0000006885-11-000063.txt : 20110418 0000006885-11-000063.hdr.sgml : 20110418 20110418113457 ACCESSION NUMBER: 0000006885-11-000063 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20110609 FILED AS OF DATE: 20110418 DATE AS OF CHANGE: 20110418 EFFECTIVENESS DATE: 20110418 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STAGE STORES INC CENTRAL INDEX KEY: 0000006885 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-FAMILY CLOTHING STORES [5651] IRS NUMBER: 911826900 STATE OF INCORPORATION: NV FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14035 FILM NUMBER: 11764807 BUSINESS ADDRESS: STREET 1: 10201 MAIN ST CITY: HOUSTON STATE: TX ZIP: 77025 BUSINESS PHONE: 7136675601 MAIL ADDRESS: STREET 1: 10201 MAIN STREET CITY: HOUSTON STATE: TX ZIP: 77025 FORMER COMPANY: FORMER CONFORMED NAME: APPAREL RETAILERS INC DATE OF NAME CHANGE: 19930908 FORMER COMPANY: FORMER CONFORMED NAME: TEXTILE DISTRIBUTORS INC DATE OF NAME CHANGE: 19690521 DEF 14A 1 def14a.htm STAGE STORES, INC., DEF 14A def14a.htm


 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A
(Rule 14a-101)

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934

Filed by the Registrant T
Filed by a Party other than the Registrant o
Check the appropriate box:

o
Preliminary Proxy Statement
o
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
T
Definitive Proxy Statement
o
Definitive Additional Materials
o
Soliciting Material Pursuant to § 240.14a-12

Stage Stores, Inc.
(Name of Registrant as Specified In Its Charter)

Payment of Filing Fee (Check the appropriate box):

T
No fee required.
o
Fee computed on table below per Exchange Act Rules 14a-6(i) (1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:_______________
 
(2)
Aggregate number of securities to which transaction applies:_______________
 
(3)
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):_______________
 
(4)
Proposed maximum aggregate value of transaction:_______________
 
(5)
Total fee paid:_______________
 
o
Fee paid previously with preliminary materials.
o
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.
 
 
 
(1)
Amount Previously Paid:_______________
 
(2)
Form, Schedule or Registration Statement No.:_______________
 
(3)
Filing Party:_______________
 
(4)
Date Filed: ________________
 


 

 
 
 
 
 

 

 
_____________________________________
 
 
 
STAGE STORES INC.
 
BEALLS GOODY’S PALAIS ROYAL PEEBLES STAGE
 
 
______________________________________
 
 
Notice of 2011
Annual Meeting
and
Proxy Statement
 
 
 
 

 
 

 
 





















This Page Intentionally Left Blank.
 
 

 
 

 
 

STAGE STORES INC.

BEALLS GOODY’S PALAIS ROYAL PEEBLES STAGE

10201 Main Street
Houston, Texas 77025
 
April 29, 2011
 
Dear Shareholder:
 
On behalf of the Board of Directors, it is my pleasure to invite you to attend the 2011 Annual Meeting of Shareholders of Stage Stores, Inc. on Thursday, June 9, 2011, at 1:00 p.m. local time, in Houston, Texas.  Information about the Annual Meeting is presented in the following pages.
 
The Annual Meeting will begin with a discussion and vote on the matters set forth in the accompanying Notice of Annual Meeting of Shareholders and Proxy Statement, followed by a discussion on any other business matters that are properly brought before the meeting.
 
Your vote is very important.  We encourage you to read the Proxy Statement and vote your shares as soon as possible.  Whether or not you plan to attend, you can be sure your shares are represented at the Annual Meeting by promptly completing, signing, dating and returning your Proxy Card in the enclosed envelope or by submitting your vote and proxy by telephone or by the Internet.
 
If you will need special assistance at the Annual Meeting because of a disability, please contact Bob Aronson, Vice President, Investor Relations, at (800) 579-2302.
 
Thank you for your continued support of Stage Stores, Inc. We look forward to seeing you on June 9th.
 
Sincerely,
GRAPHIC
William J. Montgoris
Chairman of the Board


 

 
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                   n Item 2 - Advisory Vote on Executive Compensation
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                                      Votes on Executive Compensation
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                  Additional Information
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n To be voted on at the meeting
 
 
EVERY SHAREHOLDER’S VOTE IS IMPORTANT.  PLEASE
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY
CARD, OR SUBMIT YOUR VOTE AND PROXY BY
TELEPHONE OR BY THE INTERNET, AS SOON AS POSSIBLE.

 
STAGE STORES INC.

BEALLS GOODY’S PALAIS ROYAL PEEBLES STAGE
 


 
To the Shareholders:
 
The 2011 Annual Meeting of Shareholders of Stage Stores, Inc. (the “Company”) will be held at the offices of the Company, 10201 Main Street, Houston, Texas 77025 on Thursday, June 9, 2011, at 1:00 p.m. local time.  If you need directions to attend the Annual Meeting, they can be found on our website, www.stagestoresinc.com, under “Investor Relations”.  The shareholders will vote on the following matters:
 
 
1.
Election of seven Directors for a term of one year,
 
 
2.
Advisory Vote on Executive Compensation,
 
 
3.
Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation,
 
 
4.
Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2011,
 
 
5.
Approval of Second Amended and Restated 2008 Equity Incentive Plan, and
 
 
6.
Such other matters as may properly come before the Annual Meeting or any adjournment thereof.
 
The Board of Directors has fixed the close of business on April 12, 2011 as the record date for the determination of shareholders entitled to notice of, and to vote at, the Annual Meeting.
 
 
   
By Order of the Board of Directors
   
 
graphic
  Edward J. Record
  Chief Operating Officer   
  and Secretary
   
April 29, 2011  
 
 
 
iii

 
 
 
 
 
If you are a beneficial owner whose shares are held of record by a broker, you must instruct the broker how to vote your shares. If you do not provide voting instructions, your shares will not be voted on any proposal on which the broker does not have discretionary authority to vote. This is called a “broker non-vote.” In these cases, the broker can register your shares as being present at the Annual Meeting for purposes of determining the presence of a quorum, but will not be able to vote on those matters for which specific authorization is required under the rules of the New York Stock Exchange (“NYSE”).
 
If you are a beneficial owner whose shares are held of record by a broker, your broker has discretionary voting authority under NYSE rules to vote your shares on the ratification of Deloitte & Touche LLP, even if the broker does not receive voting instructions from you. However, your broker does not have discretionary authority to vote on Items 1 (Election of Directors), 2 (Advisory Vote on Executive Compensation), 3 (Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation) and 5 (Approval of the Second Amended and Restated 2008 Equity Incentive Plan) without instructions from you, in which case a broker non-vote will occur and your shares will not be voted on those matters. Accordingly, it is particularly important that beneficial owners instruct their brokers how they wish to vote their shares.
 
More Information Is Available
 
If you have any questions about the proxy voting process, please contact the broker, bank or other financial institution where you hold your shares. The Securities and Exchange Commission (“SEC”) also has a website (www.sec.gov/spotlight/proxymatters.shtml) with more information about your rights as a shareholder.
 
Additionally, you may contact our Investor Relations Department at www.stagestoresinc.com/investor-relations.
 
 
The Company’s 2011 Proxy Statement, 2010 Annual Report and 2010 Annual Report on Form 10-K are available to review at http://bnymellon.mobular.net/bnymellon/ssi.
 
 
In accordance with the Company’s security procedures, all persons attending the Annual Meeting must present either their E-Notice, or the Admission Ticket found on their Proxy Card (if they requested and received a Proxy Card), or a brokerage statement or other proof of ownership of Stage Stores stock as of the Record Date, and picture identification.  If you are a shareholder of record and plan to attend the meeting in person, please bring your E-Notice or your Admission Ticket with you to the meeting.  For security purposes, briefcases, bags, purses, backpacks and other containers will be subject to search at the door.

 


 
 
This Proxy Statement is furnished in connection with the solicitation of proxies by Stage Stores, Inc. (the “Company”, “we”, “our” or “us”) on behalf of the Board of Directors (the “Board”) for the 2011 Annual Meeting of Shareholders (the “Annual Meeting”), which will be held at the principal executive offices of the Company, 10201 Main Street, Houston, Texas 77025, on Thursday, June 9, 2011, at 1:00 p.m. local time. This Proxy Statement and Proxy Card are first being made available to the shareholders on or about April 29, 2011.  The proxy will be voted at the Annual Meeting if the signer of the Proxy Card or the shareholder submitting their vote and proxy by mail, by telephone or by the Internet was a shareholder of record on April 12, 2011 (the “Record Date”).
 
 
We have adopted the “Notice Only Delivery Method” of distributing our Proxy Statement, Proxy Card and Annual Report to shareholders.  Therefore, we will mail a Notice of Internet Availability of Proxy Materials (“E-Notice”) to shareholders rather than paper copies of these documents.  If you would like to receive a paper copy of these documents, you must request one.  Instructions on how to request a copy by telephone, email or the Internet are contained in the E-Notice.
 
 
           The holders of our common stock are entitled to one vote per share on all matters to be voted upon by the shareholders.  On the Record Date, there were 36,114,999 shares of our common stock, par value $0.01, outstanding. A list of the shareholders entitled to vote at the Annual Meeting will be available for inspection at the Annual Meeting for purposes relating to the Annual Meeting.
 
You can ensure that your shares are voted at the Annual Meeting by submitting your instructions by completing, signing, dating and returning your Proxy Card in the envelope provided (if you requested a paper copy of the Proxy Card) or by submitting your vote and proxy by telephone or by the Internet.  Submitting your instructions by Proxy Card, by telephone, or by the Internet will not affect your right to attend the Annual Meeting and vote.  A shareholder who gives a proxy may revoke it at any time before it is exercised by voting in person at the Annual Meeting, by delivering a subsequent proxy, or by notifying the Inspectors of Election in writing of such revocation.
 
The representation in person or by proxy of a majority of the outstanding shares of our common stock entitled to a vote at the Annual Meeting is necessary to provide a quorum for the transaction of business at the Annual Meeting. Shares can only be voted if the shareholder is present in person or is represented by a properly signed Proxy Card or by a vote and proxy submitted by telephone or by the Internet.  Each shareholder’s vote is very important. Whether or not you plan to attend the Annual Meeting in person, please sign and promptly return the  Proxy Card (if you requested a paper copy of the Proxy Card) or submit your vote and proxy by telephone or by the Internet.  All signed and returned Proxy Cards and votes and proxies submitted by telephone or by the Internet will be counted towards establishing a quorum for the Annual Meeting, regardless of how the shares are voted.
 
A shareholder of record on the Record Date may vote in any of the following four ways:
 
·  
by toll-free number at 1-866-540-5760; or
 
·  
by the Internet at www.proxyvoting.com/ssi; or
 
·  
by completing and mailing a Proxy Card (if you requested a paper copy of the Proxy Card); or
 
·  
by written ballot at the Annual Meeting.
 
If you vote by mail, by the Internet or by telephone, your vote must be received by 11:59 p.m. Eastern Time on Wednesday, June 8, 2011, the day before the Annual Meeting.  Your shares will be voted as you indicate.  If you return or otherwise complete your Proxy Card, but you do not indicate your voting preferences, the proxies will vote your shares FOR Items 1 (Election of Directors), 2 (Advisory Vote on Executive Compensation), 4 (Ratification of the Selection of Deloitte & Touche LLP) and 5 (Approval of Second Amended and Restated 2008 Equity Incentive Plan), for once every THREE years with respect to Item 3 (Advisory Vote on the Frequency of
 
Future Advisory Votes on Executive Compensation), and in their discretion for Item 6 (such other matters as may properly come before the Annual Meeting or any adjournment thereof).
 
If your shares are held in a brokerage account (this is called “street name”), you should follow the voting directions provided by the broker.  You may complete and mail a voting instruction card to the broker or, in most cases, submit voting instructions by mail, by telephone or by the Internet. Your shares should be voted by the broker as you have directed.
 
If your shares are held in street name and you wish to have your shares voted for Item 1 (Election of Directors), Item 2 (Advisory Vote on Executive Compensation), Item 3 (Advisory Vote on the Frequency of Future Advisory Votes on Executive Compensation), and Item 5 (Approval of Second Amended and Restated 2008 Equity Incentive Plan) you must either (i) instruct your broker how to vote your shares, (ii) vote your shares by phone or the Internet, or (iii) bring a brokerage statement, written proxy from your broker, or other proof of ownership of the Company’s common stock as of the Record Date with you to the Annual Meeting.
 
We will pass out written ballots to any shareholder entitled to vote at the Annual Meeting.
 
For additional information concerning the manner of proxy solicitation and voting, please see “Additional Information” on page 70 of this Proxy Statement.
 


 
 
Cheryl Nido Turpin
 
On March 29, 2011, Cheryl Nido Turpin informed the Board of Directors that she would not be standing for re-election as a member of the Board of Directors at the Annual Meeting.  Due to the departure of Ms. Turpin, the Board is conducting a search for an additional Director.
 
New Directors
 
Earl Hesterberg.  On July 1, 2010, the Board of Directors appointed Earl J. Hesterberg to the Board, thereby increasing its membership to seven Directors.
 
Gabrielle Greene.  On September 21, 2010, the Board of Directors appointed Gabrielle E. Greene to the Board, thereby increasing its membership to eight Directors.
 
In General
 
To the extent required by the rules of the SEC, certain information concerning former Directors James Scarborough and Sharon Mosse, both of whom retired as Directors at the conclusion of the 2010 Annual Meeting, and Dr. Tom Mentzer, who passed away on February 26, 2010, is provided in this Proxy Statement.
 
At the Annual Meeting, seven Directors are to be elected to hold office until the 2012 Annual Meeting and until their successors have been elected and have qualified. Information concerning the seven nominees is set forth below.  All of the nominees are currently Directors.  The Board has determined that the following six Director nominees are Independent Directors, as independence is defined by the NYSE:  Alan J. Barocas, Michael L. Glazer, Gabrielle E. Greene, Earl J. Hesterberg, William J. Montgoris, and David Y. Schwartz.  Mr. Hall, the seventh Director nominee, is not an Independent Director as he is our President and Chief Executive Officer. The Board’s Corporate Governance and Nominating Committee recommended those current Directors for re-election.  The Board knows of no reason why any nominee may be unable to serve as a Director.  If any nominee is unable to serve, the shares represented by all valid proxies will be voted for the election of such other person as the Board may nominate.
 
 
Board Composition
 
Nominees for Director are selected on the basis of broad experience, diversity (differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity), wisdom, integrity, the ability to make independent analytical inquiries, an understanding of the Company’s business environment, and a willingness to devote adequate time to Board duties.
 
Below we identify and describe the specific experience, qualifications, attributes or skills (collectively, “Director Qualifications”) our Directors bring to the Board that are important in light of our business. The specific Directors’ Qualifications that the Corporate Governance and Nominating Committee and the Board considered in each Director’s re-nomination follow their individual biographies.
 
·  
Leadership experience. We believe that Directors with experience in significant leadership positions over an extended period, especially Chief Executive Officer (“CEO”) and Chief Operating Officer (“COO”) positions, provide the Company with special insights. These people generally possess extraordinary leadership qualities and the ability to identify and develop those qualities in others. They demonstrate a practical understanding of organizations, processes, strategy, risk management and the methods to drive change and growth.
 
·  
Finance experience. We believe that an understanding of finance and financial reporting processes is important for our Directors. The Company measures its operating and strategic performance by reference to financial targets. In addition, accurate financial reporting and vigorous auditing are critical to our success. We seek to have at least a majority of the members of our Audit Committee qualify as Audit Committee Financial Experts and we expect all of our Directors to be financially knowledgeable.
 
·  
Industry experience. We seek to have Directors with experience as executives, directors, consultants, professionals or other capacities in the retail industry.
 
·  
Marketing experience. As a retailer, marketing is critical to our success. Therefore, marketing expertise is very important to us.
 
·  
Real estate experience. As of the end of our 2010 Fiscal Year (January 29, 2011), we operated 786 stores in 39 states.  In addition to opening new stores, the Company has continued to invest in the expansion, relocation and remodeling of its existing stores.  Therefore, real estate expertise is very important to us.
 
 The following information pertains to each nominee’s (i) age as of April 12, 2011, (ii) principal occupations for at least the past five years, and (iii) directorships in other public companies at any time during the past five years.
 
         
Name
 
Age
 
Positions Currently Held
Alan J. Barocas
 
62
 
Director
Michael L. Glazer
 
62
 
Director, Chairman of  Corporate Governance and Nominating Committee
Gabrielle E. Greene
 
50
 
Director
Andrew T. Hall
 
50
 
Director, President and Chief Executive Officer
Earl J. Hesterberg
 
57
 
Director
William J. Montgoris
 
64
 
Director, Chairman
David Y. Schwartz
 
70
 
Director, Chairman of Audit Committee
 
Mr. Barocas has been a Director since January 2007.  Since January 1, 2011, he has been Senior Executive Vice President of Leasing at General Growth Properties, Inc. located in Chicago. From May 2006 to January 1, 2011, Mr. Barocas was the principal of Alan J. Barocas and Associates, a real estate consulting firm.  From June 1981 to April 2006, he was employed by GAP, Inc.  His last position with GAP, Inc. was Senior Vice President of Real Estate.  He is a past Trustee of the International Council of Shopping Centers (ICSC).
 
 
Director Qualifications:
 
·  
Leadership and Industry experience: current Senior Executive Vice President of a large public company engaged in commercial real estate; former Senior Vice President of Real Estate of a large public company in the retail industry; twenty-five years of experience with a large public company in the retail industry
 
·  
Real estate experience:  more than thirty years of real estate experience, twenty-five of which were with a large public company in the retail industry
 
Mr. Glazer has been a Director since August 2001.  Since October 2009, he has served as President and CEO of Mattress Giant Corporation located in Addison, Texas.  From August 2005 to October 2009, Mr. Glazer served as Managing Director of Team Neu, located in Pittsfield, Massachusetts.  From May 1996 to August 2005, he served as President and Chief Executive Officer of KB Toys, Inc.  KB Toys, Inc. filed a petition under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware on January 14, 2004 and emerged from Chapter 11 in August 2005.  From April 1995 to January 1999, Mr. Glazer also served as President of Big Lots.  From March 1990 to January 1995, he served as President of the Bombay Company.  Mr. Glazer is also a Director of CPI Corporation.   He also formerly served on the boards of Brookstone and Big Lots.
 
Director Qualifications:
 
·  
Leadership experience: current President and CEO of a privately held company in the retail industry with 1,000 employees; former President and CEO of three public companies in the retail industry
 
·  
Industry experience:  thirty-six years of experience in the retail industry
 
Ms.  Greene was appointed a Director on September 21, 2010.  Since 2005, she has been a General Partner of Rustic Canyon/Fontis Partners, a later-stage private equity fund investing in high growth segments of emerging domestic markets, headquartered in Pasadena, California.  From 2002 to 2005, Ms. Greene was the Chief Financial Officer of Gluecode Software, Inc. headquartered in El Segundo, California.  From 2000 to 2002, she was the Chief Financial Officer of Crown Services Company headquartered in Fresno, California. From 1998 to 2000, Ms. Greene was a General Partner of Black Enterprise/Greenwich Street Growth Fund headquartered in New York, New York.  She also serves on the Board of Directors of Whole Foods Market, Inc., a NASDAQ listed company that pioneered the supermarket concept in health foods retailing.  From September 2006 to May 2008, Ms. Greene served on the Board of Directors of Bright Horizons Family Solutions Inc., a then NASDAQ listed leading provider of workplace services for employers and families headquartered in Watertown, Massachusetts.
 
Director Qualifications:
 
·  
Leadership and Audit Committee experience:  Significant board experience; served on the boards of two public companies, one of which was in the retail sector; significant Audit Committee experience, having served on that committee for the entirety of her board service for both companies, as well as chairing the Whole Foods Audit Committee for the past three years
 
·  
Finance experience:  Extensive financial experience; former CFO of two companies, one in the retail industry and one in the service industry; extensive experience in finance and investment analysis as a private equity investor
 
Mr. Hall joined the Company in February 2006 as President and Chief Operating Officer and assumed the position of President and Chief Executive Officer in November 2008.  He became a Director in March 2008.  Mr. Hall was employed by Foley’s, a Houston-based division of May Department Stores, Inc., from June 2002 to February 2006.  While at Foley’s, Mr. Hall served as Chief Financial Officer (June 2002 to April 2003) and as Chairman (May 2003 to February 2006).
 
Director Qualifications:
 
·  
Leadership and Industry experience: current President and CEO of the Company;  former Chairman of Foley’s, a division of May Department Stores; eighteen years of experience in the retail industry
 
·  
Finance experience:  Certified Public Accountant; former CFO of a division of a large public company in the retail industry
 
Mr.  Hesterberg was appointed a Director on July 1, 2010.  Since April 2005, he has been the President, CEO and a Director of Group 1 Automotive, Inc., a NYSE company headquartered in Houston, Texas.  From
 
 
4

 
 
October 2004 to April 2005, Mr. Hesterberg served as Group Vice President, North America Marketing, Sales and Service for Ford Motor Company. From July 1999 to September 2004, he served as Vice President, Marketing, Sales and Service for Ford of Europe, and from 1999 until 2005, he served on the supervisory board of Ford Werke AG. Mr. Hesterberg has also served as President and Chief Executive Officer of Gulf States Toyota, an independent national distributor of new Toyota vehicles, parts and accessories. He has also held various senior sales, marketing, general management, and parts and service positions with Nissan Motor Corporation in U.S.A. and Nissan Europe, both of which are wholly-owned by Nissan Motor Co., Ltd., a global provider of automotive products and services.
 
·  
Leadership experience: current President, CEO and a Director of a NYSE company in the automotive retail industry with 7,500 employees; former Executive Vice President and corporate officer of a NYSE listed global automotive manufacturer
 
·  
Industry and Marketing experience: 36 years of sales, marketing and service experience in the automotive retail industry
 
Mr. Montgoris has been a Director since June 2004.  He retired from The Bear Stearns Companies, Inc. in June 1999.  From 1987 to 1999, Mr. Montgoris served in the following positions with Bear Stearns:  Chief Operating Officer (1996 to 1999), Chief Operating Officer and Chief Financial Officer (1993 to 1996) and Chief Financial Officer (1987 to 1993).  Mr. Montgoris is also a director of Carter’s, Inc. and OfficeMax Incorporated.  From June 1999 to March 2009, he served as a director of the Reserve Fund, a family of money market mutual funds.
 
Director Qualifications:
 
·  
Leadership, Industry and Committee experience: former COO of a leading global investment banking, securities trading and brokerage firm; member of the Audit Committee of a large public company that is the largest branded marketer in the United States of apparel exclusively for babies and young children; member of the Audit and Compensation Committees of a large public company that is a leader in both business-to-business and retail office products distribution
 
·  
Finance experience: accounting background; Certified Public Accountant; former CFO of a leading global investment banking, securities trading and brokerage firm
 
Mr. Schwartz has been a Director since July 2007.  Since June 1997, Mr. Schwartz has been a business advisor and consultant to various companies principally in the retail, distribution and services industries.  Prior to that, Mr. Schwartz spent thirty-five years with Arthur Andersen, LLP, from which he retired as a Senior Partner in June 1997.  While at Arthur Andersen, he served clients in various industries, primarily retailing, distribution and communications.  Mr. Schwartz is also a director of Walgreen Co. and Foot Locker, Inc. He retired as a director of True Value Company in April 2011.
 
Director Qualifications:
 
·  
Leadership, Industry and Audit Committee experience: member of the Board of Directors of two large companies in the retail industry; Chairman of the Audit Committee of a public company in the retail industry and former Chairman of the Audit Committee of a private company in the wholesale distribution industry; Chairman of the Finance and Strategic Planning Committee of a large public company in the retail industry
 
·  
Finance experience: Certified Public Accountant;  former partner with Arthur Andersen (partner in charge of Retail Industry Program and Managing Partner of the Chicago office’s Attest and Business Consulting Practice)
 
Your Board of Directors recommends a vote FOR each nominee for Director.
 
 
 
Our business is managed under the direction of our Board.  Our Board currently consists of eight Directors. Members of our Board are kept informed of our business through discussions with our CEO and other officers, by reviewing materials provided to them, by visiting our offices, stores and distribution centers, and by participating in meetings of the Board and its Committees.
 
 
 
Board Leadership Structure.  Andy Hall, our CEO, does not serve as the Chairman of our Board.  We believe that this leadership structure is appropriate for the Company because while it allows the CEO to speak for and lead the Company and communicate with other members of senior management, it provides for effective oversight by our Board, all of whose members are independent with the exception of Mr. Hall, and all of whom are highly qualified and experienced and, other than Mr. Hall, exercise a strong independent oversight function.  This oversight function is enhanced by the fact that all of the Board’s standing committees—Audit, Compensation, and Corporate Governance and Nominating—are comprised entirely of Independent Directors.
 
The Board’s Role in Risk Oversight. The Board’s role in the risk oversight of the Company is administered directly and through its standing committees as follows:
 
·  
The Audit Committee has primary responsibility for financial oversight. In that regard, the Audit Committee’s purpose is to assist in the Board’s oversight of (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with legal and regulatory requirements, (iii) the Company’s independent auditor’s qualifications, independence and work, and (iv) the performance of the Company’s internal audit function and independent auditors. The Committee acts independently as authorized and assists the Board in fulfilling its oversight responsibilities by reviewing certain financial information that is provided to the Board and others, the internal control structure, the audit process, and the adherence to applicable laws and regulations. Considering the size and complexity of the Company, the Committee must apply reasonable materiality standards to all of its activities. In addition, the Audit Committee has certain responsibilities with respect to our compliance program.  For additional information, please see “Information Relating to the Board of Directors and Committees—Audit Committee” and “Item 4—Ratification of the Selection of Deloitte & Touche LLP as Independent Registered Public Accounting Firm for Fiscal 2011—Audit Committee Report” later in this Proxy Statement.
 
·  
The Compensation Committee considers the risks associated with our compensation policies and practices for all employees, including non-executive officers, to ensure that they do not create risks that are reasonably likely to have a material adverse affect on the Company. For additional information, please see “Information Relating to the Board of Directors and Committees—Compensation Committee” later in this Proxy Statement.
 
·  
The Corporate Governance and Nominating Committee assists the Board in fulfilling its corporate governance and oversight responsibilities by reviewing corporate governance issues that may be brought before the Board, by exercising oversight over the Company’s Corporate Governance Guidelines, by recommending qualified individuals for nomination as Directors and reviewing their performance, and by reviewing applicable laws and regulations related to corporate governance matters.  For additional information, please see “Information Relating to the Board of Directors and Committees—Corporate Governance and Nominating Committee” later in this Proxy Statement.
 
·  
The Board is kept abreast of its Committees' risk oversight and other activities via reports of each Committee Chairman to the full Board. These reports are presented at every regular Board meeting and include discussions of Committee agenda topics, including matters involving risk oversight.
 
·  
Members of management who supervise the day-to-day risk management responsibilities periodically provide reports to the Board as a whole and to the Committees if requested.
 
The Board considers specific risk topics, including risks associated with our strategic plan, our capital structure and our development activities. In addition, the Board receives detailed regular reports from the members of our senior management team, which consists of the heads of our principal business and corporate functions—that include discussions of the risks and exposures involved in their respective areas of responsibility. These reports are provided in connection with regular Board meetings and are discussed, as necessary, at Board meetings. Further, the Board is routinely informed of developments affecting the Company that could affect our risk profile or other aspects of our business.
 
Director Independence. Seven of our eight Directors are Independent Directors, as independence is defined by the NYSE.   One of our Directors is not an Independent Director by virtue of the fact that he is our current President and CEO (Andy Hall). All members of the Board’s Audit, Compensation, and Corporate Governance and Nominating Committees are Independent Directors.  Members of the Audit Committee must also
 
 
satisfy, and they do satisfy, a separate SEC independence requirement, which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from us or any of our subsidiaries other than their Directors’ compensation.
 
Corporate Governance Guidelines. The Board has adopted written Corporate Governance Guidelines (the “Governance Guidelines”) to assist it in the exercise of its corporate governance responsibilities.  The purpose of the Governance Guidelines is to provide a structure within which our Directors and our management can monitor the effectiveness of policy and decision making both at the Board and management level, with a view to enhancing shareholder value over the long term. The Governance Guidelines are available on our website at www.stagestoresinc.com.  They can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Corporate Governance Guidelines.”
 
Code of Ethics for Senior Officers. In order to promote ethical conduct in the practice of financial management throughout the Company, the Board has adopted a Code of Ethics for Senior Officers (the “Code”).  We believe that in addition to the CEO, the Chief Operating Officer, the Chief Financial Officer and the Controller each holds an important and elevated role in corporate governance.  The Code is designed to deter wrongdoing and provides principles to which our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions are expected to adhere and advocate.  These principles embody rules regarding individual and peer responsibilities, as well as responsibilities to the shareholders, the public and others who have a stake in our continued success.  The Code is available on our website at www.stagestoresinc.com.  It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Code of Ethics for Senior Officers.”  We intend to disclose future amendments to certain provisions of the Code, or waivers of such provisions granted to Directors and executive officers, if any, on our website within four business days following the date of such amendment or waiver or as otherwise may be required by the SEC.
 
Code of Ethics and Business Conduct. The Board has also adopted a Code of Ethics and Business Conduct (the “Code of Ethics”), which is the basic set of policies and procedures governing the behavior of all Directors, executive officers, and other employees of the Company (each employee an “Associate” and collectively the “Associates”) in conformance with Section 303A.10 of the NYSE Listed Company Manual.  It is our policy to adhere to the highest standards of business ethics in all our business activities.  When Associates are engaged in any activity concerning the Company, our customers, competitors, suppliers, other Associates, shareholders or the general public, they must maintain standards of uncompromising integrity and conduct themselves in a professional manner with a positive, supportive attitude about the Company. The Code of Ethics is available on our website at www.stagestoresinc.com.  It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Code of Ethics and Business Conduct.”  We intend to disclose future amendments to certain provisions of the Code of Ethics, or waivers of such provisions granted to Directors and executive officers, if any, on our website within four business days following the date of such amendment or waiver or as otherwise may be required by the NYSE or the SEC.
 
Non-Accounting Complaints. We have established procedures to enable anyone who has a concern about a violation of the Code of Ethics or any other Company policy to report that concern through normal Company channels or anonymously.  An Anonymous Ethics Hotline is maintained by an independent third party and is available 24 hours a day, 7 days a week.
 
Accounting Complaints.   The Audit Committee has established procedures for (i) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls, or auditing matters, and (ii) the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters.  These procedures, which are incorporated into the Code of Ethics, (i) set forth a statement about our commitment to comply with the laws; (ii) encourage employees to inform us of conduct amounting to a violation of the applicable standards; (iii) describe prohibited conduct; (iv) set forth compliance procedures that employees can easily use, including making anonymous complaints; and (v) provide assurances that there will be no retaliation for reporting suspected violations.
 
Policy on Poison Pills. The term “Poison Pill” refers to a type of shareholder rights plan that some companies adopt to provide an opportunity for negotiation during a hostile takeover attempt.  The Board has not adopted a Poison Pill.  However, as we are a Nevada corporation, our Articles of Incorporation provide that we have expressly elected to be governed by Chapter 78 of the Nevada Revised Statutes (“NRS”) with respect to the acquisition of a controlling interest in the Company.  NRS 78 provides that a person who seeks to acquire a “Controlling Interest” (20% or greater) in a Nevada corporation will only obtain such voting rights in the shares acquired (the “Control Shares”) as are granted
 
 
by a vote of the holders of a majority of the remaining voting power of the Company at a special or annual meeting of the shareholders.  In addition, NRS 78 provides that the Company may redeem not less than all of the Control Shares at the average price of the Control Shares if the Control Shares are not granted full voting rights by the shareholders.
 
 
Board Meetings.  The Board held four regular meetings and four special meetings during our 2010 Fiscal Year.  During our 2010 Fiscal Year, no current Director attended fewer than 75% of the aggregate of the total number of meetings of the Board and of meetings held by committees of the Board on which he or she was a member during the time he or she was a Director.  In addition to regularly scheduled meetings, a number of Directors were involved in numerous informal meetings with management, offering valuable advice and suggestions on a broad range of corporate matters.
 
Executive Sessions (Meetings of Independent Directors). As described in the Governance Guidelines, the Independent Directors meet in regularly scheduled executive sessions without employees and non-Independent Directors present.
 
Annual Meeting. It is the Board’s policy that Directors should attend our annual meeting of the shareholders absent exceptional cause.  Last year, all Directors attended the annual meeting of shareholders except for Ms. Greene and Mr. Hesterberg, who were not Directors at the time.
 
 
The Board has the following standing committees: Corporate Governance and Nominating, Audit and Compensation.  Each committee operates under a written charter that is periodically reviewed by the respective committee and the Corporate Governance and Nominating Committee.  The following table provides information concerning the independence of our Directors and the current membership of each committee.
 
Director
Board
Corporate
Governance and
Nominating
Committee
Audit
Committee
Compensation
Committee
Mr. Barocas (I)
X
 
X
X
Mr. Glazer (I)
X
      X (C)
 
X
Ms. Greene (I)
X
 
X (ACFE)
X
Mr. Hall
X
     
Mr. Hesterberg (I)
X
X
 
X
Mr. Montgoris (I)
      X (C)
 
X (ACFE)
 
Mr. Schwartz (I)
X
X
X (C)(ACFE)
 
Ms. Turpin (I)
X
X
 
      X (C)
____________________________________________________
 
(I)
The Director is an Independent Director.
(C)
The Director is the Chairman.
(ACFE)
The Director is an Audit Committee Financial Expert.
 
 
In General.  The members of the Corporate Governance and Nominating Committee are Michael Glazer (Chairman), Earl Hesterberg, David Schwartz and Cheryl Nido Turpin, all of whom are Independent Directors.  The Committee’s primary purposes are (i) to develop, maintain and review the Governance Guidelines and propose changes to the Governance Guidelines as corporate governance developments warrant, (ii) to consider any Director candidates recommended by shareholders, (iii) to identify, recruit and recommend potential candidates for nomination as Directors to the Board consistent with criteria approved by the Board, and to nominate Directors for membership on Board committees, (iv) to evaluate the overall performance of the Board, the committees of the
 
 
Board, the Directors and management, and (v) to report annually to the Board on the status of the Chief Executive Officer’s succession plan.  The Committee assists the Board in fulfilling its corporate governance and oversight responsibilities by reviewing corporate governance issues that may be brought before the Board, by exercising oversight over the Governance Guidelines, by recommending qualified individuals for nomination as Directors and reviewing their performance, and by reviewing applicable laws and regulations related to corporate governance matters.  Annually, the Committee evaluates the overall performance of the Board and the Governance Guidelines.  Periodically, the Committee reviews the compensation paid to the Directors.  An annual performance evaluation of the Committee is conducted by the Board and the members of the Committee. The Committee met four times during our 2010 Fiscal Year.
 
Corporate Governance and Nominating Committee Charter. The Corporate Governance and Nominating Committee’s Charter is posted on our website at www.stagestoresinc.com. It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “CG&NC Charter”.
 
Evaluation of the Chairman, the Board, Board Committees and Individual Directors. The Corporate Governance and Nominating Committee is responsible for establishing the evaluation criteria and implementing the process for the annual evaluation of the Chairman, the Board, the Board Committees and the individual Directors.  Each Director annually evaluates the Chairman, the Board, the Board Committees and the other Directors.  With respect to the Chairman, the Board and the Board Committees, the evaluations are of their overall performance as a whole and the Committee considers specific areas in which the Directors believe a better contribution could be made.  The results of the evaluations of the Chairman, the Board and the Board Committees are reported to the entire Board by the Chairman.  With respect to the evaluation of individual Directors, the purpose of the evaluation is to increase the corporate governance effectiveness of the Board, not to target individual Directors.  The results of the individual Director evaluations are communicated to the respective Directors by the Chairman or his designee and, in the case of the Chairman, by outside counsel.
 
Evaluation of the Guidelines, Committee Charters, Corporate Governance Policies and Related Party Transactions.  With input from the other Directors, the Corporate Governance and Nominating Committee reports annually to the Board on its evaluation of the Governance Guidelines, the Committee charters, any other corporate governance policies, and any related party transactions (transactions involving the Company and any executive officer, Director, employee or their affiliates and immediate family members).
 
Director Qualifications; Process for Identifying and Evaluating Nominees. Nominees for Director must possess the following minimum qualifications: broad experience, diversity (differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity), wisdom, integrity, the ability to make independent analytical inquiries, an understanding of our business environment, and a willingness to devote adequate time to Board duties.  The Corporate Governance and Nominating Committee is responsible for assessing the appropriate balance of skills and qualifications required of Directors.  In identifying and evaluating nominees for Director, including nominees recommended by shareholders, the Corporate Governance and Nominating Committee will implement such processes as it deems appropriate including, in its sole discretion, retaining a third party or third parties to identify or evaluate or assist in identifying or evaluating potential nominees.  However, at a minimum, each nominee for Director must (i) meet the minimum qualifications set forth above, (ii) have at least one interview with the Corporate Governance and Nominating Committee and with any other Board member who requests an interview, and (iii) complete and sign a Director and Executive Officer Questionnaire in a form deemed appropriate by the Board prior to his or her nomination to the Board.  Each Director must no less than annually complete and sign a Director and Executive Officer Questionnaire in a form deemed appropriate by the Board.  In the event any information contained on a Director’s most recent Director and Executive Officer Questionnaire becomes incomplete or inaccurate, it is the responsibility of the Director to provide complete and accurate information to the Corporate Governance and Nominating Committee within thirty days. When formulating its Director recommendations, the Committee will also consider any advice and recommendations offered by our CEO and any other members of the Board.
 
Diversity.  The Board endeavors to have a Board representing a range of experience in business and in other areas that are relevant to the Company’s activities. The goal of the Corporate Governance and Nominating Committee is to achieve a Board that, as a whole, provides effective oversight of the management and business of the Company, through, among other things, diversity (differences of viewpoint, professional experience, education, skill and other individual qualities and attributes that contribute to the Board’s heterogeneity).  This policy with respect to the consideration of diversity in identifying Director nominees is implemented, and its effectiveness
 
 
assessed, annually by both the Board and the Corporate Governance and Nominating Committee as part of the Director nomination process.
 
Consideration of Shareholder Nominees. When formulating its Director recommendations, the Corporate Governance and Nominating Committee will also consider any written recommendations received from our shareholders identifying the nominee and stating his or her qualifications.  The Committee evaluates all nominees for Director in the same manner regardless of the source of the recommendation.  For the Annual Meeting of Shareholders in 2012, recommendations for Director nominees must be submitted in writing by Friday, December 30, 2011 to the Corporate Governance and Nominating Committee, c/o Edward J. Record, Secretary, Stage Stores, Inc., 10201 Main Street, Houston, Texas 77025, and must include the names of such nominees, together with their qualifications for service as a Director of the Company.
 
Succession Planning.  The Governance Guidelines require (i) the Corporate Governance and Nominating Committee to make an annual report to the Board on emergency as well as expected CEO succession planning and (ii) the CEO to prepare, on a continuing basis, a short-term succession plan which delineates a temporary delegation of authority to certain officers of the Company, if all or a portion of the executive officers of the Company should unexpectedly become unable to perform their duties.  The short-term succession plan will be in effect until the Board has the opportunity to consider the situation and take action, when necessary.
 
Consultants.  The Corporate Governance and Nominating Committee has the authority to retain, from time to time and at our expense, search firms and other consultants to assist it in identifying and recruiting potential directors for nomination, in evaluating director compensation, and to otherwise carry out its responsibilities and duties and to approve the search firm or other consultant’s fees and other retention terms.
 
Engagement of Compensation Consultant-Director Compensation.  The Corporate Governance and Nominating Committee (i) has the authority to retain, from time to time and at our expense, a professional compensation consulting firm to review our Director compensation program, and (ii) has selected and engaged Hay Group, a leading human resource and compensation consulting firm, as its independent consultant to advise it on Director compensation.  Likewise, the decision to retain a consultant is at the sole discretion of the Corporate Governance and Nominating Committee and the consultant works at the direction of the Corporate Governance and Nominating Committee.  Since 2005, Hay Group has been engaged from time to time by both the Corporate Governance and Nominating Committee and management for professional compensation consulting with respect to compensation of our Directors.
 
Compensation of Directors; Role of Compensation Consultant in Determining or Recommending the Amount or Form of Director Compensation. It is the responsibility of our Corporate Governance and Nominating Committee to recommend to our Board alternative forms of Director compensation. Our management reports at least once a year to the Corporate Governance and Nominating Committee on the status of our Director compensation in relation to the compensation of directors of our Peer Group. With the assistance of Hay Group as its compensation consultant, the Corporate Governance and Nominating Committee periodically evaluates Director compensation to ensure that our Directors are compensated in a manner consistent with those of our Peer Group.  Changes in Director compensation, if any, are recommended by the Corporate Governance and Nominating Committee, but must be approved by our Board after a full discussion.
 
 The nature and role of Hay Group’s assignment with respect to Director compensation and its interaction with the Chairman of the Corporate Governance and Nominating Committee is essentially the same as it is with the Compensation Committee in the case of executive officer compensation.  However, Hay Group only attends meetings of the Corporate Governance and Nominating Committee that involve Director compensation, which is generally one meeting a year.
 
 
In General.  The members of the Audit Committee are David Schwartz (Chairman), Alan Barocas, Gabrielle Greene and William Montgoris, all of whom are Independent Directors.  The Committee’s primary purposes are to (i) assist Board oversight of (a) the integrity of the Company’s financial statements, (b) the Company’s compliance with legal and regulatory requirements, (c) the Company’s independent auditor’s qualifications and independence, and (d) the performance of the Company’s internal audit function and independent auditors, and (ii) prepare an Audit Committee Report as required by the SEC to be included in the Company’s annual proxy statement.  The Committee’s primary responsibilities and duties are (i) to monitor the integrity of our financial process and systems of internal controls regarding finance, accounting and legal compliance, (ii) to select, retain, terminate, determine
 
 
compensation and oversee the work of our independent registered public accounting firm, (iii) to ensure the independence and monitor the performance of the our independent registered public accounting firm and the performance of our internal auditing department, (iv) to provide an avenue of communication between our independent registered public accounting firm and our internal auditing department, and (v) to provide an avenue of communication among the independent registered public accounting firm, our management, our internal auditing department and the Board. An annual performance evaluation of the Audit Committee is conducted by the Board and the members of the Committee.  The Committee met eleven times during our 2010 Fiscal Year.
 
Authority to Engage Advisors and to Conduct Independent Investigations.  The Audit Committee has the authority to engage, at the Company’s expense, independent counsel and other advisers it determines necessary to carry out its duties.  The Committee has the authority to conduct any investigation appropriate to fulfilling its responsibilities and duties, and it has direct access to our independent registered public accounting firm as well as anyone in the Company.
 
Audit Committee Charter. The Audit Committee’s Charter is available on our website at www.stagestoresinc.com.  It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Audit Committee Charter.”
 
Audit Committee Financial Expert.  The Board has determined that Ms. Greene and Messrs. Montgoris and Schwartz are Audit Committee Financial Experts, as that term is defined by the SEC.
 
Audit Committee Report.  The Audit Committee Report is on page 65 of this Proxy Statement.
 
 
In General.  The members of our Compensation Committee are Cheryl Nido Turpin (Chair), Alan Barocas, Michael Glazer, Gabrielle Greene and Earl Hesterberg, all of whom are Independent Directors.  It is anticipated that Mr. Hesterberg will become Chairman of the Compensation Committee after the Annual Meeting if he is reelected. The primary purpose of the Compensation Committee is to administer the cash salary, bonus and other incentive compensation programs for the current and future Executive Officers of the Company, as the term Executive Officer is defined in the Committee’s Charter.  In addition, the Committee’s purposes include the following: (i) review and approve corporate goals and objectives relevant to CEO compensation, evaluate the CEO’s performance in light of those goals and objectives and, either as a committee or together with the other Independent Directors, determine and approve the CEO’s compensation level based on this evaluation, (ii) make recommendations to the Board with respect to non-CEO executive officer compensation, and incentive-compensation and equity-based plans that are subject to Board approval, and (iii) prepare a Compensation Committee Report and/or such other disclosure as may be required by applicable SEC rules or regulations.
 
An annual performance evaluation of the Compensation Committee is conducted by the Board and the members of the Committee. The Committee met nine times during our 2010 Fiscal Year.
 
Compensation Committee Charter. The Compensation Committee’s Charter is available on our website at www.stagestoresinc.com.  It can be accessed by clicking “Investor Relations”, then “Corporate Governance”, and then “Compensation Committee Charter.”
 
Compensation Committee Report.  The Compensation Committee Report is on page 40 of this Proxy Statement.
 
Compensation and Compensation Principles. For a discussion of executive officer compensation and compensation principles, please see “Compensation of Directors and Executive Officers-Compensation Discussion and Analysis” and the compensation tables and narrative discussions that follow beginning on page 19 of this Proxy Statement.
 
Processes and Procedures for Executive Officer Compensation.  The primary responsibilities and duties of the Compensation Committee are as follows: (i) review and evaluate the performance and approve the compensation of our executive officers, (ii) review and approve the terms and conditions of written employment agreements for our executive officers, (iii) provide oversight of all cash compensation, equity compensation, benefits and perquisites for the entire officer population, (iv) review and monitor equity incentive plans as well as any pension, profit sharing and benefit plans, (v) oversee the Company’s compensation policies and practices for all employees, including non-executive officers, so that they do not create risks that are reasonably likely to have a
 
 
material adverse affect on the Company, and (vi) oversee the Board’s annual performance evaluation of the Company’s CEO using a process consistent with that set forth in the Governance Guidelines.
 
The Compensation Committee meets as frequently as circumstances require, but typically meets at least four times per year.  Each meeting held in-person allows time for an executive session in which the Committee and others specifically requested by the Committee (such as outside consultants) have an opportunity to directly discuss all executive compensation issues without the presence of management.  The Committee reviews compensation analyses prepared by an independent compensation consultant and by management and assesses program design and recommendations for individual executives against these strategies. The Committee recommends our CEO’s compensation to the Board, reviews and discusses recommendations for other senior executives with our CEO and recommends final pay packages to the Board.  The Committee also reviews overall program design and total costs compared to approved strategies.
 
The Compensation Committee believes that having the input of management is important to the overall effectiveness of our executive compensation program. Our CEO and our Executive Vice President, Human Resources (“EVP Human Resources”) are the primary representatives of management who interact with the Committee. The Committee seeks input from our CEO and our EVP Human Resources regarding the performance of our executive team and individual compensation levels (within parameters approved by the Committee) and also seeks recommendations on various executive compensation awards (e.g., new hire equity grants).  In addition, our CEO and our EVP Human Resources regularly attend Committee meetings (except for executive sessions) to participate in the presentation of materials and discussion of management’s point of view regarding compensation issues.
 
Our CEO is not permitted to be present during deliberations and voting regarding his compensation. While our CEO may be present during deliberations and voting on the compensation of other executive officers, our CEO may not vote on their compensation.
 
All base salary, bonus compensation and equity awards, regardless of the amount and the number of shares, at the Executive Vice President level and above must be approved by the Board.  The Board has granted our CEO the authority (i) to determine and modify, in his discretion, the base salary and bonus compensation of employees of the Company other than executive management (Executive Vice Presidents and above) subject to a maximum base salary of $400,000 and a maximum bonus target of 50% with respect to any single employee in any single calendar year, and (ii) to award up to 5,000 Performance Shares, SARs, shares of Restricted Stock, Stock Options or any other equity awards permitted under the Company’s Amended and Restated 2001 Equity Incentive Plan, the Company’s Amended and Restated 2008 Equity Incentive Plan, or other equity incentive plan approved by the Company’s shareholders to any single employee in any single calendar year other than executive management.
 
Authority to Engage Compensation Consultants-Executive Officer Compensation.  The Compensation Committee has the authority, in its sole discretion, to retain, from time to time and at the Company’s expense, a professional compensation consulting firm to review our executive officer compensation program, including, but not limited to, a review of our “performance based” compensation programs in light of Section 162(m) of the Internal Revenue Code, and to approve the consulting firm’s fees and other retention terms.  For a discussion of Section 162(m), please see “Tax, Accounting and Other Implications-Deductibility of Executive Compensation” later in this Proxy Statement.
 
The Committee is directly responsible for the appointment, compensation and oversight of the work of any compensation consultant retained by the Committee. The decision to retain a compensation consultant is at the sole discretion of the Committee and the compensation consultant works at the direction of the Committee. The Committee has selected and retained Hay Group as its independent compensation consultant to advise it on executive compensation.  Since 2005, Hay Group has been engaged from time to time by both the Committee and management for professional compensation consulting with respect to compensation of the Company’s executive officers.
 
Role of Compensation Consultant in Determining or Recommending the Amount or Form of Executive Officer Compensation. On an annual basis, Hay Group prepares competitive pay analyses regarding both our peer group of companies, as identified on page 24 of this Proxy Statement (the “Peer Group”), and the broader market; it provides information on our performance compared to the Peer Group and to our performance group of companies, as identified on page 25 of this Proxy Statement (the “Performance Group”); and it advises the Compensation Committee on the level and design of compensation programs for our executive officers.
 
 
The Chairman of the Compensation Committee works directly with Hay Group to determine the scope of the work needed to assist the Committee in its decision making processes.  When requested, Hay Group attends Committee and Board meetings and the Committee’s executive sessions to present and discuss market data and program design alternatives, and to provide advice and counsel regarding decisions facing the Committee.  Occasionally, Hay Group also meets individually with the Chairman of the Committee prior to Board meetings to discuss findings and issues.  In addition, with the agreement and approval of the Committee, Hay Group works with our management team on broad-based compensation design and issues and links them to our overall executive compensation strategy.  The Committee does not believe that the work of Hay Group has raised any conflict of interest.
 
Authority to Engage Independent Legal Counsel and Other Advisers.  The Compensation Committee has the authority, in its sole discretion, to retain, from time to time and at the Company’s expense, independent legal counsel and other advisers.  The Committee is directly responsible for the appointment, compensation and oversight of the work of any independent legal counsel and other advisers retained by the Committee.
 
Compensation Committee Interlocks and Insider Participation.  None of the members of the Compensation Committee has ever been an officer or an employee of the Company or its subsidiary.  None of our executive officers serves on any board of directors with any of our Directors other than on our Board in the case of Mr. Hall, our President and CEO.
 
 
In General.  Shareholders and other interested parties may send written communications to the Board and, if applicable, to individual Directors, including the Independent Directors, by mail, facsimile or courier to our principal executive offices.  All correspondence that we receive will be relayed to the Board or, if applicable, to the individual Director.  Communications should be addressed in care of Edward Record, Secretary, Stage Stores, Inc., 10201 Main Street, Houston, Texas 77025, or sent by facsimile to Mr. Record at (713) 669-2709.
 
Deadline for Shareholder Proposals for Inclusion in Next Year’s Proxy Statement.  Shareholder proposals intended to be presented at the 2012 Annual Meeting of Shareholders and included in our proxy statement and form of proxy relating to that meeting pursuant to Rule 14a-8(e) under the Securities Exchange Act of 1934 must be received in writing by us at our principal executive offices by Friday, December 30, 2011.  Proposals should be addressed to Edward Record, Secretary, Stage Stores, Inc., 10201 Main Street, Houston, Texas 77025.
 
Other Shareholder Proposals for Presentation at Next Year’s Annual Meeting.  For any shareholder proposal that is not submitted to us for inclusion in next year’s proxy statement, but is instead sought to be presented by the shareholder directly at the 2012 Annual Meeting, Rule 14a-4(c) under the Securities Exchange Act of 1934 permits management to vote proxies in its discretion if we: (i) receive written notice of the proposal before the close of business on Tuesday, March 15, 2012, and advise shareholders in the 2012 Proxy Statement about the nature of the matter and how management intends to vote on the matter, or (ii) do not receive written notice of the proposal before the close of business on Tuesday, March 15, 2012.  Notices of intention to present proposals at the 2012 Annual Meeting should be addressed to Edward Record, Secretary, Stage Stores, Inc., 10201 Main Street, Houston, Texas 77025.
 
 
 
Security Ownership of Certain Beneficial Owners
 
The following table provides information regarding beneficial ownership of our common stock by any person or entity known by us to be the beneficial owner of more than five percent (5%) of our outstanding common stock as of April 12, 2011. As of April 12, 2011, there were 36,114,999 shares of our common stock outstanding.
 
Name and Address
 
Number of Shares Beneficially Owned
 
Percent of Class
 
           
Wellington Management Company, LLP
 
3,946,928
 
10.93%
(1)
280 Congress Street
         
Boston, MA 02210
         
           
Dimensional Fund Advisors LP
 
3,087,004
 
8.55%
(2)
Palisades West, Building One
         
6300 Bee Cave Road
         
Austin, TX 78746
         
           
BlackRock, Inc.
 
2,897,055
 
8.02%
(3)
40 East 52nd Street
         
New York, NY 10022
         
           
Invesco Ltd.
 
2,175,785
 
6.02%
(4)
1555 Peachtree Street NE
         
Atlanta, GA 30309
         
           
The Vanguard Group, Inc.
 
1,860,855
 
5.15%
(5)
100 Vanguard Blvd.
         
Malvern, PA 19355
         
__________________________
 
(1)
The information is based on the Schedule 13G/A filed with the SEC on February 14, 2011 by Wellington Management Company, LLP reporting on beneficial ownership as of December 31, 2010.  According to the filing, the reporting person has shared voting power with respect to 2,906,953 shares and shared investment power with respect to 3,946,928 shares.
 
(2)
The information is based on the Schedule 13G/A filed with the SEC on February 11, 2011 by Dimensional Fund Advisors LP reporting on beneficial ownership as of December 31, 2010.  According to the filing, the reporting person has sole voting power with respect to 3,016,906 shares and sole investment power with respect to 3,087,004 shares.
 
(3)
The information is based on the Schedule 13G/A filed with the SEC on February 8, 2011 by BlackRock, Inc. reporting on beneficial ownership as of December 31, 2010.  According to the filing, the reporting person has sole voting power with respect to 2,897,055 shares and sole investment power with respect to 2,897,055 shares.
 
(4)
The information is based on the Schedule 13G filed with the SEC on February 11, 2011 by Invesco Ltd reporting on beneficial ownership as of December 31, 2010.  According to the filing, the reporting person has sole voting power with respect to 2,175,785 shares and sole investment power with respect to 2,175,785 shares.
 
(5)
The information is based on the Schedule 13G filed with the SEC on February 9, 2011 by The Vanguard Group, Inc. reporting on beneficial ownership as of December 31, 2010.  According to the filing, the
 
 
 
reporting person has sole voting power with respect to 56,639 shares, sole investment power with respect to 1,804,216 shares and shared investment power with respect to 56,639 shares.
 
Security Ownership of Management
 
The following table provides information regarding the beneficial ownership of our common stock by each Named Executive Officer listed in the 2010 Summary Compensation Table and each of our Directors, as well as the number of shares beneficially owned by all of our Directors and executive officers as a group as of April 12, 2011.  Other than in the case of Mr. Glazer, as footnoted, none of the shares are pledged as security. As of April 12, 2011, there were 36,114,999 shares of our common stock outstanding.  The table also provides information about stock options exercisable within 60 days and Deferred Stock Units (“DSUs”) credited to the accounts of each Director and Named Executive Officer under various compensation plans.  Unless otherwise indicated by footnote, individuals have sole voting and investment power.
 
Name
 
Common Stock
 
Restricted Stock (1)
 
Stock Options Exercisable Within 60 Days
 
Deferred Stock Units (2)
 
Percent of Class
Andrew T. Hall
 
 101,848
 
 116,000
 
 389,500
 
 -
 
1.7
%
Edward J. Record
 
 47,595
 
 66,700
 
 181,250
 
 -
 
(3)
 
Oded Shein
 
 -
 
 14,700
 
 -
 
 -
 
(3)
 
Richard A. Maloney
 
 -
 
 96,700
 
 97,500
 
 -
 
(3)
 
Ron D. Lucas
 
 43,923
 
 5,700
 
 113,764
 
 -
 
(3)
 
Steven L. Hunter
 
 -
 
 23,008
 
 23,250
 
 -
 
(3)
 
Alan J. Barocas
 
 18,769
 
 23,811
 
 -
 
 -
 
(3)
 
Michael L. Glazer
 
 72,973
 (4)
 23,811
 
 16,875
 
 -
 
(3)
 
Gabrielle E. Greene
 
 -
 
 4,086
 
 -
 
 -
 
(3)
 
Earl J. Hesterberg
 
 -
 
 4,608
 
 -
 
 -
 
(3)
 
William J. Montgoris
 
 16,882
 
 23,811
 
 50,625
 
 -
 
(3)
 
David Y. Schwartz
 
 600
 
 23,811
 
 7,693
 
 10,751
 
(3)
 
Cheryl Nido Turpin
 
 5,846
 
 10,839
 
 -
 
 -
 
(3)
 
                       
All Directors and Executive Officers as a group (15 persons)
 
 328,780
 
 446,335
 
 970,570
 
 10,751
 
4.7
%
_____________________________
 
(1)
Restricted stock was granted under our Amended and Restated 2001 Equity Incentive Plan.
 
(2)
DSUs are held under our 2003 Amended and Restated Non-Employee Director Equity Compensation Plan.  Each DSU is equal in value to a share of our stock, but does not have voting rights.  Individuals do not have investment power with respect to DSUs.  The number of DSUs credited to a Director’s account will be adjusted, as appropriate, to reflect any stock split, any dividend paid in cash and any dividend payable in shares of our stock.  At the election of the Director upon termination of his or her service as a Director, the DSUs will be distributed to the Director either (i) in cash, or (ii) in shares of our stock.
 
(3)
Ownership is less than one percent of our outstanding common stock.
 
(4)
All shares are pledged as security in a margin account.
 
Stock Ownership by Executive Officers
 
Our Board believes that an officer who has reached the level of Executive Vice President or above should be a shareholder and should have a financial stake in the Company.  On March 29, 2011, the Board adopted a Stock Ownership and Retention Policy for Senior Management (the “Policy”).  Among the provisions of the Policy are the following:
 
 
1. Target Ownership Level. On and after the later of (i) the fifth anniversary of his or her appointment as an Executive Vice President or higher of the Company, or (ii) March 29, 2016 (i.e., the fifth anniversary of the effective date of this Policy)(in either case, the “Target Date”), each executive officer of the Company must have developed and must thereafter maintain a stock ownership position in the Company (the “Target Ownership Level”) with a minimum value (the “Value”) as follows:
 
·  
A Target Ownership Level for the CEO having a Value equal to three times his or her base salary; and
 
·  
A Target Ownership Level for all other Executive Vice Presidents or higher having a Value equal to one times his or her base salary.
 
2.  Eligible Stock.  In determining whether the executive officer has achieved his or her Target Ownership Level, the executive officer may include the Value of any Stock owned outright or beneficially owned (e.g., trusts) and shares held in qualified and nonqualified benefit plans, in any event acquired by him or her (i) in open market purchases, (ii) from vested Restricted Stock, (iii) from net shares held following the exercise of Stock Options and Stock Appreciation Rights, (iv) from earned Performance Shares, and (v) from the purchase of Stock in any deferred compensation plan. The executive officer may also include the share value equivalents of gains on vested but unexercised Stock Options and Stock Appreciation Rights. Individual and joint holdings of Stock with an executive officer’s spouse shall count toward achieving the Target Ownership Level.
 
3.  Determination of Stock Value.  For purposes of assessing compliance with this Policy, the “Value” of Stock means the greater of (i) the then current fair market value (as defined below) of such Stock held of record by an executive officer and his or her spouse, or (ii) the value of the Stock at the time of acquisition. The Compensation Committee may, in its sole discretion, determine the value of Stock other than those referenced in Section 2 above.  For purposes of this paragraph, “fair market value” will mean the closing price of the Stock on the New York Stock Exchange for such date or, if there was no trading of the Stock on such date, for the next preceding date on which there was such trading.
 
 4.Financial Hardship.  In the event of a Financial Hardship (e.g., illness, tuition, mortgage), an executive officer, with the prior written consent of the Compensation Committee, may sell any Stock acquired by him or her (other than from the purchase of Stock in any Company sponsored deferred compensation plan) to satisfy the Target Ownership Level requirement of this Policy.
 
Stock Ownership by Directors
 
Our Board believes that Directors should be shareholders and have a financial stake in the Company in an amount that a Director deems appropriate. However, each Director must develop and maintain a stock position in the Company with an original investment of at least four times the Annual Retainer, which is currently $40,000 for Independent Directors (the “Original Investment”), within three years of the date of the Director’s initial election to the Board. In determining whether the Director has achieved the Original Investment, the Director can include (i) a Director’s tax basis in any stock acquired by the Director in open market purchases, (ii) a Director’s tax basis in any stock acquired by the Director through the exercise of Stock Options or the vesting of Restricted Stock and (iii) the amount of any Director fees which the Director has designated to be used for the acquisition of restricted stock or Deferred Stock Units under our 2003 Amended and Restated Non-Employee Director Equity Compensation Plan.  As of the date of this Proxy Statement, all of our Directors have met or exceeded the Original Investment requirement, with the exception of (i) Ms. Turpin, who was appointed to the Board on March 25, 2010 and who is not standing for reelection, (ii) Mr. Hesterberg, who was appointed to the Board on July 1, 2010 and has until July 1, 2013 to meet the Original Investment requirement, and (iii) Ms. Greene, who was appointed to the Board on September 21, 2010 and has until September 21, 2013 to meet the Original Investment requirement.
 
For additional information concerning the stock ownership of our Directors as of April 12, 2011, please see the table in “Stock Ownership of Certain Beneficial Owners and Management-Security Ownership of Management”, above.
 
Hedging by Employees and Directors; Anti-Hedging Policy
 
In General.  Section 955 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, amends Section 14 of the Exchange Act by adding a new Section 14(j) Disclosure of Hedging by Employees and Directors that directs the SEC to issue rules requiring that publicly-traded companies disclose in their proxy statements whether any employee or director, or any designee of an employee or a director, is permitted
 
 
16

 
 
to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of equity securities:
 
·  
granted to the employees or directors by the issuer as part of the compensation of the employee or director; or
 
·  
held, directly or indirectly, by the employee or director.
 
As of the date of this Proxy Statement, the SEC has not issued rules with respect to new Section 14(j).
 
Anti-Hedging Policy.  In response to new Section 14(j) and subject to amendment once the SEC has issued rules in this regard, the Board has adopted an Anti-Hedging Policy (the “Policy”) which provides that any employee or Director of the Company, or any designee of an employee or a Director of the Company shall not be permitted to purchase financial instruments (including prepaid variable forward contracts, equity swaps, collars, and exchange funds) that are designed to hedge or offset any decrease in the market value of the Company’s equity securities:
 
·  
granted to the employees or Directors by the Company as part of the compensation of the employee or Director; or
 
·  
held, directly or indirectly, by the employee or Director.
 
 
Transactions with Related Persons
 
On November 3, 2008, we entered into a Consulting Agreement with James Scarborough, who retired as our Chief Executive Officer as of that date.  The term of the Consulting Agreement began on November 3, 2008 and ended on June 10, 2010 (the “Term”).  We paid Mr. Scarborough a retainer of $350,000 per Term year during the Term of the Consulting Agreement for an aggregate total of approximately $564,000 ($126,539 in Fiscal 2010).  As Mr. Scarborough was a Named Executive Officer at the time, we filed the Consulting Agreement as an Exhibit to our Annual Report on Form 10-K for the fiscal year ended January 31, 2009. The Consulting Agreement is incorporated herein by reference.
 
Effective January 1, 2011, Alan Barocas, one of our Directors, accepted the position of Senior Executive Vice President of Leasing at General Growth Properties, Inc. (“General Growth”), which is based in Chicago, Illinois.  Because in the ordinary course of business the Company leases six of its 786 store locations from General Growth, because General Growth may manage other store locations leased by the Company and because Mr. Barocas is now an employee of General Growth, we conducted an independence analysis to determine whether Mr. Barocas remains an Independent Director, as defined in the Governance Guidelines. We reviewed information with respect to payments made by the Company to General Growth in each of the last three years (approximately $1.2 million per year); we spoke with Mr. Barocas; and we reviewed General Growth's 2009 Form 10-K and 2010 Form 10-K with respect to General Growth’s consolidated gross revenues (in excess of $2.8 billion in 2008, 2009 and 2010).  As a result, the Board concluded that Mr. Barocas continues to meet the NYSE definition of Independent Director.  The Board also concluded that Mr. Barocas did not have a direct or indirect material interest in the Company’s leasing of store locations from General Growth during Fiscal 2010.  The Board has directed that Mr. Barocas and management report to the Corporate Governance and Nominating Committee and the Board, on no less than a quarterly basis, as to whether the service of Mr. Barocas, as both a Director of the Company and an employee of General Growth, is such that (i) he is no longer an Independent Director and (ii) he may have a direct or indirect material interest in the Company’s leasing of store locations from General Growth during Fiscal 2011.
 
Other than those described above to the extent they involve a direct or indirect material interest, those related to their employment, in the case of executive officers, and those related to their service on our Board, in the case of non-employee Directors, there were no transactions, since the beginning of our last fiscal year, or any currently proposed transaction, in which we were or will be made a participant and in which any Director, nominee for Director or executive officer, or any immediate family member of a Director, nominee for Director or executive officer had or will have a direct or indirect material interest.
 
 
Review, Approval or Ratification of Transactions with Related Persons
 
In General. Article X. Related Party, Other Material Transactions and Loans of the Governance Guidelines (“Governance Guideline Article X”) and our written Related Party and Material Transactions Policy contain our policies and procedures for the review, approval or ratification of any transaction required to be reported in this Proxy Statement.  They provide as follows:
 
“Related Party Transactions.  No officer, director, or employee of the Company or any of its affiliate or subsidiary companies (collectively, the “Companies”) shall enter into any agreement, arrangement or contract with any person or entity pursuant to which any of the Companies may be obligated to:
 
 
(i)
pay any money to a “Related Party,” or
 
 
(ii)
assign or lease any property belonging to any of the Companies to a Related Party, or
 
 
(iii)
allow any Related Party to use any property belonging to any of the Companies,
 
 
if the aggregate fair market value of any monies paid to the Related Party and the property assigned or leased to or used by the Related Party exceeds Five Thousand Dollars ($5,000), without the express, prior, written approval of the Company’s Board of Directors.  The term “Related Party” includes:
 
 
(i)
any person who is an officer or director of any of the Companies (each, an “Insider”); and
 
 
(ii)
any person who is a child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of a director, executive officer or nominee for director, and any person (other than a tenant or employee) sharing the household of such director, executive officer or nominee for director (each, an “Immediate Family Member”); and
 
 
(iii)
any entity for which an Insider or Immediate Family Member is an attorney, broker, commissioned sales agent, director, manager, officer, partner or profits participant; and
 
 
(iv)
any entity in which an Insider or Immediate Family Member has beneficial ownership of five percent (5%) or more of the voting securities of the entity.
 
Other Material Transactions.  No officer, director, or employee of the Company or any of its affiliate or subsidiary companies (collectively, the “Companies”) shall enter into any agreement, arrangement or contract with any person or entity or authorize any transaction which the Company may be required to disclose to the Securities and Exchange Commission unless the agreement, arrangement, contract or transaction previously has been approved by the Company’s Board of Directors.
 
Audit Committee Approval.  Notwithstanding anything to the contrary, if required by the Securities and Exchange Commission, New York Stock Exchange, or other regulatory authority, any transaction between the Company and a Related Party, regardless of the amount involved, shall be approved by the Audit Committee.”
 
Loans to Directors, Executive Officers and Their Immediate Family Members.  Governance Guideline Article X provides that the Company shall not, directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for or guarantee the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any Director, executive officer, or Immediate Family Member of any Director or executive officer.  As used in the Governance Guidelines and this Proxy Statement, “executive officer” means our President, chief operating officer, principal financial officer, principal accounting officer (or, if there is no such accounting officer, the controller), any vice president in charge of a principal business unit, division or function (such as marketing, merchandising, administration or finance), any other officer who performs a policy-making function, or any other person who performs similar policy-making functions for us, in all cases including officers of our subsidiaries if they perform policy-making functions for us.
 
 
 
Executive Summary
 
Financial Highlights. The Company’s strategy for 2010 was to build on its 2009 achievements and to pursue sales and earnings growth as the economy stabilized.
 
·  
Reflecting the successful implementation of our business strategies, total sales for the year increased 2.7% and comparable store sales increased slightly.
 
·  
The gross profit rate for the year grew by 90 basis points and the operating margin rate improved by 80 basis points.  Diluted earnings per share increased 32.0%.
 
·  
As of year-end, the Company had no borrowings on its $250.0 million senior secured revolving credit facility and had cash, net of debt, of approximately $51.0 million.  Our strong balance sheet and cash flow allowed the Company to increase its quarterly dividend rate by 50%, and to undertake and complete a $25.0 million stock repurchase program.
 
·  
For the one-year period ending January 29, 2011, the Company had a total shareholder return (“TSR”) of 16.8%.  Over the three-year period ending January 29, 2011, annualized TSR was 17.2%.
 
Key Changes to Executive Compensation Program During 2010.  During 2010, with Hay Group’s assistance, we conducted a full review of our executive compensation philosophy to ensure that the program supports the following key objectives:
 
·  
motivate, attract, and retain executives who are focused on the Company’s short and long-term business objectives; and
 
·  
align our program with shareholder interests.
 
Based on the results of this review, we made the following important changes that we believe support good governance practices:
 
·  
Eliminated gross-ups
 
o  
The provision that previously provided for excise tax gross-up payments upon a Change in Control has been eliminated in all current employment agreements and will not be contained in future employment agreements.
 
o  
In addition, the Company will no longer provide a gross-up on the value of the estate/financial planning perquisite.
 
·  
Adopted ownership guidelines for the executive team – 3x base salary for the CEO and 1x base salary for the other executive officers, to be achieved within 5 years.  The Compensation Committee will monitor each executive officer’s progress toward achieving the desired ownership levels
 
·  
Eliminated the cell phone allowance
 
·  
Eliminated medical coverage for retirees
 
Overview of 2010 Compensation.  We believe that the Company’s executive compensation program shows strong alignment between pay and performance.  Base salaries are generally at or below the median of market practices, while incentive compensation provides the opportunity for above median pay only if the Company exceeds its targeted performance levels.
 
·  
Base salaries.  In 2009, no increases were made to the base salaries of our Named Executive Officers due to challenging economic conditions.  Based on the improvement in the economy and the performance of the Company, selected increases were granted in 2010 as follows:
 
o  
Mr. Hall’s salary was increased from $750,000 to $800,000.  Based on the competitive analysis conducted by Hay Group, his salary remains at the lower end of the Peer Group.
 
 
o  
Mr. Lucas’ salary was increased from $345,000 to $357,100.
 
o  
Messrs. Record, Maloney and Hunter received salary increases to reflect the changes in the scope of their responsibilities due to their promotions.   Details are shown in the table on page 30.
 
·  
Annual incentives. Our annual incentive (bonus) program balances Company profitability, as expressed in pre-tax earnings, with relative revenue growth performance, measured in comparable store sales versus the Performance Group.
 
o  
For 2010, pre-tax earnings had to be at least $57 million, an improvement of 24.4% over 2009, for the target payout to be earned.  The comparable store sales component (25% of award opportunity) pays at the target level if performance equals or exceeds the median of the Performance Group.
 
o  
Actual performance for 2010 was as follows: pre-tax earnings of $58.9 million and 14.9 percentile on comparable store sales.  Based on this performance, the annual incentive paid out at 87.5% of target.
 
·  
Long-term incentives. The Company’s long-term incentive program uses stock appreciation rights (SARs), Performance Shares and Restricted Stock to reward sustained, multi-year performance.
 
o  
Executives only recognize value from SAR grants if the stock price appreciates from the grant date through the time of exercise.  SARs vest pro rata over a four-year period.
 
o  
Performance Shares measure Company total shareholder return over a three-year period versus the Performance Group. For the 2007-2009 performance cycle (paid in 2010), 35.7% of the target number of shares was earned.  For the 2008-2010 performance cycle (paid in 2011), 114.3% of the target number of shares was earned.
 
o  
Restricted Stock has been used from time-to-time, typically for promotions and new hires and has generally cliff vested at the end of three years.  Subject to the discretion of the Board, it is anticipated that Restricted Stock awarded in the future will generally vest over a four year period (i.e., 25% per year).
 
Our Fiscal 2010 Named Executive Officers
 
This Compensation Discussion and Analysis (“CD&A”) describes the material objectives and principles underlying our compensation policies and decisions and the material elements of the compensation of the following six executive officers during our 2010 Fiscal Year (hereinafter, “Fiscal 2010”):
 
·  
our Chief Executive Officer;
 
·  
our Chief Operating Officer and former Chief Financial Officer;
 
·  
our current Chief Financial Officer; and
 
·  
the next three most highly compensated executive officers other than our Chief Executive Officer, our Chief Operating Officer and former Chief Financial Officer and our current Chief Financial Officer.
 
These individuals are as follows and are collectively referred to in this Proxy Statement as our “Named Executive Officers”:
 
NAMED EXECUTIVE OFFICERS
 
        Executive
Title
Andrew T. Hall
President and Chief Executive Officer
Edward J. Record (1)
Chief Operating Officer
Oded Shein (1)
Executive Vice President, Chief Financial Officer
Richard A. Maloney
Chief Merchandising Officer
Ron D. Lucas
Executive Vice President, Human Resources
Steven L. Hunter
Executive Vice President, Chief Information Officer
 
_________________________
 
(1)  On January 10, 2011, the Company entered into an Employment Agreement with Mr. Shein to serve as Executive Vice President, Chief Financial Officer. Mr. Shein succeeded Mr. Record, who was appointed Chief Operating Officer of the Company in February 2010, but retained the Chief Financial Officer responsibilities while the search for his replacement was underway.
 
This CD&A should be read in conjunction with the compensation tables beginning on page 41 of this Proxy Statement.
 
Overview of Compensation Program
 
The Compensation Committee of our Board (for purposes of this CD&A, the “Committee”) administers the base salary, bonus, long-term incentive and other compensation and benefits programs with regard to our Named Executive Officers as well as our other executive officers.  Its primary responsibilities and duties are set forth in “Information Relating to the Board of Directors and Committees-Compensation Committee-Processes and Procedures for Executive Officer Compensation.” The Committee ensures that the total compensation paid to our Named Executive Officers is fair, reasonable and competitive in relation to our Peer Group and the retail industry in general. The Committee’s recommendations for the total compensation of our Named Executive Officers are subject to the approval of our Board.
 
Compensation Objectives and Principles
 
Objectives.  The objectives of our compensation program are as follows:
 
·  
to enable us to recruit, motivate and retain the executive talent required to successfully manage and grow our business and to achieve our short and long-term business objectives;
 
·  
to maximize the long-term commitment of our executive officers to our success by providing compensation elements that align their interests and our shareholders in that the compensation elements are directly related to our stock performance and other financial metrics that the Committee believes influence the creation of long-term shareholder value;
 
·  
to reward our executive officers upon the achievement of short-term and long-term business objectives and enhanced shareholder value; and
 
·  
to position our compensation packages competitively within our Peer Group.
 
Principles.  The principles of our compensation program are as follows:
 
·  
Compensation arrangements shall emphasize pay-for-performance and encourage retention of those executive officers who enhance our performance;
 
·  
Compensation arrangements shall maintain an appropriate balance between base salary and annual and long-term incentive compensation;
 
·  
Cash incentive compensation plans for our executive officers shall link pay to achievement of goals set in advance by the Committee;
 
·  
The Committee shall set annual and long-term performance goals for our CEO and evaluate his or her performance against those goals on an absolute basis as well as related to the performance of our Peer Group and our Performance Group (currently the Dow Jones Apparel Index);
 
·  
Compensation arrangements shall align the interests of our executive officers with those of shareholders;
 
·  
In the event minimum thresholds for annual and long-term performance goals are not met, incentive compensation related to those goals shall not be paid;
 
·  
It is the policy of our Board that we should not reprice or swap stock options granted to our executive officers, Directors and employees without shareholder approval;
 
·  
The Committee shall meet at least once each year in executive session, without our CEO;
 
·  
Our CEO is not permitted to be present during deliberations and voting regarding his compensation.  While our CEO may be present during deliberations and voting on our other executive officers’ compensation, our CEO makes recommendations, but does not vote on their compensation;
 
·  
The compensation of our CEO and our other executive officers shall be recommended to our Board for final approval by the Committee comprised solely of Independent Directors; and
 
·  
In approving compensation, the recent compensation history of the executive officer, including special or unusual compensation payments, and all forms of compensation to which the executive officer may be entitled, shall be taken into consideration using tally sheets or other comparable tools the Committee deems appropriate.
 
Key Considerations in Setting Compensation
 
In General
 
Based on the foregoing objectives and principles, the Committee has structured our compensation programs to motivate our Named Executive Officers to achieve the business goals set by our Board and to reward them for achieving those goals. The following is a summary of key considerations affecting the setting of compensation for our Named Executive Officers by the Committee. We describe in the section entitled “Committee Actions in Fiscal 2010 Concerning Named Executive Officer Compensation” beginning on page 29 of this Proxy Statement additional considerations that the Committee evaluated in establishing Fiscal 2010 compensation in the context of our performance and the economic environment at the time.
 
Emphasis on Future Pay Opportunity Versus Current Pay
 
The Committee strives to provide an appropriate mix of different compensation elements, including finding a balance between current versus long-term compensation and cash versus equity incentive compensation. Cash payments primarily reward more recent performance and equity awards encourage our Named Executive Officers to continue to deliver results over a longer period of time and serve as a retention tool. The Committee believes that Named Executive Officer compensation should be appropriately weighted on both long-term and short-term Company performance and operating results.
 
Discretion and Judgment
 
With the exception of our Senior Executive Bonus Plan and performance share awards, both of which depend on achieving specific quantitative performance objectives, the Committee does not use formulas in determining the amount and mix of compensation. Thus, the Committee evaluates a broad range of both quantitative and qualitative factors, including reliability in delivering financial and growth targets, performance in the context of the economic environment relative to other companies, a track record of integrity, good judgment, the vision and ability to create further growth and the ability to lead others. For annual equity incentive awards, the Committee primarily considers a Named Executive Officer’s potential for future successful performance and leadership as part of the executive management team, taking into account past performance as a key indicator. In any event, the Committee exercises its discretion and judgment.
 
Significance of Our Results
 
The Committee primarily evaluates our CEO and the other Named Executive Officer’s contributions to our overall performance rather than focusing only on their individual function. The Committee believes that each Named Executive Officer shares the responsibility to support our goals and performance as key members of our leadership team. While this compensation philosophy influences all of the Committee’s compensation decisions, it has the biggest impact on annual equity incentive awards.
 
Compensation Policies and Practices as they Relate to the Company’s Risk Management
 
The Committee, the Board and management do not believe that there are any risks arising from the Company’s compensation policies and practices for the Company’s employees, including non-executive officers, that are reasonably likely to have a material adverse effect on the Company. Our compensation programs emphasize pay-for-performance, are balanced and are focused on the long term. Under this structure, the highest amount of compensation can be achieved through consistent superior performance over sustained periods of time. In addition, a significant percentage of compensation is tied to our long-term performance. This provides strong incentives to manage the Company for the long term, while avoiding excessive risk taking in the short term. Goals and objectives
 
 
reflect a balanced mix of quantitative and qualitative performance measures to avoid excessive weight on a single performance measure. Likewise, the elements of compensation are balanced among current cash payments and equity awards. With limited exceptions, the Committee retains discretion to adjust compensation for quality of performance and adherence to our values. The Committee, the Board and senior management monitor the Company’s compensation policies and practices on an ongoing basis to determine whether the Company’s risk management objectives are being met with respect to incentivizing the Company’s employees. The annual incentive is primarily linked to profitable growth (as opposed to sales) and the Company has a Compensation Recovery Policy that is described in the next paragraph.
 
Compensation Recovery Policy
 
Our Board has adopted a Compensation Recovery Policy for Executive Officers. If our Board determines that an executive officer (an Executive Vice President or above) has engaged in fraudulent or intentional misconduct, the Board may take a range of actions to remedy the misconduct, prevent its recurrence, and impose such discipline on the wrongdoers as would be appropriate. Discipline would vary depending on the facts and circumstances, and may include, without limit, (i) termination of employment, (ii) initiating an action for breach of fiduciary duty, and (iii) if the misconduct resulted in a material inaccuracy in our financial statements or performance metrics, which affect the executive officer’s compensation, seeking reimbursement of any portion of any bonus or other incentive-based or equity-based  compensation paid or awarded to the executive that is greater than would have been paid or awarded if calculated based on the accurate financial statements or performance metrics. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.
 
The Compensation Recovery Policy for Executive Officers provides that notwithstanding anything in it to the contrary, in the event that the Company is required to prepare an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws of the United States, the Company will recover from any current or former executive officer of the Company who received incentive-based compensation (including stock options, stock appreciation rights or any other type of equity awards awarded as compensation) during the 3-year period preceding the date on which the issuer is required to prepare an accounting restatement, based on the erroneous data, in excess of what would have been paid to the executive officer under the accounting restatement.
 
Results of the Most Recent Say-On-Pay Vote
 
Although non-binding, the Committee and the Board will consider the results of the most recent shareholder advisory vote on executive compensation, referred to by the SEC as the “say-on-pay” vote, in determining compensation policies and decisions concerning our Named Executive Officers.
 
Role of Executive Officers in Compensation Decisions
 
The Committee believes that having the input of our management is important to the overall effectiveness of our executive officer compensation program. Our CEO and EVP Human Resources regularly attend Committee meetings (except for executive sessions) to participate in the presentation of materials and discussion of management’s point of view regarding compensation issues. Our CEO annually reviews and evaluates the performance of each Named Executive Officer (other than his own, which is reviewed and evaluated by the Committee). The conclusions reached and recommendations based on these reviews, including related salary adjustments and annual incentive award amounts, are presented to the Committee. The Committee can exercise its discretion in modifying any recommended adjustments or awards to our executive officers.
 
Use of Tally Sheets
 
In addition to the recommendations of our CEO, the Committee reviews tally sheets, which are prepared for each of our Named Executive Officers by our Human Resources Department.  The tally sheets present the Committee with specific dollar amounts for all elements of compensation, showing each Named Executive Officer’s annual total compensation, the individual’s accumulated and outstanding compensation and the benefits to which the Named Executive Officer would be entitled upon various termination events.
 
The Committee uses the tally sheets to ensure that our compensation is reasonable and competitive.  The Committee also uses the tally sheets to evaluate past performance of our Named Executive Officers to determine if our compensation strategy achieved our goals in the past and to align executive compensation with our near and long-term goals.
 
 
Benchmarking Overall Compensation; Our 2010 Peer Group
 
In making overall compensation decisions, the Committee compares each element of total compensation to data from Hay Group’s published survey as well as a peer group of publicly-traded apparel companies listed below (collectively, the “Peer Group”). The Committee initially developed the Peer Group in 2005 in order to benchmark executive compensation at peer companies and to assess the Company’s performance relative to the Peer Group.  The Peer Group is representative of companies that we compete with for business and talent and our annual sales fall within the range of the companies in the Peer Group. The Peer Group is reviewed annually and updated as needed for certain business reasons, such as mergers, acquisitions, etc. In general, the criteria for selecting the companies in the Peer Group are as follows:
 
·  
U.S. based, publicly traded companies in the retail industry;
 
·  
annual sales generally between one-half and two times our annual sales;
 
·  
primarily do business in apparel and/or accessories; and
 
·  
companies from which key talent may be recruited.
 
All of the companies in the Peer Group meet a majority of those criteria.  The members of the Peer Group are as follows:
 
 
· Abercrombie & Fitch Co.
 
· The Children’s Place Retail Stores, Inc.
 
 
· The Men’s Wearhouse, Inc.
 
· American Eagle Outfitters, Inc.
· Christopher & Banks Corporation
 
· New York & Company, Inc.
 
· AnnTaylor Stores Corporation
 
· Collective Brands, Inc.
 
· Pacific Sunwear of California, Inc.
 
· The Cato Corporation
 
· The Dress Barn, Inc.
 
· Stein Mart, Inc.
 
· Charming Shoppes, Inc.
 
· The Gymboree Corporation
 
· The Talbots, Inc.
 
· Chico’s FAS, Inc.
 
· Hot Topic, Inc.
 
· Urban Outfitters, Inc.
 
 
The Peer Group provides direct incumbent information on a job title match basis (e.g., CEO, Chief Operating Officer, Chief Financial Officer) for key competitors. Hay Group’s annual Retail Industry Total Remuneration Survey (the “Hay Group Survey”) is used to provide an additional benchmark for our Named Executive Officers’ base salaries and annual variable pay target levels (both cash and equity).  The Hay Group Survey provides compensation data on the broader retail marketplace (covering approximately 100 retail organizations, a majority of which are specialty stores).  It provides market data by job, controlling for differences in responsibility and revenue size.
 
Benchmarking Incentive-Based Compensation; Our Performance Group
 
While the Committee uses the Peer Group and the Hay Group Survey to benchmark the overall compensation of our Named Executive Officers, it uses the companies in the Dow Jones Apparel Index (the “Index”), a separate group of apparel retailers as identified below and collectively referred to herein as our “Performance Group”,  to measure our relative performance with respect to comparable store sales for purposes of the Senior Executive Incentive Bonus Plan and our total shareholder return for the purpose of awarding performance shares.  The Committee selected the Index in 2007 as our Performance Group because it is representative of companies that we compete with for business, talent and investor capital.  However, it should be noted that the majority of the companies in the Performance Group are national in scope, while most of the Company’s stores are located in the South Central, Mid Atlantic and Southeastern regions of the United States.
 
 
The Index is comprised of approximately 25 apparel retailers and has been developed independently by Dow Jones, which has deemed it to be a relevant comparator group for individual investors to assess company performance. Dow Jones periodically modifies the composition of the Index. The current members of the Performance Group are as follows:
 
· Abercrombie & Fitch Co.
· Dillard’s, Inc.
· The Men’s Wearhouse, Inc.
 
· Aeropostale, Inc.
· The Dress Barn, Inc.
· Nordstrom, Inc.
 
· American Eagle Outfitters, Inc.
 
· Foot Locker, Inc.
 
· Ross Stores, Inc.
 
· AnnTaylor Stores Corporation
· The Gap. Inc.
· SAKS Incorporated
 
· The Buckle, Inc.
 
· Genesco, Inc.
 
· Signet Jewelers Limited
 
· The Cato Corporation
 
· Guess?, Inc.
 
· The TJX Companies, Inc.
 
· Chico’s FAS, Inc.
 
· J. Crew Group, Inc.
 
· Urban Outfitters, Inc.
 
· The Children’s Place Retail Stores, Inc.
 
· Kohl’s Corporation
 
 
· Collective Brands, Inc.
 
· Limited Brands, Inc.
 
 
Compensation Elements
 
In General
 
All of the compensation and benefits programs for our Named Executive Officers described below meet our primary purpose to recruit and retain the executive talent required to successfully manage and grow our business and to achieve our short and long-term business objectives.  Beyond that, different elements are designed for different purposes. The elements of compensation for our Named Executive Officers are as follows:
 
·  
Base salary, perquisites and other benefits, which are designed to attract and retain executives over time;
 
·  
Annual incentive (bonus) compensation, which is designed to focus executives on the business objectives established by our Board for a particular year;
 
·  
Long-term incentive compensation, which consists of stock appreciation rights (“SARs”), restricted stock, performance shares and stock options, is designed to focus executives on our long-term success, as reflected in increases to our stock price, growth in our earnings per share and other elements; and
 
·  
Termination and change in control compensation and benefits, which are designed to facilitate our ability to attract and retain executives as we compete for talented employees in a marketplace where those types of compensatory protections are commonly offered. Termination compensation and benefits are designed to ease an employee’s transition due to an unexpected employment termination, while change in control compensation and benefits are designed to encourage employees to remain focused on our business in the event of rumored or actual fundamental corporate changes.
 
The Committee establishes the amount and mix of base salary and variable compensation by referencing Peer Group practices for each element.  The Committee does not have any specific formula for this determination.   It considers factors relating to each Named Executive Officer’s individual position and performance, including professional history and experience, relevant skill set and scope of duties. In considering the total package of compensation, the Committee also considers the internal relationship of pay across all executive positions.  Total compensation packages as well as each element of compensation (i.e., base salary, annual incentive (bonus) compensation, long-term incentive compensation and perquisites and other benefits) are intended to provide a competitive compensation package as compared to similarly-situated executives at companies in our Peer Group.
 
 
Base Salary
 
The Committee views a competitive base salary as an important component to attract and retain executive talent. Base salaries also serve as the foundation for the annual incentive (bonus) plan, which expresses the bonus opportunity as a percent of base salary. Base salary is not intended as the primary method of rewarding performance.
 
The Committee considers both internal equity and external competitiveness in determining the base salary of our Named Executive Officers.  After receiving input from our Chief Executive Officer regarding the performance of the other Named Executive Officers, the Committee uses its judgment regarding individual performance, market competitiveness, length of service, job responsibilities and other factors to determine the appropriate base salary for each Named Executive Officer.
 
Annual Incentive (Bonus) Compensation
 
Annual incentive (bonus) compensation for our Named Executive Officers is determined each year according to a Senior Executive Incentive Bonus Plan (the “Bonus Plan”).  The current Bonus Plan establishes an annual cash bonus amount and is paid based on the following two weighted parameters:
 
                    Parameter
Weight
Company Pre-Tax Earnings Relative to Target
   75%
Comparable Store Sales Relative to Performance Group
   25%
 
In March of each year, the Committee evaluates our annual strategic plan to determine if these financial parameters are appropriate to measure achievement of our objectives and to motivate our executive officers.  Based on discussions with our CEO, our Chief Operating Officer and our Chief Financial Officer, the Committee recommends and the Board approves the financial parameters to be included in the Bonus Plan.  This final approval typically occurs at the Committee and the Board’s March meetings.  An incentive matrix establishes threshold (minimum), target and maximum performance levels for each parameter based on the level of perceived difficulty in achieving our financial plan.  The incentive matrix clearly outlines a minimum level of performance below which no bonus will be paid and the relationship between the two parameters (i.e., Pre-Tax Earnings Relative to Target and Comparable Store Sales Relative to Performance Group) that will generate payouts.
 
Annual incentive compensation targets for each Named Executive Officer under the Bonus Plan are expressed as a percentage of each Named Executive Officer’s base salary with the target percentage increasing with job scope and complexity. For additional information on our 2010 Senior Executive Incentive Bonus Plan, the formula used to calculate annual bonus amounts, and bonuses awarded under that plan, please see “Committee Actions in Fiscal 2010 Concerning Named Executive Officer Compensation-Establishment of 2010 Senior Executive Incentive Bonus Plan” beginning on page 31 of this Proxy Statement and “Committee Actions in 2011 Concerning Named Executive Officer Compensation-Fiscal 2010 Bonus Plan Awards” on page 38 of this Proxy Statement.
 
At its March meeting, the Committee also reviews our stated financial results for the recently completed fiscal year, certifies the calculation of proposed bonus amounts and reports them to the Board.
 
Long-Term Incentive Compensation
 
In General. The Committee considers long-term incentive compensation (“LTI”) critical to the alignment of executive compensation with the creation of shareholder value.  Our long-term equity incentive compensation awards are currently granted pursuant to our Amended and Restated 2001 Equity Incentive Plan (the “2001 Plan”), which was approved by our shareholders at our 2004 Annual Meeting, and our Amended and Restated 2008 Equity Incentive Plan (the “2008 Plan”), which was approved by our shareholders at our 2009 Annual Meeting.
 
At its March meeting, the Committee reviews the portfolio of long-term incentive vehicles, the targeted award size and the performance measures associated with any awards. The Committee also reviews recommendations provided by management and Hay Group regarding LTI design. Our Board’s practice has been to make annual grants of equity awards, including stock options, SARs, restricted stock and performance shares, upon the recommendation of the Committee at that time.  It is the Board’s intent to make greater use of Restricted Stock awards in the future. The Committee believes that the use of multiple equity vehicles balances a focus on equity-driven growth with the retention and performance aspects of restricted stock.  The grant date is the same date that
 
 
our Board approves the awards.  The equity award is priced at the closing price on the NYSE of our common stock on that date (the “Fair Market Value”).  From time to time, our Board will consider making grants under other special circumstances, such as when recruiting new executive talent, upon the promotion of an executive and to retain key individuals.  Any and all other grants (other than the March grants) are effective as of the date of the event (e.g., new hire or promotion date) and are priced at the Fair Market Value of our common stock on that date.
 
Stock Options. Stock options represent the right to purchase a share of our common stock at a fixed price (the exercise price) for a specified period of time (the option term).  The exercise price is the Fair Market Value of our common stock on the date of grant.  The executive officer benefits only if our stock value appreciates from the grant date through the exercise date.  In 2010, we did not grant stock options to any executive officers, but we have granted them in past years.
 
Most of the stock options we have awarded our Named Executive Officers vest at the rate of 25% per year over the first four years following the date of grant and some stock options vest at the end of three years following the date of grant.  Stock options issued prior to January 29, 2005 will generally expire if not exercised ten years from the date of grant while stock options granted after January 29, 2005 will generally expire if not exercised seven years from the date of grant. If an executive officer dies, unvested stock options will immediately vest and the executive officer’s estate will have one year from the date of death to exercise all stock options.  If an executive officer’s employment is terminated by reason of retirement or disability (retirement as determined by our Board), unvested stock options will immediately vest and he or she will normally have one year from the date of termination to exercise all stock options. Upon the termination of an executive officer’s employment for reason other than death, retirement or disability, the executive officer will have sixty days from the date of termination to exercise all vested stock options. In the event of a Change in Control, as that term is defined on page 57 of this Proxy Statement, all stock options will immediately vest and will be exercisable by the executive officer. In any event, the exercise must occur within the remaining term of the stock option.  Any portion of the stock option not exercised within the remaining term of the stock option will terminate.
 
Stock Appreciation Rights (“SARs”). A stock appreciation right is similar to a stock option in that it allows the recipient to benefit from any appreciation in our stock price from the grant date through the exercise date.  However, with a SAR, the executive officer is not required to actually purchase all of the exercised shares (as with a stock option), but rather he or she just receives the amount of the increase in shares of our stock. SARs may not be settled in cash. Because the value that may be earned through SARs is dependent upon an increase in our stock price, the Committee views SAR grants as a critical link between management compensation accumulation and the creation of shareholder value. The 2001 and 2008 Plans provide that SARs may not be granted at less than 100% of the Fair Market Value of our common stock on the date of grant.
 
SARs have a seven-year term and vest either (i) one-fourth (25%) on each of the first, second, third and fourth anniversaries of the date of the grant, or (ii) one-half (50%) on the second year and one-fourth (25%) on each of the third and fourth anniversaries of the date of the grant.  If an executive officer dies, unvested SARs will immediately vest and the executive officer’s estate will have one year from the date of death to exercise all SARs.  If an executive officer’s employment is terminated by reason of retirement or disability (retirement as determined by our Board), unvested SARs will immediately vest and he or she will normally have one year from the date of termination to exercise all SARs. Upon the termination of an executive officer’s employment for reason other than death, retirement or disability, the executive officer will have sixty days from the date of termination to exercise all vested SARs.  In the event of a Change in Control, all SARs will immediately vest and will be exercisable by the executive officer. In any event, the exercise must occur within the remaining term of the SARs.  Any portion of the SARs not exercised within the remaining term of the SARs will terminate.
 
Restricted Stock.  Restricted stock is a share of our common stock that has vesting restrictions tied to continued employment.  Restricted stock provides executive officers with the opportunity to earn full value shares of our common stock.  The Committee views restricted stock as an excellent mechanism to align executive interests with those of shareholders by supporting increased share ownership for key executives.  Restricted stock is also an effective employee retention tool based on the vesting schedule which occurs over a period of several years.  Depending on the agreement, restricted stock grants may either cliff-vest, which means they vest all at once at the end of a specified vesting period, or step vest, which means they vest in pro rata increments over a specified vesting period.  If the executive officer leaves for any reason other than death, retirement or disability before vesting (retirement as determined by our Board), the unvested portion of the restricted stock award will be forfeited.  If the executive officer dies, becomes disabled or retires, the restricted stock award will fully vest.  In the event of a
 
 
Change in Control, the restricted stock award will immediately vest and will be payable to the executive officer within thirty days of the Change in Control.
 
Performance Shares.  As with restricted stock, performance shares provide executive officers with the opportunity to earn full value shares of our stock.  However, a three-year performance cycle (the “Performance Cycle”) is established at the beginning of each grant and the amount of the award is determined by our performance on total shareholder return relative to the Performance Group over the Performance Cycle.  If an executive officer’s employment is terminated for any reason other than death, retirement or disability before the end of the Performance Cycle, the performance share award is forfeited. If an executive officer’s employment is terminated due to death, retirement or disability during the Performance Cycle, he or she will receive the target number of shares set forth in his or her Performance Share Award Agreement within thirty days of the triggering event.  In the event of a Change in Control, the Target Number of performance shares will immediately vest and will be payable to the executive officer within thirty days of the Change in Control. The Committee views Performance Shares as a critical link between management compensation accumulation and the creation of shareholder value.
 
Benefits and Perquisites
 
The Committee supports a compensation philosophy for our Named Executive Officers that is more heavily weighted toward annual and long-term performance-based compensation rather than toward benefits and perquisites.
 
The perquisites and other benefits we provide our Named Executive Officers are summarized in the 2010 Summary Compensation Table, the 2010 All Other Compensation Table and the 2010 Nonqualified Deferred Compensation Table, including footnotes. In addition, we provide our executive officers with core benefits available to all full-time employees (e.g., coverage for medical, dental, prescription drugs, basic life insurance and long-term disability coverage) as well as a supplemental Executive Officer Medical Plan. The supplemental Executive Officer Medical Plan is an insured plan which provides current officers at the Executive Vice President level and above reimbursement for medical and dental out of pocket expenses that are not covered by the underlying medical plan.  Typical payments are for deductibles, co-pays and similar expenses.  
 
Retirement Plans 
 
Other than a frozen defined benefit plan in which Mr. Lucas is a participant, we do not provide a qualified retirement program for our Named Executive Officers nor is there a supplemental executive retirement plan or any other retirement plan available other than our 401(k) Plan and our Nonqualified Deferred Compensation Plan.  Please see the 2010 Pension Benefits Table on page 47 and “Retirement Benefits” beginning on page 48 of this Proxy Statement.
 
Termination and Change In Control Arrangements
 
In General.  Pursuant to their employment agreements, our Named Executive Officers are entitled to compensation and other benefits if their employment terminates or if there is a Change in Control, as described beginning on page 56 of this Proxy Statement under “Potential Payments upon Termination or Change In Control”. Termination and Change in Control compensation and other benefits are established at the time a Named Executive Officer signs an employment agreement.
 
Termination. Our Named Executive Officers are entitled to compensation and other benefits in an amount the Committee believes is appropriate, taking into account the time it is expected to take a terminated employee to find another job.  Compensation and other benefits upon termination are intended to ease the consequences to an employee of an unexpected termination of employment.  We benefit in that the employment agreements contain restrictive covenants that continue for a period of time following termination.
 
Change in Control-In General. The Committee and our Board recognize the importance to us and our shareholders of avoiding the distraction and loss of key management personnel that may occur in connection with any rumored, threatened or actual Change in Control of the Company. To that end, the Committee and our Board believe that properly designed Change in Control provisions in our Named Executive Officer’s employment agreements protect shareholder interests by enhancing executive focus during rumored or actual Change in Control activity through:
 
·  
incentives to remain with us despite uncertainties while a transaction is under consideration or pending;
 
 
·  
assurances of severance and other benefits in the event of termination; and
 
·  
immediate vesting of equity elements of total compensation after a Change in Control.
 
To diminish the potential distraction due to personal uncertainties and risks that inevitably arise when a Change in Control is rumored, threatened or pending, the Committee and our Board have provided our Named Executive Officers with what the Committee and our Board determined to be competitive Change in Control compensation and benefit provisions in their employment agreements.  The employment agreements of our Named Executive Officers provide for specific enhanced payments and benefits in the event of a Change in Control.
 
               Change in Control-Double Trigger. The enhanced termination benefits payable in connection with a Change in Control require a “double trigger” which means that (i) if a Change in Control occurs, and (ii) during the period beginning six (6) months before the Change in Control and ending twenty-four (24) months after the Change in Control,  (a) an executive officer’s employment agreement is terminated by us or our successor without good cause, or (b) the executive officer’s employment agreement is terminated by the executive officer with good reason, the executive officer will be eligible for the Change in Control compensation and benefits.  A double trigger was selected in order to enhance the likelihood that an executive officer will remain with us after a Change in Control, since the executive officer will not receive the change in control compensation payments and benefits if he or she voluntarily resigns after the Change in Control event.  Thus, the executive officer is protected from actual or constructive dismissal for twenty-four months after a Change in Control, while any new controlling party or group is better able to retain the services of a key corporate asset.
 
Committee Actions in Fiscal 2010 Concerning Named Executive Officer Compensation
 
In General
 
At its March 2010 meeting, the Committee reviewed the market data and analyses provided by Hay Group and determined that our overall compensation program is reasonably competitive and consistent with the Committee’s compensation objectives.  In determining compensation for our Named Executive Officers for Fiscal 2010, the Committee considered many factors, including:
 
·  
our Board’s judgment and satisfaction with the Company’s performance;
 
·  
assessment of the individual executive officer’s performance;
 
·  
the nature and scope of the executive officer’s responsibilities and his or her effectiveness in leading our initiatives to successfully increase customer satisfaction, enhance our growth, and propose, implement and ensure compliance with our policies;
 
·  
desired competitive positioning of compensation;
 
·  
future potential for the executive officer; and
 
·  
retention needs.
 
The Committee also considered the compensation practices and performances of our Peer Group and our Performance Group.
 
 
Base Salaries
 
Based on their performance during the 2009 Fiscal Year, and with input from Hay Group with respect to market salary data of our Peer Group, the Committee recommended to our Board, and our Board approved, the following base salaries for our Named Executive Officers for Fiscal 2010.  Unless otherwise indicated, base salaries were adjusted effective April 1, 2010 as follows:
 
FISCAL 2010 BASE SALARIES
 
 
 
Executive
 
2009 Base
Salary
 
2010 Base
Salary
Base
Salary
Increase
Mr. Hall
$750,000
$800,000
    6.7%
Mr. Record (1)
$460,000
$550,000
19.6%
Mr. Shein (2)
N/A
$350,000
N/A
Mr. Maloney (3)
$475,000
$550,000
15.8%
Mr. Lucas
$345,000
$357,100
3.5%
Mr. Hunter (4)
$325,000
$375,000
15.4%
      ______________________________
 
(1)
Mr. Record was promoted to Chief Operating Officer on February 15, 2010, at which time his base salary was increased from $460,000 to $550,000 due to his increased duties and responsibilities.  
 
(2)
Mr. Shein did not join the Company until January 10, 2011.
 
(3)
Mr. Maloney was promoted to Chief Merchandising Officer on February 15, 2010, at which time his base salary was increased from $475,000 to $550,000 due to his increased duties and responsibilities.
 
(4)
Mr. Hunter was promoted to the position of Executive Vice President, Chief Information Officer on February 26, 2010, at which time his base salary was increased from $325,000 to $375,000.
 
Based on Hay Group’s analysis, it was determined that our base salaries are generally at or below the median of our Peer Group.
 
Annual Incentive (Bonus) Compensation Paid in 2010 Under the 2009 Bonus Plan
 
At their March 2009 meetings, the Committee recommended, and the Board approved, the 2009 Senior Executive Bonus Plan (the “2009 Bonus Plan”) as described in our 2010 Proxy Statement. As with the 2010 Bonus Plan described below, the 2009 Bonus Plan set threshold, target and maximum bonus opportunities as a percentage of each Named Executive Officer’s base salary based upon the achievement of specified Pre-Tax Earnings and our ranking within the Performance Group with respect to comparable store sales.
 
 
At its March 2010 meeting, the Committee (i) reviewed our Fiscal 2009 Pre-Tax Earnings results, (ii) reviewed Fiscal 2009 Comparable Store Sales results versus our Performance Group, (iii) discussed the Dow Jones Apparel Group reporting methodologies, and (iv) reviewed the 2009 Bonus Plan achievement level. As our Fiscal 2009 Pre-Tax Earnings ($45,827,000) were 98% of our 2009 Financial Plan ($46,700,000) and our ranking within the Performance Group with respect to comparable store sales (14.3 percentile), the following bonuses were awarded in 2010 for performance under the 2009 Bonus Plan at 68% of bonus target levels:
 
2009 BONUS PLAN AWARDS
  
 
Executive
Bonus
Award
% of
2009 Base
Salary
Mr. Hall
$408,000
54.4%
Mr. Record
$203,300
44.2%
Mr. Shein (1)
N/A
N/A
Mr. Maloney
$193,800
40.8%
Mr. Lucas
$117,300
34.0%
Mr. Hunter
$127,075
39.1%
_________________________
 
(1)
Mr. Shein did not join the Company until January 10, 2011; therefore, he did not receive a bonus under the 2009 Bonus Plan.
 
Establishment of 2010 Senior Executive Incentive Bonus Plan
 
At its March 2010 meeting, the Committee recommended, and the Board approved, the parameters for the 2010 Senior Executive Incentive Bonus Plan (the “2010 Bonus Plan”) and approved the annual cash incentive opportunities for the Named Executive Officers as set forth in the table below.  The methodology and measurement parameters for the 2010 Bonus Plan were unchanged from the 2009 Bonus Plan.
 
2010 BONUS PLAN PARAMETERS
 
While the methodology and measurement parameters for the 2010 Bonus Plan were unchanged from the 2009 Bonus Plan, the Pre-Tax Earnings Target Level for the Financial Plan was increased from $46,700,000 under the 2009 Bonus Plan to $57,000,000 under the 2010 Bonus Plan (an increase of 24.4% over actual Fiscal 2009 earnings) to provide incentive to our management team in view of the improving economy.  The 2010 Bonus Plan design was as follows:
 
Pre-Tax Earnings Parameter
 
This parameter of the bonus formula is weighted to determine three-quarters (75%) of the year-end bonus amount earned. Actual bonus payment will be prorated for Pre-Tax Earnings results between the Maximum and Threshold levels.
 
 
Fiscal 2010
Pre-Tax  Earnings
 
Target bonus amount will be paid by achieving Fiscal 2010 Pre-Tax Earnings at an increase of 24.4% vs. actual Fiscal 2009 Pre-Tax earnings.
$ 57,000,000
Target Level
Maximum bonus amount will be paid at 2 times Target by achieving Fiscal 2010 Pre-Tax Earnings at 120% of Target Level, an increase of 49.3% vs. actual Fiscal 2009 Pre-Tax Earnings.
$ 68,400,000
20% Above  Target
Minimum (Threshold) bonus amount will be paid at ¼ of Target at Fiscal 2010 Pre-Tax Earnings of 80% of Target Level, a decrease of 0.5% vs. actual Fiscal 2009 Pre-Tax Earnings.
$ 45,600,000
20% Below Target
 
 
Comparable Store Sales Parameter
 
This parameter of the bonus formula is weighted to determine one-quarter (25%) of the year-end bonus amount earned.  Measurement is based on fiscal year-end comparable store sales percent change, compared to our Performance Group.  Notwithstanding, in order to earn any portion of the Comparable Store Sales bonus payment, the Company must achieve 75% of the 2010 Pre-Tax Earnings Target level ($42,750,000). Actual bonus payment will be prorated for results between the Maximum and Threshold levels.
 
Target amount will be paid if our ranking for total year-end comparable store sales change is at the fiftieth percentile (or middle mark) among our Performance Group.
 
Maximum amount (2 times Target) will be paid if our ranking of total year-end comparable store sales change is at the one-hundredth percentile (or highest rank) among our Performance Group.
 
Threshold bonus amount (1/4 of Target) will be paid if our ranking of total year-end comparable store sales change is at the twenty-fifth percentile among our Performance Group.
 
 
Potential 2010 Bonus Plan Awards
 
 Depending on our Pre-Tax Earnings and our ranking among our Performance Group with respect to total year-end comparable store sales, our Named Executive Officers had the opportunity to earn bonuses under the 2010 Bonus Plan as follows, with actual bonus payment to be prorated for results between the Maximum and Threshold levels:
 
POTENTIAL 2010 BONUS PLAN AWARDS
 
Executive
 
Base
Salary ($)
   
Bonus Range % (1)
(Threshold/Target/Maximum)
   
Bonus Range $ (2)
(Threshold/Target/Maximum)
 
Mr. Hall
   
800,000
   
22.5-90-180
     
180,000-720,000-1,440,000
 
Mr. Record
   
550,000
   
17.5-70-140
     
96,300-385,000-770,000
 
Mr. Shein (3)
   
350,000
   
N/A
     
N/A
 
Mr. Maloney
   
550,000
   
17.5-70-140
     
96,300-385,000-770,000
 
Mr. Lucas
   
357,100
   
12.5-50-100
     
44,600-178,600-357,100
 
Mr. Hunter
   
375,000
   
12.5-50-100
     
46,900-187,500-375,000
 
_________________________
 
  (1)
Percentage of base salary.
 
  (2)
Amounts have been rounded.  Amount to be paid will depend upon the extent to which the Company achieves Fiscal 2010 Pre-Tax Earnings and Comparable Store Sales parameters established by the Board. Actual bonus payments will be prorated for Fiscal 2010 Pre-Tax Earnings and Comparable Store Sales results between the threshold and maximum levels.
 
  (3)
Mr. Shein joined the Company on January 10, 2011; accordingly, he was not entitled to participate in the 2010 Bonus Plan.
 
Please see “Committee Actions in 2011 Concerning Named Executive Officer Compensation – Fiscal 2010 Bonus Plan Awards” on page 38 for bonuses approved by the Committee in March 2011 for performance under the 2010 Bonus Plan.
 
Long-Term Incentive Compensation Awards
 
At its March 2010 meeting, the Committee (i) reviewed the final Total Shareholder Return (“TSR”) results for the three year performance cycle that ended on January 31, 2010 for the March 2007 Performance Based Restricted Share Grants for Senior Executives, (ii) discussed the attainment level based on our TSR results versus our Performance Group, (iii) reviewed the current standing and attainment levels for LTI grants made in March 2008 and March 2009 based on the TSR matrix of our Performance Group, (iv) discussed individual LTI grants for senior management executives recommended by management, (v) reviewed and discussed proposed SAR equity
 
 
grants for midmanagement executives, (vi) reviewed estimated shares needed for 2010 awards, and (vii) reviewed shares available for future grants.  To determine the size of each equity award, the Committee reviewed market data, prior years’ LTI decisions, the performance of the Named Executive Officers and recommendations from Hay Group.
 
Based upon the recommendation of the Committee, our Board granted Fiscal 2010 LTI awards to our Named Executive Officers. The annual equity grants were a combination of Performance Shares and SARs and were granted as follows:
 
FISCAL 2010 LTI AWARDS
 
Executive
 
Performance Shares
at Target (1)
 
SARs (2)
 
Mr. Hall
 
25,000
 
100,000
 
Mr. Record (3)
 
20,000
 
100,000
 
Mr. Shein (4)
 
N/A
 
N/A
 
Mr. Maloney (3)
 
20,000
 
100,000
 
Mr. Lucas
 
6,000
 
18,000
 
Mr. Hunter
 
6,000
 
18,000
 
__________________________________
 
(1)
The Performance Shares cliff vest after a three-year measurement performance cycle (the “Performance Cycle”) which began on the first business day of our 2009 Fiscal Year (January 31, 2010) and ends on the last business day of our 2012 Fiscal Year (February 2, 2013). The number of Performance Shares earned will be based on our total shareholder return relative to our Performance Group at that time. The number of shares reflected in the table above are the “Target Shares”, which means the number of shares of our common stock the Named Executive Officer will earn (and receive) at the end of the Performance Cycle if our results are in the middle (fiftieth percentile) of the Performance Group. On a sliding scale, the shares earned can vary as follows:
 
Percentile Ranking of Performance Group
Performance Shares Earned *
 100%
200%
   75%
150%
   50%
100%
   25%
  25%
< 25%
   0%
 
*    As a percentage of Target Performance Shares shown in the 2010 LTI Awards table above.
 
(2)
The SARs have a grant price of $15.50 (the closing price of our common stock on March 26, 2010) and vest ratably over a four year period (i.e., 25% per year).
 
(3)
Upon their promotions on February 15, 2010, Messrs. Record and Maloney were each awarded 100,000 SARs that have a grant price of $12.94, the closing price of the Company’s stock on February 12, 2010, and that will vest ratably over a four year period (i.e., 25% per year).
 
(4)
Mr. Shein was not employed by the Company until January 10, 2011. Upon joining the Company on January 10, 2011, he was awarded 30,000 SARs that have a grant price of $16.31, the closing price of the Company’s stock on January 10, 2011, and that will vest over a four year period (i.e., 15,000 (50%) after two years, 7,500 (25%) after three years and the remaining 7,500 (25%) after four years). He was also granted 10,000 shares of restricted stock that that will cliff vest three years from the date of his employment (i.e., January 10, 2014).
 
Performance Shares Earned in 2010 Upon Completion of the 2007 Performance Cycle
 
As the performance criteria for the three-year Performance Cycle that began on the first business day of our 2007 Fiscal Year (February 4, 2007) and ended on the last business day of our 2009 Fiscal Year (January 30, 2010) (the “2007 Performance Cycle”) were met, the Named Executive Officers who were granted Performance Shares at
 
 
the beginning of the 2007 Performance Cycle were issued shares of our common stock at 35.7% attainment of the Target Shares as follows:
Executive (1)
Target Shares
Performance
Attainment %
Payout
Shares Earned
Mr. Hall
18,000
35.7
6,426
Mr. Lucas
4,500
35.7
1,607
____________________________
 
(1)
Messrs. Record, Shein, Maloney and Hunter were not employed by the Company at the beginning of the 2007 Performance Cycle; therefore, they were not entitled to receive shares as a result of the completion of the 2007 Performance Cycle.
 
Significant 2010 Events Related to the Employment of our Named Executive Officers
 
Promotion of Edward Record. On February 15, 2010, Mr. Record was promoted to Chief Operating Officer. Mr. Record had been serving as our Executive Vice President and Chief Financial Officer.  In connection with Mr. Record’s promotion:
 
·  
his base salary was increased from $460,000 to $550,000;
 
·  
he was awarded 100,000 SARs that have a grant price of $12.94, the closing price of the Company’s stock on February 12, 2010, and that will vest ratably over a four year period (i.e., 25% per year);
 
·  
he was awarded 25,000 shares of restricted stock that will cliff vest three years from the date of his promotion (i.e., February 15, 2013); and
 
·  
his target bonus potential under our 2010 Senior Executive Incentive Bonus Plan was set at 70% of his base salary, which was an increase from 65% of his base salary under our 2009 Bonus Plan.
 
Promotion of Richard Maloney. On February 15, 2010, Mr. Maloney was promoted to Chief Merchandising Officer.  Mr. Maloney had been serving as President and Chief Operating Officer of our South Hill Division. In connection with Mr. Maloney’s promotion:
 
·  
his base salary was increased from $475,000 to $550,000;
 
·  
he was awarded 100,000 SARs that have a grant price of $12.94, the closing price of the Company’s stock on February 12, 2010, and that will vest ratably over a four year period (i.e., 25% per year);
 
·  
he was awarded 25,000 shares of restricted stock that will cliff vest three years from the date of his promotion (i.e., February 15, 2013); and
 
·  
his target bonus potential under our 2010 Senior Executive Incentive Bonus Plan was set at 70% of his base salary, which was an increase from 60% of his base salary under our 2009 Bonus Plan.
 
Promotion of Steven Hunter.  On February 26, 2010, Mr. Hunter was promoted to Executive Vice President, Chief Information Officer.  Mr. Hunter had been serving as Senior Vice President, Chief Information Officer. In connection with Mr. Hunter’s promotion, his base salary was increased from $325,000 to $375,000.
 
Employment of Oded Shein.  On January 10, 2011, Mr. Shein joined the Company as Chief Financial Officer.  In connection with Mr. Shein’s employment:
 
·  
his base salary was initially set at $350,000;
 
·  
he was awarded 30,000 SARs that have a grant price of $16.31, the closing price of the Company’s stock on January 10, 2011, and that will vest over a four year period (i.e., 15,000 (50%) after two years, 7,500 (25%) after three years and the remaining 7,500 (25%) after four years);
 
·  
he was awarded 10,000 shares of restricted stock that that will cliff vest three years from the date of his employment (i.e., January 10, 2014);
 
·  
he received a lump sum payment of $200,000; and
 
·  
his target bonus potential under our 2011 Senior Executive Incentive Bonus Plan was set at 50% of his base salary.
 
Committee Actions in 2011 Concerning Named Executive Officer Compensation
 
Fiscal 2010 Overview
 
The Company’s strategy for 2010 was to build on its 2009 achievements and to pursue sales and earnings growth as the economy stabilized.  Reflecting the successful implementation of its business strategies, total sales for the year increased 2.7% and comparable store sales increased slightly.  The gross profit rate for the year grew by 90 basis points and the operating margin rate improved by 80 basis points.  Diluted earnings per share increased 32.0%.  The Company operated throughout the year as a financially sound company.  As of year end, the Company had no borrowings on its $250.0 million senior secured revolving credit facility and had cash, net of debt, of approximately $51.0 million.  Its strong balance sheet and cash flow allowed the Company to increase its quarterly dividend rate by 50%, and to undertake and complete a $25.0 million stock repurchase program.
 
Operationally during the year, the Company opened 33 new stores.  It continues to find that there is tremendous brand equity in the Goody’s name in markets and regions of the country in which they operated prior to the Company’s acquisition of the name.  As such, 30 of the 33 new stores were opened under the Goody’s name.  Twenty-six non-Goody’s stores were also rebranded with the Goody’s name.  In total, the Company ended the year with 71 Goody’s stores.  The Company added eight Estee Lauder and seventeen Clinique counters during the year, ending with 176 and 169 counters, respectively.  It remained on track for a spring 2011 roll out of its markdown optimization tool and had a successful pre-holiday period launch of its eCommerce platform.  Also in 2010, the Company completed several enhancements to its POS platform, which included coupon management and deal-based pricing.  Lastly, it took an important step to strengthen its executive team by naming Oded Shein as Executive Vice President, Chief Financial Officer.
 
CEO Fiscal 2010 Performance and Compensation
 
The Compensation Committee focuses much of its time on CEO and senior executive compensation to assure that it reflects operating and financial performance and demonstrates our commitment to enforcing a strong pay for performance philosophy.
 
The Board and Mr. Hall responded to the economic conditions in Fiscal 2010 by agreeing to a conservative business framework focusing on the following: 28 net new store openings in Fiscal 2010, strong inventory and expense controls, protecting margin rates and aggressive promotional programs focused on our customer’s needs. Under Mr. Hall’s leadership, management took actions and delivered the following results within this framework in Fiscal 2010:
 
·  
increased net income for the year by 31% to $37.6 million versus $28.7 million for Fiscal 2009;
 
·  
increased diluted earnings per share for the year by 32% to $0.99 this year from $0.75 for Fiscal 2009 by virtue of a 2.7% increase in total sales combined with a 90 basis point improvement in gross profit;
 
·  
increased EBITDA to $125.2 million, which represents an $11.5 million increase over Fiscal 2009;
 
·  
increased the net number of stores by 28 from 758 to 786;
 
·  
met the Company’s Fiscal 2010 growth objectives;
 
·  
improved operating margin rate by 80 basis points over Fiscal 2009; and
 
·  
successfully launched the Company’s eCommerce platform.
 
Additionally, during Fiscal 2010 management took important actions to hire and retain key leaders for the long term.
 
The Compensation Committee believes that Mr. Hall performed well in Fiscal 2010 by executing the Company’s business framework and by delivering a strong financial performance. Fiscal 2010 revenues were $1,470.6 million compared to $1,431.9 million in Fiscal 2009.  Fiscal 2010 earnings were $37.6 million compared to $28.7 million in Fiscal 2009.
 
 
As a result of Mr. Hall’s performance in Fiscal 2010,
 
·  
he earned and was paid a bonus of $630,000 under our 2010 Bonus Plan;
 
·  
his base salary was increased from $800,000 to $850,000 effective April 1, 2011;
 
·  
his threshold, target and maximum bonus percentages under the 2011 Senior Executive Bonus Incentive Plan were increased from the 2010 Bonus Plan (22.5%-90%-180%) to 25%-100%-200%; and
 
·  
he was granted 22,500 Performance Shares, 36,000 shares of Restricted Stock and 68,500 SARs on March 29, 2011, at a grant price of $18.84 in the case of the SARs.
 
Other Named Executive Officers Fiscal 2010 Performance and Compensation
 
Edward Record.  As Chief Operating Officer and Chief Financial Officer during most of Fiscal 2010, Mr. Record’s responsibilities were to (i) oversee real estate and store construction and (ii) oversee the Company’s finance, information technology, internal audit, logistics, risk management and legal functions. He was instrumental in the Company’s improved profitability and achievement of growth objectives including the increase of 28 net new stores in Fiscal 2010.  He was also instrumental in the successful launching of the Company's eCommerce platform in Fiscal 2010.
 
The Compensation Committee believes that Mr. Record performed well in Fiscal 2010. He possesses outstanding management capacity and leadership abilities, and has been instrumental in successfully navigating our Company through the current challenging economic environment. His financial acumen has added tremendous value to our real estate and store construction functions.
 
As a result of Mr. Record’s performance in Fiscal 2010,
 
·  
he earned and was paid a bonus of $336,875 under our 2010 Bonus Plan;
 
·  
his base salary was increased from $550,000 to $572,000 effective April 1, 2011; and
 
·  
he was granted 7,250 Performance Shares, 11,700 shares of Restricted Stock and 22,250 SARs on March 29, 2011, at a grant price of $18.84 in the case of the SARs.
 
Richard Maloney.  As President and Chief Operating Officer of the South Hill Division until September 1, 2010, Mr. Maloney’s responsibilities were to oversee all of the merchandising, planning and allocation functions in addition to store operations of the South Hill Division. Upon being promoted to Chief Merchandising Officer on February 15, 2010, he also assumed responsibility for the merchandising, planning and allocation functions across the entire Company. The Compensation Committee believes that Mr. Maloney was responsible for the improvement in both sales and margins in the South Hill Division during Fiscal 2010 and that overall he performed well.  He is a tremendously talented merchant and leader who has developed an in-depth understanding of our small town department store business model.
 
As a result of Mr. Maloney’s performance in Fiscal 2010,
 
·  
he earned and was paid a bonus of $336,875 under our 2010 Bonus Plan;
 
·  
his base salary was increased from $550,000 to $561,000 effective April 1, 2011; and
 
·  
he was granted 7,250 Performance Shares, 11,700 shares of Restricted Stock and 22,250 SARs on March 29, 2011, at a grant price of $18.84 in the case of the SARs.
 
Ron Lucas. As Executive Vice President, Human Resources during Fiscal 2010, Mr. Lucas’ responsibilities were to oversee all recruitment, placement, training and development, benefits and compensation and associate relations for the Company.  He was instrumental in the hiring and retention of key leaders for the long term and maintaining positive morale in Fiscal 2010 during a challenging business environment.  The Compensation Committee believes that Mr. Lucas performed well in Fiscal 2010.
 
 
As a result of Mr. Lucas’ performance in Fiscal 2010,
 
·  
he earned and was paid a bonus of $156,231 under our 2010 Bonus Plan;
 
·  
his base salary was increased from $357,100 to $366,000 effective April 1, 2011; and
 
·  
he was granted 2,900 Performance Shares, 4,700 shares of Restricted Stock and 8,850 SARs on March 29, 2011, at a grant price of $18.84 in the case of the SARs.
 
Steven Hunter.  As Executive Vice President, Chief Information Officer since February 26, 2010, Mr. Hunter's responsibilities were to oversee all of the Company's technology strategies, investments and implementations. He was instrumental in the successful launching of the Company's eCommerce platform in Fiscal 2010.  The Compensation Committee believes that Mr. Hunter performed well in Fiscal 2010.
 
As a result of Mr. Hunter’s performance in Fiscal 2010,
 
·  
he earned and was paid a bonus of $164,063 under our 2010 Bonus Plan;
 
·  
his base salary was increased from $375,000 to $400,000 effective April 1, 2011; and
 
·  
he was granted 2,900 Performance Shares, 10,008 shares of Restricted Stock and 8,850 SARs on March 29, 2011, at a grant price of $18.84 in the case of the SARs.
 
At their March 2011 meetings, the Compensation Committee and the Board took the following actions with respect to the compensation of the Company’s Named Executive Officers:
 
Base Salaries
 
Based on their performance during Fiscal 2010, and with input from Hay Group with respect to market salary data of our Peer Group, the Committee recommended, and the Board approved, the following base salaries for our Named Executive Officers for the Fiscal 2011.  The base salaries were adjusted effective April 1, 2011.
 
2011 BASE SALARIES
 
 
 
Executive/Title
 
2010 Base
Salary
 
2011 Base
Salary
Base
Salary
Increase
Mr. Hall
$800,000
$850,000
6.25%
Mr. Record
$550,000
$572,000
4.00%
Mr. Shein
$350,000
$350,000
(1)
Mr. Maloney
$550,000
$561,000
2.00%
Mr. Lucas
$357,100
$366,000
2.50%
Mr. Hunter
$375,000
$400,000
6.70%
   ______________________________
 
(1) As Mr. Shein joined the Company on January 10, 2011, his base salary was not adjusted.
 
Based on Hay Group’s analysis, it was determined that the base salaries of our Named Executive Officers are generally at or below the median of our Peer Group.
 
 
2010 Bonus Plan Awards
 
As our 2010 Pre-Tax Earnings ($58,892,114) were 103.3% of our 2010 Financial Plan ($57,000,000), the following bonuses were awarded on March 29, 2011 for performance under the 2010 Bonus Plan at 87.5% of Bonus Target Levels:
 
FISCAL 2010 BONUS PLAN AWARDS
 
 
Executive
 
Bonus Award
% of 2010
Base Salary
Mr. Hall
$630,000
78.75%
Mr. Record
$336,875
61.25%
Mr. Shein (1)
(1)
(1)
Mr. Maloney
$336,875
61.25%
Mr. Lucas
$156,231
43.75%
Mr. Hunter
$164,063
43.75%
_________________________
 
(1)
In consideration for his decision to accept employment with the Company on January 10, 2011, Mr. Shein received a lump sum payment of $200,000 and did not receive a bonus under the 2010 Bonus Plan.
 
Long-Term Incentive Compensation Awards
 
            The following long-term equity incentive (“LTI”) awards were granted to the Named Executive Officers on March 29, 2011 in consideration of their 2010 performance and as incentive for their future performance:
 
2011 LTI Awards
 
Executive
Performance Shares (1)
SARs (2)
Restricted Stock (3)
Mr. Hall
22,500
68,500
36,000
Mr. Record
7,250
22,250
11,700
Mr. Shein
2,900
0
 4,700
Mr. Maloney
7,250
22,250
11,700
Mr. Lucas
2,900
8,850
 4,700
Mr. Hunter
2,900
8,850
10,008
__________________________________
 
(1)
The Performance Shares cliff vest after a three-year measurement performance cycle (the “Performance Cycle”) which began on the first business day of the Company’s 2011 Fiscal Year (January 30, 2011) and ends on the last business day of the Company’s 2013 Fiscal Year (February 1, 2014).  The number of Performance Shares earned will be based on the Company’s total shareholder return relative to the  “Performance Group”. The number of shares reflected in the table above are the “Target Shares”, which means the number of shares of the Company’s common stock the Named Executive Officer will earn (and receive) at the end of the Performance Cycle if the Company’s results are in the middle (fiftieth percentile) of the Performance Group.
 
(2)
The SARs have a grant price of $18.84 (the closing price of the Company’s common stock on March 29, 2011) and will vest on a pro rata basis over four years (i.e., 25% per year).
 
(3)
In general, the Restricted Stock will vest on a pro rata basis over four years (i.e., 25% per year).  However, 5,308 shares of the Restricted Stock granted Mr. Hunter will cliff vest in three years (i.e., on March 29, 2014).
 
 
Elimination of Gross-Up Payments  
 
On March 29, 2011, the Committee and the Board determined that in view of evolving best practices, excise tax gross-up payments upon a Change in Control are no longer an appropriate component of executive compensation.  Therefore, the provision for excise tax gross-up payments has been eliminated in all current employment agreements and it will not be contained in future employment agreements.  
 
The Board also determined that other than relocation expenses that are taxable under the IRS Code and qualify for reimbursement under the Company’s relocation policy, which will be grossed up for Federal, FICA, state and local tax rates, where applicable, the Company will not make any gross-up payments.
 
Reassessment of Perquisites
 
At their January 25, 2011 meetings, the Committee and the Board reviewed our policies with respect to perquisites to consider whether the perquisites should be maintained and whether, and to what extent, it may be appropriate for us to discontinue particular perquisites or to require repayment of the cost of perquisites.  As a result, the Committee and the Board determined that cell phone allowances would be discontinued as a perquisite effective for all senior executive officers (Executive Vice Presidents and above) effective April 1, 2011 and for all other employees effective May 1, 2011. The Committee and the Board believe that the remaining perquisites we currently provide our Named Executive Officers are reasonable, competitive and consistent with our overall executive compensation program.
 
Executive Officer Employment Agreements
 
The Company has Employment Agreements (the “Agreements”) with the Named Executive Officers (individually an “Executive”). Mr. Hall is employed as President and Chief Executive Officer; Mr. Record is employed as Chief Operating Officer; Mr. Shein is employed as Executive Vice President, Chief Financial Officer; Mr. Maloney is employed as Chief Merchandising Officer; Mr. Lucas is employed as Executive Vice President, Human Resources; and Mr. Hunter is employed as Executive Vice President, Chief Information Officer. The Agreements provide for a base salary and annual incentive (bonus) compensation.  The Agreements also provide for perquisites such as an automobile allowance and a financial planning allowance and the Executive’s participation in all other bonus and benefit plans available to executive officers of the Company. Provisions of the Agreements related to termination and Change in Control are discussed in “Potential Payments on Termination or Change In Control” beginning on page 49 of this Proxy Statement.
 
The Employment Agreements of our Named Executive Officers are referenced as exhibits to the Company’s Annual Report on Form 10-K as filed on March 30, 2011.  Any new Employment Agreements entered into with our Named Executive Officers during the first quarter of Fiscal 2011 will be attached as exhibits to either a Current Report on Form 8-K or the Company’s Quarterly Report on Form 10-Q to be filed on or before June 9, 2011. The Employment Agreements can be reviewed on the SEC’s EDGAR database at www.sec.gov.
 
Tax, Accounting and Other Implications
 
Deductibility of Executive Compensation
 
Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million limit on the amount that a public company may deduct for compensation paid to a company’s CEO or any of the company’s three other most highly compensated executive officers (other than the CEO) who are employed as of the end of the year. This limitation does not apply to compensation that meets the requirements under Section 162(m) for “qualifying performance-based” compensation (i.e., compensation paid only if the individual’s performance meets pre-established objective goals based on performance criteria approved by the shareholders.)  The Committee’s policy is to design compensation programs that further our best interests and those of our shareholders and that preserve the tax deductibility of compensation expenses.
 
Incentive bonuses paid to executive officers under our Senior Executive Incentive Bonus Plan and awards granted under our 2001 Plan and our 2008 Plan are designed to qualify as performance-based compensation.  The Committee also believes, however, that it must maintain the flexibility to take actions that it deems to be in our best interests but which may not qualify for tax deductibility under Section 162(m).  In this regard, if the amount of base salary for any of our executive officers exceeds $1 million, which is not anticipated to be the case, any amounts over $1 million will not be deductible for federal income tax purposes.
 
 
39

 
As required under the tax rules, the Company must obtain shareholder approval of the material terms of the performance goals for qualifying performance-based compensation every five years.  We last requested and received shareholder approval in 2008. Therefore, we are not seeking shareholder approval at the 2011 Annual Meeting, but we will do so on or before the 2013 Annual Meeting.
 
Committee Considerations
 
The Committee considered (i) the impact of the $1 million limit on the deductibility of non-performance based compensation imposed by Code Section 162(m), (ii) the accounting treatment of various types of equity-based compensation under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718, and (iii) the non-deductibility of excess parachute tax payments under Code Section 280G (and the related excise tax imposed on covered employees under Code Section 4999) in its design of executive compensation programs. In addition, the Committee considered other tax and accounting provisions in developing the compensation programs for our Named Executive Officers.  These included the special rules applicable to non-qualified deferred compensation arrangements under Code Section 409A as well as the overall income tax rules applicable to various forms of compensation.  While the Committee strives to compensate our Named Executive Officers in a manner that produces favorable tax and accounting treatment, its main objective is to develop fair and equitable compensation arrangements that appropriately motivate, reward and retain those executives.
 
 
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with our management.  Based on that review and discussion, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in the Company’s Annual Report on Form 10-K for 2010 and in this Proxy Statement.
 
This Compensation Committee Report is provided by the following Independent Directors, who constitute all of the members of the Compensation Committee:
 
Cheryl Nido Turpin (Chair)
Alan J. Barocas
Michael L. Glazer
Gabrielle E. Greene
Earl J. Hesterberg
 
 
 
The following table summarizes the compensation of our Named Executive Officers for our three fiscal years ended January 31, 2009 (“Fiscal 2008”), January 30, 2010 (“Fiscal 2009”) and January 29, 2011 (“Fiscal 2010”), with the exception of Mr. Shein and Mr. Hunter, who were not Named Executive Officers in Fiscal 2008 and Fiscal 2009 and Mr. Maloney, who was not a Named Executive Officer in Fiscal 2008.
 
Named and Principal Position
 
Fiscal
Year
       
Bonus
($) (1)
 
 Stock
Awards
($) (2)
 
Option
Awards
($) (3)
 
Non-Equity Incentive Plan Compensation
($) (4)
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)
 
 All Other Compensation
($) (5)
 
Total
($)
Salary
($)
         
                                       
Andrew T. Hall
 
2010
 
 791,346
     -  
 496,250
 
 719,000
 
 630,000
 
 89,709
 
 150,398
 
 2,876,703
     President and
 
2009
 
 750,000
   
 -
 
 381,900
 
 402,000
 
 408,000
 
 34,176
 
 119,744
 
 2,095,820
     Chief Executive Officer
 
2008
 
 675,000
 (6)
 -
 
 849,880
 
 656,740
 
 -
 
 (70,936)
 
 101,642
 
 2,212,326
                                       
Edward J. Record
 
2010
 
 540,442
 (7)
 -
 
 720,500
 
 587,000
 
 336,875
 
 90,659
 
 102,774
 
 2,378,250
     Chief Operating Officer
 
2009
 
 460,000
   
 -
 
 190,950
 
 180,900
 
 203,300
 
 85,191
 
 182,570
 
 1,302,911
   
2008
 
 460,000
   
 -
 
 367,950
 
 229,050
 
 -
 
 (66,905)
 
 163,078
 
 1,153,173
                                       
Oded Shein
 
2010
 
 20,192
 (8)
 200,000
 
 163,100
 
 222,600
 
 -
 
 (16)
 
 22,780
 
 628,656
     Executive Vice President,
                                     
     Chief Financial  Officer
                                     
                                       
Richard A. Maloney
 
2010
 
 547,116
 (9)
 -
 
 720,500
 
 587,000
 
 336,875
 
 1
 
 280,597
 
 2,472,089
    Chief Merchandising Officer
2009
 
 475,000
   
 -
 
 190,950
 
 180,900
 
 193,800
 
 53
 
 156,276
 
 1,196,979
                                       
Ron D. Lucas
 
2010
 
 355,006
   
 -
 
 119,100
 
 129,420
 
 156,231
 
 344,814
 
 77,219
 
 1,181,790
     Executive Vice President,
 
2009
 
 345,000
   
 -
 
 76,380
 
 72,360
 
 117,300
 
 489,208
 
 66,239
 
 1,166,487
     Human Resources
 
2008
 
 345,000
   
 -
 
 147,180
 
 91,620
 
 -
 
 (535,046)
 
 64,503
 
 113,257
                                       
Steven L. Hunter
 
2010
 
 372,116
 (10)
 -
 
 119,100
 
 129,420
 
 164,063
 
 2,117
 
 37,325
 
 824,141
      Executive Vice President,                                      
      Chief Information Officer
                                     
_____________________________________________
 
(1)
Any amounts shown in this column are discretionary cash bonuses awarded for performance in the fiscal year indicated, but paid during the subsequent fiscal year.  In consideration for his decision to accept employment with the Company on January 10, 2011, Mr. Shein received a lump sum of $200,000.
 
(2)
The amounts shown in this column reflect the grant date fair value for performance stock and restricted stock for the Named Executive Officers with respect to the fiscal year in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 9 to our audited consolidated financial statements for Fiscal 2010 and Note 8 to our audited consolidated financial statements for Fiscal 2009 and Fiscal 2008 included in our Annual Reports on Form 10-K for those fiscal years.  Further information regarding the 2010 awards is included in the “2010 Plan-Based Awards” and “2010 Outstanding Awards at Fiscal Year-End” tables later in this Proxy Statement. The grant date fair value of the performance-based awards reflected in this column (the “2010 Performance Shares”) is the Target payout based on the probable outcome of the performance criteria, determined as of the grant date.  The maximum potential values for the 2010 Performance Shares would be 200% of Target and would be as follows:  Mr. Hall ($992,500), Mr. Record ($794,000), Mr. Maloney ($794,000), Mr. Lucas ($238,200) and Mr. Hunter ($238,200).  Mr. Shein had not been awarded any performance shares as of the end of Fiscal 2010.
 
(3)
The amounts shown in this column reflect the grant date fair value for stock options and SARs for the Named Executive Officers with respect to the fiscal year in accordance with FASB ASC Topic 718.  Assumptions used in the calculation of these amounts are included in Note 9 to our audited consolidated financial statements for Fiscal 2010 and Note 8 to our audited consolidated financial statements for Fiscal 2009 and Fiscal 2008 included in our Annual Reports on Form 10-K for those fiscal years.  Further information regarding the 2010 awards is included in the “2010 Plan-Based Awards” and “2010 Outstanding Awards at Fiscal Year-End” tables later in this Proxy Statement.
 
 
(4)
Non-Equity Incentive Plan Compensation (performance based cash bonus) amounts include any amounts deferred under the Executive Deferred Compensation Plan. Amounts reflect performance based bonuses earned during the fiscal year covered (and paid during the subsequent fiscal year) under the applicable Senior Executive Incentive Bonus Plan.
 
(5)
All other compensation includes deferred compensation matching contributions, auto allowances, estate planning allowances, insurance premiums and other compensation, as set forth in the 2010 All Other Compensation Table below.
 
(6)
On November 3, 2008, Mr. Hall was promoted to Chief Executive Officer and his title became President and Chief Executive Officer.  In connection with his promotion, Mr. Hall’s base salary was increased from $650,000 to $750,000.
 
(7)
On February 15, 2010, Mr. Record was promoted to Chief Operating Officer. Mr. Record had been serving as our Chief Financial Officer.  In connection with his promotion, Mr. Record’s base salary was increased from $460,000 to $550,000.
 
(8)
Mr. Shein joined the Company on January 10, 2011 at a base salary of $350,000.
 
(9)
On February 15, 2010, Mr. Maloney was promoted to Chief Merchandising Officer.  Mr. Maloney had been serving as President and Chief Operating Officer of our South Hill Division. In connection with his promotion, Mr. Maloney’s base salary was increased from $475,000 to $550,000.
 
(10)
On February 26, 2010, Mr. Hunter was promoted to Executive Vice President, Chief Information Officer.  Mr. Hunter had been serving as Senior Vice President, Chief Information Officer. In connection with his promotion, Mr. Hunter’s base salary was increased from $325,000 to $375,000.
 
 
The following table provides information concerning the compensation of our Named Executive Officers found in the “All Other Compensation” column of the 2010 Summary Compensation Table on page 41.
 
Name
 
Fiscal Year
 
Deferred Compensation Matching Contributions
($)
 
 Auto Allowances ($)
 
Estate
Planning Allowances
($)
 
Life
Insurance Premiums
($)
 
Health
Insurance Premiums
($)
 
Relocation
Expense
Reimburse-
ments
($)
 
Tax
Reimburse-ments
($)
 
Cell
Phone
Allowances
($)
 
Total
($)
                                         
Andrew T. Hall
 
2010
 
 122,233
 
 12,000
 
 2,078
 
 3,105
 
 9,422
 
 -
 
 -
 
 1,560
 
 150,398
   
2009
 
 93,236
 
 12,000
 
 2,003
 
 2,070
 
 8,875
 
 -
 
 -
 
 1,560
 
 119,744
   
2008
 
 77,654
 
 12,000
 
 -
 
 2,070
 
 8,358
 
 -
 
 -
 
 1,560
 
 101,642
                                         
Edward J. Record
 
2010
 
 77,284
 
 12,000
 
 1,298
 
 1,210
 
 9,422
 
 -
 
 -
 
 1,560
 
 102,774
   
2009
 
 48,244
 
 12,000
 
 1,338
 
 1,041
 
 8,875
 
 69,595
 
 39,917
 
 1,560
 
 182,570
   
2008
 
 53,424
 
 12,000
 
 2,006
 
 1,036
 
 8,358
 
 53,823
 
 30,871
 
 1,560
 
 163,078
                                         
Oded Shein
 
2010
 
 22,088
 
 692
 
 -
 
 -
 
 -
 
 -
 
 -
 
 -
 
 22,780
                                         
Richard A. Maloney
2010
 
 76,164
 
 12,000
 
 6,500
 
 8,041
 
 7,168
 
 137,117
 
 32,047
 
 1,560
 
 280,597
   
2009
 
 52,032
 
 12,000
 
 3,742
 
 7,107
 
 6,755
 
 43,743
 
 29,337
 
 1,560
 
 156,276
                                         
Ron D. Lucas
 
2010
 
 49,303
 
 12,000
 
 1,967
 
 5,221
 
 7,168
 
 -
 
 -
 
 1,560
 
 77,219
   
2009
 
 38,758
 
 12,000
 
 2,112
 
 5,054
 
 6,755
 
 -
 
 -
 
 1,560
 
 66,239
   
2008
 
 39,511
 
 12,000
 
 -
 
 5,068
 
 6,364
 
 -
 
 -
 
 1,560
 
 64,503
                                         
Steven L. Hunter
 
2010
 
 12,094
 
 11,769
 
 3,292
 
 1,105
 
 9,065
 
 -
 
 -
 
 -
 
 37,325
 
 
 
The following table provides information concerning each grant of an award made to a Named Executive Officer in Fiscal 2010 under any plan.  Definitions of Performance Shares, Restricted Stock and SARs as used in the footnotes to this table are found in the CD&A beginning on page 19 of this Proxy Statement.
 
     
Estimated Future Payouts Under Non-Equity Incentive Plan Awards  (1)
 
Estimated Future Payouts
Under Equity Incentive Plan
Awards (2)
 
All Other Stock Awards: Number of Shares of Stock or Units  (#)
 
All Other Options Awards: Number of Securities Underlying Options  (#) (3)
 
Exercise or Base Price of Option Awards ($/Sh)
 
Grant Date Fair Value of Stock and Option Awards
($)(4)
Name
 
Grant
Date
Threshold
($)
Target
($)
Maximum
($)
 
Threshold
(#)
Target
 (#)
Maximum
(#)
       
                                   
Andrew T. Hall
   
 180,000
 720,000
 1,440,000
 
 -
 -
 -
 
 -
 
 -
 
 -
 
 -
   
3/26/2010
 -
 -
 -
 
 6,250
 25,000
 50,000
 
 -
 
 -
 
 -
 
 496,250
   
3/26/2010
 -
 -
 -
 
 -
 -
 -
 
 -
 
 100,000
 
 15.50
 
 719,000
                                   
Edward J. Record
   
 96,300
 385,000
 770,000
 
 -
 -
 -
 
 -
 
 -
 
 -
 
 -
   
3/26/2010
 -
 -
 -
 
 5,000
 20,000
 40,000
 
 -
 
 -
 
 -
 
 397,000
   
2/15/2010
 -
 -
 -
 
 -
 -
 -
 
 -
 
 100,000
 
 12.94
 
 587,000
   
2/15/2010
 -
 -
 -
 
 -
 -
 -
 
 25,000
 
 -
 
 -
 
 323,500
                                   
Oded Shein
   
 -
 -
 -
 
 -
 -
 -
 
 -
 
 -
 
 -
 
 -
   
1/10/2011
 -
 -
 -
 
 -
 -
 -
 
 -
 
 30,000
 
 16.31
 
 222,600
   
1/10/2011
 -
 -
 -
 
 -
 -
 -
 
 10,000
 
 -
 
 -
 
 163,100
                                   
Richard A. Maloney
   
 96,300
 385,000
 770,000
 
 -
 -
 -
 
 -
 
 -
 
 -
 
 -
   
3/26/2010
 -
 -
 -
 
 5,000
 20,000
 40,000
 
 -
 
 -
 
 -
 
 397,000
   
2/15/2010
 -
 -
 -
 
 -
 -
 -
 
 -
 
 100,000
 
 12.94
 
 587,000
   
2/15/2010
 -
 -
 -
 
 -
 -
 -
 
 25,000
 
 -
 
 -
 
 323,500
                                   
Ron D. Lucas
   
 44,600
 178,600
 357,100
 
 -
 -
 -
 
 -
 
 -
 
 -
 
 -
   
3/26/2010
 -
 -
 -
 
 1,500
 6,000
 12,000
 
 -
 
 -
 
 -
 
 119,100
   
3/26/2010
 -
 -
 -
 
 -
 -
 -
 
 -
 
 18,000
 
 15.50
 
 129,420
                                   
Steven L.  Hunter
   
 46,900
 187,500
 375,000
 
 -
 -
 -
 
 -
 
 -
 
 -
 
 -
   
3/26/2010
 -
 -
 -
 
 1,500
 6,000
 12,000
 
 -
 
 -
 
 -
 
 119,100
   
3/26/2010
 -
 -
 -
 
 -
 -
 -
 
 -
 
 18,000
 
 15.50
 
 129,420
_______________________________
 
(1)
Shown are the Threshold, Target and Maximum payouts for which each executive was eligible under our 2010 Senior Executive Incentive Bonus Plan (the “2010 Bonus Plan”).  Amounts actually earned with respect to these awards are included in the 2010 Summary Compensation Table as Non-Equity Incentive Plan Compensation.  Further detail regarding potential 2010 Bonus Plan awards can be found in “Establishment of 2010 Senior Executive Incentive Bonus Plan” beginning on page 31 and “Fiscal 2010 Bonus Plan Awards” on page 38 of this Proxy Statement.
 
(2)
These columns reflect Performance Shares that vest over time in an amount depending on performance criteria.  The Performance Shares will vest after a three-year Performance Cycle based on the Company’s total shareholder return relative to the Performance Group, as described in the CD&A.
 
 
The “Threshold” number of shares refers to the lowest number of shares of our common stock the Named Executive Officer can earn (and receive) at the end of the Performance Cycle if the results are at the twenty-fifth percentile of the Performance Group.  Performance results below the twenty-fifth percentile at the end of the performance cycle will result in the executives earning no shares under this equity grant.
 
The “Target” number of shares refers to the number of shares of our common stock the Named Executive Officer can earn (and receive) at the end of the Performance Cycle if the results are at the fiftieth percentile of the Performance Group.
 
The “Maximum” number of shares refers to the number of shares of our common stock the Named Executive Officer can earn (and receive) at the end of the Performance Cycle if the results are at the one hundredth percentile of the Performance Group, which is twice the Target number of shares.
 
 
(3)
This column reflects SARs.  The SARs vest ratably over a four-year period (i.e., 25% per year).
 
(4)
The grant date fair value of the performance-based awards reflected in this column (the “Performance Shares”) is the Target payout based on the probable outcome of the performance criteria, determined as of the grant date.  The maximum potential values would be 200% of Target and would be as follows:  Mr. Hall ($992,500), Mr. Record ($794,000), Mr. Maloney ($794,000), Mr. Lucas ($238,200) and Mr. Hunter ($238,200). Mr. Shein had not been awarded any Performance Shares as of the end of Fiscal 2010.
 
 
The following table provides information, on an award by award basis, concerning unexercised options, stock that has not vested, and equity incentive plan awards for each Named Executive Officer outstanding as of the end of Fiscal 2010.   Market value is computed using the closing market price of our common stock on January 28, 2011, the last trading day prior to the end of our last completed fiscal year ($15.72).
 
   
Options/SARs Awards
 
Stock Awards
Name
 
Number of Securities Underlying Unexercised Options/SARs  Exercisable (#)
 
Number of Securities Underlying Unexercised Options/SARs Unexercisable (#) (1)
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options /SARs(#)
 
Option/ SARs Exercise Price ($/Sh)
 
Option/ SARs Expiration Date