||||||||
|
Named
Executive Officer
|
Fiscal
2008
|
Fiscal
2009
|
||||||
|
Michael
D.
Casey
|
$ | 700,000 | (a) | $ | 700,000 | |||
|
Chief
Executive Officer
|
||||||||
|
Andrew
B.
North
|
$ | 250,000 | (b) | $ | 250,000 | |||
|
Vice
President of Finance and Interim Chief Financial Officer
|
||||||||
|
Richard
F.
Westenberger
|
$ | -- | $ | 400,000 | (c) | |||
|
Executive
Vice President and Chief Financial Officer
|
||||||||
|
Joseph
Pacifico
|
$ | 650,000 | $ | 650,000 | ||||
|
President
|
||||||||
|
James
C.
Petty
|
$ | 425,000 | $ | 425,000 | ||||
|
President
of Retail Stores
|
||||||||
|
Charles
E. Whetzel,
Jr.
|
$ | 425,000 | $ | 425,000 | ||||
|
Executive
Vice President and Chief Sourcing Officer
|
||||||||
|
Frederick
J. Rowan,
II
|
$ | 850,000 | (d) | $ | -- | |||
|
Former
Chairman of the Board and Chief Executive Officer
|
||||||||
|
(a)
|
Prior
to his promotion on August 1, 2008 to Chief Executive Officer, Mr. Casey’s
base salary was $450,000. The amount shown reflects his base
salary following his promotion.
|
|
(b)
|
Mr.
North served as Interim Chief Financial Officer from August 1, 2008 until
January 19, 2009. Mr. North continues to serve as Vice
President of Finance.
|
|
(c)
|
Mr.
Westenberger joined the Company as Executive Vice President and Chief
Financial Officer effective January 19,
2009.
|
|
(d)
|
Mr.
Rowan retired as Chief Executive Officer effective August 1,
2008.
|
Annual
Performance Bonus
The
Company makes annual cash performance bonuses a significant component of our
named executive officers’ targeted total direct compensation, while maintaining
the Company’s compensation philosophy to target total direct compensation
between the fiftieth and seventy-fifth percentiles of similar executive
positions in the Retail Survey and our peer group, and in the top quartile when
superior performance is achieved. We believe this design aligns the
interests of our named executive officers with the interests of our
shareholders.
Our
Compensation Committee approves a target bonus for each named executive officer
that is based on a percentage of their base salaries. In establishing
these bonus targets, the Compensation Committee considers our named executive
officers’ potential total direct compensation in light of the Company’s
compensation philosophy and comparative compensation data. The named
executive officers can earn their target bonuses based upon the Company’s
achievement of financial performance targets pre-determined by the Compensation
Committee.
14
In
accordance with our Amended and Restated Annual Incentive Compensation Plan (the
“Incentive Compensation Plan”), for fiscal 2008, the Compensation Committee used
three financial performance metrics to determine the amount, if any, of annual
performance bonuses to be paid under our Incentive Compensation Plan: net sales
(weighted at 25%), adjusted earnings before interest and taxes (“adjusted EBIT”)
(weighted at 25%), and adjusted earnings per share (“adjusted EPS”) (weighted at
50%). Our Compensation Committee selected net sales, adjusted EBIT,
and adjusted EPS as performance metrics because it believes they are key
financial measures that are aligned with the interests of our shareholders and
help to measure the quality of our earnings.
Our
Compensation Committee has the discretion not to award performance bonuses, even
if the Company achieves its financial performance targets, and to take into
account personal performance in determining the percentage of each named
executive officer’s annual performance bonus to be paid, if any.
Our named
executive officers could have earned from 0% to 200% of their target performance
bonus in fiscal 2008 based upon the Company’s achievement of the following
financial targets, weighted at the following percentages:
|
Net
Sales
($
in billions)
(25%)
|
Adjusted
EBIT
($
in millions)
(25%)
|
Adjusted
EPS
(50%)
|
||||||||||
|
25%
of Target Performance Bonus
|
$ | 1.447 | $ | 146.2 | $ | 1.32 | ||||||
|
100%
of Target Performance Bonus
|
$ | 1.490 | $ | 154.6 | $ | 1.40 | ||||||
|
200%
of Target Performance Bonus
|
$ | 1.560 | $ | 162.5 | $ | 1.48 | ||||||
Based on
the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and
adjusted EPS of $1.37 in fiscal 2008, our named executive officers', other than
our former interim Chief Financial Officer, each earned approximately 62%
of their performance bonus target (representing 100% of the net sales target, 0%
of the adjusted EBIT target, and 75% of the adjusted EPS target). Our
former interim Chief Financial Officer earned 80% of his performance bonus
target.
Internal
Revenue Code Section 162(m)
Section
162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million
limit on the amount that a public company may deduct for compensation paid to a
company’s principal executive officer and the company’s three most highly
compensated executive officers other than its principal financial
officer. This limitation generally does not apply to
performance-based compensation that is awarded under a plan that is approved by
the shareholders of a company and that also meets certain other technical
requirements. Our compensation program for our named executive
officers generally operates within the deductibility requirements under
Section 162(m). However, the Compensation Committee realizes
that exceptions may occur.
Equity
Incentives
Our
Amended and Restated 2003 Equity Incentive Plan (“Equity Incentive Plan”) allows
for various types of equity awards, including stock options, restricted stock,
stock appreciation rights, and deferred stock. Awards under our
Equity Incentive Plan are granted to recruit, motivate, and retain employees and
in connection with promotions or increased responsibility. Our
Compensation Committee has only awarded time and performance-based stock options
and time and performance-based restricted stock, although it could use other
forms of equity awards in the future.
All
awards under our Equity Incentive Plan must be approved by our Compensation
Committee. Our Compensation Committee determines the type, timing,
and amount of equity awards granted to each of our named executive officers
after considering their previous equity awards, base salary, and target annual
performance bonus in light of the Company’s compensation
philosophy. Our Compensation Committee also considers the comparative
compensation data in the Retail Survey and our peer group, and our desire to
retain and motivate our named executive officers and to align their goals with
the long-term goals of our shareholders.
Our
Compensation Committee’s practice is to approve grants of stock options and
restricted stock at regularly scheduled meetings. Our Compensation
Committee may also make equity grants at special meetings or by unanimous
written consent. In the future, our Compensation Committee may select
a date subsequent to a regularly scheduled meeting on which to grant equity
awards. Our Compensation Committee sets the exercise prices of equity
awards at the closing price of our common stock on the NYSE on the date of
grant.
15
In
considering the value of equity awards, we calculate the value of stock option
awards by using the Black-Scholes option pricing valuation method and the value
of restricted stock awards equal to the closing price of our common stock on the
date of grant. In addition, our Compensation Committee regularly
reviews the equity ownership of our named executive officers compared to the
Company’s minimum ownership guidelines. Under the Company’s minimum
ownership guidelines, no named executive officer can sell Company stock (other
than to cover the tax obligations resulting from the vesting of Company
restricted stock), unless he owns shares of Company stock with a total market
value in excess of a multiple of his base salary. The multiples for
our named executive officers are as follows: Chief Executive Officer and
President - seven times their base salary; Chief Sourcing Officer - five times
his base salary; our President of Retail Stores and Chief Financial Officer -
three times their base salaries. Each of our named executive officers
has complied with these ownership guidelines.
In March
2004, our Compensation Committee granted Mr. Casey, then our Chief Financial
Officer, 200,000 time-based stock options that vested in five equal, annual
installments based on his continued employment with the Company. In
each of February 2006 and February 2007, our Compensation Committee granted Mr.
Casey 12,000 stock options and 12,000 shares of restricted stock, each of which
vest in four equal, annual installments based on his continued employment with
the Company. In August 2008, following Mr. Casey’s promotion to Chief
Executive Officer, our Compensation Committee granted Mr. Casey 125,000
time-based stock options that vest in four equal, annual installments based upon
Mr. Casey’s continued employment with the Company. Mr. Casey was also
granted 75,000 performance-based shares of restricted stock. Fifty
percent of these shares will be eligible to vest upon the Company’s reporting of
adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in fiscal 2010 (over
fiscal 2009) of at least 4%. If this threshold earnings per share
growth is achieved in fiscal 2009 and 2010, then these eligible shares will
vest, in varying percentages, from 33% to 100%, based on the Company’s compound
annual growth rate in earnings per share from fiscal 2009 to 2010 ranging
between 4% and 8%. The remaining 50% of these shares will then vest
in equal amounts on December 31, 2011 and December 31, 2012 based on his
continued employment with the Company. In March 2009, Mr. Casey was
granted 100,000 time-based stock options and 50,000 shares of restricted stock,
each of which vest in four equal, annual installments based on his continued
employment with the Company. Pursuant to a Company policy, while
employed by the Company, Mr. Casey shall not sell any of these vested restricted
shares, other than to cover any associated tax obligations, until the fourth
anniversary of the date of grant.
In
September 2003, our Compensation Committee granted our former
interim Chief Financial Officer and current Vice President of Finance, Mr.
North, 22,560 time-based and 37,440 performance-based stock options, each of
which vested in five equal, annual installments based on Mr. North’s continued
employment with the Company. In February 2006, our Compensation
Committee granted Mr. North 2,800 time-based stock options and 1,200 shares of
restricted stock, each of which vest in four equal, annual installments based on
his continued employment with the Company. In each of February 2007
and December 2007, our Compensation Committee granted Mr. North 6,000 time-based
stock options and 3,000 shares of restricted stock, each of which vest in four
equal, annual installments based on his continued employment with the
Company. In March 2009, our Compensation Committee granted Mr. North
10,000 time-based stock options and 5,000 shares of restricted stock, each of
which vest in four equal, annual installments based on his continued employment
with the Company.
In
February 2009, our Compensation Committee granted our current Chief Financial
Officer, Mr. Westenberger, 20,000 time-based stock options and 10,000 shares of
restricted stock, each of which vest in four equal, annual installments based
upon Mr. Westenberger’s continued employment with the
Company. Pursuant to a Company policy, while employed by the Company,
Mr. Westenberger shall not sell any of these vested restricted shares, other
than to cover any associated tax obligations, until the fourth anniversary of
the date of grant.
In March
2004, our Compensation Committee granted our President 200,000 time-based stock
options that vested in five equal, annual installments based on Mr. Pacifico’s
continued employment with the Company. In November 2005, we granted
our President 200,000 performance-based stock options. These options
vest in February 2010 based upon Mr. Pacifico’s continued employment with the
Company, the Company’s achievement of fiscal 2009 adjusted net income of at
least $116 million, and an individual performance criterion. In
fiscal 2007, we made assumptions that these performance criteria will not be met
and that these shares will not vest. In July 2008, our Compensation
Committee granted our President 200,000 time-based stock options that vest in
three equal, annual installments based on Mr. Pacifico’s continued employment
with the Company.
In June
2007, our Compensation Committee granted our President of Retail Stores 40,000
time-based stock options and 10,000 shares of restricted stock, each of which
vest in four equal, annual installments based upon Mr. Petty’s continued
employment with the Company. In July 2008, our Compensation Committee
granted our President of Retail Stores 75,000 time-based stock options and
25,000 shares of restricted stock, each of which vest in four equal, annual
installments based upon Mr. Petty’s continued employment with the
Company. In March 2009, Mr. Petty was granted 25,000 time-based stock
options and 7,000 shares of restricted stock, each of which vest in four equal,
annual installments based on his continued employment with the
Company. Pursuant to a Company policy, while employed by the Company,
Mr. Petty shall not sell any of these vested restricted shares, other than to
cover any associated tax obligations, until the fourth anniversary of the date
of grant.
16
In May
2005, our Compensation Committee granted our Chief Sourcing Officer 60,000 stock
options that vest in four equal, annual installments based on Mr. Whetzel’s
continued employment with the Company. In May 2005, our Compensation
Committee also granted our Chief Sourcing Officer 40,000 shares of restricted
stock that cliff vest in May 2009 based on Mr. Whetzel’s continued employment
with the Company. In July 2008, our Compensation Committee granted
our Chief Sourcing Officer 40,000 stock options and 10,000 shares of restricted
stock, each of which vest in four equal, annual installments based on Mr.
Whetzel’s continued employment with the Company. In March 2009, Mr.
Whetzel was granted 20,000 time-based stock options and 5,000 shares of
restricted stock, each of which vest in four equal, annual installments based on
his continued employment with the Company. Pursuant to a Company
policy, while employed by the Company, Mr. Whetzel shall not sell any of these
vested restricted shares, other than to cover any associated tax obligations,
until the fourth anniversary of the date of grant.
In May
2005, our Compensation Committee granted our former Chief Executive Officer
400,000 performance-based stock options. These options were scheduled
to vest in varying percentages in February 2009 based upon Mr. Rowan’s continued
employment with the Company, the Company’s achievement of specified levels of
fiscal 2008 adjusted net income ranging from $75 million to $100 million, and an
individual performance criterion. Due to Mr. Rowan’s retirement,
which was treated as a termination for "good reason," the vesting of these
options was accelerated.
Employment
Agreements
The
Company maintains employment agreements that provide our Chief Executive Officer
and certain named executive officers with, among other things, minimum base
salary levels, annual performance bonus targets, and severance
benefits. The material terms of these agreements are summarized
briefly below.
Michael
D. Casey
Mr. Casey served as Chief Financial
Officer in fiscal 2008 through July 31, 2008, and as Chief Executive Officer for
the remainder of fiscal 2008. In accordance with the terms
of Mr. Casey's employment agreement, which was entered into in August
2001, his base salary shall be no less than $250,000, and his annual performance
bonus target shall be no less than 65% of his base salary. Mr.
Casey entered into his employment agreement prior to his promotion to Chief
Executive Officer. In recognition of this, and taking into
consideration comparative compensation data, the Compensation Committee set Mr.
Casey’s fiscal 2008 base salary as Chief Financial Officer at $450,000 and his
performance bonus target at 87.5% of his base salary, and set his fiscal 2008
base salary as Chief Executive Officer at $700,000 and his performance bonus
target at 150% of his base salary. It is expected that the Company
and Mr. Casey will enter into a new employment agreement
that reflects Mr. Casey's promotion to Chief Executive
Officer. Based upon the achievement of the Company’s net sales of
$1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr.
Casey received an annual performance bonus of $651,000, or 93% of his most
recent base salary and 62% of his target incentive.
Joseph
Pacifico
In accordance with the terms of our
President’s employment agreement entered into in August 2001, his base salary
shall be no less than $420,000 and his annual performance bonus
target shall be no less than 65% of his base salary. Mr.
Pacifico entered into this employment agreement prior to being promoted to
President in June 2004. In recognition of an increase in the scope of
his responsibilities resulting from his promotion to President, and taking into
consideration comparative compensation data, the Compensation Committee set our
President’s fiscal 2008 base salary at $650,000 and his performance bonus target
at 100% of his base salary. Based upon the achievement of the
Company’s net sales of $1.5
billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr.
Pacifico received an annual performance bonus of $403,000, or 62% of his most
recent base salary and of his target incentive.
James
C. Petty
In accordance with the terms of our
President of Retail Stores’ employment agreement entered into in May 2008, his
base salary shall be no less than $400,000 and his annual performance bonus
target shall be no less than 75% of his base salary. In
fiscal 2008, we set our President of Retail Stores’ base salary at $425,000 and
his performance bonus target at 75% of his base salary. Based upon
the achievement of the Company’s net sales of $1.5 billion, adjusted EBIT of
$143.4 million, and adjusted EPS of $1.37, Mr. Petty received an annual
performance bonus of $200,000, or 47% of his most recent base salary and 62% of
his target incentive.
17
Charlie
E. Whetzel, Jr.
In accordance with the terms of our
Chief Sourcing Officer’s employment agreement entered into in August 2001, his
base salary shall be no less than $285,000 and his annual performance bonus
target shall be no less than 65% of his base salary. Mr. Whetzel
entered into his employment agreement prior to his promotion to Chief Sourcing
Officer and an increase in the scope of the responsibilities of his
position. In recognition of this, and taking into consideration
comparative compensation data, the Compensation Committee set our Chief Sourcing
Officer’s fiscal 2008 base salary at $425,000 and his performance bonus target
at 87.5% of his base salary. Based upon the achievement of the
Company’s net sales of $1.5
billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr. Whetzel
received an annual performance bonus of $230,563, or 54% of his most recent base
salary and 62% of his target incentive.
Richard
F. Westenberger
In accordance with the terms of our
Chief Financial Officer’s employment arrangement entered into in January 2009,
his base salary shall be no less than $400,000 and his annual performance bonus
target shall be no less than 75% of his base salary.
Potential
Payments Upon a Termination or Change in Control
Termination
In the
event that our Chief Executive Officer, President, or Chief Sourcing Officer is
terminated by the Company for “cause,” retires, becomes disabled, or dies, the
executive or his estate will be provided his base salary and fringe, medical,
and other benefits through the termination of his employment. If any
of these named executive officers is terminated “without cause,” or if any of
these named executive officers terminates his employment for “good reason,” the
named executive officer shall receive his base salary and medical and dental
benefits for 24 months following the date of his termination, provided the named
executive officer complies with confidentiality, intellectual property
assignment, non-competition, and non-solicitation obligations, which generally
last for a period of one to two years.
Our Chief
Executive Officer, President, or Chief Sourcing Officer shall also receive the
annual performance bonus that he would have earned as if he had been employed at
the end of the year in which his employment was terminated. The
determination of whether an annual performance bonus is payable to the named
executive officer may take into account whether the Company achieved its
performance targets, but may not take into account whether personal performance
targets for the named executive officer were achieved. The vesting of
equity incentives for these named executive officers is not required to be
accelerated in the event of a termination of employment. The total
payments made to these named executive officers shall comply with the
requirements of Section 409A of the Internal Revenue Code of 1986, as
amended.
In the
event, our President of Retail Stores is terminated by the Company for “cause,”
resigns, or dies, the executive or his estate will be provided his base salary
through the termination of his employment. If our President of Retail
Stores becomes disabled, the executive shall continue to receive his base salary
and fringe benefits until the Company terminates his employment for
disability. If our President of Retail Stores is terminated “without
cause,” or if he terminates his employment for “good reason,” he shall receive
his base salary for 24 months following the date of his termination, provided
the executive officer complies with confidentiality, intellectual property
assignment, non-competition, and non-solicitation obligations, which generally
last for a period of two years.
In the
event our Chief Financial Officer is terminated by the Company for “cause,” he
shall receive his base salary then in effect, together with medical and dental
benefits, for 12 months following the date of his termination. In
addition, our Chief Financial Officer shall also receive the annual performance
bonus, if any, pro-rated for the amount of time he was employed by the Company
in the year in which his employment was terminated.
Our
former interim Chief Financial Officer and current Vice President of Finance is
eligible for severance compensation in accordance with the Company’s general
severance policy, which provides one week of severance for each year of service
in the case of termination.
In
determining whether a termination occurred with or without “cause,” “cause” is
generally deemed to exist when the named executive officer has: been convicted
of a felony (or the entering of a plea of guilty or no contest to a felony);
committed an act of fraud involving an act of dishonesty for personal gain which
is materially injurious to the Company; willfully breached his obligations of
confidentiality, intellectual property assignment, non-competition, or
non-solicitation against the Company; willfully engaged in gross misconduct
which is materially injurious to the Company; or, after a cure period, willfully
refused to perform his duties.
18
In
determining whether a named executive officer, with the exception of our
President of Retail Stores, has “good reason” to terminate his employment, “good
reason” is generally deemed to exist when the Company has: materially reduced a
named executive officer’s duties, responsibilities, or status; assigned to the
executive a material amount of additional duties that are significantly
inconsistent with his previous duties; required the executive to relocate; or
materially breached his employment agreement. In determining whether
our President of Retail Stores has “good reason” to terminate his employment,
“good reason” is generally deemed to exist when the Company has materially
reduced the President of Retail Stores’ duties, responsibilities, or status, or
materially breached his employment agreement.
Based
upon a hypothetical termination “without cause” or for “good reason” as of
January 3, 2009, the severance and other benefits certain of our named executive
officers would have been entitled to are as follows:
|
Chief
Executive
Officer
|
Interim
Chief
Financial
Officer
|
President
|
President
of
Retail
Stores
|
Chief
Sourcing
Officer
|
||||||||||||||||
|
Base
Salary
|
$ | 1,400,000 | $ | 28,846 | $ | 1,300,000 | $ | 850,000 | $ | 850,000 | ||||||||||
|
Performance
Bonus
|
651,000 | -- | 403,000 | -- | 230,563 | |||||||||||||||
|
Health
and Other Benefits
|
29,170 | -- | 29,170 | -- | 29,170 | |||||||||||||||
|
Total
|
$ | 2,080,170 | $ | 28,846 | $ | 1,732,170 | $ | 850,000 | $ | 1,109,733 | ||||||||||
In
addition, our named executive officers, with the exception of our former interim
Chief Financial Officer, are entitled to receive any benefits that they would
have been entitled to under our 401(k) plan and supplemental retirement plans,
if any. These severance benefits are provided under the terms of each
of our named executive officers’ employment agreements, if any.
Change
in Control
In the
event of a change in control of the Company, all unvested stock options shall
vest and the Compensation Committee has the ability to remove the vesting
restrictions on all unvested shares of restricted stock. The closing
price on the NYSE of the Company’s common stock on the last trading day of
fiscal 2008 was $19.24 per share. Based upon a hypothetical change in
control of the Company on January 3, 2009, the intrinsic value of accelerated
stock option vesting and the value of accelerated vesting of restricted shares
for our named executive officers would have been as follows:
|
Chief
Executive
Officer
|
Interim
Chief
Financial
Officer
|
President
|
President
of
Retail
Stores
|
Chief
Sourcing
Officer
|
||||||||||||||||
|
Option
Value
|
$ | 344,900 | $ | -- | $ | 1,189,400 | $ | 379,500 | $ | 202,400 | ||||||||||
|
Restricted
Stock
Value
|
1,731,600 | 98,124 | -- | 625,300 | 962,000 | |||||||||||||||
|
Total
Value
|
$ | 2,076,500 | $ | 98,124 | $ | 1,189,400 | $ | 1,004,800 | $ | 1,164,400 | ||||||||||
Retirement
Benefits of Former Chief Executive Officer
In connection
with Mr. Rowan's retirement, the Company paid Mr. Rowan severance benefits of
$346,538 in fiscal 2008 and $78,462 in fiscal 2009, and a lump sum payment of
$1,947,020 in fiscal 2009. In addition, Mr. Rowan was entitled to
receive the annual performance bonus that he would have earned had he been
employed at the end of fiscal 2008. Under the terms of his employment
agreement, Mr. Rowan’s annual performance bonus target shall be no less than
150% of his base salary. In fiscal 2008, the Compensation Committee
set our former Chief Executive Officer’s performance bonus target at 150% of his
base salary. Based upon the achievement of the Company’s net sales of
$1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37,
our former Chief Executive Officer received an annual performance bonus of
$790,500, or 93% of his base salary and 62% of his target
incentive.
19
As part
of Mr. Rowan’s employment agreement, the Company provided him with a
supplemental executive retirement plan (“SERP”) which provides a defined benefit
according to a formula based on his final average annual salary during the
highest 36 consecutive months of his last 60 months of employment, offset by
other external retirement benefits and Social Security benefits to which he is
entitled. Based on the value of his other retirement and Social
Security benefits, Mr. Rowan began to receive his monthly benefit payment of
$18,990 starting in August 2008 and will continue to receive $227,878 annually
for his lifetime. The plan is fully funded through two insurance
policies, and the Company was not required to make any premium payments in
fiscal 2008. The Company included taxable income of $17,855 in Mr.
Rowan’s income, representing the taxes on the increase in the present value of
the accumulated benefit in fiscal 2008 up to the date of his retirement and
associated tax gross-up.
Pursuant
to his employment agreement, the Company had also provided Mr. Rowan with life
insurance equal to 250% of his annual base salary. This life
insurance benefit was provided through two split-dollar life insurance
policies. Upon Mr. Rowan’s retirement on August 1, 2008, the
split-dollar arrangement was terminated and $891,922 of the cash value of the
policies was used to reimburse the Company for premium payments made prior to
fiscal 2003. Upon termination of the split-dollar arrangement, Mr.
Rowan incurred $816,396 of taxable compensation which was included in his fiscal
2008 taxable income. This amount consisted of a cash surrender value
of $483,804 and associated tax gross-up of $332,592.
Perquisites
and Other Benefits
The
Company provides perquisites and other benefits to our Chief Executive Officer,
President, and Chief Sourcing Officer, and in fiscal 2008, to our former Chief
Executive Officer. In fiscal 2008, the Compensation Committee
established a perquisite allowance from which these named executive officers
were reimbursed for certain perquisites, including automobile allowances,
financial and tax planning, health club dues, and related tax gross-up
payments. Amounts from the perquisite allowance that remain unused at
the end of the fiscal year are forfeited.
The
fiscal 2008 perquisite allowances for certain of our named executive officers
were:
|
Chief
Executive
Officer
|
President
|
Chief
Sourcing
Officer
|
Former
Chief
Executive
Officer
|
|||||||||||||
|
Perquisite
Allowance
|
$ | 30,000 | $ | 45,000 | $ | 30,000 | $ | 35,000 | (a) | |||||||
|
(a)
|
Pro-rated
to reflect his retirement on August 1,
2008.
|
In
addition to the perquisite allowances, our President is provided a country club
membership. Our former Chief Executive Officer was provided a country
club membership in fiscal 2008 during his employment. Additional
information on named executive officer perquisites can be found in the footnotes
to the Fiscal 2008 Summary Compensation Table on page 22 of this proxy
statement.
Pursuant
to the Company’s 401(k) plan, in fiscal 2008, the Company provided its
executives the same level of matching contributions available to all eligible
employees, which is equal to 100% of each named executive officer’s first 3% of
pre-tax contributions and 50% of each executive officer’s next 2% of pre-tax
contributions each year, subject to Internal Revenue Service
limitations. In fiscal 2008, each of our named executive officers,
with the exception of our former interim Chief Financial Officer, received
$9,200 in matching contributions. Our former interim Chief Financial
Officer received $6,200 in matching contributions in fiscal
2008. Effective April 17, 2009, the Company has suspended this
matching contribution for all employees, including our named executive
officers.
The
Company also made premium payments on behalf of certain of our named executive
officers, on their personally owned insurance policies. In fiscal
2008, including the associated tax gross-ups, the Company made payments of
$69,505 on behalf of our Chief Executive Officer, $192,876 on behalf of our
President, and $99,043 on behalf of our Chief Sourcing Officer.
The
Company also provides our Chief Executive Officer, President, Chief Sourcing
Officer, and former Chief Executive Officer with an excess supplementary health
insurance policy that reimburses our executives for certain qualified health
expenses not covered under the Company’s ERISA medical plan.
20
The
Compensation Committee of the Board has reviewed and discussed with Company
management the Compensation Discussion and Analysis included in this proxy
statement. Based on such review and discussions, the Compensation
Committee has recommended to the Board that the Compensation Discussion and
Analysis be included in this proxy statement for filing with the
SEC.
Submitted
by the Compensation Committee
Mr. Paul
Fulton, Chairman
Mr. A.
Bruce Cleverly
Mr. John
R. Welch
21
The table
below provides information concerning the compensation of our named executive
officers.
In the
“Salary” column, we disclose the base salary paid to each of our named executive
officers during fiscal 2008, 2007, and 2006.
In the
“Bonus” column, we disclose the cash bonuses earned during fiscal 2008, 2007,
and 2006, other than amounts earned pursuant to the Company’s Incentive
Compensation Plan.
In the
“Stock Awards” and “Option Awards” columns, we disclose the fiscal 2008, 2007,
and 2006 compensation expense the Company recorded in accordance with SFAS 123R
relating to awards of stock or options, without a reduction for assumed
forfeitures. For restricted stock, the SFAS 123R fair value is
calculated using the closing price on the NYSE of our stock on the date of grant
and the related expense is recorded ratably over the vesting
period. For time-based and performance-based stock options, the
SFAS 123R fair value is calculated based on assumptions summarized in
Note 6 to our audited consolidated financial statements, which are included
in our fiscal 2008 Annual Report on Form 10-K. For time-based
stock options, we recognize the related expense ratably over the vesting
period. For performance-based stock options and restricted stock
awards that cliff vest, if we assume the performance criteria will be met and
restricted stock awards will cliff vest, we record the related expense ratably
over the vesting period.
In the
column “Non-Equity Incentive Plan Compensation,” we disclose the dollar value of
all compensation earned in fiscal 2008, 2007, and 2006 pursuant to the Company’s
Incentive Compensation Plan.
In the
column “Nonqualified Deferred Compensation Earnings,” we disclose the dollar
value of any earnings from an aggregate change in the actuarial present value of
the named executive officers accumulated benefit under all defined benefit and
pension plans.
In the
column “All Other Compensation,” we disclose the dollar value of all other
compensation that could not properly be reported in other columns of the Fiscal
2008 Summary Compensation Table, including perquisites, amounts reimbursed for
the payment of taxes, and insurance premiums paid by the Company for the benefit
of our named executive officers.
|
Name
and Principal Position
|
Fiscal
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
(b)
|
Option
Awards
($)
(c)
|
Non-Equity
Incentive
Plan
Compensation
($)
|
Nonqualified
Deferred
Compensation
Earnings
($)
(d)
|
All
Other
Compensation
($)
(e)
|
Total
($)
|
|||||||||||||||||||||||||
|
Michael
D.
Casey
|
2008
|
$ | 540,385 | (a) | $ | -- | $ | 309,716 | $ | 435,586 | $ | 651,000 | $ | -- | $ | 121,500 | $ | 2,058,187 | ||||||||||||||||
|
Chief
Executive Officer
|
2007
|
$ | 375,000 | $ | -- | $ | 160,369 | $ | 334,134 | $ | -- | $ | -- | $ | 124,459 | $ | 993,962 | |||||||||||||||||
|
(previously
Chief Financial Officer)
|
2006
|
$ | 375,000 | $ | -- | $ | 89,689 | $ | 302,069 | $ | 328,125 | $ | -- | $ | 119,036 | $ | 1,213,919 | |||||||||||||||||
|
Andrew
B.
North
|
2008
|
$ | 232,115 | $ | -- | $ | 31,262 | $ | 63,996 | $ | 100,000 | $ | -- | $ | 6,200 | $ | 433,573 | |||||||||||||||||
|
Vice
President of Finance and
|
||||||||||||||||||||||||||||||||||
|
Interim
Chief Financial Officer
|
||||||||||||||||||||||||||||||||||
|
Joseph
Pacifico
|
2008
|
$ | 642,308 | $ | -- | $ | -- | $ | 432,210 | $ | 403,000 | $ | -- | $ | 271,561 | $ | 1,749,079 | |||||||||||||||||
|
President
|
2007
|
$ | 600,000 | $ | -- | $ | -- | $ | 261,446 | $ | -- | $ | -- | $ | 264,148 | $ | 1,125,594 | |||||||||||||||||
|
2006
|
$ | 600,000 | $ | -- | $ | -- | $ | 880,962 | $ | 600,000 | $ | -- | $ | 284,210 | $ | 2,365,172 | ||||||||||||||||||
|
James
C.
Petty
|
2008
|
$ | 412,500 | $ | 593,596 | (f) | $ | 113,334 | $ | 177,158 | $ | 200,000 | $ | -- | $ | 91,899 | $ | 1,588,487 | ||||||||||||||||
|
President
of Retail Stores
|
||||||||||||||||||||||||||||||||||
|
Charles
E. Whetzel,
Jr.
|
2008
|
$ | 417,308 | $ | -- | $ | 241,507 | $ | 162,232 | $ | 230,563 | $ | -- | $ | 164,220 | $ | 1,215,830 | |||||||||||||||||
|
Executive
Vice President and
|
2007
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,195 | $ | -- | $ | -- | $ | 159,390 | $ | 883,882 | |||||||||||||||||
|
Chief
Sourcing Officer
|
2006
|
$ | 375,000 | $ | -- | $ | 219,297 | $ | 130,193 | $ | 328,125 | $ | -- | $ | 153,105 | $ | 1,205,720 | |||||||||||||||||
|
Frederick
J. Rowan,
II
|
2008
|
$ | 497,615 | $ | -- | $ | -- | $ | 2,241,343 | $ | 790,500 | $ | 10,581 | $ | 1,289,053 | $ | 4,829,092 | |||||||||||||||||
|
Former
Chairman of the Board and
|
2007
|
$ | 812,000 | $ | -- | $ | -- | $ | 326,666 | $ | -- | $ | 0 | $ | 150,432 | $ | 1,289,098 | |||||||||||||||||
|
Chief
Executive Officer
|
2006
|
$ | 812,000 | $ | 1,000,000 | (g) | $ | -- | $ | 849,172 | $ | 1,218,000 | $ | 0 | $ | 143,603 | $ | 4,022,775 | ||||||||||||||||
22
| (a) |
Prior to Mr. Casey’s
promotion to Chief Executive Officer on August 1, 2008, his base salary
for the 2008 fiscal year was $450,000. After his promotion and for
the balance of the 2008 fiscal year, his base salary was
$700,000.
|
|
(b)
|
The
amounts disclosed in this column
for Messrs. Casey, North, Petty, and Whetzel reflect the expense we
recorded in accordance with SFAS 123R for the following
grants:
|
| (i) |
Mr. Casey
was granted 12,000 shares of restricted stock on each of February 16,
2006 and February 15, 2007 with a grant date fair value of $34.32 and
$22.19 per share, respectively. Both grants vest in four equal,
annual installments following the date of grant. Mr. Casey was
also granted 75,000 shares of performance-based restricted stock on August
7, 2008 with a grant date fair value of $17.92 per share. Fifty
percent of these shares will be eligible to vest upon the Company’s
reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in
fiscal 2010 (over fiscal 2009) of at least 4%. If this
threshold earnings per share growth is achieved in fiscal 2009 and 2010,
then these eligible shares will vest, in varying percentages, from 33% to
100%, based on the Company’s compound annual growth rate in earnings per
share from fiscal 2009 to 2010 ranging between 4% and 8%. The
remaining 50% of these shares will then vest in equal amounts on December
31, 2011 and December 31, 2012 based on his continued employment with the
Company. In fiscal 2008, we have assumed that these performance
criteria will be met and that these shares will
vest.
|
|
(ii)
|
Mr.
North was granted 1,200 shares of restricted stock on February 16, 2006
with a grant date fair value of $34.32 per share, 3,000 shares of
restricted stock on February 15, 2007 with a grant date fair value of
$22.19 per share, and 3,000 shares of restricted stock on December 3, 2007
with a grant date fair value of $22.79 per share. These grants
vest in four equal, annual installments following the date of
grant.
|
|
(iii)
|
Mr.
Petty was granted 10,000 shares of restricted stock on June 5, 2007 with a
grant date fair value of $27.06 per share. Mr. Petty was also
granted 25,000 shares of restricted stock on July 1, 2008 with a grant
date fair value of $14.18 per share. Both grants vest in four
equal, annual installments following the date of
grant.
|
|
(iv)
|
Mr. Whetzel
was granted 40,000 shares of restricted stock on May 13, 2005 with a
grant date fair value of $22.01 per share. These shares cliff
vest on May 13, 2009. We have assumed these shares will
vest on May 13, 2009, and in accordance with SFAS 123R, we record
expense for these grants ratably over the four-year vesting
period. Mr. Whetzel was also granted 10,000 shares of
restricted stock on July 1, 2008 with a grant date fair value of $14.18
per share. These shares vest in four equal, annual installments
following the date of grant.
|
|
(c)
|
The
amounts disclosed in this column represent the expense we recorded in
accordance with SFAS 123R for the following
grants:
|
|
(i)
|
Mr. Casey
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These shares vest in five equal, annual
installments following the date of grant. Mr. Casey was
also granted 12,000 time-based stock options on February 16, 2006
with a Black-Scholes fair value of $15.59 per share and an exercise price
of $34.32 per share, 12,000 time-based stock options on February 15, 2007
with a Black-Scholes fair value of $10.01 per share and an exercise price
of $22.19 per share, and 125,000 time-based stock options on August 6,
2008 with a Black-Scholes fair value of $7.13 per share and an exercise
price of $17.90 per share. The stock options granted to Mr.
Casey in fiscal 2006, 2007, and 2008 vest in four equal, annual
installments following the date of
grant.
|
|
(ii)
|
Mr.
North was granted 60,000 time-based stock options on September 17, 2003
with a Black-Scholes fair value of $4.88 per share and an exercise price
of $6.98 per share. These shares vest in five equal, annual
installments following the date of grant. Mr. North was also
granted 2,800 time-based stock options on February 16, 2006 with a
Black-Scholes fair value of $15.59 per share and an exercise price of
$34.32 per share, 6,000 time-based stock options on February 15, 2007 with
a Black-Scholes fair value of $10.01 per share and an exercise price of
$22.19 per share, and 6,000 time-based stock options on December 3, 2007
with a Black-Scholes fair value of $9.15 per share and an exercise price
of $22.79 per share. The stock options granted to Mr. North in
fiscal 2006 and 2007 vest in four equal, annual installments following the
date of grant.
|
|
(iii)
|
Mr. Pacifico
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These shares vest in five equal, annual
installments following the date of grant. Mr. Pacifico was
also granted 200,000 performance-based stock options on November 10,
2005 with a Black-Scholes fair value of $12.68 and an exercise price of
$31.18 per share. Subject to the achievement of individual and
Company performance targets, these stock options vest in
February 2010. In fiscal 2007, we assumed these
performance criteria will not be met and that these shares will not
vest. Prior to fiscal 2007, we assumed that 100% of these
shares would vest. In accordance with SFAS 123R, we record
performance-based stock option expense based upon the probability of
performance target achievement, and we adjust any previously recorded
expense if assumptions regarding the achievement of performance targets
change. Mr. Pacifico was granted 200,000 time-based stock
options on July 1, 2008 with a Black-Scholes fair value of $4.89 per share
and an exercise price of $14.18 per share. These shares vest in
three equal, annual installments following the date of
grant.
|
|
(iv)
|
Mr.
Petty was granted 40,000 time-based stock options on June 5, 2007 with a
Black-Scholes fair value of $12.15 per share and an exercise price of
$27.06 per share. Mr. Petty was also granted 75,000 time-based
stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per
share and an exercise price of $14.18 per share. These shares
vest in four equal, annual installments following the date of
grant.
|
|
(v)
|
Mr. Whetzel
was granted 60,000 time-based stock options on May 13, 2005 with a
Black-Scholes fair value of $8.71 per share and an exercise price of
$22.01 per share. Mr. Whetzel was also granted 40,000
time-based stock options on July 1, 2008 with a Black-Scholes fair value
of $5.82 per share and an exercise price of $14.18 per
share. Both grants vest in four equal, annual installments
following the date of grant.
|
|
(vi)
|
Mr. Rowan
was granted 400,000 performance-based stock options on May 13, 2005
with a Black-Scholes fair value of $7.76 per share and an exercise price
of $22.01 per share. These stock options were scheduled to vest
in February 2009, subject to the achievement of individual and
Company performance criteria. Due to Mr. Rowan’s termination
for "good reason" on August 1, 2008, the vesting of these shares was
accelerated and the Company recognized approximately $2.2 million of
stock-based compensation expense during fiscal 2008, in accordance with
SFAS 123R.
|
| (d) |
Amount
represents the increase in the present value of Mr. Rowan’s SERP in
fiscal 2008.
|
| (e) |
The
amounts shown as “All Other Compensation” for fiscal 2008 consist of the
following:
|
|
Name
|
Insurance
Premium
Payments
(i)
|
Excess
Personal
Liability
Insurance
Premiums
|
Medical
Reimbursements
(ii)
|
401(k)
Company
Match
|
Perquisites
(iii)
|
Severance
Compensation
(iv)
|
Relocation
|
Tax
Gross-Ups
(v)
|
Total
|
|||||||||||||||||||||||||||
|
Michael
D. Casey
|
$ | 40,000 | $ | 3,400 | $ | 5,777 | $ | 9,200 | $ | 30,315 | $ | -- | $ | -- | $ | 32,808 | $ | 121,500 | ||||||||||||||||||
|
Andrew
B. North
|
$ | -- | $ | -- | $ | -- | $ | 6,200 | $ | -- | $ | -- | $ | -- | $ | -- | $ | 6,200 | ||||||||||||||||||
|
Joseph
Pacifico
|
$ | 111,000 | $ | 3,400 | $ | 9,603 | $ | 9,200 | $ | 41,502 | $ | -- | $ | -- | $ | 96,856 | $ | 271,561 | ||||||||||||||||||
|
James
C. Petty
|
$ | -- | $ | -- | $ | -- | $ | 9,200 | $ | -- | $ | -- | $ | 74,085 | $ | 8,614 | $ | 91,899 | ||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
$ | 57,000 | $ | 3,400 | $ | 20,069 | $ | 9,200 | $ | 24,194 | $ | -- | $ | -- | $ | 50,357 | $ | 164,220 | ||||||||||||||||||
|
Frederick
J. Rowan, II
|
$ | -- | $ | 3,400 | $ | 5,992 | $ | 9,200 | $ | 36,413 | $ | 878,239 | $ | -- | $ | 355,809 | $ | 1,289,053 | ||||||||||||||||||
|
(i)
|
Payments
to Messrs. Casey, Pacifico, and Whetzel relate to contributions made
to individual whole-life insurance policies paid by the
Company.
|
|
(ii)
|
Amounts
relate to medical reimbursements and related costs pursuant to a
supplemental executive medical reimbursement
plan.
|
23
|
(iii)
|
Mr. Casey’s
perquisites are comprised of $26,906 for automobile-related costs, $1,909
for a health club membership, $750 for financial planning, and $750 for a
service award; Mr. Pacifico’s perquisites are comprised of $26,728
for automobile-related costs, $6,376 for a health club membership, $4,298
for country club dues, and $4,100 for financial planning;
Mr. Whetzel’s perquisites are comprised of $18,360 for
automobile-related costs, $3,925 for financial planning, and $1,909 for a
health club membership; and Mr. Rowan’s perquisites are comprised of
$18,545 for financial planning, $9,823 for fundraising activities, $3,097
for automobile-related costs, $2,997 for country club dues, and $1,951 in
reimbursable medical expense pursuant to his separation
agreement.
|
|
(iv)
|
Mr.
Rowan’s severance compensation is comprised of $483,804 related to the
termination of his split-dollar arrangement, $346,538 of severance
benefits, and $47,897 for office furniture given to Mr.
Rowan.
|
|
(v)
|
Mr. Casey’s
gross-ups are comprised of $29,505 for insurance premium payments, $2,508
for excess personal liability insurance, $435 for automobile-related
costs, and $360 for a service award; Mr. Pacifico’s gross-ups are
comprised of $81,876 for insurance premium payments, $7,796 for
automobile-related costs, $4,676 for county club dues, and $2,508 for
excess personal liability insurance; Mr. Petty’s gross-up is comprised of
$8,614 for relocation reimbursements; Mr. Whetzel’s gross-ups are
comprised of $42,043 for insurance premium payments, $5,806 for
automobile-related costs, and $2,508 for excess personal liability
insurance; and Mr. Rowan’s gross-ups are comprised of $332,592 for
insurance premium payments, $9,785 for financial planning, $7,274 for the
increase in the present value of his SERP agreement, $2,508 for excess
personal liability insurance, $2,211 for country club dues, and $1,439 for
reimbursable medical expenses.
|
|
(f)
|
Special
one-time bonus related to the reimbursement for a loss on sale of Mr.
Petty’s former residence and associated tax
gross-ups.
|
|
(g)
|
Bonus
award earned in fiscal 2006 based on the Company’s achievement of
performance criteria related to the integration of
OshKosh. This award was paid in fiscal
2007.
|
24
The
following table provides information concerning each grant of plan-based awards
made to a named executive officer in fiscal 2008. This includes
incentive compensation awards granted under our Incentive Compensation Plan and
stock option and restricted stock awards granted under our Equity Incentive
Plan. The threshold, target, and maximum columns reflect the range of
estimated payouts under these plans for fiscal 2008. The exercise
price disclosed is equal to the closing market price of our common stock on the
date of grant. The last column reports the aggregate SFAS 123R value
of all awards made in fiscal 2008 as if they were fully vested on the grant
date.
|
Estimated
Future Payouts Under
Non-Equity
Incentive Plan Awards (a)
|
Estimated
Future Payouts Under
Equity
Incentive Plan Awards
|
||||||||||||||||||||||||||||||||||||
|
Name
|
Award
Type
|
Equity
Award
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
|
|||||||||||||||||||||||||||
|
Michael
D. Casey
|
Cash
Bonus
|
-- | $ | 262,500 | $ | 1,050,000 | $ | 2,100,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
(b)
|
8/7/2008
|
$ | -- | $ | -- | $ | -- | -- | 75,000 | 75,000 | $ | -- | $ | 1,344,000 | |||||||||||||||||||||||
|
Options
(c)
|
8/6/2008
|
$ | -- | $ | -- | $ | -- | -- | 125,000 | 125,000 | $ | 17.90 | $ | 891,250 | |||||||||||||||||||||||
|
Andrew
B. North
|
Cash
Bonus
|
-- | $ | 31,250 | $ | 125,000 | $ | 250,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Joseph
Pacifico
|
Cash
Bonus
|
-- | $ | 162,500 | $ | 650,000 | $ | 1,300,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
(d)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 200,000 | 200,000 | $ | 14.18 | $ | 978,000 | |||||||||||||||||||||||
|
James
C. Petty
|
Cash
Bonus
|
-- | $ | 79,688 | $ | 318,750 | $ | 637,500 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
(e)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 25,000 | 25,000 | $ | -- | $ | 354,500 | |||||||||||||||||||||||
|
Options
(f)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 75,000 | 75,000 | $ | 14.18 | $ | 436,500 | |||||||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
Cash
Bonus
|
-- | $ | 92,969 | $ | 371,875 | $ | 743,750 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
(e)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 10,000 | 10,000 | $ | -- | $ | 141,800 | |||||||||||||||||||||||
|
Options
(f)
|
7/1/2008
|
$ | -- | $ | -- | $ | -- | -- | 40,000 | 40,000 | $ | 14.18 | $ | 232,800 | |||||||||||||||||||||||
|
Frederick
J. Rowan, II
|
Cash
Bonus
|
-- | $ | 318,750 | $ | 1,275,000 | $ | 2,550,000 | -- | -- | -- | $ | -- | $ | -- | ||||||||||||||||||||||
|
Shares
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
Options
|
-- | $ | -- | $ | -- | $ | -- | -- | -- | -- | $ | -- | $ | -- | |||||||||||||||||||||||
|
(a)
|
The
amounts shown under “Threshold” represent 25% of the target performance
bonus, assuming threshold level performance is achieved for all
performance measures. The amounts shown under “Target”
represent 100% of the target performance bonus. The amounts
shown under “Maximum” represent 200% of the target performance
bonus.
|
|
(b)
|
Shares
of performance-based restricted stock granted to Mr. Casey on
August 7, 2008 pursuant to the Company’s Equity Incentive
Plan. Fifty percent of these shares will be eligible to vest
upon the Company’s reporting of adjusted EPS growth in fiscal 2009 (over
fiscal 2008) and in fiscal 2010 (over fiscal 2009) of at least
4%. If this threshold earnings per share growth is achieved in
fiscal 2009 and 2010, then these eligible shares will vest, in varying
percentages, from 33% to 100%, based on the Company’s compound annual
growth rate in earnings per share from fiscal 2009 to 2010 ranging between
4% and 8%. The remaining 50% of these shares will then vest in
equal amounts on December 31, 2011 and December 31, 2012 based on his
continued employment with the Company. In fiscal 2008, we have
assumed that these performance criteria will be met and that these shares
will vest.
|
|
(c)
|
Time-based
stock options granted to Mr. Casey on August 6, 2008 pursuant to
the Company’s Equity Incentive Plan. These stock options vest
ratably in four equal, annual installments following the date of
grant.
|
|
(d)
|
Time-based
stock options granted to Mr. Pacifico on July 1, 2008 pursuant
to the Company’s Equity Incentive Plan. These stock options
vest ratably in three equal, annual installments following the date of
grant.
|
|
(e)
|
Shares
of restricted stock granted to Mr. Petty and Mr. Whetzel on July 1,
2008 pursuant to the Company’s Equity Incentive Plan. These
restricted shares vest ratably in four equal, annual installments
following the date of grant.
|
|
(f)
|
Time-based
stock options granted to Mr. Petty and Mr. Whetzel on July 1, 2008
pursuant to the Company’s Equity Incentive Plan. These stock
options vest ratably in four equal, annual installments following the date
of grant.
|
25
The
following table provides information concerning our named executive officers’
exercises of stock options and vesting of restricted stock during fiscal
2008. The table reports, on an aggregate basis, the number of
securities acquired upon exercise of stock options, the dollar value realized
upon exercise of stock options, the number of shares of restricted stock that
have vested, and the dollar value realized upon the vesting of restricted
stock.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||
|
Name
|
Number
of
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
on
Exercise
($)
(a)
|
Number
of
Shares
Acquired
on
Vesting
(#)
|
Value
Realized
on
Vesting
($)
(b)
|
||||||||||||
|
Michael
D. Casey
|
-- | $ | -- | 6,000 | $ | 125,520 | ||||||||||
|
Andrew
B. North
|
-- | $ | -- | 1,800 | $ | 36,329 | ||||||||||
|
James
C. Petty
|
-- | $ | -- | 2,500 | $ | 38,400 | ||||||||||
|
Frederick
J. Rowan, II
|
548,356 | $ | 9,353,608 | -- | $ | -- | ||||||||||
|
(a)
|
Aggregate
dollar amount was calculated by multiplying the number of shares acquired
by the difference between the market price of the underlying securities at
the time of exercise and the exercise price of the stock
options.
|
|
(b)
|
Aggregate
dollar amount was calculated by multiplying the number of shares acquired
on vesting by the market price of the Company’s stock on the date of
vesting.
|
26
The
following table provides information regarding unexercised stock options, stock
that has not yet vested, and equity incentive plan awards for each named
executive officer outstanding as of the end of fiscal 2008. Each
outstanding award is represented by a separate row that indicates the number of
securities underlying the award.
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(Exercisable)
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
(a)
(Unexercisable)
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(b)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
(c)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units
or Other
Rights
That Have
Not
Vested
($)
(d)
|
|||||||||||||||||||||
|
Michael
D. Casey
|
243,488 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 160,000 | 40,000 | -- | $ | 14.81 |
3/22/2014
|
-- | $ | -- | ||||||||||||||||||||
| 6,000 | 6,000 | -- | $ | 34.32 |
2/16/2016
|
-- | $ | -- | ||||||||||||||||||||
| 3,000 | 9,000 | -- | $ | 22.19 |
2/15/2017
|
-- | $ | -- | ||||||||||||||||||||
| -- | 125,000 | -- | $ | 17.90 |
8/6/2018
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 90,000 | $ | 1,731,600 | ||||||||||||||||||||
|
Andrew
B. North
|
32,500 | -- | -- | $ | 6.98 |
9/17/2013
|
-- | $ | -- | |||||||||||||||||||
| 1,400 | 1,400 | -- | $ | 34.32 |
2/16/2016
|
-- | $ | -- | ||||||||||||||||||||
| 1,500 | 4,500 | -- | $ | 22.19 |
2/15/2017
|
-- | $ | -- | ||||||||||||||||||||
| 1,500 | 4,500 | -- | $ | 22.79 |
12/3/2017
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 5,100 | $ | 98,124 | ||||||||||||||||||||
|
Joseph
Pacifico
|
389,688 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 160,000 | 40,000 | -- | $ | 14.81 |
3/22/2014
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | 200,000 | $ | 31.18 |
11/10/2015
|
-- | $ | -- | ||||||||||||||||||||
| -- | 200,000 | -- | $ | 14.18 |
7/1/2018
|
-- | $ | -- | ||||||||||||||||||||
|
James
C. Petty
|
10,000 | 30,000 | -- | $ | 27.06 |
6/5/2017
|
-- | $ | -- | |||||||||||||||||||
| -- | 75,000 | -- | $ | 14.18 |
7/1/2018
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 32,500 | $ | 625,300 | ||||||||||||||||||||
|
Charles
E. Whetzel, Jr.
|
389,688 | -- | -- | $ | 3.08 |
8/15/2011
|
-- | $ | -- | |||||||||||||||||||
| 45,000 | 15,000 | -- | $ | 22.01 |
5/13/2015
|
-- | $ | -- | ||||||||||||||||||||
| -- | 40,000 | -- | $ | 14.18 |
7/1/2018
|
-- | $ | -- | ||||||||||||||||||||
| -- | -- | -- | $ | -- | -- | 50,000 | $ | 962,000 | ||||||||||||||||||||
|
Frederick
J. Rowan, II
|
1,060,710 | -- | -- | $ | 3.08 |
8/1/2011
|
-- | $ | -- | |||||||||||||||||||
|
(a)
|
Unexercised
options relate to the following
awards:
|
|
(i)
|
Mr. Casey
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These stock options vest in five equal,
annual installments following the date of grant. Mr. Casey
was also granted 12,000 time-based stock options on both February 16,
2006 and February 15, 2007 with a Black-Scholes fair value of $15.59 per
share and $10.01 per share, and an exercise price of $34.32 per share and
$22.19 per share, respectively. In addition, Mr. Casey was
granted 125,000 time-based stock options on August 6, 2008 with a
Black-Scholes fair value of $7.13 per share and an exercise price of
$17.90 per share. The stock options granted to Mr. Casey in
fiscal 2006, 2007, and 2008 vest in four equal, annual installments
following the date of grant.
|
|
(ii)
|
Mr. North
was granted 2,800 time-based stock options on February 16, 2006 with a
Black-Scholes fair value of $15.59 per share and an exercise price of
$34.32 per share. Mr. North was also granted 6,000
time-based stock options on February 15, 2007 with a Black-Scholes
fair value of $10.01 per share and an exercise price of $22.19 per
share. In addition, Mr. North was granted 6,000 time-based
stock options on December 3, 2007 with a Black-Scholes fair value of $9.15
per share and an exercise price of $22.79 per share. The stock
options granted to Mr. North in fiscal 2006 and 2007 vest in four equal,
annual installments following the date of
grant.
|
|
(iii)
|
Mr. Pacifico
was granted 200,000 time-based stock options on March 22, 2004 with a
Black-Scholes fair value of $6.56 per share and an exercise price of
$14.81 per share. These stock options vest in five equal,
annual installments following the date of grant. Mr. Pacifico
was also granted 200,000 time-based stock options on July 1, 2008 with a
Black-Scholes fair value of $4.89 per share and an exercise price of
$14.18 per share. These stock options vest in three equal,
annual installments following the date of
grant.
|
27
|
(iv)
|
Mr.
Petty was granted 40,000 time-based stock options on June 5, 2007 with a
Black-Scholes fair value of $12.15 per share and an exercise price of
$27.06 per share. Mr. Petty was also granted 75,000 time-based
stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per
share and an exercise price of $14.18 per share. The stock
options granted to Mr. Petty in fiscal 2007 and 2008 vest in four equal,
annual installments following the date of
grant.
|
|
(v)
|
Mr. Whetzel
was granted 60,000 time-based stock options on May 13, 2005 with a
Black-Scholes fair value of $8.71 per share and an exercise price of
$22.01 per share. Mr. Whetzel was also granted 40,000
time-based stock options on July 1, 2008 with a Black-Scholes fair value
of $5.82 per share and an exercise price of $14.18 per
share,. The stock options granted to Mr. Whetzel in fiscal 2005
and 2008 vest in four equal, annual installments following the date of
grant.
|
|
(b)
|
Unexercised,
unearned stock options relate to the following
awards:
|
|
(i)
|
Mr. Pacifico
was granted 200,000 performance-based stock options on November 10,
2005 with a Black-Scholes fair value of $12.68 and an exercise price of
$31.18 per share. Subject to the achievement of individual and
Company performance targets, these stock options vest in
February 2010. We have assumed that these performance
criteria will not be met and that these shares will not
vest.
|
|
(c)
|
Equity
Incentive Plan awards relate to the following
grants:
|
|
(i)
|
Mr. Casey
was granted 12,000 shares of restricted stock on both February 16,
2006 and February 15, 2007 with a grant date fair value of $34.32 per
share and $22.19 per share. These grants vest in four equal,
annual installments following the date of grant. Mr. Casey was
also granted 75,000 shares of performance-based restricted stock on August
7, 2008 with a grant date fair value of $17.92 per share. Fifty
percent of these shares will be eligible to vest upon the Company’s
reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in
fiscal 2010 (over fiscal 2009) of at least 4%. If this
threshold earnings per share growth is achieved in fiscal 2009 and 2010,
then these eligible shares will vest, in varying percentages, from 33% to
100%, based on the Company’s compound annual growth rate in earnings per
share from fiscal 2009 to 2010 ranging between 4% and 8%. The
remaining 50% of these shares will then vest in equal amounts on December
31, 2011 and December 31, 2012 based on his continued employment with the
Company. In fiscal 2008, we have assumed that these performance
criteria will be met and that these shares will
vest.
|
|
(ii)
|
Mr.
North was granted 1,200 shares of restricted stock on February 16,
2006 with a grant date fair value of $34.32 per share. Mr.
North was also granted 3,000 shares of restricted stock on both February
15, 2007 and December 3, 2007 with a grant date fair value of $22.19 and
$22.79 per share, respectively. All grants vest in four equal,
annual installments following the date of
grant.
|
|
(iii)
|
Mr.
Petty was granted 10,000 shares of restricted stock on June 5, 2007 with a
grant date fair value of $27.06 per share. Mr. Petty was also
granted 25,000 shares of restricted stock on July 1, 2008 with a grant
date fair value of $14.18 per share. Both grants vest in four
equal, annual installments following the date of
grant.
|
|
(iv)
|
Mr. Whetzel
was granted 40,000 shares of restricted stock on May 13, 2005 with a
grant date fair value of $22.01 per share. These shares cliff
vest on May 13, 2009. We have assumed these shares will
vest on May 13, 2009 and in accordance with SFAS 123R, we record the
related expense for these grants ratably over the four-year vesting
period. Mr. Whetzel was also granted 10,000 shares of
restricted stock on July 1, 2008 with a grant date fair value of $14.18
per share. This grant vests in four equal, annual installments
following the date of grant.
|
|
(d)
|
Amount
based on the closing market price per share of the Company’s common stock
on Friday, January 2, 2009 of
$19.24.
|
28
As part
of Mr. Rowan’s employment agreement, the Company had provided him with a SERP
which provides a defined benefit according to a formula based on his final
average annual salary during the highest 36 consecutive months of his last 60
months of employment, offset by other external retirement benefits and Social
Security benefits to which he is entitled. Based on the value of his
other retirement and Social Security benefits, Mr. Rowan began to receive his
monthly benefit payment of $18,990 starting in August 2008 and will continue to
receive $227,878 annually for his lifetime. The plan is fully funded
through two insurance policies, and the Company was not required to make any
premium payments in fiscal 2008. The Company included taxable income
of $17,855 in Mr. Rowan’s income, representing the taxes on the increase in the
present value of the accumulated benefit in fiscal 2008 up to the date of his
retirement and associated tax gross-up.
The
following table provides information with respect to Mr. Rowan’s
SERP. The amounts below reflect the actuarial present value of
Mr. Rowan’s accumulated benefit under the plan, computed as of January 3,
2009.
|
Name
|
Plan
Name
|
Number
of Years
Credited
Service
(#)
|
Present
Value of
Accumulated
Benefit
($)
|
Payments
During
Last
Fiscal Year
($)
|
||||||||||
|
Frederick
J. Rowan, II
|
SERP
|
-- | $ | 3,030,355 | $ | 94,950 | ||||||||
29
DIRECTORS,
AND EXECUTIVE OFFICERS
The
following table sets forth the number of shares of the Company’s common stock
owned by each of the following parties as of March 27, 2009, or as of such
other date as indicated: (a) each person known by the Company to own
beneficially more than five percent of the outstanding common stock;
(b) the Company’s named executive officers; (c) each Director; and
(d) all Directors and named executive officers as a
group. Unless otherwise indicated below, the holders address is 1170
Peachtree Street NE, 9th Floor,
Atlanta, Georgia 30309.
|
Beneficial Ownership
|
||||||
|
Name of Beneficial Owner
|
Shares
|
Percent
|
||||
|
Barclays
Global Investors (1)
|
3,669,154
|
6.5
|
%
|
|||
|
Friess
Associates LLC (2)
|
2,930,800
|
5.2
|
%
|
|||
|
Snow
Capital Management, L.P. (3)
|
2,021,300
|
3.6
|
%
|
|||
|
Wellington
Management Company, LLP (4)
|
1,805,667
|
3.2
|
%
|
|||
|
The
Guardian Life Insurance Company of America (5)
|
1,520,289
|
2.7
|
%
|
|||
|
Michael
D. Casey (6)
|
783,800
|
1.4
|
%
|
|||
|
Joseph
Pacifico (7)
|
867,776
|
1.5
|
%
|
|||
|
Andrew
B. North (8)
|
49,360
|
*
|
||||
|
James
C. Petty (9)
|
52,000
|
*
|
||||
|
Richard
F. Westenberger (10)
|
10,000
|
*
|
||||
|
Charles
E. Whetzel, Jr. (11)
|
793,108
|
1.4
|
%
|
|||
|
Bradley
M. Bloom (12)
|
167,878
|
*
|
||||
|
A.
Bruce Cleverly (13)
|
12,679
|
*
|
||||
|
Paul
Fulton (14)
|
125,583
|
*
|
||||
|
William
J. Montgoris (15)
|
12,843
|
*
|
||||
|
David
Pulver (16)
|
278,434
|
*
|
||||
|
John
R. Welch (17)
|
51,494
|
*
|
||||
|
Thomas
E. Whiddon (17)
|
102,962
|
*
|
||||
|
All
directors and executive officers as a group (18)
|
3,307,917
|
5.7
|
%
|
|||
|
*
Indicates less than 1% of our common
stock.
|
|
(1)
|
This
information is based on a Schedule 13G filed with the SEC on February 5,
2009. Barclays Global Investors, NA, Barclays Global Fund
Advisors, Barclays Global Investors, Ltd, Barclays Global Investors Japan
Limited, Barclays Global Investors Canada Limited, Barclays Global
Investors Australia Limited and Barclays Global Investors (Deutschland) AG
as a group have sole voting power covering 2,797,551 shares of our common
stock and dispositive power covering 3,669,154 shares of our common
stock. The address for Barclays Global Investors is 400 Howard
Street, San Francisco, CA 94105.
|
|
(2)
|
This
information is based on a Schedule 13G filed with the SEC on February 17,
2009. Friess Associates LLC is an investment advisor and has
sole voting power covering 2,930,800 shares of our common
stock. The address for Friess Associates LLC is 115 E. Snow
King, Jackson, WY 83001.
|
|
(3)
|
This
information is based on a Schedule 13G filed with the SEC on March 6,
2009. Snow Capital Management, L.P. is an investment advisor and has sole
voting power covering 2,002,155 shares of our common stock and dispositive
power covering 2,021,300 shares of our common stock. The
address for Snow Capital Management, L.P. is 2100 Georgetowne Drive, Suite
400, Sewickley, Pennsylvania 15143.
|
|
(4)
|
This
information is based on a Schedule 13G filed with the SEC on November 10,
2008. Wellington Management Company, LLP has shared voting
power covering 1,370,167 shares of our common stock and shared dispositive
power covering 1,805,667 shares of our common stock. The
address for Wellington Management Company, LLP is 75 State Street, Boston
Massachusetts 02109.
|
|
(5)
|
This
information is based on information provided on a Schedule 13G/A filed
with the SEC on November 7, 2008. The Guardian Life Insurance
Company of America shares voting and dispositive power covering 1,520,289
shares of our common stock. The Guardian Life Insurance Company
of America is the parent company of Guardian Investor Services LLC and RS
Investment Management Co. LLC. The address for The Guardian
Life Insurance Company of America is 388 Market Street, Suite 1700,
San Francisco, California 94111. Guardian Investor Services LLC
shares voting and dispositive power covering 1,520,289 shares of our
common stock. RS Investment Management Co. LLC shares voting
and dispositive power covering 1,520,289 shares of our common
stock. RS Partners Fund shares voting and dispositive power
covering 920,082 shares of our common
stock.
|
|
(6)
|
Includes
458,488 shares subject to exercisable stock options, including stock
options that will become exercisable during the 60 days after
March 27, 2009 and 134,000 restricted
shares.
|
30
|
(7)
|
Includes
589,688 shares subject to exercisable stock options, including stock
options that will become exercisable during the 60 days after
March 27, 2009.
|
|
(8)
|
Includes
39,100 shares subject to exercisable stock options, including stock
options that will become exercisable during the 60 days after
March 27, 2009 and 9,050 restricted
shares.
|
|
(9)
|
Includes
10,000 shares subject to exercisable stock options, including stock
options that will become exercisable during the 60 days after
March 27, 2009 and 39,500 restricted
shares.
|
|
(10)
|
Includes
10,000 restricted shares.
|
|
(11)
|
Includes
449,688 shares subject to exercisable stock options, including stock
options that will become exercisable during the 60 days after
March 27, 2009 and 55,000 restricted
shares.
|
|
(12)
|
Includes
17,874 shares held by Berkshire Partners, of which Mr. Bloom is a member,
and as to which Mr. Bloom disclaims beneficial ownership except to the
extent of his pecuniary interest therein. Mr. Bloom’s
address is c/o Berkshire Partners, One Boston Place, Suite 3300,
Boston, Massachusetts 02108.
|
|
(13)
|
Includes
6,481 shares of restricted common
stock.
|
|
(14)
|
Mr. Fulton’s
address is c/o Bassett Furniture Industries, Inc., 380 Knollwood
Street, Suite 610, Winston-Salem, North Carolina
27103. The total shown next to Mr. Fulton’s name includes
16,000 shares subject to exercisable stock
options.
|
|
(15)
|
Includes
4,583 shares of restricted common
stock.
|
|
(16)
|
Mr. Pulver
is the sole shareholder of Cornerstone Capital, Inc., which is the
record holder of 262,434 of the shares set forth next to Mr. Pulver’s
name above. The total shown next to Mr. Pulver’s name
includes 16,000 shares subject to exercisable stock
options.
|
|
(17)
|
Includes
16,000 shares subject to exercisable stock
options.
|
|
(18)
|
Includes 1,610,964
shares subject to exercisable stock options, including stock options that
will become exercisable during the 60 days following March 27,
2009.
|
|
|
Section 16(a) Beneficial
Ownership Reporting Compliance
|
Section 16(a) of
the Securities Exchange Act of 1934, as amended, requires that the Company’s
executive officers and directors, and persons who beneficially own more than ten
percent (10%) of the Company’s common stock, file initial reports of ownership
and changes in ownership with the SEC and the NYSE. Based on a review
of the copies of such forms furnished to the Company, the Company believes that
all forms were filed in a timely manner during fiscal 2008.
31
APPROVAL
OF THE COMPANY’S AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN
On May 12, 2005, the Board
adopted and the shareholders approved the Amended and Restated 2003 Equity
Incentive Plan (the “Existing Plan”), which provides that 11,488,392 shares may
be delivered, with respect to awards granted under the Existing Plan, with no
more than 1,260,000 of such additional shares able to be used for awards other
than stock options. As of March 27, 2009, 875,452 shares of stock
were available for issuance under the Existing Plan. The Compensation
Committee, Board of Directors, and the Company’s management believe it is in the
best interest of the Company and its shareholders to adopt the Amended and
Restated 2003 Equity Incentive Plan (the “Plan”). The material
modifications to the Existing Plan are as follows: (i) increasing the maximum
number of shares of stock available under the Existing Plan by 565,000 shares
from 11,488,392 shares to 12,053,392 shares; (ii) removing the limitation on the
number of shares that may be used for awards other than stock options and
replacing it with a provision requiring any awards, with the exception of
options and stock appreciation rights, to reduce the shares of stock available
for issuance under the Plan by 1.46 shares for each share subject to the award
granted; (iii) prohibiting the ability to provide dividend equivalents for stock
options or stock appreciation rights; and (iv) requiring that the number of
shares of common stock available for issuance under the Plan be reduced by the
aggregate number of shares subject to a stock appreciation right upon the
exercise of the stock appreciation right. These modifications and the
following description are summaries of the material features of the Plan but may
not contain all the information you may wish to know. We encourage
you to review the entire text of the Plan which is attached hereto as Appendix
A. The Plan is not required to be qualified under Section 401 of the
Internal Revenue Code of 1986 (“the Code”) nor is it subject to the provisions
of the Employee Retirement Income Security Act of 1974. The
Compensation Committee has recommended and the Board of Directors has approved
the Amended and Restated 2003 Equity Incentive Plan.
The Company intends to file a
registration statement under the Securities Act covering all shares of common
stock reserved for issuance under the Plan. The registration
statement is expected to be filed as soon as practicable after approval of the
Plan.
Summary
of the Amended and Restated 2003 Equity Incentive Plan
Purpose. The Plan
enhances the Company’s ability to continue to attract and retain able key
employees and directors, reward such individuals for their contributions, and
encourage such individuals to take into account the long-term interests of the
Company and its subsidiaries. To this end, the Plan permits the
Company to grant a variety of stock and cash-based awards and related benefits,
including stock options, stock appreciation rights, restricted or unrestricted
stock awards, promises to deliver stock in the future, rights to receive cash or
stock-based on performance, and cash grants or loans made in connection with
other awards.
Administration. The
administrator is the Compensation Committee of the Board of
Directors. The administrator will set the terms of all awards
including the exercise price for awards that have one. Subject only
to the limitations provided in the Plan, the administrator has discretionary
authority to interpret the Plan; determine eligibility for and grant awards;
determine, modify, or waive the terms and conditions of any award; prescribe
forms, rules, and procedures; and otherwise do all things necessary to carry out
the purposes of the Plan. In the case of any award intended to be
eligible for the performance-based compensation exception under Section 162(m),
the administrator intends to exercise its discretion under the Plan so as to
qualify the award for that exception. Determinations of the
administrator made under the Plan are conclusive and bind all
parties.
Eligibility and
Participation. Directors and key employees who, in the opinion
of the Plan’s administrator, are in a position to make a significant
contribution to the success of the Company and its subsidiaries will be eligible
to receive awards under the Plan. Over 80 people are currently
eligible to participate in the Plan.
Effective Date and
Term. Our equity incentive plan was originally adopted on
August 15, 2001 and was approved by shareholders on August 15,
2001. The provisions of the equity incentive plan were amended, and
restated, and the plan was renamed on October 10, 2003, and approved by the
shareholders and the Board on October 10, 2003 prior to our initial public
offering and subsequently at our Annual Meeting of Shareholders on May 14,
2004. The Existing Plan was further amended and restated and
subsequently approved by shareholders at the Company’s 2005 annual meeting of
shareholders on May 12,
2005. The effective date of the Plan if Proposal Number Two is
approved, will be May 14, 2009, the date of our Annual
Meeting. Although the number of shares that may be granted under the
Plan is limited, as described below, there is no time limit on the duration of
the Plan itself. However, no incentive stock options may be granted
under the Plan after August 15, 2011.
32
Shares
Subject to the Plan
Number of
Shares. If Proposal Number Two is approved, the aggregate
maximum number of shares of common stock that may be delivered in satisfaction
of awards under the Plan will be increased by 565,000 shares to 12,053,392,
subject to adjustment in the event of certain changes in our capitalization as
described below. Any shares of common stock granted in connection
with awards other than options and stock appreciation rights will reduce the
number of shares of common stock available for issuance under the Plan by 1.46
shares for every one share of stock subject to such award. With
respect to stock appreciation rights, if such a right is exercised, the number
of shares of stock deemed to have been issued under the Plan will be reduced by
the aggregate number of shares subject to the stock appreciation right so
exercised. If shares of common stock are withheld from an award
granted under the Plan in order to satisfy tax withholding obligations, the
number of shares of stock deemed to have been issued under the Plan will be the
aggregate number of shares subject to the award or the portion of the award that
was exercised or settled.
As of
March 27, 2009, the total number of shares of common stock underlying the awards
granted under the Plan was 5,910,997, and the price per share of our common
stock on the same date was $18.76. If any award granted under the
Plan terminates, or is otherwise forfeited in whole or in part, before it is
fully exercised, or upon exercise is satisfied other than by delivery of stock,
the number of shares as to which such award was not exercised shall be available
for future grants. The maximum number of shares that may be issued
under the Existing Plan represents approximately 20.3% of the total number of
shares of our common stock outstanding on March 27, 2009, and 21.3% if Proposal
Number Two is approved, excluding treasury shares.
Adjustments to
Awards. In the event of a stock dividend, stock split, or
combination of shares (including a reverse stock split), recapitalization or
other change in our capital structure, the administrator will make appropriate
adjustments to the maximum number of shares that may be delivered under the Plan
and to the maximum share limits on awards to individual
participants. The administrator will also make appropriate
adjustments to the number and kind of shares of stock or securities subject to
awards then outstanding or subsequently granted, any exercise prices relating to
awards, and any other provision of awards affected by such
change. The administrator may also make the adjustments described
above to take into account distributions to shareholders other than stock
dividends or normal cash dividends, material changes in accounting practices or
principles, extraordinary dividends, mergers, consolidations, acquisitions,
dispositions or similar transactions involving the Company’s stock, or any other
event, if it determines that adjustments are appropriate to avoid distortion in
the operation of the Plan and to preserve the value of awards made under the
Plan.
Shares to be
Delivered. Shares delivered under the Plan will be authorized
but unissued common stock, or previously issued common stock that we acquire and
hold in our treasury. No fractional shares will be delivered under
the Plan.
Section 162(m) Limits and
Requirements. The maximum number of
shares for which stock options may be granted to any person in any calendar year
and the maximum number of shares subject to stock appreciation rights granted to
any person in any calendar year will each be 1,000,000, subject to adjustments
in the event of changes in our capitalization as described above. The
maximum benefit that may be paid to any person under other awards in any
calendar year will be, to the extent paid in shares, 1,000,000 shares (or their
value in dollars), subject to adjustments in the event of changes in our
capitalization as described above, and, with respect to any cash grant made in
connection with a related award to defray the cost of the award to a
participant, only the amount necessary to defray all or part of the cost of the
related award to the participant.
In the
case of any performance award intended to qualify as performance-based for the
purposes of Section 162(m), the Plan and such award will be construed so as to
qualify the award for such exception. With respect to performance
awards, the administrator will pre-establish, in writing, specific performance
criteria no later than 90 days after the start of the period of performance (or
at an earlier time if necessary to qualify the award as performance-based under
Section 162(m)). The performance criteria shall serve as a condition
to the grant, vesting, or payment of the performance award, as determined by the
administrator. The performance criteria pre-established by the
administrator will be an objectively determinable measure of performance
relating to any or any combination of the following (determined either on a
consolidated basis or, as the context permits, on a divisional, subsidiary, line
of business, project or geographical basis, or in combinations thereof): sales;
revenues; assets; expenses; earnings before or after deduction for all or any
portion of interest, taxes, depreciation, or amortization, whether or not on a
33
continuing
operations or an aggregate or per share basis; return on equity, investment,
capital or assets; one or more operating ratios; borrowing levels, leverage
ratios or credit rating; market share; capital expenditures; cash flow; stock
price; shareholder return; sales of particular products or services; customer
acquisition or retention; acquisitions and divestitures (in whole or in part);
joint ventures and strategic alliances; spin-offs, split-ups and the like;
reorganizations; or recapitalizations, restructurings, financings (issuance of
debt or equity), or refinancings. A performance criterion measure
determined by the administrator need not be based upon an increase, a positive
or improved result, or avoidance of loss. Prior to the grant,
vesting, or payment of the performance award, as the case may be, the
administrator will determine whether the performance criteria have been attained
and such determination will be conclusive. If the performance
criteria are not attained, no other award will be provided in substitution of
the performance award. The provisions of this paragraph will not
apply to an award that consists of a stock option or stock appreciation right
that was granted with an exercise price not less than the fair market value of
the underlying stock on the date of grant.
Awards
Stock Options. The
administrator may from time to time award stock options to any participant
subject to the limitations described above. Stock options give the
holder the right to purchase shares of our common stock within a specified
period of time at a specified price and subject to other terms and
conditions. Two types of stock options may be granted under the Plan:
incentive stock options, or “ISOs,” which are subject to special tax treatment
as described below, and non-statutory options. As indicated above,
eligibility for ISOs is limited to our employees. The expiration date
of an ISO cannot be more than ten years after the date of the original
grant. The expiration date of a non-statutory option is determined by
the discretion of the administrator. The exercise price of any option
granted under the Plan cannot be less than the fair market value of the
underlying stock on the date of grant. The administrator also
determines all other terms and conditions related to the exercise of a stock
option, including the consideration to be paid, if any, for the grant of the
stock options, the time at which stock options may be exercised, and conditions
related to the exercise of stock options.
Stock Appreciation
Rights. The
administrator may grant stock appreciation rights under the Plan. A
stock appreciation right entitles the holder upon exercise to receive common
stock equal in value to the excess of the fair market value of the shares of
stock subject to the right over the fair market value of such shares on the date
of grant.
Stock Awards; Deferred
Stock. The Plan provides for awards of nontransferable shares
of restricted common stock, as well as unrestricted shares of common
stock. Awards of restricted and unrestricted stock may be made in
exchange for past services or other lawful consideration. Generally,
awards of restricted stock are subject to the requirement that the shares be
forfeited or resold to us unless specified conditions are met. Other
awards under the Plan may also be settled with restricted stock. The
Plan also provides for deferred stock grants entitling the recipient to receive
shares of common stock in the future on such conditions as the administrator may
specify.
Performance
Awards. The
administrator may also make awards subject to the satisfaction of specified
performance criteria. The performance criteria used in connection
with a particular performance award will be determined by the
administrator. In the case of performance awards intended to qualify
for exemption under Section 162(m), limits and requirements described above
under “162(m) Limits and Requirements” will apply.
Dividend
Equivalents. With the exception of stock options and stock
appreciation rights, the Administrator may provide for the payment of amounts in
lieu of cash dividends or other cash distributions with respect to stock subject
to an award.
Non-Transferability. No
award may be transferred other than by will or by the laws of descent and
distribution, and during a participant’s lifetime an award may be exercised only
by the participant; provided, however, that the foregoing does not prohibit any
transfer of an award of unrestricted stock or, for periods after restricted
stock ceases to be subject to restrictions requiring that it be redeemed or
offered for sale to the Company if specified conditions are not
satisfied.
Effect, Discontinuance, Cancellation,
Amendment, and Termination. Neither adoption of the Plan nor
the grant of awards to a participant shall affect our right to make awards to
such participant that are not subject to the Plan, to issue shares to such
participant as a bonus or otherwise, or to adopt other plans or compensation
arrangements under which shares may be issued.
The
administrator may at any time discontinue granting awards under the
Plan. With the consent of the participant, the administrator may at
any time cancel an existing award in whole or in part and grant another award
for such number of shares as the administrator specifies. The
administrator may, but is not obligated to, at any time amend the Plan or any
outstanding award for the purpose of satisfying the requirements of Section 409A
or Section 422 of the Code, or of any changes in applicable laws or regulations
or for any other purpose that may at the time be permitted by law, or may at any
time terminate the Plan as to any further grants of awards. However,
except to the
34
extent
expressly required by the Plan, no such amendment adversely affect the rights of
any participant (without his or her consent) under any award previously granted,
nor such amendment, without the approval of the shareholders, effectuate a
change for which shareholder approval is required under the listing standards of
the NYSE or in order for the Plan to continue to qualify for the award of
incentive stock options under Section 422 of the Code.
Federal Tax
Effects. The following discussion summarizes the material
Federal income tax consequences of the grant and exercise of stock options under
the Plan, based on the Federal income tax laws in effect on the date of this
proxy statement. The summary does not purport to be a complete
description of Federal tax consequences that may be associated with the Plan,
nor does it cover state, local, or non-United States taxes.
Incentive Stock
Options. In general, an
optionee realizes no taxable income upon the grant of an ISO and does not
realize any ordinary income in connection with the exercise of the
ISO. However, the exercise of an ISO may result in an alternative
minimum tax liability to the optionee. With certain exceptions, if a
disposition of shares purchased under an ISO occurs within two years from the
date of grant or within one year after exercise, the so-called "disqualifying"
disposition results in ordinary income to the optionee (and a deduction
available to the Company) equal to the excess of the fair market value of the
shares at the time of exercise over the exercise price. Any
additional gain recognized on the disposition is treated as a capital gain for
which we are not entitled to a deduction. If the optionee does not
dispose of the shares until after the expiration of these one- and two-year
holding periods, any gain or loss recognized upon a subsequent sale is treated
as a long-term capital gain or loss for which we are not entitled to a
deduction.
Non-Statutory Options. In general, a grantee
realizes no taxable income at the time of the grant of a non-statutory option,
but realizes ordinary income in connection with the exercise of the option in an
amount equal to the excess of the fair market value of the shares at the time of
exercise over the exercise price. A corresponding deduction is
available to the Company. Any gain or loss recognized upon a
subsequent sale or exchange of the shares is treated as a capital gain or loss,
long or short-term depending on the period the shares are held, for which we are
not entitled to a deduction.
ISOs are
treated as non-statutory stock options to the extent they first become
exercisable by an individual in any calendar year for shares having an aggregate
fair market value (determined as of the date of grant) in excess of
$100,000. In general, ISOs are also treated as non-statutory options
to the extent that they are exercised by the optionee more than three months
after termination of employment.
Under the
so-called "golden parachute" provisions of the Internal Revenue Code, options
that are granted or that vest in connection with a change in control of the
Company may be required to be valued and taken into account in determining
whether the participant has received payments in the nature of compensation that
are contingent on the change in control in excess of certain
limits. If these limits are exceeded the excess may be subject to an
additional 20% Federal tax and may be nondeductible to the Company.
2003 Equity Incentive Plan
Benefits. The future benefits or amounts that would be
received under the 2003 Equity Incentive Plan by executive officers,
non-executive directors, and non-executive officer employees are discretionary
and are therefore not determinable at this time. In addition, the
benefits or amounts which would have been received by or allocated to such
persons under the Plan during the last completed fiscal year in which the Plan
was in effect cannot be determined.
The
foregoing is only a summary of the Amended and Restated 2003 Equity Incentive
Plan, a copy of which is attached hereto as Appendix A.
Our
Board recommends a vote FOR the approval of the Amended and Restated 2003 Equity
Incentive Plan.
Vote
Required
The
approval of Proposal Number Two requires the affirmative vote of the holders of
a majority of the shares of common stock present or represented at the meeting
and voted on the Proposal at the Annual Meeting. Votes may be
cast in favor of or against Proposal Number Two. Shareholders may
also abstain from voting on Proposal Number Two. Votes to abstain
will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes, and, therefore, will have the effect of votes “against”
this Proposal. Proxies that are granted without providing voting
instructions will be voted FOR the approval of Proposal
Number Two.
35
The
following table provides information about the Company’s equity compensation
plan as of the end of its last fiscal year:
|
Plan Category
|
Number of securities to be
issued upon exercise
of outstanding options,
warrants, and rights
|
Weighted-average
exercise price of
outstanding options,
warrants, and rights
|
Number of securities
remaining available for
future issuance under
the equity compensation
plans (excluding
securities reflected in
first column)
|
|||||||||
|
Equity
compensation plans approved by security holders (1)
|
5,066,594
|
(2)
|
$ |
10.03
|
1,440,827
|
|||||||
|
Equity
compensation plans not approved by security holders
|
--
|
--
|
--
|
|||||||||
|
Total
|
5,066,594
|
$ |
10.03
|
1,440,827
|
||||||||
|
(1)
|
Represents
stock options that are outstanding or that are available for future
issuance pursuant to the Company’s Equity Incentive
Plan.
|
|
(2)
|
The
weighted-average contractual life for all outstanding stock options as of
January 3, 2009 was approximately 4.63
years.
|
The
Company has a written policy that requires all transactions with related persons
be reviewed by our Chief Financial Officer, and all such transactions involving
more than $10,000 be reviewed with and approved by our Audit
Committee. Our Chief Financial Officer annually reviews all
transactions with related persons with our Audit Committee.
There
were no such transactions during fiscal 2008.
36
The Audit
Committee reviews the Company’s accounting, auditing, and financial reporting
process on behalf of the Board. Management has the primary
responsibility for establishing and maintaining adequate internal financial
controls, for preparing the financial statements, and for the public reporting
process. PwC, the Company’s independent registered public accounting
firm, is responsible for expressing opinions on the conformity of the Company’s
audited consolidated financial statements with accounting principles generally
accepted in the United States of America and on the effectiveness of the
Company’s internal control over financial reporting.
The Audit
Committee has reviewed and discussed with management and PwC the audited
consolidated financial statements for the fiscal year ended January 3, 2009 and
PwC’s evaluation of the effectiveness of the Company’s internal control over
financial reporting. The Audit Committee has discussed with PwC the
matters that are required to be discussed by Statement on Auditing Standards
No. 61 (Communication with Audit Committees), as amended, as adopted by the
Public Company Accounting Oversight Board in Rule 3200T. PwC has
provided to the Audit Committee the written disclosures and the letter required
by applicable requirements of the Public Company Accounting Oversight Board
regarding the independent registered public accounting firm’s independence, and
the Audit Committee has discussed with PwC its independence. The
Audit Committee has concluded that PwC’s provision of audit and non-audit
services to the Company and its affiliates are compatible with PwC’s
independence.
Based on
the considerations and discussions referred to above, the Audit Committee
recommended to our Board of Directors that the audited consolidated financial
statements for the fiscal year ended January 3, 2009 be included in our Annual
Report on Form 10-K
for fiscal 2008 for filing with the SEC.
Submitted
by the Audit Committee
Mr. David
Pulver, Chairman
Mr. William
J. Montgoris
Mr. Thomas
E. Whiddon
37
RATIFICATION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit
Committee of the Board of Directors has appointed PwC to serve as our
independent registered public accounting firm for fiscal 2009. The
Board is submitting the appointment of PwC as our independent registered public
accounting firm for shareholder ratification. The Board recommends
that shareholders ratify this appointment at the Annual Meeting. A
representative of PwC is expected to attend the Annual Meeting and will be
available to respond to appropriate questions. For additional
information regarding the Company’s relationship with PwC, please refer to the
Audit Committee Report above.
The Audit
Committee has also adopted policies and procedures for pre-approving all
non-audit work performed by PwC. The Audit Committee has pre-approved
the use of PwC for specific types of services that fall within categories of
non-audit services, including various tax services. The Audit
Committee receives regular updates as to the fees associated with the services
that are subject to pre-approval. Services that do not fall within a
pre-approved category require specific consideration and pre-approval by the
Audit Committee.
The
aggregate fees that the Company incurred for professional services rendered by
PwC for the fiscal years ended January 3, 2009 and December 29, 2007 were
as follows:
|
2008
|
2007
|
|||||||
|
Audit
Fees
|
$ | 926,008 | $ | 966,284 | ||||
|
Audit-Related
Fees
|
-- | 73,649 | ||||||
|
Tax
Fees
|
-- | 147,000 | ||||||
|
Software
License Fees
|
3,000 | 6,250 | ||||||
|
Total
Fees
|
$ | 929,008 | $ | 1,193,183 | ||||
|
|
·
|
Audit Fees for the
fiscal years ended January 3, 2009 and December 29, 2007 were for
professional services rendered for the integrated audit of the
consolidated financial statements and internal control over financial
reporting of the Company, other auditing procedures related to the
adoption of new accounting pronouncements and review of other significant
transactions, and related out-of-pocket
expenses.
|
|
|
·
|
Audit-Related Fees for
the fiscal year ended December 29, 2007 were for assurance services
related to employee benefit plan audits and related out-of-pocket
expenses.
|
|
|
·
|
Tax Fees for the fiscal
year ended December 29, 2007 were for services related to tax
consultation and compliance, special projects, and related out-of-pocket
expenses.
|
The
Board recommends a vote FOR the ratification of the appointment of
PricewaterhouseCoopers LLP as the Company’s independent registered public
accounting firm.
|
Vote
Required
|
The
approval of Proposal Number Three requires the affirmative vote of the holders
of a majority of the shares of common stock present or represented at the
meeting and voted on the Proposal at the Annual Meeting. Votes may be
cast in favor of or against Proposal Number Three. Shareholders may
also abstain from voting on Proposal Number Three. Votes to abstain
will be counted toward a quorum, but will be excluded entirely from the
tabulation of votes, and, therefore, will have the effect of votes “against”
this Proposal. Proxies that are granted without providing voting
instructions will be voted FOR the approval of Proposal
Number Three.
As of the
date of this proxy statement, we know of no business that will be presented for
consideration at the Annual Meeting, other than the items referred to
above. If any other matter is properly brought before the Annual
Meeting for action by shareholders, proxies in the enclosed form returned to the
Company will be voted in accordance with the recommendation of the Board or, in
the absence of such a recommendation, in accordance with the judgment of the
proxy holder.
38
APPENDIX
A
CARTER'S, INC.
AMENDED
AND RESTATED 2003 EQUITY INCENTIVE PLAN
|
1.
|
Definitions.
|
|
|
Exhibit A, which
is incorporated by reference, defines the terms used in the Plan and sets
forth certain operational rules related to those terms.
|
||
|
2.
|
Purpose.
|
|
|
The purpose of this amended and
restated Plan is to advance the interests of the Company by enhancing the
ability of the Company and its subsidiaries to attract and retain able
Employees and Directors; to reward such individuals for their
contributions; and to encourage such individuals to take into account the
long-term interests of the Company and its subsidiaries by providing for
the grant to Participants of Stock-based incentive Awards.
|
||
|
3.
|
Administration.
|
|
|
The Administrator has
discretionary authority, subject only to the express provisions of the
Plan, to interpret the Plan; determine eligibility for and grant Awards;
determine, modify or waive the terms and conditions of any Award;
prescribe forms, rules and procedures; and otherwise do all things
necessary to carry out the purposes of the Plan. In the case of any Award
intended to be eligible for the performance-based compensation exception
under Section 162(m), of the Code, the Administrator will exercise
its discretion consistent with qualifying the Award for that exception.
Determinations of the Administrator made under the Plan will be conclusive
and will bind all parties.
|
||
|
4.
|
Effective
Date and Term of Plan.
|
|
|
The Plan was originally adopted
on August 15, 2001 and was approved by shareholders on
August 15, 2001. The Plan was amended, restated and renamed on
October 10, 2003, and approved by shareholders on October 10,
2003, prior to the Company's initial public offering, and subsequently at
the Company's 2004 annual meeting of shareholders on May 14, 2004.
The Plan was further amended and restated and subsequently approved by
shareholders at the Company’s 2005 annual meeting of shareholders on May
12, 2005. The provisions of this amendment and restatement of the Plan,
including without limitation the increase in the number of shares
available to be delivered under Awards, shall become effective on the date
on which this amendment and restatement is approved by the shareholders of
the Company. Except as hereinafter provided, any Award made prior to
shareholder approval of the amendment and restatement set forth herein
shall be subject to the terms of the Plan as in effect prior to such
amendment and restatement. Notwithstanding the foregoing, an Award may be
made under the terms of this amendment and restatement of the Plan but
prior to shareholder approval of such amendment and restatement if the
Award is conditioned upon such approval.
|
||
|
No
ISOs may be granted under the Plan after August 15,
2011.
|
||
|
5.
|
Shares
Subject to the Plan.
|
|
|
(a)
|
Number of
Shares. The aggregate maximum number of shares of
Stock that may be delivered in satisfaction of Awards under the Plan shall
be 12,053,392. Any shares of Stock granted in connection with Options and
SARs shall be counted against this limit as one share of Stock for every
one share subject to the Option or SAR. Any shares of Stock granted in
connection with Awards other than Options and SARs shall be counted
against this limit as 1.46 shares of Stock for every one share of stock
subject to the underlying Award. With respect to SARs, if a SAR
is exercised the number of shares of stock deemed to have been issued
under the Plan shall be the aggregate number of shares subject to the SAR
and not just by the number of shares actually delivered upon Exercise of
the SAR. For the avoidance of doubt, if any Award granted under the Plan
terminates without having been exercised in full, or is otherwise
forfeited in whole or in part, or upon exercise is satisfied other than by
delivery of Stock, the number of shares of Stock as to which such Award
was not exercised shall be available for future grants. For the
avoidance of doubt, all of the shares of Stock available for delivery
under Awards issued under the Plan immediately prior to the effective date
of this restatement shall remain available for delivery under any type of
Award granted under the Plan. If shares of Stock are withheld
from an Award in order to satisfy a Participant's tax withholding
obligations with respect to such Award pursuant to Section 7(a)(iv) of the
Plan, the number of shares of Stock deemed to have been issued under the
Plan shall be the number of shares of Stock that were subject to the Award
or portion thereof so exercised or settled and not the net number of
shares of Stock actually issued upon the exercise or
settlement.
|
|
A-1
|
(b)
|
Shares to be
Delivered. Stock delivered under the Plan shall be
authorized but unissued Stock, or if the Administrator so decides in its
sole discretion, previously issued Stock acquired by the Company and held
in its treasury.
No fractional shares of Stock shall be delivered under the
Plan.
|
|||
|
(c)
|
Section 162(m)
Limits. The maximum number of shares of Stock for which
Stock Options may be granted to any person in any calendar year and the
maximum number of shares of Stock subject to SARs granted to any person in
any calendar year will each be 1,000,000. The maximum benefit that may be
paid to any person under other Awards in any calendar year will be, to the
extent paid in shares, 1,000,000 shares (or their value in dollars), and,
with respect to any cash Award made in connection with a related Award
pursuant to paragraph (vii) under the definition of "Award" in
Appendix A, an amount not to exceed the amount necessary to defray in
whole or in part the cost (including tax cost) of the related Award to the
Participant. The Plan and Awards hereunder made to Covered Employees (as
such term is defined in Section 162(m)) are intended to satisfy
Section 162(m) and shall be construed in accordance with that
intention.
|
|||
|
6.
|
Eligibility
and Participation.
|
|||
|
Persons eligible to receive
Awards under the Plan shall be such Employees and Directors selected by
the Administrator. Eligibility for ISOs is limited to Employees of the
Company or of a "parent corporation" or a "subsidiary corporation" of the
Company as those terms are defined in Section 424 of the
Code.
|
||||
|
7.
|
Terms
and Conditions of Awards.
|
|||
|
(a)
|
All
Awards.
|
|||
|
(i)
|
Award Provisions.
The Administrator will determine the terms of all Awards,
subject to the limitations provided herein.
|
|||
|
(ii)
|
Transferability.
No Award may be transferred other than by will or by the laws
of descent and distribution, and during a Participant's lifetime an Award
may be exercised only by him or her; provided, however, that
the foregoing provisions shall not prohibit the transfer of an Award of
Unrestricted Stock or, for periods after Restricted Stock ceases to be
subject to restrictions requiring that it be redelivered or offered for
sale to the Company if specified conditions are not satisfied, Restricted
Stock.
|
|||
|
(iii)
|
Vesting, Etc.
An Award will vest or become exercisable at such time or times
and upon such conditions as the Administrator shall specify. Without
limiting the foregoing, the Administrator may at any time accelerate the
vesting or exercisability of all or any part of an Award.
|
|||
|
(iv)
|
Taxes. The
Administrator will make such provision for the withholding of taxes as it
deems necessary. The Administrator may, but need not, hold back shares of
Stock from an Award or permit a Participant to tender previously owned
shares of Stock (which in the case of Stock acquired from the Company
shall have been owned by the Participant for such minimum time, if any, as
the Administrator may determine) in satisfaction of tax withholding
requirements (but not in excess of the minimum withholding required by
law).
|
|||
A-2
|
|
(v)
|
Dividend Equivalents,
Etc. With the exception of Stock Options and SARs, the
Administrator may provide for the payment of amounts in lieu of cash
dividends or other cash distributions with respect to Stock subject to an
Award.
|
|
|
(vi)
|
Section 162(m).
Except as hereinafter provided, this
Section 7(a)(vi) applies to any Performance Award intended to
qualify as performance-based for the purposes of Section 162(m). In
the case of any Performance Award to which this
Section 7(a)(vi) applies, the Plan and such Award will be
construed to the maximum extent permitted by law in a manner consistent
with qualifying the Award for such exception. With respect to such
Performance Awards, the Administrator will pre-establish, in writing, one
or more specific Performance Criteria no later than 90 days after the
commencement of the period of service to which the performance relates (or
at such earlier time as is required to qualify the Award as
performance-based under Section 162(m)). The Performance Criteria so
established shall serve as a condition to the grant, vesting or payment of
the Performance Award, as determined by the Administrator. Prior to grant,
vesting or payment of the Performance Award, as the case may be, the
Administrator will certify whether the Performance Criteria have been
attained and such determination will be final and conclusive. If the
Performance Criteria with respect to the Award are not attained, no other
Award will be provided in substitution of the Performance
Award.
|
||
|
(b)
|
Awards
Requiring Exercise.
|
||
|
(i)
|
Time and Manner of Exercise of
Awards. Any exercise of an Award shall be in writing,
signed by the proper person and furnished to the Company, accompanied by
(A) such documents as may be required by the Administrator and
(B) payment in full as specified below. A Stock Option shall be
exercisable during such period or periods as the Administrator may
specify. The latest date on which a Stock Option may be exercised shall be
the Expiration Date.
|
||
|
(ii)
|
Exercise Price.
The Exercise Price shall be determined by the Administrator,
but shall not be less than 100% of the Fair Market Value at the time the
Stock Option or SAR is granted; nor shall the Exercise Price be less, in
the case of an original issue of authorized stock, than par value. No such
Award, once granted, may be re-priced (which includes both a lowering of
the Exercise Price and the cancellation of an outstanding Stock Option or
SAR accompanied by the grant of a replacement Award of the same or a
different type) other than in accordance with the applicable shareholder
approval requirements of the New York Stock Exchange (or the rules of such
other market in which the shares of the Company's stock then are listed).
In no event shall the Exercise Price of an ISO granted to a ten-percent
shareholder be less than 110% of the Fair Market Value at the time the
Stock Option is awarded. For this purpose, "ten-percent shareholder" shall
mean any Participant who at the time of grant owns directly, or by reason
of the attribution rules set forth in Section 424(d) of the Code is
deemed to own, stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or of any of its parent or
subsidiary corporations.
|
||
|
(iii)
|
Term. The
Administrator shall determine the term of each Stock Option and SAR,
provided that in no event shall such term extend beyond the Expiration
Date.
|
||
|
(iv)
|
Payment of Exercise
Price. Stock purchased upon exercise of a Stock Option
under the Plan shall be paid for as follows: (i) in cash, by check
acceptable to the Administrator (determined in accordance with such
guidelines as the Administrator may prescribe), or by money order payable
to the order of the Company, or (ii) if so permitted by the
Administrator, (A) through the delivery of shares of Stock (which, in
the case of Stock acquired from the Company, shall have been held for at
least six months unless the Administrator approves a shorter period)
having a Fair Market Value on the last business day preceding the date of
exercise equal to the exercise price, (B) through a broker-assisted
exercise program acceptable to the Administrator, (C) by other means
acceptable to the administrator or (D) by any combination of the
foregoing permissible forms of payment; provided, that if the
Stock delivered upon exercise of the Stock Option is an original issue of
authorized Stock, at least so much of the Exercise Price as represents the
par value of such Stock shall be paid other than with a personal check of
the person exercising the Stock Option.
|
||
A-3
|
|
(v)
|
Delivery of Stock.
A Participant shall not have the rights of a shareholder with
regard to Awards under the Plan except as to Stock actually received by
him or her under the Plan.
|
|||
|
The Company shall not be
obligated to deliver any shares of Stock under the Plan (i) until, in
the opinion of the
Company's counsel, all applicable federal and state laws and regulations
have been complied with, (ii) if the outstanding Stock is at the time
listed on any stock exchange, until the shares to be delivered have been
listed or authorized to be listed on such exchange upon official notice of
issuance, and (iii) until all other legal matters in connection with
the issuance and delivery of such shares have been approved by the
Company's counsel. Without limiting the generality of the foregoing, if
the sale of Stock has not been registered under the Securities Act, the
Company may require, as a condition to exercise of the Award, such
representations or agreements as counsel for the Company may consider
appropriate to avoid violation of the Securities Act and may require that
the certificates evidencing such Stock bear an appropriate legend
restricting transfer.
|
|||||
|
If an Award is exercised by the
executor or administrator of a deceased Participant, or by the person or
persons
to whom the Award has been transferred by the Participant's will or the
applicable laws of descent and distribution, the Administrator shall be
under no obligation to deliver Stock pursuant to exercise until the
Administrator is satisfied as to the authority of the person or persons
exercising the Award.
|
|||||
|
(vi)
|
ISOs. In
the case of an ISO, the Administrator may require as a condition of
exercise that the Participant exercising the ISO agree to inform the
Company promptly of any disposition (within the meaning of
Section 424(c) of the Code and the regulations thereunder) of Stock
received upon exercise of the ISO.
|
||||
|
(c)
|
Awards
Not Requiring Exercise.
|
||||
|
Awards of
Restricted Stock and Unrestricted Stock may be made in exchange for past
services or other lawful consideration.
|
|||||
|
8.
|
Effect
of Certain Transactions.
|
||||
|
(a)
|
Mergers,
Etc.
|
||||
|
Except as otherwise provided
in an Award, in the event of a Covered Transaction in which there is an
acquiring or surviving entity the following rules shall
apply:
|
|||||
|
(i)
|
Awards Other Than Stock
Options.
|
||||
|
(A)
|
The
Administrator may provide for the assumption of some or all outstanding
Awards, or for the grant of new awards in substitution therefore, by the
acquirer or survivor or an affiliate of the acquirer or survivor, in each
case on such terms and subject to such conditions as the Administrator
determines.
|
||||
|
(B)
|
In
the absence of such an assumption or if there is no substitution, except
as otherwise provided in the Award, each SAR and other Award requiring
exercise (other than Stock Options) will become fully exercisable, and the
delivery of shares of Stock issuable under each outstanding Award of
Deferred Stock will be accelerated and such shares will be issued, prior
to the Covered Transaction, in each case on a basis that gives the holder
of the Award a reasonable opportunity, as determined by the Administrator,
following exercise of the Award or the issuance of the shares, as the case
may be, to participate as a shareholder in the Covered Transaction, and
the Award will terminate upon consummation of the Covered
Transaction.
|
||||
|
(C)
|
In
the case of Restricted Stock, the Administrator may require that any
amounts delivered, exchanged or otherwise paid in respect of such Stock in
connection with the Covered Transaction be placed in escrow or otherwise
made subject to such restrictions as the Administrator deems appropriate
to carry out the intent of the Plan.
|
||||
A-4
|
|
(ii)
|
|
||
|
(A)
|
Subject
to paragraph 8(a)(ii)(B) below, all outstanding Stock Options will
cease to be exercisable and will be forfeited (after any payment or other
consideration deemed equitable by the Administrator for the termination of
any vested portion of any Award is made), as of the effective time of the
Covered Transaction; provided, that the Administrator may in its sole
discretion on or prior to the effective date of the Covered Transaction,
(1) make any outstanding Stock Options exercisable in part or in
full, (2) remove any performance or other conditions or restrictions
on any Stock Options, and/or (3) in the event of a Covered
Transaction under the terms of which holders of the Stock of the Company
will receive upon consummation thereof a payment (whether cash, non-cash
or a combination of the foregoing) for each share of such Stock
surrendered in the Covered Transaction, make or provide for a payment
(whether cash, non-cash or a combination of the foregoing) to the
Participant equal to the difference between (A) the Fair Market Value
times the number of shares of Stock subject to outstanding Stock Options
(to the extent then exercisable at prices not in excess of the Fair Market
Value) and (B) the aggregate Exercise Price of all such outstanding
Stock Options in exchange for the termination of such Stock
Options.
|
|||
|
(B)
|
With
respect to an outstanding Stock Option held by a Participant who,
following the Covered Transaction, will be employed by or otherwise
providing services to an entity which is a surviving or acquiring entity
in the Covered Transaction or an affiliate of such an entity, the
Administrator may at or prior to the effective time of the Covered
Transaction, in its sole discretion and in lieu of the action described in
paragraph 8(a)(ii)(A) above, arrange to have such surviving or
acquiring entity or affiliate assume any Stock Option held by such
Participant outstanding hereunder or grant a replacement award which, in
the judgment of the Administrator, is substantially equivalent to any
Stock Option being replaced.
|
|||
|
(iii)
|
Other Situations.
The Administrator may grant Awards under the Plan in
substitution for awards held by Employees and Directors of another
corporation who concurrently become Employees or Directors of the Company
or a subsidiary of the Company as the result of a merger or consolidation
of that corporation with the Company or a subsidiary of the Company, or as
the result of the acquisition by the Company or a subsidiary of the
Company of property or stock of that corporation. The Company may direct
that substitute Awards be granted on such terms and conditions as the
Administrator considers appropriate in the circumstances.
|
|||
|
(b)
|
Changes
in and Distributions with Respect to the Stock.
|
|||
|
(i)
|
Basic Adjustment
Provisions. In the event of a stock dividend, stock
split or combination of shares (including a reverse stock split),
recapitalization or other change in the Company's capital structure, the
Administrator will make appropriate adjustments to the maximum number of
shares that may be delivered under the Plan under Section 5(a) and to
the maximum share limits described in Section 5(c), and will also
make appropriate adjustments to the number and kind of shares of stock or
securities subject to Awards then outstanding or subsequently granted, any
Exercise Prices relating to Awards and any other provision of Awards
affected by such change, whose determination will be binding on all
persons.
|
|||
|
(ii)
|
Certain Other
Adjustments. To the extent consistent with
qualification of ISOs under Section 422 of the Code and with the
performance-based compensation rules of Section 162(m), where
applicable, the Administrator may also make adjustments of the type
described in paragraph (i) above to take into account distributions
to shareholders other than those provided for in Section 8(a) and
8(b)(i), material changes in accounting practices or principles,
extraordinary dividends, consolidations or mergers (except those described
in Section 8(a)), acquisition of stock or property, or any other
event, if the Administrator determines that adjustments are appropriate to
avoid distortion in the operation of the Plan and to preserve the value of
Awards made hereunder.
|
|||
A-5
|
9.
|
Termination
of Employment.
|
|
|
In the case of any Award, the
Administrator may, through agreement with the Participant, (including,
without limitation, any shareholder agreement of the Company to which the
Participant is a party) resolution, or otherwise, provide for
post-termination exercise provisions different from those expressly set
forth in this Section 9, including without limitation the vesting
immediately prior to termination of all or any portion of an Award not
otherwise vested prior to termination, and terms allowing a later exercise
by a former employee or director (or, in the case of a former employee or
director who is deceased, the person or persons to whom the Award is
transferred by will or the laws of descent and distribution) as to all or
any portion of the Award not exercisable immediately prior to termination
of Employment, but in no case may an Award be exercised after the
Expiration Date. If the Administrator does not otherwise provide for such
provisions and if a Participant's Employment terminates prior to the
Expiration Date (including by reason of death) the following provisions
shall apply:
|
||
|
(a)
|
All
Stock Options and SARs held by the Participant immediately prior to the
cessation of the Participant's Employment that are not vested immediately
prior to the cessation of Employment shall automatically terminate upon
such cessation of Employment.
|
|
|
(b)
|
To
the extent vested immediately prior to cessation of Employment, the Stock
Option or SAR shall continue to be vested and shall be exercisable
thereafter during the period prior to the Expiration Date for 60 days
following such cessation (120 days in the event that a Participant's
service terminates by reason of death); provided, however, that if the
Participant's Employment is terminated "for Cause" as defined herein, all
unvested or unexercised Awards shall terminate immediately.
|
|
|
(c)
|
Except
as otherwise provided in an Award, after completion of the exercise period
described in paragraph (b) above, the Awards described in
paragraph (b) above shall terminate to the extent not previously
exercised, expired, or terminated.
|
|
|
No Award requiring exercise
shall be exercised or surrendered in exchange for a cash payment after the
Expiration Date.
|
||
|
10.
|
Employment
Rights.
|
|
|
Neither the adoption of the Plan
nor the grant of Awards shall confer upon any Participant any right to
continue as an Employee or Director of the Company or any subsidiary or
affect in any way the right of the Company or a subsidiary to terminate
the Participant's relationship at any time. Except as specifically
provided by the Administrator in any particular case, the loss of existing
or potential profit on Awards granted under this Plan shall not constitute
an element of damages in the event of termination of the relationship of a
Participant even if the termination is in violation of an obligation of
the Company to the Participant by contract or otherwise.
|
||
A-6
|
11.
|
Effect,
Discontinuance, Cancellation, Amendment, and Termination.
|
|
Neither adoption of the Plan nor
the grant of Awards to a Participant shall affect the Company's right to
make awards to such Participant that are not subject to the Plan, to issue
to such Participant Stock as a bonus or otherwise, or to adopt other plans
or compensation arrangements under which Stock may be issued.
The Administrator may at any time
discontinue granting Awards under the Plan. With the consent of the
Participant, the Administrator may at any time, subject to the limitations
of the second sentence of Section 7(b)(ii), cancel an existing Award
in whole or in part and grant another Award for such number of shares as
the Administrator specifies. The Administrator may, but shall not be
obligated to, at any time or times amend the Plan or any outstanding Award
for the purpose of satisfying the requirements of Sections 409A and 422 of
the Code or of any changes in applicable laws or regulations or for any
other purpose that may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of Awards; provided , that except
to the extent expressly required by the Plan, no such amendment shall
adversely affect the rights of any Participant (without his or her
consent) under any Award previously granted, nor shall such amendment,
without the approval of the shareholders of the Company, effectuate a
change for which shareholder approval is required under the listing
standards of the New York Stock Exchange (or the rules of such other
market in which the shares of the Company's Stock then are listed) or in
order for the Plan to continue to qualify for the Award of incentive stock
options under Section 422 of the Code.
|
|
A-7
EXHIBIT
A
Definition
of Terms
The following terms, when used
in the Plan, will have the meanings and be subject to the provisions set forth
below:
"Administrator":
The committee of the Board, consisting of two or more Directors, all
of whom shall be "non-employee Directors" within the meaning of Rule 16b-3
under the 1934 Act and "outside Directors" within the meaning of
Section 162(m). In addition, membership of the committee shall satisfy such
independence or other requirements as may be imposed by the rules of the New
York Stock Exchange (or the rules of such other market in which the shares of
the Company's Stock then are listed). The Administrator may delegate ministerial
tasks to such persons as it deems appropriate.
"Affiliate":
Any corporation or other entity owning, directly or indirectly, 50%
or more of the outstanding Stock of the Company, or in which the Company or any
such corporation or other entity owns, directly or indirectly, 50% of the
outstanding capital stock (determined by aggregate voting rights) or other
voting interests.
"Award":
Any or a combination of the following:
(i)
Stock Options;
(ii)
SARs;
(iii)
Restricted Stock;
(iv)
Unrestricted Stock;
(v)
Deferred Stock;
(vi)
Performance Awards; and
(vii) Grants of
cash made in connection with other Awards in order to help defray in whole or in
part the cost (including tax cost) of the Award to the Participant.
"Board":
The Board of Directors of the Company.
"Cause":
The Board's determination, in its reasonable judgment, that any one
or more of the following has occurred:
(i)
the
Participant shall have been convicted of, or shall have pleaded guilty or nolo contendere to, any
felony or any crime involving dishonesty or moral turpitude;
(ii)
the
Participant shall have committed any fraud, theft, embezzlement,
misappropriation of funds, breach of fiduciary duty or act of
dishonesty;
(iii) the
Participant shall have breached in any material respect any of the provisions of
any agreement between the Participant and the Company or an
Affiliate;
(iv) the
Participant shall have engaged in conduct likely to make the Company or any of
its Affiliates subject to criminal liabilities other than those arising from the
Company's normal business activities; or
(v) the
Participant shall have willfully engaged in any other conduct that involves a
breach of fiduciary obligation on the part of the Participant or otherwise could
reasonably be expected to have a material adverse effect upon the business,
interests or reputation of the Company or any of its
Affiliates.
A-8
"Code":
The U.S. Internal Revenue Code of 1986, as from time to time amended
and in effect, or any successor statute as from time to time in
effect.
"Company":
Carter's, Inc., a Delaware corporation.
"Covered
Transaction": Except as otherwise specifically provided in an
Award Agreement, any of (i) a consolidation, merger, or similar transaction
or series of related transactions in which the Company is not the surviving
corporation or which results in the acquisition of all or substantially all of
the Company's then outstanding voting stock by a single person or entity or by a
group of persons and/or entities acting in concert, or (ii) a sale or
transfer of all or substantially all the Company's assets.
"Deferred
Stock": An unfunded and unsecured promise to deliver
Stock or other securities in the future on specified terms.
"Employee":
Any person who is employed by the Company or an
Affiliate.
"Employment":
A Participant's employment or other service relationship with the
Company and its Affiliates. Employment will be deemed to continue, unless the
Administrator expressly provides otherwise, so long as the Participant is
employed by, or otherwise is providing services in a capacity described in
Section 6 to the Company or its Affiliates. If a Participant's employment
or other service relationship is with an Affiliate and that entity ceases to be
an Affiliate, the Participant's Employment will be deemed to have terminated
when the entity ceases to be an Affiliate unless the Participant transfers
Employment to the Company or its remaining Affiliates.
"Exercise
Price": The price at which a share of Stock may be purchased
under a Stock Option or the value an increase above which may allow Stock to be
purchased under a SAR.
"Expiration
Date": In the case of an Award requiring exercise, the date
which is ten years (five years in the case of an ISO granted to anyone other
than a "ten percent shareholder" as defined in Section 7(b)(ii)) from the
date the Award was granted or such earlier date as may be specified by the
Administrator at the time the Award is granted.
"Fair
Market Value": The value of one share of Stock, determined as
follows:
|
(i)
|
if
the Stock is listed on a national securities exchange (such as the New
York Stock Exchange) or is quoted on The NASDAQ Stock Market ("NASDAQ"),
the closing price of a share of Stock on the relevant date (or, if such
date is not a business day or a day on which quotations are reported, then
on the immediately preceding date on which quotations were reported), as
reported by the principal national exchange on which such shares are
traded (in the case of an exchange) or by NASDAQ, as the case may
be;
|
|
(ii)
|
if
the Stock is not listed on a national securities exchange or quoted on
NASDAQ, but is actively traded in the over-the-counter market, the average
of the closing bid and asked prices for a share of the Stock on the
relevant date (or, if such date is not a business day or a day on which
the quotations are reported, then on the immediately preceding date on
which quotations were reported), or the most recent date for which such
quotations are reported; and
|
|
(iii)
|
if,
on the relevant date, the Stock is not publicly traded or reported as
described in (i) or (ii) above, the value determined in good
faith in accordance with such reasonable valuation method as the
Administrator may determine.
|
"ISO":
A Stock Option intended to be an "incentive stock option" within the
meaning of Section 422 of the Code. Each Stock Option granted pursuant to
the Plan will be treated as providing by its terms that it is to be a
non-incentive stock option unless, as of the date of grant, it is expressly
designated as an ISO.
A-9
"Participant":
A person who is granted an Award under the Plan.
"Performance
Award": An Award subject to Performance Criteria. The
Administrator in its discretion may grant Performance Awards that are intended
to qualify for the performance-based compensation exception under
Section 162(m) and Performance Awards that are not intended so to
qualify.
"Performance
Criteria": Specified criteria the satisfaction of which is a
condition for the grant, exercisability, vesting or full enjoyment of an Award.
For purposes of Awards that are intended to qualify for the performance-based
compensation exception under Section 162(m) a Performance Criterion will
mean an objectively determinable measure of performance relating to any or any
combination of the following (determined either on a consolidated basis or, as
the context permits, on a divisional, subsidiary, line of business, project or
geographical basis or in combinations thereof): sales; revenues; assets;
expenses; earnings before or after deduction for all or any portion of interest,
taxes, depreciation, or amortization, whether or not on a continuing operations
or an aggregate or per share basis; return on equity, investment, capital or
assets; one or more operating ratios; borrowing levels, leverage ratios or
credit rating; market share; capital expenditures; cash flow; stock price;
shareholder return; sales of particular products or services; customer
acquisition or retention; acquisitions and divestitures (in whole or in part);
joint ventures and strategic alliances; spin-offs, split-ups and the like;
reorganizations; or recapitalizations, restructurings, financings (issuance of
debt or equity) or refinancings. A Performance Criterion measure and any targets
with respect thereto determined by the Administrator need not be based upon an
increase, a positive or improved result or avoidance of loss.
"Plan":
The Carter's, Inc. 2003 Amended and Restated Equity Incentive
Plan, from time to time amended and in effect.
"Restricted
Stock": An Award of Stock for so long as the Stock remains
subject to restrictions requiring that it be redelivered or offered for sale to
the Company if specified conditions are not satisfied.
"Section 162(m)":
Section 162(m) of the Code.
"SARs":
Rights entitling the holder upon exercise to receive Stock equal in
value to the excess of the Fair Market Value of the shares of Stock subject to
the right over the Fair Market Value of such shares of Stock on the date of
grant.
"Securities
Act": The Securities Act of 1933, as amended.
"Stock":
Common Stock of the Company, par value $.01 per share.
"Stock
Options": Options entitling the recipient to acquire shares of
Stock upon payment of the exercise price.
"Unrestricted
Stock": An Award of Stock not subject to any restrictions
under the Plan.
A-10
Invitation
to Carter's, Inc.
2009
Annual Meeting of Shareholders
Carter's,
Inc. will conduct its Annual Meeting of Shareholders on Thursday, May 14, 2009,
at 8:00 a.m. The meeting will be held at our offices located at 1170 Peachtree
Street NE, 6th Floor,
Atlanta, Georgia 30309.
You are
cordially invited to join us for refreshments prior to the Annual Meeting,
beginning at 7:30 a.m. The meeting will convene promptly at 8:00
a.m.
In order
to expedite your entrance into the meeting, please present this invitation at
the registration desk. Invitations or proof of stock ownership as of
the record date of March 27, 2009 will be required to enter the
meeting. Photo identification is also required for
admission.
We look
forward to your participation.
Important
Notice Regarding Internet Availability of Proxy Materials for the Annual
Meeting:
The
Notice and Proxy Statement and Annual Report are available at
www.proxyvote.com.
|
PROXY
|
||
|
CARTER’S,
INC.
|
||
|
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF CARTER’S,
INC.
|
||
|
ANNUAL
MEETING OF SHAREHOLDERS - MAY 14, 2009
|
||
|
The
undersigned hereby appoints Michael D. Casey and Joseph Pacifico as
proxies (each with the power to act alone and with full power of
substitution) to vote, as designated herein, all shares the undersigned is
entitled to vote at the Annual Meeting of Shareholders of
Carter’s, Inc. to be held on May 14, 2009, and at any and all
adjournments thereof. The proxies are authorized to vote in
their discretion upon such other business as may properly come before the
meeting and any and all adjournments thereof.
|
||
|
Your
vote on the election of Class III Directors, the Amended and Restated 2003
Equity Incentive Plan, and ratification of the appointment of
PricewaterhouseCoopers LLP as the Company’s independent registered public
accounting firm for fiscal 2009 may be specified on the reverse
side. The nominees for Class III Directors are: Paul
Fulton, John R. Welch, and Thomas E. Whiddon.
|
||
|
IF
PROPERLY SIGNED, DATED, AND RETURNED, THIS PROXY WILL BE VOTED AS
SPECIFIED ON THE REVERSE SIDE, OR, IF NO CHOICE IS SPECIFIED, THIS PROXY
WILL BE VOTED “FOR” THE ELECTION OF ALL DIRECTOR NOMINEES IN PROPOSAL 1,
“FOR” THE APPROVAL OF THE AMENDED AND RESTATED 2003 EQUITY INCENTIVE PLAN
SET FORTH IN PROPOSAL 2, AND “FOR” THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR FISCAL 2009 IN PROPOSAL 3.
|
||
|
(Continued
and to be signed on the reverse side)
|
|
VOTE
BY INTERNET - www.proxyvote.com
|
||
|
1170
PEACHTREE STREET NE
SUITE
900
ATLANTA,
GEORGIA 30309
|
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 website and then follow the instructions to obtain your
records and to create an electronic voting instruction form.
|
|
|
ELECTRONIC
DELIVERY OF FUTURE SHAREHOLDER COMMUNICATIONS
|
||
|
If
you would like to reduce the costs incurred by Carter’s, Inc. in mailing
proxy materials, you can consent to receiving all future proxy statements,
proxy cards, and annual reports electronically via e-mail or the
Internet. To sign up for electronic delivery, please follow the
instructions above to vote using the Internet and, when prompted, indicate
that you agree to receive or access shareholder communications
electronically in future years.
|
||
|
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 and then
follow the instructions.
|
||
|
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 Carter’s, Inc., c/o Broadridge
Financial Solutions, Inc., 51 Mercedes Way, Edgewood, NY
11717.
|
TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: x
|
M12901 KEEP
THIS PORTION FOR YOUR RECORDS
|
||
|
DETACH
AND RETURN THIS PORTION ONLY
|
THIS
PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
CARTER’S,
INC.
|
||||||||||||||||||||||||||
|
Vote on Election of Directors
|
||||||||||||||||||||||||||
|
1.
Election
of Class III Directors:
|
For
All
|
Withhold
All
|
For
All
Except
|
To
withhold authority to vote for any individual
nominee(s),
mark “For All Except” and write the number(s) of the nominee(s) on the
line below.
|
||||||||||||||||||||||
|
Nominees:
|
o
|
o
|
o
|
|||||||||||||||||||||||
|
01)
Paul Fulton
|
||||||||||||||||||||||||||
|
02)
John R. Welch
|
||||||||||||||||||||||||||
|
03)
Thomas E. Whiddon
|
||||||||||||||||||||||||||
|
The
Board of Directors recommends a vote FOR the election of the
Class III Nominees.
|
||||||||||||||||||||||||||
|
Vote on Approval of Plan
|
||||||||||||||||||||||||||
|
2.
Approval
of the Amended and Restated 2003 Equity Incentive
Plan.
|
For
o
|
Against
o
|
Abstain
o
|
|||||||||||||||||||||||
|
The
Board of Directors recommends a vote FOR approval of the
Amended and Restated 2003 Equity Incentive Plan.
|
||||||||||||||||||||||||||
|
Vote
on Ratification of PricewaterhouseCoopers LLP
|
||||||||||||||||||||||||||
|
3.
Ratification
of the appointment of PricewaterhouseCoopers LLP
as independent registered public
accounting firm for fiscal 2009.
|
For
o
|
Against
o
|
Abstain
o
|
|||||||||||||||||||||||
|
The
Board of Directors recommends a vote FOR the ratification of
the appointment of PricewaterhouseCoopers LLP as independent registered
public accounting firm for fiscal 2009.
|
||||||||||||||||||||||||||
|
PLEASE
SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
|
||||||||||||||||||||||||||
|
Yes
|
No
|
|||||||||||||||||||||||||
|
Please
indicate if you plan to attend this meeting.
|
o
|
o
|
||||||||||||||||||||||||
|
Note:
Please sign exactly as your name or names appear(s) on this
Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney,
trustee, or guardian, please give full title as such. If the
signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a
partnership, please sign in partnership name by authorized
person.
|
||||||||||||||||||||||||||
|
Signature
[PLEASE SIGN WITHIN BOX]
|
Date
|
Signature
(Joint Owners)
|
Date
|
|||||||||||||||||||||||