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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐ |
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Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to §240.14a-12
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee paid previously with preliminary materials.
☐ Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.
DESTINATION XL GROUP, INC.
Notice of Annual Meeting of Stockholders
to be held on August 8, 2024
Notice is hereby given that the 2024 Annual Meeting of Stockholders of Destination XL Group, Inc. (the “Company”) will be held at the corporate offices of the Company, 555 Turnpike Street, Canton, Massachusetts 02021 at 9:30 A.M., local time, on Thursday, August 8, 2024 for the following purposes:
These proposals are more fully described in the Proxy Statement following this Notice.
The Board of Directors recommends that you vote (i) FOR the election of all seven nominees to serve as directors of the Company, (ii) FOR the approval, on an advisory basis, of named executive officer compensation, (iii) FOR the approval of amendments to our 2016 Incentive Compensation Plan, including the increase in the total number of shares authorized for issuance under the plan and (iv) FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending February 1, 2025
Along with the attached Proxy Statement, we are sending you a copy of our Annual Report on Form 10-K for the fiscal year ended February 3, 2024.
The Board of Directors has fixed the close of business on June 12, 2024 as the record date for the determination of the stockholders entitled to notice of, and to vote at, the Annual Meeting. Accordingly, only stockholders of record at the close of business on that date will be entitled to vote at the Annual Meeting. A list of the stockholders of record as of the close of business on June 12, 2024 will be available for inspection by any of our stockholders for any purpose germane to the Annual Meeting during normal business hours at our principal executive offices, 555 Turnpike Street, Canton, Massachusetts 02021, beginning on July 24, 2024 and at the Annual Meeting.
Stockholders are cordially invited to attend the Annual Meeting in person. Regardless of whether you plan to attend the Annual Meeting, please mark, date, sign and return the enclosed proxy to ensure that your shares are represented at the Annual Meeting.
By order of the Board of Directors,
/s/ ROBERT S. MOLLOY
ROBERT S. MOLLOY
Secretary
Canton, Massachusetts
June 28, 2024
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on August 8, 2024: The Proxy Statement and 2024 Annual Report to Stockholders are available at:
https://investor.dxl.com/financial-information/annual-reports
TABLE OF CONTENTS
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Proposal 2: Advisory Vote to Approve Named Executive Officer Compensation |
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38 |
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Proposal 3: Approval of Amendments to the 2016 Incentive Compensation Plan |
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39 |
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Proposal 4: Ratification of Appointment of Independent Registered Public Accounting Firm |
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Appendix A - 2016 Incentive Compensation Plan, as proposed to be amended |
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A- 1 |
DESTINATION XL GROUP, INC.
555 Turnpike Street
Canton, Massachusetts 02021
(781) 828-9300
Proxy Statement
Annual Meeting of Stockholders
August 8, 2024
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Purpose and Distribution of Proxy Materials
This Proxy Statement and the enclosed form of proxy are being mailed to our stockholders on or about June 28, 2024, in connection with the solicitation by the Board of Directors (the “Board”) of Destination XL Group, Inc. (the “Company”) of proxies to be used at the Annual Meeting of Stockholders, to be held at the Company’s corporate headquarters located at 555 Turnpike Street, Canton, Massachusetts 02021 at 9:30 A.M., local time, on Thursday, August 8, 2024 and at any and all adjournments thereof (the “Annual Meeting”). This Proxy Statement describes the matters to be voted on at the Annual Meeting and contains other required information.
Stockholders Entitled to Vote
Only holders of record of our common stock, par value $0.01 per share, at the close of business on June 12, 2024, the record date for the Annual Meeting, will be entitled to notice of, and to vote at, the Annual Meeting. On that date, there were 58,235,323 shares of common stock issued and outstanding. Each share is entitled to one vote at the Annual Meeting.
How to Vote
Stockholders of record may vote by mail or in person at the meeting. If you choose to vote by mail, please complete and mail the enclosed proxy card in the enclosed postage prepaid envelope. If your shares are held in a stock brokerage account or by a bank, you must follow the voting procedures of your broker or bank.
Voting Instructions
When a proxy is returned properly executed, the shares represented will be voted in accordance with the stockholder’s instructions.
Stockholders are encouraged to vote on the matters to be considered. If no instructions have been specified by a stockholder, however, the shares covered by an executed proxy will be voted (i) FOR the election of all seven nominees to serve as directors of the Company, (ii) FOR the approval, on an advisory basis, of named executive officer compensation, (iii) FOR the amendments to the 2016 Incentive Compensation Plan, (iv) FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm, for the fiscal year ending February 1, 2025 and (v) in the discretion of the proxies named in the proxy card with respect to any other matters properly brought before the Annual Meeting. We are not aware of any other matter that may be properly presented at the Annual Meeting.
If your shares are held in a stock brokerage account or by a bank, you must follow the voting procedures of your broker or bank. If you do not give voting instructions to your broker or bank, your broker or bank does not have discretion to vote your shares on the proposals in this Proxy Statement, except for Proposal 4 to ratify the appointment of our independent registered public accounting firm, which is considered a “routine” proposal. A broker “non-vote” occurs when the broker or bank who is the record holder of the shares does not vote on a particular proposal, either because it does not have discretionary voting power to vote the shares or has not received voting instructions from the beneficial owner.
As a result, if you are not the record holder of your shares, it is critical that you provide instructions to your broker or bank if you want your vote to count.
1
Revoking Your Proxy or Changing Your Vote
You may revoke your proxy at any time before it has been exercised as follows:
If you are not a record holder and your shares are held by your broker or bank, you must contact your broker or bank to change your vote or obtain a legal proxy to vote your shares if you wish to cast your vote in person at the Annual Meeting.
Quorum Requirements
In order to carry on the business of the Annual Meeting, we must have a quorum. This means at least a majority of the outstanding shares of common stock eligible to vote must be represented at the Annual Meeting, either by proxy or in person. Abstentions and broker non-votes will be counted as present or represented at the Annual Meeting for purposes of determining the presence or absence of a quorum.
Approval of a Proposal
A majority of the votes properly cast “FOR” a matter is required for all proposals. In addition, as described in more detail in Proposal 2 below, Proposal 2 is an advisory vote and is non-binding.
Votes cast means the votes actually cast “FOR” or “AGAINST” a particular proposal, whether in person or by proxy. With respect to all matters presented at the Annual Meeting, abstentions and non-votes will not be deemed to be votes “cast” with respect to such matters and will not count as votes “FOR” or “AGAINST” such matter. Votes will be tabulated by our transfer agent subject to the supervision of the person designated by the Board as an inspector.
2
PROPOS AL 1
ELECTION OF DIRECTORS
Our Board, in accordance with our Fourth Amended and Restated By-Laws (the “By-Laws”), has set the number of members at seven directors.
At the Annual Meeting, seven nominees will be elected to serve on the Board until the 2025 Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified. Accordingly, the Nominating and Corporate Governance Committee has recommended, and our Board has nominated, Harvey S. Kanter, Carmen R. Bauza, Jack Boyle, Lionel F. Conacher, Willem Mesdag, Ivy Ross and Elaine K. Rubin as nominees, all of whom currently serve as members of our Board.
Unless a proxy shall specify that it is not to be voted for a nominee, it is intended that the shares represented by each duly executed and returned proxy will be voted in favor of the election as directors of Harvey S. Kanter, Carmen R. Bauza, Jack Boyle, Lionel F. Conacher, Willem Mesdag, Ivy Ross and Elaine K. Rubin. Although management expects all nominees to serve if elected, proxies will be voted for a substitute if a nominee is unable to accept nomination or election. Cumulative voting is not permitted.
Vote Needed for Approval
The affirmative vote of a majority of the shares of common stock properly cast at the Annual Meeting, in person or by proxy, is required for the election of each of the nominees.
Recommendation
The Board of Directors recommends that you vote “FOR”
the election of the seven individuals named above as directors of our Company.
The following table sets forth the names, ages as of June 28, 2024, and certain other information for each of our current directors, all terms expiring at the Annual Meeting.
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Name |
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Age |
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Director
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Audit |
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Compensation |
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Nominating and
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Cybersecurity
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Lionel F. Conacher, Chairman of the Board and Director |
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61 |
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2018 |
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C |
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X |
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Harvey S. Kanter, President and Chief Executive Officer and Director |
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62 |
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2019 |
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Carmen R. Bauza, Director |
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62 |
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2021 |
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X |
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X |
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Jack Boyle, Director |
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56 |
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2017 |
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X |
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C |
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Willem Mesdag, Director |
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70 |
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2014 |
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X |
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C |
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Ivy Ross, Director |
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68 |
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2013 |
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X |
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C |
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Elaine K. Rubin, Director |
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61 |
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2021 |
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X |
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X |
C= current member and committee chairperson
X= current member of the committee
Board Nominees
Set forth below is certain information regarding our current board members being nominated for re-election at the Annual Meeting, and includes information furnished by them as to their principal occupations and business experience for the past five years and certain directorships held by each director within the past five years:
Lionel F. Conacher has been a director since June 2018 and became Chairman of the Board on August 12, 2020. Since September 2021, Mr. Conacher has served as a member of the board of directors for Better Choice Company Inc., a publicly traded company and served as a member of its audit committee from November 2021 until September 2022. From September 2022 until May 2023, he served as its interim chief executive officer. Mr. Conacher was a managing partner of Next Ventures, GP from August 2018 until February 2021. From January 2011 to June 2018, Mr. Conacher was a senior advisor for Altamont Capital Partners LLC (“ACP”), a private equity firm. Prior to joining ACP, from April 2008 until July 2010, Mr. Conacher was the president and chief operating officer of Thomas Weisel Partners, an investment bank. Additionally, Mr. Conacher served as the chairman of Wunderlich Securities, an investee company of ACP, from December 2013 until July 2017. Mr. Conacher previously served as a member of the board of directors for AmpHP Inc., a venture-backed human performance company. He also formerly served as a member of the board of directors of Mervin Manufacturing, a leading designer and manufacturer of snow boards and other board sports equipment, and PowerDot, Inc., a consumer electronics company that markets a muscle recovery and performance tool. Mr. Conacher brings extensive financial and operational experience to the Board.
3
Harvey S. Kanter is the President, Chief Executive Officer and a director of the Company. Mr. Kanter joined the Company in February 2019 in a transition role as Advisor to the Acting CEO and assumed the role of President and Chief Executive Officer and a director of the Company in April 2019. Mr. Kanter served as a non-executive co-chair, Seattle University Center for Leadership Formation, Albers School of Business and Economics from February 2021 until February 2024. Mr. Kanter served as a director and a member of the compensation committee of Potbelly Corporation, a publicly traded company, from August 2015 until May 2019. Mr. Kanter has over 35 years of business experience, with an extensive background in the retail industry having served from March 2012 until June 2017 as the president and chief executive officer of Blue Nile, Inc., a leading online retailer of high-quality diamonds and fine jewelry and formerly a publicly traded company. From March 2012 until February 2020, Mr. Kanter also served as a member of the board of directors of Blue Nile, Inc. and, from January 2014 until February 2020 as its chairman. From January 2009 to March 2012, Mr. Kanter was the chief executive officer and president of Moosejaw Mountaineering and Backcountry Travel, Inc., a leading multi-channel retailer of premium outdoor apparel and gear. From April 2003 to June 2008, Mr. Kanter served in various executive positions at Michaels Stores, Inc. He was a former brand ambassador for the Fred Hutch Cancer Research Institute, and previously served as an advisory member to the Seattle University Executive MBA Program. Mr. Kanter brings an extensive knowledge of integrated-commerce retailing, with strong strategic and operational expertise.
Carmen R. Bauza was appointed a director of the Company in December 2021. In March 2023, Ms. Bauza joined the board of directors of OneWater Marine Inc., a publicly traded company, and serves as a member of its audit and compensation committees. Since May 2022, Ms. Bauza has also served on the board of directors of Zumiez, Inc., a publicly traded company, and serves as a member of its audit and governance and nominating committees. Ms. Bauza serves as a member of the board of managers of Claire’s Holdings LLC, which she joined in October 2018. Most recently, Ms. Bauza was the chief merchandising officer at Fanatics, Inc. from January 2019 until April 2021. Prior to that, she was the chief merchandising officer at HSN from November 2016 until December 2017 and the senior vice president, general merchandise manager consumables, health and wellness at Walmart from June 2007 to October 2016. She previously held roles at Bath Body Works, Five Below and The Walt Disney Company. Ms. Bauza currently serves as a member of the board of trustees at Seton Hill University and as a member of the advisory board of RoundTable Healthcare Partners Council. Ms. Bauza brings extensive retail and merchandising experience to the Board.
Jack Boyle has been a director since August 2017. Since February 2024, Mr. Boyle has been the president, buying and North America for Fanatics, Inc., a market leader for officially licensed sports merchandise. From February 2019 to January 2024, Mr. Boyle was the global co-president of direct to consumer/omni-channel for Fanatics, Inc. Mr. Boyle originally joined Fanatics as president of merchandising in June 2012, and from December 2017 to February 2019, served as co-president of North America direct-to-consumer/omni-channel. From February 2005 to June 2012, Mr. Boyle was the executive vice president, general merchandising manager of women’s apparel, intimate, cosmetics and accessories for Kohl’s Corporation. From October 2003 to February 2005, he served as senior vice president, divisional merchandise manager of women’s apparel for Kohl’s Corporation, vice president of junior sportswear from July 2000 to October 2003 and vice president of planning/allocation for women's apparel from December 1999 to July 2000. From June 1990 to December 1999, Mr. Boyle held various merchandise positions, including divisional merchandise manager of women’s, at May Company. Mr. Boyle brings to the Board extensive experience in merchandising, brand management and omni-channel leadership.
Willem Mesdag has been a director since January 2014. Mr. Mesdag is the managing partner of Red Mountain Capital Partners LLC, an investment management firm, and since May 2019, has also served as a Senior Advisor for HPS Investment Partners, a global investment firm. Prior to founding Red Mountain in 2005, Mr. Mesdag was a partner and managing director of Goldman Sachs Co., which he joined in 1981. Prior to Goldman Sachs, he was a securities lawyer at Ballard, Spahr, Andrews Ingersoll, which he joined in 1978. He also currently serves on the board of Heidrick Struggles International, Inc., a publicly traded company, for which he chairs the audit and finance committee and serves on the human resources and compensation committee. He previously served on the boards of 3i Group plc, Cost Plus, Inc., Encore Capital Group, Inc., Nature’s Sunshine Products, Inc., Skandia AB and Yuma Energy, Inc., all of which are or were publicly traded companies. Having had an extensive career in international investment banking and finance and having served on domestic and international public company boards, Mr. Mesdag brings to the Board significant knowledge and experience related to business and financial issues and corporate governance as well as an investor's perspective.
Ivy Ross has been a director since January 2013. In May 2014, Ms. Ross joined Google as head of glass and is currently a vice president of hardware design at Google. From July 2011 until April 2014, Ms. Ross was the chief marketing officer of Art.com where she oversaw the company's marketing, branding, merchandising and user-experience functions. Prior to Art.com, from June 2008 to June 2011, Ms. Ross was EVP of marketing for the Gap brand, and also acted as the creative catalyst for all brands within Gap, Inc. Ms. Ross also has held senior creative and product design positions at Disney Stores North America, Mattel, Calvin Klein, Coach, Liz Claiborne, Swatch Watch and Avon. She also has served on Proctor and Gamble’s design board since its inception. With her industry insight and marketing expertise, Ms. Ross provides a valuable perspective to the Board as we continue to build our DXL brand.
4
Elaine K. Rubin has been a director since April 2021. Since January 2010, Ms. Rubin has been the founder and president of Digital Prophets Network, LLC, a consulting, advisory and placement firm with a network of digital commerce experts that supports the growth of retail and direct-to-consumer businesses. Since October 2013, she has also served as an advisor to Hint, Inc., which produces fruit-infused water. Prior to that, Ms. Rubin previously held leadership positions at 1800flowers.com, iVillage.com and amazon.com. She previously served on the boards of Smart Final Stores, Inc. and Blue Nile, Inc., both of which were formerly publicly traded companies. Ms. Rubin co-founded shop.org in February 1996 and served as its elected chair of the board of directors from February 1996 to October 2007 and served on the board of the National Retail Federation (NRF) from 2001 until 2010. Ms. Rubin brings extensive knowledge and experience of digital commerce business and provides valuable insights to the Board as we continue to grow our direct business.
All directors hold office until the next Annual Meeting of Stockholders and until their respective successors have been duly elected and qualified or until their earlier death, resignation or removal.
There are no family relationships between any of our directors and executive officers.
5
CORPORATE G OVERNANCE
Board Composition
Our Board is currently comprised of seven members and there are no vacancies.
Our Board met eight times during our fiscal year ended February 3, 2024 (“fiscal 2023”). All directors attended at least 75% of the Board meetings and meetings of the committees of the Board on which each director served. We believe that it is important for the members of the Board to attend our annual stockholder meetings. All members of the Board attended our 2023 Annual Meeting of Stockholders.
Board Diversity
We recognize the value of diversity at the Board level and believe that our Board currently comprises an appropriate mix of background, diversity and expertise. Although we do not have a formal separate written policy, our Nominating and Corporate Governance Committee is required under its charter to recommend nominees that ensure sufficient diversity of backgrounds on our Board.
The Board Diversity Matrix below presents the composition of our Board by gender identity and demographic background in accordance with Rule 5606(f) of The Nasdaq Stock Market (“Nasdaq”).
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Board Diversity Matrix as of June 12, 2024 |
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Female |
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Male |
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Non-Binary |
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Did Not Disclose Gender |
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Total number of directors: 7 |
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Part I: Gender Identity |
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Directors |
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3 |
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4 |
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- |
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- |
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Part II: Demographic Background |
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African American or Black |
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- |
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- |
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- |
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- |
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Alaskan Native or Native American |
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- |
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- |
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- |
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- |
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Asian |
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- |
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- |
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- |
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- |
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Hispanic or Latinx |
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1 |
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- |
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- |
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- |
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Asian |
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- |
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- |
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- |
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- |
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Native Hawaiian or Pacific Islander |
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- |
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- |
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- |
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- |
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White |
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2 |
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4 |
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- |
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- |
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Two or more Races or Ethnicities |
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- |
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- |
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- |
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- |
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LGBTQ+ |
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- |
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- |
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- |
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- |
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Did not disclose demographic background |
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- |
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- |
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- |
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- |
Corporate Governance Highlights
We comply with the corporate governance requirements imposed by the Sarbanes-Oxley Act of 2002, the SEC and Nasdaq. To assist the Board in fulfilling its responsibilities, we have adopted certain Corporate Governance Guidelines (the "Governance Guidelines"). Many features of our corporate governance principles are discussed in other sections of this proxy statement, but some of the highlights are:
6
Stockholder Engagement
Members of our Board and senior management regularly engage with our stockholders throughout the year and welcome their feedback on our practices and policies.
Independent Directors
A majority of the members of the Board are “independent” under the rules of Nasdaq. The Board has determined that the following current directors are independent: Mses. Bauza, Ross and Rubin and Messrs. Boyle, Conacher and Mesdag.
Committees o f the Board
Our Board has four standing committees: the Nominating and Corporate Governance Committee, the Audit Committee, the Compensation Committee and the Cybersecurity and Data Privacy Committee. Each committee is comprised of directors who are “independent.”
Nominating and Corporate Governance Committee
The Nominating and Corporate Governance Committee (the “Nominating Committee”) has a written charter, which can be found under “Corporate Governance– Charters Policies” on the Investor Relations page of our website at https://investor.dxl.com . The Nominating Committee was established to perform functions related to governance of our Company, including, but not limited to, planning for the succession of our CEO and such other officers as the Nominating Committee shall determine from time to time, recommending to the Board individuals to stand for election as directors, overseeing and recommending the selection and composition of committees of the Board, and developing and recommending to the Board a set of corporate governance principles applicable to our Company. The Nominating Committee also has responsibility for overseeing the Company’s policies, practices and disclosures with respect to sustainability and environmental, social and governance (ESG) factors, including overseeing the assessment of climate risks. The Nominating Committee has the authority to retain independent advisors, with all fees and expenses to be paid by the Company. The current members of the Nominating Committee are Mr. Boyle and Mses. Bauza and Rubin, each of whom is “independent” under the rules of Nasdaq. The Nominating Committee met five times during fiscal 2023.
7
The Board's current policy with regard to the consideration of director candidates recommended by stockholders is that the Nominating Committee will review and consider any director candidates who have been recommended by stockholders in compliance with the procedures established from time to time by the Nominating Committee, and conduct inquiries it deems appropriate. The Nominating Committee will consider for nomination any such proposed director candidate who is deemed qualified by the Nominating Committee in light of the minimum qualifications and other criteria for Board membership approved by the Nominating Committee from time to time.
While the Nominating Committee does not have a formal diversity policy for Board membership and identifies qualified candidates without regard to race, color, disability, gender, national origin, religion or creed, it does seek to ensure the fair representation of all stockholder interests on the Board. In that regard, in considering candidates for the Board, the Nominating Committee considers, among other factors, diversity with respect to viewpoint, skills and experience. The Board believes that the use of these general criteria, along with the minimum qualifications listed below, will result in nominees who represent a mix of backgrounds and experiences that will enhance the quality of the Board.
At a minimum, the Nominating Committee must be satisfied that each nominee, both those recommended by the Nominating Committee and those recommended by stockholders, meets the following minimum qualifications:
The current procedures to be followed by stockholders in submitting recommendations for director candidates can be found in Section 4.15 of our By-Laws.
The Nominating Committee is responsible for identifying and evaluating individuals, including nominees recommended by stockholders, believed to be qualified to become Board members and recommending to the Board the persons to be nominated by the Board for election as directors at any annual or special meeting of stockholders and the persons to be elected by the Board to fill any vacancies on the Board. The Nominating Committee may solicit recommendations from any or all of the following sources: non-management directors, the CEO, other executive officers, third-party search firms or any other source it deems appropriate. The Nominating Committee will review and evaluate the qualifications of any such proposed director candidate, and conduct inquiries it deems appropriate. The Nominating Committee will evaluate all such proposed director candidates in the same manner, with no regard to the source of the initial recommendation of such proposed director candidate. Accordingly, there are no differences in the manner in which the Nominating Committee evaluates director nominees recommended by stockholders. In identifying and evaluating candidates for membership on the Board, the Nominating Committee will take into account all factors it considers appropriate, which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity, and the extent to which the candidate would fill a present need on the Board.
Audit Committee
We have a separately designated standing Audit Committee established in accordance with section 3(a)(58)(A) of the Exchange Act. The Audit Committee is currently comprised of Messrs. Conacher and Mesdag and Ms. Ross. Each of the members of the Audit Committee is independent, as independence for Audit Committee members is defined under the rules of Nasdaq. Messrs. Conacher and Mesdag each qualifies as an audit committee financial expert under the rules of the SEC.
The Audit Committee operates under a written charter, which can be found under “Corporate Governance- Charters Policies” on the Investor Relations page of our website at https://investor.dxl.com.
8
The purpose of the Audit Committee is to (i) assist the Board in fulfilling its oversight responsibilities to the stockholders, potential stockholders and the investment community; (ii) oversee the audits of our financial statements and our relationship with our independent registered public accounting firm; (iii) promote and further the integrity of our financial statements and oversee the qualifications, independence and performance of our independent registered public accounting firm (including being solely responsible for appointing, determining the scope of, evaluating and, when necessary, terminating the relationship with the independent registered public accounting firm); and (iv) provide the Board and the independent registered public accounting firm, unfiltered access to each other on a regular basis. The Audit Committee has the authority to retain independent advisors, with all fees and expenses to be paid by the Company. The Audit Committee meets at least quarterly and as often as it deems necessary to perform its responsibilities. During fiscal 2023, the Audit Committee met six times.
For additional information regarding the Audit Committee, see the “ Report of the Audit Committee ” included elsewhere in this Proxy Statement.
Compensation Committee
The primary purpose of the Compensation Committee is to discharge the Board’s responsibilities relating to executive compensation. The Compensation Committee also reviews and independently approves, or makes recommendations to the full Board, all stock-based compensation awards to our executive officers under our equity incentive plans. The Compensation Committee has the authority to retain independent advisors, with all fees and expenses to be paid by the Company. The Compensation Committee met five times during fiscal 2023. The current members of the Compensation Committee are Messrs. Mesdag, Boyle and Conacher, each of whom is “independent” under the rules of Nasdaq.
The Compensation Committee operates under a written charter, which can be found under “Corporate Governance – Charters Policies” on the Investor Relations page of our website at https://investor.dxl.com .
The Compensation Discussion and Analysis recommended by the Compensation Committee to be included in the Proxy Statement is included in this Proxy Statement. Among other things, the Compensation Discussion and Analysis describes in greater detail the Compensation Committee’s role in the executive compensation process.
Cybersecurity and Data Privacy Committee
The Cybersecurity and Data Privacy Committee (the “Cybersecurity Committee”) oversees the monitoring and management of cyber risk and data privacy in the Company. The Cybersecurity Committee has the authority to retain independent advisors, with all fees and expenses to be paid by the Company. The current members of the Cybersecurity Committee are Mses. Bauza, Ross and Rubin. The Cybersecurity Committee met four times during fiscal 2023.
Pursuant to its charter, our Cybersecurity Committee (i) assists our Board in fulfilling its risk oversight responsibilities with respect to the protection of the Company’s assets, including confidential, proprietary and personal information, reputation and goodwill in all forms; (ii) supervises and monitors the soundness of our cybersecurity and data protection strategies and practices; (iii) oversees and monitors our material compliance with applicable information security, privacy and data protection laws, industry standards and contractual requirements; (iv) promotes and furthers the integrity, adoption and coordination of our data security processes across the Company to help ensure that data and system security is a Company-wide business objective and priority; and (v) oversees our cybersecurity and data protection performance and the overall implementation of our cybersecurity and data protection strategy.
The Cybersecurity Committee operates under a written charter, which can be found under “Corporate Governance –Charters Policies” on the Investor Relations page of our website at https://investor.dxl.com .
Board Leadership Structure
The Board believes that the Company and its stockholders are best served by maintaining flexibility to have any director serve as Chairperson of the Board. Under our Corporate Governance Guidelines, if the Chairperson is not independent, the Board appoints an independent Lead Director.
Our Board delegates substantial responsibility to its committees, including as described below. We believe that the independent committees of our Board and their chairpersons are an important aspect of the leadership structure of our Board.
9
Risk Oversight
Our Board, as a whole and through its committees, has responsibility for the oversight of enterprise risk management. With the oversight of our full Board, our executive officers are responsible for the day-to-day management of the material risks we face. The involvement of the full Board in setting our business strategy is a key part of its oversight of risk management and in determining what constitutes an appropriate level of risk for us. The full Board receives updates from our executive officers and outside advisors regarding certain risks our Company faces, including various operating risks and corporate governance best practices. At least annually, our senior management team meets to review our identified risks and compensating controls as well as any potential new risks and, when appropriate, presents to the full Board.
In addition, our Board committees each oversee certain aspects of risk management. Our Audit Committee is responsible for overseeing the management of risks associated with the Company’s financial reporting, accounting and auditing matters; our Compensation Committee oversees risks associated with our human capital and compensation policies and programs; our Cybersecurity Committee oversees the management of risks associated with cyber risk and data privacy issues; and our Nominating Committee oversees the management of risks associated with director independence, conflicts of interest, composition and organization of our Board, and overall governance structure, director succession planning and our environmental, sustainability and social programs. Our Board committees report their findings to the full Board.
Sustainability
Our Company recognizes the importance of addressing and prioritizing environmental, social and governance (ESG) issues throughout our business. In fiscal 2021, we engaged with a third-party firm to assist us in the development of the Company's initial ESG strategy and initiatives. Our Sustainability Committee, consisting of a cross-disciplinary team from corporate management, reports to the Nominating and Corporate Governance Committee and, when appropriate, presents to our full Board. Our senior management team is working with our Sustainability Committee to develop short- and long-term ESG goals and a related action plan. Information regarding our current efforts, and our ongoing ESG initiatives can be found on our corporate website at https://investor.dxl.com . The information included in, referenced to, or otherwise accessible through our website, is not incorporated by reference in, or considered to be part of, this document or any document unless expressly incorporated by reference therein.
Corporate Governance Guidelines
The Board has adopted Corporate Governance Guidelines that set forth our governance principles relating to, among other things, director independence, director qualifications and responsibilities, board structure and meetings, and management succession.
A copy of the Corporate Governance Guidelines can be found under “Corporate Governance – Charters Policies” on the Investor Relations page of our corporate website, which is at https://investor.dxl.com .
Code of Ethics
We have adopted a Code of Ethics for Directors, Officers and Financial Professionals (the “Code of Ethics”). The full text of the Code of Ethics can be found under “Corporate Governance – Charters Policies” on the Investor Relations page of our corporate web site, which is at https://investor.dxl.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding any amendment to, or waiver from, a provision of our Code of Ethics by posting such information on our website. We also have a Code of Ethics for all of our associates. Annually, our directors and associates, including our officers, certify that they have read and are in compliance with our Code of Ethics.
Compensation Committee Interlocks and Insider Participation
Each of Willem Mesdag, Jack Boyle and Lionel F. Conacher served as a member of the Compensation Committee during fiscal 2023, none of whom was at any time during fiscal 2023 or at any other time an officer or employee of our Company. During fiscal 2023, none of our executive officers served as a member of the board of directors or compensation committee of any other entity that had one or more executive officers serving as a member of our Board or Compensation Committee.
10
DIRECTOR COMPENSATION
The Compensation Committee is responsible for reviewing and making recommendations to our Board with respect to the compensation paid to our non-employee directors.
The Company's Non-Employee Director Compensation Plan, as amended to date (the "Director Plan"), sets forth the compensation to be paid to our non-employee directors, including in the form of equity. The plan has a minimum equity ownership requirement that requires each director to receive at least 60% of their annual retainers in shares of common stock until the value of their equity ownership is equal to at least three times the annual retainer. Any shares issued to satisfy the minimum equity ownership requirement are issued under the Company’s 2016 Plan. The Director Plan also permits the Company’s non-employee directors to acquire shares of the Company’s common stock at fair market value by voluntarily electing to receive shares of common stock in lieu of cash fees for service as a director. In November 2023, the Director Plan was amended to permit directors the ability to select shares of deferred stock beginning in fiscal 2024. Any shares of deferred stock will be issued from the 2016 Plan.
The Director Plan is a stand-alone plan and is not a sub-plan under the 2016 Plan. Accordingly, shares issued under the Director Plan for voluntary elections to receive shares of common stock in lieu of cash fees do not reduce the shares available for issuance under the 2016 Plan. The maximum number of shares that can be issued in any quarter pursuant to the Director Plan is limited to 250,000 shares in the aggregate, with the shortfall paid in cash.
We believe that our Director Plan will support our ongoing efforts to attract and retain exceptional directors to provide strategic guidance to our Company. We believe that the total compensation that our non-employee directors receive is in line with our current peer group. Our non-employee directors were compensated under the plan as follows in fiscal 2023:
Director Compensation Table
The following table sets forth the compensation paid to our directors during fiscal 2023. Mr. Kanter is not included in the following table as he is a Named Executive Officer and, accordingly, received no compensation for his services as a director. Compensation earned by Mr. Kanter is included below in the “ Summary Compensation Table. ”
2023 DIRECTOR COMPENSATION TABLE
|
Name |
|
Fees Earned or
|
|
|
Stock
|
|
|
Option
|
|
|
All Other
|
|
|
Total
|
|
|||||
|
Lionel F. Conacher, Chairman |
|
$ |
195,000 |
|
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
$ |
195,000 |
|
|
Carmen R. Bauza |
|
|
54,000 |
|
|
|
80,996 |
|
|
|
— |
|
|
|
— |
|
|
|
134,996 |
|
|
Jack Boyle |
|
|
72,500 |
|
|
|
72,484 |
|
|
|
— |
|
|
|
— |
|
|
|
144,984 |
|
|
Willem Mesdag |
|
|
— |
|
|
|
144,991 |
|
|
|
— |
|
|
|
— |
|
|
|
144,991 |
|
|
Ivy Ross |
|
|
77,500 |
|
|
|
67,495 |
|
|
|
— |
|
|
|
— |
|
|
|
144,995 |
|
|
Elaine K. Rubin |
|
|
57,375 |
|
|
|
77,620 |
|
|
|
— |
|
|
|
— |
|
|
|
134,995 |
|
11
Compensation Discu ssion and Analysis
Executive Summary
This Compensation Discussion and Analysis provides a summary of our executive compensation philosophy and programs, and discusses the compensation paid to our Chief Executive Officer (“CEO”), our Chief Financial Officer (“CFO”) and certain of our other executive officers who served in fiscal 2023 (collectively, our “Named Executive Officers”).
Our Named Executive Officers for fiscal 2023 were:
Fiscal 2023 Financial and Executive Compensation Highlights
Fiscal 2023 proved to be a challenging year as uncertainty about the economy grew during the year, directly impacting the apparel retail market. The resulting decrease in consumer discretionary spending negatively impacted customer traffic and, as a result, our sales performance fell short of our expectations.
When we approved the plan for fiscal 2023, we had just completed two record years of sales and earnings and, while we expected our sales growth to slow slightly, we did not expect the slowdown in customer traffic that we began to see in the second quarter of fiscal 2023. Despite these headwinds, fiscal 2023 was the second highest year of sales in the history of our Company, only behind fiscal 2022. Furthermore, our operational discipline allowed us to maintain a solid gross margin, manage our operating expenses, resulting in $27.9 million of net income and an adjusted EBITDA margin (a non-GAAP measure) of 10.7%.
A significant accomplishment in fiscal 2023 was the development and finalization of our long-range plan. In connection with our long-range plan, we renegotiated Mr. Kanter's employment agreement, extending the initial term of the agreement until August 11, 2026. We believe that this was an important step to ensure Mr. Kanter will oversee the execution of our long-range plan.
We believe that the compensation earned by our Named Executive Officers in fiscal 2023 was aligned with our operating performance. The following table shows total compensation earned and total realized pay for each of the Named Executive Officers (NEOs) in fiscal 2023 as compared to fiscal 2022:
|
|
|
Total Compensation (1) |
|
|
Total Realized Pay (2) |
|
||||||||||||||||||
|
Named Executive Officer |
|
Fiscal 2023 |
|
|
Fiscal 2022 |
|
|
% Change |
|
|
Fiscal 2023 |
|
|
Fiscal 2022 |
|
|
% Change |
|
||||||
|
Harvey S. Kanter |
|
$ |
5,959,023 |
|
|
$ |
4,221,881 |
|
|
|
41.1 |
% |
|
$ |
4,269,385 |
|
|
$ |
6,881,634 |
|
|
|
(38.0 |
)% |
|
Peter H. Stratton, Jr. |
|
$ |
1,048,280 |
|
|
$ |
1,153,866 |
|
|
|
(9.2 |
)% |
|
$ |
1,124,903 |
|
|
$ |
1,287,281 |
|
|
|
(12.6 |
)% |
|
Anthony J. Gaeta |
|
$ |
872,760 |
|
|
$ |
831,020 |
|
|
|
5.0 |
% |
|
$ |
993,374 |
|
|
$ |
899,072 |
|
|
|
10.5 |
% |
|
Robert S. Molloy |
|
$ |
948,334 |
|
|
$ |
1,014,167 |
|
|
|
(6.5 |
)% |
|
$ |
1,320,125 |
|
|
$ |
1,088,916 |
|
|
|
21.2 |
% |
|
Allison Surette |
|
$ |
847,626 |
|
|
$ |
818,948 |
|
|
|
3.5 |
% |
|
$ |
904,688 |
|
|
$ |
850,290 |
|
|
|
6.4 |
% |
Executive Compensation Philosophy and Objectives
Our Compensation Committee is responsible for establishing, implementing and monitoring adherence to the Board’s compensation philosophy, which is to ensure that executive compensation is fair, reasonable, competitive and aligned with the interests of the Company’s stockholders.
12
The Compensation Committee believes that an effective executive compensation program will:
When reviewing compensation, the Compensation Committee emphasizes Direct Compensation, which consists of total cash compensation (base salary and annual performance-based cash incentive awards) plus long-term incentive awards. Every year, the Compensation Committee assesses the effectiveness of our compensation plans with the goal of strengthening our overall compensation program as appropriate, including by setting performance metrics to ensure that compensation is aligned with performance that drives stockholder value. We also compare our performance metrics to those used by our peers and take into consideration the recommendations of proxy advisory services.
Key Features of Our Executive Compensation Program
We believe that the Company’s executive compensation program includes key features that align the compensation for our executive officers with the interests of our stockholders.
|
What We Do |
What We Don’t Do |
|
Focus on performance-based pay |
No re-pricing of underwater options |
|
Balance short-term and long-term incentives |
No hedging or pledging of Company stock |
|
Use multiple targets for performance awards |
No tax gross-up on severance payments |
|
Provide executives with very limited perquisites |
No supplemental executive retirement plan |
|
Require “double-trigger” change-in-control provisions |
|
|
Maintain a “clawback” policy covering incentive cash and equity programs |
|
|
Seek to mitigate undue risk in compensation plans |
|
|
Utilize an independent compensation consultant |
|
Use of Compensation Consultants
The Compensation Committee has the authority to retain any compensation consultant, legal counsel and/or other adviser to assist in carrying out its duties, including the review of compensation of our Named Executive Officers. The Compensation Committee may accept, reject or modify any recommendations by compensation consultants or other outside advisors.
The Compensation Committee periodically consults with the Segal Group ("Segal"), formerly Sibson Consulting, an independent firm that specializes in benefits and compensation, with respect to the structure and competitiveness of the Company’s executive compensation program compared to its proxy peer group. The Compensation Committee has assessed Segal’s independence, and has concluded that no conflict of interest exists with respect to the services that it performs.
In August 2023, the Compensation Committee and Mr. Kanter agreed to extend the "initial term" of his employment agreement from April 1, 2025 to August 11, 2026. In connection with this extension, the Compensation Committee engaged Segal to review Mr. Kanter's base salary and total direct compensation as well as provide guidance on the terms, conditions and value of a performance award that served both as a retention award to extend his employment to August 2026 and satisfy the commitment in the employment agreement to grant Mr. Kanter a new performance award if the third tranche of his initial new-hire performance award did not vest. See “ Compensation Components and Fiscal 2023 Compensation Decisions ” and “ Employment Agreement - Harvey S. Kanter, Chief Executive Officer and Director ” below for additional information regarding the performance award granted in 2023. Based on market insights from Segal, including information derived from published surveys on CEO compensation in retail companies with annual revenues of $500 million to $1.0 billion and trends in CEO compensation, there were no other changes to Mr. Kanter's compensation.
In March of 2023, the Compensation Committee also engaged Korn Ferry to review its peer group for purposes of reviewing and determining compensation decisions for fiscal 2023. The Compensation Committee has assessed Korn Ferry’s independence and has concluded that no conflict of interest exists with respect to the services that it performs.
13
Fiscal 2023 Target Compensation
CEO Compensation . The Compensation Committee is responsible for determining the target compensation of our CEO. With respect to setting 2023 target compensation, working with Segal, the Compensation Committee compared each element of the CEO’s Direct Compensation to published survey data and data from the Company’s peer group. The Compensation Committee’s objective was that total target compensation should approximate the median target compensation of the Company’s peer group. In addition, as discussed below, in August 2023, the Company extended its employment agreement with Mr. Kanter, which included a grant of a performance stock units.
Other Named Executive Officers. Our CEO makes recommendations regarding the compensation paid to our other Named Executive Officers to the Compensation Committee for its review and approval. Our Named Executive Officers other than the CEO are provided with a competitive base salary and an opportunity to earn performance awards each year, which are driven by our overall financial targets, and to participate in our equity incentive plans.
In 2022, Korn Ferry completed a study that evaluated all positions at our corporate office, from entry level to the CEO, and using their job leveling methodology, created a career framework of job levels based on scope, complexity, and responsibilities of each role. The CEO, together with the Chief Human Resources Officer, uses this framework and the respective job levels when evaluating the annual compensation paid to the other Named Executive Officers.
Our Peer Group
When determining peer companies for use in reviewing and establishing compensation for our Named Executive Officers, we focus primarily on public companies within the specialty retail apparel business with similar revenue and/or market capitalization. The companies in the fiscal 2023 peer group were:
|
•
|
Big 5 Sporting Goods |
•
|
J.Jill, Inc. |
•
|
Vera Bradley |
|
|
|
|
|
|
|
|
•
|
Build-A-Bear Workshop, Inc. |
•
|
Kirkland’s, Inc. |
•
|
Vince Holding Corp. |
|
|
|
|
|
|
|
|
•
|
Cato Group |
•
|
Movado Group |
•
|
Zumiez, Inc. |
|
|
|
|
|
|
|
|
•
|
Citi Trends |
•
|
Shoe Carnival |
|
|
|
|
|
|
|
|
|
|
•
|
Delta Apparel, Inc. |
•
|
Tile Shop Holdings |
|
|
|
|
|
|
|
|
|
|
•
|
Duluth Holding, Inc. |
•
|
Tilly’s Inc. |
|
|
|
|
|
|
|
|
|
In order to develop an appropriate peer group, we considered domestic, publicly traded companies with a range of revenues and market capitalizations that may differ from those included by independent analysts such as Institutional Shareholder Services (ISS). We do so because we believe that companies doing business in specialty retail markets with omni-channel distribution models provide a better benchmark for total shareholder return. An independent analyst may include a company that falls within the same Standard Poor’s GICS code with similar revenue and market capitalization but with a different business model, business risks, geographic locations, customer base and industry traffic trends which, consequently, may have nothing in common with our Company. For example, a company that owns automotive dealerships is within the same GICS code as our Company, but clearly has a distinctively different business model and is not affected by the same trends that affect specialty retail apparel. As compared to our fiscal 2023 peers, we fell just below the median for revenues and slightly below the 85% percentile for market capitalization. Because our stock is so thinly traded, more weight was given to revenue than to market capitalization.
In fiscal 2024, the Compensation Committee engaged Korn Ferry again to review its peer group for fiscal 2024. As a result of that review and based on the recommendations of Korn Ferry, the Company has added Rocky Brands to its fiscal 2024 peer group and removed Tile Shop Holdings because it is not in the apparel business and therefore may not be affected by the same trends that affect specialty retail apparel.
Say-on-Pay
At our 2023 Annual Meeting, stockholders voted on a non-binding advisory proposal as to the frequency with which we should conduct an advisory vote on executive compensation (a "say-on-pay proposal"). At that meeting, and in accordance with the recommendation of our Board, 97.2% of votes cast voted for the “one-year” frequency for advisory votes on executive compensation. Therefore, we intend to hold an advisory “say-on-pay” vote every year until the next “say-on-pay” frequency vote by our stockholders which will be at our 2029 Annual Meeting.
At our 2023 Annual Meeting, stockholders voted on a non-binding advisory vote on executive compensation as disclosed in the 2023 Proxy Statement. Of the votes cast at the 2023 Annual Meeting on the “say-on-pay” proposal, 98.9% voted in favor of the
14
proposal. The Compensation Committee considered the results of the 2023 advisory vote and believes that it affirms support of our stockholders for our approach to executive compensation, namely, to align short- and long-term incentives with the Company’s financial performance. We will continue to consider the outcome of subsequent say-on-pay votes when making future compensation decisions for our executive officers.
Risk Assessment
We believe that our compensation programs do not provide incentives for unnecessary risk-taking by our employees. Our emphasis on performance-based annual and long-term incentive awards is designed to align executives with preserving and enhancing stockholder value. In addition, we use multiple objectives for our annual incentive plan (“AIP”), which limits the potential benefit from any single event of excessive risk-taking, and a cap on total payouts, as well as management processes in place for establishing key performance targets and monitoring our metrics. In addition, we have clawback policies in place relating to recoupment of compensation in the event of accounting restatements and misconduct of our executives, as described below under “Clawback Policies.” Based on these considerations, among others, we do not believe that our compensation policies and practices create risks that are likely to have a material adverse effect on our Company.
Compensation Components and Fiscal 2023 Compensation Decisions
We believe that our executive compensation policies and practices appropriately align the interests of our executives with those of our stockholders and emphasize the shared responsibility of our executive officers for the Company’s financial performance. Accordingly, the compensation of our Named Executive Officers is heavily weighted toward “at-risk” performance-based compensation.
The primary components of compensation for our Named Executive Officers in 2023 included base salary (“fixed compensation”), annual performance-based cash incentives under our AIP and long-term cash and/or equity incentives under our Long-Term Incentive Plan (“LTIP") (“at-risk compensation”). The annual weight of each component leads to the following allocation of potential compensation that each executive can earn. The CEO Target Compensation excludes the grant of performance stock units granted to Mr. Kanter in connection with the extension in August 2023 of his employment agreement, which served as a retention award.
15
The components of executive compensation are as follows:
Base salary represents the fixed component of an executive’s annual compensation. In order to attract and retain top executive talent, we believe that it is important that our base salary be competitive, generally at or near the median of our industry peers.
Base salaries are reviewed annually and adjustments are influenced by the Company’s performance in the previous fiscal year and the executive’s contribution to that performance. The executive’s performance is measured by various factors, including, but not limited to, achievement of specific individual and department goals. Additionally, adjustments may be considered with respect to an individual’s promotion that may occur during the fiscal year, and any modifications in the individual's level of responsibility.
The Compensation Committee expects the CEO’s base salary to be at or near the peer group median, and to approximate 25%-33% of his target Direct Compensation. The base salary of our other Named Executive Officers is recommended by our CEO to the Compensation Committee for its review and approval, and targets the median of the peer group and published industry compensation surveys.
In April 2023, Mr. Gaeta was named Chief Stores and Real Estate Officer, and his salary was increased from $325,000 to $400,000, and Ms. Surette's salary was adjusted from $350,000 to $375,000.
Subsequent to fiscal 2023, Messrs. Stratton, Gaeta and Molloy and Ms. Surette each received a 3% merit increase.
The Compensation Committee believes that a substantial portion of each Named Executive Officer’s compensation should tie directly to our Company’s financial performance. The Company’s AIP is an annual performance-based incentive plan that provides a cash award to participants based on achievement of specified corporate, departmental and individual targets.
2023 AIP Awards
On April 27, 2023, the Compensation Committee established the financial, operating and performance metrics for the 2023 AIP. Traditionally, the metrics for the AIP have been focused on the financial and operating performance of the Company in relation to our board-approved budget. However, given the significant uncertainty surrounding the U.S. economy, and the retail industry in particular, in order to keep employees engaged and motivated to achieve our strategic objectives should the macroeconomic situation deteriorate in 2023, the Compensation Committee added a second tier to the 2023 AIP program that was a relative measure, comparing the Company's financial performance in fiscal 2023 against the financial performance of its 2023 peer group, as listed above under " Our Peer Group ".
Under this two-tier structure, the payout related to corporate or departmental targets accounted for 80% of the potential award and was determined based on the higher achievement of either TIER I (based on the Company’s approved financial plan) or TIER II (based on the relative financial performance of the Company to its 2023 peers).
TIER I Company performance metrics consisted of corporate targets for Sales and Adjusted EBITDA and departmental targets, if applicable, for Store Operations, Marketing Digital, and Merchandise/Planning and Allocation. Under TIER I, the Company’s financial performance metrics accounted for 80% of the potential award for Messrs. Kanter, Stratton and Molloy and 40% of the potential award for Mr. Gaeta and Ms. Surette. Mr. Gaeta’s performance metrics included specific store operation targets, and Ms. Surette's performance metrics included specific merchandising, planning and allocation targets, and accounted for 40% of their respective potential award. The performance metrics were derived from the Company’s annual operating plan for fiscal 2023. The Compensation Committee believed that sales and adjusted EBITDA continued to be the two most significant financial metrics for the 2023 AIP.
TIER II Company performance metrics consisted of corporate targets for Comparable Sales and Adjusted EBITDA Margin, each accounting for 40% of the potential award for each participant. Our Comparable Sales and Adjusted EBITDA Margin results for fiscal 2023 were compared to our 2023 peer group on a quartile ranking. For each metric, if the Company ranked in (i) the top quartile, the payout would be 100%; (ii) the second quartile, the payout would be 75%; and (iii) the third quartile, the payout would be 50%. No payout would be earned if the Company finished in the fourth quartile.
Individual performance metrics consisted of discretionary personal goals that accounted for the remaining 20% of the potential award for each of the Named Executive Officers under either TIER I or TIER II. See footnote 6 to the below table for a discussion of these individual targets.
For fiscal 2023, Mr. Kanter’s target participation in the AIP was at 100% of his earned salary with the potential to earn up to 200% of the TIER I corporate targets and 100% of the TIER II corporate targets; Mr. Stratton's target participation was 60%
16
of his earned salary with the potential to earn up to 150% of the TIER I corporate targets and 100% of the TIER II corporate targets, and the target participation for Messrs. Molloy and Gaeta and Ms. Surette was 50% of their respective earned salaries with the potential to earn up to 150% of the TIER I corporate and departmental targets and 100% of the TIER II corporate targets. Mr. Kanter had the potential to earn up to 200% of his individual target and Messrs. Stratton, Molloy and Gaeta and Ms. Surette had the potential to earn up to 150% of their individual targets.
The 2023 AIP metrics were intended to be achievable, with an approximate 50% probability of achievement. The 2023 AIP performance metrics and actual results against these metrics were as follows:
|
|
|
Metric |
|
Award %
|
|
Award % Weight for Metric for Mr. Gaeta |
Award % Weight for Metric for Ms. Surette |
Minimum/Maximum Potential Payout |
|
2023 Target |
2023 Actual |
Payout % earned |
|
TIER I - Company's Financial Performance (1) |
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Target 1 |
|
Sales |
|
40.0% |
|
20.0% |
20.0% |
100% payout at target, with 50% payout at 95.3% of target and 150% payout at 100.5% of target, with the exception of Mr. Kanter who is eligible for a maximum payout of 200% at 100.5% of target.
|
|
$576.9 million |
$521.8 million |
0.0% |
|
Corporate Target 2 |
|
Adjusted EBITDA (2) |
|
40.0% |
|
20.0% |
20.0% |
100% payout at target, with 50% payout at 91.6% of target and 150% payout at 102.3% of target, with the exception of Mr. Kanter who is eligible for a maximum payout of 200% at 102.3% of target.
|
|
$74.8 million |
$55.9 million |
0.0% |
|
Departmental Goals, if applicable |
|
Store Operations |
|
- |
|
40.0% |
- |
Includes payroll as a percentage of sales target, net promoter score target and store conversion target. |
|
(3) |
(3) |
(3) |
|
|
|
Merchandise, Planning and Allocation |
|
- |
|
- |
40.0% |
Includes targets for sales by category, gross margin rates by category, inventory turnover and store conversion target. |
|
(3) |
(3) |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TIER II - Company’s Financial Performance Measured Against the Company's 2023 Peers (1) |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate - Target 1 |
|
Comparable Sales (4)
|
|
40.0% |
|
40.0% |
40.0% |
Top Quartile 100%; 2nd Quartile 75%; 3rd Quartile 50%; 4th Quartile no payout. |
|
Top Quartile |
2nd Quartile |
75.0% |
|
Corporate - Target 2 |
|
Adjusted EBITDA Margin (5)
|
|
40.0% |
|
40.0% |
40.0% |
Top Quartile 100%; 2nd Quartile 75%; 3rd Quartile 50%; 4th Quartile no payout. |
|
Top Quartile |
Top Quartile |
100% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INDIVIDUAL PERFORMANCE (6) |
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
|
Individual Targets |
|
Discretionary- Personal Goals |
|
20.0% |
|
20.0% |
20.0% |
Discretionary, at target, based upon individual performance, were evaluated by the CEO (except with respect to the CEO whose individual performance was evaluated by the Compensation Committee). Participants were eligible to receive a discretionary award up to 30%, with the exception of Mr. Kanter who was eligible to receive a discretionary award up to 40%. |
|
20% |
Varied by NEO |
20-25% (30% for Mr. Kanter) |
As a result of achieving the performance targets under TIER II for fiscal 2023 pursuant to the 2023 AIP, as shown above, in April 2024 the Compensation Committee approved cash bonus payouts to our NEOs as follows:
|
Named Executive Officer |
|
Payout at
|
|
|
Total
|
|
|
Total Cash Payout |
|
|||
|
Harvey S. Kanter |
|
$ |
866,346 |
|
|
|
100 |
% |
|
$ |
866,346 |
|
|
Peter H. Stratton, Jr. |
|
$ |
248,896 |
|
|
|
90 |
% |
|
$ |
224,007 |
|
|
Anthony J. Gaeta |
|
$ |
195,914 |
|
|
|
95 |
% |
|
$ |
186,118 |
|
|
Robert S. Molloy |
|
$ |
196,712 |
|
|
|
95 |
% |
|
$ |
186,876 |
|
|
Allison Surette |
|
$ |
188,289 |
|
|
|
90 |
% |
|
$ |
169,460 |
|
2024 AIP
On April 1, 2024, the Compensation Committee established the financial, operating and performance metrics for the 2024 AIP. Given the continued uncertainty surrounding the U.S. economy and reduced consumer discretionary spending, the Compensation Committee believed that the two-tier approach used in fiscal 2023 provided the appropriate balance to keep employees engaged and motivated to achieve our strategic objectives. Similar to the 2023 AIP, the Compensation Committee added a second tier to the 2024 AIP program that would be a relative measure, comparing the Company's financial
18
performance in fiscal 2024 against the financial performance of its 2024 peer group, as discussed above under " Our Peer Group ."
Under this two-tier structure, the payout related to corporate or departmental targets, if any, will be determined based on the higher achievement of either TIER I (based on the Company’s approved financial plan) or TIER II (based on the relative financial performance of the Company to its 2024 peers). The maximum payout under TIER I remains 150% (200% for Mr. Kanter); however, the maximum payout under TIER II is capped at 100%.
TIER I Company performance metrics are structured in the same manner as our historical AIPs and consist of corporate targets for Sales and Adjusted EBITDA with departmental targets for Store Operations, Marketing Digital, and Merchandise/Planning and Allocation. Under TIER I, the Company’s financial performance metrics account for 80% of the potential award for Messrs. Kanter, Stratton and Molloy and 40% of the potential award for Mr. Gaeta and Ms. Surette. Mr. Gaeta’s performance metrics include specific store operation targets, and Ms. Surette's performance metrics include specific merchandising, planning and allocation targets, and account for 40% of their respective TIER I targets.
TIER II Company performance metrics consist of corporate targets for Comparable Sales and Adjusted EBITDA Margin, each accounting for 40% of the potential award for each participant. Our Comparable Sales and Adjusted EBITDA Margin results for fiscal 2024 will be compared to our 2024 peer group on a quartile ranking. For each metric, if the Company ranks in (i) the top quartile, the payout would be 100%; (ii) the second quartile, the payout would be 75%; and (iii) the third quartile, the payout would be 50%. No payout will be earned if the Company finishes in the fourth quartile.
Individual performance targets consisting of discretionary personal goals account for the remaining 20% of the potential award for each of the Named Executive Officers under either TIER I or TIER II. Mr. Kanter has the potential to earn up to 200% of his individual target and Messrs. Stratton, Molloy and Gaeta and Ms. Surette have the potential to earn up to 150% of their individual targets.
The 2024 AIP performance metrics approved by the Compensation Committee are as follows:
|
|
|
Metric |
|
Award %
|
|
Award % Attributable to Metric for Mr. Gaeta |
Award % Attributable to Metric for Ms. Surette |
Minimum/Maximum Potential Payout |
|
|
TIER I - Company's Financial Performance |
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Target 1 |
|
Sales (52-week year) |
|
40.0% |
|
20.0% |
20.0% |
100% payout at target, with 50% payout at 97.2% of target and 150% payout at 101.8% of target, with the exception of Mr. Kanter who is eligible for a maximum payout of 200% at 101.8% of target.
|
|
|
Corporate Target 2 |
|
Adjusted EBITDA |
|
40.0% |
|
20.0% |
20.0% |
100% payout at target, with 50% payout at 86.5% of target and 150% payout at 108.1% of target, with the exception of Mr. Kanter who is eligible for a maximum payout of 200% at 108.1% of target.
|
|
|
Departmental Goals, if applicable |
|
Store Operations |
|
- |
|
40.0% |
- |
Includes payroll as a percentage of sales target, net promoter score target and store conversion target. |
|
|
|
|
Merchandise, Planning and Allocation |
|
- |
|
- |
40.0% |
Includes targets for sales by category, gross margin rates by category, inventory turnover and store conversion target. |
|
|
|
|
|
|
|
|
|
|
Departmental goals payouts range from 50% to 150% dependent upon achievement of the various targets. |
|
|
TIER II - Company's Financial Performance Measured Against the Company's 2024 Peers |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
Corporate - Target 1 |
|
Comparable Sales
|
|
40.0% |
|
40.0% |
40.0% |
Top Quartile 100%; 2nd Quartile 75%; 3rd Quartile 50%; 4th Quartile no payout. |
|
|
Corporate - Target 2 |
|
Adjusted EBITDA Margin
|
|
40.0% |
|
40.0% |
40.0% |
Top Quartile 100%; 2nd Quartile 75%; 3rd Quartile 50%; 4th Quartile no payout. |
|
19
|
|
|
|
|
|
|
|
|
|
|
|
INDIVIDUAL PERFORMANCE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Individual Targets |
|
Discretionary- Personal Goals |
|
20.0% |
|
20.0% |
20.0% |
Discretionary, at target, based upon individual performance, as evaluated by the CEO (except with respect to the CEO whose individual performance will be evaluated by the Compensation Committee). Participants are eligible to receive a discretionary award up to 30%, with the exception of Mr. Kanter who is eligible to receive a discretionary award up to 40%. |
|
|
|
|
|
|
|
|
|
|
|
|
The above targets for each metric in TIER I were derived from the Company’s annual operating plan and budget for the 2024 fiscal year, and are intended to be achievable, with an approximate 50% probability of achievement. The likelihood of achieving the 2024 targets reflects the challenges inherent in achieving the goals and objectives of an ambitious operating plan, given the continuing uncertainty with respect to the economy, higher costs, and consumer discretionary spending. The Compensation Committee's adoption of the TIER II plan is to ensure that all participants in the AIP will be motivated in fiscal 2024.
For fiscal 2024, Mr. Kanter will continue to participate at 100% of his salary, Mr. Stratton will continue to participate at 60% of his salary, and Messrs. Molloy and Gaeta and Ms. Surette will continue to participate at 50% of their respective salaries.
The Company’s long-term incentive plan is designed to ensure that the interests of our executives are aligned with those of our stockholders to create sustainable shareholder value and to promote executive retention. Awards under the LTIP consist of a combination of time-based and performance-based awards for which payouts may consist of cash or equity or a combination of both. The performance-based portion of the LTIP is based on financial metric(s) measured over a three-year performance cycle. All equity awards granted under the LTIP are issued from the Company’s stockholder-approved 2016 Incentive Compensation Plan, as amended (the “2016 Plan”). Participants in the LTIP are eligible to receive awards based on their “Target Cash Value,” which is defined as the participant’s annual base salary multiplied by his or her LTIP percentage. Under each LTIP, 50% of each participant’s Target Cash Value is subject to time-based vesting and 50% is subject to performance-based vesting.
Effective beginning with the 2022-2024 LTIP, the LTIPs include a Structured Retirement provision, which provides an opportunity for greater vesting upon retirement where the participant assists the Company in ensuring the succession of the participant’s position within the Company prior to the participant’s retirement. In order to be eligible to participate in a Structured Retirement, the participant must terminate employment after meeting the age and service requirements set forth in the LTIP; the Compensation Committee must confirm through proper corporate action that the participant has met all of the succession planning objectives set by the Compensation Committee for the participant; the participant must continue to work until the date required by the Compensation Committee (which may not be more than 60 days after the Compensation Committee confirms that the objectives have been met); and the participant must execute a release of claims in favor of the Company. The final determination as to whether the requirements of a Structured Retirement have been met is in the sole discretion of the Compensation Committee.
2021-2023 LTIP
The performance period for the Company’s 2021-2023 LTIP ended on February 3, 2024. The time-based awards under the 2021-2023 LTIP were granted in a combination of 25% stock options and 75% cash that vested over four years, with the last tranche vesting on April 1, 2025.
The performance target, established by the Compensation Committee on March 8, 2021, was a three-year relative TSR as compared to the Company’s 2021 peer group, and the actual performance achieved were as follows:
2021-2023 LTIP Performance Period
|
Metric |
|
Potential Payout |
|
Target |
|
Actual |
|
Payout % |
|
|
|
3-yr. relative total shareholder return as compared to 2021 disclosed proxy peers (1) |
|
100% payout at target (2nd quartile), with 50% payout (3rd quartile) and 150% payout (1st quartile). No payout in the 4th quartile. |
|
2nd quartile |
|
1st quartile |
|
|
150.0 |
% |
20
(1) For the Company and each of its 2021 disclosed proxy peers, the three-year relative total shareholder return was calculated as the percentage change in the 30-day trailing volume-weighted average closing stock price at January 29, 2021 and February 2, 2024, adjusted for any dividends paid.
Based on the above achievement, subsequent to the end of fiscal 2023, the Compensation Committee approved a performance award, with an effective grant date of April 1, 2024, totaling $3.0 million, to be payable in cash, subject to further vesting through August 31, 2024. In an effort to preserve share availability under the 2016 Plan, given the low stock price, the Compensation Committee believed the use of cash awards was more prudent than awarding shares.
Approximately $1.6 million of the $3.0 million of the 2021-2023 LTIP cash award was earned by the Named Executive Officers. The following is a summary of the cash awards granted to our Named Executive Officers on April 1, 2024 as a result of achieving the performance metrics under the 2021-2023 LTIP:
|
Name |
|
Total Performance-Based Cash Award |
|
|
|
|
Harvey S. Kanter |
|
$ |
937,125 |
|
|
|
Peter H. Stratton, Jr. |
|
$ |
207,375 |
|
|
|
Anthony J. Gaeta |
|
$ |
154,875 |
|
|
|
Robert S. Molloy |
|
$ |
196,875 |
|
|
|
Allison Surette |
|
$ |
149,625 |
|
|
2022-2024 LTIP and 2023-2025 LTIP
The following is a summary of the 2022-2024 LTIP and 2023-2025 LTIP in effect, but not completed, during fiscal 2023:
|
Summary of LTIPs |
|
2022-2024 |
|
2023-2025 |
||
|
Effective date |
|
April 9, 2022 |
|
May 1, 2023 |
||
|
Performance period |
|
3yrs |
|
3yrs |
||
|
End of Performance Period |
|
February 1, 2025 |
|
January 31, 2026 |
||
|
Target cash value |
|
Annual Salary * Participation Rate |
|
Annual Salary * Participation Rate |
||
|
|
|
Time-Based |
Performance-Based |
|
Time-Based |
Performance-Based |
|
Allocation of Target Cash Value |
|
50% |
50% |
|
50% |
50% |
|
Award type |
|
at effective date:
|
RSUs, Cash or a combination thereof, when earned |
|
at effective date:
|
RSUs, Cash or a combination thereof, when earned |
|
Vesting period |
|
25% April 9, 2023
|
any award earned subject to additional vesting through August 31, 2025 |
|
25% May 1, 2024
|
any award earned subject to additional vesting through August 31, 2026 |
|
|
|
|
|
|
|
|
|
Performance Targets (1): |
|
Target: |
Min/Max Payout: |
|
Target: |
Min/Max Payout: |
|
|
|
3-yr. relative total shareholder return as compared to 2022 disclosed proxy peers (2)
|
100% payout at target (2nd quartile), with 50% payout (3rd quartile) and 150% payout (1st quartile). No payout in the 4th quartile. |
|
3-yr. relative total shareholder return as compared to 2023 disclosed proxy peers (3)
|
100% payout at target (2nd quartile), with 50% payout (3rd quartile) and 150% payout (1st quartile). No payout in the 4th quartile. |
At the time of establishing the performance targets, the Compensation Committee believed that the single performance metric of a Three-Year Relative Total Shareholder Return reflected the Company’s primary objective of earnings growth and driving shareholder return.
21
The following table illustrates the components of the LTIPs with the respective vesting dates, illustrating that the time-based portion of the LTIP acts as a retention tool:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
% of |
|
Vesting of Awards by Fiscal Year: |
|
|||||||||||||
|
Approval date |
|
Performance Period |
|
total award |
|
2023 |
|
2024 |
|
2025 |
|
2026 |
|
2027 |
|
|||||
|
4/9/2022 |
|
2022-2024 LTIP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Time-Based Awards, vest April 1 (1) , subject to forfeiture |
|
50% |
|
25% |
|
25% |
|
25% |
|
25% |
|
|
— |
|
||||
|
|
|
Performance-Based Awards- vest August 31, if achieved |
|
50% |
|
|
— |
|
|
— |
|
100% |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
5/1/2023 |
|
2023-2025 LTIP |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
Time-Based Awards, vest April 1 (1) , subject to forfeiture |
|
50% |
|
|
— |
|
25% |
|
25% |
|
25% |
|
25% |
|
||||
|
|
|
Performance-Based Awards- vest August 31, if achieved |
|
50% |
|
|
— |
|
|
— |
|
|
— |
|
100% |
|
|
— |
|
|
2024-2026 LTIP
Effective April 1, 2024, the Compensation Committee established and approved the metric for the 2024-2026 LTIP. Consistent with the past four years, the Compensation Committee established a 3-year relative total shareholder return ("TSR") as the only metric under the 2024-2026 LTIP. The Compensation Committee believes that the selection of a relative total TSR against the Company’s 2024 peers (see " Our Peer Group ") aligns the interests of the LTIP participants with the interests of the Company’s stockholders. The Compensation Committee granted the time-based awards for the 2024-2026 LTIP in a combination of 50% restricted stock units and 50% cash.
No discretionary cash or equity awards were granted to our Named Executive Officers in fiscal 2023. In August 2023, as further described below under “Employment Agreement - Harvey S. Kanter, Chief Executive Officer and Director,” we entered into an amendment to Mr. Kanter’s employment agreement to extend its term until August 2026. In connection with the extension, the Compensation Committee engaged Segal to review Mr. Kanter's base salary and total direct compensation as well as provide guidance on the terms, conditions and value of a performance award. The Compensation Committee approved a grant of 573,000 performance stock units ("PSUs"). Similar to Mr. Kanter's previous PSUs, the PSUs will vest, if at all, in nine installments, when the trailing 30-day volume-weighted average closing price of a share of our common stock meets or exceeds $6.50, $6.75, $7.00, $7.25, $7.50, $7.75, $8.00, $8.25 and $8.50, respectively, subject to a minimum one-year vesting from the date of grant. Any unvested PSUs will expire on August 11, 2026.
We offer our senior executives, including our Named Executive Officers, supplemental disability insurance and long-term care and pay a portion of the premiums, which we do not do for our other employees.
Our Named Executive Officers also receive benefits under certain group health, long-term disability and life insurance plans that are generally available to all of our eligible employees.
After six months of service with us, all of our employees, including our Named Executive Officers, are eligible to participate in our 401(k) Plan, and after one year of employment are eligible for a Company match. Under the 401(k) Plan, the Company offers a qualified automatic contribution arrangement (“QACA”) with the Company matching 100% of the first 1% of deferred compensation and 50% of the next 5% (with a maximum contribution of 3.5% of eligible compensation).
We have employment agreements with our CEO and all of our other Named Executive Officers. Upon termination of employment, each executive is entitled to receive severance payments under his or her employment agreement(s) and under the Company’s incentive programs in the event of a termination without justifiable cause. These employment agreements and incentive programs, as they relate to terminations, are discussed in detail below in the section “ Employment Agreements ” following the “ Summary Compensation Table .” Our employment agreements do not contain any tax gross-ups pursuant to Section 280(g) of the Internal Revenue Code.
22
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on this review and discussion, recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
|
The Compensation Committee
|
|
Willem Mesdag, Chair |
|
Jack Boyle |
|
Lionel F. Conacher |
23
Summary Compensation Table. The following Summary Compensation Table sets forth certain information regarding compensation paid or accrued by us with respect to our Named Executive Officers for fiscal 2023.
SUMMARY COMPE NSATION TABLE
|
Name and Principal Position |
|
Year |
|
Salary ($) |
|
|
Bonus ($) |
|
|
Stock
|
|
|
Option
|
|
|
Non-Equity
|
|
|
All Other
|
|
|
Total ($) |
|
|||||||
|
Harvey S. Kanter |
|
2023 |
|
$ |
866,346 |
|
|
|
— |
|
|
$ |
2,765,938 |
|
|
|
— |
|
|
$ |
2,167,112 |
|
|
$ |
159,627 |
|
|
$ |
5,959,023 |
|
|
President and Chief Executive |
|
2022 |
|
$ |
830,539 |
|
|
|
— |
|
|
$ |
829,813 |
|
|
|
— |
|
|
$ |
2,402,969 |
|
|
$ |
158,560 |
|
|
$ |
4,221,881 |
|
|
Officer |
|
2021 |
|
$ |
735,000 |
|
|
$ |
73,500 |
|
|
$ |
443,260 |
|
|
$ |
207,035 |
|
|
$ |
2,069,448 |
|
|
$ |
88,035 |
|
|
$ |
3,616,278 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Peter H. Stratton, Jr. |
|
2023 |
|
$ |
414,827 |
|
|
|
— |
|
|
$ |
91,571 |
|
|
|
— |
|
|
$ |
514,760 |
|
|
$ |
27,122 |
|
|
$ |
1,048,280 |
|
|
Executive Vice President, Chief |
|
2022 |
|
$ |
405,846 |
|
|
|
— |
|
|
$ |
195,263 |
|
|
|
— |
|
|
$ |
526,585 |
|
|
$ |
26,172 |
|
|
$ |
1,153,866 |
|
|
Financial Officer and Treasurer |
|
2021 |
|
$ |
395,000 |
|
|
$ |
39,500 |
|
|
$ |
98,088 |
|
|
$ |
51,844 |
|
|
$ |
458,525 |
|
|
$ |
25,647 |
|
|
$ |
1,068,604 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Anthony J. Gaeta |
|
2023 |
|
$ |
391,827 |
|
|
|
— |
|
|
$ |
56,872 |
|
|
|
— |
|
|
$ |
400,383 |
|
|
$ |
23,678 |
|
|
$ |
872,760 |
|
|
Chief Stores and Real Estate |
|
2022 |
|
$ |
322,115 |
|
|
|
— |
|
|
$ |
134,310 |
|
|
|
— |
|
|
$ |
352,030 |
|
|
$ |
22,565 |
|
|
$ |
831,020 |
|
|
Officer |
|
2021 |
|
$ |
295,000 |
|
|
$ |
29,500 |
|
|
$ |
73,256 |
|
|
$ |
38,281 |
|
|
$ |
267,217 |
|
|
$ |
22,040 |
|
|
$ |
725,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Robert S. Molloy |
|
2023 |
|
$ |
393,423 |
|
|
|
— |
|
|
$ |
67,549 |
|
|
|
— |
|
|
$ |
458,060 |
|
|
$ |
29,302 |
|
|
$ |
948,334 |
|
|
General Counsel and Secretary |
|
2022 |
|
$ |
384,942 |
|
|
|
— |
|
|
$ |
165,988 |
|
|
|
— |
|
|
$ |
434,942 |
|
|
$ |
28,295 |
|
|
$ |
1,014,167 |
|
|
|
|
2021 |
|
$ |
375,000 |
|
|
$ |
37,500 |
|
|
$ |
93,122 |
|
|
$ |
49,218 |
|
|
$ |
397,809 |
|
|
$ |
27,770 |
|
|
$ |
980,419 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Allison Surette |
|
2023 |
|
$ |
376,577 |
|
|
|
— |
|
|
$ |
61,249 |
|
|
|
— |
|
|
$ |
376,464 |
|
|
$ |
33,336 |
|
|
$ |
847,626 |
|
|
Chief Merchandise Officer |
|
2022 |
|
$ |
311,558 |
|
|
|
— |
|
|
$ |
129,763 |
|
|
|
— |
|
|
$ |
346,156 |
|
|
$ |
31,471 |
|
|
$ |
818,948 |
|
The fair value associated with the performance-based component of the equity awards under the 2023-2025 LTIP was determined based on the probable outcome of the performance conditions as of the service-inception date. Because the achievement of the performance targets under the 2023-2025 LTIP was not deemed probable as of the service-inception date, no value was attributed to the performance-based portion of these awards. In addition, performance-based compensation is a liability-based award until earned, at which time it can be settled in a combination of cash and/or equity. The following reflects the fair value of the performance-based equity portion of the 2023-2025 LTIP assuming 50% of the award is settled in equity and that the payout achieved is the highest level of performance for each of the Named Executive Officers:
|
Harvey S. Kanter |
|
$ |
541,875 |
|
|
Peter H. Stratton, Jr. |
|
$ |
137,363 |
|
|
Anthony J. Gaeta |
|
$ |
85,313 |
|
|
Robert S. Molloy |
|
$ |
101,325 |
|
|
Allison Surette |
|
$ |
91,875 |
|
24
Stock Awards. The following table provides a breakdown of the amounts in fiscal 2023 in the " Stock Awards " column of the Summary Compensation Table above:
|
Name |
|
Performance Based Units (1) |
|
|
2023-2025 LTIP
|
|
|
Total Stock
|
|
|||
|
Harvey S. Kanter |
|
$ |
2,404,689 |
|
|
$ |
361,249 |
|
|
$ |
2,765,938 |
|
|
Peter H. Stratton, Jr. |
|
$ |
— |
|
|
$ |
91,571 |
|
|
$ |
91,571 |
|
|
Anthony J. Gaeta |
|
$ |
— |
|
|
$ |
56,872 |
|
|
$ |
56,872 |
|
|
Robert S. Molloy |
|
$ |
— |
|
|
$ |
67,549 |
|
|
$ |
67,549 |
|
|
Allison Surette |
|
$ |
— |
|
|
$ |
61,249 |
|
|
$ |
61,249 |
|
2023 Non-Equity (Cash) Incentive Plan Compensation. The following table provides a breakdown of the amounts for fiscal 2023 in the “ 2023 Non-Equity (Cash) Incentive Plan Compensation” column of the Summary Compensation Table above:
|
Name |
|
Annual Incentive
|
|
|
2021-2023 LTIP
|
|
|
2019-2021 LTIP
|
|
|
2020-2022 LTIP
|
|
|
2021-2023 LTIP
|
|
|
2022-2024 LTIP
|
|
Total Non-
|
|
|||||||
|
Harvey S. Kanter |
|
$ |
866,346 |
|
|
$ |
937,125 |
|
|
$ |
78,094 |
|
|
$ |
78,094 |
|
|
$ |
117,140 |
|
|
$ |
90,313 |
|
$ |
2,167,112 |
|
|
Peter H. Stratton, Jr. |
|
$ |
224,007 |
|
|
$ |
207,375 |
|
|
$ |
17,281 |
|
|
$ |
17,281 |
|
|
$ |
25,922 |
|
|
$ |
22,894 |
|
$ |
514,760 |
|
|
Anthony J. Gaeta |
|
$ |
186,118 |
|
|
$ |
154,875 |
|
|
$ |
12,906 |
|
|
$ |
12,906 |
|
|
$ |
19,359 |
|
|
$ |
14,219 |
|
$ |
400,383 |
|
|
Robert S. Molloy |
|
$ |
186,876 |
|
|
$ |
196,875 |
|
|
$ |
16,406 |
|
|
$ |
16,406 |
|
|
$ |
24,609 |
|
|
$ |
16,888 |
|
$ |
458,060 |
|
|
Allison Surette |
|
$ |
169,460 |
|
|
$ |
149,625 |
|
|
$ |
12,469 |
|
|
$ |
12,469 |
|
|
$ |
18,703 |
|
|
$ |
13,738 |
|
$ |
376,464 |
|
25
All Other Compensation . The following table provides a breakdown of the amounts for fiscal 2023 in the “ All Other Compensation ” of the Summary Compensation Table above:
|
Name |
|
Auto
|
|
|
401(k) |
|
|
Long-Term
|
|
|
Supplemental
|
|
|
Travel Allowance |
|
|
Other |
|
|
Total
|
|
|||||||
|
Harvey S. Kanter |
|
$ |
10,192 |
|
|
$ |
11,550 |
|
|
$ |
12,876 |
|
|
$ |
5,009 |
|
|
$ |
120,000 |
|
|
$ |
— |
|
|
$ |
159,627 |
|
|
Peter H. Stratton, Jr. |
|
$ |
8,562 |
|
|
$ |
11,550 |
|
|
$ |
3,947 |
|
|
$ |
3,063 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
27,122 |
|
|
Anthony J. Gaeta |
|
$ |
8,562 |
|
|
$ |
11,550 |
|
|
$ |
— |
|
|
$ |
3,566 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
23,678 |
|
|
Robert S. Molloy |
|
$ |
8,562 |
|
|
$ |
11,550 |
|
|
$ |
4,716 |
|
|
$ |
4,399 |
|
|
$ |
— |
|
|
$ |
75 |
|
|
$ |
29,302 |
|
|
Allison Surette |
|
$ |
8,562 |
|
|
$ |
11,550 |
|
|
$ |
10,465 |
|
|
$ |
2,759 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
33,336 |
|
CEO Pay Ratio
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Company is providing the following information about the relationship between the annual total compensation of the Company’s employees and the annual total compensation of the Company’s CEO. Our CEO-to-employee pay ratio has been calculated in accordance with Item 402(u) of Regulation S-K under the Exchange Act.
The total annual compensation for our CEO, Mr. Kanter, for fiscal 2023, as shown in the “ Summary Compensation Table ”, was $5,959,023. The total annual compensation for our new median employee, who is a full-time 40-hour employee, was $50,049, calculated using the same methodology as used in the “ Summary Compensation Table. ” Based on this information, for fiscal 2023 the ratio of the annual total compensation of Mr. Kanter, our CEO, to the median of the annual total compensation of all employees was 119 to 1.
The methodology used to identify the median employee in 2023 was to evaluate all employees, other than our CEO, employed by the Company as of December 31, 2023, and performed the following:
26
PAY VERSUS PERFORMANCE
Pay Versus Performance Table
In accordance with rules adopted by the SEC pursuant to the Dodd-Frank Act, below is disclosure regarding executive compensation for
For more information concerning our philosophy of how we align compensation for our NEOs to certain performance metrics, refer to the “ Compensation Discussion and Analysis ” above.
|
Year |
Summary Compensation Table
|
|
Compensation Actually Paid
|
|
Average Summary Compensation Table Total for Non-PEO NEOs ($)(2) |
|
Average Compensation Actually Paid to Non-PEO NEOs ($)(3) |
|
Total Shareholder Return
|
|
Peer Group Total Shareholder Return
|
|
Net Income
|
|
Adjusted EBITDA
|
|
||||||||
|
(a) |
(b) |
|
(c) |
|
(d) |
|
(e) |
|
(f) |
|
(g) |
|
(h) |
|
(i) |
|
||||||||
|
2023 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
2022 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
2021 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
2020 |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(
|
) |
$ |
(
|
) |
|
Fiscal Year: |
2020 |
|
2021 |
|
2022 |
|
2023 |
|
||||
|
Summary Compensation Table ("SCT") Total for PEO (column (b)) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Deduct - SCT "Stock Award" value |
|
— |
|
|
(
|
) |
|
(
|
) |
|
(
|
) |
|
Deduct - SCT "Option Award" value |
|
(
|
) |
|
(
|
) |
|
— |
|
|
— |
|
|
Add or Deduct - year-over-year change in fair value of equity awards granted in prior year that vested in current year |
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Add or Deduct - year-over-year change in fair value of equity awards granted in prior year that are outstanding and unvested as of the current year-end |
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Add - year-end fair value of equity awards granted in the current year that are outstanding and unvested as of the current year-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
Add or Deduct - vesting date fair value of equity awards granted and vested in current year |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Deduct - fair value as of prior year end of equity awards granted in prior years that failed to vest in the current year |
|
— |
|
|
— |
|
|
— |
|
|
(
|
) |
|
Compensation Actually Paid to PEO (column (c)) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
27
|
Fiscal Year: |
2020 |
|
2021 |
|
2022 |
|
2023 |
|
||||
|
Average Summary Compensation Table Total for Non-PEO NEO's (column (d)) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
|
Deduct - SCT "Stock Award" value |
|
— |
|
|
(
|
) |
|
(
|
) |
|
(
|
) |
|
Deduct - SCT "Option Award" value |
|
(
|
) |
|
(
|
) |
|
— |
|
|
— |
|
|
Add or Deduct - year-over-year change in fair value of equity awards granted in prior year that vested in current year |
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Add or Deduct - year-over-year change in fair value of equity awards granted in prior year that are outstanding and unvested as of the current year-end |
|
(
|
) |
|
|
|
|
|
|
|
(
|
) |
|
Add - year-end fair value of equity awards granted in the current year that are outstanding and unvested as of the current year-end |
|
|
|
|
|
|
|
|
|
|
|
|
|
Add or Deduct - vesting date fair value of equity awards granted and vested in current year |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Deduct - fair value as of prior year end of equity awards granted in prior years that failed to vest in the current year |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Average Compensation Actually Paid to Non-PEO NEO's (column (e)) |
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
Pay Versus Performance Relationships Descriptions
The following charts depict the relationships between PEO and non-PEO NEO Compensation Actually Paid ("CAP") and the financial metrics included in the table above. The key factor that drove the change in CAP for our PEO and non-PEO NEOs as compared to these financial metrics was the increase in our stock price over the periods reflected, as our LTIP awards are based solely on Company relative TSR. In addition, in fiscal 2021, the CAP for our PEO reflected the value of performance stock units that vested when our stock price reached certain thresholds in fiscal 2021.
28
Description of Relationship Between PEO and Non-PEO Compensation Actually Paid and Company's TSR
The following chart sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs, and the Company’s cumulative TSR over the four most recently completed fiscal years.
Description of Relationship Between the Company TSR and Peer Group Cumulative TSR
The following chart shows the cumulative TSR of the Company, assuming an initial fixed $100 investment and computed in accordance with the requirements of Item 402(v) of Regulation S-K, versus the Dow Jones U.S. Apparel Retailers, assuming an initial fixed $100 investment on January 31, 2020 (end of fiscal 2019) and computed in accordance with the requirements of Item 402(v) of Regulation S-K.
29
Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Net Income (Loss)
The following chart sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs and net income (loss) during the four most recently completed fiscal years. Net income for fiscal 2022 included a non-recurring tax benefit related to the release of our tax valuation allowance of $31.6 million. The net loss for fiscal 2020 included a $14.8 million asset impairment charge.
Description of Relationship Between PEO and Non-PEO NEO Compensation Actually Paid and Company-Selected Measure
The following chart sets forth the relationship between CAP to our PEO, the average of CAP to our Non-PEO NEOs, and Adjusted EBITDA, a non-GAAP measure (our Company-Selected Measure) during the four most recently completed fiscal years.
30
Tabular List of Most Important Performance Measures
As discussed above in more detail under " Compensation Discussion and Analysis - Compensation Components and Fiscal 2023 Compensation Decisions, " the Compensation Committee uses several financial and operational performance measures in making its compensation decisions. The following list represents the most important financial performance measures used by the Company to link Compensation Actually Paid to our PEO and other NEOs to Company performance for fiscal 2023.
|
•
|
|
•
|
|
•
|
Employment Agreements
Harvey S. Kanter, President, Chief Executive Officer and Director
On February 19, 2019, we entered into an employment agreement with Mr. Kanter, pursuant to which Mr. Kanter was appointed President, Chief Executive Officer and a director of the Company effective April 1, 2019. From February 19, 2019 to March 31, 2019, Mr. Kanter served as an Advisor to the Acting CEO. The initial term of the agreement was three years and could be automatically renewed, upon the same terms and conditions, for successive periods of one year, unless either party terminated the agreement in accordance with its terms.
In February 2022, the Compensation Committee engaged Segal to review Mr. Kanter’s direct compensation. Effective April 1, 2022, the Company and Mr. Kanter entered into an updated employment agreement (the "Employment Agreement"). The initial term of the Employment Agreement was for three years, unless terminated earlier in accordance with its terms (the "Initial Term").
On August 11, 2023, the Company and Mr. Kanter entered into the First Amendment (the “Amendment”) to the Employment Agreement (as amended, the "Amended Employment Agreement"). The Amendment extended the initial term of Mr. Kanter’s employment from April 1, 2025 to August 11, 2026, unless terminated earlier in accordance with the terms of the Amended Employment Agreement (the “Initial Term”). At the expiration of the Initial Term, the Amended Employment Agreement will automatically renew, upon the same terms and conditions, for successive periods of one year, unless either party provides advance written notice in accordance with the Amended Employment Agreement.
Pursuant to his Amended Employment Agreement, Mr. Kanter receives an annual base salary of $850,000 as President and Chief Executive Officer with an annual automobile allowance of $10,000. Mr. Kanter receives a quarterly travel allowance in the amount of $30,000, which is intended to be used for travel between Mr. Kanter's home and the Company’s corporate offices.
In connection with the extension of the Initial Term under the Amendment, Mr. Kanter received 573,000 PSUs to be settled in shares of the Company’s common stock upon vesting. The award will vest, if at all, in nine installments, when the trailing 30-day volume-weighted average closing price of a share of the Company’s common stock meets or exceeds $6.50, $6.75, $7.00, $7.25, $7.50, $7.75, $8.00, $8.25, and $8.50, respectively, subject to a minimum one-year vesting from the date of grant. Any unvested PSUs will expire on August 11, 2026.
Mr. Kanter is eligible to participate in our annual incentive plan at a target rate of 100% of his earned salary, up to a maximum payout of up to 200% of target. Mr. Kanter is also eligible to participate in our long-term incentive plans at a target bonus equal to 170% of his base salary in effect on the effective date of participation. Pursuant to the terms of the LTIP, 50% of any award will be time-based compensation and 50% will be performance-based compensation. Maximum payout of performance-based compensation is 150% of target.
Pursuant to the Amended Employment Agreement, if Mr. Kanter terminates his employment for Good Reason (as defined in the Amended Employment Agreement) or the Company terminates his employment without Justifiable Cause (as defined in the Amended Employment Agreement):
31
If Mr. Kanter’s employment is terminated by him for Good Reason or by the Company without Justifiable Cause during the one-year period following a Change in Control (as defined in the 2016 Plan), then Mr. Kanter will be eligible to receive, subject to certain requirements described in the Employment Agreement, a payment equal to (i) two times his then current base salary plus (ii) the then value of two times his target bonus under the AIP, generally payable in a lump sum within 60 days of the termination of his employment following a Change in Control.
In addition, if a termination of Mr. Kanter’s employment prior to the expiration of the Initial Term meets the requirements of a Structured Retirement (as defined in the LTIP, as described above) such termination will be deemed to be a termination by the Company without Justifiable Cause. Additionally, for purposes of the AIP, a termination of his employment that meets the requirements of a Structured Retirement and that occurs at any time during the employment term (including after the Initial Term) will be deemed to be a termination by the Company without Justifiable Cause under the AIP.
Employment Agreements with Other Named Executive Officers
We have employment agreements with each of Named Executive Officers other than our CEO (the “NEO Employment Agreements”). The term of each NEO Employment Agreement begins on the respective effective date and continues until terminated by either party. Our Named Executive Officers are eligible to participate in our AIP. Each Named Executive Officer is entitled to vacation and to participate in and receive any other benefits customarily provided by us to our senior executives.
Each of the NEO Employment Agreements provide that, if the executive officer’s employment is terminated by us at any time for any reason other than “justifiable cause” (as defined in the NEO Employment Agreements), disability or death, we are required to pay the executive the executive's then current base salary for five months after the effective date of such termination. This severance benefit is conditioned upon the executive’s execution of a general release. These payments are not made if the executive is terminated with “justifiable cause,” the executive resigns, or the executive dies or becomes disabled. The Named Executive Officers would also be entitled to additional payments or acceleration of awards under the AIP and LTIP programs, in accordance with the terms of those plans.
If the Named Executive Officer’s employment is terminated at any time within one year following a Change of Control (as defined in the NEO Employment Agreements) other than for "justifiable cause," or if the executive resigns for “good reason” (as defined in the NEO Employment Agreements), then we will be obligated to pay the executive an amount equal to twelve months of the executive’s highest base salary in effect at any time during the six-month period ending on the date of the Change of Control. This payment also is conditioned upon the executive’s execution of a general release. Payments made under this provision are to be reduced if and to the extent necessary to avoid any payments or benefits to the executive being treated as “excess parachute payments” within the meaning of Internal Revenue Code Section 280G(b)(i).
The NEO Employment Agreements contain confidentiality provisions pursuant to which each executive agrees not to disclose confidential information regarding our Company. The NEO Employment Agreements also contain covenants pursuant to which each executive agrees, during the term of his/her employment and for a one-year period following the termination of his/her employment, not to have any connection with any business which is a specialty retailer that primarily distributes, sells or markets so-called “big and tall” apparel of any kind for men or which utilizes the “big and tall” retail or wholesale marketing concept as part of its business.
32
Estimated Potential Payments to Named Executive Officers
The following table shows the payments that would be made to our Named Executive Officers assuming a “termination without cause” or a “resignation for good reason” (each a “Qualifying Termination”) or a Qualifying Termination following a Change in Control, as described in the employment agreements, as of February 3, 2024 (the last day of fiscal year 2023).
|
|
|
|
|
|
|
|
|
Long-Term Incentive Plan |
|
|
|
|
||||||||
|
Name |
|
Continued
|
|
|
Annual
|
|
|
Time-
|
|
|
Performance-
|
|
|
Total
|
|
|||||
|
Harvey S. Kanter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Qualifying Termination |
|
$ |
4,320,833 |
|
|
$ |
866,346 |
|
|
$ |
2,211,737 |
|
|
$ |
1,664,227 |
|
|
$ |
9,063,143 |
|
|
Qualifying Termination due to change in control |
|
$ |
3,400,000 |
|
|
$ |
866,346 |
|
|
$ |
2,211,737 |
|
|
$ |
1,664,227 |
|
|
$ |
8,142,310 |
|
|
Peter H. Stratton, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Qualifying Termination |
|
$ |
203,500 |
|
|
$ |
224,007 |
|
|
$ |
505,990 |
|
|
$ |
391,692 |
|
|
$ |
1,325,188 |
|
|
Qualifying Termination due to change in control |
|
$ |
407,000 |
|
|
$ |
224,007 |
|
|
$ |
505,990 |
|
|
$ |
391,692 |
|
|
$ |
1,528,688 |
|
|
Anthony J. Gaeta |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Qualifying Termination |
|
$ |
200,000 |
|
|
$ |
186,118 |
|
|
$ |
365,203 |
|
|
$ |
269,350 |
|
|
$ |
1,020,670 |
|
|
Qualifying Termination due to change in control |
|
$ |
400,000 |
|
|
$ |
186,118 |
|
|
$ |
365,203 |
|
|
$ |
269,350 |
|
|
$ |
1,220,670 |
|
|
Robert S. Molloy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Qualifying Termination |
|
$ |
193,000 |
|
|
$ |
186,876 |
|
|
$ |
452,774 |
|
|
$ |
332,836 |
|
|
$ |
1,165,486 |
|
|
Qualifying Termination due to change in control |
|
$ |
386,000 |
|
|
$ |
186,876 |
|
|
$ |
452,774 |
|
|
$ |
332,836 |
|
|
$ |
1,358,486 |
|
|
Allison Surette |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Qualifying Termination |
|
$ |
187,500 |
|
|
$ |
169,460 |
|
|
$ |
353,391 |
|
|
$ |
264,479 |
|
|
$ |
974,829 |
|
|
Qualifying Termination due to change in control |
|
$ |
375,000 |
|
|
$ |
169,460 |
|
|
$ |
353,391 |
|
|
$ |
264,479 |
|
|
$ |
1,162,329 |
|
33
Clawback Policies
Executive Clawback Policy . The Board adopted a clawback policy (the “Executive Clawback Policy”) that complies with the final SEC regulations mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and Nasdaq Listing Rule 5608. The Executive Clawback Policy provides for repayment of incentive-based compensation in the event of an accounting restatement resulting from noncompliance with financial reporting requirements under federal securities laws. The policy applies to current and former executives and requires reimbursement or forfeiture of any excess incentive compensation received by an executive during the three completed fiscal years immediately preceding the date on which the Company is required to prepare an accounting restatement. The Executive Clawback Policy is in addition to, the Company’s other clawback policies and provisions described below.
Other Clawback Policies and Provisions . Our employment agreements with members of our senior management and our long-term incentive plans contain clawback provisions that provide for remedies in the event we learn, after the senior executive is terminated by us other than for “justifiable cause,” that the senior executive could have been terminated for “justifiable cause.” In addition, since August 2018, we have had an executive incentive pay clawback policy that permits the Company to recover incentive-based compensation (cash and/or equity) from current and former executive officers of the Company in certain circumstances.
Grants of Plan-Based Awards. The following table sets forth certain information with respect to plan-based awards granted to the Named Executive Officers in fiscal 2023.
2023 GRANTS OF PLAN-BASED AWARDS
|
|
|
|
Service |
|
Estimated Future Payouts
|
|
|
Estimated Future Payouts
|
|
|
All Other
|
|
|
All Other
|
|
|
Exercise
|
|
|
Grant
|
|
||||||||||||||||||||||
|
|
|
Grant |
Inception |
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
Threshold |
|
|
Target |
|
|
Maximum |
|
|
or Units |
|
|
Options |
|
|
Awards |
|
|
Awards |
|
||||||||||
|
|
|
Date |
Date |
|
($) |
|
|
($) |
|
|
($) |
|
|
($) (1) |
|
|
($) (1) |
|
|
($) (1) |
|
|
(#) |
|
|
(#) |
|
|
($ / Sh) |
|
|
($) |
|
||||||||||
|
Harvey S. Kanter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
2023 AIP (2) |
|
4/27/2023 |
|
$ |
173,269 |
|
|
$ |
866,346 |
|
|
$ |
1,732,692 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2023-2025 LTIP, Time-Based (3) |
5/1/2023 |
1/29/2023 |
|
$ |
- |
|
|
$ |
361,250 |
|
|
$ |
- |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
82,289 |
|
|
|
— |
|
|
|
— |
|
|
$ |
361,249 |
|
|
|
2023-2025 LTIP, Performance-Based (3) |
5/1/2023 |
1/29/2023 |
|
$ |
180,625 |
|
|
$ |
361,250 |
|
|
$ |
541,875 |
|
|
$ |
180,625 |
|
|
$ |
361,250 |
|
|
$ |
541,875 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
Performance Stock Units (4) |
8/11/2023 |
8/11/2023 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
573,000 |
|
|
|
— |
|
|
|
— |
|
|
|
2,404,689 |
|
|
Peter H. Stratton, Jr. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
2023 AIP (2) |
|
4/27/2023 |
|
$ |
49,779 |
|
|
$ |
248,896 |
|
|
$ |
373,344 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2023-2025 LTIP, Time-Based (3) |
5/1/2023 |
1/29/2023 |
|
|
— |
|
|
$ |
91,575 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
20,859 |
|
|
|
— |
|
|
|
— |
|
|
$ |
91,571 |
|
|
|
2023-2025 LTIP, Performance-Based (3) |
5/1/2023 |
1/29/2023 |
|
$ |
45,788 |
|
|
$ |
91,575 |
|
|
$ |
137,363 |
|
|
$ |
45,788 |
|
|
$ |
91,575 |
|
|
$ |
137,363 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Anthony J. Gaeta |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
2023 AIP (2) |
|
4/27/2023 |
|
$ |
39,183 |
|
|
$ |
195,914 |
|
|
$ |
293,870 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2023-2025 LTIP, Time-Based (3) |
5/1/2023 |
1/29/2023 |
|
|
— |
|
|
$ |
56,875 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
12,955 |
|
|
|
— |
|
|
|
— |
|
|
$ |
56,872 |
|
|
|
2023-2025 LTIP, Performance-Based (3) |
5/1/2023 |
1/29/2023 |
|
$ |
28,438 |
|
|
$ |
56,875 |
|
|
$ |
85,313 |
|
|
$ |
28,438 |
|
|
$ |
56,875 |
|
|
$ |
85,313 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Robert S. Molloy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
2023 AIP (2) |
|
4/27/2023 |
|
$ |
39,342 |
|
|
$ |
196,712 |
|
|
$ |
295,067 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2023-2025 LTIP, Time-Based (3) |
5/1/2023 |
1/29/2023 |
|
|
— |
|
|
$ |
67,550 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
15,387 |
|
|
|
— |
|
|
|
— |
|
|
$ |
67,549 |
|
|
|
2023-2025 LTIP, Performance-Based (3) |
5/1/2023 |
1/29/2023 |
|
$ |
33,775 |
|
|
$ |
67,550 |
|
|
$ |
101,325 |
|
|
$ |
33,775 |
|
|
$ |
67,550 |
|
|
$ |
101,325 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Allison Surette |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
2023 AIP (2) |
|
4/27/2023 |
|
$ |
37,658 |
|
|
$ |
188,289 |
|
|
$ |
282,433 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2023-2025 LTIP, Time-Based (3) |
5/1/2023 |
1/29/2023 |
|
|
— |
|
|
$ |
61,250 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
13,952 |
|
|
|
— |
|
|
|
— |
|
|
$ |
61,249 |
|
|
|
2023-2025 LTIP, Performance-Based (3) |
5/1/2023 |
1/29/2023 |
|
$ |
30,625 |
|
|
$ |
61,250 |
|
|
$ |
91,875 |
|
|
$ |
30,625 |
|
|
$ |
61,250 |
|
|
$ |
91,875 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
34
Outstanding Equity Awards at Fiscal Year-End . The following table sets forth certain information with respect to outstanding equity awards held by the Named Executive Officers at the end of fiscal 2023.
2023 OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
|
|
|
Option Awards |
|
Stock Awards |
|
|||||||||||||||||||||||||||||||||
|
|
|
Number of
|
|
|
Number of
|
|
|
Equity
|
|
|
Option
|
|
|
Option
|
|
Number of
|
|
|
|
Market
|
|
|
Equity
|
|
|
|
Equity
|
|
||||||||||
|
Name |
|
Exercisable |
|
|
Unexercisable |
|
|
(#) |
|
|
($) |
|
|
Date |
|
(#) |
|
|
|
($)(1) |
|
|
(#) |
|
|
|
($)(1) |
|
||||||||||
|
Harvey S. Kanter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
573,000 |
|
|
(2 |
) |
|
2,383,680 |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
53,971 |
|
|
(3 |
) |
$ |
224,519 |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
82,289 |
|
|
(4 |
) |
$ |
342,322 |
|
|
|
|
|
|
|
|
||||
|
|
|
|
150,000 |
|
|
|
— |
|
|
|
— |
|
(5) |
$ |
0.64 |
|
|
6/10/2030 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
221,020 |
|
|
|
— |
|
|
|
221,020 |
|
(6) |
$ |
0.53 |
|
|
6/11/2030 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
83,990 |
|
|
|
— |
|
|
|
167,980 |
|
(7) |
$ |
0.69 |
|
|
3/8/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
35,421 |
|
|
|
35,422 |
|
|
|
— |
|
(8) |
$ |
0.75 |
|
|
3/9/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Peter H. Stratton, Jr. |
|
|
126,727 |
|
|
|
— |
|
|
|
48,909 |
|
(6) |
$ |
0.53 |
|
|
6/11/2030 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
37,172 |
|
|
|
— |
|
|
|
37,172 |
|
(7) |
$ |
0.69 |
|
|
3/8/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
24,078 |
|
|
|
12,038 |
|
|
|
— |
|
(8) |
$ |
0.75 |
|
|
3/9/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
13,681 |
|
(3) |
|
$ |
56,913 |
|
|
|
— |
|
|
|
|
— |
|
|||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
20,859 |
|
(4) |
|
$ |
86,773 |
|
|
|
— |
|
|
|
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Anthony J. Gaeta |
|
|
109,581 |
|
|
|
— |
|
|
|
36,527 |
|
(6) |
$ |
0.53 |
|
|
6/11/2030 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
27,761 |
|
|
|
— |
|
|
|
27,761 |
|
(7) |
$ |
0.69 |
|
|
3/8/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
7,372 |
|
|
|
8,686 |
|
|
|
— |
|
(8) |
$ |
0.75 |
|
|
3/9/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
8,497 |
|
|
(3 |
) |
$ |
35,348 |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
12,955 |
|
|
(4 |
) |
$ |
53,893 |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Robert S. Molloy |
|
|
79,298 |
|
|
|
— |
|
|
|
46,433 |
|
(6) |
$ |
0.53 |
|
|
6/11/2030 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
15,290 |
|
|
|
— |
|
|
|
35,289 |
|
(7) |
$ |
0.69 |
|
|
3/8/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
2,858 |
|
|
|
11,429 |
|
|
|
— |
|
(8) |
$ |
0.75 |
|
|
3/9/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
10,092 |
|
(3) |
|
$ |
41,983 |
|
|
|
— |
|
|
|
|
— |
|
|||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
15,387 |
|
(4) |
|
$ |
64,010 |
|
|
|
— |
|
|
|
|
— |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
Allison Surette |
|
|
4,261 |
|
|
|
— |
|
|
|
— |
|
(9) |
$ |
4.49 |
|
|
9/11/2026 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
105,867 |
|
|
|
— |
|
|
|
35,288 |
|
(6) |
$ |
0.53 |
|
|
6/11/2030 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
26,820 |
|
|
|
— |
|
|
|
26,820 |
|
(7) |
$ |
0.69 |
|
|
3/8/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
17,372 |
|
|
|
8,686 |
|
|
|
— |
|
(8) |
$ |
0.75 |
|
|
3/9/2031 |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
8,209 |
|
|
(3 |
) |
$ |
34,149 |
|
|
|
— |
|
|
|
|
— |
|
||
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
13,952 |
|
|
(4 |
) |
$ |
58,040 |
|
|
|
— |
|
|
|
|
— |
|
||
35
Option Exercises and Stock Vested Table. The following table sets forth information for the Named Executive Officers with respect to the exercise of option awards and the vesting of stock awards during fiscal 2023.
2023 OPTION EXERCISES AND STOCK VESTED
|
|
|
Option Awards |
|
|
Stock Awards |
|
||||||||||
|
Name |
|
Number of shares
|
|
|
Value Realized
|
|
|
Number of shares
|
|
|
Value Realized
|
|
||||
|
Harvey S. Kanter |
|
|
— |
|
|
$ |
— |
|
|
|
214,116 |
|
|
$ |
1,076,300 |
|
|
Peter H. Stratton, Jr. |
|
|
— |
|
|
$ |
— |
|
|
|
34,683 |
|
|
$ |
168,194 |
|
|
Anthony J. Gaeta |
|
|
10,000 |
|
|
$ |
55,027 |
|
|
|
25,328 |
|
|
$ |
122,459 |
|
|
Robert S. Molloy |
|
|
80,000 |
|
|
$ |
284,966 |
|
|
|
31,961 |
|
|
$ |
154,374 |
|
|
Allison Surette |
|
|
— |
|
|
$ |
— |
|
|
|
24,470 |
|
|
$ |
118,311 |
|
Pension Benefits
None of our Named Executive Officers was a participant in any pension plan and, therefore, none has accumulated benefits.
36
Non-Qualified Deferred Compensation
We do not offer to our executive officers or employees any defined contribution or similar plan that provides for the deferral of compensation on a basis that is not tax-qualified. We offer a 401(k) savings plan to all of our employees eligible to participate, as further described below.
401(k) Plan
The Company has one defined contribution plan, the Destination XL Group, Inc. 401(k) Savings Plan (the “401(k) Plan”). Under the 401(k) Plan, the Company offers a qualified automatic contribution arrangement (“QACA”) with the Company matching 100% of the first 1% of deferred compensation and 50% of the next 5% (with a maximum contribution of 3.5% of eligible compensation). Employees who are 21 years of age or older are eligible to make deferrals after 6 months of employment and are eligible to receive a match from the Company after one year of employment and 1,000 hours. Our Named Executive Officers are eligible to participate in the 401(k) Plan, and the amount of any Company match to our Named Executive Officers is set forth above in the “ All Other Compensation ” table.
Certain Relationships and Related Transactions
No Related Party Transactions in Fiscal 2023. Since January 29, 2023, we have not had any relationships or transactions with any of our executive officers, directors, beneficial owners of more than 5% of our common stock or any immediate family member of such persons that were required to be reported pursuant to Item 404(a) of Regulation S-K. As permitted by SEC rules, discussion of employment relationships or transactions involving the Company’s executive officers and directors, and compensation solely resulting from such employment relationships or transactions, or service as a director of the Company, as the case may be, has been omitted to the extent disclosed in the Executive Compensation or the Director Compensation section of this Amendment, as applicable.
Review, Approval or Ratification of Transactions with Related Persons . Pursuant to its charter, the Audit Committee reviews all related-party transactions on an ongoing basis and, to the extent required by the Sarbanes−Oxley Act of 2002, the SEC or Nasdaq, all such transactions must be approved by the Audit Committee except as otherwise delegated by the Audit Committee to another independent body of the Board.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires our executive officers and directors, and persons who own more than 10% of a registered class of our equity securities (collectively, the “Reporting Persons”), to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the “SEC”). The Reporting Persons are required to furnish us with copies of all Section 16(a) reports they file. Based solely upon a review of Forms 3, 4 and 5 and amendments thereto furnished to us by our officers and directors during fiscal 2023, we believe that the Reporting Persons complied with all applicable Section 16(a) reporting requirements and that all required reports were filed in a timely manner, other than, on October 16, 2023, we reported the late filing for Mr. Molloy of stock options exercised and sold on October 11, 2023.
37
PROPOSAL 2
ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION
As required under the Dodd-Frank Act, and in accordance with the recommendation by our Board and approval by our stockholders in 2023 of an annual "Say-on-Pay" vote, the Board is providing stockholders with the opportunity to vote, on a non-binding, advisory basis, to approve the compensation of our Named Executive Officers as disclosed in this Proxy Statement in accordance with the compensation disclosure rules of the SEC.
We seek to align the interests of our Named Executive Officers with the interests of our stockholders. The Compensation Committee focuses on total direct compensation paid to our executives, which includes both its annual and long-term incentive programs. A substantial portion of our Named Executive Officers' target compensation is performance-based. As such, every year, the Compensation Committee reassesses the effectiveness of its incentive programs and continually adjusts the programs to align compensation with stockholder value. Furthermore, the Compensation Committee frequently consults with its outside compensation consultant to ensure that the compensation paid to our Named Executive Officers, as well as the structure of our incentive programs, is consistent with that of our identified peers.
The "Executive Compensation" section of this Proxy Statement, including the "Compensation Discussion and Analysis" section, provides a summary of our financial performance in fiscal 2023 and describes our executive compensation programs and the decisions made by the Compensation Committee with respect to compensation for fiscal 2023. We encourage you to read our “ Compensation Discussion and Analysis ” for a complete discussion of our executive compensation program, including detailed information about the fiscal 2023 compensation of our Named Executive Officers.
Our Board is asking stockholders to approve, on a non-binding, advisory basis, the compensation of our Named Executive Officers as disclosed in this Proxy Statement pursuant to the SEC's compensation disclosure rules in the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosures. As an advisory vote, this proposal is not binding upon us or the Board. The Compensation Committee values the opinions expressed by our stockholders in their vote on this proposal and will consider the outcome of the vote when making future compensation decisions for executive officers. The affirmative vote of a majority of the shares of common stock properly cast at the Annual Meeting, in person or by proxy, is necessary to approve this proposal. Accordingly, we ask our stockholders to vote on the following resolution at the Annual Meeting:
“RESOLVED, that the compensation paid to the Company's Named Executive Officers, as disclosed in this Proxy Statement pursuant to the compensation rules of the SEC in the Compensation Discussion and Analysis, accompanying compensation tables and related narrative discussion, is hereby APPROVED.”
The Board of Directors recommends that you vote FOR the approval of the compensation of our Named Executive Officers as disclosed in this Proxy Statement.
38
PROPOSAL 3
APPROVAL OF AMENDMENTS TO OUR 2016 INCENTIVE COMPENSATION PLAN
Introduction
At the recommendation of our Compensation Committee, the Board is seeking stockholder approval of amendments to our 2016 Incentive Compensation Plan (the “2016 Plan”) to, among other things, increase the total number of shares of common stock authorized for issuance under the 2016 Plan by 6,150,000 shares and correspondingly to increase the maximum number of shares that may be delivered under the 2016 Plan as a result of the exercising of incentive stock options. The 2016 Plan was originally approved by stockholders on August 4, 2016. The stockholders subsequently approved amendments to increase the number of shares of common stock authorized for issuance under the 2016 Plan: on August 8, 2019, to increase the number of shares of common stock by 2,800,000 shares; on August 12, 2020, to increase the number of shares of common stock by 1,740,000 shares; and on August 5, 2021, to increase the number of shares of common stock by 4,855,000 shares. If stockholders approve the amendments to the 2016 Plan at the Annual Meeting, the maximum number of shares that may be issued for awards granted under the plan will be 20,745,000 shares.
In addition to the proposed amendment to increase available shares under the 2016 Plan, we are also amending the 2016 Plan to:
Pursuant to its terms, the 2016 Plan will terminate at the earliest of (a) such time as no shares remain available for issuance, (b) termination of this plan by the Board, or (c) the tenth anniversary from the date the shareholders approve the plan. If the shareholders approve this Proposal 3, the tenth anniversary of the 2016 Plan will be August 8, 2034. If the shareholders do not approve this Proposal, the 2016 Plan will remain in effect, but no further awards may be granted under the 2016 Plan after August 5, 2031. A copy of the 2016 Plan as proposed to be amended is attached as Appendix A to this Proxy Statement.
Summary of the 2016 Plan
Since fiscal 2010, our primary use of equity has been tied to awards granted pursuant to our long-term incentive program (“LTIP”). We have used our LTIPs as a means to provide a source of equity to attract, retain and reward our management team. The 2016 Plan provides us the ability to give participants important incentive and reward opportunities designed to enhance our profitable growth. Equity under the 2016 Plan is also used for new hire incentives.
The 2016 Plan is also needed for our independent directors to satisfy the requirement under the Director Plan that our directors receive 60% of their annual retainer in the form of equity (“Required Equity”). Pursuant to Nasdaq rules, shares under the Director Plan are not available for this purpose, therefore we can only issue Required Equity to our directors from a stockholder-approved plan, which is the 2016 Plan.
Purpose of Share Request
Our Board believes that our success depends on our ability to attract, incentivize and retain the best available people for positions of substantial responsibility and that the ability to grant equity awards is crucial to recruiting and retaining the services of these individuals to help us compete effectively and grow our business.
If stockholders do not approve this proposal to increase the availability of shares under our 2016 Plan, we will not have sufficient shares to satisfy the performance awards with equity under our current LTIPs, if performance is achieved, and will therefore be required to satisfy any awards in cash. In addition, our ability to recruit, retain and incentivize the key talent critical to our strategic growth initiatives would be seriously and negatively impacted.
Our Board believes that equity awards align the interests of our employees with those of our stockholders. Equity awards provide our employees with an ownership stake in the Company, motivating them to achieve outstanding business performance, and provide an effective means of rewarding our employees for their contributions to our growth.
As mentioned above, our non-employee directors are required under our Director Plan to maintain a minimum equity ownership, which requires that 60% of their retainer be satisfied in equity until such minimum equity ownership threshold is met. Because shares under our Director Plan may only be used for discretionary shares, any shares granted pursuant to this minimum equity ownership must be issued from the 2016 Plan. Our Director Plan also provides our directors with the option to elect to receive their compensation in shares of deferred stock. Any such shares must also be issued from the 2016 Plan.
We believe that our request for 6,150,000 additional shares will be sufficient to meet expected equity awards through at least August 2027, assuming continued diligent share conservation and an increase in our stock price. Based solely on the closing price of our common stock as reported on Nasdaq on June 12, 2024 of $3.61 per share, the maximum aggregate market value of the additional
39
6,150,000 shares of our common stock to be reserved for issuance under the 2016 Plan would be approximately $22.2 million. If the proposed amendments to the 2016 Plan are not approved, we will lose what has become an indispensable part of our compensation program and we may not be able to satisfy existing commitments under our 2022-2024 LTIP, 2023-2025 LTIP and 2024-2026 LTIP in equity, which, if achieved, would have to be settled in cash as required under the 2016 Plan. In addition, we would have to eliminate the required equity component of our director compensation program.
Share Reserve
At May 4, 2024, 1,445,584 shares of our common stock remained available for issuance under our 2016 Plan.
Any outstanding awards under our prior 2006 Incentive Compensation Plan (the “2006 Plan”) as of the effective date of the 2016 Plan that subsequently expire or are cancelled for any reason without having been exercised or paid under the 2006 Plan will become available for grant under the 2016 Plan. At May 4, 2024, there were 59,254 stock options outstanding that were issued under the 2006 Plan. These stock options have an average exercise price of $5.29, with the last stock option expiring in November 2024. If not exercised, the underlying shares of 59,254 would become available for grant under our 2016 Plan.
We recommend approval of the amendments to the 2016 Plan so that we may continue to provide equity compensation to attract, motivate, retain and reward high-quality executives and other key employees, officers and directors. See “ Compensation Discussion and Analysis—Long-Term Incentive Plans ” for a description of our LTIPs.
Alignment of 2016 Plan with Stockholders’ Interests
The 2016 Plan is designed to reinforce the alignment of our equity opportunities for management with the interest of our stockholders and includes a number of provisions that we believe are consistent with good governance and compensation practice, including:
· Minimum vesting period of one year from the date of grant covering 95% of all awards;
· No repricing of stock options or stock appreciation rights without stockholder approval;
· No discounted stock options;
· No dividends paid on unvested equity awards;
· No evergreen provision;
· No automatic grants or reload;
· No liberal share recycling;
· A stated clawback provision;
· “Double-trigger” vesting for change in control; and
· No tax gross-ups.
40
Key Data
|
|
|
Shares |
|
Weighted Average Exercise Price |
|
Weighted Average Remaining Term |
|
||
|
New shares requested under amendment to the 2016 Plan |
|
|
6,150,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Shares as of May 4, 2024: |
|
|
|
|
|
|
|
||
|
2016 Plan, including options outstanding under 2006 Plan |
|
|
|
|
|
|
|
||
|
Shares remaining available for issuance |
|
|
1,445,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Time-based stock options outstanding |
|
|
3,030,394 |
|
$ |
0.73 |
|
6.3 yrs. |
|
|
|
|
|
|
|
|
|
|
||
|
Time-based unvested full-value awards outstanding |
|
|
783,589 |
|
|
|
3.2 yrs. |
(2) |
|
|
Deferred stock awards payable to directors |
|
|
444,281 |
|
|
|
|
|
|
|
Performance-based unvested full-value awards outstanding |
|
|
573,000 |
|
|
|
2.3 yrs. |
|
|
|
Total full value awards outstanding |
|
|
1,800,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Non-Employee Director Compensation Plan (1) |
|
|
626,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
Other data: |
|
|
|
|
|
|
|
||
|
Burn Rate - 3 yr. average |
|
|
2.2 |
% |
|
|
|
|
|
|
Value-Adjusted Burn Rate - 3 yr. average |
|
|
1.7 |
% |
|
|
|
|
|
|
Dilution - assuming all shares are granted on a 1:1 basis |
|
|
8.7 |
% |
|
|
|
|
|
|
Overhang |
|
|
17.6 |
% |
|
|
|
|
|
|
Shareholder Transfer Value (New + Available) |
|
|
9.3 |
% |
|
|
|
|
|
|
Shareholder Transfer Value (New + Available + Outstanding) |
|
|
16.9 |
% |
|
|
|
|
|
(1) Represents shares available for stock issuances in lieu of cash for director fees.
(2) Average remaining vesting period of time-based awards.
Burn Rate
The following table sets forth information regarding grants of annual time-based awards and performance-based stock unit (PSU) awards granted and PSUs earned for each of the past three fiscal years and the average three-year burn rate:
|
Fiscal Year |
|
Performance Stock Units Granted (1) |
|
Performance Stock Units Earned (2) |
|
Time-Based Option Awards Granted |
|
Full Value Awards Granted and Earned for Achievement of Performance-Based Metrics |
|
|
Time-Based Full Value Awards Granted |
|
Shares
|
|
|
Weighted Average Common Shares (Basic) |
|
Burn Rate (3) |
|
Value Adjusted Burn Rate (4) |
|
|||||||||
|
2023 |
|
|
573,000 |
|
|
- |
|
|
1,317 |
|
|
267,219 |
|
|
|
339,923 |
|
|
29,650 |
|
|
|
61,018,000 |
|
|
1.5 |
% |
|
1.0 |
% |
|
2022 |
|
|
- |
|
|
- |
|
|
19,023 |
|
|
269,162 |
|
|
|
343,531 |
|
|
30,417 |
|
|
|
62,825,000 |
|
|
1.5 |
% |
|
1.0 |
% |
|
2021 |
|
|
- |
|
|
480,000 |
|
|
1,518,154 |
|
|
- |
|
|
|
8,054 |
|
|
- |
|
|
|
63,401,000 |
|
|
3.5 |
% |
|
3.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
3-yr average |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.2 |
% |
|
1.7 |
% |
|||||||
(1) Represents PSUs granted to Mr. Kanter in August 2023 in connection with the amendment and extension of his employment agreement. All PSUs remain unvested as of May 4, 2024.
41
(2) Represents PSUs that vested in fiscal 2021. The PSUs were granted to Mr. Kanter in fiscal 2019 in connection with his hiring.
(3) The burn rate is calculated as the sum of PSUs earned, time-based options and adjusted full-value awards divided by the basic weighted average common shares outstanding. Consistent with a proxy advisory firm’s methodology, all full-value awards have been multiplied by 1.5 (“adjusted full-value award”) for purposes of calculating burn rate. The burn rate calculation does not include the shares and deferred shares granted to directors as compensation in lieu of cash or any unearned PSUs.
(4) Value-Adjusted Burn Rate is calculated as (i) the sum of (a) number of full-value awards (including PSUs earned) * the 200-day average stock price as of the last day of the applicable Fiscal Year plus (b) number of stock options * Black Scholes valuation assuming market price is equal to the 200-day average stock price as of the last day of the applicable Fiscal Year (ii) divided by the weighted average common shares * the 200-day average stock price as of the last day of the applicable Fiscal Year.
We are Committed to Managing Dilution
Our Board recognizes the impact of dilution on our stockholders, and in evaluating the 2016 Plan sought to balance this concern with our ability to provide our management team with equity compensation as part of our long-term growth initiatives which, in time, we would expect to increase stockholder value. If approved, the issuance of the additional shares to be reserved under the 2016 Plan would dilute the holdings of stockholders by approximately 8.7%, assuming that all shares granted from the 2016 Plan were options or stock appreciation rights. However, with the Company’s expectation that it could grant some full-value awards as part of its compensation programs, in the form of restricted stock or restricted stock units (“RSUs”), the dilution could be less than 5.0%.
Our Board is committed to managing dilution. Over the past three fiscal years, we repurchased an aggregate 8.3 million shares for a total cost of $37.5 million. One impact of the stock repurchase programs has been that it decreased the number of shares of common stock outstanding, making our burn rates, as discussed above, appear higher because it is based on shares outstanding.
We also manage dilution by permitting our employees the option to satisfy their tax withholding obligations related to equity awards by withholding shares from those shares otherwise issuable. Over the past three fiscal years, we have withheld an aggregate 0.8 million shares to satisfy our employee's tax withholding obligations related to equity awards for a total cost of $4.5 million. Our Board believes the potential dilution to stockholders that could result from the approval of the amendments to the 2016 Plan is reasonable and sustainable to meet the Company’s strategic growth initiatives.
|
|
|
Potential Voting Power Dilution |
|
|
Shareholder Value Transfer (2) |
|
|||||||||||
|
|
|
Shares |
|
Dilution (1) |
|
|
Average Award Value |
|
Fair Value |
|
Shareholder Value Transfer |
|
|||||
|
As of May 4, 2024: |
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Aggregate outstanding stock options, RSUs, PSUs and deferred stock |
|
|
4,831,264 |
|
|
|
|
$ |
4.07 |
|
$ |
19,663,244 |
|
|
|
||
|
Shares available under 2016 Plan |
|
|
1,445,584 |
|
|
|
|
$ |
3.16 |
|
$ |
4,574,241 |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
New shares requested under 2016 Plan (3) |
|
|
6,150,000 |
|
|
8.7 |
% |
|
$ |
3.16 |
|
$ |
19,460,357 |
|
|
|
|
|
Total equity dilution including new shares (overhang) |
|
|
12,426,848 |
|
|
17.6 |
% |
|
|
|
|
|
|
|
|||
|
Shareholder Value Transfer (new and available) |
|
|
|
|
|
|
|
|
$ |
24,034,598 |
|
|
9.3 |
% |
|||
|
Shareholder Value Transfer |
|
|
|
|
|
|
|
|
$ |
43,697,842 |
|
|
16.9 |
% |
|||
|
Common shares outstanding at May 4, 2024 |
|
|
58,204,752 |
|
|
|
|
$ |
4.43 |
|
$ |
257,847,051 |
|
|
|
||
(1) Dilution for the additional shares requested under the 2016 Plan is calculated as the additional shares requested divided by the sum of common shares outstanding, outstanding stock options, deferred stock, PSUs and RSUs outstanding and shares remaining available for issuance under the 2016 Plan and the additional shares requested. Overhang is calculated as the total equity dilution per the table divided by the sum of common shares outstanding, outstanding stock options, deferred stock and RSUs outstanding and shares remaining available for issuance under the 2016 Plan and the additional shares requested.
(2) Shareholder Value Transfer is the sum of the fair value of shares available for grant, shares outstanding under existing awards and new shares requested, the sum of which is then divided by the value of total common shares outstanding at May 4, 2024. The average award value for shares available under the 2016 Plan and the new shares requested of $3.16 was calculated using the 200-day average stock price of the Company’s common stock at March 1, 2024 of $4.43 divided by a fungible ratio of 1.4.
(3) This dilution calculation assumes all shares granted from the 2016 Plan are options or stock appreciation rights. However, each grant of a full-value award utilizes 1.9 shares from the share reserve. Therefore, if all 6,150,000 shares requested were full-value awards, only 3.2 million actual shares would affect dilution to our stockholders, and the effect of dilution would be less than the 8.7% in the table.
42
Grant History
Our incentive-based compensation program is broad-based and not heavily concentrated to only our CEO and/or NEOs. Based on the grant activity for the past three fiscal years, equity awards granted to our CEO, exclusive of the PSUs that were granted to Mr. Kanter in fiscal 2023, in connection with this amended and extended employment agreement, were approximately 28.0% of all equity awards granted under our 2016 Plan. Grants to our NEOs, exclusive of the PSU awards granted to Mr. Kanter, represented approximately 50.8% of the total equity awards granted under our 2016 Plan over the past three fiscal years.
|
Fiscal Year |
|
CEO Grants (1) |
|
All NEO Grants |
|
|
Total Grants to All Participants |
|
CEO Ratio |
|
All
|
|
|||||
|
2023 |
|
|
172,745 |
|
|
304,308 |
|
|
|
608,459 |
|
|
28.4 |
% |
|
50.0 |
% |
|
2022 |
|
|
160,970 |
|
|
282,259 |
|
|
|
631,716 |
|
|
25.5 |
% |
|
44.7 |
% |
|
2021 |
|
|
442,225 |
|
|
818,829 |
|
|
|
1,526,208 |
|
|
29.0 |
% |
|
53.7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
3-yr average |
|
|
|
|
|
|
|
|
|
28.0 |
% |
|
50.8 |
% |
|||
(1) The grants to the CEO excludes 573,000 PSUs that were granted to Mr. Kanter in August 2023 in connection with his amended and extended employment agreement. As a result of this amended and extended employment agreement, Mr. Kanter has agreed to the extension of his employment agreement through August 2026. The PSU award, which is discussed above under " Compensation Discussion and Analysis ", is a performance award subject to a market condition which is tied to the Company's stock price.
Equity Compensation Plan Information
The following is a summary of information with respect to our equity compensation plans as of February 3, 2024:
|
Plan category |
|
Number of securities to be
|
|
|
Weighted-average
|
|
|
Number of securities
|
|
|||
|
Equity compensation plans approved by security holders (1) |
|
|
4,693,583 |
|
|
$ |
0.75 |
|
(2) |
|
2,177,876 |
|
|
Equity compensation plans not approved by security holders (3) |
|
|
32,009 |
|
|
|
— |
|
|
|
634,534 |
|
|
Total |
|
|
4,725,592 |
|
|
$ |
0.75 |
|
|
|
2,812,410 |
|
Summary of the 2016 Incentive Compensation Plan
The following is a summary of the 2016 Plan and is qualified in its entirety by reference to the full text of the 2016 Plan as proposed to be amended, which is attached as Appendix A to this Proxy Statement. The summary of the 2016 Plan may not contain all the information that is important to you and you should read Appendix A carefully before you decide how to vote.
Purpose
The purpose of the 2016 Plan is to:
43
Eligible Participants
The persons eligible to receive awards under the 2016 Plan are our officers, directors, employees and consultants or other persons who provide services to our Company. An employee on leave of absence may be considered as still employed for purposes of eligibility for participation in the 2016 Plan. As of the date of this proxy statement, there are approximately 32 employees, 6 non-employee directors as well as service providers of the Company and its affiliates who would be eligible to participate in the 2016 Plan.
Administration
Our Board has selected the Compensation Committee (the “Committee”) to administer the 2016 Plan. All Committee members must be "non-employee directors" as defined by Rule 16b-3 of the Exchange Act. The Board may in its discretion elect to administer 2016 Plan, provided that it is administered only by those directors who are independent within the meaning of the 2016 Plan. Subject to the terms of the 2016 Plan, the Committee is authorized to select eligible persons to participate in the 2016 Plan, grant awards, determine the type and number of awards to be granted and the number of shares of common stock to which awards will relate, specify times at which awards will be exercisable or settled (including performance conditions that may be required as a condition thereof), set other terms and conditions of awards, prescribe forms of award agreements, interpret and specify rules and regulations for administration of the 2016 Plan and make all other determinations that it deems necessary or advisable for the administration of the 2016 Plan.
Shares Available for Awards
The shares to be delivered under the 2016 Plan may be authorized but unissued shares of our common stock or treasury shares. Under the 2016 Plan, as proposed to be amended pursuant to this Proposal 3, the total number of shares of common stock that may be subject to the granting of awards under the 2016 Plan shall be equal to the sum of (i) 20,745,000 shares, plus (ii) 525,538 shares that were available for issuance but not granted under the 2006 Plan that rolled into the 2016 Plan on August 4, 2016, plus (iii) the number of shares subject to outstanding awards under the 2006 Plan that are forfeited, expire or terminate without delivery of shares. As of May 4, 2024, 1,445,584 shares of our common stock remained available for issuance under our 2016 Plan. In addition, at May 4, 2024, included in the total stock options outstanding of 3,030,394 were 51,664 stock options outstanding that were issued under the 2006 Plan, which if not exercised will become available for grant under our 2016 Plan.
Shares issued in respect of any full-value award, such as restricted stock and RSUs, are counted against the share limit as 1.9 shares of stock for every one share issued. Each share issued in respect of stock options or stock appreciation rights (SARs) are counted against the share limit as one share of stock for every one share issued.
Any shares of stock that again become available for award under the 2016 Plan shall be added as one share for every one share of stock options or SARs and 1.9 shares for every one full-value award.
Awards that are settled or exercised through the payment of shares, and shares withheld for the payment of taxes on awards, are counted in full against the number of shares available for award under the 2016 Plan, regardless of the number of shares actually issued upon settlement or exercise of any such award.
Awards with respect to shares that are granted to replace outstanding awards or other similar rights that are assumed or replaced by awards under the 2016 Plan pursuant to the acquisition of a business are not subject to, and do not count against, the foregoing limit.
Subject to the increase in the share reserve described above, the maximum aggregate number of shares that may be delivered under the 2016 Plan as a result of the exercise of ISOs is 20,745,000 shares. In addition, a director who is not an employee or a consultant may not be granted an award that has a fair value, as of the date of grant, which exceeds $300,000 in the aggregate.
Annual Per-Person Limitations
In any fiscal year during any part of which the 2016 Plan is in effect, the number of options, SARs and performance shares granted to any one participant may not exceed 1,000,000 for each type of such award, subject to adjustment in certain circumstances. Furthermore, the maximum dollar value that may be earned by any one participant as a performance unit in respect of a performance period of one year is $3,000,000, and the maximum dollar value that may be earned by one participant as a performance unit in respect of a performance period greater than one year is $3,000,000 multiplied by the number of full 12-month periods that are in the performance period. The term “performance unit” is defined in the 2016 Plan to mean any grant of a unit valued by reference to a designated amount of property (including cash) other than shares of common stock, which value may be paid in cash, shares of common stock, other property, or any combination thereof, upon the achievement of performance goals set by the Committee.
44
Equitable Adjustments
The Committee is authorized to adjust the limitations described in the preceding paragraph and is authorized to adjust outstanding awards (including adjustments to exercise prices of options and other affected terms of awards) in the event that a dividend or other distribution (whether in cash, shares of common stock or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar corporate transaction or event affects the common stock so that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of participants.
The Committee is also authorized to adjust the limitations on the amount of certain awards in the event of any merger, consolidation or other reorganization in which the Company does not survive, or in the event of any change in control (as defined in the 2016 Plan), by taking any of the following approaches, without the requirement of obtaining consent from any plan participant: (1) continuation of the outstanding awards by the Company, if the Company is the surviving entity, (2) the assumption or substitution for the outstanding awards by the surviving entity, (3) full exercisability or vesting and accelerated expiration of the outstanding awards, or (4) settlement of the value of the outstanding awards in cash or cash equivalents or other property followed by cancellation of such awards.
Minimum Vesting Requirement
Except with respect to 5% of the shares of common stock available for awards under the 2016 Plan, no award will become exercisable or otherwise non-forfeitable unless such award has been outstanding for a minimum period of one year from its date of grant. The Committee reserves the general discretion to accelerate vesting of awards in connection with the participant’s death, disability, termination of service or change in control.
Awards
The 2016 Plan authorizes grants of a variety of awards described below. The Committee, or the Board, if applicable, determines the terms and conditions of each award at the time of grant, including whether the payment of awards may be subject to the achievement of performance goals, consistent with the terms of the 2016 Plan. The material terms and conditions of the awards described below shall be set forth in an award agreement, as established by the Committee, consistent with the provisions of the 2016 Plan. Each award agreement shall either be (i) in writing in a form approved by the Committee and executed by the Company by an officer duly authorized to act on its behalf, or (ii) an electronic notice in a form approved by the Committee and recorded by the Company in an electronic recordkeeping system used for tracking awards.
Stock Options and SARs
The Committee is authorized to grant stock options, including both incentive stock options (“ISOs”) (which must comply with provisions of Section 422 of the Internal Revenue Code and can result in potentially favorable tax treatment to the participant) and non-qualified stock options, as well as stock appreciation rights (SARs), which entitle the participant to receive the amount by which the fair market value of a share of common stock on the date of exercise exceeds the grant price of the SAR. The exercise price per share subject to an option is determined by the Committee, but must not be less than the fair market value of a share of common stock on the date of grant. The grant price of an SAR is determined by the Committee, but must not be less than (i) the fair market value of a share of common stock on the date of grant or, (ii) in the case of an SAR issued in tandem with an ISO, the exercise price of the option granted in tandem with the SAR.
For purposes of the 2016 Plan, the term "fair market value" means the fair market value of the common stock, awards or other property as determined by the Committee or under procedures established by the Committee. Unless otherwise determined by the Committee or our Board, the fair market value of the common stock as of any given date shall be the closing sales price per share of common stock as reported on the principal stock exchange or market on which the common stock is traded on the date immediately preceding the date as of which such value is being determined or, if there is no sale on that date, the last previous day on which a sale was reported.
The aggregate fair market value with respect to ISOs granted under the Plan that become exercisable for the participant during any calendar year shall not exceed $100,000.
The maximum term of each option or SAR, the times at which each option or SAR will be exercisable, and provisions requiring forfeiture of unexercised options or SARs at or following termination of employment or service generally are fixed by the Committee except that no option or SAR may have a term exceeding 10 years. Options may be exercised by payment of the exercise price in cash, shares, outstanding awards or other property (including notes or other contractual obligations of participants to make deferred payments, so long as such notes or other contractual obligations are not in violation of applicable law), as the Committee may determine from time to time. The 2016 Plan also permits net share settlement of nonqualified stock options. Methods of exercise and settlement and other terms of the SARs are determined by the Committee.
45
Other than in connection with standard adjustments (as set forth in the 2016 Plan), (i) the terms of outstanding options or SARs may not be amended to reduce the exercise or grant price per share of such options or SARs, as applicable (ii) an outstanding option or SAR may not be cancelled, exchanged, substituted, bought out or surrendered in exchange for (a) cash or other awards, in each case, having a fair market value in excess of the amount by which the fair market value of the shares underlying such option or SAR exceeds the aggregate exercise or grant price of such option or SAR as applicable or (b) options or SARs with an exercise or grant price per share that is less than the exercise or grant price per share of the original option or SAR as applicable and (iii) the Committee shall not be permitted to take any other action with respect to an option or SAR that may be treated as a repricing, in each case, without approval of our stockholders.
Restricted Stock Awards
The Committee is authorized to grant restricted stock, which is a grant of shares of common stock which may not be sold or disposed of, and which may be forfeited in the event of certain terminations of employment or service, prior to the end of a restricted period specified by the Committee. A participant granted restricted stock generally has all of the rights of our stockholders, unless otherwise determined by the Committee, and has the right to receive dividends.
Deferred Awards, including RSUs
The Committee is authorized to grant deferred awards, which include deferred stock and RSUs. An award of deferred stock or RSUs entitles a participant the right to receive shares of common stock at the end of a specified deferral period, and may be subject to possible forfeiture of the award in the event of certain terminations of employment prior to the end of a specified restricted period. Prior to settlement, an award of deferred stock or RSUs carries no voting or dividend rights or other rights associated with share ownership, although dividend equivalents may be granted, as discussed below.
Bonus Stock and Awards in Lieu of Cash Obligations
The Committee is authorized to grant shares of common stock as a bonus free of restrictions, or to grant shares of common stock or other awards in lieu of our obligations to pay cash under the 2016 Plan or other plans or compensatory arrangements, subject to such terms as the Committee may specify.
Dividend Equivalents
The Committee is authorized to grant dividend equivalents conferring on participants the right to receive, currently or on a deferred basis, cash, shares of common stock, other awards or other property equal in value to dividends paid on a specific number of shares of common stock or other periodic payments. Dividend equivalents may be granted alone or in connection with another award, may be paid currently or on a deferred basis and, if deferred, may be deemed to have been reinvested in additional shares of common stock, awards or otherwise as specified by the Committee. No dividends shall be paid on any unvested awards, and no dividend equivalents granted in connection with another award shall be paid or distributed prior to the vesting date of the related award (or portion thereof giving rise to the dividend equivalent). Notwithstanding the foregoing, in no event shall dividend equivalents be paid in connection with the grant of a performance award until such time as the Committee has certified that the performance goals with respect to such performance award have been achieved for the relevant performance period.
Performance Awards
The Committee is authorized to grant specific performance awards, which represent a conditional right to receive cash, shares of common stock or other awards upon achievement of certain pre-established performance goals and subjective individual goals, if any, during a specified fiscal year. The Committee shall, in its sole discretion, determine and grant awards subject to these provisions. This right of a participant to exercise or receive a grant or settlement of an award, and the timing thereof, may be subject to such criteria and performance conditions (including subjective individual goals) as may be specified by the Committee. The amount of any performance awards to be distributed shall be conclusively determined by the Committee. Performance awards may be paid in a lump sum or in installments following the close of an applicable performance period, or, in accordance with procedures established by the Committee, on a deferred basis in a manner that does not violate the requirements of Section 409A of the Internal Revenue Code (“Section 409A”).
Subject to the requirements of the 2016 Plan, the Committee will determine performance award terms, including the required levels of performance with respect to specified criteria, the corresponding amounts payable upon achievement of such levels of performance, termination and forfeiture provisions and the form of settlement. Except as otherwise specified by the Committee at the time the goals are set, the Committee shall exclude the impact of (i) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (ii) an event either not directly related to our operations or not within our reasonable control of management, (iii) a change in accounting standards required by generally accepted accounting principles, or (iv) any other item or event deemed advisable by the Committee. Achievement of performance goals in respect of performance awards shall be measured over a performance period no shorter than 12 months and no longer than 5 years, as further specified by the Committee.
In granting performance awards, the Committee may establish unfunded award "pools," the amounts of which will be based upon the achievement of a performance goal or goals based on one or more of certain business criteria described in the 2016 Plan (including,
46
for example, total stockholder return, net income, pretax earnings, EBITDA, earnings per share, and return on investment). During the first 90 days of a performance period, the Committee will determine who will potentially receive performance awards for that performance period, either out of the pool or otherwise.
After the end of each performance period, the Committee will determine (i) the amount of any pools and the maximum amount of potential performance awards payable to each participant in the pools and (ii) the amount of any other potential performance awards payable to participants in the 2016 Plan. The Committee may, in its discretion, determine that the amount payable as a performance award will be reduced from the amount of any potential award.
Other Stock-Based Awards
The Committee is authorized to grant awards under the 2016 Plan that are denominated or payable in, valued by reference to, or otherwise based on or related to shares of common stock. Such awards might include convertible or exchangeable debt securities, other rights convertible or exchangeable into shares of common stock, purchase rights for shares of common stock, awards with value and payment contingent upon our performance or any other factors designated by the Committee, and awards valued by reference to the book value of shares of common stock or the value of securities of or the performance of specified subsidiaries or business units. The Committee determines the terms and conditions of such awards.
Other Terms of Awards
Awards may be settled in the form of cash, shares of common stock, other awards or other property, in the discretion of the Committee. The Committee may require or permit participants to defer the settlement of all or part of an award in accordance with such terms and conditions as the Committee may establish, including payment or crediting of interest or dividend equivalents on deferred amounts, and the crediting of earnings, gains and losses based on deemed investment of deferred amounts in specified investment vehicles. The Committee is authorized to place cash, shares of common stock or other property in trusts or make other arrangements to provide for payment of our obligations under the 2016 Plan. The Committee may condition any payment relating to an award on the withholding of taxes and may provide that a portion of any shares of common stock or other property to be distributed will be withheld (or previously acquired shares of common stock or other property be surrendered by the participant) to satisfy withholding and other tax obligations.
Awards under the 2016 Plan are generally granted without a requirement that the participant pay consideration in the form of cash or property for the grant (as distinguished from the exercise), except to the extent required by law.
Restriction on Repricing
As described above under “Stock Options and SARs,” repricing of stock options and SARs is not permitted without stockholder approval. The Committee may, however, grant awards in exchange for other awards under the 2016 Plan or under other Company plans, or other rights to payment from us, and may grant awards in addition to such other awards, rights or other awards.
Restrictions on Transferability
Under the 2016 Plan, no award can be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of the participant to any party, or assigned or transferred by the participant other than by will or the laws of descent and distribution or to a beneficiary upon the participant’s death. Any award or other rights (other than Incentive Stock Options and Stock Appreciation Rights in tandem therewith) may be transferred to such beneficiaries only if and to the extent such transfers are permitted by the Committee pursuant to the express terms of an Award Agreement, are by gift or pursuant to a domestic relations order, and are to a “Permitted Assignee” that is a permissible transferee under the applicable rules of the Securities and Exchange Commission for registration of shares of stock on a Form S-8 registration statement. A Permitted Assignee means (i) the Participant’s spouse, children or grandchildren (including any adopted and step children or grandchildren), parents, grandparents or siblings, (ii) a trust for the benefit of one or more of the Participant or the persons referred to in clause (i), (iii) a partnership, limited liability company or corporation in which the Participant or the persons referred to in clause (i) are the only partners, members or shareholders, or (iv) a foundation in which any person or entity designated in clauses (i), (ii) or (iii) above control the management of assets.
Clawback
Awards made under the 2016 Plan shall be subject to the applicable provisions of the Company’s clawback or recoupment policies as may be in effect from time to time. In addition to the terms of the Company’s clawback policy, the 2016 Plan provides that, if a participant, while employed by or providing services to the Company, or after termination of employment or service violates a non-competition, non-solicitation or non-disclosure covenant or agreement, or otherwise engages in activity that is in conflict with or adverse to the interest of the Company, as determined by the Committee, then the participant’s awards under the 2016 Plan may be
47
forfeited and the Committee may require the participant to pay to the Company all or any portion of the gain realized upon exercise or vesting of an award.
Change in Control
In the event of a change of control, the 2016 Plan provides that Committee in effect immediately preceding the change in control may, in its sole discretion, accelerate the exercisability, the lapsing of restrictions or the expiration of deferral or vesting periods of any award upon a “double trigger,” i.e., upon certain terminations of employment without “justifiable cause” or for “good reason” within 6 months before or 18 months after a change in control. In addition, the Committee may provide in an award agreement that the performance goals relating to any performance based award will be deemed to have been met upon the occurrence of any "change in control," again upon a “double trigger” as described in this paragraph.
Amendment and Termination
Our Board may amend, alter, suspend, discontinue or terminate the 2016 Plan or the Committee's authority to grant awards without further stockholder approval, except stockholder approval must be obtained, no later than the next annual meeting following Board approval for such amendment, for any amendment or alteration if such approval is required by law or regulation or under the rules of any stock exchange or quotation system on which shares of common stock are then listed or quoted. Thus, stockholder approval may not necessarily be required for every amendment to the 2016 Plan which might increase the cost of the 2016 Plan or alter the eligibility of persons to receive awards. Stockholder approval will not be deemed to be required under laws or regulations, such as those relating to incentive stock options, that condition favorable treatment of participants on such approval, although our Board may, in its discretion, seek stockholder approval in any circumstance in which it deems such approval advisable. Unless earlier terminated by our Board, the 2016 Plan will terminate at the earliest of (i) such time as no shares of common stock remain available for issuance under the 2016 Plan or (ii) the tenth anniversary of the effective date.
Federal Income Tax Consequences of Awards
The 2016 Plan is not qualified under the provisions of Section 401(a) of the Internal Revenue Code and is not subject to any of the provisions of the Employee Retirement Income Security Act of 1974. The following is a brief summary of the principal United States federal income tax consequences of awards under the 2016 Plan. This summary is not intended to be exhaustive and does not describe state, local or foreign tax laws.
Non-qualified Stock Options
On exercise of a non-qualified stock option granted under the 2016 Plan, an optionee will recognize ordinary income equal to the excess, if any, of the fair market value on the date of exercise of the shares of stock acquired on exercise of the option over the exercise price. If the optionee is our employee, that income will be subject to the withholding of Federal income tax. The optionee's tax basis in those shares will be equal to their fair market value on the date of exercise of the option, and his/her holding period for those shares will begin on that date.
If an optionee pays for shares of stock on exercise of an option by delivering shares of our stock, the optionee will not recognize gain or loss on the shares delivered, even if their fair market value at the time of exercise differs from the optionee's tax basis in them. The optionee, however, otherwise will be taxed on the exercise of the option in the manner described above as if he had paid the exercise price in cash. The optionee's tax basis in the number of shares equal to the number of shares delivered on exercise of the option will be equal to his/her tax basis in the shares delivered, and his/her holding period for those shares will include his/her holding period for the shares delivered. The optionee's tax basis and holding period for the additional shares received on exercise of the option will be the same as if the optionee had exercised the option solely in exchange for cash.
We will be entitled to a deduction for Federal income tax purposes equal to the amount of ordinary income taxable to the optionee, provided that amount constitutes an ordinary and necessary business expense for us, is reasonable in amount, is not otherwise disallowed by the Internal Revenue Code, and either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.
Incentive Stock Options
The 2016 Plan provides for the grant of stock options that qualify as "incentive stock options" as defined in Section 422 of the Internal Revenue Code, which we refer to as “ISOs.” Under the Code, an optionee generally is not subject to tax upon the grant or exercise of an ISO. In addition, if the optionee holds a share received on exercise of an ISO for at least two years from the date the option was granted and at least one year from the date the option was exercised, which we refer to as the “Required Holding Period”, the difference, if any, between the amount realized on a sale or other taxable disposition of that share and the holder's tax basis in that share will be long-term capital gain or loss.
If, however, an optionee disposes of a share acquired on exercise of an ISO before the end of the Required Holding Period, which we refer to as a “Disqualifying Disposition”, the optionee generally will recognize ordinary income in the year of the Disqualifying Disposition equal to the excess, if any, of the fair market value of the share on the date the ISO was exercised over the exercise price. If, however, the Disqualifying Disposition is a sale or exchange on which a loss, if realized, would be recognized for Federal income
48
tax purposes, and if the sales proceeds are less than the fair market value of the share on the date of exercise of the option, the amount of ordinary income recognized by the optionee will not exceed the gain, if any, realized on the sale. If the amount realized on a Disqualifying Disposition exceeds the fair market value of the share on the date of exercise of the option, that excess will be short-term or long-term capital gain, depending on whether the holding period for the share exceeds one year.
An optionee who exercises an ISO by delivering shares of stock acquired previously pursuant to the exercise of an ISO before the expiration of the Required Holding Period for those shares is treated as making a Disqualifying Disposition of those shares. This rule prevents "pyramiding" or the exercise of an ISO (that is, exercising an ISO for one share and using that share, and others so acquired, to exercise successive ISOs) without the imposition of current income tax.
For purposes of the alternative minimum tax, the amount by which the fair market value of a share of stock acquired on exercise of an ISO exceeds the exercise price of that option generally will be an adjustment included in the optionee's alternative minimum taxable income for the year in which the option is exercised. If, however, there is a Disqualifying Disposition of the share in the year in which the option is exercised, there will be no adjustment with respect to that share. If there is a Disqualifying Disposition in a later year, no income with respect to the Disqualifying Disposition is included in the optionee's alternative minimum taxable income for that year. In computing alternative minimum taxable income, the tax basis of a share acquired on exercise of an ISO is increased by the amount of the adjustment taken into account with respect to that share for alternative minimum tax purposes in the year the option is exercised.
We are not allowed an income tax deduction with respect to the grant or exercise of an incentive stock option or the disposition of a share acquired on exercise of an incentive stock option after the Required Holding Period. However, if there is a Disqualifying Disposition of a share, we are allowed a deduction in an amount equal to the ordinary income includible in income by the optionee, provided that amount constitutes an ordinary and necessary business expense for us, is reasonable in amount, is not otherwise disallowed by the Internal Revenue Code and either the employee includes that amount in income or we timely satisfy our reporting requirements with respect to that amount.
Stock Awards
Generally, the recipient of a stock award will recognize ordinary compensation income at the time the stock is awarded equal to the excess, if any, of the fair market value of the stock received over any amount paid by the recipient in exchange for the stock. If, however, the stock is non-vested when it is received under the 2016 Plan (for example, if the employee is required to work for a period of time in order to not forfeit the stock), the recipient generally will not recognize income until the stock becomes vested, at which time the recipient will recognize ordinary compensation income equal to the excess, if any, of the fair market value of the stock on the date it becomes vested over any amount paid by the recipient in exchange for the stock. A recipient may, however, file an election with the Internal Revenue Service (Section 83(b) election), within 30 days of the stock award, to recognize ordinary compensation income, as of the date the award is granted, equal to the excess, if any, of the fair market value of the stock on the date the award is granted over any amount paid by the recipient in exchange for the stock.
The recipient's basis for the determination of gain or loss upon the subsequent disposition of shares acquired as stock awards will be the amount paid for such shares plus any ordinary income recognized either when the stock is received or when the stock becomes vested. Upon the disposition of any stock received as a stock award under the 2016 Plan, the difference between the sale price and the recipient's basis in the shares will be treated as a capital gain or loss and generally will be characterized as long-term capital gain or loss if the shares have been held for more the one year from the date as of which he or she would be required to recognize any compensation income.
Stock Appreciation Rights
Generally, the recipient of a SAR will not recognize any taxable income at the time the SAR is granted. If the recipient receives the appreciation inherent in the SARs in cash, the cash will be taxable as ordinary compensation income to the recipient at the time that the cash is received. If the recipient receives the appreciation inherent in the SARs in shares of stock, the recipient will recognize ordinary compensation income equal to the excess of the fair market value of the stock on the day it is received over any amounts paid by the recipient for the stock.
In general, there will be no federal income tax deduction allowed to us upon the grant or termination of SARs. Upon the exercise of a SAR, however, we will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income that the employee is required to recognize as a result of the exercise, provided that the deduction is not otherwise disallowed under the Code.
Deferred Awards
The recipient will not have income upon the grant of a RSU or a grant of deferred shares. Also, unlike restricted stock, the recipient is not permitted to make a Section 83(b) election. When the RSU vests or the deferral period lapses on deferred shares, the recipient will have income on the date payment is made or shares are issued, in an amount equal to the fair market value of the stock on such date (or the amount of cash paid). When the stock, if any, is sold the recipient will have a capital gain or loss equal to the sales proceeds less the value of the stock already taken into income. Any capital gain or loss will be long-term if the recipient holds the stock for more than one year, otherwise it will be short-term.
49
Dividend Equivalents
Generally, the recipient of a dividend equivalent award will recognize ordinary compensation income at the time the dividend equivalent award is received equal to the fair market value of the dividend equivalent award received. We generally will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income that the employee is required to recognize as a result of the dividend equivalent award, provided that the deduction is not otherwise disallowed under the Code.
Section 409A
The 2016 Plan is intended to comply with Section 409A to the extent that such section would apply to any Award under the 2016 Plan. Section 409A governs the taxation of deferred compensation. Any participant that is granted an Award that is deemed to be deferred compensation, such as a grant of RSUs that does not qualify for an exemption from Section 409A, and does not comply with Section 409A, could be subject to taxation on the Award as soon as the Award is no longer subject to a substantial risk of forfeiture (even if the Award is not exercisable) and an additional 20% tax (and a further additional tax based upon an amount of interest determined under Section 409A) on the value of the Award.
Importance of Consulting Tax Adviser
The information set forth above is a summary only and does not purport to be complete. In addition, the information is based upon current Federal income tax rules and therefore is subject to change when those rules change. Moreover, because the tax consequences to any recipient may depend on his/her particular situation, each recipient should consult his/her tax adviser as to the Federal, state, local and other tax consequences of the grant or exercise of an award or the disposition of stock acquired as a result of an award.
New Plan Benefits
Awards granted under the 2016 Plan are within the discretion of the Committee. As discussed above under “ Compensation Discussion and Analysis- Long-Term Incentive Plans ”, if performance targets under the Company’s LTIPs are achieved, performance-based awards earned and approved by the Committee will be granted from the 2016 Plan. The number of shares that may be awarded under the LTIP cannot currently be determined due to the fact that the number of shares will be based on the closing price of our common stock, as determined on the date of grant. However, assuming that we are able to achieve the performance targets, at target, we can estimate the amount of the award that each participant is entitled to receive. Assuming that the performance targets under the 2022-2024 LTIP, 2023-2025 LTIP and 2024-2026 LTIP are achieved at the target level, and further assuming that 50% of any award would be in equity, the total award value of shares that would be granted would be approximately $1.3 million for each of the respective LTIPs.
The following table reflects the value of performance-based awards, as discussed above, that could be earned, at target, by each Named Executive Officer, all of our current executive officers as a group (including Named Executive Officers), all employees as a group (excluding executive officers) and all non-executive directors as a group. The benefits and amounts that may be awarded under the 2016 Plan beyond fiscal 2024, the 2022-2024 LTIP, the 2023-2025 LTIP and the 2024-2026 LTIP cannot otherwise currently be determined.
|
Plan Name:
|
|
Director Compensation - Estimate of Required Equity for Remainder of Fiscal 2024 (1) |
|
|
Performance-Based Portion of LTIPs (2) |
|
||
|
Participant Name |
|
|
|
|
|
|
||
|
Harvey S. Kanter |
|
|
— |
|
|
$ |
1,083,750 |
|
|
Peter H. Stratton, Jr. |
|
|
— |
|
|
$ |
274,725 |
|
|
Anthony J. Gaeta |
|
|
— |
|
|
$ |
183,750 |
|
|
Robert S. Molloy |
|
|
— |
|
|
$ |
202,650 |
|
|
Allison Surette |
|
|
— |
|
|
$ |
181,825 |
|
|
Executive Group, including NEOs |
|
|
— |
|
|
$ |
2,541,651 |
|
|
Non-Executive Employee Group |
|
|
— |
|
|
$ |
1,255,502 |
|
|
Non-Executive Director Group |
|
$ |
81,000 |
|
|
|
— |
|
50
Vote Needed for Approval
The affirmative vote of a majority of the shares of common stock properly cast at the Annual Meeting, in person or by proxy, is required for approval of Proposal 3.
Recommendation
The future success of our Company depends, in large part, upon our ability to maintain a competitive position in attracting, retaining and motivating key personnel by providing them meaningful opportunities to share in the ownership of our Company, thus aligning their interests with those of our stockholders. Accordingly, the Board of Directors recommends that you vote “FOR” the amendments to the 2016 Incentive Compensation Plan.
51
PROPOSAL 4
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Subject to ratification by our stockholders, the Audit Committee has appointed KPMG LLP (“KPMG”) as our independent registered public accounting firm for the fiscal year ending February 1, 2025, subject to completion of KPMG’s customary client acceptance procedures. KPMG has served as our independent registered public accounting firm since June 6, 2013.
Stockholder ratification of our independent registered public accounting firm is not required by our By-Laws or otherwise. However, we are submitting the selection of KPMG to our stockholders for ratification as a matter of good corporate practice. If stockholders fail to ratify the appointment of such auditors, the Audit Committee will reconsider the selection. Even if the selection is ratified, the Audit Committee may, in its discretion, direct the appointment of a different independent auditor at any time during the year if it determines that such a change would be in our best interest.
Representatives of KPMG are expected to be present at the annual meeting to respond to appropriate stockholders' questions and to make any statements they consider appropriate.
The following table sets forth the fees accrued or paid to the Company’s independent registered accounting firm for the fiscal years ended February 3, 2024 ("fiscal 2023") and January 28, 2023 ("fiscal 2022"):
|
|
|
Fiscal 2023 |
|
|
Fiscal 2022 |
|
||
|
Audit Fees (1) |
|
$ |
1,025,678 |
|
|
$ |
995,000 |
|
|
Audit-Related Fees |
|
|
— |
|
|
|
— |
|
|
Tax Fees (2) |
|
|
236,622 |
|
|
|
160,000 |
|
|
All Other Fees (3) |
|
|
1,780 |
|
|
|
1,780 |
|
|
Total Fees |
|
$ |
1,264,080 |
|
|
$ |
1,156,780 |
|
Pre-Approval of Services by Independent Auditors
The Audit Committee has adopted a policy governing the provision of audit and non-audit services by our independent registered public accounting firm. Pursuant to this policy, the Audit Committee will consider annually and approve the provision of audit services (including audit, review and attest services) by our independent registered public accounting firm and consider and pre-approve the provision of certain defined permitted non-audit services within a specified dollar limit. It will also consider on a case-by-case basis and approve specific engagements that do not fit within the definition of pre-approved services or established fee limits, if appropriate. The policy provides that any proposed engagement that does not fit within the definition of a pre-approved service or is not within the fee limits must be presented to the Audit Committee for consideration at its next regular meeting or to the Chair of the Audit Committee in time sensitive cases. The Audit Committee will regularly review summary reports detailing all services (and related fees and expenses) being provided to us by the independent registered public accounting firm.
All of the services provided in fiscal 2023 and fiscal 2022 under Audit Fees, Tax Fees and All Other Fees were pre-approved by the Audit Committee.
Vote Needed for Approval
The affirmative vote of a majority of the shares of common stock properly cast at the Annual Meeting, in person or by proxy, is required for the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending February 1, 2025.
Recommendation
The Audit Committee and the Board of Directors recommend that you vote FOR the ratification of the appointment of KPMG LLP as our independent registered public accounting firm for the fiscal year ending February 1, 2025.
52
REPORT OF THE A UDIT COMMITTEE
The Audit Committee oversees our financial reporting process on behalf of the Board and is responsible for the appointment, compensation and oversight of the Company’s independent registered public accounting firm. Our management has the primary responsibility for the financial statements, for maintaining effective internal control over financial reporting and for assessing the effectiveness of internal control over financial reporting. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited consolidated financial statements for the fiscal year ended February 3, 2024 with management, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The Audit Committee also oversees the review and assessment process of our internal control over financial reporting, including the framework used to evaluate the effectiveness of such internal controls.
The Audit Committee reviewed and discussed with KPMG LLP, our independent registered public accounting firm, which was responsible for expressing an opinion on the conformity of our audited consolidated financial statements for the fiscal year ended February 3, 2024 with U.S. generally accepted accounting principles, their judgments as to the quality, not just the acceptability, of our accounting principles and such other matters as are required to be discussed with the Audit Committee by the applicable requirements of the Public Company Accounting Oversight Board (PCAOB) and the SEC. In addition, the Committee has discussed with KPMG LLP the firm’s independence from our management and our Company, including the matters in the letter from KPMG LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding KPMG LLP’s communications with the Audit Committee concerning independence. The Audit Committee also considered the compatibility of non-audit services with KPMG LLP’s independence.
The Audit Committee discussed with KPMG LLP the overall scope and plans for their audit. The Audit Committee meets with the independent registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of our internal controls (including internal control over financial reporting), matters required to be discussed by PCAOB Auditing Standard No. 1301, Communications with Audit Committees , and the overall quality of our financial reporting. The Audit Committee held six meetings during the fiscal year ended February 3, 2024.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board (and the Board approved) that the audited consolidated financial statements be included in the Annual Report on Form 10-K for the fiscal year ended February 3, 2024 for filing with the SEC.
Pursuant to Section 404 of the Sarbanes-Oxley Act, management was required to prepare as part of our Annual Report on Form 10-K for the year ended February 3, 2024 a report on its assessment of our internal control over financial reporting, including management’s assessment of the effectiveness of such internal controls. KPMG LLP issued an audit report relative to our internal control over financial reporting at February 3, 2024. During the course of the fiscal year ended February 3, 2024, management regularly discussed the internal control review and assessment process with the Audit Committee, including the framework used to evaluate the effectiveness of such internal controls, and at regular intervals updated the Audit Committee on the status of this process and actions taken by management to respond to issues identified during this process. The Audit Committee also discussed this process with KPMG LLP. Management’s assessment report and KPMG LLP's audit report on our internal control over financial reporting were included as part of our Annual Report on Form 10-K for the year ended February 3, 2024.
The Audit Committee is governed by a written charter, which can be found under “Corporate Governance – Charters Policies” on the Investor Relations page of our website at https://investor.dxl.com. The members of the Audit Committee are considered independent because they satisfy the independence requirements for Board members prescribed by Nasdaq listing standards and Rule 10A-3 of the Exchange Act.
THE AUDIT COMMITTEE
Lionel F. Conacher, Chair of the Audit Committee
Willem Mesdag
Ivy Ross
53
Security Ownership of Ce rtain Beneficial Owners
The following table sets forth certain information with respect to persons known to us to be the beneficial owners of more than five percent of the issued and outstanding shares of our common stock as of June 12, 2024. We were informed that, except as indicated, each person has sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by such person, subject to community property laws where applicable.
|
Name and Address of Beneficial Owner |
|
Number of Shares Beneficially Owned |
|
|
Percent of Class (1) |
|
||
|
AWM Investment Company, Inc.
|
|
|
9,399,297 |
|
(2) |
|
16.1 |
% |
|
Fund 1 Investments, LLC
|
|
|
5,729,290 |
|
(3) |
|
9.8 |
% |
|
Wolf Hill Capital Management, LP
|
|
|
4,174,730 |
|
(4) |
|
7.2 |
% |
|
BlackRock, Inc.
|
|
|
3,863,613 |
|
(5) |
|
6.6 |
% |
|
Seymour Holtzman
|
|
|
3,667,591 |
|
(6) |
|
6.3 |
% |
|
The Vanguard Group
|
|
|
2,903,673 |
|
(7) |
|
5.0 |
% |
54
Security Ownership of Management
The following table sets forth certain information as of June 12, 2024, with respect to our directors, our Named Executive Officers (as defined above under “ Compensation Discussion and Analysis ”) and our directors and current executive officers as a group. Except as indicated, each person has sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by such person, subject to community property laws where applicable.
|
Name and Title |
|
Number of Shares Beneficially Owned |
|
|
Percent of Class (1) |
|
||
|
Lionel F. Conacher |
|
|
323,739 |
|
(2) |
* |
|
|
|
Chairman of the Board |
|
|
|
|
|
|
||
|
Harvey S. Kanter |
|
|
1,249,285 |
|
(3) |
|
2.1 |
% |
|
President and Chief Executive Officer and Director |
|
|
|
|
|
|
||
|
Peter H. Stratton, Jr. |
|
|
504,673 |
|
(4) |
* |
|
|
|
Executive Vice President, Chief Financial Officer and Treasurer |
|
|
|
|
|
|
||
|
Anthony J. Gaeta |
|
|
359,292 |
|
(5) |
* |
|
|
|
Chief Stores and Real Estate Officer |
|
|
|
|
|
|
||
|
Robert S. Molloy |
|
|
420,572 |
|
(6) |
* |
|
|
|
General Counsel and Secretary |
|
|
|
|
|
|
||
|
Allison Surette |
|
|
297,586 |
|
(7) |
* |
|
|
|
Chief Merchandise Officer |
|
|
|
|
|
|
||
|
Jack Boyle, Director |
|
|
522,627 |
|
(2) |
* |
|
|
|
Carmen R. Bauza, Director |
|
|
44,088 |
|
|
* |
|
|
|
Willem Mesdag, Director |
|
|
3,049,227 |
|
(8) |
|
5.2 |
% |
|
Ivy Ross, Director |
|
|
203,828 |
|
|
* |
|
|
|
Elaine K. Rubin, Director |
|
|
94,763 |
|
|
* |
|
|
|
Directors and executive officers as a group (15 persons) |
|
|
7,523,156 |
|
(9) |
|
12.4 |
% |
*Less than 1%
55
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other information with the SEC under the Exchange Act. The SEC maintains a website that contains reports, proxy statements and other information about issuers, like us, who file electronically with the SEC through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The address of this website is http://www.sec.gov.
Access to this information as well as other information on our Company is also available on our website at https://investor.dxl.com. We will furnish without charge to each person whose proxy is being solicited, upon request of any such person, a copy of the Annual Report for the year ended February 3, 2024 as filed with the SEC, including the financial statements and schedules thereto. A request for a copy of such report should be directed to Destination XL Group, Inc., 555 Turnpike Street, Canton, MA 02021, Attention: Investor Relations .
SOLICITATION
We will bear the cost of solicitation of proxies. In addition to the use of the mails, proxies may be solicited by certain of our officers, directors and employees without extra compensation, by telephone, facsimile or personal interview. We have retained D.F. King Company, Inc. for a fee not to exceed $6,500 to aid in solicitation of proxies.
DELIVERY OF DOCUMENTS TO STO CKHOLDERS SHARING AN ADDRESS
Only one copy of the Proxy Statement is being delivered to multiple stockholders sharing an address unless we have received contrary instructions from one or more of the stockholders in question. If you are one of a number of stockholders sharing a single address and would like to receive a separate copy of the Proxy Statement or if you would like to request that we send you a separate copy of annual reports or proxy statements, as applicable, in the future, please contact us at 555 Turnpike Street, Canton Massachusetts 02021, telephone (781)-828-9300 or via the “contact us” dropdown on the investor page of our website. We will send you a copy of the Proxy Statement promptly after we receive your request.
STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in our proxy statement : Under the rules of the SEC, in order for any stockholder proposal to be included in our proxy statement and proxy card for presentation at the 2024 Annual Meeting of Stockholders, the proposal must be received by the Secretary of our Company at our principal executive offices by February 28, 2025 (120 days before the anniversary of the date this Proxy Statement is being mailed to our stockholders).
Other stockholder proposals : Our By-Laws provide that for business to be properly brought before an Annual Meeting of Stockholders (or any Special Meeting in lieu of Annual Meeting of Stockholders), a stockholder must: (i) give timely written notice to the Secretary of our Company describing any proposal to be brought before such meeting; and (ii) be present at such Annual Meeting, either in person or by a representative. Such procedural requirements are fully set forth in Section 3.13 of our By-Laws. A stockholder’s notice will be timely if delivered to, or mailed to and received by, us not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding Annual Meeting (the “Anniversary Date”). To bring an item of business before the 2025 Annual Meeting, a stockholder must deliver the requisite notice of such item to the Secretary of our Company not before April 10, 2025 or after May 10, 2025. In the event the Annual Meeting is scheduled to be held on a date more than 30 days before the Anniversary Date or more than 60 days after the Anniversary Date, however, a stockholder’s notice will be timely delivered to, or mailed to, and received by, us not later than the close of business on the later of (a) the 90th day prior to the scheduled date of such Annual Meeting or (b) the 10th day following the day on which public announcement of the date of such Annual Meeting is first made by us. In order for stockholders to give timely notice of nominations for directors for inclusion on a universal proxy card in connection with the 2024 Annual Meeting, notice must be submitted by the same deadline as disclosed above under the advance notice provisions of our By-Laws and must include the information in the notice required by our By-Laws and by Rule 14a-19(b)(2) and Rule 14a-19(b)(3) under the Exchange Act.
56
STOCKHOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Our Board maintains a process for stockholders to communicate with them. Stockholders wishing to communicate with our Board should direct their communications to: Secretary of the Company, Destination XL Group, Inc., 555 Turnpike Street, Canton, Massachusetts 02021. Any such communication must state the number of shares beneficially owned by the stockholder sending the communication. The Secretary will forward such communication to all of the members of the Board or to any individual director or directors to whom the communication is directed; provided, however, that if the communication is unduly hostile, profane, threatening, illegal or otherwise inappropriate, then the Secretary has the authority to discard the communication or take appropriate legal action in response to the communication.
OTHER M ATTERS
As of this date, our management knows of no business which may properly come before the Annual Meeting other than that stated in the Notice of Annual Meeting of Stockholders. Should any other business arise, proxies given in the accompanying form will be voted in accordance with the discretion of the person or persons voting them.
57
Appendix A
Explanatory Note : This Appendix A contains a copy of the Destination XL Group, Inc. Second Amended and Restated 2016 Incentive Compensation Plan as proposed to be amended by Proposal 3 included in this Proxy Statement to which this Appendix A is attached.
Editing Guide :
Proposed additions are shown in blue, bold and as underlined text;
Proposed deletions are shown in red, bold and as strike-throughs; and
Existing text, which has been moved, is shown in green, as lighter bold with underlined text or strike-through, as applicable.
DESTINATION XL GROUP, INC.
SECOND aMENDED AND RESTATED
2016 INCENTIVE COMPENSATION PLAN
( as amended and restated effective august __, 2024 NOVEMBER 2, 2023 )
A- 1
DESTINATION XL GROUP, INC.
SECOND AMENDED AND RESTATED 2016 INCENTIVE COMPENSATION PLAN, as amended and restated
|
1. |
Purpose |
1 |
|
2. |
Definitions |
1 |
|
3. |
Administration |
5 |
|
4. |
Shares Subject to Plan |
5 |
|
5. |
Eligibility; Per-Participation Limitations |
6 |
|
6. |
Award Vesting Limitations |
6 |
|
7. |
Specific Terms of Awards |
6 |
|
8. |
Certain Provisions Applicable to Awards |
11 |
|
9. |
Code Section 162(m) Provisions |
13 |
|
10. |
Change in Control |
13 |
|
11. |
General Provisions |
15 |
|
1. |
Purpose |
A-3 |
|
2. |
Definitions |
A-3 |
|
3. |
Administration |
A-6 |
|
4. |
Shares Subject to Plan |
A-7 |
|
5. |
Eligibility; Per-Participation Limitations |
A-8 |
|
6. |
Award Vesting Limitations |
A-8 |
|
7. |
Specific Terms of Awards |
A-8 |
|
8. |
Certain Provisions Applicable to Awards |
A-13 |
|
9. |
Change in Control |
A-15 |
|
10. |
General Provisions |
A-17 |
A- 2
DESTINATION XL GROUP, INC.
SECOND AMENDED AND RESTATED
2016 INCENTIVE COMPENSATION PLAN
A- 3
(k) “ Covered Employee ” means an Eligible Person who is a “covered employee” within the meaning of Section 162(m)(3) of the Code, or any successor provision thereto.
A- 4
A- 5
A- 6
A- 7
A- 8
A- 9
A- 10
A- 11
A- 12
A- 13
For purposes of the foregoing, the terms in quotations shall have the same meanings as those terms have for purposes of Section 409A of the Code, and the limitations set forth herein shall be applied in such manner (and only to the extent) as shall be necessary to comply with any requirements of Section 409A of the Code that are applicable to the Award.
9. Code Section 162(m) Provisions .
(a) Covered Employees . The Committee, in its discretion, may determine at the time an Award is granted to an Eligible Person who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with such Award, a Covered Employee, that the provisions of this Section 9 shall be applicable to such Award.
A- 14
(b) Performance Criteria . If an Award is subject to this Section 9, then the payment or distribution thereof or lapsing of restrictions thereon and the distribution of cash, Shares or other property pursuant thereto, as applicable, shall be contingent upon achievement of one or more objective performance goals. Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m) of the Code and regulations thereunder including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” One or more of the following business criteria for the Company, on a consolidated basis, and/or for Related Entities, or for business or geographical units of the Company and/or a Related Entity (except with respect to the total shareholder return and earnings per share criteria), shall be used by the Committee in establishing performance goals for such Awards: (1) earnings per share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5) return on net assets, investment, capital, or equity; (6) economic value added; (7) direct contribution; (8) net income; pretax earnings; earnings before interest and taxes; earnings before interest, taxes, depreciation and amortization; earnings after interest expense and before extraordinary or special items; operating income or income from operations; income before interest income or expense, unusual items and income taxes, local, state or federal and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans of the Company; (9) working capital; (10) management of fixed costs or variable costs; (11) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures; (12) total shareholder return; (13) debt reduction; and/or (14) the Fair Market Value of a Share. Any of the above goals may be determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard Poor’s 500 Stock Index or a group of companies that are comparable to the Company . Except as otherwise specified by the Committee at the time the goals are set , the Committee shall exclude the impact of: (i) restructurings, discontinued operations, extraordinary items, and other unusual or non-recurring charges, (ii) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management, (iii) a change in accounting standards required by generally accepted accounting principles, or (iv) any other item or event specified by the Committee at the time the goals are set.
(c) Performance Period; Timing For Establishing Performance Goals . Achievement of performance goals in respect of such Performance Awards subject to this Section 9 shall be measured over a Performance Period no shorter than 12 months and no longer than 5 years, as specified by the Committee. Performance goals shall be established not later than 90 days after the beginning of any Performance Period applicable to Performance Awards , subject to this Section 9, or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m) of the Code.
(d) Adjustments . The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with Awards subject to this Section 9, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of an Award subject to this Section 9. The Committee shall specify the circumstances in which such Awards shall be paid or forfeited in the event of termination of Continuous Service by the Participant prior to the end of a Performance Period or settlement of Awards.
(e) Committee Certification . No Participant shall receive any payment under the Plan that is subject to this Section 9 unless the Committee has certified , by resolution or other appropriate action in writing, that the performance criteria and any other material terms previously established by the Committee or set forth in the Plan , have been satisfied to the extent necessary to qualify as “performance based compensation” under Section 162(m) of the Code.
9 10. Change in Control .
A- 15
A- 16
10. 11. General Provisions .
A- 17
A- 18
A- 19
A- 20
DESTINATION XL GROUP, INC.
Notice of 2024 Annual Meeting of
Stockholders and Proxy Statement
Thursday, August 8, 2024
9:30 A.M. EDT
Destination XL Group, Inc.
555 Turnpike Street
Canton, Massachusetts 02021
Please sign your proxy and
return it in the enclosed
postage-paid envelope so
that you may be represented
at the Annual Meeting.
ANNUAL MEETING OF STOCKHOLDERS OF
DESTINATION XL GROUP, INC.
August 8, 2024
GO GREEN
e-consent makes it easy to go paperless. With e-consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access.
Important Notice Regarding Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on August 8, 2024 :
The Proxy Statement and 2024 Annual Report to Stockholders are available at https://investor.dxl.com/financial-information/annual-reports
PLEASE SIGN, DATE AND MAIL
YOUR PROXY CARD IN THE ENVELOPE
PROVIDED AS SOON AS POSSIBLE.
Please detach along perforated line and mail in the envelope provided .
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF DIRECTORS AND "FOR" PROPOSALS 2, 3 AND 4.
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
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1.
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☐Election of Directors. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE NOMINEES NAMED BELOW. |
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Against |
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Abstain |
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Harvey S. Kanter |
☐
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☐ |
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☐ |
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Carmen R. Bauza |
☐ |
☐ |
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Jack Boyle |
☐
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☐ |
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Lionel F. Conacher |
☐
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Willem Mesdag |
☐
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Ivy Ross |
☐
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Elaine K. Rubin |
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2.
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To approve, on an advisory basis, named executive officer compensation . THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2. |
For ☐ |
Against ☐ |
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Abstain ☐ |
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Abstain |
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3.
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To approve amendments to our 2016 Incentive Compensation Plan, including t he increase in the total number of shares of common stock authorized for issuance under the plan by 6,150,000 shares . THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 3. |
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4.
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To ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for fiscal year ending February 1, 2025. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 4. |
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IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED IT WILL BE VOTED AS SPECIFIED HEREIN. IF NO SPECIFIC DIRECTION IS GIVEN, IT WILL BE VOTED “FOR” EACH DIRECTOR NOMINEE, AND “FOR” EACH OF THE OTHER PROPOSALS. RECEIPT IS HEREBY ACKNOWLEDGED OF THE NOTICE OF ANNUAL MEETING AND PROXY STATEMENT OF DESTINATION XL GROUP, INC. DATED June 28, 2024. |
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To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that changes to the registered name(s) on the account may not be submitted via this method. |
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MARK “X” HERE IF YOU PLAN TO ATTEND THE MEETING. |
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Note: Please sign exactly as your name or names appear 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. |
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Signature of Stockholder |
Date |
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Signature of Stockholder |
Date |
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DESTINATION XL GROUP, INC. |
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555 Turnpike Street Canton, Massachusetts 02021
This Proxy Is Solicited On Behalf Of The Board Of Directors For The Annual Meeting Of Stockholders To Be Held On August 8, 2024 The undersigned stockholder of Destination XL Group, Inc. (the “Company”) hereby appoints Lionel F. Conacher and Harvey S. Kanter, and each of them, as proxies, with full power of substitution to each and to each substitute appointed pursuant to such power, to vote all shares of Common Stock of the Company which the undersigned would be entitled to vote if personally present at the Annual Meeting of Stockholders of the Company to be held on Thursday, August 8, 2024, at 9:30 A.M. local time, at the corporate offices of the Company, 555 Turnpike Street, Canton, Massachusetts, and at any adjournment or postponement thereof, with all powers the undersigned would possess if personally present, as set forth on the reverse hereof, upon the matters set forth thereon and more fully described in the Notice and Proxy Statement for such Annual Meeting, and, in their discretion, upon all such other matters as may properly come before the Annual Meeting. The undersigned hereby revokes all proxies, if any, hitherto given by the undersigned for such Annual Meeting.
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(Continued and to be signed on reverse side.)
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