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| Share Name | Share Symbol | Market | Type |
|---|---|---|---|
| Express Inc | NYSE:EXPR | NYSE | Common Stock |
| Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 2.29 | 0 | 00:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant ☒ Filed by a Party other than the Registrant ☐
Check the appropriate box:
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Express, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
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Amount Previously Paid:
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Notice of
2020
Annual Meeting
of Stockholders
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Dear Fellow Shareholders,
Due to the COVID-19 pandemic, these are unprecedented times for the industry in which Express operates and competes. At the time of this writing, the Company’s offices and most of its stores have been closed for six weeks, and the majority of its store associates have been furloughed.
At this time last year, our search for a CEO was still underway. That search concluded with the Board appointing Timothy Baxter effective June 17, 2019.
Tim is a seasoned retail executive and a skilled merchant with nearly 30 years of industry experience. In his first six months as CEO, Tim assembled an outstanding Executive Team comprised of strong, seasoned and diverse leaders; and developed a clear and compelling strategy to return the Express brand and business to robust health.
When the COVID-19 crisis took hold, Tim, the Executive Team and the Board worked in close partnership to make decisions to protect the Company and its shareholders. Together, we have taken decisive action to preserve liquidity, and ensure the health and safety of associates and customers while still keeping the Company’s long-term strategy squarely in our sights. |
The Board has spent a considerable amount of time with Tim, and we have complete confidence in his leadership. He and the Executive Team have accomplished a great deal in a relatively short period of time, put a sound strategy in motion and taken what we feel are the correct and necessary steps throughout this crisis.
We believe in the bright future of Express, our strategy and our team. We hope you and your loved ones are safe and healthy, and we thank you for your continued belief and support.
Mylle H. Mangum
Chairman of the Board
May 1, 2020
Notice of
2020 Annual Meeting of Stockholders
This proxy statement is issued in connection with the solicitation of proxies by the Board of Directors of Express, Inc. for use at the 2020 Annual Meeting of Stockholders, which is to be held virtually via live webcast, and at any adjournment or postponement thereof. On or about May 1, 2020, we will begin distributing print or electronic materials regarding the virtual annual meeting to each stockholder entitled to vote at the virtual meeting. Shares represented by a properly executed proxy will be voted in accordance with instructions provided by the stockholder.
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How to Vote |
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YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to virtually attend the 2020 Annual Meeting of Stockholders, we urge you to vote your shares now in order to ensure the presence of a quorum. |
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Stockholders of record may vote: |
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By Internet: go to
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By telephone: call toll free
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By mail: if you received paper copies in the mail of the proxy materials and proxy card, mark, sign, date, and promptly mail the enclosed proxy card in the postage-paid envelope. |
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Beneficial Stockholders. If you hold your shares through a broker, bank, or other nominee, follow the voting instructions you receive from your broker, bank, or other nominee, as applicable, to vote your shares. |
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By Order of the Board of Directors,
Melinda R. McAfee
Senior Vice President, General Counsel and Corporate Secretary
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on June 10, 2020: this Notice of Annual Meeting and Proxy Statement and our 2019 Annual Report are available in the investor relations section of our website at www.express.com/investor. Additionally, and in accordance with the Securities and Exchange Commission (“SEC”) rules, you may access our proxy materials at www.proxyvote.com, a site that does not have “cookies” that identify visitors to the site.
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Proxy Statement Summary Information
The Board of Directors (the “Board”) of Express, Inc. (the “Company”) is soliciting your proxy to vote at the Company’s 2020 Annual Meeting of Stockholders (the “Annual Meeting”), or at any adjournment or postponement of the Annual Meeting. To assist you in your review of this proxy statement, we have provided a summary of certain information relating to the items to be voted on at the Annual Meeting in this section. For additional information about these topics, please review this proxy statement in full and the Company’s Annual Report on Form 10-K for 2019 which was filed with the SEC on March 17, 2020 (the “Annual Report”).
Our fiscal year ends on the Saturday closest to January 31. Fiscal years are referred to by the calendar year in which the fiscal year commences. All references herein to “2019”, “2018”, and “2017” refer to the 52-week period ended February 1, 2020, February 2, 2019, and the 53-week period ended February 3, 2018, respectively. Comparable sales for 2019 was calculated based upon the 52-week period ended February 1, 2020 compared to the 52-week period ended February 2, 2019.
In this proxy statement, we refer to adjusted operating (loss)/income and adjusted diluted earnings per share (“Adjusted EPS”), which are financial measures that are not calculated in accordance with U.S. generally accepted accounting principles (“GAAP”). Please refer to Appendix A to this proxy statement for more information on adjusted operating (loss)/income and Adjusted EPS, and a reconciliation of such measures to reported operating (loss)/income and diluted earnings per share (“EPS”), respectively, which are their most directly comparable GAAP measures.
2019 Leadership Transformation
In 2019, we made significant organizational changes that we believe will return the business to growth. One of our key accomplishments was the hiring of Timothy Baxter as our new Chief Executive Officer effective June 17, 2019, which followed a transition period where, in line with our succession planning process, Matthew Moellering, our then Executive Vice President and Chief Operating Officer, served as interim Chief Executive Officer and interim President from January 2019 until Mr. Baxter’s appointment in June.
One of Mr. Baxter’s first priorities as Chief Executive Officer was to put the right leadership team into place. During the first months of his tenure, Mr. Baxter appointed a new Executive Vice President and Chief Merchandising Officer – Malissa Akay; along with a new Executive Vice President and Chief Marketing Officer – Sara Tervo. Mr. Baxter also promoted Matthew Moellering to President and Chief Operating Officer and Perry Pericleous continues to serve as Senior Vice President and Chief Financial Officer. With a new executive leadership team in place, in January 2020, Mr. Baxter launched a new corporate strategy designed to build a strong and profitable future for Express.
Strategic Transformation for 2020 and Beyond
At our investor event in January 2020, we announced our new corporate strategy focused on Product, Brand, Customer, and Execution, which is intended to return the Company to long-term profitable growth. Across these focus areas we are determined to:
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Engage our customers and acquire new ones by communicating with customers in different and more impactful ways; |
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X-ecute with precision across all channels to accelerate sales and profitability; |
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Put product first by having fresh, relevant, and compelling product that gets to the selling floor and to the customer faster; and |
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Reinvigorate our brand by clarifying our brand message and more closely connect it to our product strategies. |
At the same time, we announced approximately $80 million in cost reduction opportunities and a fleet rationalization plan to close approximately 100 stores. For additional information regarding our new corporate strategy, please refer to our Annual Report.
2019 Business Performance
Key Financial Results
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Operating Income |
Earnings Per Share |
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• Net sales decreased 5% to $2,019 million from $2,116 million in 2018. |
• Operating Loss was $217.9 million, and on an adjusted basis operating loss was $11.2 million in 2019, compared to Operating Income of $28.2 million, and $33.7 million on an adjusted basis, in 2018. |
• EPS reflected a loss of $2.49 per diluted share compared to earnings of $0.13 per diluted share in 2018. Adjusted EPS reflected a loss of $0.13 per diluted share, compared to Adjusted EPS of $0.32 per diluted share, in 2018. |
Refer to Appendix A for more information on adjustments made to operating income and EPS.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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Proxy Statement Summary Information
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Balance Sheet Highlights |
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Strong Cash Flow Generation Generated strong cash flow in 2019, which allowed for continued investment in the business as well as share repurchases. Ended the year with $207 million in cash on hand. CASH ON HAND $207 MILLION AT END OF YEAR |
Share Repurchases Repurchased approximately 4.3 million shares of our outstanding common stock at an aggregate cost of $15.6 million in 2019, totaling repurchases of approximately 16.4 million shares of our outstanding common stock at an aggregate cost of approximately $116 million since November 2017 under our 2017 share repurchase plan. RETURNED APPROXIMATELY $116 MILLION TO SHAREHOLDERS THROUGH SHARE REPURCHASES FROM NOVEMBER 2017 THROUGH 2019 |
2019 Named Executive Officers
The Compensation Discussion and Analysis included in this proxy statement focuses on the compensation of our named executive officers (our “NEOs”) for 2019, who are listed below:
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Position |
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Timothy Baxter |
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Chief Executive Officer(1) |
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Matthew Moellering |
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President and Chief Operating Officer; former Interim Chief Executive Officer and Interim President (2) |
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Malissa Akay |
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Executive Vice President and Chief Merchandising Officer(3) |
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Sara Tervo |
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Executive Vice President and Chief Marketing Officer(4) |
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Periclis (“Perry”) Pericleous |
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Senior Vice President, Chief Financial Officer and Treasurer |
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John J. (“Jack”) Rafferty |
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Former Executive Vice President—Planning and Allocation(5) |
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Douglas Tilson |
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Former Executive Vice President—Real Estate(6) |
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Effective June 17, 2019, Mr. Baxter was appointed Chief Executive Officer. |
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Mr. Moellering served as Interim Chief Executive Officer and Interim President from January 22, 2019 until June 17, 2019. Mr. Moellering continued to serve as Executive Vice President and Chief Operating Officer until September 23, 2019, when he was appointed President and Chief Operating Officer. |
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Ms. Akay was named Chief Merchandising Officer effective September 9, 2019. |
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Ms. Tervo was named Chief Marketing Officer effective September 9, 2019. |
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Mr. Rafferty served as Executive Vice President – Planning and Allocation, until he left the Company effective October 4, 2019. |
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Mr. Tilson served as Executive Vice President – Real Estate, until he left the Company effective September 27, 2019. |
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www.express.com |
Proxy Statement Summary Information
Our executive compensation program is designed to strongly align executive compensation with the Company’s financial performance. In 2019:
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• CEO Ongoing Target Pay Opportunity Established Between 25th Percentile and Median Level of our Peer Group: Mr. Baxter’s ongoing target pay opportunity of $6.5M was established between the 25th percentile and median level of our peer group and is expected to remain unchanged for 2020. |
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• CEO Ongoing Pay-for-Performance Compensation Design with Challenging Performance Targets Continued: Overall, the design of our new CEO’s compensation package followed the design of our former CEO’s compensation package with 85% of Mr. Baxter’s ongoing target compensation package composed of short-term cash incentives and long-term equity and cash incentives. The performance-based short-term and long-term incentives for both Mr. Baxter and other executives continue to include challenging performance targets so that realizable compensation reflects business performance. For information on one-time make-whole and hiring related payments made in connection with Mr. Baxter’s appointment to CEO in 2019, see “Executive Compensation—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—One-Time Make-Whole and Hiring Related Awards” on page 43. |
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• Short-Term Incentive Program Continues to Include Challenging Financial and Strategic Performance Components: Under the Company’s 2019 short-term cash incentive program, 75% of the target bonus opportunity was based on achievement of challenging financial goals and 25% was based on achievement of key strategic objectives tied to comparable sales, retail store conversion, and customer acquisition and retention, in furtherance of the Company’s long-term growth strategy. |
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• Challenging Long-Term Incentive Performance Targets Continued: Performance-based long-term incentive awards continued to be dependent on the achievement of challenging three-year Adjusted EPS performance targets, subject to modification upwards or downwards 20% based on Company TSR performance relative to the Dow Jones U.S. Retail Apparel Index (“Relative TSR”). Our long-term incentive design was further modified for 2019 by providing that no long-term performance-based award will pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date. |
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• Performance-Based Long-Term Incentives Cash Denominated: While performance-based awards continue to represent 50% of our annual long-term incentive grants to our NEOs, to help manage share usage and overhang, in 2019, performance-based long-term incentive awards were delivered entirely in the form of performance-based cash awards (in 2018, half of the performance-based awards were delivered in the form of performance-based restricted stock units). For our new CEO, the remaining 50% was comprised of stock options with time-based vesting, and for our other NEOs the remaining 50% was comprised of restricted stock units with time-based vesting. For more information on our equity plan proposal to increase the number of shares available for grant under the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan, see “Proposal No. 4” beginning on page 69. |
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• Actual Realizable Total Direct Compensation was Significantly Below Target in 2019, Reflecting Business Results: Actual realizable total direct compensation for our continuing NEOs fell significantly below target in 2019 reflecting that (1) no short-term cash incentives paid out for either of the Spring and Fall seasons and (2) performance-based long-term incentives granted in 2017, which were subject to a three-year performance period through 2019, were entirely forfeited. In addition, performance-based awards granted in 2018 (which are subject to a three-year performance period through 2020) are not expected to pay out, and Adjusted EPS performance must significantly improve over the next two years for there to be any payout of the performance-based long-term incentives granted to our current NEOs in 2019 (which are subject to a three-year performance period through 2021). This excludes one-time make-whole and hiring related payments made to new executives. For information on one time make-whole and hiring related payments made to new executives in 2019, see “Executive Compensation – Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—One-Time Make-Whole and Hiring Related Awards” on page 43. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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Proxy Statement Summary Information
CEO Target Total Direct Compensation
The annual compensation package for our new CEO, Mr. Baxter, was based on a competitive compensation analysis of CEO pay levels at our peer group and established between the 25th percentile and median level of our peer group.
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Annual Target Compensation |
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Base Salary |
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• 2019 base salary for Mr. Baxter was prorated based on his June start date and such amount ($634,615) is reflected in the Summary Compensation Table on page 49. • Because of the limited impact our new CEO could have on the 2019 Spring and Fall performance periods, Mr. Baxter’s 2019 annual incentive compensation opportunity, pro-rated based on his June 2019 start date, was guaranteed at the greater of actual achievement or 100% of target ($910,000). • The pro-rated amount of Mr. Baxter’s 2019 long term incentive opportunity ($2,800,000) was delivered half in the form of stock options and half in the form of performance-based cash awards. The portion of Mr. Baxter’s long-term incentives denominated in performance-based cash ($1,400,000) is not included in the Summary Compensation Table on page 49. |
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Incentive Compensation Opportunity at Target |
130% |
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Target Total Cash |
$2,300,000 |
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Annual Long-Term Incentive Opportunity |
$4,200,000 |
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Target Total Direct Compensation |
$6,500,000 |
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Make-Whole Awards |
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Buy-out Grant |
$3,000,000 |
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• The amount of Mr. Baxter’s buyout grant was determined based on the amount of unvested equity awards that Mr. Baxter forfeited from his prior employer, and was comprised of one-half restricted stock units, and one-half stock options, that each cliff vest on the two-year anniversary of grant. • The amount of Mr. Baxter’s sign-on bonus was determined based the amount of annual cash bonus that Mr. Baxter forfeited from his prior employer. |
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Buy-out Bonus |
$925,000 |
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Actual Realizable Total Direct Compensation
In previous years we have separately shown three-year CEO Realizable Pay to highlight our executive compensation program’s strong pay for performance alignment. While CEO Realizable Pay may be useful to show in the future, it is not representative for 2019, both because Mr. Baxter received one-time make-whole awards to compensate him for forfeited benefits at his former employer and the fact that his 2019 short-term incentive compensation bonus was guaranteed to reflect his limited impact on the 2019 performance periods. The alignment between our executive compensation program and the Company’s financial performance is better shown by the table below, which shows how our compensation program paid out or is tracking to pay out for our continuing NEOs and other executives at the end of 2019.
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Short-Term Annual Cash Incentive Compensation Program |
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Long-Term Performance-Based Awards Subject to Three-Year Performance Periods |
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Fall 2019 |
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2017-2019 |
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2019-2021 |
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No Payout |
No Payout |
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No Payout |
Not Expected to Payout |
Will only payout if Adjusted EPS performance significantly improves over next two years |
For more information on our short-term cash incentive program, refer to “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” beginning on page 36. For information on our long-term incentive program, see “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives” beginning on page 39.
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www.express.com |
Proxy Statement Summary Information
EXECUTIVE COMPENSATION OBJECTIVES AND PRACTICES
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Program Objective |
What We DO: |
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Pay for Performance |
☑ Performance-Based Ongoing CEO Compensation Package with 85% Variable Compensation, |
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☑ Short-Term and Long-Term Incentives with Challenging Performance Targets that Incentivize Creation of Stockholder Value |
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☑ 50% of Long-Term Incentives are Performance-Based with 3-Year Performance Periods |
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Pay Competitively |
☑ Robust Compensation Setting Process that Utilizes Market Data to Ensure Competitiveness |
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Pay Responsibly |
☑ Long-Term Vesting Requirements: 3-year Performance Periods for Performance Based Long-Term Incentive Awards and Multi-Year Vesting Requirements for ongoing Time-Based Restricted Stock Units |
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☑ Annual Stockholder Engagement Process and the Incorporation of Stockholder Feedback into Executive Compensation Decision Making |
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☑ Stock Ownership Guidelines |
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☑ Mitigate Risk Through Incentive Compensation Design |
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☑ Utilize Independent Compensation Consultant |
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☑ Robust Clawback Policy including updates made in 2019 |
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What We DON’T DO: |
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Pay Responsibly |
☒ No Special Tax Gross-Ups |
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☒ No Pension Plans or Other Post-Employment Defined Benefit Plans |
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☒ No Liberal Share Recycling, Repricing of Underwater Stock Options, or Reloads of Stock Options |
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☒ No Hedging or Pledging Transactions |
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☒ No Single Trigger Change-in-Control Payments |
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☒ No Special Perquisites |
Governance Highlights
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Board Composition: |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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Proxy Statement Summary Information
Proposals to be Voted on and Voting Recommendations
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Proposal |
Board Voting Recommendation |
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Page Reference (for more detail) |
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Election of Class I Directors (Proposal No. 1) |
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Advisory vote to approve executive compensation (say-on-pay) (Proposal No. 2) |
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FOR |
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67 |
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Ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020 (Proposal No. 3) |
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FOR |
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Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4) |
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FOR |
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69 |
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6 |
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www.express.com |
Proxy Statement Summary Information
The following table provides summary information about our Class I director nominees. The Class I directors will be elected to each serve a three-year term that will expire at the Company’s 2023 annual meeting of stockholders.
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Director Since |
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Select Professional Experience |
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Board Committees |
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Select Skills/Qualifications |
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Mike Archbold |
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59 |
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January 2012 |
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Retired Retail Executive Previous Experience: - CEO – GNC Holdings, Inc. - CEO – The Talbots Inc. - President & CEO – Vitamin Shoppe - CFO of multiple retailers |
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Yes |
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Audit Committee (Chair) |
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Accounting, finance, and capital structure; risk management; retail merchandising and operations; business development and strategic planning; investor relations; corporate responsibility; executive leadership of complex organizations |
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Timothy Baxter |
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50 |
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June 2019 |
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Chief Executive Officer, Express, Inc. Previous Experience: - CEO – Delta Galil Premium Brands - Chief Merchandising Officer – Macy’s, Inc. - Various merchandising roles – Macy’s Inc. |
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No |
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Retail merchandising and operations; apparel merchandising and design; business development and strategic planning; e-commerce and omni-channel retailing; consumer brand marketing and advertising; supply chain |
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Peter Swinburn |
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67 |
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February 2012 |
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Retired Consumer Products Executive Previous Experience: - CEO – Molson Coors Brewing Company - CEO – Coors (US) - CEO – Coors Brewing Worldwide - COO – Molson Coors Brewing Company (UK) |
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Yes |
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Compensation and Governance Committee (Chair) |
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Business development and strategic planning; consumer brand marketing and advertising; international operations; finance and capital structure; corporate governance and public company board practices; executive leadership of complex organizations; mergers and acquisitions; executive compensation |
Forward-Looking Statements
This proxy statement, including the “Letter to our Stockholders from the Board of Directors,” contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include any statement that does not directly relate to any historical or current fact and are based on current expectations and assumptions, which may not prove to be accurate. Forward-looking statements are not guarantees and are subject to risks, uncertainties, changes in circumstances that are difficult to predict, and significant contingencies, many of which are beyond the Company’s control. Many factors could cause actual results to differ materially and adversely from these forward-looking statements, including those set forth in Item 1A of the Company’ s Annual Report on Form 10-K. The Company undertakes no obligation to publicly update or revise any forward-looking statements as a result of new information, future events, or otherwise, except as required by law.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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(Proposal No. 1)
The Board and its Compensation and Governance Committee are committed to ensuring that the Board possesses the right diversity of backgrounds, skills, experience, and perspectives to constitute an effective Board. The Board currently consists of eight members and is divided into three classes of directors, with three Class I directors, two Class II directors, and three Class III directors. The current term of our Class I directors expires at the Annual Meeting, while the terms for Class II and Class III directors will expire at our 2021 and 2022 annual meetings of stockholders, respectively.
Mr. Archbold, Mr. Baxter, and Mr. Swinburn currently serve as Class I directors. Mr. Archbold and Mr. Swinburn are each independent and Mr. Baxter serves as our Chief Executive Officer. Upon the recommendation of the Compensation and Governance Committee, the Board has nominated Mr. Archbold, Mr. Baxter, and Mr. Swinburn for re-election as Class I directors, to each serve three-year terms expiring at the 2023 annual meeting of stockholders. Mr. Archbold and Mr. Swinburn have each served as a director since 2012 and Mr. Baxter joined the Board in June 2019 in connection with his appointment to Chief Executive Officer of the Company.
Mr. Archbold, Mr. Baxter and Mr. Swinburn have consented to serve if elected. If re-elected, each of Mr. Archbold, Mr. Baxter, and Mr. Swinburn will hold office until his respective successor has been duly elected and qualified or until his earlier resignation or removal. If Mr. Archbold, Mr. Baxter, or Mr. Swinburn becomes unavailable to serve as a director, the Board may either designate a substitute nominee or reduce the number of directors. If the Board designates a substitute nominee, the persons named as proxies will vote for the substitute nominee designated by the Board.
Information with respect to our Class I director nominees and our continuing Class II and Class III directors, including their recent employment or principal occupation, a summary of select qualifications, skills, and experience that led to the conclusion that they are qualified to serve as directors, the names of other public companies for which they currently serve as a director or have served as a director within the past five years, their period of service on the Board, and their ages as of April 20, 2020 (the “Record Date”) are provided in this section. The Board believes that our continuing directors, together with our director nominees, possess a complementary and diverse set of qualifications, skills, and experience to allow the Board to function at a high level and fulfill its responsibilities to our stockholders. Please refer to “Corporate Governance—Board Composition” on page 14 for other information about our Board, including a description of the qualifications, skills, and experience that the Board believes are important in order to effectively oversee the Company as it carries out its growth strategy and commitment to long-term value creation.
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www.express.com |
Election of Class I Directors (Proposal No. 1)
Nominees for Class I Directors for Election at the 2020 Annual Meeting
MICHAEL ARCHBOLD
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Director Since: January 2012 Age: 59 Chair of the Audit Committee
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Select Qualifications, Skills, and Experience:
• Accounting, finance, and capital structure
• Risk management
• Retail merchandising and operations
• Business development and strategic planning
• Investor relations
• Executive leadership of complex organizations
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Business Experience
Mr. Archbold served as Chief Executive Officer of GNC Holdings, Inc. from August 2014 until July 2016 and also served as a director on the board of GNC Holdings, Inc. Prior to that, he was the Chief Executive Officer of The Talbots Inc. from August 2012 until June 2013 and also served as a director on the board of The Talbots Inc. Prior to that, Mr. Archbold served as President and Chief Operating Officer of Vitamin Shoppe, Inc. from April 2011 until June 2012, and prior to that as its Executive Vice President, Chief Operating Officer, and Chief Financial Officer from April 2007. Mr. Archbold served as Executive Vice President / Chief Financial and Administrative Officer of Saks Fifth Avenue from 2005 until 2007. From 2002 until 2005 he served as Chief Financial Officer for AutoZone, Inc., originally as Senior Vice President, and later as Executive Vice President. Mr. Archbold is an inactive Certified Public Accountant and has 20 years of financial experience in the retail industry. Mr. Archbold has also served as the Chief Executive Officer of The Council for Inclusive Capitalism, Inc. since September 2019.
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TIMOTHY BAXTER
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Director Since: June 2019 Age: 50 Chief Executive Officer, Express, Inc.
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Select Qualifications, Skills, and Experience:
• Retail merchandising and operations
• Apparel merchandising and design
• Business development and strategic planning
• E-commerce and omni-channel retailing
• Consumer brand marketing and advertising
• Experience with target customers
• Supply chain
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Business Experience
Mr. Baxter has served as our Chief Executive Officer since June 2019. Prior to joining the Company, Mr. Baxter was Chief Executive Officer of Delta Galil Premium Brands, a group of specialty retail apparel brands including 7 For All Mankind and Splendid, since May 2018. Prior to that, he held numerous leadership positions at Macy’s, Inc. from 2006 to 2017 including Chief Merchandising Officer from 2015 to 2017 and Executive Vice President, General Merchandise Manager from 2013 to 2015. Mr. Baxter started his career with Famous-Barr and May Department Stores, where he held positions of increasing responsibility from 1992 until 2006.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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9 |
Election of Class I Directors (Proposal No. 1)
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Director Since: February 2012 Age: 67 Chair of the Compensation and Governance Committee
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Select Qualifications, Skills, and Experience:
• Business development and strategic planning
• Consumer brand marketing and advertising
• International operations
• Finance and capital structure
• Corporate governance and public company board practices
• Executive leadership of complex organizations
• Mergers and acquisitions
• Executive compensation
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Business Experience
Mr. Swinburn served as Chief Executive Officer and President of Molson Coors Brewing Company from July 2008 until he retired in December 2014. He also served as a director on the board of Molson Coors Brewing Company and MillerCoors Brewing Company from July 2008 until his retirement. Prior to that, he was Chief Executive Officer of Coors (U.S.) and from 2005 until October 2007, Mr. Swinburn served as President and Chief Executive Officer of Molson Coors Brewing Company (UK) Limited. Prior to that, he served as President and Chief Executive Officer of Coors Brewing Worldwide and Chief Operating Officer of Molson Coors Brewing Company (UK) Limited following the Molson Coors Brewing Company’s acquisition of Molson Coors Brewing Company (UK) Limited in 2002 where he served until 2003. Mr. Swinburn previously served as a director of Fuller, Smith & Turner PLC and of Cabela’s Inc.
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10 |
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www.express.com |
Election of Class I Directors (Proposal No. 1)
Class II Directors with Terms Continuing Until the 2021 Annual Meeting
MICHAEL F. DEVINE
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Director Since: May 2010 Age: 61 Audit Committee Member (Chair of the Audit Committee May 2010 - March 2019)
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Select Qualifications, Skills, and Experience:
• Accounting, finance, and capital structure
• Risk management
• Corporate governance and public company board practices
• Investor relations
• Executive leadership of complex organizations
• Retail merchandising
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Business Experience
Mr. Devine was appointed Senior Vice President and Chief Financial Officer of Coach in December 2001 and Executive Vice President in August 2007, a role he held until he retired in August 2011. Prior to joining Coach, Mr. Devine served as Chief Financial Officer and Vice President—Finance of Mothers Work, Inc. (now known as Destination Maternity Corporation) from February 2000 until November 2001. From 1997 to 2000, Mr. Devine was Chief Financial Officer of Strategic Distribution, Inc. Mr. Devine was Chief Financial Officer at Industrial System Associates, Inc. from 1995 to 1997, and for the six years prior to that, he was the Director of Finance and Distribution for McMaster-Carr Supply Co. Mr. Devine previously served as a director of Nutrisystems, Inc. He currently serves as Chairman of the Board of Deckers, Inc. and as a director of Five Below, Inc.
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MYLLE MANGUM
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Director Since: August 2010 Age: 71 Chairman of the Board; Compensation and Governance Committee Member; Audit Committee Member
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Select Qualifications, Skills, and Experience:
• Business development and strategic planning
• Corporate governance and public company board practices
• Executive leadership of complex organizations
• Leadership development and succession planning
• International and franchise operations
• Accounting, finance, and capital structure
• Executive compensation
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Business Experience
Ms. Mangum is the Chief Executive Officer of IBT Holdings, LLC, a position she has held since October 2003. Prior to that, Ms. Mangum served as Chief Executive Officer of True Marketing Services, LLC since July 2002. She served as Chief Executive Officer of MMS Incentives, Inc. from 1999 to 2002. From 1997 until 1999, she served as President-Global Payment Systems and Senior Vice President-Expense Management and Strategic Planning for Carlson Wagonlit Travel, Inc. From 1992 until 1997 she served as Executive Vice President-Strategic Management for Holiday Inn Worldwide. Ms. Mangum was previously employed with BellSouth Corporation as Director-Corporate Planning and Development from 1986 to 1992 and President of BellSouth International from 1985 to 1986. Prior to that, she was with the General Electric Company. Ms. Mangum previously served as a director of Emageon, Inc., Scientific-Atlanta, Inc., and Respironics, Inc. Ms. Mangum currently serves as a director of PRGX Global, Inc., Barnes Group Inc., and Haverty Furniture Companies, Inc.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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11 |
Election of Class I Directors (Proposal No. 1)
Class III Directors with Terms Continuing Until the 2022 Annual Meeting
TERRY DAVENPORT
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Director Since: November 2016 Age: 62 Compensation and Governance Committee Member
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Select Qualifications, Skills, and Experience:
• Consumer brand marketing and advertising
• E-commerce and omni-channel retailing
• Retail merchandising and operations
• Business development and strategic planning
• International operations
• Corporate responsibility
• Experience with target customers
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Business Experience
Mr. Davenport served as Global Brand Advisor for Starbucks Coffee Company from February 2014 until he retired in October 2017. Mr. Davenport spent the last ten years of his career at Starbucks Coffee Company. Prior to serving as Global Brand Advisor, his roles at Starbucks included: Senior Vice President of Global Creative Studios, Senior Vice President of Marketing and Category for Europe, Middle East, and Africa (EMEA), and Senior Vice President of Marketing for the U.S. He originally joined Starbucks as Vice President of Brand Strategy and Consumer Insights in October 2006. Prior to joining Starbucks, Mr. Davenport held senior brand leadership roles with YUM! Brands, PepsiCo., and Omnicom Agencies. Mr. Davenport is currently a strategic advisor and consultant for various enterprises on consumer, strategy, and brand related matters.
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KAREN LEEVER
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Director Since: August 2016 Age: 56 Compensation and Governance Committee Member
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Select Qualifications, Skills, and Experience:
• E-commerce and omni-channel retailing
• Technology development and management experience
• Data analytics
• Business development and strategic planning
• Retail merchandising and operations
• Experience with target customers
• Leadership development and succession planning
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Business Experience
Ms. Leever is President, U.S. Digital Products and Marketing, for Discovery Communications, a role she has had since July 2018. Ms. Leever joined Discovery Communications in October 2015 where she first served as Executive Vice President and General Manager, Digital Media. Prior to joining Discovery Communications, she spent ten years with DIRECTV, and held several roles including: Senior Vice President of Digital and Direct Sales from 2013 until 2015, Senior Vice President of Digital Marketing and Media in 2012, and Senior Vice President of directv.com and Customer Communications in 2011. Additionally, Ms. Leever served as Vice President, Marketing at Kmart Corporation during 2005 and as Divisional Vice President, E-commerce from 2004 until 2005. Earlier in her career, she spent more than a decade in electronic television retailing at HSN and QVC, overseeing website design, messaging, pricing, and programming strategies.
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12 |
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www.express.com |
Election of Class I Directors (Proposal No. 1)
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Director Since: June 2018 Age: 49 Compensation and Governance Committee Member
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Select Qualifications, Skills, and Experience:
• Retail merchandising and operations
• Apparel merchandising and design
• Business development and strategic planning
• E-commerce and omni-channel retailing
• Consumer brand marketing and advertising
• Experience with Target Customers
• Supply Chain
• Corporate Responsibility
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Business Experience
Ms. Park is Chief Executive Officer of Paper Source, a role she has held since September 2015. Prior to joining Paper Source, Ms. Park held the titles of Executive Vice President, Global Marketing and E-commerce and Global VP, GMM, Merchandising during her 9-year tenure at Hong Kong-based luxury retailer, DFS, a division of LVMH, beginning in 2006. Prior to her roles at DFS, Ms. Park served as Senior Director, Women’s Merchandising and Director, Strategy for Dockers for Levi Strauss & Co. from 2003 to 2006. Earlier in her career, Ms. Park worked at McKinsey and Company, focusing on e-commerce, apparel and retail. Ms. Park started her career in the non-profit industry with Princeton Project 55.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR EACH OF THE CLASS I NOMINEES TO BE ELECTED AS DIRECTORS. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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13 |
The Board is responsible for overseeing the affairs of the Company in order to generate sustainable long-term value for our stockholders and does so through oversight of the Company’s (1) strategy and performance, (2) management, including succession planning, (3) risk management program, (4) compliance and corporate responsibility programs, and (5) other corporate governance practices, including stockholder engagement.
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Board Oversight |
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Strategy and Performance |
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Management, including Succession Planning |
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Risk Management |
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Compliance and Corporate Responsibility |
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Other Corporate Governance Practices, including Stockholder Engagement |
The Board believes that effective oversight is best achieved through (1) having the right combination of people on the Board, (2) an effective Board leadership and committee structure, and (3) effective Board practices. The Board continually reassesses the composition of the Board, the Board’s leadership and structure, and its governance practices and believes that the continuing directors, along with the director nominees, together have a complementary and diverse set of skills, backgrounds, experiences, and perspectives to constitute an effective Board; and furthermore, that the Board’s leadership and committee structure as well as its governance practices are effective. See “Board Composition” below and “Election of Class I Directors (Proposal No. 1)” on page 8 for more information about the composition of the Board; see “Board Leadership and Structure” on page 17 for more information about the Board’s leadership structure and its committees; and see “Board Practices” on page 21 for more information about the Board’s governance practices.
The Board and its Compensation and Governance Committee (in this “Corporate Governance” section, the “Committee”) are committed to ensuring that the Board possesses the right diversity of backgrounds, skills, experience, and perspectives to constitute an effective Board. The Committee is responsible for developing the criteria for, and reviewing periodically with the Board, the skills and characteristics of nominees, as well as the composition of the Board as a whole. These criteria include independence, diversity, age, skills, tenure, and experience in the context of the needs of the Board. The Committee also considers a number of other factors, including the ability to represent all stockholders without a conflict of interest; the ability to work in and promote a productive environment; sufficient time and willingness to fulfill the substantial duties and responsibilities of a director; a high level of character and integrity; broad professional and leadership experience and skills necessary to effectively respond to complex issues encountered by a publicly-traded company; and the ability to apply sound and independent business judgment.
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14 |
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www.express.com |
Corporate Governance
BOARD COMPETENCIES AND EXPERIENCE
The Board believes that it has the right mix of qualifications, skills, experience, and perspectives that allow it to fulfill its responsibilities, including overseeing management’s execution of the Company’s corporate strategy, which is designed to create long-term stockholder value. The information below shows how the Board’s collective qualifications, skills, and experience relate to the Company’s corporate strategy. For biographical information regarding each of our directors and their individual qualifications, skills, and experience see, “Election of Class I Directors (Proposal No. 1)” beginning on page 8.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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15 |
Corporate Governance
BOARD DEMOGRAPHICS AND REFRESHMENT
As previously noted, in addition to ensuring that the Board collectively has a diverse set of competencies, experience, and perspectives, the Committee and Board also consider independence as well as diversity, age, and tenure. The charts below show certain demographic information about our Board as of April 20, 2020.
In order to assure the appropriate balance between members with new and different perspectives and those with a deep understanding of the Company built up over many years, the Committee reviews a director’s continuation on the Board each time such director’s term of office expires. Therefore, in order to provide the Board with greater flexibility in managing Board continuity, knowledge, and skill base, the Board during 2019 amended the Corporate Governance Guidelines to remove the mandatory retirement age for directors. The Board believes that together these practices are effective at ensuring an appropriate balance between experience and a fresh perspective on the Board.
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16 |
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www.express.com |
Corporate Governance
IDENTIFYING AND EVALUATING DIRECTOR CANDIDATES
The Committee is responsible for identifying, recruiting, and recommending candidates for the Board and is responsible for reviewing and evaluating any candidates recommended by stockholders.
The following shows our nomination process for candidates to our Board:
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Conduct a Needs Assessment |
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The Committee determines the director skills, experience, and attributes needed for the Board to exercise effective oversight of the Company. The Committee assesses the skills, experience, and attributes of existing directors against desired director skills, experience, and attributes to identify any skills, experience, and attributes that would strengthen the collective skills and experience of the Board. |
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Develop a New Director Profile |
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The Committee develops a profile that sets forth the skills, experience, and attributes desired for the new director, which satisfies the needs identified in the needs assessment. |
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Identify New Director Candidates |
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The Committee may identify new director candidates through professional search firms, professional networks of sitting directors, and nominations suggested by stockholders. |
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Selection of New Director |
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The Committee makes a recommendation to the Board based on an initial round of interviews, reference checks, and a final round of interviews with all directors. |
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Due Diligence and Onboarding |
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Once due diligence is performed and the nominee is appointed to the Board, the Company provides a robust onboarding program which includes a full day of in-person meetings with senior leadership at the Company’s headquarters and participation in a multi-day new director education program for first-time directors. |
The Committee considers all director candidates, including candidates proposed by stockholders in accordance with our Bylaws, based on the same criteria. As noted above, the Committee may engage third party search firms to identify potential director nominees.
Board Leadership and Structure
Ms. Mangum has served as the Company’s independent Chairman since assuming the role at our 2016 Annual Meeting of Stockholders. The independent Chairman’s roles and responsibilities include: (1) establishing the Board agendas and schedules to confirm that appropriate topics are reviewed and sufficient time is allocated to each; (2) providing input to the CEO with respect to the information provided to the Board; (3) serving as a liaison between the independent directors and the CEO; (4) presiding at the executive sessions of independent directors; (5) facilitating communications and coordination of activities among the committees as appropriate; and (6) approving and coordinating the retention of advisors and consultants to the Board.
Our Corporate Governance Guidelines provide that the roles of Chairman and CEO may be separated or combined. The Board exercises its discretion in combining or separating these positions as it deems appropriate. The Board believes that the combination or separation of these positions should be considered as part of the succession planning process. In the event that the Chairman is not independent, the Board believes that it is beneficial for the independent directors to appoint an independent Lead Director. Currently, the Board believes that having an independent Chairman best serves the Board in its oversight role.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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17 |
Corporate Governance
The Board has two standing committees: an Audit Committee and a Compensation and Governance Committee. The composition and leadership of these committees are shown in the table below. In the future, the Board may establish other committees, as it deems appropriate, to assist it with its responsibilities. The committees report to the Board as they deem appropriate and as the Board may request. Each standing committee operates under a charter that has been approved by the Board and each is comprised solely of independent directors.
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Board Member |
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Audit Committee |
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Compensation and Governance Committee |
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Michael Archbold(1) |
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▲ |
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— |
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Terry Davenport |
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— |
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X |
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Michael F. Devine(1) |
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X |
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— |
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Karen Leever |
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— |
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X |
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Mylle Mangum |
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X |
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X |
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Winnie Park(2) |
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— |
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X |
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Peter Swinburn |
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— |
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▲ |
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▲ |
Chair of the committee |
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(1) |
Effective April 2019, Mr. Archbold was appointed to serve as Chair of the Audit Committee. Mr. Devine continues to serve as a member of the Audit Committee. |
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(2) |
Effective April 2019, Ms. Park was appointed to serve on the Compensation and Governance Committee. |
AUDIT COMMITTEE
Audit Committee Responsibilities
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The Audit Committee is responsible for, among other matters: • appointing, compensating, retaining, evaluating, terminating, and overseeing our independent registered public accounting firm; • reviewing the independent registered public accounting firm’s independence from management; • reviewing with our independent registered public accounting firm the scope and results of their audit; • approving all audit and permissible non-audit services to be performed by the Company’s independent registered public accounting firm; • overseeing the financial reporting process and discussing with management and the Company’s independent registered public accounting firm the interim and annual financial statements, including related disclosures, that the Company files with the SEC, as well as earnings releases, earnings guidance, and non-GAAP measures; • reviewing and monitoring the Company’s accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements; • establishing procedures for the confidential anonymous submission of concerns regarding questionable accounting, internal controls, or auditing matters; • reviewing and approving known related person transactions; • reviewing internal audit activities and reports; and • assisting the Board in its oversight of the Company’s risk management program, including regularly reviewing the Company’s risk portfolio, management’s process for identifying risks, and the steps management has taken to monitor and control such risks. |
The Audit Committee also prepares the Audit Committee Report that SEC rules require to be included in our annual proxy statement. This report is on page 65 of this proxy statement.
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18 |
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www.express.com |
Corporate Governance
The Audit Committee met eight times in 2019. The Audit Committee generally has eight regularly scheduled meetings per year and has an opportunity at each meeting to speak with the lead audit partner from the Company’s independent registered public accounting firm as well as the Company’s director of internal audit without any other members of management present. In addition, the Audit Committee Chair has regularly scheduled teleconferences with each of the Company’s Chief Financial Officer and the lead audit partner from the Company’s independent registered public accounting firm.
Audit Committee Practices
At the end of each quarter, the Audit Committee reviews and discusses with management and the Company’s independent registered public accounting firm the Company’s financial results, press releases concerning the Company’s financial performance and earnings estimates, any significant control deficiencies identified and steps management has taken or plans to take to remediate the deficiencies, significant estimates and proposed adjustments to the financial statements, reports to the Company’s ethics hotline, internal audit activities and reports, risk management activities, and the results of the independent registered public accounting firm’s review or audit of the Company’s financial statements, among other things.
Each year the Audit Committee evaluates the performance of the Company’s independent registered public accounting firm and considers whether it is in the best interests of the Company and its stockholders to engage the firm for another year. As part of its evaluation, the Audit Committee considers the qualifications of the persons who will be staffed on the Company’s engagement, including the lead audit partner, quality of work, firm reputation, independence, fees, retail experience, and understanding of the Company’s financial reporting processes, policies, and procedures. The Audit Committee solicits feedback from management as part of its evaluation process.
Audit Committee Independence and Expertise
The Board has affirmatively determined that (1) each of our Audit Committee members meets the definition of “independent director” for purposes of serving on the Audit Committee under both Rule 10A-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the NYSE listing rules, and (2) each qualifies as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.
Audit Committee Charter
The Audit Committee Charter may be viewed on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide a copy of the charter in print without charge upon written request delivered via email to IR@express.com or by mail to Express, Inc. 1 Express Drive, Columbus, OH 43230, Attention: Investor Relations.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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19 |
Corporate Governance
COMPENSATION AND GOVERNANCE COMMITTEE
Compensation and Governance Committee Responsibilities
|
The Compensation and Governance Committee is responsible for, among other matters: • overseeing the overall performance evaluation process for the CEO; • reviewing and approving key employee compensation goals, policies, plans, and programs; • reviewing and approving corporate goals and objectives relevant to CEO compensation and evaluating the CEO’s performance in light of these goals and objectives; • reviewing and approving, in consultation with or with the approval of the independent directors of the Board, compensation arrangements for the CEO; • reviewing the performance of and approving compensation arrangements for executive officers other than the CEO; • reviewing and approving employment agreements and other similar arrangements between the Company and its executive officers; • reviewing and recommending to the Board, in consultation with the Committee’s independent compensation consultant, compensation arrangements for the independent directors; • overseeing management’s administration of Company benefit plans and policies, including incentive compensation plans; • reviewing the Company’s compensation program to ensure it is appropriate and does not incentivize unnecessary and excessive risk taking; • identifying individuals qualified to become members of the Board, consistent with criteria approved by the Board; • reviewing stockholder proposals and making recommendations to the Board regarding proposals; • overseeing the annual self-evaluation process for the Board and its committees; • overseeing the organization of the Board to discharge the Board’s duties and responsibilities properly and efficiently; and • developing and recommending to the Board a set of corporate governance guidelines and principles applicable to the Company.
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The Compensation and Governance Committee also prepares the Compensation and Governance Committee Report that SEC rules require to be included in our annual proxy statement. This report is on page 48 of this proxy statement.
Compensation and Governance Committee Independence
The Board has affirmatively determined that each of our Compensation and Governance Committee members meets the definition of “independent director” for purposes of serving on the Compensation and Governance Committee under both Rule 10C-1 of the Exchange Act and the NYSE listing rules.
Compensation and Governance Committee Meetings
The Compensation and Governance Committee met nine times in 2019. The Compensation and Governance Committee generally has six regularly scheduled meetings per year and has an opportunity at each meeting to speak with the Compensation and Governance Committee’s independent compensation consultant.
Compensation and Governance Committee Practices
See “Executive Compensation—Compensation Discussion & Analysis—Executive Compensation Practices” on page 45 for additional information about the Compensation and Governance Committee’s practices.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation and Governance Committee has been an officer or employee of the Company. No interlocking relationships exist between the members of the Board or Compensation and Governance Committee and the board of directors or compensation committee of any other company.
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20 |
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www.express.com |
Corporate Governance
Compensation and Governance Committee Charter
The Compensation and Governance Committee Charter may be viewed on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide a copy of the charter in print without charge upon written request delivered via email to IR@express.com or by mail to Express, Inc. 1 Express Drive, Columbus, OH 43230, Attention: Investor Relations.
The Board has deep experience in the area of strategy and business development, with much of that experience gained in the retail sector. At least once per year, the Board and management engage in an in-depth discussion and align on the Company’s corporate strategy which is designed to create long-term stockholder value and serves as the foundation upon which goals are established and decisions are made. Short and medium term objectives are developed to support achievement of the long-term strategy and the Board monitors management’s progress against such objectives.
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Full Board
The Board, with the assistance of the Audit Committee and the Compensation and Governance Committee, oversees our enterprise risk management (“ERM”) program. Our ERM program is designed to enable effective identification and management of critical enterprise risks and to facilitate the incorporation of risk considerations into decision making.
The Board is kept informed of the committees’ risk oversight and related activities primarily through reports of the committee chairs to the full Board. The Board also receives a comprehensive report from management on the ERM program at least annually. In addition, the Audit Committee escalates issues relating to risk oversight to the full Board as appropriate to ensure that the Board is appropriately informed of developments that could affect our risk profile or other aspects of our business. The Board also considers specific risk topics in connection with strategic planning and other matters.
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The Audit Committee
The Audit Committee oversees management’s implementation of the ERM program, including regularly reviewing our enterprise risk portfolio, management’s process for identifying risks, and steps management has taken to monitor and control enterprise risks. |
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The Compensation and Governance Committee
The Compensation and Governance Committee is responsible for risk oversight as it relates to our compensation policies and practices and governance structure and processes. |
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Management
Management has day-to-day responsibility for the Company’s ERM program. As part of its responsibilities, management continuously identifies and monitors the Company’s enterprise risks, develops and reviews risk response plans, and takes steps to control risk where appropriate.
Management’s responsibilities are carried out by a cross-functional Risk Committee which includes our President and Chief Operating Officer, General Counsel, Chief Financial Officer, Chief Information Officer, SVP of Human Resources, and Director of Internal Audit.
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MANAGEMENT OVERSIGHT AND SUCCESSION PLANNING
As part of its management oversight responsibilities, the Board assesses whether the Company has the management talent needed to successfully pursue the Company’s strategy, monitors management’s execution of the Company’s strategy, and provides advice to management as a strategic partner. The Board believes that open communications between the Board and management play a key role in effective oversight. Accordingly, in addition to formal meetings, individual directors and members of management engage in frequent dialogue concerning the Company in between meetings.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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21 |
Corporate Governance
The Board is responsible for succession planning for the CEO position and for monitoring and advising on management’s succession planning for other executive officers and key contributors. The Board reviews and discusses succession plans for the CEO position and the Company’s other executive officers and key contributors at least once annually, usually as part of the annual talent review of the executive leadership and key contributors in the Company. As part of the annual talent review process, the CEO shares his or her evaluation of the executive leadership in the business and makes recommendations and evaluations of potential successors, along with a review of any development plans recommended for such individuals. Directors become familiar with potential successors for key management positions through various means, including annual talent reviews, presentations to the Board, and communications outside of meetings.
The Board followed its succession plan for the CEO position when it appointed Matthew Moellering, our then EVP and COO, to serve as Interim CEO and Interim President, until Mr. Baxter was appointed permanent CEO in June 2019.
The Board is committed to ensuring that the Board and the management team together cultivate a high-performing, collaborative corporate culture that emphasizes the importance of acting according to high ethical standards and in compliance with legal requirements. The Board receives a compliance update each quarter from the Company’s General Counsel who has day-to-day oversight responsibilities for the Company’s compliance program. On an annual basis, the Board reviews with management the Company’s top compliance risks based on an updated risk assessment, steps management is taking to reduce compliance risk, and key compliance initiatives for the upcoming year.
CORPORATE AND SOCIAL RESPONSIBILITY
The Company’s reputation and commitment to corporate and social responsibility, including respect for human rights, the environment, our communities, and associates, plays an important role in our ability to create long-term stockholder value. While matters of corporate responsibility are integrated within various Board discussions, the Board also dedicates specific time during each year to review and discuss the Company’s corporate responsibility program, including plans and progress against key initiatives.
As part of our commitment, we require that our product suppliers in our direct supply chain follow strict ethical labor standards contained in our Supplier Code of Conduct. In addition, our associates volunteer thousands of hours each year to support their local communities.
Our corporate and social responsibility highlights during 2019 include:
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• |
Introducing our new direct-to-consumer lifestyle brand UpWest whose brand purpose includes a philanthropic commitment to donate annually 1% of sales up to $1 million to charitable organizations including Freedom Dogs of America, Mental Health America, and Random Acts. |
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• |
Participating in Pelotonia, which is a grassroots bike tour founded in Columbus, OH with one goal: end cancer. Approximately 50 of our home office associates rode in the bike tour, and as part of their participation, the Company raised approximately $173,000 to fund cancer research. |
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• |
Partnering with GLAAD to launch our Love Unites collection of inclusive fashion pieces that honor unity and individuality. As part of the launch, we committed to a minimum $100,000 donation to GLAAD to accelerate acceptance for the LGBTQ+ community. |
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• |
Sponsoring and donating apparel items to Dress for Success – an international not-for-profit organization that empowers women to achieve economic independence by providing a network of support, professional attire and the development tools to help women thrive in work and in life. |
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• |
Partnering with the Mid-Ohio Foodbank and the Community Shelter Board to help those in need to meet their basic food and housing needs. |
Our stockholders’ views on corporate governance and executive compensation are important to us, and we value and utilize the feedback and insights that we receive. Each year, as part of our annual stockholder engagement cycle described below, we reach out to our largest stockholders who collectively hold over a majority of the shares of our outstanding common stock, which generally includes approximately our 20 largest stockholders. Our Chief Executive Officer, Chief Financial Officer, and Vice President of Investor Relations also routinely engage with stockholders throughout the year outside of our annual stockholder engagement program. Stockholders may request meetings with management or directors by sending a written request to the Office of the Corporate Secretary at 1 Express Drive, Columbus, OH 43230 or via email to IR@express.com.
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22 |
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www.express.com |
Corporate Governance
The Board’s decision to approve a capital return program for our stockholders and the Company’s repurchase of approximately 16.4 million shares since late 2017 was based in part on feedback received from our stockholders. We also received feedback from several investors that helped to inform our current proposal for the approval of an amendment to the 2018 Plan to increase the number of shares available for grant. In addition, our new Chief Executive Officer’s ongoing compensation package closely followed the compensation package for our former Chief Executive Officer, which was originally designed based in part on feedback received from stockholders on our executive compensation in prior years.
For more information regarding our 2019 stockholder engagement efforts, see “Executive Compensation—Compensation Discussion and Analysis—Executive Compensation Practices—Stockholder Engagement and Annual Advisory Vote on Executive Compensation” on page 46. For more information regarding our proposal for the approval of an amendment to the 2018 Plan to increase the number of shares available for grant, see “Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)” on page 69.
Stockholders and other interested parties may contact an individual director, including the independent Chairman, the Board as a group, or a specified Board committee or group, including the independent directors as a group, at the following address: Office of the Corporate Secretary, Express, Inc., 1 Express Drive, Columbus, OH 43230 Attn: Board of Directors. Any correspondence should clearly indicate whether the correspondence is intended for an individual director, the Board as a group, or a specified committee or group of directors.
All such reports or correspondence will be forwarded to the appropriate director or group of directors as indicated on the correspondence unless the correspondence is of a trivial nature, irrelevant to the Board’s responsibilities, or already addressed by the Board. A report will be made to the Audit Committee of all communications to the Board, and all such correspondence is made available to all directors.
The Board held a total of 10 meetings, all held in person and by telephone, during 2019. Each director attended at least 75% of Board meetings held during the year, as well as at least 75% of meetings of the committees on which he or she served during 2019. Directors are expected to attend our annual meetings of stockholders. Six of our seven then-current directors attended our 2019 annual meeting of stockholders.
The independent directors are given an opportunity to meet in executive session at each Board meeting and do so routinely.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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23 |
Corporate Governance
CORPORATE GOVERNANCE PRINCIPLES
The Board has adopted policies and procedures to ensure effective governance of Express. Our Corporate Governance Guidelines may be viewed on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide the Corporate Governance Guidelines in print without charge upon request by telephone at (888) 423-2421, via email to IR@express.com, or via mail delivered to Express, Inc., 1 Express Drive, Columbus, OH 43230, Attention: Investor Relations.
The Compensation and Governance Committee reviews our Corporate Governance Guidelines from time to time as necessary, but no less than annually, and may propose modifications to the principles and other key governance practices from time to time for adoption by the Board. The Board most recently updated our Corporate Governance Guidelines in June 2019.
Our Bylaws and Corporate Governance Guidelines provide for a majority voting standard in uncontested director elections. Therefore, in uncontested director elections, a director nominee must receive more votes cast for than against his or her election in order to be elected to the Board. The Board expects a director to tender his or her resignation if he or she fails to receive the required number of votes for election or re-election.
The Company has a classified Board, with each class of directors serving 3-year terms. Our certificate of incorporation provides that, subject to any rights applicable to any then-outstanding preferred stock, the Board shall consist of such number of directors as is determined from time to time by resolution adopted by a majority of the total number of authorized directors, whether or not there are any vacancies in previously authorized directorships. Subject to any rights applicable to any then-outstanding preferred stock, any vacancies resulting from an increase in the size of the Board or otherwise must be filled by the directors then in office unless otherwise required by law or by a resolution passed by the Board. The term of office for each director will be until his or her successor is elected at an annual meeting of stockholders or his or her death, resignation, or removal, whichever is earliest to occur. Any additional directorships resulting from an increase in the size of the Board will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors.
The Board conducts a comprehensive annual self-evaluation to determine whether it and its committees are functioning effectively and to identify potential areas of improvement. The evaluation process includes written questionnaires and one-on-one interviews with each director. The Chairman shares a summary of the results with the full Board and action plans are created to address identified improvement opportunities.
Our Corporate Governance Guidelines provide that directors should not serve on more than four other public company boards. Directors are expected to advise the Chairman in advance of accepting an invitation to serve on another public company board or for-profit private company board and before accepting an assignment to any other public company’s audit or compensation committee. No director may serve as a director, officer, or employee of a competitor of ours.
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www.express.com |
Corporate Governance
Our Code of Conduct serves as the foundation for our compliance program and sets forth the ethical standards, legal requirements, and other policies we expect our directors, officers, and associates to comply with at all times. Stockholders may access a copy of our Code of Conduct on the “Corporate Governance” page in the Investor Relations section of our website at www.express.com/investor. We will also provide the Code of Conduct in print without charge upon request by telephone at (888) 423-2421, via email to IR@express.com or via mail delivered to the Office of the Corporate Secretary at 1 Express Drive, Columbus, OH 43230.
We will promptly disclose any waivers of our Code of Conduct involving our directors or executive officers. We intend to satisfy any disclosure requirements regarding any amendment or waiver of our Code of Conduct by posting the information on the “Corporate Governance” page of our website which can be found at www.express.com/investor.
Under our current Related Person Transaction policy, a “Related Person Transaction” is any transaction, arrangement, or relationship between us or any of our subsidiaries and a Related Person where the amount involved exceeds $120,000 and the Related Person has or will have a direct or indirect material interest. A “Related Person” is any of our executive officers, directors, director nominees, any stockholder beneficially owning in excess of 5% of our stock or securities exchangeable for our stock, any immediate family member of any of the foregoing persons, and any firm, corporation, or other entity in which any of the foregoing persons is an executive officer, a partner or principal, or in a similar position, or in which such person has a 5% or greater beneficial ownership interest in such entity.
All Related Person Transactions must be approved or ratified by a majority of the disinterested directors on the Board or a designated committee thereof consisting solely of disinterested directors in accordance with our Related Person Transaction Policy. In approving any Related Person Transaction, the Board or the committee must determine that the transaction is on terms no less favorable in the aggregate than those generally available to an unaffiliated third-party under similar circumstances.
Since February 3, 2019, there has not been, and there is not currently proposed, any transaction or series of transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any Related Person had or will have a direct or indirect interest.
OVERVIEW
Non-employee directors receive compensation for Board service, which is designed to fairly compensate them for their time and effort, be competitive with the market, and align their interests with the long-term interests of our stockholders. Employee directors receive no compensation for Board service. The Compensation and Governance Committee, together with its independent compensation consultant, periodically review the form and amount of director compensation and recommend changes to the Board, as appropriate. As part of its review, the Compensation and Governance Committee considers how the Company’s director compensation program compares to the programs at the peer companies we refer to in the executive compensation setting process. See “Executive Compensation—Compensation Discussion and Analysis—Executive Compensation Practices—The Role of Peer Companies and Benchmarking” beginning on page 45 for more information about our peer companies. The Compensation and Governance Committee believes that director compensation should be competitive with the market and geared towards attracting and retaining highly-qualified independent professionals to oversee the Company and represent the interests of the Company’s stockholders.
NON-EMPLOYEE DIRECTOR COMPENSATION
The annual cash retainers for our non-employee directors in 2019 are shown in the following table.
|
Annual Retainer Type |
|
2019 Annual Retainer Amount |
|
|
Non-Employee Director |
|
$75,000 |
|
|
Committee Service |
|
$10,000 |
|
|
Chairman |
|
$100,000 |
|
|
Audit Committee Chair |
|
$20,000 |
|
|
Compensation and Governance Committee Chair |
|
$20,000 |
|
Non-employee directors also receive equity grants on an annual basis. In 2019, non-employee directors were granted restricted stock units that had a fair value of approximately $125,000 on the date of grant and that vest on June 15, 2020, subject to continued service. The Company’s non-employee Chairman was entitled to an additional grant of restricted stock units that had a value of approximately $40,000 on the date of grant and that vest on June 15, 2020 subject to continued service. All directors receive reimbursement for reasonable out-of-pocket expenses incurred in connection with their Board service.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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25 |
Corporate Governance
REASONABLE INDIVIDUAL COMPENSATION LIMITATIONS FOR NON-EMPLOYEE DIRECTORS
Under the Express, Inc. 2018 Incentive Compensation Plan (the “Plan”), the aggregate value of all compensation paid or granted to any individual for service as a non-employee director during any calendar year, including awards granted under the 2018 Plan and cash fees paid by us, will not exceed $600,000, calculating the value of any awards granted during such calendar year based on the grant date fair value of such awards for financial reporting purposes, other than with respect to any special compensation paid to any non-employee director for his or her service as Chairman of the Board.
DIRECTOR STOCK OWNERSHIP GUIDELINES
The Board has director stock ownership guidelines which call for non-employee directors to own an amount of our common stock equal to five times their annual cash retainer. Directors have five years to meet the guidelines. Under these guidelines, directors are generally not permitted to sell any shares of our common stock until they achieve the ownership guideline and thereafter are only permitted to sell shares to the extent that such sale would not cause the director to fall below the ownership guideline. To avoid fluctuating ownership requirements, once a director has achieved the applicable stock ownership guideline, he or she is considered to have satisfied the guideline, provided that the shares used to meet the underlying requirement are retained. As of the end of fiscal 2019, all non-employee directors have met or are on track to meet the stock ownership guidelines.
2019 DIRECTOR COMPENSATION TABLE
The following table sets forth information regarding compensation earned for each of our non-employee directors in fiscal 2019.
|
Director(1) |
|
Fees Earned or Paid in Cash ($) |
|
Stock Awards ($)(4)(5) |
|
Total ($) |
|
|
Michael Archbold(2) |
|
100,000 |
|
125,000 |
|
225,000 |
|
|
Terry Davenport |
|
85,000 |
|
125,000 |
|
210,000 |
|
|
Michael F. Devine |
|
90,000 |
|
125,000 |
|
215,000 |
|
|
Karen Leever |
|
85,000 |
|
125,000 |
|
210,000 |
|
|
Mylle Mangum |
|
195,000 |
|
165,000 |
|
360,000 |
|
|
Winnie Park(3) |
|
82,500 |
|
125,000 |
|
207,500 |
|
|
Peter Swinburn |
|
105,000 |
|
125,000 |
|
230,000 |
|
|
(1) |
Mr. Baxter did not receive compensation for service on the Board. |
|
(2) |
Effective April 2019, Mr. Archbold was appointed to serve as Chair of the Audit Committee. |
|
(3) |
Effective April 2019, Ms. Park was appointed to serve on the Compensation and Governance Committee. |
|
(4) |
Reflects the aggregate grant date fair value of restricted stock units. These values have been determined based on the assumptions and methodologies set forth in Note 9 of the Company’s financial statements included in our Annual Report. These amounts do not represent the actual amounts paid to or received by the named director during 2019. No stock options were granted to any of the Company’s non-employee directors in 2019. |
|
(5) |
The aggregate restricted stock units and stock options (whether or not exercisable in the case of options) outstanding as of April 20, 2020 are as follows: Mr. Archbold (48,077 restricted stock units); Mr. Davenport (48,077 restricted stock units); Mr. Devine (48,077 restricted stock units and 10,000 stock options); Ms. Leever (48,077 restricted stock units); Ms. Mangum (63,462 restricted stock units and 2,500 stock options); Ms. Park (48,077 restricted stock units); and Mr. Swinburn (48,077 restricted stock units). |
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www.express.com |
The following table sets forth the names, ages, and titles of our executive officers as of the Record Date:
|
Name |
Age |
Position |
|
Timothy Baxter |
50 |
Chief Executive Officer |
|
Matthew Moellering |
53 |
President and Chief Operating Officer |
|
Malissa Akay |
43 |
Executive Vice President and Chief Merchandising Officer |
|
Sara Tervo |
44 |
Executive Vice President and Chief Marketing Officer |
|
Periclis (“Perry”) Pericleous |
47 |
Senior Vice President, Chief Financial Officer and Treasurer |
Our executive officers are appointed by the Board and serve until their successors have been duly elected and qualified or their earlier resignation or removal. There are no family relationships among any of our directors or executive officers.
Set forth below is a description of the background of the persons named above, other than Mr. Baxter, whose background information is provided in “Election of Class I Directors (Proposal No. 1)” on page 8.
Matthew Moellering has served as our President and Chief Operating Officer since September 2019. He also served as Interim President and Interim Chief Executive Officer from January 2019 to June 2019. Prior to his current role, he was Executive Vice President and Chief Operating Officer from 2011 to 2019; Executive Vice President, Chief Administrative Officer, Chief Financial Officer, Treasurer and Secretary from 2009 until 2011, Senior Vice President, Chief Financial Officer, Treasurer and Secretary from 2007 until 2009, and Vice President of Finance from 2006 until 2007. Before joining Express, he served in various roles with Limited Brands (now known as L Brands) from 2003 until 2006, including Vice President of Financial Planning. Mr. Moellering also served in various roles with Procter and Gamble where he was employed from 1995 until 2003 and prior to that he served as an officer in the United States Army. Mr. Moellering serves on the board of directors of L.L.Bean, Inc. which is a privately held company.
Malissa Akay has served as our Executive Vice President and Chief Merchandising Officer since September 2019. Ms. Akay joined Express from Lane Bryant where she most recently served as Executive Vice President and General Merchandise Manager from 2018 to 2019 and as Senior Vice President and General Merchandise Manager from 2016 to 2017. Prior to that, Mr. Akay served in various roles with Ralph Lauren from 2012 until 2016 including Chief Merchandising Officer, Polo Accessories, and Senior Vice President, Merchandising, Planning and Allocation and Visual Merchandising. Previously, Ms. Akay spent 13 years with DFS Group where she held merchandising leadership positions across multiple categories.
Sara Tervo has served as our Executive Vice President and Chief Marketing Officer since September 2019. Ms. Tervo joined Express from Justice where she was Executive Vice President and Chief Marketing Officer from 2016 to 2019. Prior to that Ms. Tervo held multiple leadership positions with L Brands from 1998 to 2016 across marketing, creative services and public relations, including Executive Vice President, Marketing for Victoria’s Secret and Senior Vice President, Marketing for PINK.
Periclis (“Perry”) Pericleous has served as our Senior Vice President, Chief Financial Officer and Treasurer since July 2015. Prior to this appointment, he held a number of other leadership positions within our finance organization, including Vice President of Finance from December 2010 until July 2015, Director of Financial Planning & Analysis from April 2010 until December 2010, and Director of Store Finance from November 2007 until April 2010. Mr. Pericleous joined Express in August 1999 and served in a variety of roles of increasing responsibility across the finance organization, including in store finance and financial reporting. He began his career in 1996, serving in various accounting roles at Drug Emporium and then Value City Department Stores. Mr. Pericleous is a Certified Public Accountant.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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27 |
Compensation Discussion and Analysis
2019 Leadership Transformation
In 2019, we made significant organizational changes that we believe will return the business to growth. One of our key accomplishments was the hiring of Timothy Baxter as our new Chief Executive Officer effective June 17, 2019, which followed a transition period where, in line with our succession planning process, Matthew Moellering, our then Executive Vice President and Chief Operating Officer, served as interim Chief Executive Officer and interim President from January 2019 until Mr. Baxter’s appointment in June.
One of Mr. Baxter’s first priorities as Chief Executive Officer was to put the right leadership team into place. During the first months of his tenure, Mr. Baxter appointed a new Executive Vice President and Chief Merchandising Officer – Malissa Akay; along with a new Executive Vice President and Chief Marketing Officer – Sara Tervo. Mr. Baxter also promoted Matthew Moellering to President and Chief Operating Officer and Perry Pericleous continues to serve as Senior Vice President and Chief Financial Officer. With a new executive leadership team in place, in January 2020, Mr. Baxter launched a new corporate strategy designed to build a strong and profitable future for Express.
Strategic Transformation for 2020 and Beyond
At our investor event in January 2020, we announced a new corporate strategy focused on Product, Brand, Customer, and Execution, which is intended to return the Company to long-term profitable growth. Across these focus areas we are determined to:
|
• |
Engage our customers and acquire new ones by communicating with customers in different and more impactful ways; |
|
• |
X-ecute with precision across all channels to accelerate sales and profitability; |
|
• |
Put product first by having fresh, relevant, and compelling product that gets to the selling floor and to the customer faster; and |
|
• |
Reinvigorate our brand by clarifying our brand message and more closely connect it to our product strategies. |
At the same time, we announced approximately $80 million in cost reduction opportunities and a fleet rationalization plan to close approximately 100 stores. For additional information regarding our new corporate strategy, please refer to our Annual Report.
2019 BUSINESS PERFORMANCE
Key Financial Results
|
Net Sales |
Operating Income |
Earnings Per Share |
|
• Net sales decreased 5% to $2,019 million from $2,116 million in 2018.
|
• Operating Loss was $217.9 million, and on an adjusted basis operating loss was $11.2 million in 2019, compared to Operating Income of $28.2 million, and $33.7 million on an adjusted basis, in 2018. |
• EPS reflected a loss of $2.49 per diluted share compared to earnings of $0.13 per diluted share in 2018. Adjusted EPS reflected a loss of $0.13 per diluted share, compared to Adjusted EPS of $0.32 per diluted share, in 2018. |
Refer to Appendix A for more information on adjustments made to operating income and EPS.
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28 |
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www.express.com |
Executive Compensation
|
Balance Sheet Highlights |
|
|
Strong Cash Flow Generation
Generated strong cash flow in 2019, which allowed for continued investment in the business as well as share repurchases. Ended the year with $207 million in cash on hand.
CASH ON HAND $207 MILLION AT END OF YEAR |
Share Repurchases
Repurchased approximately 4.3 million shares of our outstanding common stock at an aggregate cost of $15.6 million in 2019, totaling repurchases of approximately 16.4 million shares of our outstanding common stock at an aggregate cost of approximately $116 million since November 2017 under our 2017 share repurchase plan.
RETURNED APPROXIMATELY $116 MILLION TO SHAREHOLDERS THROUGH SHARE REPURCHASES FROM NOVEMBER 2017 THROUGH 2019
|
2019 Named Executive Officers
This Compensation Discussion and Analysis focuses on the compensation of our named executive officers (our “NEOs”) for 2019, who are listed below:
|
Name |
Position |
|
Timothy Baxter |
Chief Executive Officer(1) |
|
Matthew Moellering |
President and Chief Operating Officer; former Interim Chief Executive Officer and Interim President (2) |
|
Malissa Akay |
Executive Vice President and Chief Merchandising Officer(3) |
|
Sara Tervo |
Executive Vice President and Chief Marketing Officer(4) |
|
Periclis (“Perry”) Pericleous |
Senior Vice President, Chief Financial Officer and Treasurer |
|
John J. (“Jack”) Rafferty |
Former Executive Vice President—Planning and Allocation(5) |
|
Douglas Tilson |
Former Executive Vice President—Real Estate(6) |
|
(1) |
Effective June 17, 2019, Mr. Baxter was appointed Chief Executive Officer. |
|
(2) |
Mr. Moellering served as Interim Chief Executive Officer and Interim President from January 22, 2019 until June 17, 2019. Mr. Moellering continued to serve as Executive Vice President and Chief Operating Officer until September 23, 2019, when he was appointed President and Chief Operating Officer. |
|
(3) |
Ms. Akay was named Chief Merchandising Officer effective September 9, 2019. |
|
(4) |
Ms. Tervo was named Chief Marketing Officer effective September 9, 2019. |
|
(5) |
Mr. Rafferty served as Executive Vice President – Planning and Allocation, until he left the Company effective October 4, 2019. |
|
(6) |
Mr. Tilson served as Executive Vice President – Real Estate until he left the Company effective September 27, 2019. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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29 |
Executive Compensation
Our executive compensation program is designed to strongly align executive compensation with the Company’s financial performance. In 2019:
|
• CEO Ongoing Target Pay Opportunity Established Between 25th Percentile and Median Level of our Peer Group: Mr. Baxter’s ongoing target pay opportunity of $6.5M was established between the 25th percentile and median level of our peer group and is expected to remain unchanged for 2020. • CEO Ongoing Pay-for-Performance Compensation Design with Challenging Performance Targets Continued: Overall, the design of our new CEO’s compensation package followed the design of our former CEO’s compensation package with 85% of Mr. Baxter’s ongoing target compensation package composed of short-term cash incentives and long-term equity and cash incentives. The performance-based short-term and long-term incentives for both Mr. Baxter and other executives continue to include challenging performance targets so that realizable compensation reflects business performance. For information on one-time make-whole and hiring related payments made in connection with Mr. Baxter’s appointment to CEO in 2019, see “Executive Compensation – Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—One-Time Make-Whole and Hiring Related Awards” on page 43. • Short-Term Incentive Program Continues to Include Challenging Financial and Strategic Performance Components: Under the Company’s 2019 short-term cash incentive program, 75% of the target bonus opportunity was based on achievement of challenging financial goals and 25% was based on achievement of key strategic objectives tied to comparable sales, retail store conversion, and customer acquisition and retention, in furtherance of the Company’s long-term growth strategy. • Challenging Long-Term Incentive Performance Targets Continued: Performance-based long-term incentive awards continued to be dependent on the achievement of challenging three-year Adjusted EPS performance targets, subject to modification upwards or downwards 20% based on Company TSR performance relative to the Dow Jones U.S. Retail Apparel Index (“Relative TSR”). Our long-term incentive design was further modified for 2019 by providing that no performance-based long-term incentive award will pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date. • Performance-Based Long-Term Incentives Cash Denominated: While performance-based awards continue to represent 50% of our annual long-term incentive grants to our NEOs, to help manage share usage and overhang, in 2019, performance-based long-term incentive awards were delivered entirely in the form of performance-based cash awards (in 2018, half of the performance-based awards were delivered in the form of performance-based restricted stock units). For our new CEO, the remaining 50% was comprised of stock options with time-based vesting, and for our other NEOs the remaining 50% was comprised of restricted stock units with time-based vesting. For more information on our equity plan proposal to increase the number of shares available for grant under the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan (the “2018 Plan”), see “Proposal No. 4” beginning on page 69. • Actual Realizable Total Direct Compensation was Significantly Below Target in 2019, Reflecting Business Results: Actual realizable total direct compensation for our continuing NEOs fell significantly below target in 2019 reflecting that (1) no short-term cash incentives paid out for either of the Spring and Fall seasons and (2) performance-based long-term incentives granted in 2017, which were subject to a three-year performance period through 2019, were entirely forfeited. In addition, performance-based awards granted in 2018 (which are subject to a three-year performance period through 2020) are not expected to pay out, and Adjusted EPS performance must significantly improve over the next two years for there to be any payout of the performance-based long-term incentives granted to our current NEOs in 2019 (which are subject to a three-year performance period through 2021). This excludes one-time make-whole and hiring related payments made to new executives. For information on one time make-whole and hiring related payments made to new executives in 2019, see “Executive Compensation – Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—One-Time Make-Whole and Hiring Related Awards” on page 43.
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30 |
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www.express.com |
Executive Compensation
CEO Target Total Direct Compensation
The annual compensation package for our new CEO, Mr. Baxter, was based on a competitive compensation analysis of CEO pay levels at our peer group and established between the 25th percentile and median level of our peer group.
|
Annual Target Compensation |
||
|
Base Salary |
$1,000,000 |
• 2019 base salary for Mr. Baxter was prorated based on his June start date and such amount ($634,615) is reflected in the Summary Compensation Table on page 49. • Because of the limited impact our new CEO could have on the 2019 Spring and Fall performance periods, Mr. Baxter’s 2019 annual incentive compensation opportunity, pro-rated based on his June 2019 start date, was guaranteed at the greater of actual achievement or 100% of target ($910,000). • The pro-rated amount of Mr. Baxter’s 2019 long term incentive opportunity ($2,800,000) was delivered half in the form of stock options and half in the form of performance-based cash awards. The portion of Mr. Baxter’s long-term incentives denominated in performance-based cash ($1,400,000) is not included in the Summary Compensation Table on page 49.
|
|
Incentive Compensation Opportunity at Target |
130% |
|
|
Target Total Cash |
$2,300,000
|
|
|
Annual Long-Term Incentive Opportunity |
$4,200,000
|
|
|
Target Total Direct Compensation |
$6,500,000 |
|
|
Make-Whole Awards |
||
|
Buy-out Grant |
$3,000,000
|
• The amount of Mr. Baxter’s buyout grant was determined based on the amount of unvested equity awards that Mr. Baxter forfeited from his prior employer, and was comprised of one-half restricted stock units, and one-half stock options, that each cliff vest on the two-year anniversary of grant. • The amount of Mr. Baxter’s sign-on bonus was determined based the amount of annual cash bonus that Mr. Baxter forfeited from his prior employer.
|
|
Buy-out Bonus |
$925,000 |
|
Actual Realizable Total Direct Compensation
In previous years we have separately shown three year CEO Realizable Pay to highlight our executive compensation program’s strong pay for performance alignment. While CEO Realizable Pay may be useful to show in the future, it is not representative for 2019, both because Mr. Baxter received one-time make-whole awards to compensate him for forfeited benefits at his former employer and the fact that his 2019 short-term incentive compensation bonus was guaranteed to reflect his limited impact on the 2019 performance periods. The alignment between our executive compensation program and the Company’s financial performance is better shown by the table below, which shows how our compensation program paid out or is tracking to pay out for our continuing NEOs and other executives at the end of 2019.
|
Short-Term Annual Cash Incentive Compensation Program |
|
Long-Term Performance-Based Awards Subject to Three-Year Performance Periods |
||||
|
Spring 2019 |
Fall 2019 |
|
2017-2019 |
2018-2020 |
2019-2021 |
|
|
No Payout |
No Payout |
|
No Payout |
Not Expected to Payout |
Will only payout if Adjusted EPS performance significantly improves over next two years |
|
For more information on our short-term cash incentive program, refer to “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” beginning on page 36. For information on our long-term incentive program, see “Executive Compensation—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives” beginning on page 39.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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31 |
Executive Compensation
EXECUTIVE COMPENSATION OBJECTIVES AND PRACTICES
Below we highlight the core objectives that serve as the foundation for our compensation program, the practices we have implemented to achieve those objectives, and practices we have not implemented because we do not believe they would serve the Company’s long-term interests.
|
Program
|
|
What We DO: |
|
|
Pay for Performance |
|
☑ |
Variable Compensation. A significant portion of our executives’ ongoing compensation opportunity is variable and is tied to achievement of challenging financial performance targets and changes in the Company’s stock price. In 2019, 85% of CEO ongoing target total direct compensation was variable. |
|
|
|||
|
|
☑ |
Short-Term and Long-Term Incentive Compensation with Challenging Performance Targets. 75% of our short-term cash incentive awards are subject to the achievement of challenging operating income performance targets, and the remaining 25% depends on the achievement of operational performance goals tied to our strategic initiatives. One-half of our long-term incentive awards are also subject to the achievement of challenging financial performance targets that incentivize the creation of stockholder value. |
|
|
|
|||
|
|
☑ |
Performance-Based Equity Awards. In 2019, we granted a mix of long-term incentives, comprised of (i) 50% time-based stock options, and (ii) 50% performance-based cash for our new CEO, and comprised of 50% time-based restricted stock units, and (ii) 50% performance-based cash for our Interim CEO and other NEOs. In 2019, performance-based cash awards for all NEOs were based on adjusted diluted earnings per share goals over a three-year period which may be increased or decreased by 20% based upon Company TSR performance relative to the Dow Jones U.S. Retail Apparel Index, and additionally subject to a share price hurdle, which provides that no performance-based cash award will pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date. |
|
|
|
|||
|
Pay Competitively |
|
☑ |
Robust Compensation Setting Process. We utilize market data without strict benchmarking in order to make sure executives are paid commensurate with their experience and performance. Executive compensation packages are heavily weighted on performance but also include base salary and other benefits that make them competitive with our peers. |
|
|
|||
|
Pay Responsibly |
|
☑ |
Long-Term Vesting Requirements. Stock options and time-based restricted stock units granted to our NEOs in 2019 vest ratably over 4 years, and performance-based restricted stock units and performance-based cash awards vest after 3 years, in order to align the interests of our executives with our stockholders. Other than a one-time grant of time-based stock options to our new CEO, no stock options were granted to our NEOs in 2019. |
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☑ |
Annual Stockholder Engagement Process. As part of our annual stockholder engagement cycle, we reach out to our largest stockholders who collectively hold over a majority of the shares of our outstanding common stock, which generally includes our 20 largest stockholders. We also offer our stockholders the opportunity to vote annually on the Company’s executive compensation program. We value the feedback we receive from stockholders and consider it when making decisions on behalf of the Company, including with respect to executive compensation. Refer to page 67 for more information about this year’s non-binding say-on-pay proposal and to page 69 for more information on our proposal to increase the number of shares available for grant under the 2018 Plan. |
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☑ |
Stock Ownership Guidelines. Each of our executives is subject to substantial stock ownership requirements. Under the guidelines, executives are generally not permitted to sell any shares until they achieve the ownership guideline and thereafter are only permitted to sell shares to the extent that such sale would not cause the executive to fall below the ownership guideline. |
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☑ |
Mitigate Undue Risk. The mix between short-term incentives and long-term incentives is intended to discourage executives and associates from maximizing short-term performance at the expense of long-term performance. In 2019, our short-term cash-incentive program had financial performance goals based on operating income and operational goals based on achievement of key strategic objectives, while our long-term performance-based awards had performance targets based on earnings per share with a potential adjustment based on Relative TSR and potential forfeiture based on share price appreciation, thereby discouraging participants from focusing on the achievement of one performance measure at the expense of another. |
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☑ |
Capped Payouts. Payouts are capped under our cash and equity incentive award programs. |
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☑ |
Independent Compensation Consulting Firm. The Compensation and Governance Committee (in this “Executive Compensation” section, the “Committee”) is advised by an independent compensation consultant that provides no other services to the Company. |
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☑ |
Clawback Policy. Our executives are subject to a clawback policy. In 2019, the Committee approved an update in order to expand the Company’s Clawback Policy to additionally allow for the clawback of incentive compensation in the event of management misconduct that could significantly damage the reputation of the Company, unrelated to a financial restatement. |
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32 |
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www.express.com |
Executive Compensation
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What We DON’T DO: |
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Pay |
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☒ |
No Special Tax Gross-Ups. We do not provide special tax gross-ups to executives. |
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Responsibly |
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☒ |
No Pension Plans or Other Post-Employment Defined Benefit Plans. We do not provide any qualified or non-qualified post-employment defined benefit plans. |
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☒ |
No Special Executive Perquisites. We generally do not provide our executives with any special perquisites. See “Executive Compensation—Compensation Discussion and Analysis—Additional Executive Benefits and Perquisites—Perquisites” on page 44 for information regarding one-time personal use of private aircraft by our CEO in fiscal year 2019 to provide flexibility during his transition to the Company. |
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☒ |
No Liberal Share Recycling, Repricing of Underwater Stock Options, or Reloads of Stock Options. The Company’s 2018 Plan prohibits the repricing of stock options without the consent of stockholders, does not allow for reloads of stock options to the extent stock options are used to pay the exercise price or taxes with respect to stock option exercises, and includes an explicit prohibition on liberal share recycling. |
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☒ |
No Hedging or Pledging Transactions. We prohibit associates, including NEOs, and directors from hedging or pledging any securities of the Company held by them. |
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☒ |
No Single Trigger Change-in-Control Payments. Our NEOs are not currently entitled to any single-trigger special vesting, severance, or other benefits in a change-in-control. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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33 |
Executive Compensation
WHAT WE PAY AND WHY: ELEMENTS OF COMPENSATION
Our executive compensation program is designed to strongly align executive compensation with the Company’s financial performance. The elements of our compensation program for 2019 were as follows:
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Compensation
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Form |
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Performance/
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Performance
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Alignment to Compensation
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Base Salary |
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Cash |
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Salary is set at competitive market levels in order to compete for, obtain, and retain the talent necessary to successfully operate the Company and execute our strategic plans. |
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Short-Term Incentives |
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Cash |
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Six-month operating seasons |
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Financial Goal: Adjusted Operating Income (75% weighting) |
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75% of the incentive payment opportunity depends on the achievement of pre-established objective financial goals, which is intended to motivate executives to work effectively to achieve financial performance objectives aligned with our seasonal business cycle and reward them when objectives are met. |
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Operational Goal: Key Strategic Objectives in Furtherance of the Company’s Long-Term Growth Strategy (25% weighting) |
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For 2019, 25% of the incentive payment opportunity was based on achievement of operational goals tied to key performance metrics in furtherance of the Company’s long-term growth strategy including conversion, customer acquisition and retention, and comparable sales. |
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Long-Term Incentives |
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50% performance-based cash: |
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3-year performance and vesting period |
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3-year Adjusted EPS which may be increased or decreased 20% based on Relative TSR |
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3-year performance periods based on Adjusted EPS with a Relative TSR modifier, subject to forfeiture based on share price, aligning the interests of our executives with the interests of stockholders in creating long-term value. |
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50% stock options subject to time-based vesting (new CEO)
50% time-based restricted stock units (other NEOs) |
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4-year vesting requirements |
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Multi-year vesting requirements align our executives’ interests with our stockholders and incentivize retention of our executive talent. |
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Other |
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– Defined contribution retirement plans
– Health and welfare benefits
– Termination benefits |
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We seek to offer retirement plan benefits, health and welfare benefits, and termination benefits at levels that are competitive with the market. |
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34 |
|
www.express.com |
Executive Compensation
The Committee strives to achieve an appropriate mix between the various elements of our compensation program to meet our compensation objectives; however, it does not apply any rigid allocation formula in setting our executive compensation, and the Committee may make adjustments to this approach for various positions on a case-by-case basis as appropriate. A significant portion of executive compensation is intended to be variable and tied to the Company’s financial performance and stock price. The following charts show that, excluding one-time make whole and hiring related payments, in 2019, 85% of CEO compensation and 69% of other NEO compensation at target was variable.
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(1) |
Target total direct compensation is comprised of base salary, short-term incentives, and long-term incentives. Variable compensation is comprised of short-term incentives and long-term incentives. Target total direct compensation excludes one-time make-whole and hiring related payments made to newly hired executives in 2019 that are intended to compensate them for amounts forfeited from their previous employers. |
BASE SALARY
We provide a base salary to our executive officers to compensate them for their services during the year and to provide them with a stable source of income. NEO base salaries are determined by an annual assessment of a number of factors, including the individual’s current base salary, job responsibilities, peer group and other data, relevant market survey data, and individual and Company performance.
The annual base salaries in effect for each of our NEOs still employed with us as of February 1, 2020 are shown in the following table:
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Name |
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2018 Fiscal Year End |
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Changes to Base Salary During Fiscal 2019 |
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2019 Fiscal Year End |
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Tim Baxter |
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n/a |
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Mr. Baxter was appointed CEO and joined the Company in June 2019. |
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$1,000,000 |
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Matthew Moellering |
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$1,117,000 |
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Mr. Moellering served as interim CEO and interim President, while continuing to serve as EVP and Chief Operating Officer, until Mr. Baxter was appointed to CEO in June 2019. Mr. Moellering was appointed to President and Chief Operating Officer in September 2019. |
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$825,000 |
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Malissa Akay |
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n/a |
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Ms. Akay was appointed EVP and Chief Merchandising Officer and joined the Company in September 2019. |
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$725,000 |
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Sara Tervo |
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n/a |
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Ms. Tervo was appointed EVP and Chief Marketing Officer and joined the Company in September 2019. |
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$600,000 |
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Periclis (“Perry”) Pericleous |
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$500,000 |
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No change in 2019. |
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$500,000 |
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Annual base salaries for our NEOs are expected to remain the same in 2020.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
35 |
Executive Compensation
Short-Term Incentives
Our short-term performance-based cash incentive compensation program provides our NEOs with incentive payment opportunities for each six-month operating season that corresponds to the traditional retail selling seasons of Spring (February through July) and Fall (August through January). The target short-term cash incentive compensation opportunity for each eligible executive is set at a percentage of base salary. 40% of each executive’s annual target bonus is allocated to the six-month Spring season and 60% is allocated to the six-month Fall season which is intended to align with the seasonality in our business where higher portions of our net sales and net income are typically realized in the six-month Fall season due primarily to the impact of the holiday season. The seasonal design allows us to establish appropriately challenging performance targets that align business performance expectations with the seasonal nature of the way we manage our business and prevailing market and economic conditions which can change quickly in the retail apparel sector. For example, this structure allows for mid-year development of performance targets and provides an incentive for our executives to focus on meeting goals in the six-month Fall season in circumstances when business performance and macro-economic conditions decline or improve relative to our operating plans.
2019 Short-Term Cash Incentive Compensation
Our seasonal short-term performance-based cash incentive compensation program includes a financial performance goal and an operational goal based on the achievement of key strategic initiatives that tie to our long-term strategy. For each season, 75% of the target payout opportunity was based on a financial performance goal while 25% was based on an operational performance goal.
Financial Performance Goal (75% Weighting). The financial performance goals under the short-term cash incentive program for 2019 were based on operating income, subject to adjustments for certain extraordinary items. We continue to use operating income as a financial performance goal because it is a performance measure over which executives can have significant impact, and is also directly linked to the Company’s seasonal operating plans and long-range plan. The financial goal continues to have a threshold, target, and maximum payout which allows participating executives to double the incentive payout associated with achievement of the financial goal if the maximum operating income goal is achieved.
Adjustments to operating income in 2019 were made for the purpose of excluding expense associated with the departure of certain of our executives, the impact of our corporate restructuring, and the impairment of intangible assets, which is consistent with adjustments reflected in supplemental non-GAAP financial information publicly reported by the Company. The Company provides supplemental non-GAAP financial information to exclude non-core operating items that may not be indicative of, or are unrelated to, our underlying operating results and that we believe provide a better baseline for analyzing trends. See Appendix A for adjustments made for non-core operating items in 2019 for purposes of determining whether the performance targets had been achieved.
Operational Performance Goal (25% Weighting). The operational performance goals under the short-term cash incentive program for 2019 were (1) for the Spring season based on increases in retail store conversion rate and customer acquisition and retention, and (2) for the Fall season based on an increase in Q4 comparable sales. The Spring operational goal was binary and paid out at target only; the Fall operational goal had a threshold, target, and maximum payout.
The Committee sets the performance goals near the beginning of each six-month season based on an analysis of (i) historical performance, (ii) internal financial plans, (iii) strategic objectives, and (iv) general economic conditions.
Both financial and operational performance goals are set at the same targets for all leadership in the business. We believe it is important to have all members of leadership working towards the same goals and that those goals are clear, understandable, and within their control.
For 2019, the amount of performance-based cash incentive opportunity for participating executives ranged from zero to 175% of their incentive target in Spring, and from zero to 200% of their incentive target in Fall, based upon the extent to which the performance goals were achieved. The threshold, target, and maximum short-term performance-based cash incentive payout opportunities for our NEOs for 2019 are set forth in the “Grants of Plan-Based Awards” table on page 51.
|
36 |
|
www.express.com |
Executive Compensation
The target cash incentive compensation opportunity as a percentage of base salary in effect for 2019 for each of our NEOs employed with us as of February 1, 2020 is shown below:
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Annual Short-Term Cash Incentive Payout Opportunity at Target (as a % of Base Salary) |
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|||
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Name |
2018 |
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Changes to Short-Term Cash Incentives During Fiscal 2019 |
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2019 |
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Tim Baxter |
n/a |
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Mr. Baxter was appointed CEO and joined the Company in June 2019. |
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130% |
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Matthew Moellering |
85% |
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Mr. Moellering served as interim CEO and interim President, while continuing to serve as EVP and Chief Operating Officer, until Mr. Baxter was appointed to CEO in June 2019. Mr. Moellering was appointed to President and Chief Operating Officer in September 2019. |
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90% |
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Malissa Akay |
n/a |
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Ms. Akay was appointed EVP and Chief Merchandising Officer and joined the Company in September 2019. |
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75% |
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Sara Tervo |
n/a |
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Ms. Tervo was appointed EVP and Chief Marketing Officer and joined the Company in September 2019. |
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75% |
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Periclis (“Perry”) Pericleous |
65% |
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No change in 2019. |
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65% |
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Final payout amounts for each six-month season are approved by the Committee at its first regularly scheduled in-person Committee meeting following the end of each six-month operating season and are paid out to executives after such approval.
2019 Short-Term Cash Incentive Compensation Goals and Results
Spring Season (40% weighting)
Financial Performance Goals (75% weighting). The following table illustrates the financial performance goals and actual payout levels for the six-month Spring season for our continuing NEOs (Mr. Moellering and Mr. Pericleous). Our performance targets are intended to be challenging and the financial target goal for the Spring season was set significantly higher than the prior Spring season’s actual results. Based on the Company’s Spring season financial performance, the operating income goal did not pay out under the Company’s seasonal short-term cash incentive program for the 2019 Spring season.
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No Payout |
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Weighting |
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Threshold Goal |
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Target Goal |
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Maximum Goal |
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Actual Performance |
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Actual Payout |
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Adjusted Operating Income |
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75% |
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$4M |
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$12M |
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$21M |
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$(21M) |
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No Payout |
Operational Performance Goals (25% weighting). Spring season operational goals were tied to increases in retail store conversion rate and customer acquisition and retention. The operational goal is binary and pays out at target only and only if all goals are achieved. Neither of the Spring operational goals were achieved and thus the operational goal did not pay out under the Company’s seasonal short-term cash incentive program for the 2019 Spring season.
Because of the limited impact our new CEO could have on the Spring performance period, Mr. Baxter’s Spring incentive compensation opportunity was guaranteed at the greater of actual achievement or 100% of target, pro-rated based on his June 2019 start date.
Fall Season (60% weighting)
Financial Performance Goals (75% weighting). The following table illustrates the financial performance goals and actual payout levels for the six-month Fall season for our continuing NEOs (Mr. Moellering and Mr. Pericleous). Our performance targets are intended to be challenging and the financial target goal for the Fall season was set significantly higher than the prior Fall season’s actual results. Based on the Company’s Fall season financial performance, the operating income goal did not pay out under the Company’s seasonal short-term cash incentive program for the 2019 Fall season.
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Performance Metric |
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Weighting |
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Threshold Goal |
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Target Goal |
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Maximum Goal |
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Actual Performance |
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Actual Payout |
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Adjusted Operating Income |
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75% |
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$21.5M |
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$36M |
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$49M |
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$10M |
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No Payout |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
37 |
Executive Compensation
Operational Performance Goals (25% weighting). Fall season operational goals were based on an increase in Q4 comparable sales. The operational goal has a threshold, maximum, and target payout. The Fall operational goal was not achieved and thus the operational goal did not pay out under the Company’s seasonal short-term cash incentive program from the 2019 Fall season. The following table illustrates the operational performance goal and payout levels for the six-month Fall season for our continuing NEOs (Mr. Moellering and Mr. Pericleous).
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Performance Metric |
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Weighting |
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Threshold Goal |
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Target Goal |
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Maximum Goal |
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Actual Performance |
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Actual Payout |
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Q4 Consolidated Comparable Sales |
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25% |
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+1% |
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+2% |
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+3% |
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(3%) |
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No Payout |
Because of the limited impact our new CEO and new NEOs could have on the Fall performance period, the Fall incentive compensation opportunity for each of Mr. Baxter, Ms. Akay, and Ms. Tervo was guaranteed at the greater of actual achievement or 100% of target.
2020 Short-Term Cash Incentive Compensation
Target cash incentive compensation opportunity as a percentage of base salary is expected to remain the same for our NEOs in 2020. The ongoing COVID-19 crisis and its impact on the economy and our business will be taken into account in setting the design and targets of our seasonal short-term cash incentive compensation program in 2020.
|
38 |
|
www.express.com |
Executive Compensation
For 2019, the Committee and Board determined that our NEOs would receive a mix of long-term incentives comprised of the following (excluding one-time make-whole equity awards granted to Mr. Baxter and Ms. Akay):
Our long-term incentive awards are generally intended to accomplish the following main objectives: (1) create a direct correlation between the Company’s financial performance and stock price and compensation paid to our NEOs; (2) retention of our NEOs; (3) assist in building equity ownership of our NEOs to increase alignment with long-term stockholder interests; (4) attract and motivate key associates; (5) reward participants for performance in relation to the creation of stockholder value; and (6) deliver competitive levels of compensation consistent with our compensation objectives. The total grant date fair value of awards for our NEOs are determined on a position-by-position basis using market data for corresponding positions in our peer group and other relevant market survey data, the individual’s job responsibilities, and individual performance.
Executives are generally granted long-term incentive awards as part of our annual merit review process. During this process, the Committee determines the appropriate overall value and mix of long-term incentive grants for our NEOs. For more information on our executive compensation practices, including the annual merit review process and the objectives and factors considered by the Committee as part of the executive compensation decision making process, see “—Executive Compensation Practices—“Determining Compensation for the CEO” and “Determining Compensation for the Other NEOs” beginning on page 45.
2019 Updates to Long-Term Incentive Award Program
Modification of Long-Term Incentive Mix. While performance-based awards continue to represent 50% of the annual long-term incentive grant, to help manage share usage and overhang, in 2019 performance-based long-term incentive awards were delivered in the form of performance-based cash (in 2018, half of the performance-based awards were delivered in the form of performance-based restricted stock units). As a result, long-term incentives in 2019, excluding one-time make-whole equity awards, were comprised as follows:
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|
• |
For our CEO: 50% performance-based cash and 50% stock options with time-based vesting. |
|
|
• |
For our other NEOs: 50% performance-based cash and 50% restricted stock units with time-based vesting. |
Inclusion of Share Price Hurdle. Performance-based long-term incentive awards continue to be dependent on the achievement of challenging 3-year Adjusted EPS performance targets which may be increased or decreased by 20% based on Relative TSR. In addition, 2019 long-term performance-based incentive awards will not pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date.
2019 Stock Options
In July 2019, the Company granted our new CEO Mr. Baxter the non-qualified stock options set forth in the Grants of Plan Based Awards table on page 51. Approximately one-half of the stock options are scheduled to vest ratably on each of July 15, 2020, 2021, 2022, and 2023, and the remaining one-half of the stock options will vest on July 15, 2021 subject to continued employment with the Company. No stock options were granted to our other NEOs in 2019.
The exercise price for stock options is set at the most recent closing trading price to the grant date. Options vest over multiple years and are exercisable for ten years after grant, which furthers stockholder alignment by encouraging a focus on long-term growth and stock performance.
2019 Time-Based Restricted Stock Units
In 2019, the Company granted our NEOs the time-based restricted stock units set forth in the Grants of Plan Based Awards table on page 51.
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|
• |
For Mr. Moellering and Mr. Pericleous, one-fourth of the restricted stock units are scheduled to vest on each of April 15, 2020, 2021, 2022, and 2023, subject to continued employment with the Company. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
39 |
Executive Compensation
|
|
• |
For Mr. Baxter, all of the restricted stock units are scheduled to vest on July 15, 2021, subject to continued employment with the Company, and were granted to Mr. Baxter as a make-whole award. |
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|
• |
For Ms. Akay and Ms. Tervo, one-fourth of the restricted stock units are scheduled to vest on each of September 15, 2020, 2021, 2022, and 2023, except for a portion of restricted stock units granted to Ms. Akay as a make-whole award which are scheduled to vest on October 31, 2020, subject to continued employment with the Company. |
Performance-Based Awards
Long-term performance-based awards granted to our NEOs are subject to three-year Adjusted EPS performance goals. The Adjusted EPS performance goal has a threshold goal (50% payout), target goal (100% payout), and a maximum goal (200% payout). The number and amounts of long-term performance-based awards that vest is determined using straight line interpolation if Adjusted EPS over the performance period is an amount between performance goals. No portion of performance-based awards are payable in the event the Company fails to achieve the threshold Adjusted EPS goal and in addition no portion of 2019 performance-based awards will pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date. Outstanding performance-based awards are also subject to a TSR modifier such that payouts may be increased or decreased by 20% based upon Relative TSR.
For grant and vesting purposes, “Adjusted EPS” means the Company’s diluted earnings per share calculated in accordance with GAAP, adjusted to exclude the impact of any non-core operating costs consistent with past practice for debt extinguishment and one-time transaction costs. The Company provides supplemental non-GAAP financial information to exclude non-core operating items that may not be indicative of, or are unrelated to, our underlying operating results and that we believe provide a better baseline for analyzing trends. Refer to Appendix A for more information on Adjusted EPS, a non-GAAP measure, and a reconciliation of Adjusted EPS for 2017, 2018, and 2019 to reported EPS, the most directly comparable GAAP measure.
The table below summarizes the performance-measure, award mix, and payout status of the performance-based long-term incentive awards granted to our NEOs in each of 2019, 2018, and 2017.
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Performance-based awards granted to our NEOs |
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Performance Period |
Performance Measure |
Award Mix |
Payout |
Vesting Terms |
|
Fiscal 2019-Fiscal 2021 |
3-year Adjusted EPS with a Relative TSR modifier(1) and Share Price Hurdle(2) |
100% performance-based cash |
As of the end of fiscal 2019, the Company has recorded compensation expense associated with these awards based on an earn-out percentage at the target payout level, however financial performance must significantly improve in order for these awards to pay out at target. |
Any performance-based awards that are earned are scheduled to vest in April 2022. |
|
Fiscal 2018-Fiscal 2020 |
3-year Adjusted EPS with a Relative TSR Modifier(1) |
50% performance-based restricted stock units and 50% performance-based cash |
No payout expected. |
Performance-based awards that are earned, if any, are scheduled to vest in April 2021. |
|
Fiscal 2017-Fiscal 2019 |
3-year Adjusted EPS |
100% performance-based restricted stock units |
No payout. |
All performance-based restricted stock units were forfeited. |
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|
(1) |
Relative TSR is measured for the applicable performance period based upon the change in each company’s stock price during that period. Stock prices are adjusted for dividends paid. A 20-day trading averaging period is used to determine the beginning and ending stock price values used to calculate the total shareholder return of the Company and the other companies in the Dow Jones U.S. Retail Apparel Index (“Index”). The change in value from the beginning to the end of the period is divided by the beginning value to determine total shareholder return. The Company’s total shareholder return is compared to the total shareholder return of other companies in the Index, ranked by percentile, to determine whether to modify payout for the applicable performance period based on Adjusted EPS. Modification of the payout amount is based on the Company’s percentile rank within the Index. No modifications are made if Company TSR falls between the 25th and 75th percentile of the Index. Payouts are decreased by 20% if Company TSR is below the 25th percentile of the Index and payouts are increased by 20% if Company TSR exceeds the 75th percentile of the Index except that payouts are capped at 200% of target. |
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(2) |
Share price will be measured by comparing the sales price reported for the Company’s common stock on the last day of the performance period, based on the 90-day moving average stock price prior to such date, to the last sales price reported for the Company’s common stock as of the trading day immediately prior to the date of grant. Performance-based cash awards will not pay out if the Company’s closing stock price at the end of the three-year performance period has declined from the closing stock price on the grant date. |
More detailed information regarding performance-based long-term incentive awards granted in each of 2017, 2018, and 2019, including how Company performance is tracking relative to performance targets, is provided below.
|
40 |
|
www.express.com |
Executive Compensation
In 2019, the Company granted our NEOs performance-based awards comprised of performance-based cash. The performance-based cash awards are set forth in the Grants of Plan Based Awards table on page 51 and have performance goals based on Adjusted EPS measured over a 3-year performance period commencing on the first day of the Company’s 2019 fiscal year and ending on the last day of the Company’s 2021 fiscal year, and may be increased or decreased by 20% based on Relative TSR during the 3-year performance period. No performance-based cash awards will pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date. Any performance-based cash awards that are earned based on the achievement of performance goals are scheduled to vest in April 2022.
The following chart identifies the performance metric, performance levels, the performance levels as a percentage of the target goal, and corresponding payouts as a percentage of the target performance-based award grant for the Company’s performance-based cash awards granted in 2019.
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Performance Metric: |
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Performance Level |
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Company Performance (as a % of target) |
|
% of Performance Awards Earned |
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2019-2021 Adjusted EPS; Relative TSR Modifier; Share Price Hurdle |
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Below Threshold |
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Less than 80% |
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0% of target grant |
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Threshold |
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80% |
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50% of target grant |
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Target |
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100% |
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100% of target grant |
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|
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Maximum |
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120% or higher |
|
200% of target grant |
|
Adjusted EPS was $(0.13) in 2019. Cumulative Adjusted EPS in 2020 and 2021 must equal at least $0.77 in order for the 2019 performance-based cash awards to pay out at the threshold level, subject to modification based on Relative TSR and forfeiture based on share price. Company TSR in 2019 was -12.1% and its percentile ranking among the other companies in the Index was at the 55th percentile.
2018 Performance-Based Awards
In 2018, the Company granted our then current NEOs performance-based awards comprised of 50% performance-based restricted stock units and 50% performance-based cash. The performance awards have performance goals based on Adjusted EPS measured over a 3-year performance period commencing on the first day of the Company’s 2018 fiscal year and ending on the last day of the Company’s 2020 fiscal year, and may be increased or decreased by 20% based on Relative TSR during the 3-year performance period. Any performance-based awards that are earned based on the achievement of performance goals are scheduled to vest in April 2021
The following chart identifies the performance metric, performance levels, the performance levels as a percentage of the target goal, and corresponding payouts as a percentage of the target performance-based award grant for the Company’s performance-based restricted stock unit awards and performance-based cash awards granted in 2018.
|
Performance Metric: |
|
Performance Level |
|
Company Performance (as a % of target) |
|
% of Performance Awards Earned |
|
|
2018-2020 Adjusted EPS; Relative TSR Modifier |
|
Below Threshold |
|
Less than 80% |
|
0% of target grant |
|
|
|
|
Threshold |
|
80% |
|
50% of target grant |
|
|
|
|
Target |
|
100% |
|
100% of target grant |
|
|
|
|
Maximum |
|
120% or higher |
|
200% of target grant |
|
Adjusted EPS was $0.32 in 2018 and $(0.13) in 2019. Adjusted EPS must equal at least $0.89 in 2020 in order for the 2018 performance-based awards to pay out at the threshold level. Company two-year TSR in 2018-19 was -37.1 % and its percentile ranking among the other companies in the Index was at the 39th percentile. These awards are not expected to pay out.
2017 Performance-Based Restricted Awards
In 2017, the Company granted our then current NEOs performance-based restricted stock units that were subject to performance goals based on Adjusted EPS measured over a three-year performance period commencing on the first day of the Company’s 2017 fiscal year and ending on the last day of the Company’s 2019 fiscal year. The threshold Adjusted EPS goal was $1.94. It was not achieved so awards were completely forfeited.
2020 Long-Term Incentive Compensation
For 2020, the long-term incentive program will continue to have 50% of its award value dependent on the achievement of challenging performance targets, consistent with our pay for performance philosophy, with the performance-based portion of the long-term incentive awards comprised of entirely performance-based cash awards in order to help manage share usage and overhang. The ongoing COVID-19 crisis and its impact on the economy and our business will be taken into account in setting the 3-year financial goals for the long-term performance-based cash awards granted in 2020 under our long-term compensation program.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
41 |
Executive Compensation
In previous years we have separately shown CEO Realizable Pay to highlight our compensation program’s strong pay for performance alignment. While CEO Realizable Pay may be useful to show in the future, given Mr. Baxter’s one-time make-whole and hiring related awards, the alignment between our executive compensation program and the Company’s financial performance is better shown by reviewing the information below which shows how our compensation program paid out or is tracking to pay out for our continuing NEOs and other executives at the end of 2019.
|
|
• |
Short-term annual cash incentives paid out at 0% of target for both Spring and Fall seasons in 2019. |
|
|
• |
Long-term performance-based awards are subject to three-year performance periods and generally vest based on challenging Adjusted EPS performance goals during the performance period; stock option and time-based restricted stock unit values reflect the performance of Company stock. |
|
|
o |
2017: Performance-based restricted stock units granted to our then-current NEOs in 2017 were entirely forfeited. In addition, stock options that were granted are significantly underwater and time-based restricted units are currently worth much less than their grant date value. |
|
|
o |
2018: Performance based awards granted to our then-current NEOs in 2018, comprised of half performance-based restricted stock units and half performance-based cash, are not expected to pay out. In addition, time-based restricted stock units are currently worth much less than their grant date value. No stock options were granted to our NEOs in 2018. |
|
|
o |
2019: Performance-based cash awards granted in 2019 to our current NEOs, comprised entirely of performance-based cash, will only pay out if Adjusted EPS performance significantly improves over the next two years. |
|
42 |
|
www.express.com |
Executive Compensation
ONE TIME MAKE-WHOLE AND HIRING RELATED AWARDS
In 2019 we made significant organizational changes that we believe will return the business to growth. One of our key accomplishments was the hiring of Timothy Baxter as our new Chief Executive Officer effective June 17, 2019. One of Mr. Baxter’s first priorities as Chief Executive Officer was to form a new executive leadership team which included the hiring of Malissa Akay as Executive Vice President and Chief Merchandising Officer and Sara Tervo as Executive Vice President and Chief Marketing Officer in September 2019.
In order to compensate our new executives for cash bonus awards and equity awards forfeited from their previous employers, the Company granted the following one-time make-whole and hiring related awards to our new executives in 2019. The amount of each make-whole award was determined based on amounts forfeited from each executive’s prior employer.
For more information regarding one-time make-whole and hiring related awards, see the Summary Compensation Table on page 49. For information on the vesting treatment of make-whole awards upon termination see “Employment Related Agreements” beginning on page 56 and “Potential Payments Upon Termination and Change-in-Control” beginning on page 59.
SPECIAL RETENTION AWARD
In February 2019, the Company granted a $100,000 special cash retention award (“Retention Award”) to Mr. Pericleous, Senior Vice President and Chief Financial Officer, given his key role in the Company’s leadership transition. Pursuant to the Retention Award, $100,000 was paid to Mr. Pericleous in February 2019. In the event Mr. Pericleous voluntarily terminated his employment with the Company on or prior to February 19, 2020 without Good Reason (as defined in Mr. Pericleous’ Amended and Restated Severance Agreement) or if Mr. Pericleous’ employment was terminated by the Company with Cause (as defined in Mr. Pericleous’ Amended and Restated Severance Agreement), then Mr. Pericleous would have been required repay to the Company $100,000 within ten calendar days of his last day of employment with the Company.
ADDITIONAL EXECUTIVE BENEFITS
We provide our executive officers with benefits that the Committee believes are reasonable and in the best interests of the Company and its stockholders. Consistent with our compensation objectives, we provide benefits for our executive officers, including retirement plans, life insurance benefits, housing relocation benefits, and paid time off. The Committee, in its discretion, may revise, amend, or add to an officer’s executive benefits if it deems it advisable. We believe these benefits are generally equivalent to benefits provided by comparable companies.
We have no current plans to materially change the levels of benefits we provide.
Retirement Plan Benefits
We do not sponsor a defined benefit retirement plan as we do not believe that such a plan best serves the needs of our associates or the Company at this time. We do sponsor a tax-qualified defined contribution retirement plan. Participation in the qualified plan is available to associates who meet certain age and service requirements and our executive officers participate in the qualified plan based on these requirements.
Qualified Retirement Plan
Our qualified retirement plan is available to all eligible associates, including executive officers, and allows them to elect contributions up to the maximum limits allowable under Section 401(k) of the Code. We match 100% of associate deferrals, up to 4% of compensation not in excess of the IRS maximum compensation limit. Associates’ contributions and Company matching contributions vest immediately. Please refer to footnote 11 to the Summary Compensation Table on page 50 for details of Company contributions.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
43 |
Executive Compensation
Executive Life Insurance
We provide all executive officers with executive life insurance that offers a benefit equal to two times their annual base salary up to a maximum of $2 million.
Executive Disability Insurance
We provide all executive officers with disability coverage that provides a benefit of 100% base salary continuation for up to 365 days and then 60% of the executive’s base salary plus the annual average of the last three years of cash incentive compensation, up to a maximum benefit of $25,000 per month.
Perquisites
Personal Use of Airplane
We do not provide any executive with special perquisites except for one round trip on private aircraft between Columbus, Ohio and New York, NY in June and July of 2019, in connection with Mr. Baxter’s transition to Chief Executive Officer in order to provide flexibility during his transition to the Company, increase travel efficiencies, and allow for a more productive use of executive time. Mr. Baxter is not eligible to use private aircraft for personal travel in 2020.
Employment Agreements; Severance and Post-Employment Benefits
In connection with Mr. Baxter’s employment as our Chief Executive Officer, he entered into an employment agreement with the Company. Mr. Moellering entered into an employment agreement with the Company prior to our IPO. Their employment agreements are described under “—Employment Related Agreements” beginning on page 56.
Ms. Akay, Ms. Tervo, and Mr. Pericleous do not have employment agreements with the Company. Each have entered into a severance agreement with the Company, which are described under “—Employment Related Agreements” beginning on page 57.
In connection with Mr. Rafferty and Mr. Tilson’s termination, certain termination payments were made, as provided for in their employment agreements. These payments are described in the Summary Compensation Table on page 49 and “—Potential Payments Upon Termination and Change-in-Control” on page 62 (this section also has information regarding severance, post-employment, and change-in-control benefits that would be made upon these events to our other NEOs).
|
44 |
|
www.express.com |
Executive Compensation
EXECUTIVE COMPENSATION PRACTICES
DETERMINING COMPENSATION FOR THE CEO
The Committee works directly with Frederic W. Cook & Co. (“F.W. Cook”) to obtain independent market data, analysis, and advice related to our CEO’s total compensation package. The Committee, together with F.W. Cook, present a recommended pay package for our CEO to the independent directors of the Board for further review, discussion, and approval. Mr. Baxter does not participate in any deliberations with regard to his own compensation. The Committee takes multiple factors into consideration when determining the appropriate CEO compensation package, including the CEO’s existing compensation, the Company’s performance, the CEO’s individual performance and qualifications, peer group CEO pay levels, competitor and industry performance, our compensation objectives, and our business and succession plans.
DETERMINING COMPENSATION FOR THE OTHER NEOS
Each year, the Committee approves a compensation package for each of our executive officers (excluding the CEO), that is consistent with our compensation objectives. As part of the review and approval process, at the Committee’s request, our CEO and Senior Vice President of Human Resources make recommendations for the upcoming year to the Committee regarding compensation for executive officers other than for the CEO. The recommendations are based on our compensation objectives, individual and Company performance, compensation data compiled from independent third-party executive compensation surveys, publicly available data from our peer group companies, and feedback and insights from management’s compensation consultant, Meridian Compensation Partners, all of which is summarized by management and shared with the Committee.
The Committee considers individual performance when determining (i) the annual pay increases for NEOs, (ii) the amount of the short-term cash incentive compensation opportunity for NEOs, and (iii) the amount of the long-term incentives awarded to NEOs.
Individual performance is evaluated based upon several individualized leadership factors, including: attaining specific financial and operational objectives; building and developing individual skills and a strong leadership team; execution of the Company’s business strategy; and individual performance relative to job requirements.
The Committee has an opportunity to review, analyze, and discuss the information and recommendations with its independent compensation consultant, F.W. Cook, and outside the presence of management. The Committee gives considerable weight to the CEO’s evaluation of the other NEOs when approving other NEO compensation because of the CEO’s direct knowledge of each executive officer’s performance and contributions.
THE ROLE OF PEER COMPANIES AND BENCHMARKING
How The Peer Group is Determined. The Committee selects our peer group companies based on such factors as business focus, competition for executive talent, geographic proximity of corporate locations, size of business, and publicly available compensation data. The size of the group has been established so as to provide sufficient market data across the range of senior positions at Express. The Committee annually evaluates whether companies should be added or removed from our peer group companies.
Our peer group for purposes of determining 2019 NEO compensation was comprised of the following retail companies:
In September 2019, the Committee approved changes to the Company’s peer group for purposes of setting 2020 NEO compensation. These changes included removing The Finish Line, which was acquired in 2018 and for whom public disclosure is no longer available, and adding The Cato Corporation, which has market capitalization value close to the Company’s and is a peer of direct peers.
The following chart compares the Company’s revenue and market capitalization to the median revenue and market capitalization for its new peer group.
|
In Billions |
|
Express |
|
Peer Group Median |
|
|
Annual Revenue* |
|
$2.0B |
|
$2.7B |
|
|
Market Capitalization* |
|
$311M |
|
$942M |
|
|
* |
Revenue based on publicly available information for the trailing four quarters. Market capitalization is as of December 31, 2019. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
45 |
Executive Compensation
How The Peer Group is Used. The Committee reviews both compensation and performance at peer companies to support its decision-making process so it can set total compensation levels that it believes are consistent with our compensation objectives to pay for performance and pay competitively. The Committee does not strictly set compensation at a given level relative to its peers (e.g., median). The pay positioning of individual executives varies based on their competencies, skills, experience, business impact, and performance, as well as internal alignment and pay relationships. Actual total compensation earned may be more or less than target compensation based on Company performance during the performance period.
STOCKHOLDER ENGAGEMENT AND ANNUAL ADVISORY VOTE ON EXECUTIVE COMPENSATION
We offer our stockholders the opportunity to vote annually on the Company’s executive compensation program (say-on-pay).
At our 2019 annual meeting of stockholders, stockholders demonstrated strong support for our 2018 executive compensation program with approximately 97% of the votes cast in support of the “say-on-pay” proposal. This level of support followed similarly strong support received at each of our 2017 and 2018 annual meetings.
Our stockholders’ views on corporate governance and executive compensation are important to us and we value and utilize the feedback and insights that we receive. Each year, as part of our annual stockholder engagement cycle, we reach out to our largest stockholders who collectively hold over a majority of the shares of our outstanding common stock, which generally includes approximately our 20 largest stockholders.
We received feedback from several investors that helped to inform our proposal for an approval of an amendment to the 2018 Plan to increase the number of shares available for grant. In addition, our new CEO Mr. Baxter’s ongoing compensation package in general followed the structure of our former CEO’s compensation package, which was originally designed based in part on feedback received from stockholders on our executive compensation in prior years.
For additional information regarding our stockholder engagement process, see “Corporate Governance—Board Practices—Stockholder Engagement,” on pages 22-23.
THE ROLE OF THE COMMITTEE’S COMPENSATION CONSULTANT
The Committee engages its independent executive compensation consultant, F.W. Cook, to advise the Committee about our executive compensation program and practices.
The Committee has determined that the work of F.W. Cook did not raise any conflicts of interest in 2019. In making this assessment, the Committee considered the independence factors enumerated in Rule 10C-1(b) under the Exchange Act, including the fact that F.W. Cook does not provide any other services to the Company, the level of fees received from the Company as a percentage of F.W. Cook’s total revenue, policies and procedures employed by F.W. Cook to prevent conflicts of interest, and whether the individual F.W. Cook advisers to the Committee own any of the Company’s stock or have any business or personal relationships with members of the Committee or our executive officers.
ANALYSIS OF RISK IN OUR COMPENSATION PROGRAM
The Committee evaluates the risks of our compensation program as part of its responsibilities. The compensation program is intended to discourage excessive risk taking by executives and associates to obtain short-term benefits that may be harmful to the Company and our stockholders over the long term. We believe that the following elements of our compensation program discourage excessive risk taking:
|
• |
Short-Term/Long-Term Incentive Mix. The mix between short-term cash incentives and long-term equity-based and performance cash incentives discourages executives and associates from maximizing short-term performance at the expense of long-term performance. |
|
• |
Long-Term Incentive Mix. We grant a mixture of long-term incentives, which in 2019 were comprised of one-half non-qualified stock options and one-half performance-based cash for our CEO, and one-half time-based restricted stock units and one-half performance-based cash for our other NEOs because performance-based awards alone may lead to increased risk taking and time-based equity awards alone may discourage associates from taking appropriate risks. Our stock options and time-based restricted stock units have multi-year vesting requirements and performance-based cash awards are subject to performance-based vesting conditions measured over a three-year period. Our long-term incentive awards are designed to incentivize the creation of long-term stockholder value. |
|
• |
Short-Term and Long-Term Incentive Program Design. In order to discourage excessive risk taking, both short-term cash incentive compensation awards and long-term performance-based incentive awards generally allow for a graduated payout instead of a win or lose payout structure. Each program has a minimum performance threshold below which no payout is earned and a maximum above which no additional payout is earned. In addition, a prorated payout may be earned based on the achievement between threshold and target or achievement between target and maximum. |
|
46 |
|
www.express.com |
Executive Compensation
|
• |
Stock Ownership Guidelines. We use meaningful stock ownership guidelines to align our directors’ and executive officers’ interests with our stockholders’ interests and focus our executives on attaining long-term stockholder returns. |
|
• |
Anti-Hedging and Anti-Pledging Policies. Under the Company’s Insider Trading Policy, all of our officers, employees and directors are prohibited from engaging in any hedging or monetization transactions involving Company securities, including equity swaps, collars, and exchange funds. In addition, our Insider Trading Policy prohibits all officers, employees and directors from holding Company securities in a margin account or pledging Company securities as collateral for a loan. These policies further align our executives’ and associates’ interests with those of our stockholders. |
|
• |
Clawback Policy. Our clawback policy allows us to adjust and recover any cash incentive compensation paid or the shares vested or to be vested of a performance-based long-term incentive award in the event of a material restatement of the Company’s financial results, which discourages inappropriate risk-taking behavior. See below for updates made to our clawback policy in 2019 in order to expand the circumstances under which the Company may clawback incentive compensation. |
UPDATES TO COMPENSATION CLAWBACK POLICY
In September 2019, the Committee approved updates designed to strengthen and expand the Company’s policy concerning the recovery of incentive compensation. This updated policy applies to performance-based awards and long-term equity awards paid to our NEOs as well as other executives.
Prior to the updates made in 2019, under the policy, in the event of a material restatement of the Company’s financial results, the Committee would review the circumstances that caused the restatement and consider accountability to determine whether a covered associate was negligent or engaged in misconduct. If so, and if the amount of a cash incentive award paid or to be paid, or the shares vested or to be vested of a performance-based long-term incentive award would have been less had the financial statements been correct, the Committee will recover compensation from the covered associate as it deems appropriate.
Furthering our commitment to pay responsibly, in September 2019, the Committee approved an expansion of the current policy in order to provide the Committee discretion to clawback incentive compensation from our NEOs as well as other executives in the event of management misconduct that could result in significant reputational harm to the Company, unrelated to a financial restatement. Under the updated policy, if a covered associate engages in detrimental conduct that could result in significant reputational harm to the Company (unrelated to a financial restatement), the Committee may, in its discretion, recover all or part of the covered associate’s incentive compensation granted, awarded, earned, vested, paid, settled, or received during the three years immediately preceding the Committee’s determination that detrimental conduct occurred. The updated policy is effective for all incentive awards granted under the 2018 Plan.
This policy is in addition to any requirements which might be imposed pursuant to Section 304 under the Sarbanes-Oxley Act, and will be modified to the extent required by the Dodd-Frank Act of 2010.
STOCK OWNERSHIP GUIDELINES
We have stock ownership requirements for our executives to further build commonality of interest between management and stockholders and to encourage executives to think and act like owners. Our current stock ownership guidelines are as follows:
|
Chief Executive Officer |
Lesser of 5x annual base salary or 200,000 shares |
|
Chief Operating Officer |
Lesser of 3x annual base salary or 75,000 shares |
|
Other Executive Officers |
Lesser of 2x annual base salary or 40,000 shares |
|
Senior Vice Presidents |
Lesser of 1x annual base salary or 16,000 shares |
|
Board Members |
5x annual retainer |
The executives and Board members have five years to meet the guidelines. Under the guidelines, executives and directors are generally not permitted to sell any shares of our common stock until they achieve the ownership guideline and thereafter are only permitted to sell shares of our common stock to the extent that such sale would not cause the executive or director to fall below the ownership guideline. To avoid fluctuating ownership requirements, except upon a promotion, once an individual has achieved the ownership guideline, they will be considered to have satisfied the requirements as long as the shares used to meet the underlying requirements are retained. The Committee annually reviews individual executive and director stock ownership levels. During the Committee’s most recent review of ownership levels, it was confirmed that all NEOs and directors currently meet or are on track to meet the applicable ownership guideline.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
47 |
Executive Compensation
POLICY REGARDING TIMING OF STOCK-BASED AWARDS
The Committee recognizes the importance of adhering to specific practices and procedures in the granting of equity awards and has adopted a specific policy around this process.
The Committee generally grants equity awards to executive officers annually during the first quarter in a given fiscal year at the Board’s first regularly scheduled in-person meeting for the year. For directors, the Committee generally grants equity awards annually on the date of the Company’s annual meeting of stockholders. To the extent that equity awards are granted at other times throughout the year, including with respect to grants made to new executive hires, such grants are generally made on the 15th calendar day of a month.
TRADING CONTROLS
Executive officers, including our NEOs, are required to receive pre-approval from the Company’s General Counsel prior to entering into any transactions in Company securities. Generally, trading is permitted only during specified trading periods.
From time to time, certain of our executive officers may adopt non-discretionary, written trading plans that comply with Rule 10b5-1(c) under the Exchange Act (“10b5-1 plans”). 10b5-1 plans permit our executive officers to monetize their equity-based compensation in an automatic and non-discretionary manner over time and are generally adopted for financial planning purposes.
Our Insider Trading Policy requires that our General Counsel pre-approve any new 10b5-1 plan, or any modification or termination of such a plan, and provides that executive officers may enter into or modify a 10b5-1 plan only during an open trading window and while not in possession of material non-public information. Moreover, any 10b5-1 plan must include a waiting period between establishment or modification of the plan and any transaction pursuant to the plan. In addition, our executive officers are generally prohibited from entering into overlapping 10b5-1 plans, engaging in transactions in Company stock outside of any 10b5-1 plan then in effect, and amending or terminating plans absent unforeseen events such as a change in personal financial circumstances.
ACCOUNTING AND TAX CONSIDERATIONS
As amended by the Tax Cuts and Jobs Act (the “TCJA”), which was enacted December 22, 2017, Section 162(m) of the Code generally disallows a tax deduction to public companies for compensation paid in excess of $1 million to “covered employees” under Section 162(m) (generally, such company’s chief executive officer and its chief financial officer and its three other highest paid executive officers). As in prior years, the Committee will continue to take into account the tax and accounting implications (including the expected lack of deductibility under the revised Section 162(m)) when making compensation decisions, but reserves its right to make compensation decisions based on other factors as well if the Committee determines it is in the Company’s best interest to do so.
Compensation and Governance Committee Report
The Committee has reviewed and discussed the Compensation Discussion and Analysis set forth above with management. Based on this review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and incorporated into the Company’s Annual Report on Form 10-K for the year ended February 1, 2020.
Compensation and Governance Committee
Peter Swinburn, Chair
Terry Davenport
Karen Leever
Mylle Mangum
Winnie Park
|
48 |
|
www.express.com |
Executive Compensation
The purpose of the following tables is to provide information regarding the compensation earned by our NEOs during the fiscal years indicated.
The Summary Compensation Table and the Grants of Plan-Based Awards should be viewed together for a more complete representation of both the annual and long-term incentive compensation elements of our executive compensation program.
SUMMARY COMPENSATION TABLE
The following table shows the compensation earned by our NEOs during the years ended February 1, 2020, February 2, 2019 and February 3, 2018, referred to as 2019, 2018, and 2017, respectively.
|
Name and Principal Position |
|
Year |
|
Salary ($) |
|
Bonus ($)(6) |
|
Stock Awards ($)(7) |
|
Option Awards ($)(8) |
|
Non-Equity Incentive Plan Compensation ($)(9) |
|
Non-Qualified Deferred Compensation Earnings ($)(10) |
|
All Other Compensation ($)(11) |
|
Total ($) |
|
|
Timothy Baxter(1) |
|
2019 |
|
634,615 |
|
1,835,000 |
|
1,500,000 |
|
2,900,000 |
|
— |
|
— |
|
180,772 |
|
7,050,387 |
|
|
Chief Executive Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matthew Moellering(2) |
|
2019 |
|
935,538 |
|
— |
|
650,000 |
|
— |
|
— |
|
— |
|
14,369 |
|
1,599,907 |
|
|
President and Chief Operating Officer |
|
2018 |
|
805,462 |
|
— |
|
975,000 |
|
— |
|
381,539 |
|
4,002 |
|
13,398 |
|
2,179,401 |
|
|
Former Interim Chief Executive Officer and Interim President |
|
2017 |
|
808,250 |
|
— |
|
1,104,994 |
|
194,933 |
|
216,370 |
|
24,000 |
|
13,934 |
|
2,362,481 |
|
|
Malissa Akay(3) |
|
2019 |
|
292,789 |
|
576,250 |
|
570,000 |
|
— |
|
— |
|
— |
|
683 |
|
1,439,722 |
|
|
Executive Vice President and |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Merchandising Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sara Tervo(3) |
|
2019 |
|
242,308 |
|
520,000 |
|
350,000 |
|
— |
|
— |
|
— |
|
624 |
|
1,112,932 |
|
|
Executive Vice President and Chief Marketing Officer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periclis (“Perry”) |
|
2019 |
|
500,000 |
|
100,000 |
|
325,000 |
|
— |
|
— |
|
— |
|
11,364 |
|
936,364 |
|
|
Pericleous |
|
2018 |
|
496,635 |
|
— |
|
450,000 |
|
— |
|
182,650 |
|
311 |
|
14,904 |
|
1,144,500 |
|
|
Senior Vice President, |
|
2017 |
|
479,519 |
|
— |
|
509,999 |
|
89,969 |
|
99,109 |
|
1,862 |
|
9,966 |
|
1,190,424 |
|
|
Chief Financial Officer and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John J. (“Jack”) Rafferty(4) |
|
2019 |
|
389,492 |
|
— |
|
335,000 |
|
— |
|
— |
|
— |
|
1,054,194 |
|
1,778,686 |
|
|
Former Executive Vice |
|
2018 |
|
582,000 |
|
— |
|
502,500 |
|
— |
|
212,605 |
|
13,680 |
|
12,949 |
|
1,323,734 |
|
|
President—Planning and Allocation |
|
2017 |
|
593,192 |
|
— |
|
569,504 |
|
100,466 |
|
121,434 |
|
82,045 |
|
13,273 |
|
1,479,914 |
|
|
Douglas Tilson(5) |
|
2019 |
|
308,289 |
|
— |
|
230,000 |
|
— |
|
— |
|
— |
|
860,432 |
|
1,398,721 |
|
|
Former Executive Vice |
|
|
|
|
|
|
|
|
|
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President—Real Estate |
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(1) |
Mr. Baxter was appointed Chief Executive Officer effective June 17, 2019. |
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(2) |
Mr. Moellering served as interim Chief Executive Officer and interim President and Executive Vice President and Chief Operating Officer, from January 22, 2019 until Mr. Baxter’s appointment as Chief Executive Officer. Mr. Moellering was appointed President and Chief Operating Officer effective September 23, 2019. |
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(3) |
Mr. Akay was appointed Executive Vice President and Chief Merchandising Officer and Ms. Tervo was appointed Executive Vice President and Chief Marketing Officer, effective September 9, 2019. |
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(4) |
Mr. Rafferty left the Company on October 3, 2019 and was entitled to certain severance benefits pursuant to his amended and restated employment agreement with the Company. See “—Potential Payments Upon Termination and Change-in-Control on page 62 for more detail regarding separation payments made to Mr. Rafferty under the terms of the agreement. |
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(5) |
Mr. Tilson left the Company on September 27, 2019 and was entitled to certain severance benefits pursuant to his amended and restated employment agreement with the Company. See “—Potential Payments Upon Termination and Change-in-Control on page 62 for more detail regarding separation payments made to Mr. Tilson under the terms of the severance agreement. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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49 |
Executive Compensation
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(7) |
Reflects the aggregate grant date fair value of awards granted in the applicable year. For 2019, the amounts reflect the aggregate grant date fair value of time-based restricted stock units. For 2017 and 2018, the amounts also reflect the target value of performance-based restricted stock units. No performance-based restricted stock units were granted in 2019. For Mr. Baxter, the $1,500,000 amount reflects a buy-out award of 576,923 time-based restricted stock units which cliff vest on July 15, 2021. For Ms. Akay, the $570,000 amount includes a buy-out award of 38,835 time-based restricted stock units which cliff vest on October 31, 2020. See “—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—One-Time Make-Whole and Hiring Related Awards” for more information. |
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(8) |
Reflects grant date fair value using assumptions and methodologies set forth in Note 9 of the Company’s financial statements included in its Annual Report for the year ended February 1, 2020. For Mr. Baxter, the $2,900,000 amount reflects approximately $1.4M in non-qualified stock options granted as part of Mr. Baxter’s pro-rated long-term incentive award, which vest ratably over four years, and approximately $1.5M in non-qualified stock options granted as part of Mr. Baxter’s buy-out award, which cliff vest on July 15, 2021. No stock options were granted to our other NEOs in 2019 or 2018. |
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(9) |
For 2019, reflects that no payouts were made to Mr. Moellering and Mr. Pericleous under our short-term cash incentive program. 2019 short-term cash incentive opportunity for the Fall season (and for the Spring season for Mr. Baxter, pro-rated based on his start date) was guaranteed at the greater of actual achievement or 100% of target for Mr. Baxter, Ms. Akay, and Ms. Tervo given the minimal impact our new executives could have had during the periods in which each was hired and such amounts are reflected in the Bonus column. For Mr. Moellering and Mr. Pericleous, reflects payouts of 56% of target in 2018 and 32% of target in 2017. For more information about our short-term incentive compensation program see “—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” on page 36. |
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(10) |
We do not sponsor any tax-qualified or non-qualified defined benefit retirement plans. For 2018, the amounts shown represent the amount by which earnings of 5.2% on each NEO’s non-qualified deferred compensation account balance exceeded 120% of the applicable federal long-term rate. The non-qualified deferred compensation plan that we provided for our executive officers was terminated effective March 31, 2017. Interest continued to accrue on outstanding balances until distribution in April 2018. |
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(11) |
The following table details All Other Compensation paid to each NEO during 2019: |
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Name |
|
Executive Life and Disability Insurance ($)(a) |
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Personal Aircraft Usage ($)(b) |
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Relocation Benefits ($)(c) |
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Severance ($)(d) |
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Qualified Retirement Plan Company Match ($)(e) |
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Total |
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Timothy Baxter |
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1,068 |
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32,000 |
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147,704 |
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— |
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— |
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180,772 |
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Matthew Moellering |
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2,089 |
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— |
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— |
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— |
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12,280 |
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14,369 |
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Malissa Akay |
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683 |
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— |
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— |
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— |
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— |
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683 |
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Sara Tervo |
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624 |
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— |
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— |
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— |
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— |
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624 |
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Periclis (“Perry”) Pericleous |
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1,610 |
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— |
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— |
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— |
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9,754 |
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11,364 |
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John J. ("Jack") Rafferty |
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1,149 |
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— |
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— |
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1,043,636 |
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9,409 |
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1,054,194 |
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Douglas Tilson |
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1,060 |
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— |
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— |
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849,695 |
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9,677 |
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860,432 |
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(a) |
Amounts represent the annual premiums paid by the Company for executive life insurance and executive disability insurance. |
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(b) |
This represents the expense for one round trip on private aircraft between Columbus, Ohio and New York, NY in June and July of 2019, in connection with Mr. Baxter’s transition to Chief Executive Officer. Mr. Baxter is responsible for paying the taxes associated with this benefit. Mr. Baxter is not eligible to use private aircraft for personal travel in 2020. |
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(c) |
For Mr. Baxter, represents amounts for relocation expenses paid under our relocation benefits program, which is generally available to employees for relocations requested and initiated by the Company. |
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(d) |
Reflects amounts accrued in 2019 pursuant to the base salary and short-term incentive compensation continuation benefits that Mr. Rafferty and Mr. Tilson are entitled to pursuant to the terms of their employment agreements with the Company, respectively. See—“Potential Payments Upon Termination and Change-in-Control” beginning on page 62. |
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(e) |
The Company matches 100% of 401(k) deferrals, limited to deferrals of up to 4% of compensation not in excess of the IRS Qualified Plan Maximum Compensation Limit. See “—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—Additional Executive Benefits—Retirement Plan Benefits—Qualified Retirement Plan” on page 43. |
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50 |
|
www.express.com |
Executive Compensation
During 2019, each of our NEOs participated in our short-term performance-based cash incentive program under which each NEO was eligible for awards set forth under “Estimated Possible Payouts Under Non-Equity Incentive Plan Awards” below. For a detailed discussion of our short-term incentives, refer to “—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” beginning on page 36. In addition, our NEOs participated in our long-term incentive program under which (i) each NEO is eligible to earn performance-based cash amounts set forth under “Estimated Future Payouts Under Non-Equity Incentive Plan Awards” below based on achievement of performance goals, and (ii) each NEO was granted long-term equity-based awards comprised of non-qualified stock options for our CEO and time-based restricted stock units for our other NEOs. For a detailed discussion of our long-term incentive awards, refer to “—Compensation Discussion and Analysis—What We Pay And Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives” beginning on page 39.
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Estimated Possible Payouts Under Non-Equity Incentive Plan Awards |
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Estimated Future Payouts Under Equity Incentive Plan Awards |
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All Other Stock Awards: Number of Shares or Stock |
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All Other Option Awards: Number of Securities Underlying |
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Exercise or Base Price of Option |
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Grant Date Fair Value of Stock and Option |
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Name |
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Grant Date |
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Threshold(4) ($) |
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Target ($) |
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Maximum ($) |
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Threshold (#) |
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Target (#) |
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Maximum (#) |
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Units (#) |
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Options (#) |
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Awards ($/Sh) |
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Awards ($)(5) |
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Timothy |
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— |
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910,000 |
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910,000 |
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1,820,000 |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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Baxter |
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7/15/2019 |
(1) |
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700,000 |
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1,400,000 |
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2,800,000 |
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— |
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— |
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— |
|
— |
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— |
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— |
|
— |
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7/15/2019 |
(2) |
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— |
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— |
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— |
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— |
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— |
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— |
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576,923 |
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— |
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— |
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1,500,000 |
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7/15/2019 |
(3) |
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— |
|
— |
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— |
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— |
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— |
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— |
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— |
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1,120,000 |
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2.60 |
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1,400,000 |
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7/15/2019 |
(3) |
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— |
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— |
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— |
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— |
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— |
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— |
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— |
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1,200,000 |
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2.60 |
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1,500,000 |
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Matthew |
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— |
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148,500 |
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742,500 |
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1,485,000 |
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— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Moellering |
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3/19/2019 |
(1) |
|
325,000 |
|
650,000 |
|
1,300,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
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3/19/2019 |
(2) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
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151,515 |
|
— |
|
— |
|
650,000 |
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Malissa |
|
— |
|
|
362,250 |
|
362,250 |
|
724,500 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Akay |
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9/15/2019 |
(1) |
|
225,000 |
|
450,000 |
|
900,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
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9/15/2019 |
(2) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
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38,835 |
|
— |
|
— |
|
120,000 |
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9/15/2019 |
(2) |
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— |
|
— |
|
— |
|
— |
|
— |
|
— |
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145,631 |
|
— |
|
— |
|
450,000 |
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Sara |
|
— |
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270,000 |
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270,000 |
|
540,000 |
|
— |
|
— |
|
— |
|
— |
|
|
|
— |
|
— |
|
Tervo |
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9/15/2019 |
(1) |
|
175,000 |
|
350,000 |
|
700,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
9/15/2019 |
(2) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
113,269 |
|
— |
|
— |
|
350,000 |
|
Periclis |
|
— |
|
|
65,000 |
|
325,000 |
|
650,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(“Perry”) |
|
3/19/2019 |
(1) |
|
162,500 |
|
325,000 |
|
650,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Pericleous |
|
3/19/2019 |
(2) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
75,758 |
|
— |
|
— |
|
325,000 |
|
John J |
|
— |
|
|
75,660 |
|
378,300 |
|
756,600 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
("Jack") |
|
3/19/2019 |
(1) |
|
167,500 |
|
335,000 |
|
670,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Rafferty |
|
3/19/2019 |
(2) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
78,089 |
|
— |
|
— |
|
335,000 |
|
Douglas |
|
— |
|
|
56,580 |
|
282,900 |
|
565,800 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
Tilson |
|
3/19/2019 |
(1) |
|
115,000 |
|
230,000 |
|
460,000 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|
|
3/19/2019 |
(2) |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
53,613 |
|
— |
|
— |
|
230,000 |
|
(1) |
Reflects performance-based cash with performance-based and time-based vesting criteria granted under the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan (the “2018 Plan”). The amount of performance-based cash that will vest will be determined based on Adjusted EPS for the three-year period commencing on the first day of the Company’s 2019 fiscal year and ending on the last day of the Company’s 2021 fiscal year, compared to the performance goals established by the Committee and subject to a Relative TSR modifier. In addition, no amounts will pay out if the Company’s closing stock price at the end of the three-year performance period (measured based on a 90-day moving average) has declined from the closing stock price on the grant date. See “—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives—2019 Performance-Based Awards” on page 41 for more information. |
|
(2) |
Reflects restricted stock units with time-based vesting criteria granted under the 2018 Plan. For Mr. Baxter, buy-out awards comprised of 576,923 time-based restricted stock units vest on July 15, 2021. For Ms. Akay, buy-out awards comprised of 38,835 time-based restricted stock units vest on October 31, 2020. All other awards vest in four equal installments on each anniversary of the grant date. |
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(3) |
Reflects 1,120,000 non-qualified stock options granted to Mr. Baxter as part of his pro-rated annual long-term incentive award, which vest ratably over four years, and 1,200,000 non-qualified stock options granted to Mr. Baxter as part of his buy-out award, which cliff vests on July 15, 2021. No stock options were granted to our other NEOs in 2019. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
51 |
Executive Compensation
|
(5) |
Reflects the aggregate grant date fair value of time-based restricted stock units and stock options, as applicable. These values have been determined based on the assumptions and methodologies set forth in Note 9 of the Company’s financial statements included in its Annual Report for the year ended February 1, 2020. |
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The table below sets forth certain information regarding the outstanding equity awards held by each of our NEOs as of February 1, 2020.
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|
|
Option Awards |
|
Stock Awards |
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Name |
|
Number of Securities Underlying Exercisable Options (#) |
|
Number of Securities Underlying Unexercisable Options (#) |
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($/Share) |
|
Option Expiration Date |
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(14) |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
|
Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(14) |
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Timothy |
|
— |
|
1,120,000 |
(1) |
|
— |
|
2.60 |
|
7/15/2029 |
|
— |
|
|
— |
|
— |
|
|
— |
|
Baxter |
|
— |
|
1,200,000 |
(2) |
|
— |
|
2.60 |
|
7/15/2029 |
|
— |
|
|
— |
|
— |
|
|
— |
|
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576,923 |
(3) |
|
2,313,461 |
|
— |
|
|
— |
|
Matthew |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
151,515 |
(4) |
|
607,575 |
|
— |
|
|
— |
|
Moellering |
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|
|
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|
|
|
|
|
|
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70,653 |
(5) |
|
283,319 |
|
|
|
|
|
|
|
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
23,551 |
(6) |
|
94,438 |
|
|
|
22,209 |
|
22,210 |
(7) |
|
— |
|
9.42 |
|
3/14/2027 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
24,151 |
(8) |
|
96,846 |
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
34,501 |
(9) |
|
138,349 |
|
|
|
15,394 |
|
5,132 |
(10) |
|
— |
|
21.14 |
|
3/30/2026 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
5,381 |
(11) |
|
21,578 |
|
— |
|
|
— |
|
|
|
19,255 |
|
|
|
|
— |
|
16.28 |
|
3/26/2025 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
23,311 |
|
— |
|
|
— |
|
15.88 |
|
4/1/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
38,000 |
|
— |
|
|
— |
|
17.49 |
|
4/2/2023 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
30,820 |
|
— |
|
|
— |
|
25.25 |
|
3/22/2022 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
50,000 |
|
— |
|
|
— |
|
18.51 |
|
2/18/2021 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
60,000 |
|
— |
|
|
— |
|
17.00 |
|
5/12/2020 |
|
— |
|
|
— |
|
— |
|
|
— |
|
52 |
|
www.express.com |
Executive Compensation
|
|
|
Option Awards |
|
Stock Awards |
|||||||||||||||||
|
Name |
|
Number of Securities Underlying Exercisable Options (#) |
|
Number of Securities Underlying Unexercisable Options (#) |
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($/Share) |
|
Option Expiration Date |
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(13) |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
|
Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(14) |
|
Malissa |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
38,835 |
(12) |
|
155,728 |
|
— |
|
|
— |
|
Akay |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
145,631 |
(13) |
|
583,980 |
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sara |
|
|
|
|
|
|
|
|
|
|
|
|
113,269 |
(13) |
|
454,209 |
|
|
|
|
|
|
Tervo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periclis |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
75,758 |
(4) |
|
303,790 |
|
— |
|
|
— |
|
(“Perry”) |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
32,609 |
(5) |
|
130,762 |
|
— |
|
|
— |
|
Pericleous |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
10,870 |
(6) |
|
43,587 |
|
|
|
10,250 |
|
10,251 |
(7) |
|
— |
|
9.42 |
|
3/14/2027 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
11,147 |
(8) |
|
44,699 |
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
— |
|
|
— |
|
15,924 |
(9) |
|
63,853 |
|
|
|
6,513 |
|
2,171 |
(10) |
|
— |
|
21.14 |
|
3/30/2026 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
2,277 |
(11) |
|
9,131 |
|
— |
|
|
— |
|
|
|
8,527 |
|
— |
|
|
— |
|
18.84 |
|
7/15/2025 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
5,510 |
|
— |
|
|
— |
|
17.49 |
|
4/2/2023 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
3,080 |
|
— |
|
|
— |
|
25.25 |
|
3/22/2022 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
1,500 |
|
— |
|
|
— |
|
18.51 |
|
2/18/2021 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
5,000 |
|
— |
|
|
— |
|
16.53 |
|
12/15/2020 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
875 |
|
— |
|
|
— |
|
17.00 |
|
5/12/2020 |
|
— |
|
|
— |
|
— |
|
|
— |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
53 |
Executive Compensation
|
|
|
Option Awards |
|
Stock Awards |
|||||||||||||||||
|
Name |
|
Number of Securities Underlying Exercisable Options (#) |
|
Number of Securities Underlying Unexercisable Options (#) |
|
|
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) |
|
Option Exercise Price ($/Share) |
|
Option Expiration Date |
|
Number of Shares or Units of Stock That Have Not Vested (#) |
|
|
Market Value of Shares or Units of Stock That Have Not Vested ($)(14) |
|
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) |
|
|
Equity Incentive Plans: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(14) |
|
John J. |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
|
|
|
|
|
5,998 |
(6) |
|
24,050 |
|
("Jack") |
|
22,893 |
|
|
|
|
— |
|
9.42 |
|
10/3/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
Rafferty |
|
11,053 |
|
|
|
|
— |
|
21.14 |
|
10/3/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
10,109 |
|
|
|
|
— |
|
16.28 |
|
10/3/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
12,122 |
|
— |
|
|
— |
|
15.88 |
|
4/1/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
Doug |
|
— |
|
— |
|
|
— |
|
— |
|
— |
|
|
|
|
|
|
4,443 |
(6) |
|
17,816 |
|
Tilson |
|
17,084 |
|
|
|
|
— |
|
9.42 |
|
9/29/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
8,684 |
|
|
|
|
— |
|
21.14 |
|
9/29/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
8,665 |
|
|
|
|
— |
|
16.28 |
|
9/29/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
|
|
10,956 |
|
— |
|
|
— |
|
15.88 |
|
4/1/2024 |
|
— |
|
|
— |
|
— |
|
|
— |
|
(1) |
Reflects stock options granted in 2019 under the 2018 Plan. These awards vest in equal installments on each of July 15, 2020, 2021, 2022 and 2023. |
|
(2) |
Reflects stock options granted in 2019 under the 2018 Plan as part of Mr. Baxter’s buy-out grant, which were determined based on the amount of unvested equity awards that Mr. Baxter forfeited from his prior employer. These awards vest in full on July 15, 2021. |
|
(3) |
Reflects restricted stock units granted in 2019 under the 2018 Plan as part of Mr. Baxter’s buy-out grant, which were determined based on the amount of unvested equity awards that Mr. Baxter forfeited from his prior employer. These awards will vest in full on July 15, 2021. |
|
(4) |
Reflects restricted stock units granted in 2019 under the 2018 Plan. These awards vest in equal installments on each of April 15, 2020, 2021, 2022 and 2023. |
|
(5) |
Reflects restricted stock units granted in 2018 under the 2010 Plan. These awards vest in equal installments on each of April 15, 2020, 2021, and 2022. |
|
(6) |
Reflects the number of restricted stock units with performance-based and time-based vesting criteria granted in 2018 under the 2010 Plan that would be earned at the threshold performance level. The number of performance-based restricted stock units that are actually earned will be determined based on the Company’s Adjusted EPS for the three-year period commencing on the first day of the Company’s 2018 fiscal year and ending on the last day of the Company’s 2020 fiscal year, compared to the performance goals established by the Committee, as modified based on Company’s Relative TSR. The earned portion of these awards vest on April 15, 2021. These awards are not expected to pay out. See “—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives—Performance-Based Awards—2018 Performance-Based Awards” on page 41 for further information regarding these awards. |
|
(7) |
Reflects stock options granted in 2017 under the 2010 Plan. These awards vest in equal installments on each of April 15, 2020, and 2021. |
|
(8) |
Reflects restricted stock units granted in 2017 under the 2010 Plan. These awards vest in equal installments on each of April 15, 2020 and 2021. |
|
(9) |
Reflects the number of restricted stock units with performance-based and time-based vesting criteria granted in 2017 under the 2010 Plan that would be earned at the threshold performance level. The threshold Adjusted EPS goal was not achieved so these performance-based awards were entirely forfeited. See “—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—Performance-Based Incentives—Long-Term Incentives—Performance-Based Awards—2017 Performance-Based Restricted Stock Units” on page 41 for further information regarding these awards. |
|
(10) |
Reflects stock options granted in 2016 under the 2010 Plan. These awards vested in full on April 15, 2020. |
|
(11) |
Reflects restricted stock units granted in 2016 under the 2010 Plan. These awards vested in full on April 15, 2020. |
|
(12) |
Reflects a buy-out grant of time-based restricted stock units granted to Ms. Akay upon hire, the amount of which was determined based on the amount of unvested equity awards that Ms. Akay forfeited from her prior employer. These awards cliff vest on October 31, 2020. |
|
(13) |
Reflects restricted stock units granted in 2019 under the 2018 Plan. These awards vest in equal installments on each of September 15, 2020, 2021, 2022 and 2023. |
|
(14) |
Based on the January 31, 2020 closing stock price of $4.01. |
|
54 |
|
www.express.com |
Executive Compensation
OPTION EXERCISES AND STOCK VESTED
The following table provides information relating to stock options exercised and stock awards that vested during 2019.
|
|
|
Option Awards |
|
|
Stock Awards |
|
||||||||||
|
Name |
|
Number of Shares Acquired on Exercise (#) |
|
|
Value Realized on Exercise ($) |
|
|
Number of Shares Acquired on Vesting (#) |
|
|
Value Realized on Vesting ($)(1) |
|
||||
|
Timothy Baxter |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Matthew Moellering |
|
|
— |
|
|
|
— |
|
|
|
46,381 |
|
|
|
174,856 |
|
|
Malissa Akay |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Sara Tervo |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Periclis (“Perry”) Pericleous |
|
|
— |
|
|
|
— |
|
|
|
22,530 |
|
|
|
82,275 |
|
|
John J. (“Jack”) Rafferty |
|
|
— |
|
|
|
— |
|
|
|
43,600 |
|
|
|
150,708 |
|
|
Douglas Tilson |
|
|
— |
|
|
|
— |
|
|
|
31,804 |
|
|
|
113,868 |
|
|
(1) |
Amounts reflect the market value of our common stock on the day the stock award vested. |
PENSION BENEFITS
We do not sponsor any qualified or non-qualified defined benefit plans. The Board or Committee may elect to adopt qualified or non-qualified defined benefit plans in the future if it determines that doing so is in the Company’s best interest.
DEFERRED COMPENSATION
The non-qualified deferred compensation plan that we provided for our executive officers was terminated effective March 31, 2017. Interest continued to accrue on outstanding balances until distribution in April 2018.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
55 |
Executive Compensation
TIMOTHY BAXTER
In connection with the appointment of Timothy Baxter as Chief Executive Officer, we entered into an employment agreement with Mr. Baxter effective June 17, 2019. The employment agreement may be terminated at any time by us or Mr. Baxter.
The employment agreement provides for an annual base salary that is subject to annual review for potential increase, as well as short-term, performance-based cash incentive payment opportunities for each six-month operating season based on a percentage of Mr. Baxter’s base salary. See “Executive Compensation—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” on page 36.
In addition, the employment agreement provides that Mr. Baxter is eligible for equity-based compensation awards that are commensurate with his performance and position. Mr. Baxter is also entitled to participate in all employee benefit plans that we maintain and make available to our senior executives and is entitled to paid time off in accordance with our policies as in effect from time to time.
Specific to fiscal year 2019, under the employment agreement and as compensation for unvested equity awards foregone from Mr. Baxter’s former employer, Mr. Baxter received a special one-time equity grant with an aggregate value of $3.0 million in the form of 50% of grant value as stock options and the other 50% as restricted stock units, each of which will vest on the second anniversary of the grant date of July 15, 2019 (the “Sign-On Award”). The Sign-On Award is subject to the award agreements governing the grant and the 2018 Plan. Mr. Baxter also received a one-time, make-whole cash award of up to $925,000 as compensation for the annual bonus payment foregone from Mr. Baxter’s former employer (the “Sign-On Bonus”). See “Executive Compensation—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—One-Time Make-Whole and Hiring Related Awards” on page 43.
The employment agreement includes customary restrictions with respect to the use of our confidential information and provides that all intellectual property developed or conceived by Mr. Baxter while he is employed by us that relates to our business is Company property. During Mr. Baxter’s term of employment with us and during the 12-month period immediately thereafter, Mr. Baxter has agreed not to (1) solicit any of our associates, (2) interfere with or harm any of our business relationships, or (3) participate (whether as an officer, director, employee, or otherwise) in any competitive business.
Under the employment agreement, if Mr. Baxter’s employment with the Company is terminated by the Company other than for Cause, or by Mr. Baxter for Good Reason, and Mr. Baxter signs a general release, then Mr. Baxter will be entitled to receive (1) his base salary and medical and dental benefits for 18 months following separation from the Company, (2) the amount of cash incentive compensation that he would have otherwise received during the 12-month period following separation from the Company, (3) the amount of any unpaid short-term incentive bonus for any performance period ending prior to the termination date, based on actual achievement, and (4) a prorated bonus for the performance period during which the termination of employment occurs, based on actual achievement. In addition, if Mr. Baxter’s termination without Cause or with Good Reason occurs prior to the vesting of his Sign-On Award on July 15, 2021, then the entire amount of the Sign-On Award will vest immediately as of the termination date.
In the event that Mr. Baxter’s employment is terminated by the Company other than for Cause, or by Mr. Baxter for Good Reason, and the termination occurs in connection with a change-in-control of the Company (as defined in the 2018 Plan), and Mr. Baxter signs a general release, then Mr. Baxter will be entitled to (1) a one-time payment equal to (a) two times Mr. Baxter’s annual base salary, plus (b) 1.5 times Mr. Baxter’s annual cash incentive compensation at target; (2) medical and dental benefits for 18 months following separation from the Company; (3) the amount of any unpaid short-term incentive bonus for any performance period ending prior to the termination date, based on actual achievement; (4) a prorated bonus for the performance period during which termination occurs, based on actual achievement; and (5) automatic vesting of any unvested outstanding equity-based and cash-based incentive awards (at target with respect to performance-based awards).
“Good Reason” under Mr. Baxter’s employment agreement generally includes (1) an adverse change in responsibilities, pay, or reporting relationship, (2) relocation of more than 60 miles from the executive’s home, (3) failure by the Company to abide by the agreement, or (4) failure by any successor to assume the agreement. “Cause” under Mr. Baxter’s employment agreement generally includes (1) failure by the executive to perform his or her material duties, (2) conviction of a felony, (3) misconduct in bad faith which could reasonably be expected to result in material harm to the Company, or (4) violation of any of the Company’s material policies.
MATTHEW MOELLERING
Prior to our IPO, as part of our executive retention strategy, we entered into an employment agreement with Mr. Moellering. The employment agreement may be terminated at any time by us or Mr. Moellering.
The employment agreement provides for an annual base salary that is subject to annual review for potential increase, as well as short-term, performance-based cash incentive payment opportunities for each six-month operating season based on a percentage of Mr. Moellering’s base salary. See “Executive Compensation—Compensation Discussion and Analysis—What We Pay and Why: Elements of Compensation—Performance-Based Incentives—Short-Term Incentives” on page 32.
|
56 |
|
www.express.com |
Executive Compensation
In addition, the employment agreement provides that Mr. Moellering is eligible for equity-based compensation awards that are commensurate with his performance and position. Mr. Moellering is also entitled to participate in all employee benefit plans that we maintain and make available to our senior executives and is entitled to paid time off in accordance with our policies as in effect from time to time.
The employment agreement includes customary restrictions with respect to the use of our confidential information and provides that all intellectual property developed or conceived by Mr. Moellering while he is employed by us that relates to our business is Company property. During Mr. Moellering’s term of employment with us and during the 12-month period immediately thereafter, Mr. Moellering has agreed not to (1) solicit any of our associates, (2) interfere with or harm any of our business relationships, or (3) participate (whether as an officer, director, employee, or otherwise) in any competitive business.
In April 2013, as part of the Committee’s annual review of executive compensation arrangements, the Committee approved changes to the severance arrangements for Mr. Moellering in order to make them more competitive and to bring them in-line with the severance arrangements offered by the Company’s peer group.
Under the amended and restated employment agreement, if Mr. Moellering’s employment with the Company is terminated by the Company other than for Cause, or by Mr. Moellering for Good Reason, and Mr. Moellering signs a general release, then Mr. Moellering will be entitled to receive his base salary and medical and dental benefits for 18 months following separation from the Company. In addition, Mr. Moellering will also be entitled to receive the amount of cash incentive compensation that he would have otherwise received during the 12-month period following separation from the Company.
In the event that Mr. Moellering’s employment is terminated by the Company other than for Cause, or by Mr. Moellering for Good Reason, and the termination occurs in connection with a change-in-control of the Company (as defined in the 2010 Plan), and Mr. Moellering signs a general release, then Mr. Moellering will be entitled to (1) a one-time payment equal to (a) two times Mr. Moellering’s annual base salary, plus (b) 1.5 times Mr. Moellering’s annual cash incentive compensation at target; (2) medical and dental benefits for 18 months following separation from the Company; and (3) automatic vesting of any unvested outstanding equity awards (at target with respect to performance-based equity awards).
In March 2017, the Committee approved changes to Mr. Moellering’s amended and restated employment agreement as part of the Committee’s annual review of executive compensation solely for the purpose of modifying the relocation element of the “Good Reason” definition in order to make it more consistent with the market and the definition used in our then-CEO, Mr. Kornberg’s, employment agreement. Prior to the amendment, a required relocation outside the U.S. qualified as “Good Reason.” Under the new definition, a required relocation outside of a 60-mile radius of Mr. Moellering’s current residence qualifies as “Good Reason.”
“Good Reason” as amended, under Mr. Moellering’s employment agreement generally includes (1) an adverse change in responsibilities, pay, or reporting relationship, (2) relocation of more than 60 miles from the executive’s home, (3) failure by the Company to abide by the agreement, or (4) failure by any successor to assume the agreement. “Cause” under Mr. Moellering’s amended and restated employment agreement generally includes (1) failure by the executive to perform his or her material duties, (2) conviction of a felony, or (3) misconduct in bad faith which could reasonably be expected to result in material harm to the Company.
On February 4, 2019 we entered into a letter agreement (“Interim Letter Agreement”) with Mr. Moellering in connection with his appointment to Interim CEO and Interim President effective January 22, 2019. The Interim Letter Agreement provided for an annual base salary of $1,117,000 that continued until the last day of Mr. Moellering’s interim assignment, at which time Mr. Moellering’s base salary reverted to his base salary as of January 21, 2019. The Interim Letter Agreement did not amend any other provision of Mr. Moellering’s amended and restated employment agreement.
On September 23, 2019, we entered into a letter agreement (“Letter Agreement”) with Mr. Moellering pursuant to which he was promoted to President and Chief Operating Officer of the Company. The Letter Agreement provides for an annual base salary of $825,000 and a seasonal performance-based cash incentive target percentage of 90%. In addition, beginning with the Company’s annual grant of long-term incentive awards in fiscal 2020, the Letter Agreement provides for an annual long-term incentive compensation amount of $2,000,000.
OTHER SEVERANCE AGREEMENTS
We entered into severance agreements with Ms. Akay and Ms. Tervo in September 2019. We entered into a severance agreement with Mr. Pericleous in July 2015 in connection with his promotion to Senior Vice President, Chief Financial Officer and Treasurer.
The severance agreements include customary restrictions with respect to the use of our confidential information and provides that all intellectual property developed or conceived by the executive while he is employed by us which relates to our business is Company property. Each executive has also agreed not to (1) solicit any of our associates, (2) interfere with or harm any of our business relationships, or (3) participate (whether as an officer, director, employee, or otherwise) in any competitive business during the term of his employment and during the 12-month period immediately thereafter.
Under the severance agreement, if the executive’s employment with the Company is terminated by the Company other than for Cause, or by the executive for Good Reason, and the executive signs a general release, then the executive will be entitled to receive his or her base salary and medical and dental benefits for 18 months following separation from the Company. In addition, the executive will also be entitled to receive the amount of cash incentive compensation that he or she would have otherwise received during the 12-month period following separation from the Company.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
57 |
Executive Compensation
In the event that the executive’s employment is terminated by the Company other than for Cause, or by the executive for Good Reason, and the termination occurs in connection with a change-in-control of the Company (as defined in the 2018 Plan), and the executive signs a general release, then the executive will be entitled to (1) a one-time payment equal to (a) two times the executive’s annual base salary, plus (b) 1.5 times the executive’s annual cash incentive compensation at target; (2) medical and dental benefits for 18 months following separation from the Company; and (3) automatic vesting of any unvested outstanding equity awards (at target with respect to performance-based stock awards).
“Good Reason”, under the severance agreements generally include (1) an adverse change in responsibilities, pay, or reporting relationship, (2) relocation of more than 60 miles from the executive’s home, (3) failure by the Company to abide by the agreement, or (4) failure by any successor to assume the agreement. “Cause” under the severance agreements generally include (1) failure to perform material duties, (2) conviction of a felony, or (3) misconduct in bad faith which could reasonably be expected to result in material harm to the Company.
INDEMNIFICATION AGREEMENTS
We are party to indemnification agreements with each of our NEOs and directors. The indemnification agreements provide our NEOs and directors with contractual rights to indemnification, expense advancement, and reimbursement, to the fullest extent permitted under the General Corporation Law of the State of Delaware (“DGCL”). Our Bylaws also provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL.
|
58 |
|
www.express.com |
Executive Compensation
Potential Payments Upon Termination and Change-in-Control
The information below describes and quantifies certain compensation that would have become payable under employment and severance agreements with our NEOs if their employment with us had been terminated as of February 1, 2020. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed upon a termination or change-in-control may be different. Factors that could affect these amounts include the timing during the year of any such event. Further, the information below does not incorporate changes to base salary, cash incentive compensation, bonus opportunities, and equity awards granted after February 1, 2020.
TIMOTHY BAXTER
|
Component |
|
Voluntary Resignation or Retirement ($) |
|
Involuntary without Cause or Voluntary with Good Reason with Signed Release ($) |
|
Involuntary without Cause or Voluntary with Good Reason following Change in Control with Signed Release ($) |
|
Disability ($)(6) |
|
Death ($) |
|
|
Base Salary |
|
— |
|
1,500,000 |
(1) |
— |
|
1,000,000 |
|
— |
|
|
Bonus |
|
— |
|
1,300,000 |
(2) |
5,380,000 |
(4) |
— |
|
— |
|
|
Total Cash Severance (sub-total) |
|
— |
|
2,800,000 |
|
5,380,000 |
|
1,000,000 |
|
— |
|
|
Value of Accelerated Equity/Performance Cash |
|
— |
|
— |
|
6,984,661 |
(5) |
6,984,661 |
(5) |
6,984,661 |
(5) |
|
Benefits and Perquisites |
|
— |
|
25,221 |
(3) |
25,221 |
(3) |
6,300 |
|
— |
|
|
Total Severance |
|
— |
|
2,825,221 |
|
12,389,882 |
|
7,990,961 |
|
6,984,661 |
|
|
(1) |
Represents 18 months of salary continuation. |
|
(2) |
This amount includes the guaranteed Fall 2019 performance-based short-term cash incentive award payout of $780,000 and Spring 2020 performance-based short-term cash incentive award estimated at 100% of target. |
|
(3) |
Estimates for benefits and perquisites include the continuation of medical and dental benefits for the executive and his dependents for 18 months. |
|
(4) |
Represents a lump sum payment equal to two times annual base salary and 1.5 times the annual short-term performance-based cash incentive compensation target. |
|
(5) |
The value of accelerated equity is based on the January 31, 2020 closing stock price of $4.01 per share. Amount represents the value of all unvested equity as of February 1, 2020 and the unvested performance-based cash award granted in 2019 at target. |
|
(6) |
If Mr. Baxter became permanently and totally disabled on February 1, 2020, he would receive one year of salary continuation from us and six months of benefits continuation. Additional eligible disability compensation would be provided by a third-party insurance company and not paid by us. |
MATTHEW MOELLERING
|
Component |
|
Voluntary Resignation or Retirement ($) |
|
Involuntary without Cause or Voluntary with Good Reason with Signed Release ($) |
|
Involuntary without Cause or Voluntary with Good Reason following Change in Control with Signed Release ($) |
|
Disability ($)(6) |
|
Death ($) |
|
|
Base Salary |
|
— |
|
1,237,500 |
(1) |
— |
|
825,000 |
|
— |
|
|
Bonus |
|
— |
|
297,000 |
(2) |
2,763,750 |
(4) |
— |
|
— |
|
|
Total Cash Severance (sub-total) |
|
— |
|
1,534,500 |
|
2,763,750 |
|
825,000 |
|
— |
|
|
Value of Accelerated Equity/Performance Cash |
|
— |
|
— |
|
2,124,890 |
(5) |
1,659,317 |
(5) |
1,659,317 |
(5) |
|
Benefits and Perquisites |
|
— |
|
25,221 |
(3) |
25,221 |
(3) |
6,227 |
|
— |
|
|
Total Severance |
|
— |
|
1,559,721 |
|
4,913,861 |
|
2,490,544 |
|
1,659,317 |
|
|
(1) |
Represents 18 months of salary continuation. |
|
(2) |
This amount includes the Fall 2019 performance-based short-term cash incentive award payout of $0 and the Spring 2020 performance-based short-term cash incentive award estimated at 100% of target. |
|
(3) |
Estimates for benefits and perquisites include the continuation of medical and dental benefits for the executive and his dependents for 18 months. |
|
(4) |
Represents a lump sum payment equal to two times annual base salary and 1.5 times the annual short-term performance-based cash incentive compensation target. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
59 |
Executive Compensation
|
(6) |
If Mr. Moellering became permanently and totally disabled on February 1, 2020, he would receive one year of salary continuation from us and six months of benefits continuation. Additional eligible disability compensation would be provided by a third-party insurance company and not paid by us. |
MALISSA AKAY
|
Component |
|
Voluntary Resignation or Retirement ($) |
|
Involuntary without Cause or Voluntary with Good Reason with Signed Release ($) |
|
Involuntary without Cause or Voluntary with Good Reason following Change in Control with Signed Release ($) |
|
Disability ($)(7) |
|
Death ($) |
|
|
Base Salary |
|
— |
|
1,087,500 |
(1) |
— |
|
725,000 |
|
— |
|
|
Bonus |
|
— |
|
543,750 |
(2) |
2,265,625 |
(5) |
— |
|
— |
|
|
Total Cash Severance (sub-total) |
|
— |
|
1,631,250 |
|
2,265,625 |
|
725,000 |
|
— |
|
|
Value of Accelerated Equity/Performance Cash |
|
— |
|
155,728 |
(3) |
1,189,709 |
(6) |
1,189,709 |
(6) |
1,189,709 |
(6) |
|
Benefits and Perquisites |
|
— |
|
29,310 |
(4) |
29,310 |
(4) |
5,831 |
|
— |
|
|
Total Severance |
|
— |
|
1,816,288 |
|
3,484,644 |
|
1,920,540 |
|
1,189,709 |
|
|
(1) |
Represents 18 months of salary continuation. |
|
(2) |
This amount includes the guaranteed Fall 2019 short-term performance-based cash incentive award payout of $326,250 and the Spring 2020 short-term performance-based cash incentive award estimated at 100% of target. |
|
(3) |
The value of accelerated equity is based on the January 31, 2020 closing stock price of $4.01 per share. Amount represents the value of the special new hire grant for 38,835 shares. |
|
(4) |
Estimates for benefits and perquisites include the continuation of medical and dental benefits for the executive and her dependents for 18 months. |
|
(5) |
Represents a lump sum payment equal to two times annual base salary and 1.5 times the annual short-term performance-based cash incentive compensation target. |
|
(6) |
The value of accelerated equity is based on the January 31, 2020 closing stock price of $4.01 per share. Amount represents the value of all unvested equity as of February 1, 2020 and the unvested performance-based cash award granted in 2019 at target. |
|
(7) |
If Ms. Akay became permanently and totally disabled on February 1, 2020, she would receive one year of salary continuation from us and six months of benefits continuation. Additional eligible disability compensation would be provided by a third-party insurance company and not paid by us. |
SARA TERVO
|
Component |
|
Voluntary Resignation or Retirement ($) |
|
Involuntary without Cause or Voluntary with Good Reason with Signed Release ($) |
|
Involuntary without Cause or Voluntary with Good Reason following Change in Control with Signed Release ($) |
|
Disability ($)(6) |
|
Death ($) |
|
|
Base Salary |
|
— |
|
900,000 |
(1) |
— |
|
600,000 |
|
— |
|
|
Bonus |
|
— |
|
450,000 |
(2) |
1,875,000 |
(4) |
— |
|
— |
|
|
Total Cash Severance (sub-total) |
|
— |
|
1,350,000 |
|
1,875,000 |
|
600,000 |
|
— |
|
|
Value of Accelerated Equity/Performance Cash |
|
— |
|
— |
|
804,209 |
(5) |
804,209 |
(5) |
804,209 |
(5) |
|
Benefits and Perquisites |
|
— |
|
29,310 |
(3) |
29,310 |
(3) |
5,778 |
|
— |
|
|
Total Severance |
|
— |
|
1,379,310 |
|
2,708,519 |
|
1,409,987 |
|
804,209 |
|
|
(1) |
Represents 18 months of salary continuation. |
|
(2) |
This amount includes the guaranteed Fall 2019 short-term performance-based cash incentive award payout of $270,000 and the Spring 2020 short-term performance-based cash incentive award estimated at 100% of target. |
|
(3) |
Estimates for benefits and perquisites include the continuation of medical and dental benefits for the executive and her dependents for 18 months. |
|
60 |
|
www.express.com |
Executive Compensation
|
(4) |
Represents a lump sum payment equal to two times annual base salary and 1.5 times the annual short-term performance-based cash incentive compensation target. |
|
(5) |
The value of accelerated equity is based on the January 31, 2020 closing stock price of $4.01 per share. Amount represents the value of all unvested equity as of February 1, 2020 and the unvested performance-based cash award granted in 2019 at target. |
|
(6) |
If Ms. Tervo became permanently and totally disabled on February 1, 2020, she would receive one year of salary continuation from us and six months of benefits continuation. Additional eligible disability compensation would be provided by a third-party insurance company and not paid by us. |
PERICLIS (“PERRY”) PERICLEOUS
|
Component |
|
Voluntary Resignation or Retirement ($) |
|
Involuntary without Cause or Voluntary with Good Reason with Signed Release ($) |
|
Involuntary without Cause or Voluntary with Good Reason following Change in Control with Signed Release ($) |
|
Disability ($)(6) |
|
Death ($) |
|
|
Base Salary |
|
— |
|
750,000 |
(1) |
— |
|
500,000 |
|
— |
|
|
Bonus |
|
— |
|
130,000 |
(2) |
1,487,500 |
(4) |
— |
|
— |
|
|
Total Cash Severance (sub-total) |
|
— |
|
880,000 |
|
1,487,500 |
|
500,000 |
|
— |
|
|
Value of Accelerated Equity/Performance Cash |
|
— |
|
— |
|
1,178,262 |
(5) |
813,382 |
(5) |
813,382 |
(5) |
|
Benefits and Perquisites |
|
— |
|
25,221 |
(3) |
25,221 |
(3) |
6,090 |
|
— |
|
|
Total Severance |
|
— |
|
905,221 |
|
2,690,983 |
|
1,319,472 |
|
813,382 |
|
|
(1) |
Represents 18 months of salary continuation. |
|
(2) |
This amount includes the Fall 2019 short-term performance-based cash incentive award payout of $0 and the Spring 2020 short-term performance-based cash incentive award estimated at 100% of target. |
|
(3) |
Estimates for benefits and perquisites include the continuation of medical and dental benefits for the executive and his dependents for 18 months. |
|
(4) |
Represents a lump sum payment equal to two times annual base salary and 1.5 times the annual short-term performance-based cash incentive compensation target. |
|
(5) |
The value of accelerated equity is based on the January 31, 2020 closing stock price of $4.01 per share. Amount represents the value of all unvested equity as of February 1, 2020 (at target in the case of performance-based restricted stock units) and the unvested performance-based cash award granted in 2019 at target. |
|
(6) |
If Mr. Pericleous became permanently and totally disabled on February 1, 2020, he would receive one year of salary continuation from us and six months of benefits continuation. Additional eligible disability compensation would be provided by a third-party insurance company and not paid by us. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
61 |
Executive Compensation
Mr. Rafferty left the Company on October 3, 2019 and Mr. Tilson left the Company on September 27, 2019. Each of Mr. Rafferty’s and Mr. Tilson’s amended and restated employment agreement with the Company provides for certain payments in the event of a termination by the Company without Cause, as defined in each executive’s amended and restated employment agreement, or the executive’s termination for Good Reason, as defined in each executive’s amended and restated employment agreement. Each of Mr. Mr. Rafferty’s and Mr. Tilson’s terminations qualified under these provisions.
As a result, Mr. Rafferty is entitled to receive 18 months of salary continuation equal to $873,000; the Fall 2019 short-term performance-based cash incentive payout he would have received had his employment continued in the amount of ($0) and the Spring 2020 short-term performance-based cash incentive payout he would have received had his employment continued, which will be determined after the Spring 2020 season has concluded and at 100% of target would be equal to $151,320. Mr. Rafferty is also entitled to continuation of medical and dental benefits for himself and his dependents for a period of 18 months (estimated value of $19,316).
Mr. Tilson is entitled to receive 18 months of salary continuation equal to $707,250; the Fall 2019 short-term performance-based cash incentive payout he would have received had his employment continued in the amount of ($0) and the Spring 2020 short-term performance-based cash incentive payout he would have received had his employment continued, which will be determined after the Spring 2020 season has concluded and at 100% of target would be equal to $113,160. Mr. Tilson is also entitled to continuation of medical and dental benefits for himself and his dependents for a period of 18 months (estimated value of $29,285).
CEO Compensation Relative to Median Company Employee
CEO compensation for 2019 as reflected in the Summary Compensation Table was $7,050,387. The median employee was selected from the dataset that was used to determine our median employee at the end of 2017, using the population of employees, excluding the CEO, that were employed on the last day of the Company’s 2017 fiscal year based on taxable wages earned by such persons during calendar year 2017. Although our median employee identified at the end of 2017 is no longer with the Company, SEC rules allow us to use another employee whose compensation is substantially similar to the original median employee based on the compensation measure used to select the original median employee. As of the last day of fiscal year 2019, the Company employed 13,696 associates, approximately 3,013 of whom were full-time employees and 10,683 of whom were part-time employees. The Company determined that the median Company associate, excluding the CEO, is a part-time employee who makes approximately $6,117 per year. As a result, CEO compensation in 2019 was approximately 1,152 times that of the median annual compensation for all other associates.
The Company annualized the taxable wages of employees who were hired in the middle of calendar year 2017 using such person’s standard working hours. The Company believes that its determination of the median employee is reasonable based on guidance issued by the SEC. SEC rules for identifying the median employee allow companies to apply various methodologies and apply various assumptions and, as a result, the pay ratio reported by us may not be comparable to the pay ratio reported by other companies.
|
62 |
|
www.express.com |
The following table sets forth information regarding beneficial ownership of our common stock as of April 20, 2020 for (1) each person who is known by us to own beneficially more than 5% of our common stock (a “5% stockholder”), (2) each director, director nominee, and named executive officer, and (3) all directors and executive officers as a group.
Beneficial ownership, for purposes of the following table, is determined in accordance with the rules and regulations of the SEC. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting thereof, or to dispose or direct the disposition thereof, or has the right to acquire such powers within 60 days. Common stock issuable upon the exercise of options that are currently exercisable or exercisable within 60 days of April 20, 2020 and common stock issuable upon the vesting of restricted stock units within 60 days are deemed to be outstanding and beneficially owned by the person holding the options or restricted stock units, as applicable, for purposes of computing the percentage ownership of that person and any group of which that person is a member. These shares, however, are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Percentage of beneficial ownership of our 5% stockholders is based on 64,456,389 shares of common stock outstanding. Percentage of beneficial ownership of our named executive officers and directors is based on 64,456,389 shares of common stock outstanding plus options currently exercisable or exercisable within 60 days of April 20, 2020 and restricted stock units scheduled to vest within 60 days of April 20, 2020 held by such named executive officer or director. Except as disclosed in the footnotes to the following table and subject to applicable community property laws, we believe that each beneficial owner identified in the following table possesses sole voting and investment power over all shares of common stock shown as beneficially owned by the stockholder. Unless otherwise indicated in the following table or footnotes below, the address for each beneficial owner is c/o Express, Inc., 1 Express Drive, Columbus, Ohio 43230.
|
Name and Address |
|
Shares Beneficially Owned |
|
Percent of Stock Outstanding |
|
|
5% Stockholders: |
|
|
|
|
|
|
Blackrock, Inc.(1) |
|
10,671,618 |
|
16.6% |
|
|
Contrarius Investment Management Limited(2) |
|
6,104,574 |
|
9.5% |
|
|
Dimensional Fund Advisors LP(3) |
|
5,601,373 |
|
8.7% |
|
|
Divisar Capital Management LLC.(4) |
|
5,152,231 |
|
8.0% |
|
|
The Vanguard Group, Inc.(5) |
|
4,958,300 |
|
7.7% |
|
|
T. Rowe Price Associates, Inc.(6) |
|
4,585,798 |
|
7.1% |
|
|
Renaissance Technologies LLC(7) |
|
3,813,900 |
|
5.9% |
|
|
No Street GP LP(8) |
|
3,800,000 |
|
5.9% |
|
|
Named Executive Officers and Directors: |
|
|
|
|
|
|
Timothy Baxter(9) |
|
— |
|
|
|
|
Matthew Moellering(10) |
|
605,228 |
|
* |
|
|
Malissa Akay(11) |
|
— |
|
* |
|
|
Sara Tervo(12) |
|
— |
|
* |
|
|
Periclis (“Perry”) Pericleous(13) |
|
137,412 |
|
* |
|
|
Michael Archbold(14) |
|
113,571 |
|
* |
|
|
Terry Davenport(14) |
|
84,017 |
|
* |
|
|
Michael F. Devine(15) |
|
127,770 |
|
* |
|
|
Karen Leever(14) |
|
85,910 |
|
* |
|
|
Mylle Mangum(16) |
|
148,188 |
|
* |
|
|
Winnie Park(14) |
|
60,039 |
|
* |
|
|
Peter Swinburn(14) |
|
113,571 |
|
* |
|
|
John J. Jack Rafferty(17) |
|
317,445 |
|
* |
|
|
Douglas Tilson(18) |
|
270,309 |
|
* |
|
|
All Current Directors and Executive Officers as a Group (12 persons)(19) |
|
1,475,706 |
|
2.3% |
|
|
|
|
|
|
|
|
|
* |
Less than one percent. |
|
(1) |
Based on a Schedule 13G/A filed with the SEC by Blackrock, Inc. and its subsidiaries (collectively, “Blackrock”) on February 4, 2020. As of December 31, 2019, Blackrock is the beneficial owner of 10,671,618 shares, as to which it has sole voting power as to 10,547,416 shares and sole dispositive power as to all of such shares. The address for Blackrock is 55 East 52nd Street, New York, NY 10055. |
|
(2) |
Based on a Schedule 13G/A filed with the SEC by Contrarius Investment Management Limited (“Contrarius”) on February 6, 2020. As of December 31, 2019, Contrarius and Contrarius Investment Management (Bermuda) Limited together beneficially held 6,104,574 shares, and shared the power to vote and the power to dispose or direct the disposition of all shares held. The address of Contrarius is 2 Bond Street, St. Helier, Jersey JE2 3NP, Channel Islands. The address of Contrarius Investment Management (Bermuda) Limited is Waterloo House, 100 Pitts Bay Road, Pembroke HM 08 Bermuda. |
|
(3) |
Based on a Schedule 13G/A filed with the SEC by Dimensional Fund Advisors LP or its subsidiaries (the “Dimensional Funds”) on February 12, 2020. As of December 31, 2019, the Dimensional Funds are beneficial owners of 5,601,373 shares, as to which the Dimensional Funds have sole voting power over 5,403,272 shares and sole dispositive power as to all shares. The address for Dimensional Funds is Building One, 6300 Bee Cave Road, Austin, TX 78746. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
63 |
Stock Ownership Information
|
(5) |
Based on a Schedule 13G/A filed with the SEC by The Vanguard Group, Inc. on February 12, 2020. As of December 31, 2019, the Vanguard Group, Inc. beneficially owns 4,958,300 shares of common stock as to which it has sole voting power over 59,386 shares, sole dispositive power over 4,901,744 shares, and shared dispositive power over 56,556 shares. Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of The Vanguard Group, Inc., beneficially owns 56,556 shares. Vanguard Investments Australia, Ltd. (“VIA”), a wholly-owned subsidiary of The Vanguard Group, Inc., beneficially owns 2,830 shares. The address for The Vanguard Group, Inc. is 100 Vanguard Blvd., Malvern, PA 19355. |
|
(7) |
Based on a Schedule 13G filed with the SEC by Renaissance Technologies LLC (“RTC”) and Renaissance Technologies Holdings Corporation (“RTHC”) on February 12, 2020. As of December 31, 2019, RTC and RTHC (because of RTHC’s majority ownership of RTC) beneficially own 3,813,900 shares of common stock as to which each of them has sole voting power and sole dispositive power. The address for RTC and RTHC is 800 Third Avenue, New York, NY 10022. |
|
(8) |
Based on a Schedule 13G filed with the SEC by No Street GP LP on February 14, 2020. As of December 31, 2019, No Street GP LP beneficially owns 3,800,000 shares of common stock as to which it has sole voting power and sole dispositive power as to all of such shares. The address for No Street GP LP is 505 Montgomery Street, Suite 1250, San Francisco, CA 94111. |
|
(9) |
Shares of common stock issuable upon the exercise of stock options owned by Mr. Baxter are not scheduled to be exercisable within 60 days of April 20, 2020. Shares of common stock issuable upon the vesting of restricted stock units owned by Mr. Baxter are not scheduled to vest within 60 days of April 20, 2020. |
|
(10) |
Includes 275,226 shares of common stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days of April 20, 2020. |
|
(11) |
Shares of common stock issuable upon the vesting of restricted stock units owned by Ms. Akay are not scheduled to vest within 60 days of April 20, 2020. |
|
(12) |
Shares of common stock issuable upon the vesting of restricted stock units owned by Ms. Tervo are not scheduled to vest within 60 days of April 20, 2020. |
|
(13) |
Includes 57,676 shares of common stock issuable upon the exercise of stock options that are currently exercisable or exercisable within 60 days of April 20, 2020. |
|
(14) |
Includes 48,077 shares of common stock issuable upon the vesting of restricted stock units that will vest within 60 days of April 20, 2020. |
|
(15) |
Includes (a) 10,000 shares of common stock issuable upon the exercise of stock options that are currently exercisable and (b) 48,077 shares of common stock issuable upon the vesting of restricted stock units that will vest within 60 days of April 20, 2020. |
|
(16) |
Includes (a) 2,500 shares of common stock issuable upon the exercise of stock options that are currently exercisable and (b) 63,462 shares of common stock issuable upon the vesting of restricted stock units that will vest within 60 days of April 20, 2020. |
|
(17) |
Mr. Rafferty, our former Executive Vice President, Planning and Allocation, left the Company on November 4, 2019. Beneficial ownership was calculated based on the Company’s records as of November 4, 2019. Includes 150,286 shares of common stock issuable upon the exercise of stock options. |
|
(18) |
Mr. Tilson, our former Executive Vice President, Real Estate, left the Company on September 27, 2019. Beneficial ownership was calculated based on the Company’s records as of September 27, 2019. Includes 129,966 shares of common stock issuable upon the exercise of stock options. |
|
(19) |
Does not include securities held by Mr. Rafferty and Mr. Tilson who were not executive officers as of April 20, 2020. |
|
64 |
|
www.express.com |
The Audit Committee operates under a written charter adopted by the Board. The Audit Committee, among other things, assists the Board in its oversight of the integrity of the Company’s financial statements, the independent auditor’s qualifications and independence, and the performance of the Company’s internal audit function and independent auditors. The Audit Committee relies on the expertise and knowledge of management, the internal audit function, and the independent auditor in carrying out these oversight responsibilities. Management is responsible for the preparation, presentation, and integrity of the Company’s consolidated financial statements, accounting and financial reporting principles, internal control over financial reporting, and disclosure controls and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations. Management is also responsible for objectively reviewing and evaluating the adequacy, effectiveness, and quality of the Company’s system of internal control.
The Company’s independent auditor, PricewaterhouseCoopers LLP, an independent registered public accounting firm, has served as the Company’s independent auditor since 2008. PricewaterhouseCoopers LLP is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States. PricewaterhouseCoopers LLP is also responsible for expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
In this context, the Audit Committee hereby reports as follows:
|
1. |
The Audit Committee has reviewed and discussed the audited financial statements for fiscal 2019 with management. |
|
2. |
The Audit Committee has discussed with the independent auditor the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight Board and the SEC. |
|
3. |
The Audit Committee has received the written disclosures and the letter from the independent auditor required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent auditor’s communications with the Audit Committee concerning independence, and has discussed with the independent auditor the independent auditor’s independence. |
|
4. |
Based on the review and discussion referred to in paragraphs (1) through (3) above, the Audit Committee recommended to the Board, and the Board has approved, that the audited financial statements be included in the Annual Report on Form 10-K for the year ended February 1, 2020 for filing with the SEC. |
Each member of the Audit Committee meets the independence and financial literacy requirements of the SEC and the NYSE. The Board has determined that Mr. Archbold, Mr. Devine, and Ms. Mangum are audit committee financial experts under SEC rules and have accounting or related financial management expertise.
Audit Committee
Michael Archbold, Chair
Michael F. Devine
Mylle Mangum
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
65 |
Audit Committee
Independent Registered Public Accounting Firm Fees and Services
The following table sets forth the aggregate fees billed to us by PricewaterhouseCoopers LLP, our independent auditor, in 2019 and 2018:
|
|
|
Fees |
|
|||||
|
Services Rendered |
|
2019 |
|
|
2018 |
|
||
|
Audit Fees(1) |
|
$ |
1,345,500 |
|
|
$ |
1,259,500 |
|
|
Audit-Related Fees(2) |
|
$ |
— |
|
|
$ |
80,000 |
|
|
Tax Fees |
|
$ |
— |
|
|
$ |
— |
|
|
All Other Fees(3) |
|
$ |
4,500 |
|
|
$ |
4,500 |
|
|
Total |
|
$ |
1,350,000 |
|
|
$ |
1,344,000 |
|
|
(1) |
Audit Fees for 2019 and 2018 represent fees for professional services rendered by PricewaterhouseCoopers LLP in connection with the audit of our annual consolidated financial statements. |
|
(2) |
Audit-Related Fees for 2018 represent fees for consultation concerning the implementation of the new lease accounting standard. |
|
(3) |
All other fees for 2019 and 2018 represent subscription fees for software to assist management with its financial reporting obligations. |
We have a policy that requires the Audit Committee, or the Audit Committee Chair under a limited delegation of authority from the Audit Committee, to pre-approve all audit and non-audit services to be provided by our independent auditor and to consider whether the provision of non-audit services is compatible with maintaining the independence of our independent auditor in deciding whether to approve non-audit services. Any pre-approvals made by the Audit Committee Chair under the limited delegation of authority are reported to the full Audit Committee at the next regularly scheduled meeting. All services performed by our independent auditor in 2019 and 2018 were pre-approved in accordance with the policy. As a general matter, it is the Audit Committee’s preference that any non-audit services be provided by a firm other than our independent auditor absent special circumstances.
|
66 |
|
www.express.com |
Advisory Vote to Approve Executive Compensation
(Say-on-Pay) (Proposal No. 2)
We are seeking an advisory (non-binding) vote from our stockholders to approve the compensation of our named executive officers (our “NEOs”) for 2019 as disclosed in this proxy statement. At our 2019 annual meeting of stockholders, stockholders demonstrated strong support for our executive compensation program with approximately 97% of the votes cast in support of the “say-on-pay” proposal. For 2019, the overall design of the ongoing compensation packages for our new CEO and other named executive officers remained substantially the same as in previous years, with competitive target pay opportunities combined with rigorous performance targets reflecting our commitment to pay-for-performance.
In deciding how to vote on this proposal, we urge our stockholders to read the “Compensation Discussion and Analysis” beginning on page 28 of this proxy statement, which describes in more detail our compensation objectives and the elements of our executive compensation program, as well as the Summary Compensation Table and other related compensation tables and narrative appearing on pages 49 through 55, which provide additional information on the compensation of our NEOs.
We are asking stockholders to approve, on an advisory basis, the compensation of our NEOs for 2019 as disclosed in the Compensation Discussion and Analysis, the Summary Compensation Table and related compensation tables, and the notes and narrative discussion following the compensation tables in this proxy statement. This vote is not intended to address any specific item of compensation, but rather the overall compensation program for our NEOs as described in this proxy statement.
Although this vote is non-binding, the Board and the Compensation and Governance Committee value the opinions of our stockholders and will consider the outcome of the vote when making future decisions concerning executive compensation. Furthermore, stockholders are welcome to bring any specific concerns regarding executive compensation to the attention of the Board or the Compensation and Governance Committee at any time throughout the year. Please refer to “Corporate Governance—Board Practices—Communications with the Board” on page 23 of this proxy statement for information about communicating with the Board.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
67 |
Ratification of PricewaterhouseCoopers LLP
as the Company’s Independent Registered
Public Accounting Firm for 2020
(Proposal No. 3)
The Audit Committee has appointed PricewaterhouseCoopers LLP, an independent registered public accounting firm, to serve as our independent auditor for 2020. PricewaterhouseCoopers LLP has served in this capacity for us since 2008. As a matter of good corporate governance, the Audit Committee submits its selection of our independent auditor to our stockholders for ratification. If the stockholders fail to ratify the selection, the Audit Committee will review its future selection of an independent registered public accounting firm in light of that result. Even if stockholders ratify the selection, the Audit Committee in its discretion may select a different independent registered public accounting firm at any time during fiscal 2020 if it determines that such a change would be in the best interests of the Company and our stockholders.
Additional information concerning the Audit Committee and services rendered by and fees paid to PricewaterhouseCoopers LLP is presented on pages 65 and 66. Representatives of PricewaterhouseCoopers LLP are expected to be present at the Annual Meeting. They will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.
|
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF PRICEWATERHOUSECOOPERS
|
|
68 |
|
www.express.com |
Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant
(Proposal No. 4)
We are asking stockholders to approve an amendment (the “Plan Amendment”) to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan (the “2018 Plan”) to increase the number of shares available for grant. As of March 17, 2020, upon the recommendation of the Compensation and Governance Committee (for purposes of this proposal, the “Committee”), the Board unanimously approved and adopted, subject to stockholder approval, the Plan Amendment, which would increase the number of shares of Common Stock available under the 2018 Plan by 2,500,000 shares. Unless this amendment is approved, we project that we will not have enough shares to make the number of equity grants in 2021 that the Board considers necessary to properly incentivize and retain senior management.
Rationale for the Amendment to Increase the Number of Shares Available for Grant
In January 2020, we announced our new corporate strategy intended to return Express to long-term profitable growth. The authorization of additional shares is critical to our ability to continue to issue equity-based awards, which play a key role in attracting, motivating, and retaining the high-quality talent we need to successfully execute against the Company’s growth strategy.
We grant a significant portion of compensation to our Chief Executive Officer and to our other NEOs and executives in the form of equity. We believe that equity-based awards support our pay-for-performance philosophy by (i) linking executive compensation with long-term stockholder value creation, (ii) motivating our executives to create long-term stockholder value, and (iii) rewarding them based on the Company’s performance. Prior to 2018, equity awards comprised over 65% of our CEO’s and approximately 45% of our other NEOs’ target total direct compensation, which percentages were generally consistent with the amount of compensation awarded in the form of equity among senior executives at peer companies. Because of our share price decrease, beginning in 2018 we began to utilize performance-based cash awards in our long-term incentive program in order to continue to ensure that at least half of our long-term incentive awards vest only upon the achievement of rigorous performance targets while at the same time preserving the number of shares available for grant. In 2018 and 2019, equity-based awards comprised over 30% of our CEO’s ongoing target compensation and over 22% of our other NEOs’ ongoing target compensation. Equity awards have multi-year vesting requirements and we have stock ownership guidelines for directors and executives to align their interests with stockholders.
There are approximately 2,952,036 shares remaining available for issuance under the 2018 Plan as of April 20, 2020 and we are requesting approval for 2,500,000 million additional shares to be available for issuance under the 2018 Plan. We believe that the number of shares requested, together with the shares remaining available for issuance, will be adequate to maintain our equity award program throughout the remainder of 2020 and through the 2021 equity grant cycle (which generally occurs from March until the annual meeting in June). We believe that such request is reasonable and consistent with general market practices.
During March of this year, the Committee thoughtfully evaluated the appropriate number of shares for which to seek stockholder approval. The Committee conducted this evaluation at a time of significant volatility in the stock market and a material decline in our stock price due to unprecedented business disruption resulting from the Covid-19 pandemic and related macroeconomic factors. Because of the lower stock price at the time of the Committee’s decision and continuing uncertainty in relation to the timing of the market’s recovery, the Committee determined that 2,500,000 million additional shares should be requested to allow the Company flexibility to retain and incentivize personnel that are critical to our success and our ability to execute against our growth strategy in 2021. The amount of shares requested (in addition to shares still available for grant) is consistent with the Committee’s most recent use of shares: approximately 4.5 million restricted stock units were granted to management in March and approximately 350,000 restricted stock units were issued to the Board as part of their annual retainer in June 2019. The Committee is committed to being careful stewards of shareholder capital, so any positive changes in our stock price should limit our grants from the available pool going forward to the extent appropriate.
If the Plan Amendment is approved by stockholders at the 2020 Annual Meeting, it will become immediately effective as of the date of the 2020 Annual Meeting. If the Plan Amendment is not approved by our stockholders, the Plan Amendment will not become effective, the 2018 Plan will continue in effect, and we will continue to grant awards under the 2018 Plan, subject to its terms, conditions and limitations, using the shares available for issuance thereunder. Based on our current stock price, the number of shares currently available under the 2018 Plan will not be sufficient to cover our equity compensation needs in 2021, including our ability to make annual equity grants to our NEOs and other executives.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
69 |
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
We believe that our compensation practices are competitive and consistent with market practices and that our historical share utilization has been responsible and mindful of stockholder interests. Without the availability of the additional shares of Common Stock requested by this Amendment, the Company will be at a significant competitive disadvantage and we expect that the equity-based components of our compensation program would need to be supplemented with additional cash incentives which we believe may (1) not offer the same benefits with respect to stockholder alignment and (2) impact our efforts to preserve liquidity.
Therefore, the Board believes that the Plan Amendment is in the best interests of our stockholders and the Company, and recommends that you vote to approve the Plan Amendment.
Historical Usage
The Committee carefully monitors our annual burn rate and potential stockholder dilution. We recognize that equity compensation awards dilute stockholders’ equity and we are committed to responsible management of our equity compensation programs as further described below in the section entitled “Alignment with Sound Corporate Governance and Plan Design Practices.”
Award utilization in 2019 was higher than previous years because of our making significant organizational changes in 2019 critical to the future of the Company. One of our key accomplishments was the hiring of Timothy Baxter as our new Chief Executive Officer effective June 17, 2019. Since then, we have also hired a new Executive Vice President and Chief Merchandising Officer, Executive Vice President and Chief Marketing Officer, Senior Vice President of Planning and Allocation, Senior Vice President of Production and Sourcing, Senior Vice President of Men’s Merchandising, and Senior Vice President of eCommerce. Attracting this new executive leadership team of results-oriented, strategic thinkers with diverse skills and perspectives was critical to change the trajectory of the business and to help shape and execute on the Company’s growth strategy. Moreover, awarding these new hires with equity compensation aligns their motivation with the Company’s long term performance. As a result of these considerations, inducement awards of 2,320,000 stock options and 874,658 restricted stock units, issued in reliance on the inducement exemption under New York Stock Exchange rules, were made to certain of these executives, including one-time make-whole awards. No such inducement awards have been made in the current fiscal year.
The Company also repurchased 16.4 million shares of common stock since November 2017 through the end of 2019 (representing approximately 20% of the outstanding shares as of the start of those repurchases). This has provided a significant return of capital to our stockholders, but has increased our dilution percentage.
Key Data
As of April 20, 2020, 2,952,036 shares of Common Stock remained available for awards under the 2018 Plan, which assumes that the target number of shares are earned in connection with outstanding unvested performance-based restricted stock unit awards.
If stockholders approve the Plan Amendment, the number of shares of Common Stock available under the 2018 Plan would increase by 2,500,000 shares.
The following table sets forth information about the equity awards outstanding under the 2018 Plan as of April 20, 2020 (without giving effect to the Plan Amendment). As of that date, the Company had approximately 64,456,389 shares of Common Stock outstanding.
|
|
(1) |
Assumes that the target number of shares are earned in connection with outstanding performance-based restricted stock unit awards. |
Overhang and Dilution
The Board believes that the Plan Amendment is in the best interests of our stockholders for the reasons described above. In reaching this conclusion, the Board took into account the fact that the Plan Amendment would result in an estimated share overhang of 26.4%. In determining that, despite this relatively high number, the share request was appropriate, the Board considered several factors:
|
• |
The weighted average exercise price of the stock options is $7.46, which is much greater than the current stock price. Accordingly, while the stock options represent 5.6% of outstanding common stock, the extent to which the stock options will be exercised is uncertain. |
|
70 |
|
www.express.com |
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
|
• |
Another portion of the overhang represents one-time make-whole inducement awards that were granted to certain of our new executive officers in 2019, so this is not a recurring cost. |
|
• |
Failure to have this much equity available for awards between now and the next annual meeting could potentially limit the Company’s ability to structure an executive incentive compensation program that would be in the best interests of stockholders. |
|
• |
In addition, in part to provide returns to stockholders, the Board approved a share repurchase program in November 2017 that authorized the Company to repurchase up to $150.0 million of the Company’s outstanding Common Stock using available cash. While share repurchase programs benefit our stockholders by decreasing the number of our Common Stock outstanding, they increase the resulting dilution percentage. |
Based on the New York Stock Exchange’s closing price of our Common Stock on April 20, 2020 of $1.92 per share, the aggregate market value as of April 20, 2020 of the 2,500,000 shares of Common Stock requested for new awards pursuant to the Plan Amendment is $4,800,000.
The following table includes aggregated information regarding the overhang and dilution associated with the 2018 Plan, and the potential stockholder dilution that would result if the proposed authorization of additional shares of Common Stock under the Plan Amendment is approved. The following information is as of April 20, 2020.
|
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(1) |
Assumes that the target number of shares are earned in connection with outstanding performance-based restricted stock unit awards. |
Burn Rate
As shown in the following table, for the three-year fiscal period 2017-2019, our average burn rate was 6.6% (without taking into account the 2019 inducement grants) and 8.7% (taking into account the inducement grants). These percentages were skewed higher because of our lower stock price in 2019, which increased the number of shares needed to convert the grant awards into numbers of shares. Our average burn rate percentage was also negatively impacted by our share repurchase program through which we have repurchased approximately 16.4 million shares of our Common Stock from the market since November 2017 (not counting shares delivered by employees in satisfaction of tax withholding obligations). While these stock repurchases have returned value to our stockholders, they increased our burn rate percentage by shrinking the number of shares outstanding as of the start of those repurchases by approximately 20%. The Board believes that the stock repurchase activity has been beneficial to our Company and its stockholders and that the benefits outweigh the inflation of our burn rate numbers.
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Options Granted |
|
|
Time-Based Restricted Stock Units Granted |
|
|
Target Performance- Based Restricted Stock Units Granted(3) |
|
|
Performance- Based Restricted Stock Units Earned(4) |
|
|
Total(5) |
|
|
Weighted Average Basic Shares |
|
|
Burn Rate(6) |
|
|||||||
|
2019 without inducement awards |
|
|
— |
|
|
|
3,033,033 |
|
|
|
— |
|
|
|
— |
|
|
|
3,033,033 |
|
|
|
66,133,000 |
|
|
|
6.9 |
% |
|
2019 with inducement awards(1)(2) |
|
|
2,320,000 |
|
|
|
3,907,691 |
|
|
|
— |
|
|
|
— |
|
|
|
6,227,691 |
|
|
|
66,133,000 |
|
|
|
12.4 |
% |
|
2018 |
|
|
— |
|
|
|
2,104,745 |
|
|
|
502,175 |
|
|
|
250,385 |
|
|
|
2,355,130 |
|
|
|
72,518,000 |
|
|
|
6.5 |
% |
|
2017 |
|
|
511,858 |
|
|
|
1,397,590 |
|
|
|
766,457 |
|
|
|
— |
|
|
|
1,909,448 |
|
|
|
78,592,000 |
|
|
|
4.2 |
% |
|
Three-Year Average without inducement awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5.9 |
% |
|
Three-Year Average with inducement awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7.7 |
% |
|
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(1) |
Reflects 2,320,000 non-qualified stock options granted in July 2019 to our new Chief Executive Officer in reliance on the inducement exemption under New York Stock Exchange rules. |
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
71 |
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
|
|
granted in September 2019 to our new Chief Marketing Officer, in reliance on the inducement exemption under New York Stock Exchange rules, in each case. |
|
|
(3) |
Reflects the target amount of restricted stock units that are subject to performance criteria and thus not included in the calculation of burn rate. Performance-based restricted stock units granted in 2017 were forfeited and performance-based restricted stock units granted in 2018 are not expected to pay out. |
|
|
(4) |
For 2018, reflects performance-based restricted stock units that were granted in 2015 and subject to a three-year performance period beginning on the first day of the Company’s 2015 fiscal year and ending on the last day of the Company’s 2017 fiscal year. The Committee certified the earned amount of these awards at the 75.3% of target payout level in March 2018. |
|
|
(5) |
Reflects the sum of (i) options granted, (ii) time-based restricted stock units granted, and (iii) performance-based restricted stock units earned. |
|
|
(6) |
Burn rate was calculated by dividing the number of stock options granted plus time-based restricted stock units granted and the number of performance-based restricted stock units earned in each fiscal year (using a multiplier of 1.5x for full value shares in 2019 and 2x in 2017 and 2018) by the weighted average basic common shares outstanding as of each year's fiscal year end. |
Alignment with Sound Corporate Governance and Plan Design Practices
We have sought to design the 2018 Plan in accordance with currently accepted corporate governance standards for the design and implementation of incentive compensation programs. Accordingly, the 2018 Plan furthers a robust governance structure by including minimum vesting requirements, a complete prohibition on the payment of dividends or dividend equivalents prior to vesting of an award and a limit on the annual total compensation payable to our non-employee directors.
In particular, the 2018 Plan contains the following provisions that the Board believes are consistent with the interests of our stockholders and sound corporate governance principles:
|
|
• |
No Evergreen Provision. The 2018 Plan does not contain an annual “evergreen” provision that provides for automatic increases of shares on an ongoing basis. Instead, the 2018 Plan authorizes a fixed number of shares, and stockholder approval is required for any increase in the number of shares. |
|
|
• |
No Liberal Share Recycling. In general, if any option, stock appreciation right or other stock-based award granted under the 2018 Plan expires or is canceled without having been fully exercised, the shares reserved for those awards remain available for future awards. However, shares that are tendered to us or withheld by us to pay a stock option’s exercise price or satisfy a participant’s tax withholding obligations with respect to an award’s exercise or vesting, as the case may be, do not become available for future awards. |
|
|
• |
Minimum Vesting Requirements. Awards granted under the 2018 Plan will be subject to at least a one-year minimum vesting requirement (subject to a de-minimis carve-out). |
|
|
• |
No Discounted Stock Options or Stock Appreciation Rights. The 2018 Plan generally requires the exercise price of an option or share appreciation right to be not less than the fair market value of our shares on the date of grant. |
|
|
• |
No Repricing. The 2018 Plan does not permit the repricing of equity awards without stockholder approval. |
|
|
• |
Dividends and Dividend Equivalents Only Paid On Vested Awards. The 2018 Plan prohibits the payment of dividends or dividend equivalents in any form unless and until the participant becomes vested in the underlying equity award. |
|
|
• |
Non-Employee Director Compensation Limit. The 2018 Plan limits the aggregate amount of compensation payable to an individual, whether in cash or equity awards granted, as compensation for services as a non-employee director during any calendar year to $600,000, other than with respect to any special compensation paid to any non-employee director for his or her service as Chairman of the Board. |
|
|
• |
No Special Tax Gross-Ups. The 2018 Plan does not provide for any special tax gross-ups. |
|
|
• |
Awards Are Subject to Clawback. All awards granted under the 2018 Plan are subject to the terms of the Company’s clawback policy, which was made more robust in 2019 to provide the Company with the ability to clawback an Award in the event of management misconduct that could significantly damage the reputation of Express, unrelated to a financial restatement. |
Description of the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan
The following is a summary of the material terms of the 2018 Plan. This description is qualified in its entirety by reference to the full text of the 2018 Plan, marked to show the Plan Amendment, a copy of which is attached as Appendix B to this proxy statement and incorporated into this proxy statement by reference.
The 2018 Plan provides for grants of stock options, stock appreciation rights, restricted stock, performance awards, and other stock-based and cash-based awards. Independent directors, officers, and other employees of us and our affiliates, as well as others performing consulting or advisory services for us or our affiliates, are eligible for grants under the 2018 Plan. The purpose of the 2018 Plan is to provide incentives that will attract, retain, and motivate high performing officers, directors, employees, and consultants who can contribute to long-term value creation for the Company and its stockholders.
|
72 |
|
www.express.com |
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
The 2018 Plan is administered by the Committee. Among the Committee’s powers are to determine the form, amount, and other terms and conditions of awards, clarify, construe, or resolve any ambiguity in any provision of the 2018 Plan or any award agreement, amend the terms of outstanding awards, and adopt such rules, forms, instruments, and guidelines for administering the 2018 Plan as it deems necessary or proper. All actions, interpretations, and determinations taken in good faith by the Committee or by our Board are final and binding.
The Committee has full authority to administer and interpret the 2018 Plan, to grant discretionary awards under the 2018 Plan, to determine the persons to whom awards will be granted, to determine the types of awards to be granted, to determine the terms and conditions of each award, to determine the number of shares of common stock to be covered by each award and to make all other determinations in connection with the 2018 Plan and the awards thereunder as the Committee, in its sole discretion, deems necessary or desirable.
|
SHARES AVAILABLE IN THE 2018 PLAN |
Upon approval of the Plan Amendment, an additional 2,500,000 shares of Common Stock will be added to the 2,952,036 shares of Common Stock that are currently available in the 2018 Plan as of April 20, 2020. In the event awards under the 2018 Plan expire, terminate, or are canceled, the shares that were subject to such awards will again be available under the 2018 Plan.
|
ELIGIBILITY FOR PARTICIPATION |
Independent members of our Board, as well as employees of, and consultants to, us or any of our subsidiaries and affiliates, are eligible to receive awards under the 2018 Plan. The selection of participants is within the sole discretion of the Committee. The number of persons eligible to participate in the 2018 Plan is currently estimated to be approximately seven independent members of our Board, and approximately 140 employees of us, our subsidiaries, and affiliates. The Company does not anticipate making any awards to consultants under the 2018 Plan.
|
AWARD AGREEMENTS |
Awards granted under the 2018 Plan are evidenced by award agreements, which need not be identical, that provide additional terms, conditions, restrictions, and/or limitations covering the grant of the award, including, without limitation, additional terms providing for the acceleration of exercisability or vesting of awards in the event of a change-in-control or conditions regarding the participant’s employment, as determined by the Committee in its sole discretion.
|
STOCK OPTIONS |
The Committee may grant non-qualified stock options to purchase shares of our common stock to any eligible participant and incentive stock options to purchase shares of our common stock only to eligible employees. The Committee determines the number of shares of our common stock subject to each option, the term of each option, which may not exceed ten years, or five years in the case of an incentive stock option granted to a stockholder holding at least ten percent of our outstanding Common Stock (a “10% stockholder”), the exercise price, the vesting schedule, if any, and the other material terms of each option. No incentive stock option or non-qualified stock option may have an exercise price less than the fair market value of a share of our common stock at the time of grant or, in the case of an incentive stock option granted to a 10% stockholder, 110.0% of such share’s fair market value. Stock options are exercisable at such time or times and subject to such terms and conditions as determined by the Committee at grant and the exercisability of such options may be accelerated by the Committee in its sole discretion.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
73 |
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
The Committee may grant stock appreciation rights (“SARs”) either with a stock option, which may be exercised only at such times and to the extent the related option is exercisable (a “Tandem SAR”) or independent of a stock option (a “Non-Tandem SAR”). A SAR is a right to receive a payment in shares of our common stock or cash, as determined by the Committee, equal in value to the excess of the fair market value of one share of our common stock on the date of exercise over the exercise price per share established in connection with the grant of the SAR. The term of each SAR may not exceed ten years. The exercise price per share covered by a SAR is the exercise price per share of the related option in the case of a Tandem SAR and is the fair market value of our common stock on the date of grant in the case of a Non-Tandem SAR. The Committee may also grant limited SARs, either as Tandem SARs or Non-Tandem SARs, which may become exercisable only upon the occurrence of a change-in-control, as defined in the 2018 Plan, or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter.
|
RESTRICTED STOCK |
The Committee may award shares of restricted stock. Except as otherwise provided by the Committee upon the award of restricted stock, the recipient generally has the rights of a stockholder with respect to the shares, including the right to receive dividends, the right to vote the shares of restricted stock and, conditioned upon full vesting of shares of restricted stock, the right to tender such shares, subject to the conditions and restrictions generally applicable to restricted stock or specifically set forth in the recipient’s restricted stock agreement. Except as otherwise provided in the applicable award agreement, and with respect to an award of restricted stock, a participant has no rights as a stockholder with respect to shares of our common stock covered by any award until the participant becomes the record holder of such shares. Any dividends paid with respect to such restricted stock is deferred until and contingent upon the expiration of the applicable restriction period and vesting of the award.
Recipients of restricted stock are required to enter into a restricted stock agreement with us that states the restrictions to which the shares are subject, which may include satisfaction of pre-established performance goals and the criteria or date or dates on which such restrictions will lapse. The performance goals for performance-based restricted stock may be based on one or more of the objective criteria set forth on Exhibit A to the 2018 Plan and are discussed in general below.
|
PERFORMANCE AWARDS |
The Committee may grant a performance award to a participant payable upon the attainment of specific performance goals. Based on service, performance, and/or such other factors or criteria, if any, as the Committee may determine, the Committee may, at or after grant, accelerate the vesting of all or any part of any performance award.
|
OTHER STOCK-BASED AWARDS |
The Committee may, subject to limitations under applicable law, make a grant of such other stock-based awards, including, without limitation, performance units, stock equivalent units, restricted stock units, and deferred stock units under the 2018 Plan that are payable in cash or denominated or payable in or valued by shares of our common stock or factors that influence the value of such shares. The performance goals for performance-based other stock-based awards may be based on one or more of the objective criteria set forth on Exhibit A to the 2018 Plan and discussed in general below.
|
74 |
|
www.express.com |
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
The Committee may grant a cash-based award to a participant in such amount, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law, as the Committee may determine.
|
PERFORMANCE GOALS |
The Committee may grant awards that are based upon satisfaction of objective performance criteria. These awards may be granted, vest and be paid based on attainment of specified performance goals established by the Committee. These performance goals may be based on the attainment of a certain target level of, or a specified increase or decrease in, one or more objective measurements, including but not limited to the following: (1) earnings per share; (2) operating income; (3) gross income; (4) net income (before or after taxes); (5) cash flow; (6) gross profit; (7) gross profit return on investment; (8) gross margin return on investment; (9) gross margin; (10) operating margin; (11) working capital; (12) earnings before interest and taxes; (13) earnings before interest, tax, depreciation and amortization; (14) return on equity; (15) return on assets; (16) return on capital; (17) return on invested capital; (18) net revenues; (19) gross revenues; (20) revenue growth; (21) annual recurring revenues; (22) recurring revenues; (23) license revenues; (24) sales or market share; (25) total stockholder return; (26) economic value added; (27) specified objectives with regard to limiting the level of increase in all or a portion of our bank debt or other long-term or short-term public or private debt or other similar financial obligations, which may be calculated net of cash balances and/or other offsets and adjustments as may be established by the Committee in its sole discretion; (28) the fair market value of a share of our common stock; (29) the growth in the value of an investment in the common stock assuming the reinvestment of dividends; (30) reduction in operating expenses; (31) comparable sales, comparable store sales, e-commerce sales; (32) inventory turnover or shrinkage; (33) free cash flow; (34) cash flow from operations; or (35) strategic or operational business criteria, consisting of one or more objectives based on meeting geographic expansion or new concept development goals; new store openings or other changes in store count; cost savings targets; customer satisfaction; human resources goals, including employee engagement, staffing, training and development, and succession planning; implementation or development of new or enhanced technology systems and capabilities; omni-channel goals; marketing goals; merchandising goals; sustainability goals; and goals relating to acquisitions or divestitures of subsidiaries, affiliates, or joint ventures. Any of the foregoing performance measures may be used to measure the performance of the Company as a whole, one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures as the Committee may deem appropriate.
The Committee may also exclude the impact of an event or occurrence which it determines should be appropriately excluded, including: (1) restructurings, discontinued operations, extraordinary items or events, and other unusual or non-recurring charges; (2) an event either not directly related to our operations or not within the reasonable control of management; or (3) a change in tax law or accounting standards required by generally accepted accounting principles.
Performance goals may also be based on an individual participant’s performance goals, as determined by the Committee, in its sole discretion. In addition, all performance goals may be based upon the attainment of specified levels of our performance, or the performance of a subsidiary, division, or other operational unit, under one or more of the measures described above and/or relative to the performance of other corporations. The Committee may designate additional business criteria on which the performance goals may be based or adjust, modify, or amend those criteria.
|
REASONABLE INDIVIDUAL LIMITATIONS FOR NON-EMPLOYEE DIRECTORS |
The aggregate value of all compensation paid or granted to any individual for service as a non-employee director during any calendar year, including awards granted under the 2018 Plan and cash fees paid by us, will not exceed $600,000, calculating the value of any awards granted during such calendar year based on the grant date fair value of such awards for financial reporting purposes, other than with respect to any special compensation paid to any non-employee director for his or her service as Chairman of the Board.
|
EXPRESS Notice of 2020 Annual Meeting of Stockholders |
|
75 |
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
In connection with a change-in-control, as defined in the 2018 Plan, the Committee may, in its sole discretion, accelerate vesting of or lapse of restrictions on outstanding awards under the 2018 Plan. In addition, such awards may be, in the discretion of the Committee, (1) assumed and continued or substituted in accordance with applicable law or (2) purchased by us or an affiliate for an amount equal to the excess of the price of a share of our common stock paid in a change-in-control over the exercise price of the award(s).
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AMENDMENT AND TERMINATION |
Notwithstanding any other provision of the 2018 Plan, our Board may at any time amend any or all of the provisions of the 2018 Plan, or suspend or terminate it entirely, retroactively, or otherwise; provided, however, that, unless otherwise required by law or specifically provided in the 2018 Plan, the rights of a participant with respect to awards granted prior to such amendment, suspension, or termination may not be adversely affected without the consent of such participant.
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TRANSFERABILITY |
Awards granted under the 2018 Plan are generally nontransferable (other than by will or the laws of descent and distribution), except that the Committee may provide for the transferability of nonqualified stock options at the time of grant or thereafter to certain family members.
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EFFECTIVE DATE |
The 2018 Plan was adopted by the Board as of April 30, 2018, and became effective upon approval by our stockholders on June 13, 2018. The 2018 Plan was amended in September 2019 in connection with the Company’s update to its clawback policy solely to update the language with respect to the clawback of an Award. The Plan Amendment was adopted by the Board as of March 17, 2020 and will become effective only upon approval by our stockholders.
Certain U.S. Federal Income Tax Consequences
The rules concerning the federal income tax consequences with respect to options granted and to be granted pursuant to the 2018 Plan are quite technical. Moreover, the applicable statutory provisions are subject to change, as are their interpretations and applications, which may vary in individual circumstances. Therefore, the following is designed to provide a general understanding of the U.S. federal income tax consequences with respect to such grants. In addition, the following discussion does not set forth any gift, estate, social security, or state or local tax consequences that may be applicable and is limited to the U.S. federal income tax consequences to individuals who are citizens or residents of the U.S., other than those individuals who are taxed on a residence basis in a foreign country.
Incentive Stock Options. In general, an employee will not realize taxable income upon either the grant or the exercise of an incentive stock option and the Company will not realize an income tax deduction at either of such times. In general, however, for purposes of the alternative minimum tax, the excess of the fair market value of the shares of common stock acquired upon exercise of an incentive stock option (determined at the time of exercise) over the exercise price of the incentive stock option will be considered income. If the recipient was continuously employed from the date of grant until the date three months prior to the date of exercise and such recipient does not sell the shares of common stock received pursuant to the exercise of the incentive stock option within either (i) two years after the date of the grant of the incentive stock option, or (ii) one year after the date of exercise, a subsequent sale of such shares of common stock will result in long-term capital gain or loss to the recipient and will not result in a tax deduction to the Company.
If the recipient is not continuously employed from the date of grant until the date three months prior to the date of exercise or such recipient disposes of the shares of common stock acquired upon exercise of the incentive stock option within either of the time periods described in the immediately preceding paragraph, the recipient will generally realize as ordinary income an amount equal to the lesser of (i) the fair market value of such shares of common stock on the date of exercise over the exercise price, and (ii) the amount realized upon disposition over the exercise price. In such event, subject to the limitations under Sections 162(m) and 280G of the Code (as described below), the Company generally will be entitled to an income tax deduction equal to the amount recognized as ordinary income. Any gain in excess of such amount realized by the recipient as ordinary income would be taxed at the rates applicable to short-term or long-term capital gains (depending on the holding period).
Non-Qualified Stock Options. A recipient will not realize any taxable income upon the grant of a non-qualified stock option and the Company will not receive a deduction at the time of such grant unless such option has a readily ascertainable fair market value (as determined under applicable tax law) at the time of grant. Upon exercise of a non-qualified stock option, the recipient generally will realize ordinary income in an amount equal to the excess of the fair market value of the shares of common stock on the date of exercise over the exercise price. Upon a subsequent sale of such shares of common stock by the recipient, the recipient will recognize short-term or long-term capital gain or loss depending upon his or her holding period of such shares of common stock. Subject to the limitations under Sections 162(m) and 280G of the Code (as described below), the Company will generally be allowed a deduction equal to the amount recognized by the recipient as ordinary income.
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Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4)
Certain Other Tax Issues. In addition to the matters described above, (i) any entitlement to a tax deduction on the part of the Company is subject to applicable federal tax rules (including, without limitation, Section 162(m) of the Code regarding the $1.0 million limitation on deductible compensation), (ii) the exercise of an incentive stock option may have implications in the computation of alternative minimum taxable income, (iii) certain awards under the 2018 Plan may be subject to the requirements of Section 409A of the Code (regarding non-qualified deferred compensation), and (iv) if the exercisability or vesting of any option is accelerated because of a change-in-control, such option (or a portion thereof), either alone or together with certain other payments, may constitute parachute payments under Section 280G of the Code, which excess amounts may be subject to excise taxes. Officers and directors of the Company subject to Section 16(b) of the Exchange Act may be subject to special tax rules regarding the income tax consequences concerning their options.
The 2018 Plan is not subject to any of the requirements of the Employee Retirement Income Security Act of 1974, as amended. The 2018 Plan is not, nor is it intended to be, qualified under Section 401(a) of the Code.
New Plan Benefits
No awards have been granted or promised with respect to the 2,500,000 shares to be added, subject to stockholder approval, pursuant to the Plan Amendment. Awards under our 2018 Plan are made at the discretion of the Committee and are therefore not determinable at this time.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE PLAN AMENDMENT. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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77 |
The Board knows of no other matters to be brought before the Annual Meeting. However, if other matters should come before the meeting, each of the persons named as a proxy will vote as recommended by the Board or, if no recommendation is given, in his or her discretion on such matters.
Proxy Solicitation Expenses
We will pay the expense of preparing, assembling, printing, and mailing the proxy statement, proxy card, and other related materials used in the solicitation of proxies. We have retained Innisfree M&A Inc. (“Innisfree”) to act as a proxy solicitor in conjunction with the Annual Meeting. We have agreed to pay Innisfree $24,000 plus reasonable out-of-pocket expenses, for proxy solicitation services. We will reimburse banks, brokerage firms, and others for their reasonable expenses in forwarding proxy materials to beneficial owners and obtaining their instructions. Officers and regular associates of Express may, but without compensation other than their regular compensation, solicit proxies by further mailing or personal conversations, or by telephone, e-mail, or other electronic means.
Stockholder Proposals for Inclusion in the 2021 Annual Meeting Proxy Statement
Stockholders interested in submitting a proposal for inclusion in the proxy materials for the 2021 annual meeting of stockholders may do so by following the procedures prescribed in Rule 14a-8 of the Exchange Act. To be eligible for inclusion, stockholder proposals must be submitted in writing to the Office of the Corporate Secretary, Express, Inc., 1 Express Drive, Columbus, OH 43230 and must be received no later than January 1, 2021 unless the date of our 2021 annual meeting is changed by more than 30 days from June 10, 2021, in which case the proposal must be received a reasonable time before we begin to print and mail our proxy materials.
Other Stockholder Proposals
Our Bylaws require that any stockholders who intend to present an item of business, including nominees for election as directors, at the 2021 annual meeting (other than a stockholder proposal submitted for inclusion in our 2020 proxy statement) must provide notice of such business to the Office of the Corporate Secretary, Express, Inc., 1 Express Drive, Columbus, OH 43230 between Wednesday, February 10, 2021 and the close of business on Friday, March 12, 2021. The notice must contain the information required by our Bylaws, which are posted on our website.
Electronic Delivery
Instead of receiving the Notice regarding the Internet Availability of Proxy Materials (the “Notice of Internet Availability”) or paper copies of our Annual Report and proxy statement in the mail, registered stockholders can elect to receive these communications electronically. For additional information and to elect this option, please access www.computershare.com/investor.
Many brokers and banks also offer electronic delivery of proxy materials to their clients. If you are a beneficial stockholder, you may contact your broker or bank to find out whether this service is available to you. If your broker or bank uses Broadridge Investor Communications Services, you can elect to receive future proxy materials electronically at www.investordelivery.com.
Delivery of Proxy Materials to Households
We have adopted a procedure called “householding,” which has been approved by the SEC. Accordingly, we may only deliver one copy of the Notice of Internet Availability, and if you requested printed versions by mail, one copy of this proxy statement and one copy of our Annual Report to multiple registered stockholders who share an address unless we have received contrary instructions from one or more of the stockholders. Stockholders who share an address to which printed copies of this proxy statement and Annual Report have been delivered, will continue to receive separate proxy cards. If you are a stockholder, share an address and last name with one or more other stockholders, and would like to revoke your householding consent in order to receive separate copies of proxy statements, annual reports, and Notices of Internet Availability, or you are a stockholder eligible for householding and would like to participate in householding, please contact Broadridge, either by calling toll free at (866) 540-7095 or by writing to Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
A number of brokerage firms have instituted householding. If you hold your shares through a broker, bank, or other nominee, please contact your broker, bank, or other nominee to request information about householding.
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Additional Information
Neither the Compensation and Governance Committee Report nor the Audit Committee Report shall be deemed soliciting material or filed with the SEC and none of them shall be deemed incorporated by reference into any prior or future filings made by us under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that we specifically incorporate such information by reference. In addition, this document includes several website addresses. These website addresses are intended to provide inactive, textual references only. The information on these websites is not part of this document.
Availability of SEC Filings, Code of Conduct, and Committee Charters
Copies of our reports on Forms 10-K, 10-Q, 8-K, and all amendments and exhibits to those reports filed with the SEC, our Code of Conduct, our Corporate Governance Guidelines, the charters of the Audit and the Compensation and Governance Committees, and any reports of beneficial ownership of our common stock filed by executive officers, directors, and beneficial owners of more than 10% of our outstanding common stock are posted on and may be obtained through the investor relations section of our website, at www.express.com/investor, or may be requested in print, at no cost, by telephone at (888) 423-2421, by e-mail at IR@express.com, or by mail at Express, Inc., 1 Express Drive, Columbus, OH 43230, Attention: Investor Relations.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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about
Voting and the Annual Meeting
Who is entitled to vote at the meeting?
Only stockholders of record at the close of business on April 20, 2020, the record date for the Annual Meeting (the “Record Date”), are entitled to receive notice of and to participate in the Annual Meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the Annual Meeting or at any adjournments or postponements of the meeting.
A list of stockholders of record entitled to vote at the Annual Meeting will be available during the virtual Annual Meeting and on the Annual Meeting website and will also be available for ten business days prior to the Annual Meeting between the hours of 9:00 a.m. and 4:00 p.m., Eastern Daylight Time, at the Office of the Corporate Secretary located at 1 Express Drive, Columbus, OH 43230. A stockholder may examine the list for any germane purpose related to the Annual Meeting.
What are the voting rights of the holders of Express, Inc. common stock?
Holders of Express, Inc. common stock are entitled to one vote for each share held of record as of the Record Date on all matters submitted to a vote of the stockholders, including the election of directors. Stockholders do not have cumulative voting rights.
How do I vote?
Beneficial Stockholders. If you hold your shares through a broker, bank, or other nominee, you are a beneficial stockholder. In order to vote your shares, please refer to the materials forwarded to you by your broker, bank, or other nominee, as applicable, for instructions on how to vote the shares you hold as a beneficial stockholder.
Registered Stockholders. If you hold your shares in your own name, you are a registered stockholder and may vote by proxy before the Annual Meeting via the Internet at www.proxyvote.com, by calling (800) 690-6903, or if you received paper copies of the proxy materials and proxy card in the mail, by signing and returning the enclosed proxy card. Proxies submitted via the Internet, by telephone, or by mail must be received by 11:59 p.m., Eastern Daylight Time, on June 9, 2020. You may also vote at the virtual Annual Meeting by visiting www.virtualshareholdermeeting.com/EXPR2020 and entering the 16-digit control number shown on your Notice of Internet Availability of Proxy Materials or proxy card. If you vote by telephone or via the Internet, including during the virtual Annual Meeting, you do not need to return your proxy card. Have your Notice of Internet Availability and proxy card available when you access the virtual Annual Meeting website.
Why did I receive a Notice in the mail regarding the Internet Availability of Proxy Materials instead of a full set of proxy materials?
Under rules adopted by the SEC, we are making this proxy statement available to our stockholders primarily via the Internet. On or about May 1, 2020, we will mail the Notice of Internet Availability to stockholders at the close of business on the Record Date, other than those stockholders who previously requested electronic or paper delivery of communications from us. The Notice of Internet Availability contains instructions on how to access an electronic copy of our proxy materials, including this proxy statement and our Annual Report, and also contains instructions on how to request a paper copy of the proxy materials.
Can I vote my shares by filling out and returning the Notice of Internet Availability?
No. The Notice of Internet Availability only identifies the items to be voted on at the Annual Meeting. You cannot vote by marking the Notice of Internet Availability and returning it. The Notice of Internet Availability provides instructions on how to cast your vote. For additional information, please see the section above titled “How do I vote?”
What are “broker non-votes” and why is it so important that I submit my voting instructions for shares I hold as a beneficial stockholder?
If a broker or other financial institution holds your shares in its name and you do not provide voting instructions to it, New York Stock Exchange (“NYSE”) rules allow that firm to vote your shares only on routine matters. Proposal No. 3, the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020, is the only routine matter for consideration at the Annual Meeting. For all matters other than Proposal No. 3, you must submit voting instructions to the firm that holds your shares if you want your vote to count on such matters. When a firm votes a client’s shares on some but not all of the proposals, the missing votes are referred to as “broker non-votes.”
What constitutes a quorum and how will votes be counted?
The attendance at the Annual Meeting, virtually or by proxy, of the holders of a majority of the outstanding shares of common stock entitled to vote will constitute a quorum for purposes of the Annual Meeting. A quorum is required in order for the Company to conduct its business at the Annual Meeting. As of the Record Date, 64,456,389 shares of common stock were outstanding.
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Frequently Asked Questions about Voting and the Annual Meeting
Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares considered to be present at the Annual Meeting for purposes of establishing a quorum.
What vote is required to approve each proposal, and how does the Board recommend that I vote on these proposals?
|
|
Proposal |
Vote Required |
Board Voting Recommendation |
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|
|
Election of Class I directors (Proposal No. 1) |
Majority of the votes cast FOR the director nominee |
FOR the nominee |
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|
|
Advisory vote to approve executive compensation (say-on-pay) (Proposal No. 2) |
The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting |
FOR the executive compensation of our named executive officers |
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|
|
Ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020 (Proposal No. 3) |
The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting |
FOR the ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020 |
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|
|
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4) |
The affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote at the Annual Meeting |
FOR the approval of amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to increase the number of shares available for grant |
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What are my choices for casting my vote on each matter to be voted on?
|
|
Proposal |
Voting Options |
Effect of Abstentions |
Broker Discretionary Voting Allowed? |
Effect of Broker Non-Votes |
|
|
Election of Class I directors (Proposal No. 1) |
FOR, AGAINST or ABSTAIN |
No effect—not counted as a “vote cast” |
No |
No effect |
|
|
Advisory vote to approve executive compensation (say-on-pay) (Proposal No. 2) |
FOR, AGAINST or ABSTAIN |
Treated as a vote AGAINST the proposal |
No |
No effect |
|
|
Ratification of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for 2020 (Proposal No. 3) |
FOR, AGAINST, or ABSTAIN |
Treated as a vote AGAINST the proposal |
Yes |
Not applicable |
|
|
Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant (Proposal No. 4) |
FOR, AGAINST or ABSTAIN |
Treated as a vote AGAINST the proposal |
No |
No effect |
Unless you give other instructions when you vote, the persons named as proxies, Timothy Baxter and Melinda McAfee, will vote in accordance with the Board’s recommendations. We do not expect any other business to properly come before the Annual Meeting; however, if any other business should properly come before the Annual Meeting, the proxy holders will vote as recommended by the Board or, if no recommendation is given, in their own discretion.
What happens if a director nominee does not receive a majority of the votes cast for his or her re-election?
Pursuant to the Company’s Corporate Governance Guidelines, the Board expects any director nominee who fails to receive a greater number of votes cast “for” than votes cast “against” his or her re-election to tender his or her resignation for consideration by the Compensation and Governance Committee. The Compensation and Governance Committee will act on an expedited basis to determine whether to accept the director’s resignation and will submit such recommendation for prompt consideration by the Board. The Board expects the director whose resignation is under consideration to abstain from participating in any decision regarding the resignation. The Compensation and Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept the director’s resignation.
May I change my vote or revoke my proxy?
Beneficial Stockholders. Beneficial stockholders should contact their broker, bank, or other nominee for instructions on how to change their vote or revoke their proxy.
Registered Stockholders. Registered stockholders may change their vote or revoke a properly executed proxy at any time before its exercise by:
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• |
delivering written notice of revocation to the Office of the Corporate Secretary, Express, Inc., 1 Express Drive, Columbus, OH 43230; |
|
• |
submitting another proxy that is dated later than the original proxy (including a proxy submitted via telephone or Internet); or |
|
• |
voting at the virtually Annual Meeting. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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Frequently Asked Questions about Voting and the Annual Meeting
How do I attend the Annual Meeting?
Due to the continuing public health impact of the COVID-19 pandemic, this year’s Annual Meeting will be accessible only through the Internet. All stockholders as of the Record Date, or their duly appointed proxies, may participate in the live webcast of the Annual Meeting. You can attend the Annual Meeting by visiting www.virtualshareholdermeeting.com/EXPR2020 and entering the 16-digit control number shown on your Notice of Internet Availability of Proxy Materials or proxy card. You will not be able to attend the Annual Meeting in person. The live webcast for the Annual Meeting will begin promptly at 8:30 a.m., Eastern Daylight Time on June 10, 2020. Online access to the live webcast will open approximately 15 minutes prior to the start time of the Annual Meeting. You can access this website on a computer, tablet or phone with internet connection. We recommend that you log in at least 15 minutes prior to the Annual Meeting to ensure ample time to complete the check-in procedures.
You do not need to attend the Annual Meeting to vote. Even if you plan to attend the Annual Meeting, we encourage you to submit your vote in advance by following the instructions in the Notice of Internet Availability of Proxy Materials and this Proxy Statement.
How do I participate in and ask questions at the Annual Meeting?
To submit a question at the Annual Meeting, you will need your 16-digit control number shown on the Notice of Internet Availability of Proxy Materials or proxy card. You may log in 15 minutes before the start of the Annual Meeting and submit questions online. You will also be able to submit questions during the Annual Meeting. We will read and answer questions relevant to meeting matters that comply with the meeting rules of conduct during the Annual Meeting, subject to time constraints.
What should I do if I need technical support during the Annual Meeting?
If you encounter any difficulties accessing the virtual Annual Meeting during the check-in or meeting time, please call the technical support number that will be provided on the Annual Meeting website log-in page.
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Information About Non-GAAP Financial Measures
Adjusted operating (loss)/income and adjusted diluted earnings per share are supplemental measures of financial performance that are not required by, or presented in accordance with GAAP. In each case, the reported GAAP measures are adjusted to eliminate the impact of certain non-core items. We believe that these non-GAAP measures provide additional useful information to assist stockholders in understanding our financial results and assessing our prospects for future performance. Management believes adjusted operating (loss)/income and adjusted diluted earnings per share are important indicators of our business performance because they exclude items that may not be indicative of, or are unrelated to, our underlying operating results, and provide a better baseline for analyzing trends in our business. In addition, adjusted operating (loss)/income is used to determine payouts under the Company’s short-term cash incentive compensation program and adjusted diluted earnings per share is used to determine the amount of performance-based cash and the number of performance-based restricted stock units earned for purposes of the Company’s performance-based long-term incentive program. Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported operating (loss)/income and reported diluted earnings per share. These adjusted financial measures reflect an additional way of viewing our operations that, when viewed with our GAAP results and the below reconciliations to the corresponding GAAP financial measures, provide a more complete understanding of our business. We strongly encourage investors and stockholders to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.
The following tables present: reconciliations of adjusted operating (loss)/income for 2019 and 2018 to reported operating (loss)/income and reconciliations of adjusted diluted earnings per share for 2019 and 2018 to reported diluted earnings per share.
|
|
|
2019 |
|
|
|
|
|
|||||||||
|
(in thousands, except per share amounts) |
|
Operating Loss |
|
|
Net Loss |
|
|
Diluted Earnings Per Share |
|
|
Weighted Average Diluted Shares Outstanding |
|
||||
|
Reported GAAP Measure |
|
$ |
(217,865 |
) |
|
$ |
(164,358 |
) |
|
$ |
(2.49 |
) |
|
|
66,133 |
|
|
Impairment of Intangible Assets(a) |
|
$ |
197,618 |
|
|
$ |
147,891 |
|
|
$ |
2.24 |
|
|
|
|
|
|
Impact of Restructuring(a) |
|
$ |
7,337 |
|
|
$ |
5,503 |
|
|
$ |
0.08 |
|
|
|
|
|
|
Impact of CEO Departure(b) |
|
$ |
— |
|
|
$ |
822 |
|
|
$ |
0.01 |
|
|
|
|
|
|
Impact of Other Executive Departures© |
|
$ |
1,716 |
|
|
$ |
1,728 |
|
|
$ |
0.03 |
|
|
|
|
|
|
Adjusted Non-GAAP Measure |
|
$ |
(11,194 |
) |
|
$ |
(8,414 |
) |
|
$ |
(0.13 |
) |
|
|
|
|
|
(a) |
Items tax affected at the applicable deferred or statutory rate. |
|
(b) |
Represents the tax impact of the expiration of the former CEO's non-qualified stock options. |
|
(c) |
Represents the tax impact of executive departure costs offset by the tax impact related to the expiration of the executive non-qualified stock options. |
|
|
|
2018 |
|
|
|
|
|
|||||||||
|
(in thousands, except per share amounts) |
|
Operating Income |
|
|
Net Income |
|
|
Diluted Earnings Per Share |
|
|
Weighted Average Diluted Shares Outstanding |
|
||||
|
Reported GAAP Measure |
|
$ |
28,215 |
|
|
$ |
9,630 |
|
|
$ |
0.13 |
|
|
|
73,239 |
|
|
Impact of CEO Departure |
|
$ |
5,436 |
|
|
$ |
4,050 |
|
|
$ |
0.06 |
|
|
|
|
|
|
162(m) Impact as a Result of CEO Departure |
|
$ |
— |
|
|
$ |
1,473 |
|
|
$ |
0.02 |
|
|
|
|
|
|
Equity Method Investment Impairment(a) |
|
$ |
— |
|
|
$ |
8,400 |
|
|
$ |
0.11 |
|
|
|
|
|
|
Adjusted Non-GAAP Measure |
|
$ |
33,651 |
|
|
$ |
23,553 |
|
|
$ |
0.32 |
|
|
|
|
|
|
(a) |
The tax effect of the $8.4 million impairment of our equity method investment is $2.1 million offset by a full valuation allowance against the related deferred tax assets. |
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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83 |
SECOND AMENDED AND RESTATED EXPRESS, INC. 2018 INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE
The purpose of this Express, Inc. 2018 Incentive Compensation Plan is to enhance the profitability and value of the Company for the benefit of its stockholders by enabling the Company to offer Eligible Individuals cash and stock-based incentives in order to attract, retain and reward such individuals and strengthen the mutuality of interests between such individuals and the Company’s stockholders. The Plan is effective as of the date set forth in Article XV.
ARTICLE II
DEFINITIONS
For purposes of this Plan, the following terms shall have the following meanings:
2.1“Acquisition Event” has the meaning set forth in Section 4.2(d).
2.2“Affiliate” means each of the following: (a) any Subsidiary; (b) any Parent; (c) any corporation, trade or business (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Company or one of its Affiliates; (d) any trade or business (including, without limitation, a partnership or limited liability company) which directly or indirectly controls 50% or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Company; and (e) any other entity in which the Company or any of its Affiliates has a material equity interest and which is designated as an “Affiliate” by resolution of the Committee; provided that, unless otherwise determined by the Committee, the Common Stock subject to any Award constitutes “service recipient stock” for purposes of Section 409A of the Code or otherwise does not subject the Award to Section 409A of the Code.
2.3“Award” means any award under the Plan of any Stock Option, Stock Appreciation Right, Restricted Stock, Performance Award or Other Stock-Based Award or Other Cash-Based Award. All Awards shall be granted by, confirmed by, and subject to the terms of, a written agreement executed by the Company and the Participant.
2.4“Award Agreement” means the written or electronic agreement setting forth the terms and conditions applicable to an Award. Evidence of an Award may be limited to notation on the books and records of the Company and, with the approval of the Board, need not be signed by a representative of the Company or a Participant.
2.5“Board” means the Board of Directors of the Company.
2.6“Cause” means, unless otherwise determined by the Committee in the applicable Award Agreement, with respect to a Participant’s Termination of Employment or Termination of Consultancy, the following: (a) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award (or where there is such an agreement but it does not define “cause” (or words of like import)), termination due to a Participant’s, dishonesty, fraud, moral turpitude, willful misconduct or refusal to perform his or her duties or responsibilities for any reason other than illness or incapacity, as determined by the Committee in its sole discretion; or (b) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Award that defines “cause” (or words of like import), “cause” as defined under such agreement; provided, however, that with regard to any agreement under which the definition of “cause” only applies on occurrence of a change in control, such definition of “cause” shall not apply until a change in control actually takes place and then only with regard to a termination thereafter. With respect to a Participant’s Termination of Directorship, “cause” means an act or failure to act that constitutes cause for removal of a director under applicable Delaware law.
2.7“Change in Control” has the meaning set forth in 11.2.
2.8“Change in Control Price” has the meaning set forth in Section 11.1.
2.9“Code” means the Internal Revenue Code of 1986, as amended. Any reference to any section of the Code shall also be a reference to any successor provision and any Treasury Regulation promulgated thereunder.
2.10“Committee” means any committee of the Board duly authorized by the Board to administer the Plan. If no committee is duly authorized by the Board to administer the Plan, the term “Committee” shall be deemed to refer to the Board for all purposes under the Plan.
2.11“Common Stock” means the Common Stock, $0.01 par value per share, of the Company.
2.12“Company” means Express, Inc., a Delaware corporation, and its successors by operation of law.
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2.13“Consultant” means any natural person who is an advisor or consultant to the Company or its Affiliates; provided that such person satisfies the Form S-8 definition of an “employee.”
2.14“Detrimental Activity” means, unless otherwise determined by the Committee, in the applicable Award Agreement: (a) the disclosure to anyone outside the Company or its Affiliates, or the use in any manner other than in the furtherance of the Company’s or its Affiliate’s business, without written authorization from the Company, of any confidential information, trade secrets or proprietary information, relating to the business of the Company or its Affiliates that is acquired by a Participant prior to the Participant’s Termination; (b) activity while employed or performing services that results, or if known could result, in the Participant’s Termination that is classified by the Company as a termination for Cause; (c) any attempt, directly or indirectly, to solicit, induce or hire (or the identification for solicitation, inducement or hiring of) any employee of the Company or its Affiliates to be employed by, or to perform services for, the Participant or any person or entity with which the Participant is associated (including, but not limited to, due to the Participant’s employment by, consultancy for, equity interest in, or creditor relationship with such person or entity) or any person or entity from which the Participant receives direct or indirect compensation or fees as a result of such solicitation, inducement or hire (or the identification for solicitation, inducement or hire) without, in all cases, written authorization from the Company; (d) any attempt, directly or indirectly, to solicit in a competitive manner any customer or prospective customer of the Company or its Affiliates at the time of a Participant’s Termination, without, in all cases, written authorization from the Company; (e) the Participant’s Disparagement, or inducement of others to do so, of the Company or its Affiliates or their past and present officers, directors, employees or products; or (f) breach of any agreement between the Participant and the Company or an Affiliate (including, without limitation, any employment agreement or noncompetition or nonsolicitation agreement). For purposes of sub-sections (a), (c), and (d) above, the General Counsel, Chief Operating Officer, Senior Vice President of Human Resources or the Chief Executive Officer of the Company shall have authority to provide the Participant, except for himself or herself, with written authorization to engage in the activities contemplated thereby and no other person shall have authority to provide the Participant with such authorization.
2.15“Disability” means, unless otherwise determined by the Committee in the applicable Award Agreement, with respect to a Participant’s Termination, a permanent and total disability as defined in Section 22(e)(3) of the Code. A Disability shall only be deemed to occur at the time of the determination by the Committee of the Disability. Notwithstanding the foregoing, for Awards that are subject to Section 409A of the Code, Disability shall mean that a Participant is disabled under Section 409A(a)(2)(C)(i) or (ii) of the Code.
2.16“Disparagement” means making comments or statements to the press, the Company’s or its Affiliates’ employees, consultants or any individual or entity with whom the Company or its Affiliates has a business relationship which could reasonably be expected to adversely affect in any manner: (a) the conduct of the business of the Company or its Affiliates (including, without limitation, any products or business plans or prospects); or (b) the business reputation of the Company or its Affiliates, or any of their products, or their past or present officers, directors or employees.
2.17“Effective Date” means the effective date of the Plan as defined in Article XV.
2.18“Eligible Employee” means each employee of the Company or an Affiliate.
2.19“Eligible Individual” means an Eligible Employee, Non-Employee Director or Consultant who is designated by the Committee in its discretion as eligible to receive Awards subject to the conditions set forth herein.
2.20“Exchange Act” means the Securities Exchange Act of 1934, as amended. Reference to a specific section of the Exchange Act or regulation thereunder shall include such section or regulation, any valid regulation or interpretation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
2.21“Fair Market Value” means, for purposes of the Plan, unless otherwise required by any applicable provision of the Code or any regulations issued thereunder, as of any date and except as provided below, the last sales price reported for the Common Stock on the applicable date: (a) as reported on the principal national securities exchange in the United States on which it is then traded or (b) if the Common Stock is not traded, listed or otherwise reported or quoted, the Committee shall determine in good faith the Fair Market Value in whatever manner it considers appropriate taking into account the requirements of Section 409A of the Code. For purposes of the grant of any Award, the applicable date shall be the trading day immediately prior to the date on which the Award is granted. For purposes of the exercise of any Award, the applicable date shall be the date a notice of exercise is received by the Committee or, if not a day on which the applicable market is open, the next day that it is open.
2.22“Family Member” means “family member” as defined in Section A.1.(5) of the general instructions of Form S-8.
2.23“Incentive Stock Option” means any Stock Option awarded to an Eligible Employee of the Company, its Subsidiaries and its Parents (if any) under this Plan intended to be and designated as an “Incentive Stock Option” within the meaning of Section 422 of the Code.
2.24“Merger Event” has the meaning set forth in Section 4.2(b).
2.25“Non-Employee Director” means a director or a member of the Board of the Company or any Affiliate who is not an active employee of the Company or any Affiliate.
2.26“Non-Qualified Stock Option” means any Stock Option awarded under the Plan that is not an Incentive Stock Option.
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2.27“Non-Tandem Stock Appreciation Right” shall mean the right to receive an amount in cash and/or stock equal to the difference between (x) the Fair Market Value of a share of Common Stock on the date such right is exercised, and (y) the aggregate exercise price of such right, otherwise than on surrender of a Stock Option.
2.28“Other Cash-Based Award” means an Award granted pursuant to Section 10.3 of the Plan and payable in cash at such time or times and subject to such terms and conditions as determined by the Committee in its sole discretion.
2.29“Other Stock-Based Award” means an Award under Article X of the Plan that is valued in whole or in part by reference to, or is payable in or otherwise based on, Common Stock, including, without limitation, an Award valued by reference to an Affiliate.
2.30“Parent” means any parent corporation of the Company within the meaning of Section 424(e) of the Code.
2.31“Participant” means an Eligible Individual to whom an Award has been granted pursuant to the Plan.
2.32“Performance Award” means an Award granted to a Participant pursuant to Article IX hereof contingent upon achieving certain Performance Goals.
2.33“Performance Goals” means goals established by the Committee as contingencies for Awards to vest and/or become exercisable or distributable based on one or more of the performance goals set forth in Exhibit A hereto.
2.34“Performance Period” means the designated period during which the Performance Goals must be satisfied with respect to the Award to which the Performance Goals relate.
2.35“Plan” means this Express, Inc. 2018 Incentive Compensation Plan, as amended from time to time.
2.36“Prior Plan” means the Express, Inc. 2010 Incentive Compensation Plan, as amended and restated from time to time.
2.37“Reference Stock Option” has the meaning set forth in Section 7.1.
2.38“Restricted Stock” means an Award of shares of Common Stock under the Plan that is subject to restrictions under Article VIII.
2.39“Restriction Period” has the meaning set forth in Section 8.3(a) with respect to Restricted Stock.
2.40“Rule 16b-3” means Rule 16b-3 under Section 16(b) of the Exchange Act as then in effect or any successor provision.
2.41“Section 409A of the Code” means the nonqualified deferred compensation rules under Section 409A of the Code and any applicable treasury regulations and other official guidance thereunder.
2.42“Securities Act” means the Securities Act of 1933, as amended and all rules and regulations promulgated thereunder. Reference to a specific section of the Securities Act or regulation thereunder shall include such section or regulation, any valid regulation or interpretation promulgated under such section, and any comparable provision of any future legislation or regulation amending, supplementing or superseding such section or regulation.
2.43“Stock Appreciation Right” shall mean the right pursuant to an Award granted under Article VII.
2.44“Stock Option” or “Option” means any option to purchase shares of Common Stock granted to Eligible Individuals granted pursuant to Article VI.
2.45“Subsidiary” means any subsidiary corporation of the Company within the meaning of Section 424(f) of the Code.
2.46“Substitute Award” has the meaning set forth in Section 4.4.
2.47“Tandem Stock Appreciation Right” shall mean the right to surrender to the Company all (or a portion) of a Stock Option in exchange for an amount in cash and/or stock equal to the difference between (i) the Fair Market Value on the date such Stock Option (or such portion thereof) is surrendered, of the Common Stock covered by such Stock Option (or such portion thereof), and (ii) the aggregate exercise price of such Stock Option (or such portion thereof).
2.48“Ten Percent Stockholder” means a person owning stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company, its Subsidiaries or its Parent.
2.49“Termination” means a Termination of Consultancy, Termination of Directorship or Termination of Employment, as applicable.
2.50“Termination of Consultancy” means: (a) that the Consultant is no longer acting as a consultant to the Company or an Affiliate; or (b) when an entity which is retaining a Participant as a Consultant ceases to be an Affiliate unless the Participant otherwise is, or thereupon becomes, a Consultant to the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that a Consultant becomes an Eligible Employee or a Non-Employee Director upon the termination of his or her consultancy, unless otherwise determined by the Committee, in its sole discretion, no Termination of Consultancy shall be deemed to occur until such time as such Consultant is no longer a Consultant, an Eligible Employee or a Non-Employee Director. Notwithstanding the foregoing, the Committee may otherwise define Termination of Consultancy in the Award Agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Consultancy thereafter, provided that any such change to the definition of the term “Termination of Consultancy” does not subject the applicable Stock Option to Section 409A of the Code.
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2.51“Termination of Directorship” means that the Non-Employee Director has ceased to be a director of the Company; except that if a Non-Employee Director becomes an Eligible Employee or a Consultant upon the termination of his or her directorship, his or her ceasing to be a director of the Company shall not be treated as a Termination of Directorship unless and until the Participant has a Termination of Employment or Termination of Consultancy, as the case may be.
2.52“Termination of Employment” means: (a) a termination of employment (for reasons other than a military or personal leave of absence granted by the Company) of a Participant from the Company and its Affiliates; or (b) when an entity which is employing a Participant ceases to be an Affiliate, unless the Participant otherwise is, or thereupon becomes, employed by the Company or another Affiliate at the time the entity ceases to be an Affiliate. In the event that an Eligible Employee becomes a Consultant or a Non-Employee Director upon the termination of his or her employment, unless otherwise determined by the Committee, in its sole discretion, no Termination of Employment shall be deemed to occur until such time as such Eligible Employee is no longer an Eligible Employee, a Consultant or a Non-Employee Director. Notwithstanding the foregoing, the Committee may otherwise define Termination of Employment in the Award Agreement or, if no rights of a Participant are reduced, may otherwise define Termination of Employment thereafter, provided that any such change to the definition of the term “Termination of Employment” does not subject the applicable Stock Option to Section 409A of the Code.
2.53“Transfer” means: (a) when used as a noun, any direct or indirect transfer, sale, assignment, pledge, hypothecation, encumbrance or other disposition (including the issuance of equity in any entity), whether for value or no value and whether voluntary or involuntary (including by operation of law), and (b) when used as a verb, to directly or indirectly transfer, sell, assign, pledge, encumber, charge, hypothecate or otherwise dispose of (including the issuance of equity in any entity) whether for value or for no value and whether voluntarily or involuntarily (including by operation of law). “Transferred” and “Transferable” shall have a correlative meaning.
ARTICLE III
ADMINISTRATION
3.1The Committee. The Plan shall be administered and interpreted by the Committee. To the extent required by applicable law, rule or regulation, each member of the Committee shall qualify as (a) a “non-employee director” under Rule 16b-3, and (b) an “independent director” under the rules of any national securities exchange or national securities association, as applicable. If it is later determined that one or more members of the Committee do not so qualify, actions taken by the Committee prior to such determination shall be valid despite such failure to qualify. In the event that any member of the Committee does not qualify as a “non-employee director” for purposes of Section 16 of the Exchange Act, then all compensation that is intended to be exempt from Section 16 will also be approved by the Board or a subcommittee made up of members of the Board who qualify as non-employee directors.
3.2Grants of Awards. The Committee shall have full authority to grant, pursuant to the terms of this Plan, to Eligible Individuals: (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Restricted Stock, (iv) Performance Awards; (v) Other Stock-Based Awards; and (vi) Other Cash-Based Awards. In particular, the Committee shall have the authority:
(a) to select the Eligible Individuals to whom Awards may from time to time be granted hereunder;
(b) to determine whether and to what extent Awards, or any combination thereof, are to be granted hereunder to one or more Eligible Individuals;
(c) to determine the number of shares of Common Stock or the amount of cash to be covered by each Award granted hereunder;
(d) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder (including, but not limited to, the exercise or purchase price (if any), any restriction or limitation, any vesting schedule or acceleration thereof, or any forfeiture restrictions or waiver thereof, regarding any Award and the shares of Common Stock relating thereto, based on such factors, if any, as the Committee shall determine, in its sole discretion);
(e) to determine whether, to what extent and under what circumstances grants of Options and other Awards under the Plan are to operate on a tandem basis and/or in conjunction with or apart from other awards made by the Company outside of this Plan;
(f) to determine whether and under what circumstances a Stock Option may be settled in cash, Common Stock and/or Restricted Stock under Section 6.4(d);
(g) to determine whether a Stock Option is an Incentive Stock Option or Non-Qualified Stock Option;
(h) to determine whether to require a Participant, as a condition of the granting of any Award, to not sell or otherwise dispose of shares acquired pursuant to the exercise of an Award for a period of time as determined by the Committee, in its sole discretion, following the date of the acquisition of such Award;
(i) to modify, extend or renew an Award, subject to Article XII and Section 6.4(l), provided, however, that such action does not subject the Award to Section 409A of the Code without the consent of the Participant; and
(j) solely to the extent permitted by applicable law, to determine whether, to what extent and under what circumstances to provide loans (which may be on a recourse basis and shall bear interest at the rate the Committee shall provide) to Participants in order to exercise Options under the Plan.
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3.3Guidelines. Subject to Article XII hereof, the Committee shall have the authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan and perform all acts, including the delegation of its responsibilities (to the extent permitted by applicable law and applicable stock exchange rules), as it shall, from time to time, deem advisable; to construe and interpret the terms and provisions of the Plan and any Award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or in any agreement relating thereto in the manner and to the extent it shall deem necessary to effectuate the purpose and intent of the Plan. The Committee may adopt special guidelines and provisions for persons who are residing in or employed in, or subject to, the taxes of, any domestic or foreign jurisdictions to comply with applicable tax and securities laws of such domestic or foreign jurisdictions. Notwithstanding the foregoing, no action of the Committee under this Section 3.3 shall impair the rights of any Participant without the Participant’s consent. To the extent applicable, this Plan is intended to comply with the applicable requirements of Rule 16b-3 and the Plan shall be limited, construed and interpreted in a manner so as to comply therewith.
3.4Decisions Final. Any decision, interpretation or other action made or taken in good faith by or at the direction of the Company, the Board or the Committee (or any of its members) arising out of or in connection with the Plan shall be within the absolute discretion of all and each of them, as the case may be, and shall be final, binding and conclusive on the Company and all employees and Participants and their respective heirs, executors, administrators, successors and assigns.
3.5Procedures. If the Committee is appointed, the Board shall designate one of the members of the Committee as chair and the Committee shall hold meetings, subject to the By-Laws of the Company, at such times and places as it shall deem advisable, including, without limitation, by telephone conference or by written consent to the extent permitted by applicable law. A majority of the Committee members shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by all of the Committee members in accordance with the By-Laws of the Company, shall be fully effective as if it had been made by a vote at a meeting duly called and held. The Committee shall keep minutes of its meetings and shall make such rules and regulations for the conduct of its business as it shall deem advisable.
3.6Designation of Consultants/Liability.
(a) The Committee may designate employees of the Company and professional advisors to assist the Committee in the administration of the Plan and (to the extent permitted by applicable law and applicable exchange rules) may grant authority to officers to grant Awards and/or execute agreements or other documents on behalf of the Committee.
(b) The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred by the Committee or the Board in the engagement of any such counsel, consultant or agent shall be paid by the Company. The Committee, its members and any person designated pursuant to sub-section (a) above shall not be liable for any action or determination made in good faith with respect to the Plan. To the maximum extent permitted by applicable law, no officer of the Company or member or former member of the Committee or of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted under it.
3.7Indemnification. To the maximum extent permitted by applicable law and the Certificate of Incorporation and By-Laws of the Company and to the extent not covered by insurance directly insuring such person, each officer or employee of the Company or any Affiliate and member or former member of the Committee or the Board shall be indemnified and held harmless by the Company against any cost or expense (including reasonable fees of counsel reasonably acceptable to the Committee) or liability (including any sum paid in settlement of a claim with the approval of the Committee), and advanced amounts necessary to pay the foregoing at the earliest time and to the fullest extent permitted, arising out of any act or omission to act in connection with the administration of the Plan, except to the extent arising out of such officer’s, employee’s, member’s or former member’s own fraud or bad faith. Such indemnification shall be in addition to any right of indemnification the employees, officers, directors or members or former officers, directors or members may have under applicable law or under the Certificate of Incorporation or By-Laws of the Company or any Affiliate. Notwithstanding anything else herein, this indemnification will not apply to the actions or determinations made by an individual with regard to Awards granted to such individual under the Plan.
ARTICLE IV
SHARE LIMITATION
4.1Shares.
(a) Subject to any increase or decrease pursuant to Section 4.2, the aggregate number of shares of Common Stock that may be issued with respect to Awards granted under the Plan shall not exceed 2,400,000, plus (i) any shares of Common Stock that are available under the Prior Plan as of the Effective Date, plus (ii) any shares of Common Stock that are subject to an award under the Prior Plan that lapses, expires, terminates, or is canceled on or following the Effective Date, plus (iii) effective March 17, 2020 (subject to stockholder approval) 2,500,000 million shares. No additional awards shall be made under the Prior Plan on or after the Effective Date. The shares may be either authorized and unissued Common Stock or Common Stock held in or acquired for the treasury of the Company or both. The maximum number of shares of Common Stock with respect to which Incentive Stock Options may be granted under the Plan shall be 2,400,000 shares.
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(b) If any Option, Stock Appreciation Right or Other Stock-Based Award granted under the Plan or any award under the Prior Plan expires, terminates or is canceled for any reason without having been exercised in full, the number of shares of Common Stock underlying any such unexercised Award shall be available for the purpose of Awards under the Plan; provided, however, that (i) in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code, and (ii) in the case of the exercise of Stock Appreciation Rights, the number of shares counted against the aggregate share limitations set forth under Sections 4.1(a) shall be the full number of shares subject to the Stock Appreciation Right multiplied by the percentage of the Stock Appreciation Right actually exercised, regardless of the number of shares actually used to settle such Stock Appreciation Right.
(c) If any Restricted Stock, Performance Awards or Other Stock-Based Awards denominated in shares of Common Stock awarded under the Plan to a Participant or similar awards under the Prior Plan expire or are terminated, surrendered or canceled, or are forfeited in whole or in part for any reason, the number of forfeited shares of Restricted Stock, Performance Awards or Other Stock-Based Awards denominated in shares of Common Stock shall again be available for purposes of Awards under the Plan.
(d) If a Tandem Stock Appreciation Right or a Limited Stock Appreciation Right is granted in tandem with an Option, only the shares covered by the Option, and not the shares covered by the Tandem Stock Appreciation Right or the Limited Stock Appreciation Right, shall be so counted against the maximum number of shares of Common Stock which may be issued under the Plan, and the expiration of one in connection with the other’s exercise will not restore shares to the Plan.
(e) Except as provided herein, any Award under the Plan settled in cash shall not be counted against the foregoing maximum share limitations.
(f) Shares of Common Stock delivered (either by actual delivery, attestation, or net exercise) to the Company by a Participant to (i) purchase shares of Common Stock upon the exercise of an Award or (ii) satisfy tax withholding obligations (including shares retained from the Award creating the tax obligation) shall not increase the number of shares available for future grant of Awards.
(g) Shares of Common Stock repurchased by the Company on the open market using the proceeds from the exercise of an Award shall not increase the number of shares available for future grant of Awards.
(h) With respect to Non-Employee Directors, the aggregate value of all compensation paid or granted to any individual for service as a Non-Employee Director with respect to any calendar year, including Awards granted under this Plan and cash fees paid by the Company to such Non-Employee Director outside of the Plan, shall not exceed six hundred thousand dollars ($600,000), calculating the value of any Awards granted during such calendar year based on the grant date fair value of such Awards for financial reporting purposes, excluding special compensation paid to any Non-Employee Director when serving as Chairman of the Board.
4.2Changes.
(a) The existence of the Plan and the Awards granted hereunder shall not affect in any way the right or power of the Board or the stockholders of the Company to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger or consolidation of the Company or any Affiliate, (iii) any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock, (iv) the dissolution or liquidation of the Company or any Affiliate, (v) any sale or transfer of all or part of the assets or business of the Company or any Affiliate or (vi) any other corporate act or proceeding.
(b) Subject to the provisions of Section 4.2(d), in the event of a dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property) other than regular cash dividends, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, Change in Control or exchange of Common Stock or other securities of the Company, or other corporate transaction or event that affects the Common Stock such that an adjustment is necessary or appropriate in order to prevent dilution or enlargement of benefits or potential benefits intended to be made available under the Plan (a “Section 4.2 Event”), the Committee shall equitably adjust (i) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted under the Plan, (ii) the number of shares of Common Stock or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards, and (iii) the exercise price with respect to any Stock Option or any Stock Appreciation Right. Any such adjustment determined by the Committee shall be final, binding and conclusive on the Company and all Participants and their respective heirs, executors, administrators, successors and permitted assigns. If the Company enters into or is involved in any merger, reorganization, Change in Control or other business combination with any person or entity (a “Merger Event”), the Committee may, prior to such Merger Event and effective upon such Merger Event, take such action as it deems appropriate, including, but not limited to, replacing Awards with substitute Awards in respect of the shares, other securities or other property of the surviving corporation or any affiliate of the surviving corporation on such terms and conditions, as to the number of shares, pricing and otherwise, which shall substantially preserve the value, rights and benefits of any affected Awards granted hereunder as of the date of the consummation of the Merger Event. Upon receipt by any affected Participant of any such substitute Award (or payment) as a result of any such Merger Event, such Participant’s affected Awards for which such substitute Awards (or payment) were received shall be thereupon cancelled without the need for obtaining the consent of any such affected Participant. In addition, subject to Section 4.2(d), if there shall occur any change in the capital structure or the business of the Company that is not a Section 4.2 Event or Merger Event (an “Other Extraordinary Event”), then the Committee, in its sole discretion, may adjust any Award and make such other adjustments to the Plan. Except as expressly provided in this Section 4.2 or in the applicable Award Agreement, a Participant shall have no rights by reason of any Section 4.2 Event, Merger Event, or any Other Extraordinary Event.
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(c) Fractional shares of Common Stock resulting from any adjustment in Awards pursuant to Section 4.2(a) or 4.2(b) shall be aggregated until, and eliminated at, the time of exercise by rounding-down for fractions less than one-half and rounding-up for fractions equal to or greater than one-half. No cash settlements shall be made with respect to fractional shares eliminated by rounding. Notice of any adjustment shall be given by the Committee to each Participant whose Award has been adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan.
(d) In the event of a Merger Event in which the Company is not the surviving entity or in the event of any transaction that results in the acquisition of substantially all of the Company’s outstanding Common Stock by a single person or entity or by a group of persons and/or entities acting in concert, or in the event of the sale or transfer of all or substantially all of the Company’s assets (all of the foregoing being referred to as an “Acquisition Event”), then the Committee may, in its sole discretion, in addition to its rights under Article XI herein, terminate all outstanding and unexercised Stock Options, Stock Appreciation Rights, or any Other Stock-Based Awards that provide for a Participant elected exercise, effective as of the date of the Acquisition Event, by delivering notice of termination to each Participant at least 10 days prior to the date of consummation of the Acquisition Event, in which case during the period from the date on which such notice of termination is delivered to the consummation of the Acquisition Event, each such Participant shall have the right to exercise in full all of his or her vested Awards that are then outstanding, but any such exercise shall be contingent on the consummation of the Acquisition Event, and, provided that, if the Acquisition Event does not take place within a specified period after giving such notice for any reason whatsoever, the notice and exercise pursuant thereto shall be null and void.
If an Acquisition Event occurs but the Committee does not terminate the outstanding Awards pursuant to this Section 4.2(d), then the provisions of Section 4.2(b) and Article XI shall apply.
4.3Minimum Purchase Price. Notwithstanding any provision of the Plan to the contrary, if authorized but previously unissued shares of Common Stock are issued under the Plan, such shares shall not be issued for a consideration that is less than as permitted under applicable law.
4.4Substitute Awards and Shares Issuable Under Acquired Company Plans.
(a) The Committee may, in its discretion and on such terms and conditions as the Committee considers appropriate in the circumstances, grant Substitute Awards under the Plan. Substitute Awards shall not be counted against or otherwise reduce the number of Available Shares under the Plan. For purposes of this Section 4.4, “Substitute Award” means an Award granted under the Plan in substitution for stock and stock-based awards (“Acquired Entity Awards”) held by current and former employees or non-employee directors of, or consultants to, another corporation or entity who become Eligible Individuals or whose awards are assumed or substituted as the result of a merger, consolidation or combination of the employing corporation or other entity (the “Acquired Entity”) with the Company or an Affiliate or the acquisition by the Company or an Affiliate of property or stock of the Acquired Entity immediately prior to such merger, consolidation, acquisition or combination (“Acquisition Date”) in order to preserve for the Participant the economic value of all or a portion of such Acquired Entity Award at such price as the Committee determines necessary to achieve preservation of economic value.
(b) If a company acquired by the Company or any Affiliate or with which the Company or any Affiliate combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as adjusted, to the extent appropriate, using the exchange ratio or other adjustment or valuation ratio or formula used in such acquisition or combination to determine the consideration payable to the holders of common stock of the entities party to such acquisition or combination) may be used for Awards and shall not reduce the Available Shares under the Plan. Awards using such available shares under acquired plans shall not be made after the date awards could have been made under the terms of the acquired plan, absent the acquisition or combination, and shall only be made to individuals who were not eligible to participate in the Plan prior to such acquisition or combination.
ARTICLE V
ELIGIBILITY AND MINIMUM VESTING
5.1General Eligibility. All current and prospective Eligible Individuals are eligible to be granted Awards. Eligibility for the grant of Awards and actual participation in the Plan shall be determined by the Committee in its sole discretion.
5.2Incentive Stock Options. Notwithstanding the foregoing, only Eligible Employees of the Company, its Subsidiaries and its Parent (if any) are eligible to be granted Incentive Stock Options under the Plan. Eligibility for the grant of an Incentive Stock Option and actual participation in the Plan shall be determined by the Committee in its sole discretion.
5.3General Requirement. The vesting and exercise of Awards granted to a prospective Eligible Individual are conditioned upon such individual actually becoming an Eligible Employee, Consultant or Non- Employee Director, respectively.
5.4Minimum Vesting. Notwithstanding any provision of the Plan to the contrary, except with respect to a maximum of five percent (5%) of the aggregate number of available shares initially reserved for issuance under the Plan, subject to adjustment as provided in Section 4.2, no Award payable in Common Stock (other than a Substitute Award and Awards a non-employee director elects to receive at Fair Market Value in lieu of all or a portion of such non-employee director’s cash compensation) may provide for vesting sooner than twelve (12) months from the grant date thereof or may be subject to a Performance Period that is less than twelve (12) months, as applicable, other than in connection with a Change in Control or, with respect to any Participant, in connection with the death or Disability of such Participant.
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5.5Dividends and Dividend Equivalents on Unvested Awards. To the extent any Award provides for the payment of dividends or crediting of dividend equivalents, in no event will such dividends or dividend equivalents attributable to unvested Awards be paid unless and before the underlying Award has become vested pursuant to its terms.
ARTICLE VI
STOCK OPTIONS
6.1Options. Stock Options may be granted alone or in addition to other Awards granted under the Plan. Each Stock Option granted under the Plan shall be of one of two types: (a) an Incentive Stock Option or (b) a Non-Qualified Stock Option.
6.2Grants. The Committee shall have the authority to grant to any Eligible Employee one or more Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock Options. The Committee shall have the authority to grant any Consultant or Non-Employee Director one or more Non-Qualified Stock Options. To the extent that any Stock Option does not qualify as an Incentive Stock Option (whether because of its provisions or the time or manner of its exercise or otherwise), such Stock Option or the portion thereof which does not so qualify shall constitute a separate Non-Qualified Stock Option.
6.3Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, no term of the Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of the Participants affected, to disqualify any Incentive Stock Option under such Section 422.
6.4Terms of Options. Options granted under the Plan shall be subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Committee shall deem desirable:
(a) Exercise Price. The exercise price per share of Common Stock subject to a Stock Option (other than a Substitute Award) shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Stock Option shall not be less than 100% (or, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, 110%) of the Fair Market Value of the Common Stock at the time of grant.
(b) Stock Option Term. The term of each Stock Option shall be fixed by the Committee, provided that no Stock Option shall be exercisable more than 10 years after the date the Option is granted; and provided further that the term of an Incentive Stock Option granted to a Ten Percent Stockholder shall not exceed five years.
(c) Exercisability. Unless otherwise provided by the Committee in accordance with the provisions of this Section 6.4, Stock Options granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant. If the Committee provides, in its discretion, that any Stock Option is exercisable subject to certain limitations (including, without limitation, that such Stock Option is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after the time of grant in whole or in part (including, without limitation, waiver of the installment exercise provisions or acceleration of the time at which such Stock Option may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion. Unless otherwise determined by the Committee at the time of grant, the Option agreement shall provide that (i) in the event that the Participant engages in Detrimental Activity prior to any exercise of the Stock Option (whether vested or unvested), all Stock Options held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise of a Stock Option, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event that the Participant engages in Detrimental Activity during the one-year period commencing on the date that the Stock Option is exercised or becomes vested, the Company shall be entitled to recover from the Participant at any time within one year after such exercise or vesting, and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise (whether at the time of exercise or thereafter).
(d) Method of Exercise. Subject to whatever installment exercise and waiting period provisions apply under Section 6.4(c), to the extent vested, Stock Options may be exercised in whole or in part at any time during the Option term, by giving written notice of exercise to the Company specifying the number of shares of Common Stock to be purchased. Such notice shall be accompanied by payment in full of the purchase price as follows: (i) in cash or by check, bank draft or money order payable to the order of the Company; (ii) solely to the extent permitted by applicable law, if the Common Stock is traded on a national securities exchange, and the Committee authorizes, through a procedure whereby the Participant delivers irrevocable instructions to a broker reasonably acceptable to the Committee to deliver promptly to the Company an amount equal to the purchase price; or (iii) on such other terms and conditions as may be acceptable to the Committee (including, without limitation, the relinquishment of Stock Options or by payment in full or in part in the form of Common Stock owned by the Participant based on the Fair Market Value of the Common Stock on the payment date as determined by the Committee). No shares of Common Stock shall be issued until payment therefore, as provided herein, has been made or provided for.
(e) Non-Transferability of Options. No Stock Option shall be Transferable by the Participant otherwise than by will or by the laws of descent and distribution, and all Stock Options shall be exercisable, during the Participant’s lifetime, only by the Participant. Notwithstanding the foregoing, the Committee may determine, in its sole discretion, at the time of grant or thereafter that a Non-Qualified Stock Option that is otherwise not Transferable pursuant to this Section is Transferable to a Family Member in whole or in part and in such circumstances, and under such conditions, as specified by the Committee. A Non-Qualified Stock Option that is Transferred
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to a Family Member pursuant to the preceding sentence (i) may not be subsequently Transferred otherwise than by will or by the laws of descent and distribution and (ii) remains subject to the terms of this Plan and the applicable Award Agreement. Any shares of Common Stock acquired upon the exercise of a Non-Qualified Stock Option by a permissible transferee of a Non-Qualified Stock Option or a permissible transferee pursuant to a Transfer after the exercise of the Non- Qualified Stock Option shall be subject to the terms of this Plan and the applicable Award Agreement.
(f) Termination by Death or Disability. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination is by reason of death or Disability, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of one year from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options; provided, however, that if the Participant dies within such exercise period, all unexercised Stock Options held by such Participant shall thereafter be exercisable, to the extent to which they were exercisable at the time of death, for a period of one year from the date of such death, but in no event beyond the expiration of the stated term of such Stock Options.
(g) Involuntary Termination Without Cause. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination is by involuntary termination without Cause, all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of 90 days from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options.
(h) Voluntary Termination. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination is voluntary (other than a voluntary termination described in Section 6.4(i)(y) hereof), all Stock Options that are held by such Participant that are vested and exercisable at the time of the Participant’s Termination may be exercised by the Participant at any time within a period of 90 days from the date of such Termination, but in no event beyond the expiration of the stated term of such Stock Options.
(i) Termination for Cause. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, if a Participant’s Termination (x) is for Cause or (y) is a voluntary Termination (as provided in Section 6.4(h)) after the occurrence of an event that would be grounds for a Termination for Cause, all Stock Options, whether vested or not vested, that are held by such Participant shall thereupon terminate and expire as of the date of such Termination.
(j) Unvested Stock Options. Unless otherwise determined by the Committee at the time of grant, or if no rights of the Participant are reduced, thereafter, Stock Options that are not vested as of the date of a Participant’s Termination for any reason shall terminate and expire as of the date of such Termination.
(k) Incentive Stock Option Limitations. To the extent that the aggregate Fair Market Value (determined as of the time of grant) of the Common Stock with respect to which Incentive Stock Options are exercisable for the first time by an Eligible Employee during any calendar year under this Plan and/or any other stock option plan of the Company, any Subsidiary or any Parent exceeds $100,000, such Options shall be treated as Non-Qualified Stock Options. Should any provision of this Plan not be necessary in order for the Stock Options to qualify as Incentive Stock Options, or should any additional provisions be required, the Committee may amend this Plan accordingly, without the necessity of obtaining the approval of the stockholders of the Company.
(l) Form, Modification, Extension and Renewal of Stock Options. Subject to the terms and conditions and within the limitations of the Plan, Stock Options shall be evidenced by such form of agreement or grant as is approved by the Committee. Notwithstanding anything herein to the contrary, without the consent of stockholders, the Committee may not (i) lower the strike price of a Stock Option after it is granted, or take any other action with the effect of lowering the strike price of a Stock Option after it is granted, or (ii) permit the cancellation of a Stock Option in exchange for another Award.
(m) Deferred Delivery of Common Shares. The Committee may in its discretion permit Participants to defer delivery of Common Stock acquired pursuant to a Participant’s exercise of an Option in accordance with the terms and conditions established by the Committee in the applicable Award Agreement, which shall be intended to comply with the requirements of Section 409A of the Code.
(n) Early Exercise. The Committee may provide that a Stock Option include a provision whereby the Participant may elect at any time before the Participant’s Termination to exercise the Stock Option as to any part or all of the shares of Common Stock subject to the Stock Option prior to the full vesting of the Stock Option and such shares shall be subject to the provisions of Article VIII and be treated as Restricted Stock. Unvested shares of Common Stock so purchased may be subject to a repurchase option in favor of the Company or to any other restriction the Committee determines to be appropriate.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1Tandem Stock Appreciation Rights. Stock Appreciation Rights may be granted in conjunction with all or part of any Stock Option (a “Reference Stock Option”) granted under the Plan (“Tandem Stock Appreciation Rights”). In the case of a Non-Qualified Stock Option, such rights may be granted either at or after the time of the grant of such Reference Stock Option. In the case of an Incentive Stock Option, such rights may be granted only at the time of the grant of such Reference Stock Option.
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7.2Terms and Conditions of Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, and the following:
(a) Exercise Price. The exercise price per share of Common Stock subject to a Tandem Stock Appreciation Right (other than a Substitute Award) shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Tandem Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the Common Stock at the time of grant.
(b) Term. A Tandem Stock Appreciation Right or applicable portion thereof granted with respect to a Reference Stock Option shall terminate and no longer be exercisable upon the termination or exercise of the Reference Stock Option, except that, unless otherwise determined by the Committee, in its sole discretion, at the time of grant, a Tandem Stock Appreciation Right granted with respect to less than the full number of shares covered by the Reference Stock Option shall not be reduced until and then only to the extent that the exercise or termination of the Reference Stock Option causes the number of shares covered by the Tandem Stock Appreciation Right to exceed the number of shares remaining available and unexercised under the Reference Stock Option.
(c) Exercisability. Tandem Stock Appreciation Rights shall be exercisable only at such time or times and to the extent that the Reference Stock Options to which they relate shall be exercisable in accordance with the provisions of Article VI, and shall be subject to the provisions of Section 6.4(c).
(d) Method of Exercise. A Tandem Stock Appreciation Right may be exercised by the Participant by surrendering the applicable portion of the Reference Stock Option. Upon such exercise and surrender, the Participant shall be entitled to receive an amount determined in the manner prescribed in this Section 7.2. Stock Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent that the related Tandem Stock Appreciation Rights have been exercised.
(e) Payment. Upon the exercise of a Tandem Stock Appreciation Right, a Participant shall be entitled to receive up to, but no more than, an amount in cash and/or Common Stock (as chosen by the Committee in its sole discretion) equal in value to the excess of the Fair Market Value of one share of Common Stock over the Option exercise price per share specified in the Reference Stock Option agreement multiplied by the number of shares of Common Stock in respect of which the Tandem Stock Appreciation Right shall have been exercised, with the Committee having the right to determine the form of payment.
(f) Deemed Exercise of Reference Stock Option. Upon the exercise of a Tandem Stock Appreciation Right, the Reference Stock Option or part thereof to which such Stock Appreciation Right is related shall be deemed to have been exercised for the purpose of the limitation set forth in Article IV of the Plan on the number of shares of Common Stock to be issued under the Plan.
(g) Non-Transferability. Tandem Stock Appreciation Rights shall be Transferable only when and to the extent that the underlying Stock Option would be Transferable under Section 6.4(e) of the Plan.
7.3Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation Rights may also be granted without reference to any Stock Options granted under the Plan.
7.4Terms and Conditions of Non-Tandem Stock Appreciation Rights. Non-Tandem Stock Appreciation Rights granted hereunder shall be subject to such terms and conditions, not inconsistent with the provisions of the Plan, as shall be determined from time to time by the Committee, and the following:
(a) Exercise Price. The exercise price per share of Common Stock subject to a Non-Tandem Stock Appreciation Right (other than a Substitute Award) shall be determined by the Committee at the time of grant, provided that the per share exercise price of a Non-Tandem Stock Appreciation Right shall not be less than 100% of the Fair Market Value of the Common Stock at the time of grant.
(b) Term. The term of each Non-Tandem Stock Appreciation Right shall be fixed by the Committee, but shall not be greater than 10 years after the date the right is granted.
(c) Exercisability. Unless otherwise provided by the Committee in accordance with the provisions of this Section 7.4, Non-Tandem Stock Appreciation Rights granted under the Plan shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at the time of grant. If the Committee provides, in its discretion, that any such right is exercisable subject to certain limitations (including, without limitation, that it is exercisable only in installments or within certain time periods), the Committee may waive such limitations on the exercisability at any time at or after grant in whole or in part (including, without limitation, waiver of the installment exercise provisions or acceleration of the time at which such right may be exercised), based on such factors, if any, as the Committee shall determine, in its sole discretion. Unless otherwise determined by the Committee at grant, the Award Agreement shall provide that (i) in the event that the Participant engages in Detrimental Activity prior to any exercise of the Non-Tandem Stock Appreciation Right, all Non-Tandem Stock Appreciation Rights held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise of a Non-Tandem Stock Appreciation Right, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event that the Participant engages in Detrimental Activity during the one-year period commencing on the date the Non-Tandem Stock Appreciation Right is exercised or becomes vested, the Company shall be entitled to recover from the Participant at any time within one year after such exercise or vesting, and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise (whether at the time of exercise or thereafter).
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(d) Method of Exercise. Subject to whatever installment exercise and waiting period provisions apply under Section 7.4(c), Non-Tandem Stock Appreciation Rights may be exercised in whole or in part at any time in accordance with the applicable Award Agreement, by giving written notice of exercise to the Company specifying the number of Non-Tandem Stock Appreciation Rights to be exercised.
(e) Payment. Upon the exercise of a Non-Tandem Stock Appreciation Right a Participant shall be entitled to receive, for each right exercised, up to, but no more than, an amount in cash and/or Common Stock (as chosen by the Committee in its sole discretion) equal in value to the excess of the Fair Market Value of one share of Common Stock on the date that the right is exercised over the Fair Market Value of one share of Common Stock on the date that the right was awarded to the Participant.
(f) Termination. Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, subject to the provisions of the applicable Award Agreement and the Plan, upon a Participant’s Termination for any reason, Non-Tandem Stock Appreciation Rights will remain exercisable following a Participant’s Termination on the same basis as Stock Options would be exercisable following a Participant’s Termination in accordance with the provisions of Sections 6.4(f) through 6.4(j).
(g) Non-Transferability. No Non-Tandem Stock Appreciation Rights shall be Transferable by the Participant otherwise than by will or by the laws of descent and distribution, and all such rights shall be exercisable, during the Participant’s lifetime, only by the Participant.
7.5Limited Stock Appreciation Rights. The Committee may, in its sole discretion, grant Tandem and Non-Tandem Stock Appreciation Rights either as a general Stock Appreciation Right or as a Limited Stock Appreciation Right. Limited Stock Appreciation Rights may be exercised only upon the occurrence of a Change in Control or such other event as the Committee may, in its sole discretion, designate at the time of grant or thereafter. Upon the exercise of Limited Stock Appreciation Rights, except as otherwise provided in an Award Agreement, the Participant shall receive in cash and/or Common Stock, as determined by the Committee, an amount equal to the amount (i) set forth in Section 7.2(e) with respect to Tandem Stock Appreciation Rights, or (ii) set forth in Section 7.4(e) with respect to Non-Tandem Stock Appreciation Rights.
ARTICLE VIII
RESTRICTED STOCK
8.1Awards of Restricted Stock. Shares of Restricted Stock may be issued either alone or in addition to other Awards granted under the Plan. The Committee shall determine the Eligible Individuals, to whom, and the time or times at which, grants of Restricted Stock shall be made, the number of shares to be awarded, the price (if any) to be paid by the Participant (subject to Section 8.2), the time or times within which such Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Awards.
Unless otherwise determined by the Committee at grant, each Award of Restricted Stock shall provide that in the event that the Participant engages in Detrimental Activity prior to, or during the one-year period after, any vesting of Restricted Stock, the Committee may direct that all unvested Restricted Stock shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to the Fair Market Value at the time of vesting of any Restricted Stock which had vested in the period referred to above.
The Committee may condition the grant or vesting of Restricted Stock upon the attainment of specified performance targets (including, the Performance Goals) or such other factor as the Committee may determine in its sole discretion.
8.2Awards and Certificates. Eligible Individuals selected to receive Restricted Stock shall not have any right with respect to such Award, unless and until such Participant has delivered a fully executed copy of the agreement evidencing the Award to the Company and has otherwise complied with the applicable terms and conditions of such Award. Further, such Award shall be subject to the following conditions:
(a) Purchase Price. The purchase price of Restricted Stock shall be fixed by the Committee. Subject to Section 4.3, the purchase price for shares of Restricted Stock may be zero to the extent permitted by applicable law, and, to the extent not so permitted, such purchase price may not be less than par value.
(b) Acceptance. Awards of Restricted Stock must be accepted within a period of 60 days (or such shorter period as the Committee may specify at grant) after the grant date, by executing a Restricted Stock agreement and by paying whatever price (if any) the Committee has designated thereunder.
(c) Legend. Each Participant receiving Restricted Stock shall be issued a stock certificate in respect of such shares of Restricted Stock, unless the Committee elects to use another system, such as book entries by the transfer agent, as evidencing ownership of shares of Restricted Stock. Such certificate shall be registered in the name of such Participant, and shall, in addition to such legends required by applicable securities laws, bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Award, substantially in the following form:
“The anticipation, alienation, attachment, sale, transfer, assignment, pledge, encumbrance or charge of the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the Express, Inc. (the “Company”) 2018 Incentive Compensation Plan (the “Plan”) and an Agreement entered into between the registered owner and the Company dated [_______]. Copies of such Plan and Agreement are on file at the principal office of the Company.”
(d) Custody. If stock certificates are issued in respect of shares of Restricted Stock, the Committee may require that any stock certificates evidencing such shares be held in custody by the Company until the restrictions thereon shall have lapsed, and that, as a
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condition of any grant of Restricted Stock, the Participant shall have delivered a duly signed stock power or other instruments of assignment (including a power of attorney), each endorsed in blank with a guarantee of signature if deemed necessary or appropriate by the Company, which would permit transfer to the Company of all or a portion of the shares subject to the Restricted Stock Award in the event that such Award is forfeited in whole or part.
8.3Restrictions and Conditions. The shares of Restricted Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions:
(a) Restriction Period.
(i) The Participant shall not be permitted to Transfer shares of Restricted Stock awarded under the Plan during the period or periods set by the Committee (the “Restriction Period”) commencing on the date of such Award, as set forth in the Restricted Stock Award Agreement and such agreement shall set forth a vesting schedule and any event that would accelerate vesting of the shares of Restricted Stock. Within these limits, based on service, attainment of Performance Goals pursuant to Section 8.3(a)(ii) and/or such other factors or criteria as the Committee may determine in its sole discretion, the Committee may condition the grant or provide for the lapse of such restrictions in installments in whole or in part, or may accelerate the vesting of all or any part of any Restricted Stock Award and/or waive the deferral limitations for all or any part of any Restricted Stock Award.
(ii) If the grant of shares of Restricted Stock or the lapse of restrictions is based on the attainment of Performance Goals, the Committee shall establish the objective Performance Goals and the applicable vesting percentage of the Restricted Stock applicable to each Participant or class of Participants in writing prior to the beginning of the applicable fiscal year or at such later date as otherwise determined by the Committee. Such Performance Goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.
(b) Rights as a Stockholder. Except as provided in Section 8.3(a) and this Section 8.3(b) and as otherwise determined by the Committee, the Participant shall have, with respect to the shares of Restricted Stock, all of the rights of a holder of shares of Common Stock of the Company including, without limitation, the right to vote such shares, subject to and conditioned upon the full vesting of shares of Restricted Stock, the right to tender such shares, and the right to receive all dividends and other distributions paid with respect to the Restricted Stock, provided that such dividends or other distributions will be subject to the same vesting requirements as the underlying Restricted Stock and shall be paid at the time the Restricted Stock becomes vested. If dividends or distributions are paid in shares of Common Stock, such shares shall be deposited with the Company and shall be subject to the same restrictions on transferability and forfeitability as the Restricted Stock with respect to which they were paid.
(c) Termination. Unless otherwise determined by the Committee at grant or, if no rights of the Participant are reduced, thereafter, subject to the applicable provisions of the Award Agreement and the Plan, upon a Participant’s Termination for any reason during the relevant Restriction Period, all Restricted Stock still subject to restriction will be forfeited in accordance with the terms and conditions established by the Committee at grant or thereafter.
(d) Lapse of Restrictions. If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock, the certificates for such shares, if any, shall be delivered to the Participant. All legends shall be removed from said certificates at the time of delivery to the Participant, except as otherwise required by applicable law or other limitations imposed by the Committee.
ARTICLE IX
PERFORMANCE AWARDS
9.1Performance Awards. The Committee may grant a Performance Award to a Participant payable upon the attainment of specific Performance Goals. If the Performance Award is payable in shares of Restricted Stock, such shares shall be transferable to the Participant upon attainment of the relevant Performance Goal in accordance with Article VIII. If the Performance Award is payable in cash, it may be paid upon the attainment of the relevant Performance Goals either in cash or in shares of Restricted Stock (based on the then current Fair Market Value of such shares), as determined by the Committee, in its sole and absolute discretion. Each Performance Award shall be evidenced by an Award Agreement in such form that is not inconsistent with the Plan and that the Committee may from time to time approve.
Unless otherwise determined by the Committee at grant, each Performance Award shall provide that in the event the Participant engages in Detrimental Activity prior to, or during the one-year period after, any vesting of the Performance Award, the Committee may direct (at any time within one year thereafter) that all of the unvested portion of the Performance Award shall be immediately forfeited to the Company and that the Participant shall pay over to the Company an amount equal to any gain that the Participant realized from any Performance Award that had vested in the period referred to above.
9.2Terms and Conditions. Performance Awards awarded pursuant to this Article IX shall be subject to the following terms and conditions:
(a) Earning of Performance Award. At the expiration of the applicable Performance Period, the Committee shall determine the extent to which the Performance Goals established pursuant to Section 9.2 (c) are achieved and the percentage of each Performance Award that has been earned.
(b) Non-Transferability. Subject to the applicable provisions of the Award Agreement and the Plan, Performance Awards may not be Transferred during the Performance Period.
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(c) Objective Performance Goals, Formulae or Standards. The Committee shall establish the objective Performance Goals for the earning of Performance Awards based on a Performance Period applicable to each Participant or class of Participants in writing prior to the beginning of the applicable Performance Period or at such later date as otherwise determined by the Committee. Such Performance Goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.
(d) Dividends. Amounts equal to dividends declared during the Performance Period with respect to the number of shares of Common Stock covered by a Performance Award will not be paid to the Participant unless otherwise determined by the Committee at the time of grant; provided, however, in all events any dividend or dividend equivalents attributable to such Performance Award will be subject to the same vesting requirements as the underlying Performance Award, and shall be paid only at the time the Performance Award becomes vested.
(e) Payment. Following the Committee’s determination in accordance with Section 9.2(a), the Company shall settle Performance Awards, in such form (including, without limitation, in shares of Common Stock or in cash) as determined by the Committee, in an amount equal to such Participant’s earned Performance Awards. Notwithstanding the foregoing, the Committee may, in its sole discretion, award an amount other than the earned Performance Awards and/or subject the payment of all or part of any Performance Award to additional vesting, forfeiture and deferral conditions as it deems appropriate.
(f) Termination. Subject to the applicable provisions of the Award Agreement and the Plan, upon a Participant’s Termination for any reason during the Performance Period for a given Performance Award, the Performance Award in question will vest or be forfeited in accordance with the terms and conditions established by the Committee at grant.
ARTICLE X
OTHER STOCK-BASED AND CASH-BASED AWARDS
10.1Other Stock-Based Awards. The Committee is authorized to grant to Eligible Individuals Other Stock-Based Awards that are payable in, valued in whole or in part by reference to, or otherwise based on or related to shares of Common Stock, including but not limited to, shares of Common Stock awarded purely as a bonus and not subject to restrictions or conditions, shares of Common Stock in payment of the amounts due under an incentive or performance plan sponsored or maintained by the Company or an Affiliate, stock equivalent units, restricted stock units, and Awards valued by reference to book value of shares of Common Stock. Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other Awards granted under the Plan.
Subject to the provisions of the Plan, the Committee shall have authority to determine the Eligible Individuals, to whom, and the time or times at which, such Awards shall be made, the number of shares of Common Stock to be awarded pursuant to such Awards, and all other conditions of the Awards. The Committee may also provide for the grant of Common Stock under such Awards upon the completion of a specified Performance Period.
The Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified Performance Goals as the Committee may determine, in its sole discretion. Such Performance Goals may incorporate provisions for disregarding (or adjusting for) changes in accounting methods, corporate transactions (including, without limitation, dispositions and acquisitions) and other similar type events or circumstances.
10.2Terms and Conditions. Other Stock-Based Awards made pursuant to this Article X shall be subject to the following terms and conditions:
(a) Non-Transferability. Subject to the applicable provisions of the Award Agreement and the Plan, shares of Common Stock subject to Awards made under this Article X may not be Transferred prior to the date on which the shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.
(b) Dividends. Subject to the provisions of the Award Agreement and the Plan, the recipient of an Award under this Article X shall not be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the number of shares of Common Stock covered by the Award (as determined at the time of the Award by the Committee in its sole discretion) unless otherwise determined by the Committee at the time of grant; provided, however, in all events any dividends or dividend equivalents attributable to such Award will be subject to the same vesting requirements as the underlying Award and shall only be paid at the time the Award becomes vested.
(c) Vesting. Any Award under this Article X and any Common Stock covered by any such Award shall vest or be forfeited to the extent so provided in the Award Agreement, as determined by the Committee, in its sole discretion.
(d) Price. Common Stock issued on a bonus basis under this Article X may be issued for no cash consideration. Common Stock purchased pursuant to a purchase right awarded under this Article X shall be priced, as determined by the Committee in its sole discretion.
10.3Other Cash-Based Awards. The Committee may from time to time grant Other Cash-Based Awards to Eligible Individuals in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law, as it shall determine in its sole discretion. Other Cash-Based Awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions, and if subject to vesting conditions, the Committee may accelerate the vesting of such Awards at any time in its sole discretion. The grant of an Other Cash-Based Award shall not require a segregation of any of the Company’s assets for satisfaction of the Company’s payment obligation thereunder.
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10.4Detrimental Activity. Unless otherwise determined by the Committee at grant, the Award Agreement shall provide that (i) in the event that the Participant engages in Detrimental Activity prior to any exercise, distribution or settlement of any Other Stock-Based Award and/or Other Cash-Based Award, such Other Stock-Based Awards and/or Other Cash-Based Awards held by the Participant shall thereupon terminate and expire, (ii) as a condition of the exercise, distribution or settlement of an Other Stock-Based Award and/or Other Cash-Based Award, the Participant shall be required to certify (or shall be deemed to have certified) at the time of exercise in a manner acceptable to the Company that the Participant is in compliance with the terms and conditions of the Plan and that the Participant has not engaged in, and does not intend to engage in, any Detrimental Activity, and (iii) in the event that the Participant engages in Detrimental Activity during the one-year period commencing on the date of exercise, distribution, or settlement of an Other Stock-Based Award and/or Other Cash-Based Award, the Company shall be entitled to recover from the Participant at any time within one year after such exercise, settlement, or distribution, and the Participant shall pay over to the Company, an amount equal to any gain realized as a result of the exercise, distribution or settlement (whether at the time of exercise, distribution or settlement or thereafter).
ARTICLE XI
CHANGE IN CONTROL PROVISIONS
11.1Benefits. In the event of a Change in Control of the Company (as defined below), and except as otherwise provided by the Committee in an Award Agreement, a Participant’s unvested Award shall not vest and a Participant’s Award shall be treated in accordance with one of the following methods as determined by the Committee:
(a) Awards, whether or not then vested, shall be continued, assumed, have new rights substituted therefore or be treated in accordance with Section 4.2(d) hereof, as determined by the Committee, and restrictions to which shares of Restricted Stock or any other Award granted prior to the Change in Control are subject shall not lapse upon a Change in Control and the Restricted Stock or other Award shall, where appropriate in the sole discretion of the Committee, receive the same amount and form distribution as other Common Stock on such terms as determined by the Committee; provided that the Committee may decide to award additional Restricted Stock or other Awards in lieu of any cash distribution. Notwithstanding anything to the contrary herein, for purposes of Incentive Stock Options, any assumed or substituted Stock Option shall comply with the requirements of Treasury Regulation Section 1.424-1 (and any amendment thereto).
(b) The Committee, in its sole discretion, may provide for the purchase of any Awards by the Company or an Affiliate for an amount of cash equal to the excess (if any) of the Change in Control Price (as defined below) of the shares of Common Stock covered by such Awards, over the aggregate exercise price of such Awards (if applicable). For purposes of this Section 11.1, “Change in Control Price” shall mean the highest price per share of Common Stock paid in any transaction related to a Change in Control of the Company.
(c) Notwithstanding any other provision herein to the contrary, the Committee may, in its sole discretion, provide for accelerated vesting or lapse of restrictions, of an Award at any time.
11.2Change in Control. Unless otherwise determined by the Committee in the applicable Award Agreement or other written agreement approved by the Committee, a “Change in Control” shall be deemed to occur if:
(a) any “person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act (other than the Company, any trustee or other fiduciary holding securities under any employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of Common Stock of the Company), becoming the beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding securities;
(b) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in paragraph (a), (c), or (d) of this Section 11.2 or a director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such term is used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the Board;
(c) a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; provided, however, that a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no person (other than those covered by the exceptions in Section 11.2(a)) acquires more than 50% of the combined voting power of the Company’s then outstanding securities shall not constitute a Change in Control of the Company; or
(d) a complete liquidation or dissolution of the Company or the consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets other than the sale or disposition of all or substantially all of the assets of the Company to a person or persons who beneficially own, directly or indirectly, 50% or more of the combined voting power of the outstanding voting securities of the Company at the time of the sale.
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Notwithstanding the foregoing, with respect to any Award that is characterized as “non-qualified deferred compensation” within the meaning of Section 409A of the Code, an event shall not be considered to be a Change in Control under the Plan for purposes of payment of any such award unless such event is also a “change in ownership,” a “change in effective control” or a “change in the ownership of a substantial portion of the assets” of the Company within the meaning of Section 409A of the Code.
ARTICLE XII
TERMINATION OR AMENDMENT OF PLAN
12.1Termination or Amendment. Notwithstanding any other provision of the Plan, the Board may at any time, and from time to time, amend, in whole or in part, any or all of the provisions of the Plan (including any amendment deemed necessary to ensure that the Company may comply with any regulatory requirement referred to in Article XIV or Section 409A of the Code), or suspend or terminate it entirely, retroactively or otherwise; provided, however, that, unless otherwise required by law or specifically provided herein, the rights of a Participant with respect to Awards granted prior to such amendment, suspension or termination, may not be impaired without the consent of such Participant and, provided further, that without the approval of the holders of the Company’s Common Stock entitled to vote in accordance with applicable law, no amendment may be made that would (i) increase the aggregate number of shares of Common Stock that may be issued under the Plan (except by operation of Section 4.2); (ii) change the classification of individuals eligible to receive Awards under the Plan; (iii) decrease the minimum option price of any Stock Option or Stock Appreciation Right; (iv) extend the maximum option period under Section 6.4; (v) award any Stock Option or Stock Appreciation Right in replacement of a canceled Stock Option or Stock Appreciation Right with a higher exercise price than the replacement award;(vi) cancel any Stock Options or Stock Appreciation Rights at a time when its Exercise Price exceeds Fair Market Value in exchange for cash, shares of Common Stock, or other Awards or (vii) require stockholder approval in order for the Plan to continue to comply with the provisions of Section 422 of the Code applicable to Incentive Stock Options. In no event may the Plan be amended without the approval of the stockholders of the Company in accordance with the applicable laws of the State of Delaware to increase the aggregate number of shares of Common Stock that may be issued under the Plan, decrease the minimum exercise price of any Award, or to make any other amendment that would require stockholder approval under Financial Industry Regulatory Authority (FINRA) rules and regulations or the rules of any exchange or system on which the Company’s securities are listed or traded at the request of the Company. Notwithstanding anything herein to the contrary, the Board may amend the Plan or any Award Agreement at any time without a Participant’s consent to comply with applicable law including Section 409A of the Code.
The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, but, subject to Article IV or as otherwise specifically provided herein, no such amendment or other action by the Committee shall impair the rights of any holder without the holder’s consent.
ARTICLE XIII
UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payment as to which a Participant has a fixed and vested interest but which are not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any right that is greater than those of a general unsecured creditor of the Company.
ARTICLE XIV
GENERAL PROVISIONS
14.1Legend. The Committee may require each person receiving shares of Common Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that the Participant is acquiring the shares without a view to distribution thereof. In addition to any legend required by the Plan, the certificates for such shares may include any legend that the Committee deems appropriate to reflect any restrictions on Transfer. All certificates for shares of Common Stock delivered under the Plan shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed or any national securities exchange system upon whose system the Common Stock is then quoted, any applicable federal or state securities law, and any applicable corporate law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
14.2Other Plans. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is required, and such arrangements may be either generally applicable or applicable only in specific cases.
14.3No Right to Employment/Directorship/Consultancy. Neither the Plan nor the grant of any Option or other Award hereunder shall give any Participant or other employee, Consultant or Non-Employee Director any right with respect to continuance of employment, consultancy or directorship by the Company or any Affiliate, nor shall there be a limitation in any way on the right of the Company or any Affiliate by which an employee is employed or a Consultant or Non-Employee Director is retained to terminate his or her employment, consultancy or directorship at any time.
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14.4Withholding of Taxes. The Company shall have the right to deduct from any payment to be made pursuant to the Plan, or to otherwise require, prior to the issuance or delivery of shares of Common Stock or the payment of any cash hereunder, payment by the Participant of, any federal, state or local taxes required by law to be withheld. Upon the vesting of Restricted Stock (or other Award that is taxable upon vesting), or upon making an election under Section 83(b) of the Code, a Participant shall pay all required withholding to the Company. Unless not permitted by the Committee at the time of grant of an Award or thereafter, and subject to any rules established by the Committee, the Participant shall be able to satisfy any statutorily required withholding obligation by reducing the number of shares of Common Stock otherwise deliverable or by delivering shares of Common Stock already owned, and shall be permitted similarly to satisfy additional tax withholding above the statutory minimum applicable withholding amounts; provided, however, that the Participant shall not be entitled to deliver such additional shares if it would cause adverse accounting or tax consequences for the Company.
14.5No Assignment of Benefits. No Award or other benefit payable under the Plan shall, except as otherwise specifically provided by law or permitted by the Committee, be Transferable in any manner, and any attempt to Transfer any such benefit shall be void, and any such benefit shall not in any manner be liable for or subject to the debts, contracts, liabilities, engagements or torts of any person who shall be entitled to such benefit, nor shall it be subject to attachment or legal process for or against such person.
14.6Listing and Other Conditions.
(a) Unless otherwise determined by the Committee, as long as the Common Stock is listed on a national securities exchange or system sponsored by a national securities association, the issuance of shares of Common Stock pursuant to an Award shall be conditioned upon such shares being listed on such exchange or system. The Company shall have no obligation to issue such shares unless and until such shares are so listed, and the right to exercise any Option or other Award with respect to such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion that any sale or delivery of shares of Common Stock pursuant to an Option or other Award is or may in the circumstances be unlawful or result in the imposition of excise taxes on the Company under the statutes, rules or regulations of any applicable jurisdiction, the Company shall have no obligation to make such sale or delivery, or to make any application or to effect or to maintain any qualification or registration under the Securities Act or otherwise, with respect to shares of Common Stock or Awards, and the right to exercise any Option or other Award shall be suspended until, in the opinion of said counsel, such sale or delivery shall be lawful or will not result in the imposition of excise taxes on the Company.
(c) Upon termination of any period of suspension under this Section 14.6, any Award affected by such suspension which shall not then have expired or terminated shall be reinstated as to all shares available before such suspension and as to shares which would otherwise have become available during the period of such suspension, but no such suspension shall extend the term of any Award.
(d) A Participant shall be required to supply the Company with certificates, representations and information that the Company requests and otherwise cooperate with the Company in obtaining any listing, registration, qualification, exemption, consent or approval the Company deems necessary or appropriate.
14.7Stockholders Agreement and Other Requirements. Notwithstanding anything herein to the contrary, as a condition to the receipt of shares of Common Stock pursuant to an Award under the Plan, to the extent required by the Committee, the Participant shall execute and deliver a stockholder’s agreement or such other documentation that shall set forth certain restrictions on transferability of the shares of Common Stock acquired upon exercise or purchase, and such other terms as the Board or Committee shall from time to time establish. Such stockholder’s agreement or other documentation shall apply to the Common Stock acquired under the Plan and covered by such stockholder’s agreement or other documentation. The Company may require, as a condition of exercise, the Participant to become a party to any other existing stockholder agreement (or other agreement).
14.8Governing Law. The Plan and actions taken in connection herewith shall be governed and construed in accordance with the laws of the State of Delaware (regardless of the law that might otherwise govern under applicable Delaware principles of conflict of laws).
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14.9Jurisdiction; Waiver of Jury Trial. Any suit, action or proceeding with respect to the Plan or any Award Agreement, or any judgment entered by any court of competent jurisdiction in respect of any thereof, shall be resolved only in the courts of the State of Delaware or the United States District Court for the District of Delaware and the appellate courts having jurisdiction of appeals in such courts. In that context, and without limiting the generality of the foregoing, the Company and each Participant shall irrevocably and unconditionally (a) submit in any proceeding relating to the Plan or any Award Agreement, or for the recognition and enforcement of any judgment in respect thereof (a “Proceeding”), to the exclusive jurisdiction of the courts of the State of Delaware, the court of the United States of America for the District of Delaware, and appellate courts having jurisdiction of appeals from any of the foregoing, and agree that all claims in respect of any such Proceeding shall be heard and determined in such Delaware State court or, to the extent permitted by law, in such federal court, (b) consent that any such Proceeding may and shall be brought in such courts and waives any objection that the Company and each Participant may now or thereafter have to the venue or jurisdiction of any such Proceeding in any such court or that such Proceeding was brought in an inconvenient court and agree not to plead or claim the same, (c) waive all right to trial by jury in any Proceeding (whether based on contract, tort or otherwise) arising out of or relating to the Plan or any Award Agreement, (d) agree that service of process in any such Proceeding may be effected by mailing a copy of such process by registered or certified mail (or any substantially similar form of mail), postage prepaid, to such party, in the case of a Participant, at the Participant’s address shown in the books and records of the Company or, in the case of the Company, at the Company’s principal offices, attention General Counsel, and (e) agree that nothing in the Plan shall affect the right to effect service of process in any other manner permitted by the laws of the State of Delaware.
14.10Construction. Wherever any words are used in the Plan in the masculine gender they shall be construed as though they were also used in the feminine gender in all cases where they would so apply, and wherever words are used herein in the singular form they shall be construed as though they were also used in the plural form in all cases where they would so apply.
14.11Other Benefits. No Award granted or paid out under the Plan shall be deemed compensation for purposes of computing benefits under any retirement plan of the Company or its Affiliates nor affect any benefit under any other benefit plan now or subsequently in effect under which the availability or amount of benefits is related to the level of compensation.
14.12Costs. The Company shall bear all expenses associated with administering this Plan, including expenses of issuing Common Stock pursuant to Awards hereunder.
14.13No Right to Same Benefits. The provisions of Awards need not be the same with respect to each Participant, and such Awards to individual Participants need not be the same in subsequent years.
14.14Death/Disability. The Committee may in its discretion require the transferee of a Participant to supply it with written notice of the Participant’s death or Disability and to supply it with a copy of the will (in the case of the Participant’s death) or such other evidence as the Committee deems necessary to establish the validity of the transfer of an Award. The Committee may also require that the agreement of the transferee to be bound by all of the terms and conditions of the Plan.
14.15Section 16(b) of the Exchange Act. All elections and transactions under the Plan by persons subject to Section 16 of the Exchange Act involving shares of Common Stock are intended to comply with any applicable exemptive condition under Rule 16b-3. The Committee may establish and adopt written administrative guidelines, designed to facilitate compliance with Section 16(b) of the Exchange Act, as it may deem necessary or proper for the administration and operation of the Plan and the transaction of business thereunder.
14.16Section 409A of the Code. The Plan is intended to comply with the applicable requirements of Section 409A of the Code and shall be limited, construed and interpreted in accordance with such intent. To the extent that any Award is subject to Section 409A of the Code, it shall be paid in a manner that will comply with Section 409A of the Code, including proposed, temporary or final regulations or any other guidance issued by the Secretary of the Treasury and the Internal Revenue Service with respect thereto. Notwithstanding anything herein to the contrary, any provision in the Plan that is inconsistent with Section 409A of the Code shall be deemed to be amended to comply with Section 409A of the Code and to the extent such provision cannot be amended to comply therewith, such provision shall be null and void. The Company shall have no liability to a Participant, or any other party, if an Award that is intended to be exempt from, or compliant with, Section 409A of the Code is not so exempt or compliant or for any action taken by the Committee or the Company and, in the event that any amount or benefit under the Plan becomes subject to penalties under Section 409A of the Code, responsibility for payment of such penalties shall rest solely with the affected Participants and not with the Company. Notwithstanding any contrary provision in the Plan or Award Agreement, any payment(s) of “nonqualified deferred compensation” (within the meaning of Section 409A of the Code) that are otherwise required to be made under the Plan to a “specified employee” (as defined under Section 409A of the Code) as a result of his or her separation from service (other than a payment that is not subject to Section 409A of the Code) shall be delayed for the first six (6) months following such separation from service (or, if earlier, the date of death of the specified employee) and shall instead be paid (in a manner set forth in the Award Agreement) on the payment date that immediately follows the end of such six-month period or as soon as administratively practicable thereafter.
14.17Successor and Assigns. The Plan shall be binding on all successors and permitted assigns of a Participant, including, without limitation, the estate of such Participant and the executor, administrator or trustee of such estate.
14.18Severability of Provisions. If any provision of the Plan shall be held invalid or unenforceable, such invalidity or unenforceability shall not affect any other provisions hereof, and the Plan shall be construed and enforced as if such provisions had not been included.
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14.19Payments to Minors, Etc. Any benefit payable to or for the benefit of a minor, an incompetent person or other person incapable of receipt thereof shall be deemed paid when paid to such person’s guardian or to the party providing or reasonably appearing to provide for the care of such person, and such payment shall fully discharge the Committee, the Board, the Company, its Affiliates and their employees, agents and representatives with respect thereto.
14.20Agreement. As a condition to the grant of an Award, if requested by the Company and the lead underwriter of any public offering of the Common Stock (the “Lead Underwriter”), a Participant shall irrevocably agree not to sell, contract to sell, grant any option to purchase, transfer the economic risk of ownership in, make any short sale of, pledge or otherwise transfer or dispose of, any interest in any Common Stock or any securities convertible into, derivative of, or exchangeable or exercisable for, or any other rights to purchase or acquire Common Stock (except Common Stock included in such public offering or acquired on the public market after such offering) during such period of time following the effective date of a registration statement of the Company filed under the Securities Act that the Lead Underwriter shall specify (the “Lock-Up Period”). The Participant shall further agree to sign such documents as may be requested by the Lead Underwriter to effect the foregoing and agree that the Company may impose stop-transfer instructions with respect to Common Stock acquired pursuant to an Award until the end of such Lock-Up Period.
14.21Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
14.22Special Rule Related to Securities Trading Policy. The Company has established (or may from time to time establish) a securities trading policy (the ‘‘Policy’’) relative to disclosure and trading on inside information as described in the Policy. Under the Policy, certain Participants are or may be prohibited from trading Common Stock or other securities of the Company except during certain ‘‘window periods’’ as described in the Policy. If, under the terms of an Agreement, the last day on which a Stock Option or Stock Appreciation Right can be exercised falls on a date that is not, in the opinion of counsel to the Company, within a window period permitted by the Policy, the applicable exercise period shall automatically be extended by this Section 14.22 until the second business day of, in the opinion of counsel to the Company, a window period under the Policy, but in no event beyond the expiration date of the Stock Option or Stock Appreciation Right. The Committee shall interpret and apply the extension automatically provided by the preceding sentence to ensure when possible without extending the exercise period beyond the expiration date that in no event shall the term of any Stock Option or Stock Appreciation Right expire except during a window period.
14.23Clawback. All Awards, amounts, or benefits received or outstanding under the Plan shall be subject to clawback, cancellation, recoupment, rescission, payback, reduction, or other similar action in accordance with the terms of any Company clawback or similar policy or any applicable law related to such actions, as may be in effect from time to time. A Participant’s acceptance of an Award shall be deemed to constitute the Participant’s acknowledgement of and consent to the Company’s application, implementation, and enforcement of any applicable Company clawback or similar policy that may apply to the Participant, whether adopted before or after September 9, 2019 and any provision of applicable law relating to clawback, cancellation, recoupment, rescission, payback, or reduction of compensation, and the Participant’s agreement that the Company may take such actions as may be necessary to effectuate any such policy or applicable law, without further consideration or action.
14.24Non-U.S. Laws. The Committee shall have the authority to adopt such modifications, procedures and subplans as may be necessary or desirable to comply with provisions of the laws of foreign countries in which the Company or its Affiliates may operate to assure the viability of the benefits from Awards granted to Participants performing services in such countries and to meet the objectives of the Plan.
14.25Code Section 162(m). For the avoidance of doubt, the provisions of this Plan is not intended, and shall not be interpreted, to modify any awards granted in the Prior Plan or any written binding contract in effect as of November 2, 2017 to the extent such modification would result in a loss of deductibility under Code Section 162(m).
ARTICLE XV
EFFECTIVE DATE OF PLAN
The Plan shall become effective on the date of the Company’s 2018 Annual Meeting of Stockholders, subject to approval at such meeting by stockholders eligible to vote in the election of directors, by a vote sufficient to meet the requirements of Code Section 422, Rule 16b-3 under the Exchange Act (if applicable), applicable requirements under the rules of any stock exchange or automated quotation system on which the Shares may be listed or quoted and other laws, regulations and obligations of the Company applicable to the Plan. Awards may be granted subject to stockholder approval, but may not be exercised or otherwise settled in the event the stockholder approval is not obtained.
ARTICLE XVI
TERM OF PLAN
No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the earlier of the date that the Plan is adopted or the date of stockholder approval, but Awards granted prior to such tenth anniversary may extend beyond that date.
ARTICLE XVII
NAME OF PLAN
This Plan shall be known as the “Express, Inc. 2018 Incentive Compensation Plan.”
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Performance Goals with respect to Performance Awards may be based on the attainment of certain target levels of, or a specified increase or decrease (as applicable), in objective measurement, including but not limited to, the following:
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earnings per share; |
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operating income; |
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gross income; |
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net income (before or after taxes); |
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cash flow; |
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gross profit; |
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gross profit return on investment; |
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gross margin return on investment; |
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gross margin; |
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operating margin; |
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working capital; |
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earnings before interest and taxes; |
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earnings before interest, tax, depreciation and amortization; |
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return on equity; |
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return on assets; |
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return on capital; |
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return on invested capital; |
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net revenues; |
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gross revenues; |
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revenue growth; |
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annual recurring revenues; |
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recurring revenues; |
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license revenues; |
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sales or market share; |
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total shareholder return; |
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economic value added; |
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specified objectives with regard to limiting the level of increase in all or a portion of the Company’s bank debt or other long-term or short-term public or private debt or other similar financial obligations of the Company, which may be calculated net of cash balances and/or other offsets and adjustments as may be established by the Committee in its sole discretion; |
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the fair market value of a share of Common Stock; |
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the growth in the value of an investment in the Common Stock assuming the reinvestment of dividends; |
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reduction in operating expenses; |
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comparable sales, comparable store sales, e-commerce sales; |
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inventory turnover or shrinkage; |
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free cash flow; |
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strategic or operational business criteria, consisting of one or more objectives based on meeting geographic expansion or new concept development goals; new store openings or other changes in store count; cost savings targets; customer satisfaction; human resources goals, including employee engagement, staffing, training and development and succession planning; implementation or development of new or enhanced technology systems and capabilities; omni-channel goals; marketing goals; merchandising goals; sustainability goals; and goals relating to acquisitions or divestitures of subsidiaries, affiliates, or joint ventures. |
The Committee may, in its sole discretion, also exclude, or adjust to reflect, the impact of an event or occurrence that the Committee determines should be appropriately excluded or adjusted, including:
(a) restructurings, discontinued operations, extraordinary items or events, and other unusual or non-recurring charges as described in Accounting Principles Board Opinion No. 30 and/or management’s discussion and analysis of financial condition and results of operations appearing or incorporated by reference in the Company’s Form 10-K for the applicable year;
(b) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; or
(c) a change in tax law or accounting standards required by generally accepted accounting principles.
Performance goals may also be based upon individual participant performance goals or on such other performance goals as determined by the Committee in its sole discretion.
In addition, such performance goals may be based upon the attainment of specified levels of Company (or subsidiary, division, other operational unit or administrative department of the Company) performance under one or more of the measures described above relative to the performance of other corporations. The Committee may also:
(a) designate additional business criteria on which the performance goals may be based; or
(b) adjust, modify or amend the aforementioned business criteria.
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EXPRESS Notice of 2020 Annual Meeting of Stockholders |
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103 |
EXPRESS EXPRESS, INC. 1 EXPRESS DRIVE COLUMBUS, OH 43230 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. During the Meeting - Go to www.virtualshareholdermeeting.com/EXPR2020 ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends you vote FOR all the nominees listed in the following proposal: 1. Election of Class I Directors. Nominees For Against Abstain 1a. Michael Archbold 1b. Timothy Baxter 1c. Peter Swinburn The Board of Directors recommends you vote FOR the following proposals: For Against Abstain 2. Advisory vote to approve executive compensation (say-on-pay). 3. Ratification of PricewaterhouseCoopers LLP as the Company's independent registered public accounting firm for 2020. 4. Approval of Amendment to the Amended and Restated Express, Inc. 2018 Incentive Compensation Plan to Increase the Number of Shares Available for Grant. NOTE: Also includes authorization of the named proxies to vote in their discretion upon such other business as may properly come before the meeting or any adjournment or postponement thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 0000463226_1 R1.0.1.18
EXPRESS Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice & Proxy Statement and Annual Report are available at www.proxyvote.com EXPRESS, INC. Annual Meeting of Stockholders June 10, 2020 8:30 a.m., EDT This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Timothy Baxter and Melinda McAfee, or either of them, as proxies, each with the power to appoint his or her substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot, all of the shares of common stock of Express, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held virtually at 8:30 a.m., EDT, on June 10, 2020 at www.virtualshareholdermeeting.com/EXPR2020, and any adjournment or postponement thereof. This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, this proxy will be voted for all of the nominees listed in Proposal 1, for Proposals 2, 3, and 4, and, in the proxies discretion, upon such other business as properly comes before the meeting. Continued and to be signed on reverse side 0000463226_2 R1.0.1.18
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