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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy
Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box:
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material under §240.14a-12
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Tuesday Morning Corporation
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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(1)
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Title of each class of securities to which transaction applies:
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(2)
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Aggregate number of securities to which transaction applies:
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(3)
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Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
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(4)
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Proposed maximum aggregate value of transaction:
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(5)
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Total fee paid:
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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(1)
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Amount Previously Paid:
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(2)
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Form, Schedule or Registration Statement No.:
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(3)
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Filing Party:
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(4)
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Date Filed:
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TUESDAY MORNING CORPORATION
6250 LBJ Freeway
Dallas, Texas 75240
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held November 15, 2017
Dear Stockholders:
You
are cordially invited to attend the 2017 Annual Meeting of Stockholders (the "Annual Meeting") of Tuesday Morning Corporation (the "Company") to be held at Tuesday Morning
Corporation's Headquarters, 6250 LBJ Freeway, Dallas, Texas 75240, on November 15, 2017 at 8:30 a.m., Central time. For directions to the Annual Meeting, please write to our Corporate
Secretary at Tuesday Morning Corporation, 6250 LBJ Freeway, Dallas, Texas 75240. At the Annual Meeting, our stockholders will be asked to consider and vote on the following matters:
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1.
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Election
of eight directors;
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2.
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Advisory
approval of the Company's executive compensation;
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3.
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Advisory
approval of the frequency of an advisory vote on executive compensation;
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4.
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Ratification
of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending
June 30, 2018; and
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5.
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Transaction
of any other business that may properly come before the Annual Meeting or any postponement or adjournment thereof.
This
Notice of Annual Meeting, the Proxy Statement for the Annual Meeting and our Annual Report for fiscal 2017 are being made available to our stockholders on or about October 5,
2017 on the Internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive the proxy materials by email or, upon request, in
printed form by mail.
Only
stockholders of record at the close of business on September 22, 2017 are entitled to notice of, and to vote at, the Annual Meeting or any postponement or adjournment
thereof. If you are the beneficial owner of shares of our common stock held in "street name," you will receive voting instructions from your broker, bank or other nominee (the stockholder of record),
which will provide you with details as to how to vote these shares. Additionally, you may vote these shares in person at the Annual Meeting if you have requested and received a legal proxy from your
broker, bank or other nominee giving you the right to vote the shares at the Annual Meeting, and you complete the legal proxy and present it to us at the Annual Meeting. Stockholders of record may
vote over the Internet, by telephone, by mail if you received a printed set of proxy materials or in person at the Annual Meeting.
Under
applicable rules, if you hold your shares in street name, brokers, banks or other nominees will not have discretion to vote these shares on the election of directors, the advisory
vote on executive compensation and the advisory vote on the frequency of the advisory vote on executive compensation. Accordingly, if your shares are held in street name and you do not submit voting
instructions to your broker, bank or other nominee, these shares will not be counted in determining the outcome of these proposals at the Annual Meeting. We encourage you to provide voting
instructions to your broker, bank or other nominee if you hold your shares in street name so that your voice is heard on these matters.
Thank
you for your continued support of and interest in Tuesday Morning Corporation.
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By Order of the Board of Directors,
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Bridgett C. Zeterberg
Secretary
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Dallas,
Texas
October 5, 2017
TUESDAY MORNING CORPORATION
6250 LBJ Freeway
Dallas, Texas 75240
PROXY STATEMENT
for the
ANNUAL MEETING OF STOCKHOLDERS
to be held on
Wednesday, November 15, 2017
This Proxy Statement and the related proxy materials are being furnished to stockholders of Tuesday Morning Corporation, a Delaware corporation, on or about
October 5, 2017, on the Internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive our proxy materials by email,
or, upon request, in printed form by mail. The Board of Directors of the Company (the "Board of Directors" or the "Board") is soliciting your proxy for use at the Annual Meeting of Stockholders to be
held on November 15, 2017, at 8:30 a.m., Central time, at our corporate headquarters located at 6250 LBJ Freeway, Dallas, Texas 75240, and at any and all adjournments or postponements
thereof (the "Annual Meeting"). For directions to the Annual Meeting, please write to our Corporate Secretary at Tuesday Morning Corporation, 6250 LBJ Freeway, Dallas, Texas 75240. At the Annual
Meeting, our stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders and described in more detail in this Proxy Statement.
As
used in this Proxy Statement, the terms "Tuesday Morning," "Company," "we," "us," and "our" refer to Tuesday Morning Corporation.
Important Notice Regarding Internet Availability
In accordance with rules adopted by the Securities and Exchange Commission ("SEC"), we may furnish proxy materials, including this Proxy
Statement and the Company's 2017 Annual Report to Stockholders, by providing access to these documents on the Internet instead of mailing a printed copy of our proxy materials to our stockholders.
Based on this practice, most of our stockholders have already received a Notice of Internet Availability of Proxy Materials (the "Notice"), which provides instructions for accessing our proxy
materials on a website referred to in the Notice and for requesting to receive printed copies of the proxy materials by mail or electronically by email.
If
you would like to receive a paper or email copy of our proxy materials for our Annual Meeting or for all future meetings, please follow the instructions for requesting such materials
included in the Notice. Please note that if you previously requested or consented to delivery of our proxy materials by mail or electronically via email, you did not receive the separate Notice.
Instead, we sent you a full set of our proxy materials, which includes instructions for voting on the proposals described in this Proxy Statement. We believe the delivery options that we have chosen
allow us to provide our stockholders with the proxy materials they need, while lowering the cost of the delivery of such materials and reducing the environmental impact of printing and mailing paper
copies.
1
PROXY STATEMENT SUMMARY
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of
the information that you should consider, and you should read the entire Proxy Statement carefully before voting.
Annual Meeting Information
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Time and Date:
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8:30 a.m., Central time, on Wednesday, November 15, 2017
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Place:
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Tuesday Morning Corporation
6250 LBJ Freeway
Dallas, Texas 75240
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Record Date:
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September 22, 2017
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Voting:
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Only stockholders of record at the close of business on September 22, 2017 are entitled to notice of, and to vote at, the Annual Meeting.
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How to Vote:
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If you are a stockholder of record, you may vote over the Internet, by telephone, by mail if you received a printed set of proxy materials or in person at the Annual Meeting. If you are a beneficial owner of shares of
our common stock held in "street name," you may vote in accordance with the instructions you receive from your broker, bank or other nominee (the stockholder of record).
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Attending the Annual Meeting:
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All stockholders as of the close of business on the record date, or their duly appointed proxies, may attend the Annual Meeting. Please note that if you hold your shares in "street name" through a broker, bank or
other nominee, you will need to bring either (i) a legal proxy from your broker, bank or other nominee (the stockholder of record) or (ii) a recent brokerage statement reflecting your stock ownership and a validly government issued ID, and
check in at the registration desk at the Annual Meeting.
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Annual Meeting Agenda and Voting Recommendations
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Proposal
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Board's Voting
Recommendation
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No. 1.
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Election of Directors
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"
FOR
" each director nominee
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The Company is asking stockholders to elect eight director nominees to the Board. The Board believes that the nominees possess the necessary experience, qualifications, attributes and skills to serve as directors.
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No. 2.
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Advisory Vote on Executive Compensation
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"
FOR
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The Company is asking stockholders to approve, on an advisory basis, the compensation for the named executive officers disclosed in these proxy materials.
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No. 3.
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Advisory Vote on Frequency of Advisory Vote on Executive Compensation
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"FOR" every "1 YEAR"
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The Company is asking stockholders to approve, on an advisory basis, the option of every "1 YEAR" as the preferred frequency for holding advisory votes on executive compensation.
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No. 4.
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Ratification of Selection of Independent Registered Public Accounting Firm
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"
FOR
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The Company and the Audit Committee are asking stockholders to ratify the engagement of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2018.
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Board Nominees
The following table provides summary information about each director nominee.
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Name
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Age
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Director
Since
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Principal Occupation
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Committee Memberships
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Terry Burman(1)
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71
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2013
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Retired Chief Executive Officer of Signet Jewelers Limited
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Nominating and Governance (Chair)
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Steven R. Becker
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50
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2012
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Chief Executive Officer of Tuesday Morning Corporation
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N/A
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Barry S. Gluck(2)
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65
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2017
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Off-Price Retail Consultant and retired Executive Vice President of Merchandising, Marketing, and Store Planning and Allocation of Ross
Stores Inc.
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Nominating and Governance
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Frank M. Hamlin(2)
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2014
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Executive Vice President and Chief Marketing Officer of Tailored Brands
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Audit, Compensation
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William Montalto
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70
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2013
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Consultant and retired Executive Vice President and Chief Operating Officer of Sterling Jewelers
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N/A
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Sherry M. Smith(2)
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2014
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Former Chief Financial Officer and Executive Vice President of Supervalu Inc.
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Compensation (Chair)
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Richard S Willis(2)
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2012
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Chief Executive Officer and President of Pharmaca Integrative Pharmacies
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Audit (Chair), Nominating and Governance
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James T. Corcoran(3)
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N/A
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Chief Executive Officer of Purple Mountain Capital Partners LLC
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N/A
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(1)
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Independent
Chairman of the Board
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(2)
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Independent
Director
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(3)
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Independent
Director Nominee. Pursuant to the terms of the Cooperation Agreement, dated as of October 1, 2017, by and among the Company, Jeereddi
II, LP, Purple Mountain Capital Partners LLC and certain of their affiliates, Mr. Corcoran has been nominated by our Board of Directors for election at the Annual Meeting.
Mr. Corcoran's nomination will fill a vacancy resulting from the retirement of Jimmie L. Wade. Mr. Wade's retirement will be effective immediately following the Annual Meeting.
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Corporate Governance Highlights
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During the fiscal year ended June 30, 2017, six of the eight directors were independent and met regularly in executive session.
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The roles of Chief Executive Officer and Chairman of the Board are separate.
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Only independent directors are Committee members.
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All directors are elected annually.
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The Board has a robust director nominee selection process.
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The Board has stock ownership guidelines for directors and executive officers.
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The Company has anti-hedging and anti-pledging policies.
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The Company has a robust clawback policy.
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Board, Committee and director performance evaluations are performed annually.
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The Board and Committees are responsible for risk oversight.
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All of our directors attended at least 75% of the meetings of the Board and Committees on which they served during the 2017 fiscal year.
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All sitting directors attended the Company's 2016 Annual Meeting of Stockholders.
Financial Review
In fiscal 2017, we made tangible progress on each of our strategic priorities, including real estate, merchandising, marketing, supply chain and
talent management. In connection with our real estate initiatives, we relocated 52 stores, expanded 13 stores, opened 21 stores and closed 41 stores, for an ending store count of 731. Additionally, we
solidified the senior leadership team across key functional areas. However, the Company's fiscal 2017 results were adversely impacted by increased supply chain and freight costs, driven significantly
by elevated costs and lower than expected sales resulting from its supply chain issues experienced earlier in the fiscal year as a result of adding the new Phoenix distribution center. Some of our
fiscal 2017 business highlights include:
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Net sales were $966.7 million, compared to $956.4 million for fiscal 2016.
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Comparable store sales increased 2.2% compared to the same period a year ago.
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Fiscal 2017 net sales were negatively impacted by lower than plan store level inventories for a portion of the year due to the supply chain
challenges experienced during the year, as well as 20 fewer stores.
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During fiscal 2017, we continued to implement our strategy of improving store locations and the in-store experience for our customers, which
included (i) closing less productive stores with limited foot traffic and relocating some of these stores to, or opening new stores in, better locations with footprints that are on average
three to five thousand square feet larger, (ii) expanding some existing stores to a larger footprint, and (iii) improving the finishes in these relocated, new and expanded stores.
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Sales at the 52 stores relocated during the past 12 months increased approximately 52% on average for fiscal 2017 as compared to fiscal
2016 and contributed approximately 290 basis points of comparable store sales growth.
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The Company's operating loss for fiscal 2017 was $32.3 million, compared to operating income of $2.4 million for fiscal 2016.
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The Company reported a net loss of $32.5 million, or $0.74 per share, for fiscal 2017 compared to net income of $3.7 million, or
$0.08 per share, in the prior year period.
During
the fiscal year, we benchmarked our progress against six top priorities, which are regularly discussed at executive team meetings and are included in both job performance and
short-term incentive plan objectives.
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While we experienced supply chain challenges in fiscal 2017 in connection with the implementation of the Phoenix distribution center, the new
distribution center now is operating effectively and costs throughout our entire supply chain are improving. The Dallas distribution center performance has significantly improved and is exceeding many
of our internal efficiency metrics. These efforts are expected to continue to bring costs down over time.
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We have had improvement in working capital management. During the fourth quarter, we reduced our inventory balance and have reduced borrowings
on our bank line compared to the third quarter of fiscal 2017. The reduction in our inventory balance was largely the result of improvements in the efficiency of our supply chain, a decrease in cycle
times and reduction in the amount of inventory held in our distribution centers. We have increased our inventory turn and expect that progress to continue.
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We believe we continue to experience strong results from the execution of our real estate strategy. Our new real estate, including store
relocations, new stores and expansion stores, continue to be top producers and we remain focused on upgrading our portfolio while managing the costs associated with this program.
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We have increased the effectiveness of our marketing dollars. Our marketing efforts are focused on driving customer engagement. We partnered
with a new advertising agency to roll out a new advertising campaign in the first quarter of fiscal 2018. We have also improved our data capture and significantly increased our customer database.
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We have improved our merchandise assortment. The overall retail environment has allowed us to enter into some new vendor relationships and add
new brands to our product mix. We have been very focused on improving store level turn by driving a compelling product assortment with a sharp value proposition and carefully managing our weeks of
supply.
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And finally, cost control. We completed a headcount rationalization in our corporate office and a consolidation of our field operations. As a
result, we have a lean organization that is well-positioned to deliver results.
Executive Compensation Highlights
Our compensation program is designed to motivate long-term growth and to hold executives accountable for key annual results year-over-year. The
program is designed to reward performance linked to stockholder value and support executive recruitment and engagement. A significant portion of the executives' total direct compensation is based on
the Company's performance and improving stockholder value. This philosophy is reflected in the design of both our short-term cash incentive program as well as the long-term equity incentive program.
We believe that performance-based compensation and equity compensation better aligns the interests of executives and stockholders.
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Some
of the compensation "best practices" we employ in furtherance of our philosophy include:
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Compensation GovernanceWhat We Do & What We Don't Do
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✓
What We Do
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✗
What We Don't Do
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✓
Annual "Say on Pay" vote
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No formal employment agreements other than the CEO
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Pay for performance culture, emphasis on performance-based compensation
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No discretionary bonuses paid to permanent NEOs when performance results are below threshold performance.
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Executive ownership guidelines
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No tax gross-up upon change-in-control
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Executive equity retention/holding requirements
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No repricing of stock options
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Manage compensation risk by using a variety of financial metrics in pay programs and capping payouts
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No across-the-board pay increases
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Hedging/pledging policies
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No formal non-qualified benefits or perquisite programs
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Use of independent compensation consultant
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No hedging or pledging of stock
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Evaluate our peer group and pay positioning
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In
fiscal 2017, we further enhanced our compensation "best practices" with changes to our equity incentive plan, including:
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removing the liberal share recycling provision in our plan;
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reducing the number of shares exempt from minimum vesting;
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eliminating Board discretion to accelerate equity awards in connection with a change in control and requiring a "double trigger" for
acceleration; and
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including a robust clawback policy.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
AND VOTING PROCEDURES
Who Can Vote?
The record date for the Annual Meeting is September 22, 2017 (the "Record Date"). Only holders of record of shares of our common stock,
par value $0.01 per share (the "Common Stock"), at the close of business on such date are entitled to notice of, and to vote at, the Annual Meeting. Holders of record of Common Stock are entitled to
one vote per share on the matters to be considered at the Annual Meeting. At the close of business on the Record Date, 45,844,216 shares of Common Stock were issued and outstanding and the holders
thereof are entitled to vote at the Annual Meeting.
What Constitutes a Quorum?
In order for any business to be conducted at the Annual Meeting, the holders of at least a majority of the shares of our Common Stock entitled
to vote at the Annual Meeting must be represented at the Annual Meeting, either in person or by proxy. Proxies received but marked as
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abstentions
and broker non-votes (which are described below) will be considered present at the Annual Meeting for purposes of determining a quorum at the Annual Meeting. Although it is not expected,
if holders of less than a majority of the shares of our Common Stock are present or represented by proxy at the Annual Meeting, we may adjourn and reschedule the Annual Meeting, without notice other
than announcement at the Annual Meeting, until a quorum is present or represented.
How Do I Vote My Shares?
If you are a stockholder of record, you cannot vote your shares of Common Stock unless you are present at the Annual Meeting or you have
previously given your proxy. Written ballots will be provided to anyone who wants to vote in person at the Annual Meeting and is entitled to do so. You can vote by proxy in one of three convenient
ways:
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by mail
if you received a printed set of proxy materials, you can vote by
completing, signing, dating and returning the separate proxy card in the postage-paid self-addressed envelope;
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over the Internet
by visiting the website provided in the Notice or provided in the
separate proxy card if you received a printed set of proxy materials, and following the instructions provided; or
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by telephone
by calling the toll-free number provided in the Notice or provided in
the separate proxy card if you received a printed set of proxy materials, and following the instructions provided.
Stockholders of record may vote their shares by telephone or over the Internet 24 hours a day, seven days a week. Telephone and Internet votes must be
received by 11:59 p.m. Eastern time on November 14, 2017 and votes by mail must be received on or before the Annual Meeting.
If
your shares of Common Stock are held in "street name" by a broker, bank or other nominee, you should have received different voting instructions from your broker, bank or other
nominee as to how to vote such shares. These instructions should indicate if Internet or telephone voting is available and, if so, provide details regarding how to use those systems to vote your
shares. Additionally, you may vote these shares in person at the Annual Meeting if you have requested and received a legal proxy from your broker, bank or other nominee (the stockholder of record)
giving you the right to vote these shares in person at the Annual Meeting.
What Is the Recommendation of the Board of Directors?
The Board unanimously recommends that you vote (1) "
FOR
" the election of each of the
Board's director nominees, (2)
"FOR"
the approval, on an advisory basis, of the Company's executive compensation,
(3)
"FOR"
, on an advisory basis, the option of every
"1 YEAR"
as the frequency for advisory votes
on the Company's executive compensation and (4) "
FOR
" the ratification of the selection of Ernst & Young LLP ("Ernst &
Young") as our independent registered public accounting firm for fiscal 2018.
How Will the Proxies Be Voted?
Where stockholders have appropriately specified how their proxies are to be voted, they will be voted accordingly. If a properly executed proxy
does not indicate any voting instructions, the shares of Common Stock represented by such proxy will be voted as follows:
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"
FOR
" the election of each of the Board's director nominees;
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"
FOR
" the approval, on an advisory basis, of the Company's executive compensation;
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"
FOR
" the approval, on an advisory basis, of holding an advisory vote on the Company's
executive compensation every
"1 YEAR"
;
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"
FOR
" the ratification of the selection of Ernst & Young as the Company's independent
registered public accounting firm for the fiscal year ending June 30, 2018; and
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at the discretion of the proxy holders on any other matter that may properly come before the Annual Meeting.
If
the Company proposes to adjourn the Annual Meeting, the proxy holders will vote all shares for which they have voting authority in favor of such adjournment. The Board of Directors is
not presently aware of any matters other than those stated in the Notice of Annual Meeting of Stockholders and described in this Proxy Statement to be presented for consideration of the Company's
stockholders at the Annual Meeting.
Why Did I Receive Multiple Proxy Cards?
Many of our stockholders hold their shares in more than one account and may receive separate proxy cards or voting instruction forms for each of
those accounts. To ensure that all of your shares are represented at the Annual Meeting, we recommend that you vote every proxy card that you receive.
How May I Change My Vote or Revoke My Proxy?
If you are a stockholder of record, you may change your vote or revoke your proxy at any time before it is exercised
by:
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delivering a signed, written revocation letter, dated later than the proxy, to our Secretary at our corporate headquarters at 6250 LBJ Freeway,
Dallas, Texas 75240 no later than November 14, 2017;
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timely mailing another duly executed proxy bearing a later date to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717
which is received by Vote Processing prior to the applicable deadline;
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voting at a later time over the Internet or by telephone prior to the applicable deadline, if you previously voted over the Internet or by
telephone; or
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attending the Annual Meeting and casting your vote in person. Your attendance at the Annual Meeting will not, in and of itself, revoke your
proxy.
If
your shares are held in "street name" through a broker, bank or other nominee, you must contact your broker, bank or nominee to receive instructions as to how to revoke your proxy if
such instructions have not already been provided to you. In any case, your last properly-received and timely voted proxy or ballot will be the vote that is counted.
How Do I Vote My Shares Held in Street Name?
If you are the beneficial owner of shares held in "street name" and do not submit voting instructions to your broker, bank or other nominee,
under the applicable rules the broker, bank or other nominee that holds your shares may use its discretion in voting your shares with respect to "routine items" but not with respect to "non-routine
items." On non-routine items for which you do not submit voting instructions to your broker, bank or other nominee, these shares will not be voted and will be treated as "broker non-votes." The
proposal to ratify the selection of Ernst & Young as our independent registered public accounting firm for fiscal 2018 is considered a routine item and therefore may be voted upon by your
broker, bank or other nominee if you do not provide voting instructions on this proposal. However, the election of directors, the advisory vote on executive compensation and the
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advisory
vote on the frequency of advisory votes on executive compensation are considered non-routine items. Accordingly, if your shares are held in street name and you do not provide voting
instructions to your broker, bank or other nominee, these shares will not be counted in determining the outcome of these proposals at the Annual Meeting. We encourage you to provide voting
instructions to your broker, bank or other nominee if you hold your shares in street name so that your voice is heard on these matters.
How Many Votes Must Each Proposal Receive to be Adopted?
Assuming the presence of a quorum, the following vote is required for each proposal:
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Election of directors
The nominees for director who receive a plurality of the
votes of the shares of Common Stock present in person or by proxy at the Annual Meeting and entitled to vote thereon will be elected to the Board of Directors. This means the eight nominees who
receive the highest number of votes
"FOR"
his or her election at the Annual Meeting will be elected to the Board. Stockholders may not cumulate their
votes in the election of directors. If you do not vote for a particular nominee, or if you indicated on your proxy card, via the Internet or by telephone that you want to withhold authority to vote
for a particular nominee, then your shares will not be voted for that nominee. If you hold your shares in "street name" through a broker, bank or other nominee, you shares will not be voted for any
director nominee unless you provide the broker, bank or other nominee with specific voting instructions on a timely basis directing the broker, bank or other nominee to vote for such nominee.
Abstentions and broker non-votes do not constitute a vote "for" or "against" a nominee.
-
-
Advisory vote on executive compensation
The approval, on an advisory basis, of the
Company's executive compensation requires the affirmative vote of the majority of shares of our Common Stock present in person or by proxy at the Annual Meeting and entitled to vote thereon.
Abstentions are considered to be "present" and "entitled to vote" at the Annual Meeting with respect to this proposal, and as a result, abstentions will have the same effect as a vote against this
proposal. Shares underlying broker non-votes are not considered to be "entitled to vote" at the Annual Meeting with respect to this proposal, and as a result, broker non-votes will generally have no
effect on the outcome of this proposal, except that each broker non-vote will reduce the absolute number, but not the percentage, of affirmative votes necessary for the approval of the Company's
executive compensation.
-
-
Advisory vote on the frequency of an advisory vote on executive compensation
The
approval, on an advisory basis, of the frequency for advisory votes on the Company's executive compensation requires the affirmative vote of the majority of shares of our Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote thereon. Abstentions are considered to be "present" and "entitled to vote" at the Annual Meeting, and as a result, abstentions will have
the same effect as a vote against this proposal. Shares underlying broker non-votes are not considered to be "entitled to vote" at the Annual Meeting, and as a result, broker non-votes will generally
have no effect on the outcome of this proposal, except that each broker non-vote will reduce the absolute number, but not the percentage, of affirmative votes necessary for the approval of the
frequency for advisory votes on the Company's executive compensation.
-
-
Ratification of the selection of the Company's independent registered public accounting
firm
The ratification of the selection by the Audit Committee of the Board (the "Audit Committee") of Ernst & Young as the Company's independent registered
public accounting firm for fiscal 2018 requires the affirmative vote of the majority of shares of our Common Stock present in person or by proxy at the Annual Meeting and entitled to vote thereon.
Although SEC regulations and NASDAQ rules require the Company's independent registered public accounting firm to be engaged, retained and supervised by the Audit Committee, the selection is being
submitted for
10
ratification
at the Annual Meeting with a view towards soliciting the opinion of the Company's stockholders, which the Audit Committee will take into consideration in future deliberations. If the
selection of Ernst & Young as the Company's independent registered public accounting firm is not ratified at the Annual Meeting, the Audit Committee may consider the engagement of another
independent registered public accounting firm, but will not be obligated to do so. Abstentions are considered to be "present" and "entitled to vote" at the Annual Meeting with respect to this
proposal, and as a result, abstentions will have the same effect as a vote against this proposal. As discussed above, under applicable rules, brokers, banks and other nominees may use their discretion
to vote shares of Common Stock held in "street name" for which voting instructions are not submitted with respect to the ratification of the selection of Ernst & Young, so no broker non-votes
are expected for this proposal.
Who Is Soliciting this Proxy?
The Board of Directors is soliciting this proxy. The Company will bear the cost of the solicitation of proxies by the Board of Directors. The
Company's directors and certain of the Company's officers and employees in the ordinary course of their employment may solicit proxies by mail, Internet, telephone, facsimile, personal contact, email
or other online methods. We will reimburse their expenses in connection therewith. We also will reimburse banks, brokers, custodians, nominees or fiduciaries for reasonable expenses they incur in
sending these proxy materials to you if you are a beneficial holder of our shares. Other proxy solicitation expenses that we will pay include those for preparing, mailing, returning and tabulating
proxies.
The
costs of soliciting proxies pursuant to this Proxy Statement will be paid by the Company. Solicitation may be made in person or by telephone, email, mail or facsimile by our
directors, officers or employees. The Company has also engaged Okapi Partners, a proxy solicitation firm, to assist in the solicitation of proxies for a fee of $30,000. The total amount to be spent
for the Company's solicitation of proxies from stockholders, including the estimated cost of $77,000 in connection with settling the contested election with the Jeereddi/PMCP Group (as defined below),
for the Annual Meeting is estimated to be approximately $277,000, of which $277,000 has been incurred to date.
How May I Attend the Annual Meeting?
All stockholders as of the Record Date, or their duly appointed proxies, may attend the Annual Meeting. Please note that if you hold your shares
in "street name" through a broker, bank or other nominee you will need to bring a legal proxy from your broker, bank or other nominee (the stockholder of record) or a brokerage statement reflecting
your stock ownership as of the Record Date and check in at the registration desk at the Annual Meeting.
When Will the Voting Results Be Announced?
The preliminary voting results are expected to be announced at or shortly following the Annual Meeting. We will report the final voting results,
or the preliminary voting results if the final voting results are unavailable, in a Current Report on Form 8-K to be filed with the SEC within four business days after the Annual Meeting. You
may obtain a copy of this Form 8-K by visiting the SEC's website at
www.sec.gov
or our website at
www.tuesdaymorning.com
, under "Investor
RelationsFinancial InfoSEC Filings."
RESOLUTION OF STOCKHOLDER NOMINATIONS
Background
On August 8, 2017, the Company received a letter from Naveen Jeereddi of Jeereddi Investments LP (together with certain of its
affiliates, "Jeereddi") and James T. Corcoran of Purple
11
Mountain
Capital Partners LLC (together with certain of its affiliates, "Purple Mountain," and Purple Mountain together with Jeereddi, the "Jeereddi/PMCP Group") indicating that the Jeereddi
Group intended to nominate a slate of three director candidates to stand for election to the Board at the Annual Meeting (the "Initial Letter"). In addition, the Initial Letter reflected the
Jeereddi/PMCP Group's view that Steven Becker, the Company's Chief Executive Officer, should be replaced by Michael Barnes.
Between
August 8, 2017 and August 17, 2017, representatives of the Company held discussions with members of the Jeereddi/PMCP Group to discuss their concerns.
On
August 18, 2017, Jeereddi II, LP delivered a notice to the Company indicating its intent to nominate three candidates, which included Mr. Corcoran,
Mr. Barnes, and R. Michael Rouleau, the Company's former Chief Executive Officer (collectively, the "Jeereddi/PMCP Candidates"), to stand for election to the Board at the Annual Meeting (the
"Notice").
Between
August 18, 2017 and September 24, 2017, the Board held meetings to discuss the Jeereddi/PMCP Candidates and the composition of the Board and instructed
representatives of the Company to continue to engage with the Jeereddi/PMCP Group. During this time, representatives of the Company and of the Jeereddi/PMCP Group continued to engage in discussions to
explore ways to reach an agreement to avoid the distractions of a contested election, but could not reach an agreement at such time.
On
September 25, 2017, the Jeereddi/PMCP Group delivered a letter to the Company withdrawing its nomination of Mr. Rouleau.
Later
on September 25, 2017, the Company filed with the SEC its preliminary proxy statement in connection with the Annual Meeting.
Between
September 25, 2017 and September 31, 2017, representatives of the Company and of the Jeereddi/PMCP Group continued to engage in discussions regarding a potential
agreement to settle the contested election for directors at the Annual Meeting.
On
October 1, 2017, the Company and the Jeereddi/PMCP Group entered into a cooperation agreement (the "Cooperation Agreement") to settle the contested election for directors at
the Annual Meeting.
On
October 2, 2017, the Company and the Jeereddi/PMCP Group issued a joint press release announcing their entrance into the Cooperation Agreement.
Cooperation Agreement with the Jeereddi/PMCP Group
Pursuant to the terms of the Cooperation Agreement, the Company agreed to nominate James T. Corcoran for election to the Board at the 2017
Annual Meeting. If elected, Mr. Corcoran will be appointed to the Nominating and Governance Committee. Mr. Corcoran's nomination will fill a vacancy created by the retirement of Jimmie
L. Wade, effective as of immediately following the 2017 Annual Meeting. Under the terms of the Cooperation Agreement, Mr. Corcoran will offer his resignation to the Board if at any time the
Jeereddi/PMCP Group no longer beneficially owns at least 533,344 shares of the Company's common stock (subject to adjustment for stock splits, reclassifications, combinations and similar adjustments,
the "Minimum Ownership Threshold"). In addition, so long as the Jeereddi/PMCP Group meets the Minimum Ownership Threshold, the Jeereddi/PMCP Group will be entitled to certain replacement rights during
the Standstill Period (as defined below) in the event Mr. Corcoran is unable to serve as a director.
Also
under the terms of the Cooperation Agreement, Jeereddi II agreed to irrevocably withdraw its notice of nomination of candidates for election at the 2017 Annual Meeting previously
submitted to the Company on August 18, 2017. In addition, each member of the Jeereddi/PMCP Group agreed that
12
it
will not, directly or indirectly, (i) nominate or recommend for nomination any person for election at the 2017 Annual Meeting or at the 2018 annual meeting of stockholders (the "2018 Annual
Meeting"), (ii) submit proposals for consideration or otherwise bring any business before the 2017 and 2018 Annual Meetings, or (iii) engage in certain activities related to "withhold"
or similar campaigns with respect to the 2017 and 2018 Annual Meetings.
The
Cooperation Agreement also provides that at the 2017 and 2018 Annual Meetings, each member of the Jeereddi/PMCP Group will cause all shares of the Company's common stock beneficially
owned by them to be present and voted (i) in favor of all of the directors nominated for election by the Board, (ii) in favor of the appointment of the Company's independent registered
accounting firm for the years ended June 30, 2017 and June 30, 2018, respectively, and (iii) in accordance with the Board's recommendation with respect to the Company's
"say-on-pay" proposal,
provided
,
however
, that to the extent that the recommendation of both
Institutional Shareholder Services Inc. ("ISS") and Glass Lewis & Co., LLC ("Glass Lewis") differs from the Board's recommendation with respect to any matter other than
nominees for election as directors to the Board, the Jeereddi/PMCP Group shall have the right to vote in accordance with the recommendation of ISS and Glass Lewis with respect to such matters.
Further,
under the terms of the Cooperation Agreement, each member of the Jeereddi/PMCP Group agreed to certain normal and customary standstill provisions during a standstill period,
which is defined as the period beginning on the date of the Cooperation Agreement and through the later of (x) the date that is the first day to submit stockholder nominations for the 2019
annual meeting of stockholders pursuant to the Company's Bylaws (the "2019 Advance Notice Date") and (y) the date that Mr. Corcoran no longer serves on the Board;
provided
,
however
, that if Mr. Corcoran is not re-nominated by the Board for election at the 2018
Annual Meeting, the Standstill Period shall end thirty (30) days following the conclusion of the 2018 Annual Meeting; and
provided
,
further
, that if
Mr. Corcoran resigns for any reason prior to the 2019 Advance Notice Date, the Standstill Period shall continue until the 2019
Advance Notice Date (the "Standstill Period").
Among
other things, the standstill provisions provide that, during the Standstill Period, each member of the Jeereddi/PMCP Group will not, among other things, solicit proxies or consents
regarding any matter to come before any annual or special meeting of stockholders, or enter into a voting agreement or any group with stockholders other than affiliates of the Jeereddi/PMCP Group and
current group members. In addition, each member of the Jeereddi/PMCP Group will not seek to make, or encourage any third party in making, any offer or proposal with respect to any tender offer,
merger, acquisition, amalgamation, recapitalization, restructuring, disposition, spin-off, asset sale, joint venture or other business combination involving the Company and will not seek, or encourage
any person, to submit nominees in furtherance of a contested solicitation for the election or removal of directors.
Each
of the parties also agreed to certain mutual non-disparagement obligations, and the Company agreed to reimburse the Jeereddi/PMCP Group for its reasonable, documented out-of-pocket
fees and
expenses, including legal expenses, occurred in connection with the matters related to the negotiation and execution of the Cooperation Agreement, up to a maximum of $25,000.
The
foregoing is not a complete description of the Cooperation Agreement. For a further description of the Cooperation Agreement and a copy of the Cooperation Agreement, please see our
Current Report on Form 8-K that we filed with the SEC on October 2, 2017.
13
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Annual Meeting, the holders of Common Stock as of the Record Date will consider and vote upon the election of eight directors. The Board
has nominated Terry Burman, Steven R. Becker, Barry S. Gluck, Frank M. Hamlin, William Montalto, Sherry M. Smith, Richard S Willis and James T. Corcoran for election as directors of the Company. Each
of Terry Burman, Steven R. Becker, Barry S. Gluck, Frank M. Hamlin, William Montalto, Sherry M. Smith and Richard S Willis are currently serving as our directors, and each has agreed to stand for
re-election to our Board. Jimmie L. Wade has informed the Board that he will retire from the Board, effective immediately following the Annual Meeting. The Board thanks Mr. Wade for his years
of service to the Company. Under the terms of the Cooperation Agreement, the Board has nominated James T. Corcoran for election to the Board, and Mr. Corcoran's nomination will fill the vacancy
created by Mr. Wade's retirement. Mr. Corcoran has agreed to stand for election to our Board. If they are elected, each of the nominees will continue to serve until their successors are
duly elected and qualified at the next annual meeting of stockholders, or until their earlier death, resignation or removal. Should any nominee become unable or unwilling to accept nomination for
election, which is not currently anticipated, the Board may designate a substitute nominee or reduce the number of directors accordingly. The proxy holders will vote for any substitute nominee
designated by the Board. Each of the Board's nominees has indicated his or her willingness to serve the full term.
The
following is biographical information about each of the nominees to the Board of Directors, including the specific experience, qualifications, attributes and skills of the nominees
that led to the
conclusion that each of the nominees should serve as a director of the Company, in light of the Company's business and structure:
Terry Burman
, age 71, has served as a director of Tuesday Morning since February 2013 and has served as Chairman of the Board of the
Company since December 2015. Prior to that, Mr. Burman served as Lead Independent Director and a member of the Office of the Chairman from September 2015 to December 2015. From March 2001 to
January 2011, Mr. Burman was the Chief Executive Officer of Signet Jewelers Limited ("Signet"), a specialty jewelry retailer. Mr. Burman joined Signet in 1995 as the Chairman and CEO of
Sterling Jewelers, Inc., a U.S. division of Signet. Before joining Signet, Mr. Burman held various senior executive positions of increasing responsibility with Barry's
Jewelers, Inc., a specialty jewelry retailer, from 1980 to 1995, including President and Chief Executive Officer from 1993 to 1995. Prior to that, Mr. Burman was a partner with Roberts
Department Stores, a regional department store chain specializing in apparel. Mr. Burman has served as the Lead Independent Director of Abercrombie & Fitch Co., a clothing
retailer, since May 2017 and on the board of directors of Abercrombie & Fitch Co., since January 2014 and Learning Care Group, the second largest provider of early childhood care and
education services in the U.S., since July 2014. Mr. Burman also served on the board of directors of Signet until January 2011. Mr. Burman served on the board of directors of YCC
Holdings LLC, a retailer of candles, fragrances and other products, from October 2007 until it was acquired in October 2013, and served as chairman of the board and a director of Zale
Corporation, a jewelry retailer, from May 2013 until it was acquired in May 2014. In nominating Mr. Burman to serve as a director of the Company, the Board of Directors considered his extensive
executive, financial and management expertise and experience, his experience as a chief executive officer in the retail industry, his significant international management experience, and his general
business and financial acumen.
Steven R. Becker
, age 50, has served as a director of Tuesday Morning since July 2012 and was appointed its Chief Executive Officer in
December 2015. Prior to becoming CEO of Tuesday Morning, Mr. Becker served as Chairman of the Board of the Company from July 2012 until September 2015 and as Executive Chairman and head of the
Office of the Chairman from September 2015 until December 2015. Prior to becoming CEO of Tuesday Morning, Mr. Becker spent 20 years in the
14
investment
management industry with a focus on investing in middle market public companies. Mr. Becker has extensive public company board experience having previously served as a board member
at a variety of public companies including, Hot Topic, Inc., an apparel retailer, Ruby Tuesday, a national restaurant company, Emcore, a semiconductor producer, Plato Learning, an educational
software Company, Pixelworks, a semiconductor producer, Fuel Systems Solutions, a manufacturer of alternative energy systems, and Special Diversified Opportunities, a holding company that owns
businesses in a variety of industries, among others. Prior to becoming CEO of Tuesday Morning, Mr. Becker was the co-managing partner at Becker Drapkin Asset Management, whose predecessor,
Greenway Capital, he founded in 2005. From 1997 to 2004, Mr. Becker was a partner at Special Situations Funds, a New York City-based asset manager. Prior to joining Special Situations Funds,
Mr. Becker was a part of the distressed debt and leveraged equities research team at Bankers Trust Securities. Mr. Becker began his
career at Manley Fuller Asset Management in New York as a small cap analyst. In nominating Mr. Becker to serve as a director of the Company, the Board of Directors considered the insights
Mr. Becker brings through his prior service as a director of our Company, his demonstrated leadership and experience as our Chief Executive Officer and his extensive financial experience, in
both public and private companies, which provides the Board with valuable expertise in corporate finance, strategic planning, and corporate governance.
Barry S. Gluck
, age 65, has served as a director of Tuesday Morning since January 2017. Mr. Gluck served in various Senior
Management positions with Ross Stores Inc. ("Ross") from 1989 to 2007, most recently as Executive Vice President of Merchandising, Marketing and Store Planning and Allocation. Prior to joining
Ross, Mr. Gluck was with Today's Man as Vice President, General Merchandise Manager and Chief Merchandising Officer and with Macy's Department Stores as Vice President Divisional Merchandising
Manager. Since 2012, Mr. Gluck has served as the Founder and Managing Director of Gluck Consulting LLC, a management consultant group which focuses primarily on off-price/value channels.
In nominating Mr. Gluck to serve as a director of the Company, the Board considered his 30-years of off-price and value channel experience, his extensive executive, marketing and management
expertise having served as a chief merchandising officer in the retail industry, and his general business and financial acumen.
Frank M. Hamlin
, age 49, has served as a director of Tuesday Morning since April 2014. Mr. Hamlin has served as Executive Vice
President and Chief Marketing Officer for Tailored Brands, Inc. since September 6, 2017. From June 2014 to August 26, 2016 Mr. Hamlin served as Chief Marketing Officer of
GameStop Corp., a global, multichannel video game, consumer electronics and wireless services retailer. Mr. Hamlin previously served as Executive Vice President and GM, Marketing and E-Commerce
of Guitar Center, Inc., a musical instruments retailer, from June 2010 until May 2014, and as Executive Vice President and Chief Operating Officer of E-Miles, LLC, an interactive
marketing company, from February 2007 to June 2010. From July 2004 until February 2007, he was Director of Marketing, Central Market Division for H.E. Butt Grocery, a fresh, specialty and prepared
foods retailer. Prior to that time, Mr. Hamlin held various positions with Brierley & Partners, E-Rewards, Inc., Arista Records and The Walt Disney Company. In nominating
Mr. Hamlin to serve as a director of the Company, the Board of Directors considered the various senior executive-level positions he has held with retail service companies, as well as his
extensive experience in marketing, branding strategy and customer engagement.
William Montalto
, age 70, has served as a director of Tuesday Morning since June 2013. Mr. Montalto served as a consultant to
Tuesday Morning pursuant to a consulting agreement from July 1, 2016 to October 31, 2016. Prior to that, from January 1, 2016 through June 30, 2016, Mr. Montalto was
an employee of Tuesday Morning in an interim position as Assistant to the Chief Executive Officer to assist in the search and hiring of the Chief Information Officer and Head of Supply Chain. From
August 20, 2015 through December 31, 2015, Mr. Montalto served as a consultant to Tuesday Morning. Mr. Montalto served in various positions with Sterling Jewelers, the U.S.
division
15
of
Signet, a specialty jewelry retailer, from 1986 to 2012. Mr. Montalto served as Executive Vice President and Chief Operating Officer of Sterling Jewelers from 2006 until his retirement in
June 2012, and he previously served as Executive Vice President and Chief Administrative Officer of the division from 2002 until 2006 and in various other capacities with the division prior to 2002.
Prior to joining Sterling, Mr. Montalto served as a retail management consultant for Coopers & Lybrand (now PricewaterhouseCoopers) from 1980 to 1986, where he led significant systems
planning and development consulting engagements for a variety of major retailers. In nominating Mr. Montalto to serve as a director of the Company, the Board of Directors considered his
operational expertise and extensive knowledge in all aspects of retailing including information technology, real estate and marketing.
Sherry M. Smith
, age 56, has served as a director of Tuesday Morning since April 2014. Ms. Smith served in various positions with
Supervalu Inc., a grocery retailer and food distributor, from 1987 to 2013. Ms. Smith served as Chief Financial Officer and Executive Vice President of Supervalu Inc. from
December 2010 until August 2013, and she previously served as Senior Vice President, Finance from 2006 until 2010, Senior Vice President, Finance and Treasurer from 2002 until 2005, and in various
other capacities with Supervalu Inc. prior to 2002. Prior to joining Supervalu Inc., Ms. Smith held various positions with McGladrey LLP, a public accounting firm.
Ms. Smith has served on the board of directors of Deere & Company, a manufacturer and distributor of agricultural, turf, construction and forestry equipment, since December 2011, and
currently serves as a member of the audit committee and finance committee. Ms. Smith has also served on the board of directors of Realogy Holdings Corporation since December 2014, and currently
serves on its audit committee. Ms. Smith has served on the board of directors of Piper Jaffrey Corp since January 2016, and currently serves on its compensation committee and audit committee.
Since January 2015, Ms. Smith has served on the Financial Accounting Standards Advisory Council (FASAC), a group that advises the Financial Accounting Standards Board (FASB) on strategic
issues, project priorities and other matters. In nominating Ms. Smith to serve as a director of the Company, the Board of Directors considered her leadership qualities developed from her
experience while serving as a senior executive and as Chief Financial Officer of Supervalu Inc., the breadth of her experiences in auditing, finance, accounting, compensation, strategic
planning, and other areas of oversight, and her subject matter knowledge in the areas of finance and accounting and other board experience.
Richard S Willis
, age 57, has served as a director of Tuesday Morning since July 2012. Since January 2016, Mr. Willis has served as
the Chief Executive Officer, President and a Director of Pharmaca Integrative Pharmacies, an innovative retail pharmacy that combines traditional pharmacy services with natural health and beauty
products and expert practitioners. From September 2011 through December 2015, Mr. Willis served as the President and Chief Executive Officer and as a director of Speed Commerce, Inc.
(formerly Navarre Corporation), one of the nation's largest omni channel, pure play, end-to-end e-commerce solution providers. Mr. Willis previously served as the Executive Chairman of
Charlotte Russe, a mall-based specialty retailer of fashionable, value-priced apparel and accessories, from January 2011 to September 2011. From 2009 to 2011, Mr. Willis served as President of
Shoes for Crews, a seller of slip resistant footwear. From 2003 to 2007, Mr. Willis was President and Chief Executive Officer of Baker & Taylor Corporation, a global distributor of
books, DVDs and music. Previously, Mr. Willis served as Chairman, President and Chief Executive Officer of Troll Communications and President and Chief Executive Officer of Bell Sports.
Mr. Willis served four terms
as Chairman of the Board of Regents at Baylor University. In nominating Mr. Willis to serve as a director of the Company, the Board of Directors considered his considerable executive leadership
experience across multiple industries, including distribution businesses that serve retailers and their suppliers, and his significant expertise in operating businesses and directing transformative
plans, including executive level experiences of more than 20 years in retail and manufacturing industries.
16
James T. Corcoran
, age 34, is a new nominee and is not currently a director of the Company. He has served as the founder and Chief
Executive Officer of Purple Mountain Capital Partners LLC, a private investment firm, since June 2017. Prior to founding Purple Mountain Capital Partners LLC, he served as a Principal at
Highfields Capital Management, a value-oriented investment management firm in Boston, from 2010 to 2016. Mr. Corcoran worked as an investment banking analyst for Credit Suisse
(USA), Inc. in its leveraged finance and restructuring group, from 2006 to 2008, in addition to working in its hedge funds investment group, from 2005 to 2006. Mr. Corcoran received his
MBA from the Harvard Business School and his AB with honors in Economics and Political Science from the University of Chicago and is a CFA charterholder. Mr. Corcoran is being nominated by the
Board pursuant to the terms of the Cooperation Agreement.
The Board of Directors unanimously recommends that you vote "FOR" the election of each of the Board's nominees.
PROPOSAL NO. 2
ADVISORY VOTE ON EXECUTIVE COMPENSATION
As required by Section 14A of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Company is asking stockholders to
approve, on an advisory basis, the compensation for the named executive officers disclosed in these materials. This proposal, commonly referred to as a "say on pay" proposal, gives stockholders the
opportunity to express their views on the compensation of the named executive officers.
The
vote on this resolution is not intended to address any specific element of compensation. Rather, the vote relates to the compensation of our named executive officers, as described in
this Proxy Statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the
Compensation Committee of the Board. The Company currently submits the compensation of named executive officers to an advisory vote of stockholders on an annual basis.
As
described in more detail below under the heading "Executive CompensationCompensation Discussion and Analysis," our executive compensation program is designed to motivate
our executives to create a successful company. We believe that our compensation program, with its balance of short-term incentives (including performance-based cash bonus awards) and long-term
incentives (including equity awards that vest over certain time periods and performance-based equity awards), rewards sustained performance that is aligned with long-term stockholder interests. Please
read the "Compensation Discussion and Analysis," compensation tables and narrative discussion sections of this Proxy Statement below for additional details about our executive compensation program,
including information about the fiscal 2017 compensation of our named executive officers.
We
believe a significant amount of total compensation should be in the form of short-term and long-term incentive awards to align compensation with our financial and operational
performance goals as well as individual performance goals. We continually evaluate the individual elements of our executive compensation program in light of market conditions and governance
requirements and make changes where appropriate for our business. We believe that the core of our executive compensation program provides opportunities to reward high levels of individual and Company
performance and will help drive the creation of sustainable stockholder value.
The
Compensation Committee, which is responsible for determining the compensation of our executive officers, is comprised solely of non-employee directors who satisfy the independence
requirements under NASDAQ rules and will continue to emphasize responsible compensation arrangements that attract, retain, and motivate high caliber executives to achieve the Company's business
strategies and objectives.
17
Accordingly,
we ask our stockholders to vote on the following resolution at the Annual Meeting:
"
RESOLVED
, that the Company's stockholders approve, on an advisory basis, the compensation paid to the Company's named executive officers,
as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion."
The Board of Directors unanimously recommends that you vote "FOR" the approval of the compensation of the Company's named executive officers, as disclosed in this
Proxy Statement.
PROPOSAL NO. 3
ADVISORY VOTE ON THE FREQUENCY OF
AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
In addition to requiring an advisory vote on executive compensation, Section 14A of the Exchange Act also requires that at least once
every six years, we provide stockholders with the opportunity to vote on how frequently we should seek future advisory votes on executive compensation. In 2011, our Board of Directors recommended and
our stockholders voted overwhelmingly in favor of holding an annual advisory vote on executive compensation.
By
voting with respect to this proposal, stockholders may indicate whether they would prefer that we conduct future advisory votes on executive compensation once every one, two, or three
years. Stockholders also may, if they desire, abstain from casting a vote on this proposal.
The
Board of Directors has determined that an annual advisory vote on executive compensation will allow our stockholders to provide timely, direct input on the Company's executive
compensation philosophy, policies and practices as disclosed in the proxy statement each year. The Board of Directors believes that an annual vote is therefore consistent with the Company's efforts to
engage in an ongoing dialogue with our stockholders on executive compensation and corporate governance matters.
Our
Compensation Committee carefully considers executive compensation program decisions each year, taking stockholder feedback into account in making these decisions. Accordingly, the
Board of Directors believes that an annual advisory vote on executive compensation is an important part of our executive compensation process.
This
vote is advisory and not binding on the Company or the Board of Directors. The Board of Directors and the Compensation Committee will take into account the outcome of the vote,
however, when considering the frequency of future advisory votes on executive compensation.
The Board of Directors unanimously recommends that you vote for the option of every "1 YEAR" as the preferred frequency for advisory votes on executive
compensation.
PROPOSAL NO. 4
RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
On September 19, 2017, the Audit Committee selected Ernst & Young as the Company's independent registered public accounting firm
for the fiscal year ending June 30, 2018. Although SEC regulations and the NASDAQ listing requirements require the Company's independent registered public accounting firm to be engaged,
retained and supervised by the Audit Committee, the selection is being submitted for ratification at the Annual Meeting with a view towards soliciting the opinion of the Company's stockholders, which
the Audit Committee will take into consideration in future deliberations. If the selection of Ernst & Young as the Company's independent registered public accounting firm is not ratified at the
Annual Meeting, the Audit Committee may consider the engagement of another independent registered public accounting firm, but will not be obligated to do so. The Audit Committee may terminate the
engagement of Ernst & Young as the Company's
18
independent
registered public accounting firm without the approval of the Company's stockholders if the Audit Committee deems termination to be necessary or appropriate. The Company expects that
representatives of Ernst & Young will be present at the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement if they desire to do so.
The Board of Directors unanimously recommends that you vote "FOR" the ratification of the selection of Ernst & Young as the Company's independent
registered public accounting firm for the fiscal year ending June 30, 2018.
CORPORATE GOVERNANCE
Director Nomination
The Nominating and Governance Committee of the Board of Directors is responsible for providing oversight as to the identification, selection and
qualification of candidates to serve as directors of the Company and will recommend to the Board candidates for election or re-election as directors (or to fill any vacancies on the Board). The
members of the Nominating and Governance Committee are Terry Burman, as Chair, Barry S. Gluck and Richard S Willis. Each of the members of the Nominating and Governance Committee is an independent
director under applicable NASDAQ rules. The Nominating and Governance Committee Charter is available on the Company's website at
www.tuesdaymorning.com
under "Investor RelationsCorporate GovernanceCorporate Governance Documents." The Nominating and Governance Committee Charter is also available in print to any stockholder
who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.
In
identifying and evaluating nominees for director, the Nominating and Governance Committee will take into account the following attributes and qualifications: (1) relevant
knowledge and mix of background and experience; (2) personal and professional ethics, integrity and professionalism; (3) accomplishments in their respective fields; (4) the skills
and expertise to make a significant contribution to the Board, the Company and its stockholders; and (5) whether the candidate has any of the following qualities: financial expertise, general
knowledge of the retail industry, and Chief Executive Officer, Chief Financial Officer or other senior management experience. In addition, although the Nominating and Governance Committee does not
have a formal diversity policy in place for the director nomination process, diversity is an important factor in the Nominating and Governance Committee's consideration and assessment of a candidate,
with diversity being broadly construed to mean a variety of opinions, perspectives, experiences and backgrounds, including gender, race and ethnicity differences, as well as other differentiating
characteristics, all in the context of the requirements of the Board at that point in time. In addition, no person may be considered as a candidate for nomination as a director of the Company if
(i) during the last ten years, that person, or any of his or her affiliates, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or is currently
under investigation for same or (ii) during the last ten years, that person, or any of his or her affiliates, was a party to a civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which that person, or any of his or her affiliates, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws on finding any violation with respect to such laws, or is currently under investigation for same. In addition, the Nominating and Governance
Committee will recommend to the Board candidates for re-election as directors. The Nominating and Governance Committee may conduct all necessary and appropriate inquiries into the backgrounds and
qualifications of potential candidates. There are no specific or minimum qualities a candidate must have to be recommended as a director nominee by the Nominating and Governance Committee.
The
process for evaluating candidates is the same regardless of the source of the recommendation. The Nominating and Governance Committee will not discriminate on the basis of race,
color, national origin, gender, religion or disability in selecting nominees. In addition to those candidates identified
19
through
its own internal processes, the Nominating and Governance Committee will evaluate a candidate proposed by any single stockholder (or group of stockholders) that beneficially owns our Common
Stock provided that the information regarding the potential candidate or candidates has been timely given to the Company. In order to be considered by the Nominating and Governance Committee for
evaluation for an upcoming annual meeting of stockholders, a notice from a stockholder regarding a potential candidate must be sent to the Company's Secretary at the Company's headquarters by the date
specified in the "Stockholders' Proposals" section of the previous year's proxy statement for notice of the intention to nominate directors at the meeting. The notice should set forth (a) as to
each person whom the stockholder proposes as a potential candidate for director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation
or employment of such person, (iii) the class and number of shares of the Company that are beneficially owned by such person, and (iv) any other information relating to such person that
is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without
limitation such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice,
(i) the name and address of the stockholder of record, as they appear on the Company's books, of the beneficial owners, if any, and, if such stockholder or beneficial owner is an entity, the
persons controlling such entity, proposing such nomination, (ii) the class and number of shares of the Company which are held of record and beneficially by such stockholder and control persons
and a description of certain agreements, arrangements or understandings among the stockholder, beneficial owners or control persons (and a representation to notify the Company of any such agreements,
arrangements or understandings in effect as of the record date of the meeting), (iii) a representation that the stockholder is entitled to vote at the meeting and intends to appear at the
meeting in person or by proxy, and (iv) a representation whether the stockholder or the beneficial owner or control person, if any, will engage in a solicitation with respect to the nomination
and, if so, certain information concerning the solicitation. All candidates (whether identified internally or by a stockholder) who, after evaluation and recommendation by the Nominating and
Governance Committee, are then nominated by the Board will be included as the Board's recommended slate of director nominees in the Company's proxy statement.
In
addition to submitting potential candidates for consideration by the Nominating and Governance Committee, any stockholder of the Company may nominate one or more individuals for
election as a director of the Company at an annual meeting of stockholders if the stockholder sends a notice to the Company's Secretary at the Company's headquarters, in the form specified in the
Bylaws, by the date specified in the "Stockholders' Proposals" section of the previous year's proxy statement for nomination of directors. The procedures described in the prior paragraph are meant to
establish an additional means by which certain stockholders can have access to the Company's process for identifying and evaluating Board candidates and is not meant to replace or limit stockholders'
general nomination rights in any way.
Each
of the nominees for director, other than Mr. Gluck and Mr. Corcoran, served as a director prior to the last annual meeting of stockholders. The Nominating and
Governance Committee identified
Mr. Gluck as a director candidate through a third party search firm retained by the Board of Directors. Mr. Corcoran is being nominated as a director pursuant to the terms of the
Cooperation Agreement.
Director Independence
NASDAQ listing standards require our Board of Directors to be comprised of at least a majority of independent directors. For a director to be
considered independent, the Board must determine that the director does not have any direct or indirect material relationship with the Company which would interfere with the exercise of independent
judgment in carrying out of his or her responsibilities as a
20
director.
Based on the independence standards prescribed by NASDAQ, our Board has affirmatively determined that six of the eight current directors, including Mr. Wade who will be retiring from
the Board effective as of immediately following the Annual Meeting, are independent. Mr. Corcoran, a new director nominee, has also been determined to be independent. Mr. Becker is not
independent due to his relationship with the Company as Chief Executive Officer. The Board determined that Mr. Montalto is not independent due to the services that he provided between August
2015 and October 2016 in various capacities. In determining that Mr. Burman is independent, our Board considered his prior service as a member and Vice Chairman of the Office of the Chairman as
described below, and determined that such service would not interfere with his independence because he received no compensation for such service, served only in an advisory role and did not perform
any management or executive functions. As prescribed by NASDAQ rules, the independent directors have regularly scheduled meetings without management present.
Independent Chairman of the Board
The Company had different individuals serving as its Chief Executive Officer and Chairman of the Board from 2000 until September 2015 and,
effective December 2015, reestablished the separation of these roles. In connection with the retirement of the Company's Chief Executive Officer in September 2015, the Board appointed
Mr. Becker, the then-serving Chairman of the Board, to serve as Executive Chairman of the Company, in which role Mr. Becker continued his duties as Chairman of the Board and also served
as the interim principal executive officer of the Company. In
September 2015, the Board also created a new Office of the Chairman to provide oversight to the Company's strategic initiatives until the Board hired a new Chief Executive Officer. The Office of
Chairman was led by Mr. Becker, as Executive Chairman, and included Mr. Burman as Vice Chairman, Melissa Phillips, in her capacity as the Company's President and Chief Operating Officer,
and Phillip Hixon, in his capacity as the Company's Executive Vice President, Store Operations. At the same time, the Board also appointed Mr. Burman to serve as Lead Independent Director. The
Board determined that this leadership structure was appropriate and in the best interests of the Company and its stockholders at that time because it provided strong executive leadership through the
Executive Chairman together with independent leadership of the independent directors through the Lead Independent Director.
In
December 2015, the Board appointed Mr. Becker as the Company's new Chief Executive Officer and eliminated the office of Executive Chairman and dissolved the Office of Chairman.
The Board also appointed Mr. Burman as independent Chairman of the Board and eliminated the position of Lead Independent Director. The separation of the roles of Chairman of the Board and Chief
Executive Officer is designed to allow our Chief Executive Officer, Mr. Becker, to focus on the day-to-day management of the Company's business and our independent Chairman of the Board,
Mr. Burman, to focus on the continued development of a high-performing Board, including (1) ensuring the Board remains focused on the Company's long-term strategic plans,
(2) developing Board agendas, (3) working with Company management to ensure the Board has timely and adequate information, (4) coordinating Board committee activities,
(5) supporting the Chief Executive Officer and (6) ensuring effective stakeholder communications. The Board recognizes the time, effort and energy that the Chief Executive Officer is
required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as the Board's oversight responsibilities continue to
grow. The Board believes, due to the continued leadership and experience provided by these two individuals, that having separate positions is the appropriate leadership structure for the Company at
this time and demonstrates our commitment to good corporate governance.
21
Board of Directors' Role in Risk Oversight
Our Company, like others, faces a variety of enterprise risks, including credit risk, liquidity risk and operational risk. In fulfilling its
risk oversight role, the Board focuses on the adequacy of the Company's risk management process and overall risk management system. The Board believes an effective risk management system will
(1) adequately identify the material risks that the Company faces in a timely manner, (2) implement appropriate risk management strategies that are responsive to the Company's risk
profile and specific material risk exposures, (3) integrate consideration of risk and risk management into business decision-making throughout the Company and (4) include policies and
procedures that adequately transmit necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant committee.
The
Board of Directors oversees the Company's policies with respect to risk assessment and risk management, as well as major risk exposures and the process used to manage those
exposures. Accordingly, the Board of Directors periodically reviews the risks associated with the various departments within the Company, in addition to its other duties. The Board of Directors
receives information from Board committees, management and advisors regarding the Company's risk management process and system, the nature of the material risks the Company faces and the adequacy of
the Company's policies and procedures designed to respond to and mitigate these risks.
Communication with the Board of Directors
Stockholders may communicate with one or more members of the Board in writing by regular mail. The following address may be used by stockholders
who wish to send such communications:
Board
of Directors
c/o Secretary
Tuesday Morning Corporation
6250 LBJ Freeway Dallas,
Texas 75240
Such
communication should be clearly marked "Stockholder-Board Communication." The communication must indicate whether it is meant to be distributed to the entire Board, a specific
committee of the Board or to specific members of the Board, and must state the number of shares beneficially owned by the stockholder making the communication. The Secretary has the authority to
disregard any inappropriate communications. If deemed an appropriate communication, the Secretary will submit such stockholder's correspondence to the Chairman of the Board (on behalf of the Board) or
to any specific committee, director or directors to whom the correspondence is directed.
Code of Business Conduct
We have adopted a "Code of Business Conduct" that establishes the business conduct to be followed by all of our officers, including our
principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (the "Senior Financial Officers"), and all of our
employees and members of our Board and embodies the Company's principles and practices relating to the ethical conduct of the Company's business and its long-standing commitment to honesty, fair
dealing and full compliance with all laws affecting the Company's business. Amendments to and waivers from the Code of Conduct with respect to the Senior Financial Officers will be posted on our
website within four business days after approval by the Board. Any waiver from the Code of Conduct with respect to our Senior Financial Officers requires approval by the Board. There were no waivers
from the Code of Conduct with respect to the Senior Financial Officers during the fiscal year ended June 30, 2017. The Code of Conduct is available on the Company's website at
www.tuesdaymorning.com
under "Investor RelationsCorporate GovernanceCorporate Governance Documents".
22
MEETINGS AND COMMITTEES OF THE BOARD
Board of Directors
Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all
Board, committee and stockholder's meetings. During the fiscal year ended June 30, 2017, the Board of Directors held 7 meetings. Each of our directors attended 75% or more of the Board and
committee meetings held during the fiscal year (or portion of the fiscal year during which he or she served as a director or committee member). Directors are encouraged to attend the Company's annual
meeting of stockholders. All of the directors then serving on the Board attended the Company's 2016 Annual Meeting of Stockholders meeting held on November 16, 2016.
Committees of the Board
The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. The committees are the
Audit Committee, the Compensation Committee and the Nominating and Governance Committee.
Audit Committee
For the fiscal year ended June 30, 2017, the Audit Committee had three members and met 8 times. Such members included Richard S
Willis, as Chair, Jimmie L. Wade and Frank M. Hamlin, all of which were non-employee directors and all of whom the Board has determined are independent pursuant to the applicable NASDAQ rules and
satisfy the SEC requirements relating to the independence of audit committee members. Mr. Wade will retire from the Board and all committees and subcommittees thereof, including the Audit
Committee, effective as of immediately following the Annual Meeting. The Board also determined that all the members of the Audit Committee had the ability to read and understand fundamental financial
statements.
For
the fiscal year ended June 30, 2017, the Board of Directors determined that Messrs. Willis and Wade each qualified as an "audit committee financial expert" as defined
by applicable SEC rules and designated each as the Company's audit committee financial expert. The Board has adopted a charter for the Audit Committee, which is available on the Company's website at
www.tuesdaymorning.com
under "Investor RelationsCorporate GovernanceCorporate Governance Documents." The Audit Committee
Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.
The
Audit Committee's responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility
to:
-
-
establish policies and procedures for reviewing and approving the appointment, compensation, retention and oversight of our independent
registered public accounting firm;
-
-
review and discuss with our independent registered public accounting firm, internal auditors and management the adequacy and effectiveness of
the Company's system of internal controls;
-
-
review the scope and results of our independent registered public accounting firm's audit of the Company's annual financial statements,
accompanying footnotes and audit report;
-
-
pre-approve all audit and permissible non-audit fees;
-
-
review and discuss with management and the registered independent public accounting firm of the Company the annual and quarterly consolidated
financial statements of the Company and related disclosures;
23
-
-
review and discuss with management and the registered independent public accounting firm of the Company significant issues regarding accounting
principles and financial statement presentations;
-
-
review, approve and ratify related party transactions; and
-
-
perform other functions or duties deemed appropriate by the Board.
The
Audit Committee has authority under its charter to retain any independent counsel, experts or advisors (accounting, financial, legal or otherwise) that the Audit Committee believes
to be necessary or appropriate to assist in the fulfillment of its responsibilities. At each meeting, the Audit Committee meets in executive session in which only independent directors are present.
The Audit Committee also meets independently with the Company's independent registered public accounting firm.
Compensation Committee
The Compensation Committee has three members and met 8 times during the fiscal year ended June 30, 2017. The Compensation Committee is
comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to applicable NASDAQ rules.
For
the fiscal year ended June 30, 2017, the Compensation Committee was comprised of Sherry M. Smith, as Chair, Frank M. Hamlin and Jimmie L. Wade. Mr. Wade will retire
from the Board and all committees and subcommittees thereof, including the Compensation Committee, effective as of immediately following the Annual Meeting. The Board adopted a charter for the
Compensation Committee, which is available on the Company's website at
www.tuesdaymorning.com
under "Investor RelationsCorporate
GovernanceCorporate Governance Documents." The Compensation Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250
LBJ Freeway, Dallas, Texas 75240.
The
Compensation Committee's responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility
to:
-
-
review and approve the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluate the performance of
our Chief Executive Officer in light of those goals and objectives, and determine the compensation of our Chief Executive Officer based on this evaluation;
-
-
review and approve compensation and incentive arrangements (including any employment or severance agreements) for the executive officers of the
Company;
-
-
review and assess the results of any stockholder advisory vote with respect to the Company's executive compensation;
-
-
administer the Company's equity incentive plans, including the review and grant of stock options and other equity incentive grants to
directors, executive officers and other key employees of the Company; and
-
-
perform other functions or duties deemed appropriate by the Board.
The
Compensation Committee also oversees the Company's stock ownership guidelines for non-employee directors and certain executive officers.
Compensation
Committee meetings have been regularly attended by the Chief Executive Officer. At each meeting, the Compensation Committee meets in an executive session in which only
independent directors are present. None of the executive officers are present during voting or deliberations on his or her compensation.
The
Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and legal counsel as it deems necessary to assist in the
fulfillment of its
24
responsibilities.
See "Executive CompensationCompensation Discussion and AnalysisHow Compensation Decisions Are MadeThe Role of the Executive Compensation
Consultant" below for more information regarding the role of the compensation consultant utilized by the Compensation Committee. Prior to engaging any such advisor, consultant or legal counsel, the
Compensation Committee conducts an independence assessment of such advisor pursuant to NASDAQ rules and federal securities laws and regulations, but the Compensation Committee retains discretion to
engage any such advisor, without regard to its independence, after considering the findings in such assessment. The Compensation Committee also reviews and discusses with the appropriate officers of
the Company any disclosures required under federal securities laws and regulations regarding conflicts of interest with respect to such advisors.
Nominating and Governance Committee
The Nominating and Governance Committee has three members and met 4 times during the fiscal year ended June 30, 2017. The Nominating and
Governance Committee is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to applicable NASDAQ rules.
The
Nominating and Governance Committee is currently comprised of Terry Burman, as Chair, Richard S Willis and Barry Gluck. The Board adopted a charter for the Nominating and Governance
Committee, which is available on the Company's website at
www.tuesdaymorning.com
under "Investor RelationsCorporate
GovernanceCorporate Governance Documents." The Nominating and Governance Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the
Company at 6250 LBJ Freeway, Dallas, Texas 75240.
The
Nominating and Governance Committee's responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility
to:
-
-
evaluate and recommend to the Board from time to time as to changes that the Nominating and Governance Committee believes to be necessary,
appropriate or desirable with respect to the size, composition, and functional needs of the Board;
-
-
periodically review the Company's Certificate of Incorporation and Bylaws and make recommendations to the Board as they relate to corporate
governance matters;
-
-
develop and recommend to the Board specific guidelines and criteria for screening and selecting nominees to the Board, including any director
nominations submitted by the Company's stockholders;
-
-
provide oversight as to the identification, selection, and qualification of candidates for the Board, including interviewing and evaluating new
candidates for the Board;
-
-
recommend to the Board candidates for election or re-election as directors or to fill any vacancies on the Board;
-
-
recommend to the Board candidates for appointment to the standing committees of the Board in accordance with the policies and principles in
such committees' charters and taking into consideration such other factors as it deems necessary, appropriate or desirable;
-
-
oversee and approve the management continuity planning process and make recommendations to the Board regarding CEO and other executive officer
succession;
-
-
periodically review and assess the Company's corporate governance principles and make recommendations to the Board for changes as deemed
necessary, appropriate or desirable; and
-
-
perform other functions or duties deemed appropriate by the Board.
The
Nominating and Governance Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and legal counsel as it deems necessary to assist
in the fulfillment of its responsibilities.
25
EXECUTIVE OFFICERS
The following sets forth certain information about our executive officers, other than Mr. Becker, our Chief Executive Officer, whose
biographical information is included above under "Proposal No. 1Election of Directors."
Stacie R. Shirley
Ms. Shirley, age 48 has served as the Company's Executive Vice President, Chief Financial Officer and Treasurer since January 2016. Prior
to joining the Company, Ms. Shirley served as an executive officer of Neiman Marcus Group LTD LLC, a luxury fashion retailer, serving as Senior Vice President, Finance and
Treasurer from September 2010 until December 2015 and Vice President, Finance and Treasurer from December 2001 until September 2010. In her most recent position with Neiman Marcus Group,
Ms. Shirley's areas of responsibility included finance, capital markets and treasury operations, capital planning and forecasting, credit operations, investor relations, risk management and
internal audit. Prior to joining Neiman Marcus Group, Ms. Shirley served in various
capacities at CompUSA Inc. from 1993 to 2001, including serving as Vice President, Finance and Treasurer from 1999 to 2001. Ms. Shirley began her career as an accountant with
Ernst & Young in 1990 and is a certified public accountant.
Phillip D. Hixon
Mr. Hixon, age 63, has served as the Company's Executive Vice President, Store Operations since September 2015 and served as a member of
the Office of Chairman from September 2015 until the dissolution of that office in December 2015. From June 2014 to September 2015, Mr. Hixon served as the Company's Senior Vice President,
Store Operations, and from September 2013 to June 2014, Mr. Hixon served as the Company's Vice President, Store Planning. Prior to joining the Company, Mr. Hixon served as Vice President
of Business Development of Merchco Services, Inc., a provider of retail store development and support services, from June 2012 until August 2013. From 2011 until 2012 and 2005 until 2006,
Mr. Hixon owned and served as principal of Diversified Resources LLC, where he developed and implemented programs for clients in the areas of strategic planning, effective business
practices, process enhancement and organizational effectiveness. From 2009 until 2011, Mr. Hixon served in the Department of Strategy and Innovation of Petco Animal Supplies Inc., a
specialty retailer of pet supplies. From 2006 until 2009, Mr. Hixon held various executive positions with Duckwall-Alco Stores Inc., a retail chain, including Senior Vice President,
Store Operations, Real Estate, Store Development and Senior Vice President, Merchandising. Mr. Hixon served as Vice President, Store Development for Michaels Stores, Inc., a national
arts and crafts specialty retailer, from 1987 until 2005.
Trent E. Taylor
Mr. Taylor, age 60, has served as the Company's Senior Vice President, Chief Information and Inventory Management Officer since June
2017. From January 2017 to June 2017, Mr. Taylor served as the Company's Senior Vice President, Chief Information and Supply Chain Officer, and from April 2016 to January 2017,
Mr. Taylor served as the Company's Senior Vice President, Chief Information Officer. Prior to joining the Company, Mr. Taylor served as Chief Information Officer of hhgregg, a retailer
of consumer electronics and home appliances from September 2011 until March 2016. From November 1992 until 2009, Mr. Taylor served in various roles for the Walgreen Company including Chief
Information Officer and Executive Vice President of e-commerce.
26
Belinda J. Byrd-Rohleder
Ms. Byrd-Rohleder, age 54, has served as the Company's Senior Vice President, General Merchandising Manager since January 2017 and served
as Vice President, Division Merchandising Manager from June 2015 until January 2017. Prior to joining the Company, Ms. Byrd-Rohleder served as the Senior Vice President of Arden Companies from
August 2012 until May 2014. From February 2010 until January 2012, Ms. Byrd-Rohleder served as the Senior Vice President, General Merchandise Manager for Home and Hardlines at Shopko, a
regional mass merchant. Prior to joining Shopko, Ms. Byrd-Rohleder was the Senior Vice President at HSN for Home and Apparel/Accessories from August 2006 to July 2008. Prior to joining HSN,
Ms. Byrd-Rohleder held the role of VP/GMM of Soft Home for Sears Holdings (both Kmart and Sears companies) from May 2004 to August 2006. Prior to Sears Holdings Ms. Byrd-Rohleder served
in various roles with Kmart Corporation from 1994 to 2004, including Divisional Vice President of Soft Home and Senior Buyer of numerous home businesses, including Home Textiles, Housewares and
Furniture.
27
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes our compensation policies, principles and practices and presents a review and analysis of
executive compensation earned in fiscal 2017 by our named executive officers (NEOs). This discussion and analysis also contains statements regarding our performance targets and goals. These targets
and goals are disclosed in the limited context of our compensation programs and should not be understood to be statements of management's expectations or estimates of results or other guidance. We
specifically caution investors not to apply these statements to other contexts.
Fiscal 2017 Financial and Business Review
Retail industry performance, in general, has been very challenging in most sectors in 2017. We believe Tuesday Morning, as an off-price
retailer, has strong potential for long term growth along with the rest of the segment. We believe Tuesday Morning is in the right business and is working to capitalize on the opportunity that the
off-price segment offers.
Some
of our financial and business highlights for the fiscal year include:
-
-
Net sales were $966.7 million, compared to $956.4 million for fiscal 2016.
-
-
Comparable store sales increased 2.2% compared to the same period a year ago.
-
-
Fiscal 2017 net sales were negatively impacted by lower than plan store level inventories for a portion of the year due to the supply chain
challenges experienced during the year, as well as 20 fewer stores.
-
-
During fiscal 2017, we continued to implement our strategy of improving store locations and the in-store experience for our customers, which
included (i) closing less productive stores with limited foot traffic and relocating some of these stores to, or opening new stores in, better locations with footprints that are on average
three to five thousand square feet larger, (ii) expanding some existing stores to a larger footprint, and (iii) improving the finishes in these relocated, new and expanded stores.
-
-
Sales at the 52 stores relocated during the past 12 months increased approximately 52% on average for fiscal 2017 as compared to fiscal
2016 and contributed approximately 290 basis points of comparable store sales growth.
-
-
The Company's operating loss for fiscal 2017 was $32.3 million, compared to operating income of $2.4 million for fiscal 2016.
-
-
The Company reported a net loss of $32.5 million, or $0.74 per share, for fiscal 2017 compared to net income of $3.7 million, or
$0.08 per share, in the prior year period.
Tuesday
Morning has taken significant steps to improve our business operations and financial performance. During the fiscal year, we benchmarked our progress against six top priorities,
which are regularly discussed at executive team meetings and are included in both job performance and short-term incentive plan objectives.
-
-
While we experienced supply chain challenges in fiscal 2017 in connection with the implementation of the Phoenix distribution center, the new
distribution center is operating effectively and costs throughout our entire supply chain are improving. The Dallas distribution center performance has significantly improved and is exceeding many of
our internal efficiency metrics. These efforts are expected to continue to bring costs down over time.
28
-
-
We have had improvement in working capital management. During the fourth quarter, we reduced our inventory balance and have reduced borrowings
on our bank line compared to the third quarter of fiscal 2017. The reduction in our inventory balance was largely the result of improvements in the efficiency of our supply chain, a decrease in cycle
times and reduction in the amount of inventory held in our distribution centers. We have increased our inventory turn and expect that progress to continue.
-
-
We believe we continue to experience strong results from the execution of our real estate strategy. Our new real estate, including store
relocations, new stores and expansion stores, continue to be top producers and we remain focused on upgrading our portfolio while managing the costs associated with this program.
-
-
We have increased the effectiveness of our marketing dollars. Our marketing efforts are focused on driving customer engagement. We partnered
with a new advertising agency to roll out a new advertising campaign in the first quarter of fiscal 2018. We have also improved our data capture and significantly increased our customer database.
-
-
We have improved our merchandise assortment. The overall retail environment has allowed us to enter into some new vendor relationships and add
new brands to our product mix. We have been very focused on improving store level turn by driving a compelling product assortment with a sharp value proposition and carefully managing our weeks of
supply.
-
-
And finally, cost control. We completed a headcount reduction in our corporate office and a consolidation of our field operations. As a result,
we have a lean organization that is well-positioned to deliver improved results.
Our Compensation Philosophy
Our compensation program is designed to motivate long-term growth, to hold executives accountable for key annual results year-over-year and to
support executive recruitment and engagement. This philosophy includes the following:
-
-
A significant portion of our executives' total direct compensation is based on our performance and improving stockholder value. This philosophy
is reflected in the design of both our short-term cash incentive program as well as our long-term equity incentive program.
-
-
Our compensation program attempts to better align the interests of executives and stockholders through performance-based compensation and
equity compensation. We have stock ownership guidelines for executives.
-
-
Our compensation program is also designed to attract and retain talented executives who are committed to our future success.
-
-
We consider all relevant factors to determine an executive's compensation, and manage individual total compensation around the median of the
market as determined by peer group analysis and an evaluation of the broader retail industry.
-
-
Our program provides incentives for performance by giving individual executives the opportunity to earn more or less than targeted compensation
levels based on actual performance.
29
What We Do & What We Don't Do
The table below highlights certain of our current compensation practices, including the practices we have implemented because we believe they
support stockholder return and certain practices we have not implemented because we do not believe they would serve our stockholders' long term interests.
|
|
|
Compensation GovernanceWhat We Do & What We Don't Do
|
✓
What We Do
|
|
✗
What We Don't Do
|
|
|
|
✓
Annual "Say on Pay" vote
|
|
✗
No formal employment agreements other than the CEO
|
✓
Pay for performance culture, emphasis on performance-based compensation
|
|
✗
No discretionary bonuses paid to permanent NEOs when performance results are below threshold performance
|
✓
Executive ownership guidelines
|
|
✗
No tax gross-up upon change-in-control
|
✓
Executive equity retention/holding requirements
|
|
✗
No re-pricing of stock options
|
✓
Manage compensation risk by using a variety of financial metrics in pay programs and capping payouts
|
|
✗
No across-the-board pay increases
|
✓
Hedging/pledging policies
|
|
✗
No formal non-qualified benefits or perquisite programs
|
✓
Use of independent compensation consultant
|
|
✗
No hedging or pledging of stock
|
✓
Evaluate our peer group and pay positioning
|
|
|
At
the fiscal 2016 annual stockholder meeting, in addition to approving an additional 2,500,000 shares for the plan to support ongoing competitive equity grants to participants, the
following amendments were approved for 2014 Long-Term Incentive Plan:
-
-
Removing the liberal share recycling provision for awards granted pursuant to the 2014 Plan.
-
-
Reducing the number of shares exempt from minimum vesting requirements from 10% to 5% and requiring that vesting of any stock option awards may
not occur sooner than 1 year following grant, or if earlier, the participant's death, total and permanent disability, retirement or, in the two-year period following a change in control, if the
participant is terminated without cause or a participant terminates his or her service for good reason.
-
-
Eliminating the Board's discretion to accelerate the vesting of outstanding and unvested awards upon a change-in-control and require a
"double-trigger" for vesting whereby such awards would only accelerate in full if a participant is terminated without cause or a participant terminates his or her service for good reason on or within
two years after a change in control. In connection with the cash-out of awards in a change of control where the acquirer or surviving or resulting corporation does not agree to assume such awards, the
Board may cancel unvested portions of such awards for no consideration unless otherwise determined by the Board.
-
-
Including a robust clawback policy that will authorize the recovery of gains from all or most equity awards in the event of certain financial
restatements.
The
Board believes that these approved changes, in addition to the existing provisions in the 2014 Plan, serve the interests of our stockholders better, support effective governance and
further demonstrate reasonable use of the shares.
30
Our Named Executive Officers
For fiscal 2017, our NEOs included the following persons, reflecting the changes in our leadership team during the fiscal year:
|
|
|
Named Executive Officer
|
|
Position
|
Steven R. Becker
|
|
Chief Executive Officer and President
|
Stacie R. Shirley
|
|
Executive Vice President, Chief Financial Officer & Treasurer
|
Phillip D. Hixon
|
|
Executive Vice President, Store Operations
|
Trent E. Taylor
|
|
Chief Information Officer and Senior Vice President, Inventory Management
|
Belinda J. Byrd-Rohleder
|
|
Senior Vice President and General Merchandising Manager
|
Melissa Phillips
|
|
Former President and Chief Operating Officer
|
In
January 2017, the Company eliminated the Chief Operations Officer position and it was mutually agreed Ms. Phillips would resign from her position effective immediately.
How Compensation Decisions Are Made
The Compensation Committee, which is comprised solely of independent directors, has responsibility for overseeing the development and
administration of our executive compensation programs. Annually, the Compensation Committee reviews executive compensation programs and practices relative to our performance and market trends and
practices.
The
Compensation Committee establishes the design of all executive remuneration programs, including those for our Chief Executive Officer. The Compensation Committee reviews and approves
annual pay targets, sets financial and business metrics for performance plans, and approves final payout levels for executive officers within the Compensation Committee's scope.
The Compensation Committee has the authority to retain, terminate, compensate and oversee any compensation consultant or other advisors to
assist the committee in the discharge of its responsibilities. Since December 2013, the Compensation Committee has engaged Hay Group, Inc., now known as Korn Ferry Hay Group, as its outside
compensation consultant. For 2017, Korn Ferry Hay Group assisted the Compensation Committee with:
-
-
advice and analysis on the design, structure and level of executive and director compensation;
-
-
review of market survey and proxy compensation data for benchmarking;
-
-
advice on the external retail environment and evolving compensation trends;
-
-
peer group review and analysis;
-
-
review of current and past retail practices on broad-based and performance-based pay in a market downturn; and
-
-
assistance with continuing regulatory compliance and changes regarding compensation matters.
Korn
Ferry Hay Group attends the Compensation Committee meetings, including executive sessions. Although Korn Ferry Hay Group works with our management on various matters for which the
Compensation Committee is responsible, our management does not direct or oversee the retention or activities of Korn Ferry Hay Group.
In
December 2015, Hay Group was acquired by Korn Ferry, an organizational advisory and executive search firm. Prior to the public announcement of Korn Ferry's pending acquisition of Hay
31
Group,
our management, with the approval of our Compensation Committee, engaged Korn Ferry for services in addition the executive and director compensation services provided by Hay Group, primarily
consisting of executive recruitment services. During fiscal 2017, a total of $233,323 was paid to Korn Ferry Hay Group. These costs include $101,000 paid to Korn Ferry Hay Group as the Compensation
Committee's compensation consultant in fiscal 2017, $7,500 for the PayNet online compensation survey subscription, $107,323 for residual executive recruitment services expenses from fiscal 2016, and
$17,500 for executive coaching services.
Following
a review of the independence of Korn Ferry Hay Group, the Compensation Committee concluded that no conflict of interest exists with respect to the work of Korn Ferry Hay Group.
The Compensation Committee re-engaged Korn Ferry Hay Group as its outside consultant for executive
and director compensation matters for fiscal 2017. The committee has a policy that states that any projects done with Korn Ferry Hay Group outside of board and executive compensation activities must
be reviewed and approved by the Committee.
In reviewing and making compensation decisions, the Compensation Committee also relies on the CEO's view of the business, people strategy, and
performance of the other senior executives. Certain members of our management meet periodically with Korn Ferry Hay Group at the direction of the Compensation Committee to ensure the consultants have
the information they need to advise the Compensation Committee. The compensation consultant works directly with the Compensation Committee on CEO compensation.
We typically review peer group information in making compensation determinations. In fiscal 2017, the Compensation Committee conducted a
comprehensive review of our peer group to assure that it provides a relevant comparison to the market. The Compensation Committee considered a number of factors in determining the appropriate peer
group including: similar size in terms of revenue (1/2x to 2x our revenue), financial performance (market capitalization, profitability, and gross margin), and business model
(e.g., retail, hard goods retail, household goods retail, and off-price retail, number of stores, number of employees). Companies may still be considered for inclusion in the peer group even if
they do not meet all of the criteria. The Compensation Committee, with advice from Korn Ferry Hay Group, elected to make the following changes to our peer group in fiscal 2017:
|
|
|
Company
|
|
Action
|
Ollie's Bargain Outlet
|
|
Add
|
Gordmans (bankruptcy)
|
|
Remove
|
Our
current peer group includes the following companies:
|
|
|
Fiscal 2016 Peer Group
|
Big 5 Sporting Goods
|
|
Shoe Carnival
|
Cato Corp
|
|
Five Below
|
Fred's
|
|
Ollie's Bargain Outlet
|
Haverty Furniture
|
|
Hibbett Sports
|
Kirkland's
|
|
La-Z-Boy
|
Vitamin Shoppe
|
|
Pier 1 Imports
|
Restoration Hardware
|
|
Stage Stores
|
Stein Mart
|
|
|
32
At our 2016 annual stockholders' meeting, 88% of our stockholders who voted on our "Say on Pay" advisory proposal voted in favor of our
executive compensation program, up from approximately 86% in the prior year.
Although
the advisory stockholder vote on executive compensation is non-binding, the Compensation Committee took the results of the stockholder vote into consideration when determining
its approach to future compensation decisions.
Fiscal 2017 Compensation Program and Payouts
Summary
-
-
Consistent with fiscal 2016, we continued to provide the same three basic elements of executive compensation in fiscal 2017, consisting of base
salary, short-term cash incentive compensation and long-term equity compensation, with limited changes other than those relating to our management changes and business initiatives as discussed below.
-
-
Our top priority continued to be to make investments in the business and create operational changes and improvements to our processes and
procedures in order to create sustainable profitability. As a result, for fiscal 2017 the majority of the compensation objectives, pay programs and pay practices aligned pay with actual Company
financial and operational performance.
-
-
The Compensation Committee targets base salary, short-term cash incentive opportunities and long-term equity awards generally around the median
of the market.
-
-
Primarily as a result of supply chain challenges we experienced for a portion of fiscal 2017 while implementing our new Phoenix distribution
center, we did not meet our short-term threshold operating income goal, and therefore no incentive awards were earned under the revised incentive plan.
-
-
In consultation with its independent compensation consultant, the Compensation Committee decided to make a number of proactive enhancements to
the executive compensation program for fiscal 2018 in order to better align executive rewards with stockholder value creation. These changes are discussed in further detail below under "Fiscal 2018
Compensation Enhancements".
Our executive pay programs emphasize pay-at-risk. The charts below represent the targeted mix of pay between base salary, short-term incentives
and long-term equity incentives for our current CEO and other active NEOs for fiscal 2017:
|
|
|
CEO
|
|
Other NEOs
|
|
|
|
33
Upon joining Tuesday Morning, an executive's base salary level is determined using a combination of internal and external factors. Generally,
base salaries are initially set based around the median value of the position in the market and the executive's experience. Given our emphasis on pay-at-risk, subsequent base salary increases are
generally based on annual market movement and individual performance. The Compensation Committee receives input from the Board of Directors regarding our CEO's performance and the Committee receives
input from the CEO on the other NEOs' performance.
Based
upon the factors described above, the Compensation Committee made the following base salary determinations for fiscal 2017:
-
-
Mr. Becker's salary was determined by the Compensation Committee after completion of a peer group analysis by its independent
consultant. Korn Ferry Hay Group conducted a detailed analysis of CEO compensation that included both a comparison of each CEO's pay within our proxy peer group as well as an evaluation of the broader
retail industry. See "Chief Executive Officer Compensation" below.
-
-
Ms. Phillips received a budgeted merit increase in base salary from $425,000 to $435,625 for her work achievements over the prior fiscal
year performance period.
-
-
Ms. Shirley received a prorated merit increase based on her time with the Company and her contributions to date.
-
-
Mr. Hixon received a base salary increase for the strategic direction he has provided to the stores organization to execute on our real
estate, merchandising, and supply chain programs.
-
-
Mr. Taylor joined the Company in the last quarter of fiscal 2016 and therefore did not receive a merit pay increase; however, because of
Mr. Taylor's prior experience with Supply Chain operations, he was promoted to CIO and SVP Supply Chain in January 2017. As a result of this change, his pay increased from his hire rate of
$315,000 to $340,000 commensurate with the additional scope of responsibility. Later in the year, his job responsibilities were refined and he became responsible for Inventory Management which
includes the Planning and Allocation functions as well as continued responsibility for Information Technology.
-
-
Ms. Byrd-Rohleder joined the Company in June 2015 as a Vice President and Division Merchandising Manager. With the elimination of
Melissa Phillip's position and her departure in January 2017, Ms. Byrd-Rohleder, was promoted to Senior Vice President, General Merchandising Manager. In recognition of the promotion,
Ms. Byrd was given a promotional increase from $221,450 to $270,000.
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Fiscal 2016 Annual
Base Salary
|
|
Fiscal 2017 Annual
Base Salary
|
|
Steven R. Becker
|
|
$
|
700,000
|
|
$
|
717,500
|
|
Stacie R. Shirley
|
|
$
|
400,000
|
|
$
|
404,167
|
|
Phillip D. Hixon
|
|
$
|
300,000
|
|
$
|
306,000
|
|
Trent E. Taylor
|
|
$
|
315,000
|
|
$
|
340,000
|
|
Belinda J. Byrd-Rohleder
|
|
$
|
221,450
|
|
$
|
270,000
|
|
Melissa Phillips
|
|
$
|
425,000
|
|
$
|
435,625
|
|
34
Our Annual Cash Incentive Program is designed to recognize short-term operational and financial performance. Individual target award levels are
reviewed and approved by the Compensation Committee within the first 90 days of the performance period to the extent practicable. The target award levels are determined based on guidance from
our independent compensation
consultant's annual total compensation survey using external market data for comparable positions at our peer companies and in the market. Earned incentives are paid in cash at the end of the
performance period. The executive must be employed by us at the time the awards are paid to earn an award.
Under
the fiscal 2017 Annual Cash Incentive Plan, participants had the opportunity to earn a target bonus payout as a percentage of incentive-eligible base salary. For 2017, the
Compensation Committee determined that each NEO's annual cash incentive payments would be based on achievement of adjusted Operating Income goals (80% of total) and achievement of certain strategic
and personal objectives important for the Company to achieve its business plan (20% of total). Actual earned awards could range from 0% to a maximum of 200% of their target award opportunity. The
Committee also established that all annual cash incentive payments would be subject to a minimum Operating Income performance hurdle. Executive payments are based on threshold, target, and maximum
Operating Income targets as well as strategic and personal objective performance levels and are subject to reduction at the discretion of the Compensation Committee.
|
|
|
Weighting
|
|
Metric
|
80%
|
|
Operating Income, as adjusted
|
20%
|
|
Strategic and Individual Objectives
|
The
objective metric and performance levels at threshold, target and maximum for Operating Income under the 2017 Annual Cash Incentive Plan are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Threshold
Performance
Level
|
|
Target
Performance
Level
|
|
Maximum
Performance
Level
|
|
|
|
|
|
(in millions)
|
|
|
|
Operating Income, as adjusted
|
|
$
|
5.5
|
|
$
|
10.9
|
|
$
|
13.6
|
|
In
the event the threshold performance level for Operating Income is not achieved, no bonus is payable under the 2017 Annual Cash Incentive Plan.
In
addition to the Operating Income metric, the fiscal 2017 Annual Cash Incentive Plan included three strategic financial and operational goals that require support from all leadership
team members in order to achieve the business plan. Specifically, the three strategic metrics were related to strategic project stores and associated sales plans, distribution center cost control and
SG&A budget adherence. One to three individual metrics, specific to each executive, are also established to measure contributions on an individual level. Threshold and target levels of performance are
created for each strategic and individual goal. The strategic and individual goals sum to 20% of the total cash incentive opportunity; however, such amounts are payable only if the minimum Operating
Income threshold is satisfied.
35
Performance under Fiscal 2017 Plan.
The Company's operating loss for fiscal 2017 was $32.3 million. As a result, no
short-term incentives were
paid to NEOs for fiscal 2017 because threshold performance was not achieved.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2017 Individual Annual Cash Incentive
Level as a Percent of Base Salary
|
|
Named Executive Officer
|
|
Threshold
Performance
Level
|
|
Target
Performance
Level
|
|
Maximum
Performance
Level
|
|
Actual
Payout
|
|
Steven R. Becker
|
|
|
25
|
%
|
|
100
|
%
|
|
200
|
%
|
|
0
|
%
|
Stacie R. Shirley
|
|
|
15
|
%
|
|
60
|
%
|
|
120
|
%
|
|
0
|
%
|
Phillip D. Hixon
|
|
|
15
|
%
|
|
60
|
%
|
|
120
|
%
|
|
0
|
%
|
Trent E. Taylor
|
|
|
11.25
|
%
|
|
45
|
%
|
|
90
|
%
|
|
0
|
%
|
Belinda J. Byrd-Rohleder
|
|
|
11.25
|
%
|
|
45
|
%
|
|
90
|
%
|
|
0
|
%
|
Melissa Phillips
|
|
|
18.75
|
%
|
|
75
|
%
|
|
150
|
%
|
|
N/A
|
|
Our long-term equity incentive program ("LTI") is intended to align NEO interests with stockholders, drive decisions that result in sustained
long-term financial and operational performance, and retain key executive talent. Our LTI Plan for fiscal 2017 includes the following:
-
-
September annual grants, consistent with our total compensation philosophy which allows the timing of the annual base salary review for merit
adjustments, results from the annual incentive plan, and equity grants for the upcoming year to be communicated after the completion of our fiscal year.
-
-
In September 2016, the LTI program provided for the CEO to receive 50% of the target grant in performance-based non-qualified stock options
(with additional stretch opportunity to earn additional options for performance above target level) and 50% time-based non-qualified stock options.
-
-
In September 2016, the fiscal year 2017 LTI program was enhanced to include performance-based restricted awards for the leadership team at the
SVP-level and above (other than the CEO). The program includes a 36-month performance cycle and is measured on total 3-year EBITDA results at the end of the performance cycle. In addition, there is a
+3% Comp Sales modifier which may be applied at the end of the cycle. If overall Comp Sales results are less than 3%, there will be a 25% reduction in earned performance-based RSAs. Given the negative
EBITDA result for fiscal 2017, we believe it is unlikely that any amounts will be earned under the performance share portion of the fiscal 2017 LTI award.
-
-
Under the fiscal 2017 LTI Program, the mix of stock option, time-based restricted stock and performance-based restricted stock awards were:
|
|
|
Organization Level
|
|
Mix (NQSO to RSA)
|
CFO
|
|
35%NQSO/35% RSA/30% PRSAs
|
EVP
|
|
35%NQSO/35% RSA/30% PRSAs
|
SVP
|
|
40%NQSO/35% RSA/25% PRSAs
|
-
-
Each executive's equity award target was determined by the individual NEO's executive level, external market competitiveness, as well as other
factors as deemed appropriate by the Compensation Committee.
-
-
Full year award values are granted to new hires at the next regularly scheduled Compensation Committee meeting, and the subsequent annual award
is prorated.
36
In September 2016, our NEOs (excluding the CEO) at an Executive Vice President-level received 35% of their long-term award value in time-based
non-qualified stock options and 35% of their award value in time-based restricted stock, all of which vest ratably in four equal installments (25% per year) beginning on the first anniversary of the
award date. In addition, they were granted 30% of their award value in performance-based restricted stock awards which will vest based on actual overall 3-year Company EBITDA, as adjusted, subject to
reduction of payouts by the Compensation Committee at its discretion. Our Senior Vice President NEOs and their peers received 40% of their long-term award value in time-based non-qualified stock
options and 35% of their award value in time-based restricted stock, all of which vest ratably in four equal installments (25% per year) beginning on the first anniversary of the award date. In
addition, they were granted 25% of their award value in performance-based restricted stock awards which will vest based on overall 3-year Company
EBITDA, as adjusted, subject to reduction of payouts by the Compensation Committee at its discretion.
The
following table summarizes the dollar value and the number of shares subject to awards granted to the NEOs (other than the CEO who is discussed separately below) in fiscal 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
Date
|
|
Stock
Options
|
|
Restricted
Stock
|
|
Performance-based
Restricted Stock
|
|
Fiscal 2017
Targeted Award
Dollar Value
|
|
Stacie R. Shirley
|
|
9/1/2016
|
|
|
21,610
|
|
|
9,076
|
|
|
7,779
|
|
$
|
300,000
|
|
Phillip D. Hixon
|
|
9/1/2016
|
|
|
37,258
|
|
|
15,648
|
|
|
13,413
|
|
$
|
300,000
|
|
Trent E. Taylor*
|
|
9/1/2016
|
|
|
5,855
|
|
|
2,152
|
|
|
1,537
|
|
$
|
125,000
|
|
Belinda J. Byrd-Rohleder**
|
|
9/1/2016
|
|
|
10,645
|
|
|
4,471
|
|
|
|
|
$
|
60,000
|
|
|
|
2/23/2017
|
|
|
30,128
|
|
|
11,076
|
|
|
7,911
|
|
$
|
125,000
|
|
Melissa Phillips***
|
|
9/1/2016
|
|
|
53,225
|
|
|
23,355
|
|
|
29,806
|
|
$
|
500,000
|
|
-
*
-
Annual
award prorated to start date
-
**
-
Annual
award value based on VP, Division Merchandising Manager role at time of grant. Subsequent grant on 2/2/2017 in recognition of promotion to SVP, General
Merchandising Manager on January 16, 2017.
-
***
-
In
connection with her departure in January 2017, all of the awards noted in the table above terminated without any payment to Ms. Phillips.
With respect to other compensation, our NEOs are entitled to participate in all employee benefit plans, including our 401(k) plan, health and
dental plan, life insurance and disability plans. We do not offer non-qualified benefits such as deferred compensation, corporate-owned life insurance or supplemental executive retirement programs to
our NEOs. In addition, we provide minimal perquisites to our executives which are referenced in footnote (3) of the Summary Compensation Table below. The Compensation Committee believes that
the perquisites provided to our executives are reasonable and consistent with its overall compensation program to better enable us to attract and retain superior employees for key positions.
Steven R. Becker
In December 2015, Mr. Becker was named Chief Executive Officer. In connection with his appointment, we entered into an
employment agreement with him, the terms of which are described under "Narrative Disclosure to Summary Compensation Table". On January 16, 2017, Mr. Becker was appointed as the Company's
President. Since Mr. Becker already was serving as
37
Chief
Executive Officer, there were no changes in compensation or to his employment agreement as a result of this appointment.
The
following table summarizes Mr. Becker's compensation for fiscal 2017:
|
|
|
Compensation Component
|
|
Fiscal 2017 Compensation
|
Annual Base Salary
|
|
$717,500
|
Target Short-Term Incentive Opportunity
|
|
100% of Base Salary ($0 Payout for Fiscal 2017)
|
Annual Equity Award
|
|
$1,400,000 Targeted Award Value (with an additional performance equity opportunity originally valued at $700,000 for achievement performance goals at the maximum level)
|
50% Time-Based Non-Qualified Stock Options (September 1, 2016 Grant Date)("Target Options")
|
|
248,385
|
50% Performance-Based Stock Options (September 1, 2016 Grant Date)
|
|
248,385
|
"Stretch Options" (for performance above target) (September 21, 2016 Grant Date)
|
|
248,385
|
Other Compensation
|
|
$22,529
|
Salary and Annual Cash Incentive
In September 2016, the Compensation Committee asked Korn Ferry Hay Group to conduct a detailed analysis of CEO
compensation that included both a comparison of each CEO's pay within our peer group as well as an evaluation of the broader retail industry. Based on the analyses, the Committee approved a 2.5% base
salary increase from $700,000 to $717,500 with a 100% short-term incentive target. The base salary and total target cash opportunity positioned Mr. Becker's cash compensation around the median
of the proxy peer group and approximately at the 25
th
percentile of the broader retail industry and was within the internal merit budget guidelines for the Company.
Equity Awards
At hire, the Compensation Committee determined that Mr. Becker's aggregate annual target LTI award value would be $1,400,000,
with an additional stretch opportunity
originally valued at $700,000 for performance above target level. Mr. Becker's $1,400,000 target award (based upon award value) consisted of 50% time-based non-qualified stock options (and 50%
performance-based non-qualified stock options). The Compensation maintained this LTI award level for Mr. Becker for fiscal 2017 based on Korn Ferry Hay Group analysis of peer company and retail
industry long-term incentive compensation practices for the Chief Executive Officer position and based on other internal company factors.
Mr. Becker's
fiscal 2017 annual LTI equity grant on September 1, 2016 consisted of 248,385 time-based non-qualified stock options which vest ratably in four equal
installments (25% per year) beginning on the first anniversary of the grant. With respect to the performance-based non-qualified stock option award included in the target award, the award consisted of
options to acquire 248,385 shares of common stock equal to the value of $700,000 for performance at target (the "Target Options"). The inclusion of time-based and performance-based restrictions
ensured that Mr. Becker's equity award would be "at risk", which promoted our desire to align CEO pay with superior Company performance and stockholder wealth accumulation. See "Executive
CompensationGrants of Plan-Based Awards in Fiscal 2017" for additional information.
Under
the September 1, 2016 performance-based non-qualified stock option award, the 36-month performance period began on July 1, 2016 and ends on June 30, 2019. As
outlined below, Mr. Becker's Target Options and Stretch Options are subject to vesting upon achievement of threshold, target,
38
stretch
and maximum specified EBITDA goals and the achievement of same store sales goals at the end of the measurement period. The performance options were designed to ensure that Mr. Becker's
realizable compensation aligns with our long term performance and stockholder value.
The
Target Options are subject to incremental vesting at the end of the performance period based upon achievement of threshold and target levels of EBITDA for the fiscal year ending
June 30, 2019 and the Stretch Options are subject to incremental vesting at the end of the performance period based upon achievement of stretch and maximum levels of EBITDA goals for the fiscal
year ending June 30, 2019, and any vested amounts will be reduced by 25% if the Company's comparable store sales do not increase by a target average amount over the course of the performance
period. The percentage of vested Target Options and Stretch Options can be interpolated between the specified levels of performance required for vesting of each award.
Other Compensation
With respect to other compensation, Mr. Becker is entitled to participate in all employee benefit plans, including our
401(k) plan, health and dental plan, life
insurance and disability plans. In addition, his employment agreement provides for one comprehensive executive physical each calendar year. Any compensation paid to Mr. Becker is subject to
recovery based on the Company's clawback policy.
Fiscal 2018 Compensation Enhancements
The following is a brief summary of certain changes to the compensation of the NEOs for fiscal 2018 which is intended to provide additional
information to stockholders in their review of our compensation program for fiscal 2017. A more detailed description of compensation for 2018 will be included in the proxy statement for the 2018
Annual Meeting of Stockholders.
For fiscal 2018, the Compensation Committee revised the compensation program to further align the interests of executives and stockholders and
to provide additional performance incentives to executives. The compensation approved by the Compensation Committee included the following elements:
-
-
Annual Base Salary.
No base salary increases were approved for NEOs for
fiscal 2018.
-
-
Annual Cash Incentive Plan.
For 2018, the Compensation Committee determined
that the short-term incentive plan framework that was updated and approved for fiscal year 2017 will continue for the fiscal 2018 measurement period. Each NEO's annual cash incentive payments will be
based on achievement of operating income goals (80% of total) and achievement of certain strategic and personal objectives important for the Company to achieve its business plan (20% of total). The
committee also established that all annual cash incentive payments will be subject to a minimum Operating Income performance hurdle.
-
-
Equity Award Grants.
Because the Company does not believe that the current
market value of our stock is reflective of the value of the Company, for the fiscal year 2018 grant, participants, including Board members, will receive the same number of shares, based on
organization level, which they received with the fiscal year 2017 grant. Based on stock price performance during the vesting period, participants will have the opportunity to earn market compensation
and potentially more if we deliver results. In order to continue to align executive rewards with stockholder value, the Compensation Committee will keep the performance-based equity portion of the LTI
awards for the CEO, CFO, EVPs and SVPs. All NEOs will have a performance-based LTI equity award opportunity measured over a 36-month performance period (with a stretch opportunity for performance
above target level), tied to overall Company EBITDA as adjusted, subject to reduction of payouts by the Compensation Committee in its discretion.
39
In August 2017, the Compensation Committee reviewed the salaries for the following eligible NEOs based on Company results and individual
contributions. As a result, no base salary increases were approved for fiscal 2018. Base salary amounts for the NEOs are:
|
|
|
|
|
|
|
|
Named Executive Officer
|
|
Fiscal 2017
Base Salary
|
|
Fiscal 2018
Base Salary
|
|
Steven R. Becker
|
|
$
|
717,500
|
|
$
|
717,500
|
|
Stacie R. Shirley
|
|
$
|
404,167
|
|
$
|
404,167
|
|
Phillip D Hixon
|
|
$
|
306,000
|
|
$
|
306,000
|
|
Trent E. Taylor
|
|
$
|
340,000
|
|
$
|
340,000
|
|
Belinda J. Byrd-Rohleder
|
|
$
|
270,000
|
|
$
|
270,000
|
|
Under the fiscal 2018 Annual Cash Incentive Plan, participants will continue to have the opportunity to earn a target bonus payout as a
percentage of incentive-eligible base salary. For 2018, the Compensation Committee determined that each NEO's annual cash incentive payments will be based on achievement of adjusted Operating Income
goals (80% of total) and achievement of certain strategic and personal objectives important for the Company to achieve its business plan (20% of total). Actual earned awards can range from 0% to a
maximum of 200% of their target award opportunity. The committee also established that all annual cash incentive payments will be subject to a minimum Operating Income performance hurdle. Executive
payments will be based on threshold, target and maximum Operating Income and strategic and personal objectives performance levels and are subject to reduction in the discretion of the Compensation
Committee.
|
|
|
Weighting
|
|
Metric
|
80%
|
|
Operating Income, as adjusted
|
20%
|
|
Strategic and Individual Objectives
|
The
individual annual cash incentive level as a percent of annual base salary for the named executive officers for fiscal 2018 will be as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2018 Individual Annual Cash
Incentive Level
as a Percent of Base Salary
|
|
Named Executive Officer
|
|
Threshold
Performance
Level
|
|
Target
Performance
Level
|
|
Maximum
Performance
Level
|
|
Steven R. Becker
|
|
|
25
|
%
|
|
100
|
%
|
|
200
|
%
|
Stacie R. Shirley
|
|
|
15
|
%
|
|
60
|
%
|
|
120
|
%
|
Phillip D. Hixon
|
|
|
15
|
%
|
|
60
|
%
|
|
120
|
%
|
Trent E. Taylor
|
|
|
11.25
|
%
|
|
45
|
%
|
|
90
|
%
|
Belinda J. Byrd-Rohleder
|
|
|
11.25
|
%
|
|
45
|
%
|
|
90
|
%
|
In Fiscal 2018, the Compensation Committee chose to grant the same number of shares to participants as they received in Fiscal 2017, instead of
granting with a dollar value consistent
with the fiscal 2017 awards. As a result, the grant date fair values of the fiscal 2018 awards granted to participants are significantly less than the grant date fair values of the fiscal 2017 awards.
The Compensation Committee took this approach because it believes the current market value of the stock is not reflective of the value of the Company, the awards provide the potential for substantial
future
40
value
to participants based on the Company's performance, and the awards use substantially fewer shares than would have been required to provide equivalent dollar value to fiscal 2017.
For
fiscal 2018, the Compensation Committee granted the same number of shares for the CEO as the previous year; however, in order to further conserve shares, the performance-based
options have been replaced with an equivalent number of shares of performance-based restricted stock. In order to continue to align executive rewards with stockholder value the committee maintained
performance-based equity awards for the CFO, EVPs and SVPs. The performance-based equity award program better aligns each NEO's equity portfolio with that of the stockholders. For fiscal year 2018,
all NEOs have a performance-based LTI equity award opportunity measured over a 36-month performance period (with a stretch opportunity for performance above target level), tied to overall Company
EBITDA as adjusted, subject to reduction of payouts by the Compensation Committee in its discretion.
The
CEO was granted 50% performance-based restricted stock at target performance and 50% time-based non-qualified stock options. The other NEOs were granted a mix of performance shares,
time-based non-qualified stock options and time-based stock grants. Each of the performance-based awards includes an additional stretch opportunity for performance above target level. The Compensation
Committee approved the following equity grant guidelines for fiscal year 2018:
|
|
|
|
|
|
|
|
|
|
|
Annual Share Grants
|
|
|
Level
|
|
Target
|
|
Stretch
|
|
Equity Mix at Target Performance
|
CEO
|
|
|
248,385 NQSOs/104,321 PRSAs
|
|
|
104,321
|
|
50% NQSOs/50% Performance-Based RSAs
|
CFO
|
|
|
37,258 NQSOs/15,648 RSAs/13,413 PRSAs
|
|
|
13,413
|
|
35% NQSOs/35% RSAs/30% Performance-Based RSAs
|
EVP
|
|
|
37,258 NQSOs/15,648 RSAs/13,413 PRSAs
|
|
|
13,413
|
|
35% NQSOs/35% RSAs/30% Performance-Based RSAs
|
The
key differences between annual equity grants for fiscal 2017 and fiscal 2018 are that (i) the grants fiscal 2018 were based on a specified number of shares equal to the fiscal
2017 grant, as opposed to a dollar value for the grant, and (ii) the performance-based portion of the CEO award was changed from performance-based non-qualified stock options to an equivalent
number of shares of performance-based restricted stock.
Tax and Accounting Considerations
As part of its role, the Compensation Committee reviews and considers the deductibility of executive compensation under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), which provides that the Company may not deduct compensation of more than $1,000,000 that is paid to certain individuals. To the extent
readily determinable, and as one of the factors in considering compensation matters, the Compensation Committee considers the anticipated tax treatment to the Company and to its executives of various
payments and benefits. Some types of compensation payments and their deductibility (e.g., the spread on exercise of non-qualified options) depend upon the timing of an executive's vesting or
exercise of previously granted rights. Further, interpretations of and changes in the tax laws and other factors beyond the Compensation Committee's control also affect the deductibility of
compensation. Although the Compensation Committee does design certain components of its executive compensation program to seek full deductibility, the Compensation Committee believes that the
interests of stockholders are best served by not restricting
the Compensation Committee's discretion and flexibility in crafting compensation programs, even though such programs may result in certain non-deductible compensation expenses. Accordingly, the
Compensation Committee has not and will not make compensation decisions based solely on the deductibility of compensation for federal income tax purposes. In addition, because of the uncertainties
associated with the application and interpretation of section 162(m) and the regulations issued
41
thereunder,
there can be no assurance that compensation intended to satisfy the requirements for deductibility under section 162(m) will in fact be deductible.
Compensation Program Risk
As part of its oversight of our executive pay programs, the Compensation Committee considers the impact of our compensation programs and the
incentives created by the potential compensation rewards that it administers on our risk profile. In addition, we review all of our existing compensation policies and plans to determine whether they
present a significant risk. Some of the factors included in this review are:
-
-
Mix of fixed and variable compensation pay components.
-
-
Use of performance-based metrics in short-term and long-term equity incentive plans.
-
-
Rewards tied to our total results.
-
-
Caps on potential compensation earnings.
-
-
Stock vesting schedules.
-
-
Adoption of stock ownership requirements.
Based
on this review, we have concluded that our compensation policies and plans are not reasonably likely to have a material adverse effect on us.
Stock Ownership Guidelines for Executives and Non-Employee Directors
The Company adopted stock ownership requirements in 2014. The stock ownership guidelines are shown below and generally must be achieved within
five years of becoming subject to the policy.
|
|
|
|
|
Organizational Level
|
|
Ownership Guideline as a
Multiple of Base
Salary/Annual Cash
Retainer
|
|
Chief Executive Officer
|
|
|
5x
|
|
Executive Vice President
|
|
|
2x
|
|
Senior Vice President
|
|
|
1x
|
|
Non-Employee Directors
|
|
|
3x
|
|
For
purposes of calculating stock ownership, the following sources may be included:
-
-
shares of common stock owned outright by the non-employee director or officer, as well as stock owned by his or her immediate family members
residing in the same household;
-
-
shares of common stock held in trust for the benefit of the non-employee director or officer, as well as his or her family;
-
-
unvested restricted stock or restricted stock units;
-
-
if applicable, shares of common stock held pursuant to deferred compensation arrangements; and
-
-
if applicable, shares purchased with amounts invested in the Company's retirement plans, including, without limitation, the 401(k) plan and any
employee stock purchase plan.
Unexercised
options and unearned performance shares are not counted toward stock ownership requirements.
42
Stock Retention/Holding Requirements
While the executive officer or director has not met with his or her stock ownership requirement, the executive officer or director must retain
50% of the net shares (after cashless exercises of options and the payment of any applicable tax liability related to equity grants by the Company) of the vested long-term incentive plan shares or
annual equity retainer awarded to the executive officer or director. The executive officer or director may sell Company stock acquired by exercising stock options to pay the exercise price of the
stock option and may sell shares to pay any applicable tax liability related to equity grants by the Company.
Clawback Policy
The Company may recoup all or any portion of any shares or cash paid to a participant in connection with an award, in the event of a restatement
of the Company's financial statements as set forth in the Company's clawback policy, approved by the Board.
Anti-Hedging Policy
We have an anti-hedging policy that prohibits the named executive officers, the Company's Board of Directors and other Company employees from
hedging against a decrease in the value of the Company's stock. Under the policy, the named executive officers are prohibited from purchasing any financial instruments designed to offset decreases in
the market value of the Company's stock. During fiscal 2017, all named executive officers were in compliance with this policy.
Anti-Pledging Policy
The Company has adopted an anti-pledging policy that prohibits the named executive officers, the Company's Board of Directors and other Company
employees from holding the Company's stock in a margin account or otherwise pledging the Company's stock as collateral for a loan. None of the named executive officers pledged any Company stock in
fiscal 2017.
Compensation Committee Interlocks and Insider Participation
None of the persons who served on our Compensation Committee during the last completed fiscal year (Sherry M. Smith, Frank M. Hamlin, and Jimmie
L. Wade): (i) was formerly an officer of the Company; (ii) during the last fiscal year, was an officer or employee of the Company; or (iii) had any relationship requiring
disclosure under Item 404 of Regulation S-K. None of our executive officers served as a member of the compensation committee or similar committee or as a member of the board of directors
of any other entity one of whose executive officers served on the Compensation Committee or as a member of the Board of Directors of the Company.
43
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of
Regulation S-K with management and, based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in
the Proxy Statement.
|
|
|
|
|
THE COMPENSATION COMMITTEE
Sherry M. Smith, Chair
Frank M. Hamlin
Jimmie L. Wade
|
44
SUMMARY COMPENSATION TABLE
The table below summarizes the compensation of each of the named executive officers for the fiscal years ended June 30, 2017,
June 30, 2016, and June 30, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
(1)Stock
Awards
($)
|
|
(1)Option
Awards
($)
|
|
(2)Non-Equity
Incentive Plan
Compensation
($)
|
|
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)
|
|
(3)All
Other
Compensation
($)
|
|
Total
($)
|
|
Steven Becker(4)
|
|
|
2017
|
|
|
714,583
|
|
|
|
|
|
|
|
|
1,363,684
|
|
|
|
|
|
|
|
|
22,529
|
|
|
2,100,796
|
|
President and Chief Executive
|
|
|
2016
|
|
|
471,698
|
|
|
147,671
|
|
|
|
|
|
1,376,565
|
|
|
|
|
|
|
|
|
15,684
|
|
|
2,011,618
|
|
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stacie R. Shirley(5)
|
|
|
2017
|
|
|
403,472
|
|
|
|
|
|
113,097
|
|
|
62,842
|
|
|
|
|
|
|
|
|
4,931
|
|
|
584,342
|
|
Executive Vice President,
|
|
|
2016
|
|
|
183,333
|
|
|
60,000
|
|
|
300,003
|
|
|
192,633
|
|
|
|
|
|
|
|
|
401
|
|
|
736,370
|
|
Chief Financial Officer and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Phillip D. Hixon
|
|
|
2017
|
|
|
305,000
|
|
|
|
|
|
194,999
|
|
|
108,346
|
|
|
|
|
|
|
|
|
11,947
|
|
|
620,292
|
|
Executive Vice President,
|
|
|
2016
|
|
|
293,333
|
|
|
|
|
|
75,003
|
|
|
347,998
|
|
|
|
|
|
|
|
|
13,875
|
|
|
730,199
|
|
Store Operations
|
|
|
2015
|
|
|
260,000
|
|
|
|
|
|
50,321
|
|
|
174,119
|
|
|
57,200
|
|
|
|
|
|
16,354
|
|
|
557,994
|
|
Trent E. Taylor(6)
|
|
|
2017
|
|
|
327,460
|
|
|
|
|
|
24,753
|
|
|
17,026
|
|
|
|
|
|
|
|
|
2,074
|
|
|
371,313
|
|
Senior Vice President, Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information and Inventory
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Belinda J. Byrd-Rohleder(7)
|
|
|
2017
|
|
|
242,627
|
|
|
71,788
|
|
|
104,999
|
|
|
94,212
|
|
|
|
|
|
|
|
|
1,129
|
|
|
514,755
|
|
Senior Vice President, General
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merchandising Manager
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melissa Phillips
|
|
|
2017
|
|
|
235,868
|
|
|
|
|
|
350,000
|
|
|
154,778
|
|
|
|
|
|
|
|
|
197,797
|
|
|
940,443
|
|
Former President and Chief
|
|
|
2016
|
|
|
422,500
|
|
|
|
|
|
125,002
|
|
|
560,497
|
|
|
|
|
|
|
|
|
12,208
|
|
|
1,120,207
|
|
Operating Officer
|
|
|
2015
|
|
|
360,227
|
|
|
200,000
|
|
|
99,732
|
|
|
344,959
|
|
|
99,000
|
|
|
|
|
|
19,400
|
|
|
1,123,318
|
|
-
(1)
-
These
columns represent the grant date fair value of the respective equity awards computed in accordance with Financial Accounting Standards Board's Accounting
Standards Codification Topic 718, CompensationStock Compensation ("FASB ASC Topic 718"). The amounts reflect the probable outcome of performance conditions and market conditions that
affect the vesting of awards and exclude the impact of estimated forfeitures related to service-based vesting conditions. Refer to note (1)(l) and note (6) to the Company's consolidated
financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017 for additional information on the valuation assumptions used in the calculation
of grant date fair value for stock and option awards included in the Summary Compensation Table above. For additional information regarding stock and option awards to the named executive officers,
refer to the "Grants of Plan-Based Awards in Fiscal 2017" table and "Outstanding Equity Awards at 2017 Fiscal Year-End" table. The actual value realized by any named executive officer from these
awards may range from $0 to greater than the amounts reported, depending on the Company's performance, the market value of our common stock and the officer's number of additional years of service with
the Company.
The
amounts reflected under stock awards for fiscal 2017 for the named executive officers (other than Mr. Becker) include performance-based restricted stock awards (at target level
performance). The value of these performance-based restricted awards at the grant date assuming the highest level of performance was achieved is $104,400 for Ms. Shirley, $180,002 for
Mr. Hixon, $20,627 for Mr. Taylor, $62,497 for Ms. Byrd-Rohleder and $400,003 for Ms. Phillips. Ms. Phillips awards terminated without payment in connection with her
departure in January 2017.
The
amounts reflected under option awards for Mr. Becker for fiscal 2016 and fiscal 2017 include time-based stock options and performance-based stock options (including Target Options for
performance at target level). Mr. Becker's Target Options for fiscal 2016 were granted in February 2016. Due to an administrative oversight, Mr. Becker's 295,508 Stretch Options
(representing achievement of the maximum award level) for fiscal 2016 were not granted as intended in February 2016 and instead were granted in September 2016 (during fiscal 2017). The value of
Mr. Becker's stock options awards for fiscal 2016 (the 295,508 Target Options granted in February 2016 and the 295,508 Stretch Options granted in September 2016
but intended to be part of Mr. Becker's fiscal 2016 compensation) at the grant date assuming the highest level of performance was achieved was $2,046,393. The value of Mr. Becker's stock
option awards for fiscal 2017 (the 248,385 Target Options and 248,385 Stretch Options) at the grant date assuming the highest level of performance was achieved was $ 2,005,064. The value of the
295,508 Stretch Options granted in fiscal 2017 were instead reflected in Mr. Becker's fiscal 2017 compensation, the value of Mr. Becker's option awards at grant date and assuming
achievement of the highest performance level would have been $2,674,891 for fiscal 2017 and $1,376,565 for fiscal 2016.
-
(2)
-
Because
the Company did not achieve the threshold performance levels for fiscal 2017, the named executive officers did not receive cash incentive payments under the
Annual Cash Incentive Plan for fiscal 2017. See "Executive CompensationCompensation Discussion and
45
AnalysisFiscal
2017 Compensation Program and PayoutsComponents of CompensationAnnual Cash Incentive Plan" above for more information regarding the Annual Cash
Incentive Plan.
-
(3)
-
The
amounts set forth in this column reflect the following for the fiscal year ended June 30, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Matching
Contribution(3-a)
|
|
Life
Insurance(3-b)
|
|
Long-Term
Care Benefits(3-c)
|
|
Severance
Benefits(3-d)
|
|
Total
|
|
Steven R. Becker
|
|
|
21,400
|
|
|
1,129
|
|
|
|
|
|
|
|
|
22,529
|
|
Stacie R. Shirley
|
|
|
4,042
|
|
|
889
|
|
|
|
|
|
|
|
|
4,931
|
|
Phillip Hixon
|
|
|
9,190
|
|
|
2,419
|
|
|
338
|
|
|
|
|
|
11,947
|
|
Trent Taylor
|
|
|
|
|
|
2,074
|
|
|
|
|
|
|
|
|
2,074
|
|
Belinda Byrd-Rohleder
|
|
|
|
|
|
1,129
|
|
|
|
|
|
|
|
|
1,129
|
|
Melissa Phillips
|
|
|
2,856
|
|
|
431
|
|
|
|
|
|
196,510
|
|
|
199,797
|
|
-
(3-a)
-
Matching
contributions allocated by the Company to each of the named executive officers pursuant to the Company's 401(k) Profit Sharing Plan available to all
eligible employees.
-
(3-b)
-
The
value attributable to $300,000 of life insurance premiums (and imputed income) provided under the Company's health benefit program available to all eligible
employees.
-
(3-c)
-
The
value attributable to Long-term Care benefit coverage provided under a grandfathered long-term care insurance program.
-
(3-d)
-
Ms. Phillips
resigned in January 2017. See "Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal 2017
TableEmployment Agreements or ArrangementsSeparation Agreement" for additional information.
-
(4)
-
Mr. Becker
was appointed as our Chief Executive Officer in December 2015 and was appointed as President in January 2017.
-
(5)
-
Ms. Shirley's
appointment as our Executive Vice President, Chief Financial Officer and Treasurer was approved on December 17, 2015, and she began
service in this position on January 18, 2016.
-
(6)
-
Mr. Taylor
was promoted to Senior Vice President, Chief Information and Inventory Management Officer in June 2017. Mr. Taylor was promoted to Senior
Vice President, Chief Information and Supply Chain Officer in January 2017.
-
(7)
-
Ms. Byrd-Rohleder
was promoted to Senior Vice President, General Merchandising Manager in January 2017. Prior to her promotion to Senior Vice President,
General Merchandising Manager, Ms. Byrd-Rohleder held the position of Vice PresidentDivision Merchandising Manager. In that role, she was a participant in the company's Management
Incentive Plan. While the Company did not reach the minimum level of performance to earn a formulaic award under the plan, Ms. Byrd-Rohleder was paid a discretionary bonus of $71,788 that was
based on her division's high performance in sales, gross margin and inventory turn.
46
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2017
The following table sets forth certain information with respect to grants of plan-based awards to the named executive officers in fiscal 2017.
The estimated possible payouts under non-equity incentive plan awards represent the bonus award opportunities granted to our named executive officers in fiscal 2017 under the Annual Cash Incentive
Plan.
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All Other Option
Awards
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All Other
Stock
Awards:
Number of
Shares of
Stock or
Units(4)
(#)
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|
Estimated Possible Payouts
Under Non-Equity Incentive
Plan Awards(1)
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Estimated Possible Payouts
Under Equity Incentive
Plan Awards(2)
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Grant Date
Fair Value
of Stock
and
Option
Awards(3)
($)
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Number of
Securities
Underlying
Options
(#)
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Exercise
or Base
Price(6)
($/Sh)
|
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Name
|
|
Grant Date
|
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Threshold
($)
|
|
Target
($)
|
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Maximum
($)
|
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Threshold
(#)
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Target
(#)
|
|
Maximum
(#)
|
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Steven R. Becker(4)
|
|
|
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|
|
179,375
|
|
|
717,500
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|
1,435,000
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|
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9/1/16
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248,385
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|
|
6.71
|
|
|
722,304
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|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
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|
|
124,193
|
|
|
248,385
|
|
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496,770
|
|
|
|
|
|
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|
6.71
|
|
|
641,380
|
|
Stacie R. Shirley(5)
|
|
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60,625
|
|
|
242,500
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|
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485,000
|
|
|
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9/1/16
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,610
|
|
|
6.71
|
|
|
62,842
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
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|
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3,890
|
|
|
7,779
|
|
|
15,559
|
|
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|
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|
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52,197
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|
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|
|
9/1/16
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|
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9,076
|
|
|
|
|
|
|
|
|
60,900
|
|
Phillip D. Hixon(6)
|
|
|
|
|
|
60,625
|
|
|
242,500
|
|
|
485,000
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,258
|
|
|
6.71
|
|
|
108,346
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
6,707
|
|
|
13,413
|
|
|
26,826
|
|
|
|
|
|
|
|
|
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|
|
90,001
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,648
|
|
|
|
|
|
|
|
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104,998
|
|
Trent E. Taylor(7)
|
|
|
|
|
|
38,250
|
|
|
153,000
|
|
|
306,000
|
|
|
|
|
|
|
|
|
|
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|
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|
|
9/1/16
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
5,855
|
|
|
6.71
|
|
|
17,026
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
769
|
|
|
1,537
|
|
|
3,074
|
|
|
|
|
|
|
|
|
|
|
|
10,313
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,152
|
|
|
|
|
|
|
|
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14,400
|
|
Belinda J. Byrd-Rohleder(8)
|
|
|
|
|
|
30,375
|
|
|
121,500
|
|
|
243,000
|
|
|
|
|
|
|
|
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|
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|
|
|
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|
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|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
10,645
|
|
|
6.71
|
|
|
35,429
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,471
|
|
|
|
|
|
|
|
|
30,000
|
|
|
|
|
1/4/16
|
|
|
|
|
|
|
|
|
|
|
|
3,956
|
|
|
7,911
|
|
|
15,822
|
|
|
|
|
|
|
|
|
|
|
|
31,248
|
|
|
|
|
1/4/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,076
|
|
|
|
|
|
|
|
|
43,750
|
|
|
|
|
1/4/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,139
|
|
|
3.95
|
|
|
58,783
|
|
Melissa Phillips(9)
|
|
|
|
|
|
81,680
|
|
|
326,719
|
|
|
653,438
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,225
|
|
|
6.71
|
|
|
154,778
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
14,903
|
|
|
29,806
|
|
|
59,613
|
|
|
|
|
|
|
|
|
|
|
|
199,998
|
|
|
|
|
9/1/16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,355
|
|
|
|
|
|
|
|
|
150,002
|
|
-
(1)
-
For
Messrs. Becker, Hixon and Taylor and for Mses. Shirley, Byrd-Rohleder and Phillips, represents a grant pursuant to the Company's Annual Cash Incentive
Plan for fiscal 2017 if the applicable Company financial performance metric is satisfied. For 2017, the threshold performance level was not achieved and, therefore, no payments were made to any of the
named executive officers under the Company's Annual Cash Incentive Plan for fiscal 2017. See "Executive CompensationCompensation Discussion and AnalysisFiscal 2017
Compensation Program and PayoutsComponents of CompensationAnnual Cash Incentive Plan" above for a description of the Annual Cash Incentive Plan for fiscal 2017.
-
(2)
-
Includes
performance-based stock options granted to Mr. Becker and performance-based restricted stock granted to the other named executive officers. See
"Executive CompensationCompensation Discussion and AnalysisFiscal 2017 Compensation Program and PayoutsComponents of CompensationLong-Term Equity
Incentives" above for a description of these awards.
-
(3)
-
This
column represents the grant date fair value of the respective equity awards computed in accordance with FASB ASC Topic 718. The amounts shown reflect the
probable outcome of performance conditions and market conditions that affect the vesting of awards and exclude the impact of estimated forfeitures related to service-based vesting conditions. Refer to
note (1)(l) and note (6) to the Company's consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017 for
additional information on the valuation assumptions used in the calculation of grant date fair value for stock and option awards. All equity awards granted during fiscal 2017 were granted pursuant to
the 2014 Plan. Stock options granted under the 2014 Plan have an exercise price equal to the closing price on the date of grant.
-
(4)
-
The
equity awards granted to Mr. Becker consist of: (i) a grant of stock options on September 1, 2016 to purchase 248,385 shares of the
Company's Common Stock, which vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and September 1, 2020; and (ii) a
grant of stock options on September 1, 2016, to purchase 248,385 shares of the Company's Common Stock, which vest on June 30, 2019, subject to certain performance conditions and subject
to the right to earn a minimum number of stock options to purchase 124,193 shares for performance above threshold level but below target level and a maximum number of stock options to purchase 496,770
if the maximum performance level is achieved. In addition, as discussed above, due to an administrative oversight, a portion of Mr. Becker's fiscal 2016 stock options (Stretch Options) were not
granted as intended in February 2016 and instead were granted on September 21, 2016 (during fiscal 2017). Since these Stretch Options were intended to be granted in fiscal 2016, these awards
were reflected in the Grants of Plan-Based Awards in Fiscal 2016 table in the proxy statement for the Company's 2016 annual meeting of stockholders and are not reflected in the table above. The value
of these Stretch Options at the date of grant was $669,828, assuming that the highest level of performance conditions would be achieved.
47
-
(5)
-
The
equity awards granted to Ms. Shirley consist of: (i) a grant of 9,076 shares of restricted stock on September 1, 2016, which vest in four
equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and September 1, 2020; (ii) a grant of 7,779 shares of performance-based
restricted stock (at target level performance), which vest on June 30, 2019, subject to certain performance conditions and subject to the right to earn a minimum number of 3,890 shares for
performance above threshold level, but below target level and a maximum of 15,559 shares if the maximum performance level is achieved; and (iii) a grant of stock options on September 1,
2016 to purchase 21,610 shares of the Company's Common Stock, which vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and
September 1, 2020.
-
(6)
-
The
equity awards granted to Mr. Hixon consist of: (i) a grant of 15,648 shares of restricted stock on September 1, 2016, which vest in four
equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and September 1, 2020; (ii) a grant of 13,413 shares of performance-based
restricted stock (at target level performance), which vest on June 30, 2019, subject to certain performance conditions and subject to the right to earn a minimum number of 6,707 shares for
performance above threshold level, but below target level and a maximum of 28,826 shares if the maximum performance level is achieved; and (iii) a grant of stock options on September 1,
2016 to purchase 37,258 shares of the Company's Common Stock, which vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and
September 1, 2020.
-
(7)
-
The
equity awards granted to Mr. Taylor consist of: (i) a grant of 2,152 shares of restricted stock on September 1, 2016, which vest in four
equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and September 1, 2020; (ii) a grant of 1,537 shares of performance-based
restricted stock (at target level performance), which vest on June 30, 2019, subject to certain performance conditions and subject to the right to earn a minimum number of 769 shares for
performance above threshold level, but below target level and a maximum of 3,074 shares if the maximum performance level is achieved; and (iii) a grant of stock options on September 1,
2016 to purchase 5,855 shares of the Company's Common Stock, which vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and
September 1, 2020.
-
(8)
-
The
equity awards granted to Ms. Byrd-Rohleder consist of: (i) a grant of 4,471 shares of restricted stock on September 1, 2016, which vest in
four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and September 1, 2020; and (ii) a grant of stock options on
September 1, 2016 to purchase 10,645 shares of the Company's Common Stock, which vest in four equal annual installments on September 1, 2017, September 1, 2018,
September 1, 2019 and September 1, 2020. In addition, in connection with her appointment as Senior Vice President, General Merchandising Manager, Ms. Byrd-Rohleder received:
(i) a grant of 11,076 shares of restricted stock on February 23, 2017, which vest in four equal annual installments on February 23, 2018, February 23, 2019,
February 23, 2020 and February 23, 2021; (ii) a grant of 7,911 performance-based restricted stock (at target level performance), which vest on June 30, 2019, subject to
certain performance conditions and subject to the right to earn a minimum number of 3,956 shares for performance above threshold level, but below target level and a maximum of 15,822 shares if the
maximum performance level is achieved; (v) and a grant of stock options on February 23, 2017 to purchase 30,139 shares of the Company's Common Stock, which vest in four equal annual
installments on February 23, 2018, February 23, 2019, February 23, 2020 and February 23, 2021.
-
(9)
-
The
equity awards granted to Ms. Phillips consist of: (i) a grant of 22,355 shares of restricted stock on September 1, 2016, which vest in four
equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and September 1, 2020; (ii) a grant of 29,806 shares of performance-based
restricted stock (at target level performance), which vest on June 30, 2019, subject to certain performance conditions and subject to the right to earn a minimum number of 14,903 shares for
performance above threshold level, but below target level and a maximum of 59,613 shares if the maximum performance level is achieved; and (iii) a grant of stock options on September 1,
2016 to purchase 53,255 shares of the Company's Common Stock, which vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and
September 1, 2020. In connection with Ms. Phillips' departure in January 2017, each of these awards was terminated with no payments to Ms. Phillips.
48
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2017 TABLE
Employment Agreements or Arrangements
Employment Agreement with Mr. Becker
In connection with Mr. Becker's appointment as Chief Executive Officer, the Company entered into an employment agreement with
Mr. Becker on December 11, 2015. In the employment agreement, Mr. Becker agreed to serve as Chief Executive Officer for an initial term ending June 30, 2019. The initial
term of employment automatically renews for successive one-year periods unless either party provides notice of non-renewal at least 90 days prior to the expiration of the then current
employment term.
Under
the employment agreement, in fiscal 2016 Mr. Becker was entitled to, among other things: (i) a lump sum cash payment of $147,671.23 for his prior service as Executive
Chairman, which amount equals the pro-rated base salary Mr. Becker would have received if he was acting as Chief Executive Officer during such time pursuant to the terms of the Employment
Agreement; (ii) an annual base salary of $700,000; and (iii) an initial grant of stock options on the second trading day following the Company's fiscal 2016 second quarter earnings
announcement having an aggregate target value as determined in the Employment Agreement of $1.4 million, 50% of which were time-based stock options that vest in equal annual installments over
four years beginning on the first anniversary of the grant date and 50% of which were performance-based stock options (with an additional stretch opportunity
of $700,000 for performance above target level) that vest based on the achievement of certain performance goals during the three-year performance period beginning on July 1, 2016 and ending on
June 30, 2019. In addition, Mr. Becker also is eligible for annual equity grants under the 2014 Plan, with the actual amounts subject to the approval of the Board's Compensation
Committee. See "Grants of Plan-Based Awards in Fiscal 2017" for additional information.
Under
the employment agreement, Mr. Becker is also eligible to earn an annual bonus each fiscal year under the Company's Annual Cash Incentive Plan with a threshold opportunity
equal to 50% of his base salary, a target opportunity equal to 100% of his base salary, a stretch opportunity equal to 150% of his base salary and a maximum opportunity equal to 200% of his base
salary. No payments were made to Mr. Becker under the Company's Annual Cash Incentive Plan for fiscal 2016 or fiscal 2017 as the threshold performance levels were not achieved.
In
the employment agreement, Mr. Becker has agreed to certain restrictive covenants during the employment term and for one year thereafter (or 18 months if
Mr. Becker is terminated for any reason on or within 12 months following a "change in control").
Under
the employment agreement and the agreements governing Mr. Becker's equity awards, Mr. Becker is entitled to certain severance benefits as discussed below under
"Potential Payments upon Termination or Change of Control."
Offer Letter to Ms. Shirley
In connection with Ms. Shirley's appointment as Executive Vice President, Chief Financial Officer and Treasurer, the Company agreed to
certain employment arrangements with Ms. Shirley on December 17, 2015 pursuant to an offer letter from the Company. Under these employment arrangements, the Company agreed to provide
Ms. Shirley with an annual base salary of $400,000. The Company also agreed to cause her to be eligible to participate in the Company's Annual Cash Incentive Plan for the 2016 fiscal year,
under which she could earn a bonus for the 2016 fiscal year equal to a specified percentage of her base salary as follows: 30% of her base salary at the threshold level of performance, 60% of her base
salary at the target level of performance and 120% of her base salary at the maximum level of performance, which would be pro-rated in each case based upon her
49
hire
date. For 2016 and 2017, the threshold performance level was not achieved and, therefore, no payments were made to Ms. Shirley under the Company's Annual Cash Incentive Plan for fiscal
2016 or 2017.
Under
these employment arrangements, the Company also granted Ms. Shirley an initial annual grant of equity awards valued at $300,000, 50% of which were service-based
non-qualified stock options and 50% of which were service-based restricted stock awards. Both the stock options and restricted stock awards vest ratably over four years, beginning with the first
anniversary of the date of grant. In addition, in connection with her appointment, Ms. Shirley received (i) a sign-on bonus of $60,000, a prorated portion of which must be paid back to
the Company if Ms. Shirley voluntarily resigns before the first anniversary of her start date and (ii) a supplemental grant of service-based restricted stock valued at $150,000 which
will vest on the second anniversary of the date of grant. Ms. Shirley is also entitled to standard employee benefits generally offered to the Company's employees. In the event of an involuntary
termination of her employment, Ms. Shirley will be entitled to receive a severance payment equal to her annual base salary as well as health benefits paid by the Company for 12 months in
exchange for an executed severance agreement and release of claims.
Other Employment Agreements
Except as disclosed above, the Company is not a party to employment agreements with any other current or former named executive officers
identified in the Summary Compensation Table other than at-will employment arrangements.
The
Company has entered into indemnification agreements with each named executive officer, each in a form approved by the Company's Board and previously disclosed by the Company. The
Company has also entered into a form of the indemnification agreement with each of its directors. The Company's Board has further authorized the Company to enter into the form of indemnification
agreement with future directors and executive officers of the Company and other persons or categories of persons that may be designated from time to time by the Board. The indemnification agreement
supplements and clarifies existing indemnification provisions of the Company's Certificate of Incorporation and Bylaws and, in general, provides for indemnification to the fullest extent permitted by
law, subject to the terms and conditions provided in the indemnification agreement. The indemnification agreement also establishes processes and procedures for indemnification claims, advancement of
expenses and costs and other determinations with respect to indemnification.
Awards under Equity Plans
The equity awards granted to the named executive officers during fiscal 2017 included annual LTI.
With
respect to the stock option awards and restricted stock awards described under "Grants of Plan-Based Awards in Fiscal 2017", such awards require that the named executive officer
remain employed by the Company until the respective dates listed in the table (or provide consulting services if no longer employed by the Company) and, in the case of performance-based awards, that
certain performance metrics be achieved, in each case, subject to acceleration of vesting in certain circumstances described below under "Potential Payments upon Termination or Change of Control."
See "Executive CompensationCompensation Discussion and AnalysisFiscal 2017 Compensation Program and
PayoutsComponents of CompensationAnnual Cash Incentive Plan" above for a description of the Annual Cash Incentive Plan for fiscal 2017 and the discussion of certain
provisions of the Annual Cash Incentive Plan in "Potential Payments upon Termination or Change of Control" below.
50
Separation Agreement
On January 17, 2017, the Company eliminated the Chief Operations Officer position and it was mutually agreed Ms. Phillips would
resign from her position effective immediately. In connection with Ms. Phillips' departure, the Company entered into a separation agreement with
Ms. Phillips on February 1, 2017 which provided Ms. Phillips with certain severance benefits in exchange for a full release and Ms. Phillips' agreement to certain
restrictive covenants.
In
particular; (i) Ms. Phillips received severance payments of $435,624, payable on the Company's regular payroll schedule over twelve months ; (ii) an enhanced
severance payment of $15,000, and (iii) continued coverage under the Company's group health plan pursuant to COBRA, the Company will continue pay on Ms. Phillips' behalf an amount equal
to the amount the Company previously paid as the Company's portion of Ms. Phillips' monthly premiums for health benefits until the earlier of the expiration of 12 months following her
separation date, the date on which she is no longer entitled to COBRA continuation coverage, or the date on which she obtains employment or an independent contractor engagement offering health
benefit. All equity awards outstanding at the time of her resignation terminated without any payments to Ms. Phillips.
51
OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR-END
The following table sets forth certain information with respect of the stock awards granted to the named executive officers during the fiscal
year ended June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
Name
|
|
Number of
Securities
Underlying
Unexercised
Options:
Exercisable
(#)
|
|
Number of
Securities
Underlying
Unexercised
Options:
Unexercisable
(#)
|
|
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Number of
Shares or
Units of
Stock that
Have Not
Vested
(#)
|
|
Market
Value of
Shares or
Units of
Stock that
Have Not
Vested(1)
($)
|
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units or
Other
Rights
that Have
Not
Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights
that Have
Not
Vested(1)
($)
|
|
Steven R. Becker
|
|
|
10,000
|
|
|
|
|
|
|
|
|
4.22
|
|
|
7/01/22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
73,877
|
|
|
221,631
|
|
|
|
|
|
5.64
|
|
|
2/02/26
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
248,385
|
|
|
|
|
|
6.71
|
|
|
9/01/26
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
295,508
|
|
|
5.64
|
|
|
2/02/26
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
248,385
|
|
|
6.71
|
|
|
9/01/26
|
(5)
|
|
|
|
|
|
|
|
|
|
|
|
|
Stacie R. Shirley
|
|
|
20,149
|
|
|
60,444
|
|
|
|
|
|
5.64
|
|
|
2/02/26
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,610
|
|
|
|
|
|
6.71
|
|
|
9/01/26
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
19,947
|
(6)
|
|
37,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26,596
|
(7)
|
|
50,532
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,076
|
(8)
|
|
17,244
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,779
|
(9)
|
|
14,780
|
|
Phillip D. Hixon
|
|
|
7,500
|
|
|
2,500
|
|
|
|
|
|
12.83
|
|
|
11/6/23
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,506
|
|
|
1,168
|
|
|
|
|
|
14.19
|
|
|
2/18/24
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,024
|
|
|
7,022
|
|
|
|
|
|
18.42
|
|
|
8/26/24
|
(12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,012
|
|
|
5,012
|
|
|
|
|
|
19.36
|
|
|
2/10/25
|
(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,361
|
|
|
64,082
|
|
|
|
|
|
7.90
|
|
|
9/03/25
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,000
|
|
|
|
|
|
5.95
|
|
|
11/2/25
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,258
|
|
|
|
|
|
6.71
|
|
|
9/01/26
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128
|
(16)
|
|
243
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
780
|
(17)
|
|
1,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
556
|
(18)
|
|
1,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,120
|
(19)
|
|
13,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,648
|
(8)
|
|
29,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,413
|
(9)
|
|
25,485
|
|
Trent E. Taylor
|
|
|
5,654
|
|
|
16,961
|
|
|
|
|
|
6.58
|
|
|
5/16/26
|
(20)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,855
|
|
|
|
|
|
6.71
|
|
|
9/1/26
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,123
|
(21)
|
|
13,534
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,152
|
(8)
|
|
4,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,537
|
(9)
|
|
2,920
|
|
Belinda J. Byrd-Rohleder
|
|
|
2,848
|
|
|
8,544
|
|
|
|
|
|
7.90
|
|
|
9/03/25
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,000
|
|
|
|
|
|
5.95
|
|
|
11/2/25
|
(15)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,645
|
|
|
|
|
|
6.71
|
|
|
9/01/26
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,139
|
|
|
|
|
|
3.95
|
|
|
2/23/27
|
(22)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,847
|
(19)
|
|
5,409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,471
|
(8)
|
|
8,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,076
|
(25)
|
|
21,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,911
|
(26)
|
|
15,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Melissa Phillips
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
(1)
-
Market
value was determined using the closing price of Common Stock of $1.90, which was the closing price as reported on NASDAQ on June 30, 2017.
-
(2)
-
These
options vest in four equal annual installments, with 25% having vested on February 2, 2017, and the remaining portion vesting on February 2,
2018, February 2, 2019 and February 2, 2020.
-
(3)
-
These
options vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and September 1, 2020.
-
(4)
-
These
options, referred to in this Proxy Statement as Target Options, were granted on February 2, 2016 and vest on June 30, 2019, subject to certain
performance conditions. Does not include an additional 295,508 Stretch Options because the threshold level performance for such Stretch Options has not been achieved during the performance period.
52
-
(5)
-
These
options, referred to in this Proxy Statement as Target Options, were granted on September 1, 2016 and vest on June 30, 2019, subject to certain
performance conditions. Does not include an additional 248,835 Stretch Options because the threshold level performance for such Stretch Options has not been achieved during the performance period.
-
(6)
-
Represents
the remaining unvested portion of restricted stock awards granted on February 2, 2016, of which 25% of the shares vested on February 1,
2017. These unvested shares vest in three equal annual installments on February 2, 2018, February 2, 2019 and February 2, 2020.
-
(7)
-
These
restricted stock awards vest on February 2, 2018.
-
(8)
-
These
restricted stock awards vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and
September 1, 2020.
-
(9)
-
These
performance-based restricted stock awards vest on June 30, 2019, subject to certain performance conditions.
-
(10)
-
These
options vest in four equal annual installments, with 75% having vested through November 6, 2016, and the remaining portion vesting on
November 6, 2017.
-
(11)
-
These
options vest in four equal annual installments, with 75% having vested through February 18, 2017, and the remaining portion vesting on
February 18, 2018.
-
(12)
-
These
options vest in four equal annual installments, with 50% having vested through August 26, 2016, and the remaining portion vesting on August 26,
2017 and August 28, 2018.
-
(13)
-
These
options vest in four equal annual installments, with 50% having vested through February 10, 2017, and the remaining portion vesting on
February 10, 2018 and February 10, 2019.
-
(14)
-
These
options vest in four equal annual installments, with 25% having vested on September 3, 2016, and the remaining portion vesting on September 3,
2017, September 3, 2018 and September 3, 2020.
-
(15)
-
These
options vest on November 2, 2017.
-
(16)
-
Represents
the remaining unvested portion of restricted stock awards granted on February 18, 2014, of which 75% of the shares vested through
February 18, 2017. These unvested shares vest on February 2, 2018.
-
(17)
-
These
restricted stock awards vest in two equal annual installments on August 26, 2017 and August 26, 2018.
-
(18)
-
Represents
the remaining unvested portion of restricted stock awards granted on February 10, 2015, of which 50% of the shares vested through
February 10, 2017. These unvested shares vest in two equal annual installments on February 10, 2018 and February 10, 2019.
-
(19)
-
Represents
the remaining unvested portion of restricted stock awards granted on September 3, 2015, of which 25% of the shares vested on September 3,
2016. These unvested shares vest in three equal annual installments on September 3, 2017, September 3, 2018 and September 3, 2019.
-
(20)
-
These
options vest in four equal annual installments, with 25% having vested on May 16, 2017, and the remaining portion vesting on May 16, 2018,
May 16, 2019 and May 16, 2020.
-
(21)
-
Represents
the remaining unvested portion of restricted stock awards granted on May 16, 2016, of which 25% of the shares vested on May 16, 2017. These
unvested shares vest in three equal annual installments on May 16, 2018, May 16, 2019 and May 16, 2020.
-
(22)
-
These
options vest in four equal annual installments on February 23, 2018, February 23, 2019, February 23, 2020 and February 23, 2021.
-
(23)
-
These
options vest in three equal annual installments on September 3, 2017, September 3, 2018 and September 3, 2020.
-
(24)
-
These
restricted stock awards vest in four equal annual installments on September 1, 2017, September 1, 2018, September 1, 2019 and
September 1, 2020.
-
(25)
-
These
restricted stock awards vest in four equal annual installments on February 23, 2018, February 23, 2019, February 23, 2020 and
February 23, 2021.
-
(26)
-
These
performance-based restricted stock awards vest on June 30, 2019, subject to certain performance conditions.
-
(27)
-
The
employment of Ms. Phillips terminated effective as of January 16, 2017 and equity forfeited pursuant to the equity agreements.
53
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2017
The following table contains information regarding the value received by the named executive officers upon option award exercises and restricted
stock award vesting during the fiscal year ended June 30, 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Option
|
|
Stock Awards
|
|
Name
|
|
Number of
Shares
Acquired on
Exercise (#)
|
|
Value
Realized On
Exercise(1) ($)
|
|
Number of
Shares
Acquired on
Vesting(2) (#)
|
|
Value
Realized On
Vesting(1) ($)
|
|
Steven R. Becker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stacie Shirley
|
|
|
|
|
|
|
|
|
6,649
|
|
|
26,264
|
|
Phillip D. Hixon
|
|
|
|
|
|
|
|
|
3,171
|
|
|
20,071
|
|
Trent E. Taylor
|
|
|
|
|
|
|
|
|
2,375
|
|
|
4,988
|
|
Belinda J. Byrd-Rohleder
|
|
|
|
|
|
|
|
|
950
|
|
|
6,270
|
|
Melissa Phillips
|
|
|
|
|
|
|
|
|
3,956
|
|
|
26,110
|
|
-
(1)
-
Based
on the closing price of our Common Stock on the applicable vesting date.
54
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
The tables below reflect the amount of compensation payable to each of the named executive officers of the Company in the event of termination
of such executive's employment or upon a change of control of the Company. The amount of compensation payable to each named executive officer upon voluntary termination, involuntary termination
without cause, involuntary termination with cause, retirement, in the event of the executive's death or disability and in connection with a change of control is shown below. Amounts for awards granted
pursuant to the Tuesday Morning Corporation 2004 Long-Term Equity Incentive Plan, as amended (the "2004 Plan"), the 2008 Plan and the 2014 Plan are calculated for purposes of the tables below, in the
case of restricted stock, based on the closing price of Common Stock as of June 30, 2017 ($1.90). Since the market price as of June 30, 2017 is below the exercise price of all
outstanding stock options, no amounts are shown with respect to stock options. Except for Ms. Phillips who resigned in January 2017, the amounts shown
assume that such termination was effective as of June 30, 2017, and thus include amounts earned through such time and are estimates of the amounts that would be paid out to the executives upon
their termination or upon our change of control. Accordingly, except with respect to Ms. Phillips, the amounts provided in this section are based on hypothetical circumstances, may materially
differ from actual amounts payable upon the triggering event, and the actual amounts to be paid out can only be determined at the time of such triggering event.
Payments Made Upon Termination
Regardless of the manner in which a named executive officer's employment terminates, he or she is generally entitled to receive amounts earned
during his or her term of employment. Such amounts include:
-
-
any accrued, unpaid base salary through the date of termination, any payments or benefits under employee benefit plans in which the executive
participates on the date of termination and any unreimbursed expenses; and
-
-
awards granted pursuant to the 2004 Plan, the 2008 Plan and the 2014 Plan, to the extent vested or exercisable, except in the case of certain
terminations for "cause" as discussed below.
Under
the terms of the 2004 Plan, the 2008 Plan and the 2014 Plan (and related award agreements thereunder), upon an executive's voluntary termination or involuntary termination without
"cause," all of the executive's options that were exercisable on the date of such termination remain exercisable for a period of 90 days after the date of such termination (but no later than
the original expiration date of the options); provided that the executive does not compete against the Company (as defined in the applicable plan or award agreement) during such period, subject to
certain exceptions, and all options that were not exercisable on such date will be forfeited.
Under
the terms of the 2004 Plan, the 2008 Plan and the 2014 Plan (and related award agreements thereunder), upon an executive's voluntary termination or involuntary termination for any
reason (other than death, disability, retirement or in connection with a "change in control"), all unvested shares of restricted stock will be forfeited, provided that certain awards may continue to
vest if the former employee serves as a director or consultant to the Company.
The
2004 Plan and the award agreements under the 2008 Plan (for awards granted before February 18, 2014) generally define "cause" to mean (i) the commission of a felony or
a crime involving moral turpitude or any other act or omission involving dishonesty, disloyalty or fraud, (ii) conduct tending to bring the Company into public disgrace,
(iii) substantial and repeated failure to perform duties properly assigned to the executive, (iv) gross negligence or willful misconduct, or (v) breach of duty of loyalty or other
act of fraud or dishonesty. During fiscal 2014, we adopted amended forms of award agreements for awards under the 2008 Plan, effective for awards granted
55
under
the plan on or after such date, under which "cause" is defined to mean (i) commission of fraud, embezzlement, theft, felony or an act of dishonesty in the course of the executive's
employment which damaged the Company, (ii) disclosure of trade secrets of the Company, or (iii) violation the terms of any non-competition, non-disclosure or similar agreement to which
the executive is a party. Award agreements under the 2014 Plan define "cause" to mean the same as such term is defined under the amended forms of award agreements for the 2008 Plan.
The
2008 Plan also defines "cause" more broadly with respect to general provisions relating to forfeiture or recoupment of awards, whether exercised or unexercised or vested or unvested.
If the committee administering the 2008 Plan finds that a holder of an award granted under the 2008 Plan, (i) committed fraud, embezzlement, theft, felony, a crime involving moral turpitude or
an act of dishonesty in the course of his or her employment which damaged the Company, (ii) disclosed trade secrets of the Company, (iii) violated the terms of any non-competition,
non-disclosure or similar agreement, (iv) knowingly caused or assisted in causing the publicly released financial statements of the Company to be misstated, (v) substantially and
repeatedly failed to perform the duties of such executive's office, (vi) committed gross negligence or willful misconduct, (vii) materially breached such executive's employment
agreement, (viii) failed to correct or otherwise rectify any failure to comply with reasonable instruction from the Company that could materially or adversely affect the Company,
(ix) willfully engaged in conduct materially injurious to the Company, (x) harassed or discriminated against the Company's employees, customers or vendors, (xi) misappropriated
funds or assets, (xii) willfully violated Company policies or standards of business conduct, (xiii) failed to maintain specified immigration status, or (xiv) knowingly caused or
assisted in causing the Company to engage in criminal misconduct, then some or all awards awarded to such holder, and all net proceeds realized with respect to any such awards, will be forfeited to
the Company as determined by the committee. The committee may also specify in an award agreement that the rights, payments, and benefits of a holder of an award granted under the 2008 Plan with
respect to such award will be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of certain specified events, in addition to any otherwise applicable vesting or
performance conditions of an award.
Under
the terms of the 2004 Plan, the 2008 Plan and the 2014 Plan (and related award agreements thereunder), upon an executive's involuntary termination for "cause," all of the
executive's options will be forfeited immediately upon termination, whether or not then exercisable.
Under
the terms of the Annual Cash Incentive Plan, if a participating executive's employment is terminated voluntarily for any reason, or is terminated by the Company for any reason
other than death or disability, during a performance period, the participating executive will immediately forfeit any right to receive any incentive cash bonus for such performance period. If the
termination occurs after the end of the performance period, but prior to the date of actual payment for such performance period, the committee administering the Annual Cash Incentive Plan may pay the
terminated executive an amount not to exceed the amount of incentive cash bonus earned for such performance period.
Payments Made Upon Retirement
In the event of the retirement of a named executive officer (in addition to the items identified above under "Payments Made Upon Termination"),
under the terms of the 2004 Plan, the 2008 Plan and the 2014 Plan, all of the executive's options that were exercisable on the date of such retirement remain exercisable for a period of three years
after the date of such retirement (but no later than the original expiration date of the options); provided that the executive does not compete against the Company (as defined in the applicable plan
or award agreement) during such period, subject to certain exceptions, and all options that were not exercisable on such date will be forfeited, provided that certain awards may continue to vest if
the former executive serves as a director or consultant to the Company. Upon the executive's retirement, all unvested shares of restricted stock awarded under the 2004 Plan, the 2008 Plan and the 2014
Plan will be forfeited, provided that certain awards may
56
continue
to vest if the former executive serves as a director or consultant to the Company. The 2004 Plan and the 2008 Plan generally define "retirement" to mean the same as such term is defined under
any Company pension plan or retirement program or as otherwise approved by the committee administering the applicable plan. The 2014 Plan defines "retirement" to mean an executive's termination of
service solely due to retirement upon or after the attainment of age 65.
Payments Made Upon Death or Disability
In the event of the death or disability of a named executive officer (in addition to the items identified above under "Payments Made Upon
Termination") the named executive officer would receive payments under the Company's disability or life insurance plan, as appropriate. Under the terms of the 2004 Plan and the 2008 Plan (and related
award agreements thereunder) (for awards granted before February 18, 2014), upon an executive's death or disability, all of the executive's options that were exercisable on the date of death or
disability remain exercisable for a period of one year after such date (but no later than the original expiration date of the options), all options that were not exercisable on such date will be
forfeited and all unvested shares of restricted stock will vest. During fiscal 2014, we adopted amended forms of award agreements for awards under the 2004 Plan and the 2008 Plan, effective for awards
granted under the plans on or after such date, under which, upon an executive's death or disability, all of the executive's unvested options will vest and become exercisable on the date of death or
disability, all options will remain exercisable for a period of one year after such date (but no later than the original expiration date of the options), and all unvested shares of restricted stock
will vest. Award agreements for awards under the 2014 Plan include provisions consistent with those in the amended forms of award agreements under the 2004 Plan and the 2008 Plan with respect to
accelerated vesting of equity awards upon an executive's death or disability.
The
2004 Plan defines "disability" to mean any disability that would entitle the executive to disability payments under any Company disability plan or as otherwise determined by the
committee administering the applicable plan. The 2008 Plan defines "disability" to mean, (i) in the case of an award that is exempt from Code Section 409A, a disability that would
entitle the executive to disability payments under any Company disability plan, or in the absence of such plan (or coverage thereunder), a permanent and total disability as defined in Code
Section 22(e)(3), and (ii) in the case of an award subject to Code Section 409A, (A) the executive is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (B) the
executive is, by reason of any medically determinable physical or mental impairment that can expected to result in death or can be expected to last for a continuous period of not less than
12 months, receiving income replacement benefits for a period of not less than three months under a Company accident and health plan. The 2014 Plan defines "disability" to mean, (i) in
the case of an award (other than an incentive stock option) that is exempt from Code Section 409A, a disability that would entitle the executive to disability payments under any Company
disability plan or insurance policy, or in the absence of such plan or policy (or eligibility thereunder), that the executive, because of a physical or mental condition resulting from bodily injury,
disease or mental disorder, is unable to perform his or her duties of employment for a period of six continuous months, as determined in good faith by the committee administering the plan, based upon
medical reports or other evidence satisfactory to such committee, (ii) in the case of an incentive stock option, a total and permanent disability as defined under the rules governing such
awards under the Code, and (iii) in the case of an award subject to Code Section 409A, a disability as defined under Code Section 409A and the regulations or other guidance issued
thereunder (in lieu of the definition of disability for awards exempt from Code Section 409A to the extent necessary to comply with Code Section 409A).
57
Under
the terms of the Annual Cash Incentive Plan, if a participating executive's employment is terminated due to death or disability during a performance period, the committee
administering the Annual Cash Incentive Plan may, in its discretion, pay the executive a pro rata portion of incentive cash bonus that would have been earned by the executive, if the executive had
remained employed, based on the number of days worked during the performance period. The Annual Cash Incentive Plan defines "disability" to mean any disability that would entitle the executive to
disability payments under the Company's disability plan or insurance policy; or, if no such plan or policy is then in existence or if the executive is not entitled to participate in such plan or
policy, a physical or mental condition resulting from bodily injury, disease or mental disorder that prevents the executive from performing his or her duties for a period of six continuous months, as
determined in good faith by the committee administering the Annual Cash Incentive Plan, based upon medical reports or other evidence satisfactory to the committee. However, if the incentive cash bonus
award is subject to Code Section 409A, then the term "disability" will have the meaning given such term under Code Section 409A.
Payments Made Upon Change of Control
Except for Mr. Becker, none of our named executive officers have a formal employment agreement with the Company. Under the terms of all
awards issued under the 2004 Plan and the 2008 Plan, and all awards issued under the 2014 Plan prior to November 16, 2016, immediately prior to a change of control, all stock options and stock
awards held by the named executive officer would automatically vest and become exercisable.
Generally,
a change of control is deemed to occur under the 2004 Plan, the 2008 Plan and the 2014 Plan if:
-
(a)
-
any
"person" or "group" other than an "exempt person" (as defined in such plan), is or becomes the "beneficial owner" (as such terms are defined in the Exchange Act
and the rules thereunder), of securities of the Company representing 50% or more of the combined voting power of the Company's then outstanding securities; or
-
(b)
-
the
stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than a merger or consolidation where the Company
is the surviving entity or which do not affect the Company's corporate existence and, in the case of awards under the 2008 Plan and the 2014 Plan, the transaction is actually consummated; or
-
(c)
-
the
stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets, other than a sale to an exempt person.
In
addition, a change of control is deemed to occur under the 2008 Plan and the 2014 Plan if the individuals who are the incumbent directors (as determined under such plan) cease for any
reason to constitute a majority of the members of the Board.
On
November 16, 2016, the 2014 Plan was amended to provide that all future awards will not automatically vest upon a change of control. Instead, such future awards will vest if a
participant's employment is terminated without cause or the participant terminates his or her employment for "good reason" at any time within the two year period following the change of control.
On December 11, 2015, we entered into an employment agreement with Mr. Becker, which contained additional severance benefits.
Under the employment agreement, in the
event of Mr. Becker's death or "disability" (in addition to the items identified above under "Payments Made Upon Termination"), Mr. Becker would be entitled to his incentive cash bonus
earned under the
58
Company's
Annual Cash Incentive Plan for the fiscal year prior to the year of termination but not yet paid as of the date of termination and a pro-rated portion of his incentive cash bonus that would
have been payable to him under the Company's Annual Cash Incentive Plan for the fiscal year in which the termination occurred, if he had remained employed during the entire performance period, payable
at the same time as the bonus would otherwise be payable and subject to achievement of the applicable performance goals for the performance period.
In
addition, in the event of his death or "disability," Mr. Becker would be entitled to: (i) vesting of all time-based equity awards, pro-rated based on the number of days
employed since the applicable grant date; and (ii) vesting of all performance-based equity awards, subject to achievement of applicable performance goals and pro-rated based on the number of
days employed since the applicable grant date (provided that for Mr. Becker's initial grant of performance-based options under the agreement, if termination of employment occurs after
December 11, 2018, no proration would occur). Mr. Becker (or his personal representative) will also have the ability to exercise vested options until the earlier of (x) one year
following his death or "disability" (or, if later, one year from the end of the performance period for the performance-based options in his initial grant under the agreement) or (y) expiration
of the options. Mr. Becker's employment agreement defines the term "disability" to mean a disability under the Company's 2014 Plan.
Under
the employment agreement, in the event Mr. Becker terminates his employment without "good reason," or the Company terminates his employment for "cause," Mr. Becker
would only be entitled to the compensation identified above under "Payments Made Upon Termination."
In
the event Mr. Becker terminates his employment with "good reason," or the Company terminates his employment without "cause," prior to a "change in control" or more than
12 months thereafter (in addition to the items identified above under "Payments Made Upon Termination"), Mr. Becker would be entitled to: (i) 12 months base salary, paid in
installments; (ii) his incentive cash bonus earned under the Company's Annual Cash Incentive Plan for the fiscal year prior to the year of termination but not yet paid as of the date of
termination; and (iii) a pro-rated portion of his incentive cash bonus that would have been payable to him under the Company's Annual Cash Incentive Plan for the fiscal year in which the
termination occurred, if he had remained employed during the entire performance period, payable at the same time as the bonus would otherwise be payable and subject to achievement of the applicable
performance goals for the performance period. Mr. Becker would also forfeit any unvested options (including any options included in the initial grant under the agreement), and any vested
options would remain exercisable until the earlier of (x) one year following his termination of all service with the Company (both as an employee and member of the Board) (or, if later, one
year from the end
of the performance period for the performance-based options in the initial grant under the agreement) or (y) expiration of the option's term.
In
the event Mr. Becker terminates his employment with "good reason," or the Company terminates his employment without "cause," on or within 12 months after a "change in
control" (in addition to the items identified above under "Payments Made Upon Termination"), Mr. Becker would be entitled to: (i) 18 months base salary, paid in installments;
(ii) his incentive cash bonus earned under the Company's Annual Cash Incentive Plan for the fiscal year prior to the year of termination but not yet paid as of the date of termination; and
(iii) a pro-rated portion of his incentive cash bonus that would have been payable to him under the Company's Annual Cash Incentive Plan for the fiscal year in which the termination occurred,
if he had remained employed during the entire performance period, payable at the same time as the bonus would otherwise be payable and subject to achievement of the applicable performance goals for
the performance period. In addition, all unvested time-based options held by Mr. Becker (including any time-based options included in the initial grant under the agreement) would immediately
vest and all unvested performance-based options held by Mr. Becker (including any performance-based options included in the initial grant under the agreement, if still outstanding) would remain
eligible to vest based upon achievement of performance goals in accordance
59
with
the terms of the applicable award agreement (pro-rated based on actual days of employment (provided that for Mr. Becker's initial grant of performance-based options under the agreement, if
termination of employment occurs after December 11, 2018, no proration would occur)). All vested options will have the same post-termination exercise period as described in the immediately
preceding paragraph.
In
the event of Mr. Becker's termination upon the Company's non-renewal of the employment agreement, such termination would be treated as a termination without "cause" other than
in connection with a "change in control" and Mr. Becker would be entitled to the same benefits and payments described above with respect to his termination without "cause."
In
the employment agreement, Mr. Becker has agreed to certain restrictive covenants during the employment term and for one year thereafter (or 18 months if
Mr. Becker is terminated for any reason on or within 12 months following a "change in control").
The
employment agreement defines "cause" to mean: (i) an act of theft, embezzlement, fraud or dishonesty; (ii) any willful misconduct or gross negligence; (iii) any
violation of fiduciary duties; (iv) conviction of, or pleading nolo contendere or guilty to, a felony or misdemeanor that may cause damage to the Company or its reputation; (v) an
uncured, material violation of the Company's written policies, standards or guidelines; (vi) an uncured, willful failure or refusal to satisfactorily perform duties
or responsibilities; and (vii) an uncured, material breach by Mr. Becker of the employment agreement or any other agreement with the Company. The employment agreement defines "good
reason" to mean: (w) a material reduction by the Company of Mr. Becker's base salary or target bonus opportunity as a percentage of his base salary, without his consent; (x) an
uncured, material breach by the Company of the employment agreement; (y) the Company's relocation of its principal executive offices, or requirement that Mr. Becker have his principal
work location change which results in his principal work location being changed to a location in excess of 50 miles from the location of the Company's current principal executive offices, in each
case, without Mr. Becker's consent; or (z) the failure by a successor to all or substantially all of the Company's assets to assume the employment agreement either contractually or by
operation of law. The employment agreement defines a "change in control" to mean a change in control under the 2014 Plan.
On
December 11, 2015, we approved two new forms of nonqualified stock option award agreements (one for performance-based options and the other for time-based options) to be used
for the initial equity award grant and certain future grants under the 2014 Plan to Mr. Becker pursuant to the employment agreement. The new forms reflect the terms of the awards as discussed
above.
60
The
following table shows the potential payments upon termination or change of control of the Company for Mr. Becker, the Company's Chief Executive Officer, as of June 30,
2017, the last day of the 2017 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and
Payments Upon Separation
|
|
Voluntary
Termination Without
Good Reason or
Involuntary
Termination With
Cause
|
|
Voluntary
Termination
With Good Reason
or Involuntary
Termination Without
Cause Without
Change
in Control
|
|
Voluntary
Termination With
Good Reason or
Involuntary
Termination Without
Cause With Change
in Control
|
|
Disability
|
|
Death
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive cash bonus
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Long-term incentive compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
Restricted stock awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits & perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & welfare benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
300,000
|
|
Cash severance
|
|
|
|
|
|
717,500
|
|
|
1,076,250
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
717,500
|
|
$
|
1,076,250
|
|
$
|
|
|
$
|
300,000
|
|
-
(1)
-
No
amounts are reflected because the exercise prices of all outstanding options exceed the market price of the Common Stock as of June 30, 2017. See
"Outstanding Equity Awards at 2017 Fiscal Year-End" for additional information regarding Mr. Becker's outstanding stock option awards as of June 30, 2017.
The following table shows the potential payments upon termination or change of control of the Company for Ms. Shirley, the Company's
Executive Vice PresidentChief Financial Officer and Treasurer, as of June 30, 2017, the last day of the 2017 fiscal year. Pursuant to her offer letter, in the event of an
involuntary termination of her employment, Ms. Shirley is entitled to receive a severance payment equal to her annual base salary as well as health benefits paid by the Company for
12 months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
Termination
|
|
Involuntary
Termination
|
|
Change
in Control
|
|
Disability
|
|
Death
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive cash bonus
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Long-term incentive compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
Restricted stock awards
|
|
|
|
|
|
|
|
|
135,238
|
|
|
135,238
|
|
|
135,238
|
|
Benefits & perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & welfare benefits
|
|
|
|
|
|
14,647
|
|
|
|
|
|
|
|
|
|
|
Life insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
Cash severance
|
|
|
|
|
|
404,167
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
418,814
|
|
$
|
135,238
|
|
$
|
135,238
|
|
$
|
435,238
|
|
-
(1)
-
No
amounts are reflected because the exercise prices of all outstanding options exceed the market price of the Common Stock as of June 30, 2017. See
"Outstanding Equity Awards at 2017 Fiscal Year-End" for additional information regarding Ms. Shirley's outstanding stock option awards as of June 30, 2017.
61
The following table shows the potential payments upon termination or change of control of the Company for Mr. Hixon, the Company's
Executive Vice President, Store Operations, as of June 30, 2017, the last day of the 2017 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
Termination
|
|
Involuntary
Termination
|
|
Change
in Control
|
|
Disability
|
|
Death
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive cash bonus
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Long-term incentive compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
Restricted stock awards
|
|
|
|
|
|
|
|
|
97,010
|
|
|
97,010
|
|
|
97,010
|
|
Benefits & perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & welfare benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
Cash severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
97,010
|
|
$
|
97,010
|
|
$
|
397,010
|
|
-
(1)
-
No
amounts are reflected because the exercise prices of all outstanding options exceed the market price of the Common Stock as of June 30, 2017. See
"Outstanding Equity Awards at 2017 Fiscal Year-End" for additional information regarding Mr. Hixon's outstanding stock option awards as of June 30, 2017.
The following table shows the potential payments upon termination or change of control of the Company for Mr. Taylor, the Company's Chief
Information Officer and Senior Vice President of Inventory Management, as of June 30, 2017, the last day of the 2017 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
Termination
|
|
Involuntary
Termination
|
|
Change
in Control
|
|
Disability
|
|
Death
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive cash bonus
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Long-term incentive compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
Restricted stock awards
|
|
|
|
|
|
|
|
|
23,463
|
|
|
23,463
|
|
|
23,463
|
|
Benefits & perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & welfare benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
Cash severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
23,463
|
|
$
|
23,463
|
|
$
|
323,463
|
|
-
(1)
-
No
amounts are reflected because the exercise prices of all outstanding options exceed the market price of the Common Stock as of June 30, 2017. See
"Outstanding Equity Awards at 2017 Fiscal Year-End" for additional information regarding Mr. Taylor's outstanding stock option awards as of June 30, 2017.
62
The following table shows the potential payments upon termination or change of control of the Company for Ms. Byrd, the Company's Senior
Vice President and General Merchandising Manager, as of June 30, 2017, the last day of the 2017 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Benefits and Payments
|
|
Voluntary
Termination
|
|
Involuntary
Termination
|
|
Change
in Control
|
|
Disability
|
|
Death
|
|
Compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive cash bonus
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Long-term incentive compensation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
Restricted stock awards
|
|
|
|
|
|
|
|
|
65,010
|
|
|
65,010
|
|
|
65,010
|
|
Benefits & perquisites:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health & welfare benefits
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Life insurance proceeds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300,000
|
|
Cash severance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
65,010
|
|
$
|
65,010
|
|
$
|
365,010
|
|
-
(1)
-
No
amounts are reflected because the exercise prices of all outstanding options exceed the market price of the Common Stock as of June 30, 2017. See
"Outstanding Equity Awards at 2017 Fiscal Year-End" for additional information regarding Ms. Byrd-Rohleder's outstanding stock option awards as of June 30, 2017.
In January 2017, the Company eliminated the Chief Operations Officer position and it was mutually agreed Ms. Phillips would resign from
her position effective immediately. In connection with Ms. Phillips' departure, the Company entered into a separation agreement with Ms. Phillips on February 1, 2017 which
provided Ms. Phillips with certain severance benefits in exchange for a full release and Ms. Phillips' agreement to certain restrictive covenants.
In
particular; (i) Ms. Phillips received severance payments of $435,624, payable on the Company's regular payroll schedule over twelve months ; (ii) an enhanced
severance payment of $15,000, and (iii) continued coverage under the Company's group health plan pursuant to COBRA, the Company will continue pay on Ms. Phillips' behalf an amount equal
to the amount the Company previously paid as the Company's portion of Ms. Phillips' monthly premiums for health benefits until the earlier of the expiration of 12 months following her
separation date, the date on which she is no longer entitled to COBRA continuation coverage, or the date on which she obtains employment or an independent contractor engagement offering health
benefit. All equity awards outstanding at the time of her resignation terminated without any payments to Ms. Phillips.
63
DIRECTOR COMPENSATION
The table below summarizes the compensation earned by each non-employee director of the Company for the fiscal year ended June 30, 2017.
Mr. Corcoran did not serve on the Board in fiscal 2017.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Fees Earned
or Paid
in Cash
($)(1)
|
|
Stock
Awards
($)(2)(3)(4)
|
|
Option
Awards
($)(4)
|
|
Non-Equity
Incentive Plan
Compensation
($)
|
|
Change
Pension
Value and
Non-qualified
Deferred
Earnings
($)
|
|
All Other
Compensation
($)(5)
|
|
Total
($)
|
|
Terry Burman
|
|
$
|
128,750
|
|
$
|
130,000
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
258,750
|
|
Frank M. Hamlin
|
|
|
66,764
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136,764
|
|
William Montalto
|
|
|
41,250
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
52,500
|
|
|
163,750
|
|
Sherry M. Smith
|
|
|
85,222
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
155,222
|
|
Jimmie L. Wade
|
|
|
71,250
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,250
|
|
Richard S Willis
|
|
|
88,750
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
158,750
|
|
Barry S. Gluck
|
|
|
15,514
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85,514
|
|
-
(1)
-
This
column includes annual cash retainers for board and committee service, committee chair service and, in the case of Mr. Burman, independent Chairman
service.
-
(2)
-
This
column represents the grant date fair value of the respective equity awards computed in accordance with FASB ASC Topic 718. The amounts shown exclude the impact
of estimated forfeitures related to service-based vesting conditions. Refer to note (1)(l) and note (6) to the Company's consolidated financial statements in the Company's Annual Report
on Form 10-K for the fiscal year ended June 30, 2017 for additional information on the valuation assumptions used in the calculation of grant date fair value for stock awards included in
the table. The value of the stock awards is calculated using the closing price of the Common Stock on the date the awards were made to each director. The closing stock price represents the grant date
fair value of the stock awards under the 2014 Plan.
-
(3)
-
On
November 16, 2016, the Company granted each director, except Mr. Gluck (who was not then serving as a director), 13,084 shares of restricted stock
under the 2014 Plan having a grant date fair value of $70,000 all of which are scheduled to vest on November 16, 2017, which represented the standard annual restricted stock grant under the
Company's non-employee director compensation program. In addition, on November 16, 2016, the Company granted Mr. Burman 11,215 shares of restricted stock under the 2014 Plan having a
grant date fair value of $60,000 all of which are scheduled to vest on November 16, 2017, which represented a special restricted stock grant in connection with his service as independent
Chairman of the Board. On February 24, 2017, in connection with his appointment to the Board of Directors, Mr. Gluck received 17,500 shares of restricted stock under the 2014 Plan having
a grant date fair value of $70,000 all of which are scheduled to vest on February 24, 2018.
64
-
(4)
-
The
non-employee directors had the following outstanding equity awards at the end of the 2017 fiscal year.
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Options
Exercisable(#)
|
|
Outstanding Options
Unexercisable(#)
|
|
Compensation
Unvested
Stock Award
|
|
Terry Burman
|
|
|
20,000
|
|
|
|
|
|
24,229
|
|
Frank M. Hamlin
|
|
|
|
|
|
|
|
|
13,084
|
|
William Montalto
|
|
|
20,000
|
|
|
|
|
|
13,084
|
|
Sherry M. Smith
|
|
|
|
|
|
|
|
|
13,084
|
|
Jimmie L. Wade
|
|
|
|
|
|
|
|
|
13,084
|
|
Richard S Willis
|
|
|
20,000
|
|
|
|
|
|
13,084
|
|
Barry S. Gluck
|
|
|
|
|
|
|
|
|
17,500
|
|
-
(5)
-
Effective
as of July 1, 2016 Mr. Montalto entered into a consulting agreement with the Company pursuant to which Mr. Montalto provided
consulting services to the Company to assist with the supply chain issues until December 31, 2016. This agreement ended sooner than expected on October 31, 2016. Under the agreement,
Mr. Montalto was entitled to a consulting fee of $15,000 per month for the months of July, August and September and $7,500 per month for the months of October, November and December,
reimbursement of expenses and indemnification from the Company. The amount reflected in the "All Other Compensation" column for Mr. Montalto includes his consulting fees.
In
November 2016 the Company adopted the following compensation program for non-employee directors (the "Director Compensation Plan"):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Board
Fees ($)
|
|
Audit
Committee
Fees ($)
|
|
Compensation
Committee
Fees ($)
|
|
Nominating and
Governance
Committee
Fees ($)
|
|
Annual Retainer
|
|
$
|
60,000
|
|
$
|
10,000
|
|
$
|
7,500
|
|
$
|
5,000
|
|
Annual Chairman Fee
|
|
|
60,000
|
|
|
20,000
|
|
|
15,000
|
|
|
10,000
|
|
Annual restricted stock grantvalue
|
|
|
70,000
|
|
|
|
|
|
|
|
|
|
|
Under
the Director Compensation Plan, non-employee directors receive reimbursement for their out-of-pocket expenses incurred in attending Board and committee meetings and the standard
20% discount on merchandise purchases that is provided to all of our employees.
Upon
being appointed as a non-employee director to the Board of Directors, a director will receive the standard annual grant of restricted stock awards valued at $70,000 on the grant
date, provided that the director begins service on or prior to July 31 during the first year of service. If the director begins service after July 31 during the first year of service,
the director will receive one-half of the standard annual grant of restricted stock awards valued at $35,000 on the grant date. For all awards granted before November 16, 2016 the restricted
stock vests on the earlier of the one year anniversary of the grant date or immediately prior to the Company's next annual meeting of stockholders on the annual meeting date. For all awards granted
after November 16, 2016 the restricted stock vests on the one year anniversary of the grant date.
In
addition, on November 16, 2016, the Company also paid fees to Mr. Burman of $60,000 and granted Mr. Burman 11,215 shares of restricted stock under the 2014 Plan
having a grant date fair value of $60,000, all of which are scheduled to vest on November 16, 2017, which represented a special restricted stock grant in connection with his service as
independent Chairman of the Board.
65
EQUITY COMPENSATION PLAN INFORMATION
The following table provides information about our common stock that may be issued upon the exercise of options under equity compensation plans
approved by stockholders as of June 30, 2017, the end of the 2017 fiscal year. We do not have any equity compensation plans that were not approved by our stockholders.
|
|
|
|
|
|
|
|
|
|
|
Plan Category
|
|
Number of Securities
to be Issued Upon
Exercise of
Outstanding Options,
Warrants and Rights
(thousands)
|
|
Weighted-Average
Exercise Price of
Outstanding Options,
Warrants and Rights
|
|
Number of Securities
Remaining Available for
Future Issuance
Under Equity
Compensation Plans
(excluding securities
reflected in column)
(thousands)
|
|
Equity Compensation Plans Approved by Security Holders
|
|
|
3,516
|
|
$
|
7.02
|
|
|
4,297
|
|
Equity Compensation Plans Not Approved by Security Holders
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,516
|
|
$
|
7.02
|
|
|
4,297
|
|
66
REPORT OF THE AUDIT COMMITTEE
The Audit Committee, which is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to the
applicable NASDAQ rules and SEC requirements relating to the independence of audit committee members, oversees Tuesday Morning Corporation's financial reporting process on behalf of the Board of
Directors. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities,
the Audit Committee has reviewed and discussed the audited financial statements in the Annual Report on Form 10-K with management, which included a discussion of the quality, not just the
acceptability of the accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements.
The
Audit Committee is responsible for appointment, compensation and oversight of the Company's independent registered public accounting firm, Ernst & Young. The Audit Committee
reviewed with Ernst & Young who is responsible for expressing an opinion on the conformity of those audited financial statements with U.S. generally accepted accounting principles, their
judgments as to the quality, not just the acceptability, of Tuesday Morning Corporation's accounting principles. The Audit Committee also discussed with the independent registered public accounting
firm the matters required to be discussed by Auditing Standard No. 16 (codified as Auditing Standard No. 1301), "Communications with Audit Committees", issued by the Public Company
Accounting Oversight Board. In addition, the Audit Committee has discussed with the independent registered public accounting firm the independent registered public accounting firm's independence from
management and the Company, and has received the written disclosures and the letter from the independent registered public accounting firm required by applicable requirements of the Public Company
Accounting Oversight Board regarding the independent registered public accounting firm's communications with the Audit Committee concerning
independence, and considered the compatibility of non-audit services with the independent registered public accounting firm's independence.
The
Audit Committee discussed with the Company's independent registered public accounting firm the overall scope and plans for their respective audits. 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 the Company's internal controls, and the overall
quality of the Company's financial reporting.
The
Audit Committee meets with the Company's Chief Financial Officer to discuss the overall scope and results of projects, including evaluation of the Company's internal controls and the
overall quality of the Company's financial reporting.
Based
on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors (and the Board approved) that the audited financial statements be
included in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2017 for filing with the Securities and Exchange Commission. The Audit Committee also selected
Ernst & Young as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2018.
|
|
|
|
|
As Members of the Audit Committee,
|
|
|
Richard S Willis, Chair
Jimmie L. Wade
Frank M. Hamlin
|
67
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Policy and Procedures with Respect to Related Party Transactions
The Company has adopted a written policy governing the review, approval or ratification of "Related Party Transactions," as described below (the
"Policy").
For the purposes of the Policy, a "Related Party Transaction" is a transaction or any material amendment to a transaction, including, but not
limited to, any financial transaction, agreement, arrangement or relationship (including any indebtedness of guarantee of indebtedness), or
any series of similar transactions, agreements, arrangements or relationships, in which the Company was, is or will be a participant, and the amount involved exceeds $120,000, and in which any Related
Party had, has or will have a direct or indirect material interest (subject to certain exceptions).
For
purposes of the Policy, a "Related Party" is: (i) any person who is, or at any time since the beginning of the Company's last fiscal year was, an executive officer, a
director, or a nominee for director of the Company; (ii) any person who, at the time of the occurrence or existence of the Related Party Transaction, is the beneficial owner of more than 5% of
any class of the Company's voting securities; or (iii) any "immediate family member" (as defined in the Policy) of any of the foregoing persons and any person (other than a tenant or employee)
sharing the household of any of the foregoing persons.
The Policy requires that when the Company or a Related Party proposes to engage in a transaction that is potentially a Related Party
Transaction, the following steps will be taken:
-
-
The Related Party will submit the matter for review by the Company's General Counsel prior to entering into the transaction.
-
-
The General Counsel will then assess whether the proposed transaction is a Related Party Transaction for purposes of the Policy. If the General
Counsel determines that the proposed transaction is a Related Party Transaction, the proposed Related Party Transaction will be submitted to the Audit Committee for consideration or, in those
instances in which that is not practicable or desirable, to the Chair of the Audit Committee (who will possess delegated authority to act on behalf of the Committee). The Audit Committee, or when
submitted to the Chair, the Chair, will consider the relevant facts and circumstances of the Related Party Transaction. No member of the Audit Committee will participate in any review, consideration
or approval of any Related Party Transaction in which he or she or any immediate family member, directly or indirectly, is involved.
-
-
The Audit Committee (or the Chair) will approve or ratify only those Related Party Transactions that the Audit Committee (or the Chair)
believes are fair to the Company and that are determined to be in, or are not inconsistent with, the best interests of the Company and its stockholders. The Audit Committee or Chair, as applicable,
shall convey the decision to the General Counsel, who shall convey the decision to the Related Party and appropriate persons within the Company.
-
-
In the event it is not practicable to present any Related Party Transaction to the Audit Committee or the Chair prior to entering into such
Related Party Transaction, it may be presented to the General Counsel for approval or be preliminarily entered into subject to ratification by the Audit Committee; provided, however, that if the Audit
Committee or the
68
Ratification Procedures
In the event any Related Party Transaction is not reported to the Audit Committee or the Chair or approved pursuant to the above described
process prior to the Company entering into such Related Party Transaction, the following steps will be taken:
-
-
The Related Party Transaction will be submitted to the Audit Committee or Chair, and the Audit Committee or Chair will consider all of the
relevant facts and circumstances available to the Audit Committee or the Chair. No member of the Audit Committee will participate in any review, consideration or approval of any Related Party
Transaction in which he or she or any immediate family member directly or indirectly is involved.
-
-
Based on the conclusions reached with respect to the standards set forth above concerning approval of Related Party Transactions, the Audit
Committee or the Chair will evaluate all options, including but not limited to ratification, amendment or termination of the Related Party Transaction.
Disclosure
Under the Policy, all Related Party Transactions that are required to be disclosed in the Company's filings with the SEC, as required by the
Securities Act of 1933, as amended, and the Exchange Act and related rules and regulations, will be so disclosed in accordance with such laws, rules and regulations. Furthermore, all Related Party
Transactions will be disclosed to the Board of Directors following approval or ratification, as the case may be, of a Related Party Transaction.
Report of the Company's Related Party Transactions
The Company did not participate in any Related Party Transactions during the fiscal year ended June 30, 2017.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our Common Stock to
report their initial ownership of our Common Stock and any subsequent changes in that ownership to the SEC. Specific due dates have been established by the SEC for the filing of these reports, and we
are required to disclose in this Proxy Statement any failure to file by these dates. The SEC's rules require such persons to furnish the Company with copies of all Section 16(a) reports that
they file. Based solely on our review of these reports and on written representations from the reporting persons that no report was required, we believe that the applicable Section 16(a)
reporting requirements were complied with for all transactions which occurred during the fiscal year ended June 30, 2017. Each of Trent Taylor and Belinda Byrd-Rohleder inadvertently failed to
timely file a report on Form 4 relating to three equity grants made in September 2017 but such transactions were reported on Form 4s that were subsequently filed.
69
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the beneficial ownership of our Common Stock as of September 22, 2017
by (1) each person (or group of affiliated persons) who is known by us to own beneficially more than 5% of the Common Stock outstanding on September 22, 2017 (based upon SEC filings),
(2) each of our directors and the new director nominee, (3) each of our named executive officers and (4) all of our directors and executive officers as a group. The Company has
determined beneficial ownership in accordance with the rules and regulations of the SEC. Unless otherwise indicated, to the Company's knowledge, each stockholder has sole voting and dispositive power
with respect to the securities beneficially owned by that stockholder. On September 22, 2017, there were 45,844,216 shares of Common Stock outstanding.
|
|
|
|
|
|
|
|
|
|
Shares Beneficially
Owned
|
|
Name
|
|
Number
|
|
Percent
|
|
T. Rowe Price Associates, Inc.(1)
|
|
|
7,401,490
|
|
|
16.1
|
%
|
1900 E. Pratt Street
Baltimore, MD 21202
|
|
|
|
|
|
|
|
PAR Investment Partners, L.P.(2)
|
|
|
3,504,155
|
|
|
7.6
|
%
|
One International Place, Suite 2041
Boston, MA 02110
|
|
|
|
|
|
|
|
Uziel Capital Management, LLC(3)
|
|
|
3,408,500
|
|
|
7.4
|
%
|
654 Madison Avenue, 9
th
Floor
New York, NY 10065
|
|
|
|
|
|
|
|
Dimensional Fund Advisors LP(4)
|
|
|
3,376,129
|
|
|
7.4
|
%
|
Building One, 6300 Bee Cave Road
Austin, TX 78746
|
|
|
|
|
|
|
|
The Vanguard Group(5)
|
|
|
2,296,889
|
|
|
5.0
|
%
|
100 Vanguard Blvd.
Malvern, PA 19355
|
|
|
|
|
|
|
|
Steven R. Becker(6)
|
|
|
1,097,754
|
|
|
2.4
|
%
|
Terry Burman(7)
|
|
|
240,154
|
|
|
*
|
|
Barry S. Gluck(8)
|
|
|
27,500
|
|
|
*
|
|
Frank M. Hamlin(9)
|
|
|
41,595
|
|
|
*
|
|
William Montalto(10)
|
|
|
111,584
|
|
|
*
|
|
Sherry M. Smith(11)
|
|
|
33,745
|
|
|
*
|
|
Jimmie L. Wade(12)
|
|
|
28,249
|
|
|
*
|
|
Richard S Willis(13)
|
|
|
63,968
|
|
|
*
|
|
Stacie R. Shirley(14)
|
|
|
152,517
|
|
|
*
|
|
Phillip D. Hixon(15)
|
|
|
210,767
|
|
|
*
|
|
Trent E. Taylor(16)
|
|
|
37,035
|
|
|
*
|
|
Belinda J. Byrd-Rohleder(17)
|
|
|
75,813
|
|
|
*
|
|
Melissa Phillips(18)(19)
|
|
|
18,031
|
|
|
*
|
|
James T. Corcoran(20)
|
|
|
422,885
|
|
|
*
|
|
All directors and executive officers as a group (12 persons)(19)
|
|
|
2,121,681
|
|
|
4.6
|
%
|
-
*
-
Denotes
ownership of less than 1.0%.
-
(1)
-
Based
on information set forth in the Schedule 13G/A filed with the SEC on February 7, 2017 by T. Rowe Price Associates, Inc. ("TRP Associates")
and T. Rowe Price Small-Cap Stock Fund, Inc. ("TRP Fund"), TRP Associates has the sole power to vote 1,106,900 shares of the 7,401,490 shares of Common Stock and the sole power to dispose of
all of the 7,401,490 shares of Common Stock and TRP Fund has the sole power to vote 4,055,300 shares of the 7,401,490 shares of Common Stock and no dispositive power.
70
-
(2)
-
Based
on information set forth in the Schedule 13G/A filed with the SEC on February 14, 2017 by PAR Investment Partners, L.P. ("PAR"), PAR
Group, L.P. ("PAR Group") and PAR Capital Management, Inc. ("PAR Capital Management") (collectively, the "PAR Reporting Persons"), each of the PAR Reporting Persons has the sole power to
vote all of the 3,504,155 shares of Common Stock and the sole power to dispose of all of the 3,504,155 shares of Common Stock. PAR Group is the sole general partner of PAR and PAR Capital is the sole
general partner of PAR Group and therefore PAR Group and PAR Capital may be deemed to be the beneficial owner of all shares held directly by PAR.
-
(3)
-
Based
on information set forth in the Schedule 13G filed with the SEC on August 22, 2017 by Uziel Capital Management, LLC ("UCM") and Ori Uziel,
UCM has shared voting and dispositive power with respect to 3,408,500 shares of Common Stock and Ori Uziel has shared voting and dispositive power with respect to 3,408,500 shares of Common Stock and
sole voting and dispositive power with respect to an additional 25,000 shares of Common Stock.
-
(4)
-
Based
on information set forth in the Schedule 13G/A filed with the SEC on February 9, 2017 by Dimensional Fund Advisors LP ("Dimensional"),
Dimensional is an investment advisor to four registered investment companies and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts
(collectively, such investment companies, funds, trusts, and accounts, the "Dimensional Funds"). Dimensional may be deemed to be the beneficial owner of all of the 2,539,815 shares of Common Stock
held by the Dimensional Funds as Dimensional has the sole power to vote 3,293,770 of such shares and the sole power to dispose of all 3,376,129 of such shares.
-
(5)
-
Based
on information set forth in the Schedule 13G filed with the SEC on February 13, 2017 by The Vanguard Group, The Vanguard Group has sole voting
power with respect to 54,141 shares of Common Stock, shared voting power with respect to 4,100 shares of Common Stock, sole dispositive power with respect to 2,240,748 shares of Common Stock and
shared dispositive power with respect to 56,141 shares of Common Stock.
-
(6)
-
Represents
743,137 shares of Common Stock held directly, 145,973 shares that may be acquired upon the exercise of options that are currently exercisable or will
become exercisable within 60 days of September 22, 2017 and 208,644 unvested shares of restricted stock. Shares of Common Stock held directly include shares held by Western Family Value
I, L.P. ("WFV I"). Western Family Value, LLC ("WFV") is the general partner of WFV I and may be deemed to beneficially own securities owned by WFV I. Mr. Becker is the sole member
of WFV and may be deemed to beneficially own securities owned by WFV. Mr. Becker disclaims beneficial ownership of the securities owned by WFV I and WFV, except to the extent of the pecuniary
interest of Mr. Becker in such securities.
-
(7)
-
Represents
195,855 shares of Common Stock held directly, 20,000 shares that may be acquired upon the exercise of options that are currently exercisable or will
become exercisable within 60 days of September 22, 2017 and 24,299 unvested shares of restricted stock.
-
(8)
-
Represents
10,000 shares of Common Stock held directly and 17,500 unvested shares of restricted stock.
-
(9)
-
Represents
28,511 shares of Common Stock held directly and 13,084 unvested shares of restricted stock.
-
(10)
-
Represents
23,500 shares of Common Stock held directly, 55,000 shares of Common Stock held indirectly by the William Montalto Revocable Trust, 20,000 shares that
may be acquired upon the exercise of options that are currently exercisable or will become exercisable within 60 days of September 22, 2017 and 13,084 unvested shares of restricted
stock.
-
(11)
-
Represents
20,661 shares of Common Stock held directly and 13,084 unvested shares of restricted stock.
71
-
(12)
-
Represents
15,165 shares of Common Stock held directly and 13,084 unvested shares of restricted stock.
-
(13)
-
Represents
30,884 shares of Common Stock held directly, 20,000 shares that may be acquired upon the exercise of options that are currently exercisable or will
become exercisable within 60 days of September 22, 2017 and 13,084 unvested shares of restricted stock.
-
(14)
-
Represents
16,584 shares of Common Stock held directly, 25,551 shares that may be acquired upon the exercise of options that are currently exercisable or will
become exercisable within 60 days of September 22, 2017 and 111,382 unvested shares of restricted stock.
-
(15)
-
Represents
5,379 shares of Common Stock held directly, 116,157 shares that may be acquired upon the exercise of options that are currently exercisable or will
become exercisable within 60 days of September 22, 2017 and 89,231 unvested shares of restricted stock.
-
(16)
-
Represents
2,272 shares of Common Stock held directly, 7,118 shares that may be acquired upon the exercise of options that are currently exercisable or will become
exercisable within 60 days of September 22, 2017 and 27,645 unvested shares of restricted stock.
-
(17)
-
Represents
2,761 shares of Common Stock held directly, 26,019 shares that may be acquired upon the exercise of options that are currently exercisable or will become
exercisable within 60 days of September 22, 2017 and 47,033 unvested shares of restricted stock.
-
(18)
-
The
employment of Ms. Phillips terminated in January 2017. The information reported for Ms. Phillips is based on information available to the Company
and may not reflect her current beneficial ownership.
-
(19)
-
Represents
1,094,709 shares of Common Stock held directly, 55,000 shares of Common Stock held indirectly, 380,818 shares that may be acquired upon the exercise of
options that are currently exercisable or will become exercisable within 60 days of September 22, 2017 and 591,154 unvested shares of restricted stock. Does not include shares of Common
Stock reported as beneficially owned in the table above by Ms. Phillips as she was not serving as an executive officer of the Company as of the date of this Proxy Statement.
-
(20)
-
Represents
65,000 shares of Common Stock held directly, and 357,885 shares of Common Stock held by PMCP I, LP. James T. Corcoran is the sole member of
PMCP GP, LLC, which is the General Partner of PMCP I, LP, and therefore may be deemed to be the beneficial owner of all shares held directly by PMCP I, LP.
72
STOCKHOLDERS' PROPOSALS
Pursuant to Rule 14a-8, to be included in the Board of Directors' solicitation of proxies relating to the 2018 annual meeting of the
Company's stockholders, a stockholder proposal must be received at our principal executive offices, no later than June 7, 2018.
With
respect to stockholder proposals to be presented at the 2018 annual meeting which are not intended to be included in our proxy statement relating to that meeting, pursuant to the
Company's Amended and Restated Bylaws (the "Bylaws"), a stockholder's written notice of such proposal, in the form specified in the Bylaws, must be delivered to or mailed and received at our principal
executive offices no earlier than July 18, 2018 and no later than August 17, 2018. Pursuant to Rule 14a-4(c)(1) promulgated under the Exchange Act, the Company's management will
have discretionary authority to vote on any matter of which the Company does not receive notice of by August 17, 2018, with respect to proxies submitted for the 2018 annual meeting of the
Company's stockholders.
Pursuant
to the Bylaws, in order to nominate persons for election to the Board of Directors at the 2018 annual meeting of the Company's stockholders, a stockholder must deliver notice of
the intention to submit nominations at the meeting, in the form specified in the Bylaws, to the Secretary of the Company no earlier than July 18, 2018 and no later than August 17, 2018.
We
reserve the right to reject, rule out of order, or take other appropriate actions with respect to any proposal or nomination that does not comply with these and other applicable
requirements.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young served as our independent registered public accounting firm for the fiscal year ended June 30, 2017, and the Audit
Committee has selected Ernst & Young as the independent registered public accounting firm for the fiscal year ending June 30, 2018. The Board is soliciting the ratification of this
selection by the Company's stockholders at the Annual Meeting.
Representatives
of Ernst & Young are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they so desire and are expected to be
available to respond to appropriate questions.
Audit Fees
The aggregate fees billed by Ernst & Young for professional services rendered for the audit of the Company's annual financial statements,
including the audit of the Company's internal control over financial reporting and the review of the financial statements included in the Company's
Quarterly Reports on Form 10-Q for fiscal 2017 and fiscal 2016 were $902,430 and $843,910, respectively. The fiscal 2017 audit fees also included services in connection with a registration
statement filed with the SEC.
Audit-Related Fees
The aggregate fees billed by Ernst & Young for audit-related services rendered for the fiscal years ended June 30, 2017 and
June 30, 2016, were $2,160 and $24,160, respectively. Audit-related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or
review of our consolidated financial statements and are not reported under "Audit Fees." The fiscal 2017 services were comprised solely of the Company's subscription to on-line research whereas the
fiscal 2016 services were comprised of consultation on technical matters as well as the Company's subscription to on-line research.
73
Tax Fees
The aggregate fees billed by Ernst & Young for tax-related services rendered for fiscal year ended June 30, 2016 were $81,600. No
fees were billed by Ernst & Young for tax-related service in the fiscal year ended June 30, 2017. Tax fees consist of fees billed for tax services that are unrelated to the audit of our
consolidated financial statements and include assistance regarding federal, state and local tax compliance, approved tax planning and other tax advice.
All Other Fees
Excluding the audit fees, audit-related fees and tax fees mentioned above, there were no other fees billed by Ernst & Young during the
fiscal years ended June 30, 2017 and June 30, 2016, respectively. Pre-Approval Policies and Procedures
The
Audit Committee has adopted a policy that requires advance approval of all audit fees, audit-related fees, tax services and other services performed by our independent registered
public accounting firm. The policy provides for pre-approval by the Audit Committee of specifically defined audit and non-audit services. Unless the specific service has been previously pre-approved
with respect to that year (and except for items exempt from pre-approval under applicable laws and rules), the Audit Committee must approve the permitted service before the independent registered
public accounting firm is engaged to perform it. The Audit Committee has delegated to the Chairman of the Audit Committee authority to approve permitted services provided that the Chairman reports any
decisions to the Committee at its next scheduled meeting. All audit and non-audit services for the fiscal year ended June 30, 2017 were pre-approved by the Audit Committee.
HOUSEHOLDING OF PROXIES
For stockholders who have requested a printed copy of our proxy materials, the SEC has adopted rules that permit companies and intermediaries
such as brokers to satisfy delivery requirements for annual reports and proxy statements with respect to two or more stockholders sharing the same address by delivering a single Annual Report, Proxy
Statement or Notice of Internet Availability of Proxy Materials addressed to those stockholders. This process, which is commonly referred to as "householding," potentially provides extra convenience
for stockholders and cost savings for companies. The Company, and some brokers, household annual reports, proxy materials, or Notice of Internet Availability of Proxy Materials, as applicable,
delivering a single annual report and proxy statement to multiple stockholders who have requested printed copies and share an address, unless contrary instructions have been received from one or more
of the affected stockholders.
Once
you have received notice from your broker or the Company that your broker or the Company will be householding materials to your address, householding will continue until you are
notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate Annual Report, Proxy Statement or Notice
of Internet Availability of Proxy Materials, as applicable, in the future, please notify your broker if your shares are held in a brokerage account, or the Company if you hold registered shares. If,
at any time, you and another stockholder sharing the same address wish to participate in householding and prefer to receive a single copy of our Annual Report and Proxy Statement, please notify your
broker if your shares are held in a brokerage account, or the Company if you hold registered shares.
You
may request to receive at any time a separate copy of our Annual Report or Proxy Statement by sending a written request to the Company's Secretary at 6250 LBJ Freeway, Dallas, Texas
75240 or by telephoning (972) 387-3562. A separate copy of the requested materials will be sent promptly following receipt of your request.
74
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors is not aware of any matter to be presented for action at the Annual Meeting other
than the matters set forth herein. If any other matters should arise at the Annual Meeting, shares represented by proxies will be voted at the discretion of the proxy holders.
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By Order of the Board of Directors,
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Bridgett C. Zeterberg
Secretary
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Dallas,
Texas,
October 5, 2017
75
VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. TUESDAY MORNING CORPORATION 6250 LBJ FREEWAY DALLAS, TX 75240 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. For Withhold For All Except To withhold authority to vote for any individual nominee(s), mark For All Except and write the number(s) of the AllAll The Board of Directors recommends you vote FOR the following: nominee(s) on the line below. 0 0 0 1. Election of Directors Nominees 01 Steven R. Becker 06 William Montalto 02 Terry Burman 07 Sherry M. Smith 03 James T. Corcoran 08 Richard S Willis 04 Barry S. Gluck 05 Frank M. Hamlin The Board of Directors recommends you vote FOR the following proposal: 2. Approval, on an advisory basis, of the Company's executive compensation. For 0 2 years 0 For 0 Against 0 3 years 0 Against 0 Abstain 0 Abstain 0 Abstain 0 The Board of Directors recommends you vote 1 YEAR on the following proposal: 3. Approval, on an advisory basis, of the frequency of an advisory vote on compensation. 1 year 0 The Board of Directors recommends you vote FOR the following proposal: 4. Ratification of the selection of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending June 30, 2018. NOTE: Such other business as may properly come before the meeting or any postponement or adjournment thereof. 0 For address change/comments, mark here. (see reverse for instructions) Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000345717_1 R1.0.1.17
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement, Annual Report is/ are available at www.proxyvote.com. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS TUESDAY MORNING CORPORATION Annual Meeting of Stockholders November 15, 2017 8:30 AM (Central time) The undersigned hereby appoints Stacie Shirley and Bridgett Zeterberg, and each of them, proxies or proxy with full power of substitution and revocation as to each of them, to represent and vote, as designated on the other side, all the shares of stock of Tuesday Morning Corporation standing in the name of the undersigned with all powers which the undersigned would possess if present at the Annual Meeting of Stockholders of Tuesday Morning Corporation to be held on November 15, 2017 or any adjournment or postponement thereof, on all matters coming before said meeting. The availability of the proxy statement dated October 5, 2017 is acknowledged. You are encouraged to specify your vote by marking the appropriate boxes ON THE REVERSE SIDE, and this proxy will be voted as specified. If no choice is specified, this proxy will be voted in accordance with the Board of Directors' recommendations, which are FOR all nominees listed in Proposal 1, FOR Proposal 2, FOR a frequency of 1 Year for Proposal 3 and FOR Proposal 4. If any other matters properly come before the meeting, or any adjournment or postponement thereof, the proxy holder(s) named in this proxy will vote the shares in their discretion. The proxy holder(s) cannot vote your shares unless you sign and return this card, grant your proxy through the Internet or grant your proxy by telephone in accordance with the instructions on the reverse side. Address change/comments: (If you noted any Address Changes and/or Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side 0000345717_2 R1.0.1.17
QuickLinks
PROXY STATEMENT SUMMARY
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING PROCEDURES
RESOLUTION OF STOCKHOLDER NOMINATIONS
PROPOSAL NO. 1 ELECTION OF DIRECTORS
PROPOSAL NO. 2 ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL NO. 3 ADVISORY VOTE ON THE FREQUENCY OF AN ADVISORY VOTE ON EXECUTIVE COMPENSATION
PROPOSAL NO. 4 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CORPORATE GOVERNANCE
MEETINGS AND COMMITTEES OF THE BOARD
EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION Compensation Discussion and Analysis
COMPENSATION COMMITTEE REPORT
SUMMARY COMPENSATION TABLE
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2017
NARRATIVE DISCLOSURE TO SUMMARY COMPENSATION TABLE AND GRANTS OF PLAN-BASED AWARDS IN FISCAL 2017 TABLE
OUTSTANDING EQUITY AWARDS AT 2017 FISCAL YEAR-END
OPTION EXERCISES AND STOCK VESTED IN FISCAL 2017
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
DIRECTOR COMPENSATION
EQUITY COMPENSATION PLAN INFORMATION
REPORT OF THE AUDIT COMMITTEE
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCKHOLDERS' PROPOSALS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
HOUSEHOLDING OF PROXIES
OTHER MATTERS
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