def14a.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )
 
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Filed by a Party other than the Registrant  o
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Definitive Proxy Statement
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Soliciting Material Pursuant to §240.14a-12

 
Carter’s, Inc.
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
 
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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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April 3, 2009
 
Dear Shareholder,
 
It is my pleasure to invite you to attend our 2009 Annual Meeting of Shareholders on May 14, 2009.  The meeting will be held at 8:00 a.m. at our offices located at 1170 Peachtree Street NE, 6th Floor, Atlanta, Georgia 30309.
 
The attached Notice of 2009 Annual Meeting of Shareholders and Proxy Statement describe the formal business to be conducted at the meeting.  Whether or not you plan to attend the Annual Meeting, your shares can be represented if you promptly submit your voting instructions by telephone, over the internet, or by completing, signing, dating, and returning your proxy card in the enclosed envelope.
 
On behalf of the Board of Directors and management of Carter’s, Inc., thank you for your continued support and investment in Carter's.
 
Sincerely,
 
Michael D. Casey
Chief Executive Officer
 

 
 

 
 
1170 Peachtree Street NE, Suite 900
Atlanta, Georgia 30309
Tel:  (404) 745-2700
Fax:  (404) 892-3079
 
NOTICE OF 2009 ANNUAL MEETING OF SHAREHOLDERS
 
Notice is hereby given that the 2009 Annual Meeting of Shareholders of Carter’s, Inc. (the “Annual Meeting”) will be held at 8:00 a.m. on May 14, 2009 at our offices located at 1170 Peachtree Street NE, 6th Floor, Atlanta, Georgia 30309.  At the Annual Meeting, we will address all business that may properly come before the meeting and vote on the following matters:

1.  
The election of three Class III Directors;
 
2.  
The approval of the Company’s Amended and Restated 2003 Equity Incentive Plan; and
 
3.  
The ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal 2009.
 
Shareholders of record at the close of business on March 27, 2009 are entitled to receive notice of, attend, and vote at the Annual Meeting.  Your vote is very important.  Whether or not you plan to attend the Annual Meeting, to ensure that your shares are represented at the Annual Meeting, please complete, sign, date, and return the proxy card in the envelope provided or submit your voting instructions by telephone or over the internet.

If you plan to attend the Annual Meeting and are a registered shareholder, please bring the invitation attached to your proxy card.  If your shares are registered in the name of a bank or your broker, please bring your bank or brokerage statement showing your beneficial ownership with you to the Annual Meeting or request an invitation by writing to me at the address set forth above.
 
Important Notice Regarding the Availability of Proxy Materials for the
2009 Annual Meeting of Shareholders of Carter’s, Inc. to be held on May 14, 2009:
The proxy materials and the Annual Report to Shareholders are available at www.carters.com.

 
By order of the Board of Directors,
 
Brendan M. Gibbons
Vice President, General Counsel, and Secretary
Atlanta, Georgia
April 3, 2009
 

 
 

 

PROXY STATEMENT
 
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GENERAL INFORMATION ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING
 
Why am I receiving this proxy statement?
 
The Board of Directors of Carter’s, Inc. (“we,” “us,” “our,” “Carter’s,” or the “Company”) is soliciting proxies for our 2009 Annual Meeting of Shareholders on May 14, 2009 (the “Annual Meeting”).  This proxy statement and accompanying proxy card are being mailed on or about April 3, 2009 to shareholders of record as of March 27, 2009 (“record date”).
 
You are receiving this proxy statement because you owned shares of Carter’s common stock on the record date and are therefore entitled to vote at the Annual Meeting.  By use of a proxy, you can vote regardless of whether or not you attend the Annual Meeting.  This proxy statement provides information on the matters on which the Company’s Board of Directors (the “Board”) would like you to vote so that you can make an informed decision.
 
What is the purpose of the Annual Meeting?
 
The purpose of the Annual Meeting is for our shareholders to address all business that may properly come before the meeting and to vote on the following matters:
 
1.  
The election of three Class III Directors (see page 9);
 
2.  
The approval of the Company’s Amended and Restated 2003 Equity Incentive Plan (the “Plan”) (see page 32); and
 
3.  
The ratification of the appointment of PricewaterhouseCoopers LLP (“PwC”) as the Company’s independent registered public accounting firm for fiscal 2009 (see page 38).
 
Who is asking for my vote?
 
The Company is soliciting your proxy on behalf of the Board.  The Company is paying for the costs of this solicitation and proxy statement.
 
Who can attend the Annual Meeting?
 
All shareholders of record, or their duly appointed proxies, may attend the Annual Meeting.  As of the record date, there were 56,667,490 shares of common stock issued and outstanding.
 
What are my voting rights?
 
Each share of common stock is entitled to one vote on each matter submitted to shareholders at the Annual Meeting.
 
What is the difference between holding shares as a shareholder of record and as a beneficial owner?
 
If your shares are registered directly in your name with the Company’s transfer agent, American Stock Transfer and Trust Company, you are considered the shareholder of record for these shares.  As the shareholder of record, you have the right to grant your voting proxy directly to persons listed on your proxy card or vote in person at the Annual Meeting.
 
If your shares are held in a brokerage account or by another nominee, you are considered the beneficial owner of shares held “in street name.” These proxy materials are being forwarded to you together with a voting instruction card.  As a beneficial owner, you have the right to direct your broker, trustee, or nominee how to vote, and you are also invited to attend the Annual Meeting.  Because you are a beneficial owner and not the shareholder of record, you may not vote your shares in person at the Annual Meeting unless you obtain a “legal proxy” from the broker, trustee, or nominee that holds your shares.  Your broker, trustee, or nominee should have enclosed or provided directions for you to use to instruct the broker, trustee, or nominee how to vote your shares.
 
If the brokers do not receive timely instructions from the beneficial owner regarding how the beneficial owner wants the shares voted, brokers holding shares of record for a beneficial owner have discretionary authority to vote on Proposal Number One, Proposal Number Two, and Proposal Number Three.
 

 
1

 

What are my choices when voting on the election of Class III Directors, and what vote is needed to elect the Director nominees?
 
In voting on the election of Class III Directors (Proposal Number One), shareholders may:
 
1.  vote for all nominees,
 
2.  vote to withhold authority for all nominees, or
 
3.  vote for all nominees, except specific nominees.
 
The three nominees for election as Class III Directors who receive the greatest number of votes will be elected as Class III Directors.  Votes that are withheld will be counted toward a quorum, but will be excluded entirely from the tabulation of votes for each nominee, and, therefore, will not affect the outcome of the vote on this Proposal.
 
What are my choices when voting on whether to approve the Plan, and what vote is required to approve the Plan?
 
In voting on the Plan (Proposal Number Two), shareholders may:
 
1.  vote for the Plan,
 
2.  vote against the Plan, or
 
3.  abstain from voting on the Plan.
 
The approval of Proposal Number Two requires the affirmative vote of the holders of a majority of the shares of common stock present or represented at the meeting and voted on the Proposal at the Annual Meeting.  Votes to abstain will be counted toward a quorum, but will be excluded entirely from the tabulation of votes for this Proposal, and, therefore, will not affect the outcome of the vote on this Proposal.
 
What are my choices when voting on the ratification of the appointment of PwC as the Company’s independent registered public accounting firm for fiscal 2009?
 
In voting on the ratification of PwC (Proposal Number Three), shareholders may:
 
1.  vote for ratifying PwC’s appointment,
 
2.  vote against ratifying PwC’s appointment, or
 
3.  abstain from voting on ratifying PwC’s appointment.
 
The approval of Proposal Number Three requires the affirmative vote of the holders of a majority of the shares of common stock present or represented at the meeting and voted on the Proposal at the Annual Meeting.  Votes to abstain will be counted toward a quorum, but will be excluded entirely from the tabulation of votes for this Proposal, and, therefore, will not affect the outcome of the vote on this Proposal.
 
What constitutes a quorum?
 
A quorum is the minimum number of shares required to be present to transact business at the Annual Meeting.  Pursuant to the Company’s by-laws, the presence at the Annual Meeting, in person, by proxy, or by remote communication, of the holders of at least a majority of the shares entitled to be voted will constitute a quorum.  Broker non-votes will be counted as shares that are present at the meeting for purposes of determining a quorum.  If a quorum is not present, the meeting will be adjourned until a quorum is obtained.
 
How does the Board recommend that I vote?
 
Unless you give instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board.  The Board recommends a vote:
 
FOR the election of the nominees for Class III Directors (Proposal Number One);
 
FOR the approval of the Plan (Proposal Number Two); and
 
FOR the ratification of the appointment of PwC (Proposal Number Three).
 

 
2

 

How do I vote?
 
If you are a shareholder of record, you may vote in one of four ways.  First, you may vote by mail by signing, dating, and mailing your proxy card in the enclosed envelope.  Second, you may vote in person at the Annual Meeting.  Third, you may vote over the internet by completing the voting instruction form found at www.proxyvote.com.  You will need your proxy card when voting over the internet.  Fourth, you may vote by telephone by using a touch-tone telephone and calling 1-800-690-6903 and following the instructions.
 
If your shares are held in a brokerage account or by another nominee, these proxy materials are being forwarded to you together with a voting instruction card.  Follow the instructions on the voting instruction card in order to vote your shares by proxy or in person.
 
Can I change my vote after I return my proxy card?
 
Yes.  Even after you have submitted your proxy card, you may change your vote at any time before your proxy votes your shares by submitting written notice of revocation to Brendan M. Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc., at the Company’s address set forth in the Notice of the Annual Meeting, or by submitting another proxy card bearing a later date.  Alternatively, if you have voted by telephone or over the internet, you may change your vote by calling 1-800-690-6903 and following the instructions.  The powers of the proxy holders will be suspended if you attend the Annual Meeting in person, although attendance at the Annual Meeting will not by itself revoke a previously granted proxy.  If you hold your shares through a broker or other custodian and would like to change your voting instructions, please review the directions provided to you by that broker or custodian.
 
May I vote confidentially?
 
Yes.  Our policy is to keep your individual votes confidential, except as appropriate to meet legal requirements, to allow for the tabulation and certification of votes, or to facilitate proxy solicitation.
 
Who will count the votes?
 
A representative of Broadridge Financial Solutions, Inc. will count the votes and act as the inspector of election for the Annual Meeting.
 
What happens if additional matters are presented at the Annual Meeting?
 
As of the date of this proxy statement, the Board knows of no matters other than those set forth herein that will be presented for determination at the Annual Meeting.  If, however, any other matters properly come before the Annual Meeting and call for a vote of shareholders, the Board intends proxies to be voted in accordance with the judgment of the proxy holders.
 
Where can I find the voting results of the Annual Meeting?
 
We intend to announce preliminary voting results at the Annual Meeting and publish final results in our quarterly report on Form 10-Q for the second quarter of fiscal 2009.
 
How may I obtain information about the Company?
 
A copy of our fiscal 2008 Annual Report accompanies this proxy statement and is available on our website at www.carters.com.  Shareholders may also obtain a free copy of our Annual Report on Form 10-K by visiting our website or by sending a request in writing to Mr. Gibbons at the Company’s address set forth in the Notice of the Annual Meeting.
 
When are shareholder proposals due for consideration in next year's proxy statement or at next year’s annual meeting?
 
Any proposals to be considered for inclusion in next year’s proxy statement must be submitted in writing to Mr. Gibbons at the Company’s address set forth in the Notice of the Annual Meeting, prior to the close of business on December 4, 2009.  There are additional requirements under our by-laws and the proxy rules to present a proposal, including continuing to own a minimum number of shares of our stock until next year’s annual meeting and appearing in person at the annual meeting to explain your proposal.  Shareholders who wish to make a proposal to be considered at next year’s annual meeting, other than proposals to be considered for inclusion in next year’s proxy statement, must notify the Company in the same manner specified above no earlier than January 14, 2010 and no later than February 13, 2010.
 

 
3

 

Who can help answer my questions?
 
If you have any questions about the Annual Meeting or how to submit or revoke your proxy, or to request an invitation, contact Mr. Gibbons at the Company’s address set forth in the Notice of the Annual Meeting.
 

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE INFORMATION
 
Board of Directors
 
Bradley M. Bloom became a Director in August 2001.  Mr. Bloom is a Managing Director of Berkshire Partners LLC, (“Berkshire Partners”) which he co-founded in 1986.  He is or has been a director of several of Berkshire Partners’ consumer and retailing companies.  Mr. Bloom is a current director of Bare Escentuals, Inc., Citizens of Humanity Holding Company LLC, and Gordon Brothers Group, and a former director of Acosta, Inc., Sterling, Inc., America’s Best Contacts and Eyeglasses, L.P., and Miami Cruiseline Services Holdings I.B.V.
 
Michael D. Casey became a director in August 2008.  Mr. Casey joined the Company in 1993 as Vice President-Finance.  Mr. Casey was named Senior Vice President-Finance in 1997, Senior Vice President and Chief Financial Officer in 1998, Executive Vice President and Chief Financial Officer in 2003, and Chief Executive Officer on August 1, 2008.  Prior to joining the Company, Mr. Casey was a Senior Manager with Price Waterhouse LLP, predecessor to PricewaterhouseCoopers LLP.
 
A. Bruce Cleverly became a Director in March 2008.  Mr. Cleverly retired as President of Global Oral Care from Procter & Gamble Company/The Gillette Company in September 2007, a position he held since 2005.  Mr. Cleverly joined The Gillette Company in 1975 as a Marketing Assistant and held positions of increasing responsibility in product management.  In 2001, Mr. Cleverly became President of Gillette’s worldwide Oral Care business.  In October 2005, Mr. Cleverly was elected President of The Procter & Gamble Company’s Global Oral Care division.  Mr. Cleverly is a director of Rain Bird Corporation and a member of the Board of Fellows of the Harvard School of Dental Medicine.
 
Paul Fulton became a Director in May 2002.  Mr. Fulton retired as President of Sara Lee Corporation in 1993 after spending 34 years with the company.  He is currently non-Executive Chairman of the Board of Bassett Furniture Industries, Inc. and Premier Commercial Bank.  Mr. Fulton was previously a director at Bank of America Corporation, where he served from 1993 to 2007; Lowe’s Companies, Inc., where he served from 1996 to 2007; and Sonoco Products Company, Inc., where he served from 1989 to 2005.
 
William J. Montgoris became a Director in August 2007.  Mr. Montgoris retired as Chief Operating Officer of The Bear Stearns Companies, Inc. in 1999, a position he held since August 1993.  While at Bear Stearns, Mr. Montgoris also served as the company’s Chief Financial Officer from April 1987 until October 1996.  Mr. Montgoris is currently a director of Stage Stores, Inc. and Office Max Incorporated.
 
David Pulver became a Director in January 2002.  Mr. Pulver has been a private investor for more than 25 years and is the President of Cornerstone Capital, Inc.  Mr. Pulver is a current director of Hearst-Argyle Television, Inc., where he has served since August of 1997.  Mr. Pulver was a founder of The Children’s Place, Inc., and served as its Chairman and Co-Chief Executive Officer until 1982.
 
John R. Welch became a Director in February 2003.  Mr. Welch retired as President of Mast Industries (Far East) Ltd. in April 2002 after spending 18 years with the company.  Mr. Welch also served as Executive Vice President of Operations at Warnaco Knitwear, a division of Warnaco, Inc. from August 1978 to December 1983.  Mr. Welch is currently a director of Brandot International Ltd.
 
Thomas E. Whiddon became a Director in August 2003.  Mr. Whiddon retired as Executive Vice President-Logistics and Technology of Lowe’s Companies, Inc. in March 2003, a position he held since 2000.  From 1996 to 2000, Mr. Whiddon served as Lowe’s Chief Financial Officer.  Since his retirement, Mr. Whiddon has worked as a consultant, serving various companies in executive capacities on an interim basis.  Mr. Whiddon is currently a director of Sonoco Products Company, Inc. and of Dollar Tree Stores, Inc.  Mr. Whiddon has been an Advisory Director of Berkshire Partners since October 2005 and previously served as a director of Bare Escentuals, Inc.
 
Board Meetings
 
Our Corporate Governance Principles require Carter’s to have at least four regularly scheduled Board meetings each year, and each Director is expected to attend each meeting.  The Board met five times during fiscal 2008.  In fiscal 2008, no Director participated in less than 75% of the aggregate number of all of the Board and applicable committee meetings.  Although the Company does not have a policy regarding Director attendance at annual meetings, each Director attended the Company’s annual meeting in fiscal 2008.
 
    Our Board has delegated the responsibility of setting the agendas and preparing materials for the Company’s Board meetings to Mr. Casey.
 
4

 
 
Executive Sessions
 
Executive sessions of non-management Directors are held at least four times a year, and executive sessions of independent, non-management Directors are held at least once a year.  Any non-management Director can request that an additional executive session be scheduled.  The Chairman of the Nominating and Corporate Governance Committee, currently Mr. Welch, has been chosen to be the presiding Director at the executive sessions of non-management Directors (the “Presiding Director”).
 
Board Committees
 
Our Board has a standing Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee.  The Board may also establish other committees to assist in the discharge of its responsibilities.  For example, in June 2008, the Board established a Transition Committee, chaired by Mr. Cleverly, to assist our Chief Executive Officer in the transition into his new role.
 
The current members of each Board committee and the number of committee meetings held during fiscal 2008 are listed below.
Name of Director
 
Audit
Committee
 
Compensation
Committee
 
Nominating and
Corporate
Governance
Committee
Bradley M. Bloom
                   
x
 
A. Bruce Cleverly
           
x
         
Paul Fulton
           
x
*
       
William J. Montgoris
   
x
                 
David Pulver
   
x
*
               
John R. Welch
           
x
     
x
*
Thomas E. Whiddon
   
x
             
x
 
Number of Meetings in Fiscal 2008
   
8
     
6
     
4
 

 
 
 *   Chairman
 
Audit Committee
 
The primary responsibilities of the Audit Committee include:
 
 
·
oversight of the quality and integrity of the consolidated financial statements, including the accounting, auditing, and reporting practices of the Company;
 
 
·
oversight of the Company’s internal control over financial reporting;
 
 
·
appointment of the independent registered public accounting firm and oversight of its performance, including its qualifications and independence;
 
 
·
oversight of the Company’s compliance with legal and regulatory requirements; and
 
 
·
oversight of the performance of the Company’s internal audit function.
 
The Audit Committee operates pursuant to a written charter that addresses the requirements of the New York Stock Exchange’s (“NYSE”) listing standards.  The charter is available on our website at www.carters.com or in print by contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc., at the Company’s address set forth in the Notice of the Annual Meeting.  The Board has determined that each member of the Audit Committee is independent and meets the financial literacy requirements set forth in the NYSE’s listing standards.  The Board has also determined that each member of the Audit Committee is an “audit committee financial expert” as defined by the Securities and Exchange Commission (“SEC”).
 
The Audit Committee Report is included in this proxy statement on page 37.
 

 
5

 

Compensation Committee
 
The primary responsibilities of the Compensation Committee include:
 
 
·
establishing the Company’s philosophy, policies, and strategy relative to executive compensation, including the mix of base salary and short-term and long-term incentive compensation within the context of stated guidelines for compensation relative to peer companies;
 
 
·
evaluating the performance of the Chief Executive Officer and other executive officers relative to approved performance goals and objectives;
 
 
·
setting the compensation of the Chief Executive Officer and other executive officers based upon an evaluation of their performance;
 
 
·
assisting the Board in developing and evaluating candidates for key executive positions and ensuring a succession plan is in place for the Chief Executive Officer and other executive officers;
 
 
·
evaluating compensation plans, policies, and programs with respect to the Chief Executive Officer, other executive officers, and non-management Directors;
 
 
·
monitoring and evaluating benefit programs for the Company’s Chief Executive Officer and other executive officers; and
 
 
·
producing an annual report on executive compensation for inclusion in the Company’s annual proxy statement.  This years Compensation Committee Report is included in this proxy statement on page 21.
 
The Compensation Committee operates pursuant to a written charter that addresses the requirements of the NYSE’s listing standards.  The charter is available on our website at www.carters.com or in print by contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc., at the Company’s address set forth in the Notice of the Annual Meeting.  The Board has determined that each member of the Compensation Committee is independent.
 
Compensation Committee Interlocks and Insider Participation

None of the members of our Compensation Committee serving during fiscal 2008 has been an officer or other employee of the Company.  None of our executive officers has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our Board or the Compensation Committee.
 
Nominating and Corporate Governance Committee

The primary responsibilities of the Nominating and Corporate Governance Committee include:
 
 
·
identifying and recommending candidates qualified to become Board members;
 
 
·
recommending Directors for appointment to Board Committees; and
 
 
·
developing and recommending to the Board a set of corporate governance principles and monitoring the Company’s compliance with and effectiveness of such principles.
 
The Nominating and Corporate Governance Committee operates pursuant to a written charter that addresses the requirements of the NYSE’s listing standards.  The charter is available on our website at www.carters.com or in print by contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc., at the Company’s address set forth in the Notice of the Annual Meeting.  The Board has determined that each member of the Nominating and Corporate Governance Committee is independent.
 
Consideration of Director Nominees

The Nominating and Corporate Governance Committee regularly assesses the appropriateness of the size of the Board of Directors.  In the event that vacancies occur or are anticipated, the Committee will identify prospective nominees that come to its attention through current Board members, professional search firms, or shareholders who hold more than 1% of our common stock.  The Board believes that it is appropriate to limit the group of shareholders who can propose nominees due to time constraints on the Nominating and Corporate Governance Committee.  The Committee will consider persons recommended by shareholders who hold more than 1% of our common stock for inclusion as nominees for election to the Board if the names of such persons are submitted to Brendan M. Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc., at the Company’s address set forth in the Notice of the Annual Meeting.  This submission must be made in writing and in accordance with our by-laws, including mailing the submission in a timely manner and including the nominee’s name, address, and qualifications for Board membership.

 
6

 
 
When evaluating a potential candidate for membership on the Board, the Committee considers each candidate’s skills and experience and assesses the needs of the Board and its committees at that point in time.  In connection with this assessment, the Committee will determine whether to interview prospective nominees, and if warranted, one or more members of the Committee, and others as appropriate, will interview prospective nominees in person or by telephone.  Once this evaluation is completed, if warranted, the Committee recommends candidates to the Board for nomination, and the Board determines whether or not to select the nominees after considering the recommendation of the Committee.
 
Interested Party Communications
 
A shareholder or other interested party may submit a written communication to the Board, non-management Directors, or Presiding Director.  The submission must be delivered to Brendan M. Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc., at the Company’s address set forth in the Notice of the Annual Meeting.
 
The Board, non-management Directors, or Presiding Director may require the submitting shareholder to furnish such information as may be reasonably required or deemed necessary to sufficiently review and consider the submission of such shareholder.
 
Each submission will be forwarded, without editing or alteration, to the Board, non-management Directors, or Presiding Director, as appropriate, on or prior to the next scheduled meeting of the Board.  The Board, non-management Directors, or Presiding Director, as appropriate, will determine, in their sole discretion, the method by which such submission will be reviewed and considered.
 
Corporate Governance Principles and Code of Ethics
 
Carter’s is committed to conducting its business with the highest level of integrity and maintaining the highest standards of corporate governance.  Our Corporate Governance Principles and our Code of Business Ethics and Professional Conduct provide the structure within which our Board and management operate the Company.  The Company’s Code of Business Ethics and Professional Conduct applies to all Directors and Company employees, including the Company’s executive officers.  Our Corporate Governance Principles and Code of Business Ethics and Professional Conduct are available on the Company’s website at www.carters.com or in print by contacting Brendan M. Gibbons, Vice President, General Counsel, and Secretary of Carter’s, Inc., at the Company’s address set forth in the Notice of the Annual Meeting.
 
Director Independence
 
The Company’s Corporate Governance Principles require a majority of the Company’s Directors to be independent.  For a Director to be considered independent, the Board must determine that the Director has no direct or indirect material relationship with Carter’s.  The Board considers all relevant information provided by each Director regarding any relationships each Director may have with Carter’s or management.  To assist it in making such independence determinations, the Board has established the following independence tests, which address all the specific independence tests of the NYSE’s listing standards.  A Director will not be considered independent if:
 
 
·
the Director is, or within the last three years has been, employed by the Company; or an immediate family member of the Director is, or within the last three years has been, employed as an executive officer of the Company;
 
 
·
the Director, or an immediate family member of the Director, has received, during any twelve-month period within the last three years, direct compensation from the Company exceeding $120,000, other than Director or committee fees and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
 
 
·
(a) the Director, or an immediate family member of the Director, is a current partner of a firm that is the Company’s internal auditor or independent registered public accounting firm; (b) the Director is a current employee of such a firm; (c) the Director has an immediate family member who is a current employee of such a firm and who participates in the firm’s audit, assurance, or tax compliance (but not tax planning) practice; or (d) the Director, or an immediate family member of the Director, was, within the last three years (but is no longer), a partner or employee of such a firm and personally worked on the Company’s audit within that time;
 

 
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·
the Director, or an immediate family member of the Director, is, or within the last three years has been, employed as an executive officer of another company where any of the Company’s present executive officers serve or served on that company’s compensation committee;
 
 
·
the Director is a current employee, or has an immediate family member who is an executive officer, of another company that has made payments to, or receives payments from, the Company for property or services in an amount which, in any of the last three fiscal years, exceeds the greater of $1.0 million, or 2%, of such other company’s consolidated gross revenues;
 
 
·
the Director, or an immediate family member of the Director, is, or within the last three years has been, employed by a company that has a director who is an officer of the Company;
 
 
·
the Director serves as an officer, director, or trustee, or as a member of a fund raising organization or committee of a not-for-profit entity to which the Company made, in any of the last three fiscal years, contributions in excess of the greater of (i) $50,000, or (ii) 2% of the gross annual revenues or charitable receipts of such entity; or
 
 
·
the Director is, or within the last three years has been, an executive officer of another company that is indebted to the Company, or to which the Company is indebted, and the total amount of either company’s indebtedness to the other exceeds 1% of the total consolidated assets of such company.
 
Applying these standards, the Board has determined that all of our non-management Directors are independent.  In the course of making these determinations, the Board considered the following:
 
 
·
Mr. Bloom’s status as a director of Gordon Brothers Group.  From June 2006 to May 2007, the Company made payments totaling $151,061 to Gordon Brothers Group.  Because Mr. Bloom is not an employee of Gordon Brothers Group, the Board determined that he does not fail to meet the independence tests listed above, and does not otherwise have a material relationship with the Company.
 

 
8

 

PROPOSAL NUMBER ONE
 
ELECTION OF CLASS III DIRECTORS
 
The Board proposes that the three Class III Director nominees be re-elected to the Board to serve until 2012.  The Company’s Board is divided into three classes with each Director serving a three-year term or until his or her earlier resignation, death, or removal.  In addition to the three Class III nominees, the Company’s current Class I and Class II Directors are listed below.  Each nominee currently serves as a Class III Director.
 
Class III Nominees—Terms Expiring at the Annual Meeting
 
Name
 
Age
 
Paul Fulton                                                                                  
    74  
John R. Welch                                                                                  
    77  
Thomas E. Whiddon                                                                                  
    56  

The individuals who will continue to serve as Class I and Class II Directors after the Annual Meeting are:
 
Class I Directors—Terms Expiring in 2010
 
Name
 
Age
 
William J. Montgoris                                                                                  
    62  
David Pulver                                                                                  
    67  

 
Class II Directors—Terms Expiring in 2011
 
Name
 
Age
 
Bradley M. Bloom                                                                                  
    56  
Michael D. Casey                                                                                  
    48  
A. Bruce Cleverly                                                                                  
    63  

 
The Board recommends a vote FOR the election of Paul Fulton, John R. Welch, and Thomas E. Whiddon as Class III Directors.
 
Vote Required
 
The three nominees for election as Class III Directors who receive the greatest number of votes will be elected as Class III Directors.  Votes may be cast in favor of all nominees, withheld for all nominees, or for all nominees, except specific nominees.  Votes that are withheld will be counted toward a quorum, but will be excluded entirely from the tabulation of votes for each nominee, and, therefore, will not affect the outcome of the vote on this Proposal.  Proxies that are granted without providing voting instructions will be voted FOR the election of the three Class III Director nominees.
 

 
9

 

COMPENSATION OF DIRECTORS
 
Each of our non-management Directors receives an annual retainer and meeting fees, and each committee Chairman receives a separate retainer.  In fiscal 2008, each Director’s annual retainer was comprised of a $20,000 cash payment, except for Mr. Cleverly who received a pro-rated amount upon joining the Board in March 2008, and a grant of our common stock valued at approximately $90,000.  Effective at the Annual Meeting, the equity portion of our Directors’ annual retainer will be increased to $100,000.  Each Director also received meeting fees of $2,500 for each regularly scheduled Board meeting, $1,000 for each special Board meeting, and $1,000 for each regularly scheduled or special meeting of our standing Board committees.  In addition, for meetings of our Transition Committee held in connection with our Board or standing Board committee meetings, or Transition Committee meetings held telephonically, each Director received meeting fees of $1,000.  For special, in-person meetings of our Transition Committee, our Directors received meeting fees of $2,500.
 
In fiscal 2008, the Chairman of our Audit Committee received a $20,000 retainer, and the Chairmen of our Compensation, Nominating and Corporate Governance, and Transition Committees each received $10,000 retainers.  In addition, as a new non-management Director, Mr. Cleverly was granted a one-time grant of restricted common stock valued at approximately $100,000.  This restricted stock “cliff vests” after three years following the date of grant.
 
We reimburse Directors for travel expenses incurred in connection with attending Board and committee meetings and for other expenses incurred while conducting Company business.  We pay no additional compensation to Mr. Casey for serving as a Director.  There are no family relationships among any of the Directors or our executive officers.
 
The following table provides information concerning the compensation of our non-management Directors for fiscal 2008.
 
FISCAL 2008 DIRECTOR COMPENSATION TABLE
 
Name
 
Fees Earned
or Paid in Cash
(b)
   
Stock
Awards
($)
(c)
   
Option
Awards
($)
   
Total
($)
 
Bradley M. Bloom (a)
  $ 31,000     $ 90,000     $ --     $ 121,000  
A. Bruce Cleverly
  $ 49,500     $ 118,215
(d)
  $ --     $ 167,715  
Paul Fulton
  $ 53,000     $ 90,000     $ --     $ 143,000  
William J. Montgoris
  $ 39,000     $ 123,846
(e)
  $ --     $ 162,846  
David Pulver
  $ 65,000     $ 90,000     $ --     $ 155,000  
Elizabeth A. Smith (f)
  $ 35,000     $ --     $ --     $ 35,000  
John R. Welch
  $ 50,000     $ 90,000     $ 716 (g)   $ 140,716  
Thomas E. Whiddon
  $ 43,000     $ 90,000     $ 11,234
(h)
  $ 144,234  
 

 
   (a)
All compensation earned by Mr. Bloom was paid to Berkshire Partners.
 
   (b)
This column reports the amount of cash compensation earned in fiscal 2008 through annual cash retainers and meeting fees.
 
   (c)
On May 8, 2008, we issued each of our non-management Directors 6,198 shares of common stock with a grant date fair value of $14.52 per share.
 
   (d)
Upon joining the Board in March 2008, the Company issued Mr. Cleverly 6,481 shares of restricted stock, which “cliff vest” in March 2011.  These shares had a grant date fair value of $15.43 per share.  In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 123 (revised 2004), “Share-Based Payment” (“SFAS 123R”), we assume these shares will vest in March 2011 and record the related expense ratably over the vesting period.
 
   (e)
Upon joining the Board in August 2007, the Company issued Mr. Montgoris 4,583 shares of restricted stock, which “cliff vest” in August 2010.  These shares had a grant date fair value of $21.82 per share.  In accordance with SFAS 123R, we assume these shares will vest in August 2010 and record the related expense ratably over the vesting period.
 
  (f)
Ms. Smith resigned from the Board effective December 31, 2008.
 
   (g)
On April 5, 2003, Mr. Welch was granted 16,000 stock options with an exercise price of $4.94 and a Black-Scholes fair value of $1.54.  The amount disclosed in this column equals the Company’s expense for such stock options in accordance with SFAS 123R recorded ratably over the vesting period through April 2008.
 
    (h)
On September 17, 2003, Mr. Whiddon was granted 16,000 stock options with an exercise price of $6.98 and a Black-Scholes fair value of $4.88.  The amount disclosed in this column equals the Company’s expense for such stock options in accordance with SFAS 123R recorded ratably over the vesting period through September 2008.
 
For stock options, the SFAS 123R fair value is calculated based on assumptions summarized in Note 6 to our audited consolidated financial statements which are included in our Annual Report on Form 10-K.  For complete beneficial ownership information of our common stock for each of our Directors, see heading “Securities Ownership of Beneficial Owners, Directors, and Executive Officers” on page 30.

 
10

 
 
EXECUTIVE OFFICERS’ BIOGRAPHICAL INFORMATION AND EXPERIENCE
 
The following table sets forth the name, age, and position of each of our executive officers as of the date of this proxy statement.
 
Name
   
Age
 
Position
Michael D. Casey
 
48
Chief Executive Officer
Joseph Pacifico
 
59
President
David A. Brown
 
51
Executive Vice President and Chief Operations Officer
James C. Petty
 
50
President of Retail Stores
Richard F. Westenberger
 
40
Executive Vice President and Chief Financial Officer
Charles E. Whetzel, Jr.
 
58
Executive Vice President and Chief Sourcing Officer

 
Michael D. Casey joined the Company in 1993 as Vice President-Finance.  Mr. Casey was named Senior Vice President-Finance in 1997, Senior Vice President and Chief Financial Officer in 1998, Executive Vice President and Chief Financial Officer in 2003, and Chief Executive Officer on August 1, 2008.  Mr. Casey became a Director on August 7, 2008.  Prior to joining the Company, Mr. Casey was a Senior Manager with Price Waterhouse LLP, predecessor to PricewaterhouseCoopers LLP.

Joseph Pacifico joined the Company in 1992 as Executive Vice President-Sales and Marketing.  Mr. Pacifico was named President of Marketing in 1997 and President of Carter’s, Inc. in 2004.  Mr. Pacifico began his career with VF Corporation in 1981 as a sales representative for The HD Lee Company, Inc. and was promoted to the position of Vice President of Marketing in 1989, a position he held until 1992.

David A. Brown joined the Company in 1992 as Senior Vice President-Business Planning and Administration.  Mr. Brown was named Executive Vice President-Operations in 1997, and Executive Vice President and Chief Operations Officer in 2005.  Prior to 1992, Mr. Brown held various positions at VF Corporation including Vice President-Human Resources for both The HD Lee Company, Inc. and Bassett-Walker, Inc.  Mr. Brown also held human resource positions with Blue Bell, Inc. and Milliken & Company earlier in his career.

James C. Petty joined the Company in 2007 as President of Retail Stores.  Prior to joining the Company, Mr. Petty served as President and Chief Executive Officer of PureBeauty, Inc. from 2005 to 2006.  From 1997 to 2004, Mr. Petty held various positions at Tween Brands, Inc., formerly Too, Inc., including President, General Manager – Limited Too Division, Executive Vice President, Stores and Real Estate; Senior Vice President, Stores; and Vice President, Stores, Limited Too Division.  Prior to 1997, Mr. Petty held various positions at Gap, Inc.
 
Richard F. Westenberger joined the Company in 2009 as Executive Vice President and Chief Financial Officer.  Prior to joining the Company, Mr. Westenberger served as Vice President of Corporate Finance and Treasurer of Hewitt Associates, Inc. from 2006 to 2008.  Prior to Hewitt, Mr. Westenberger was Senior Vice President and Chief Financial Officer of Land’s End, Inc., a specialty apparel division of Sears Holdings Corporation.  During his ten years at Sears, Mr. Westenberger held various other senior financial management positions, including Vice President of Corporate Planning and Analysis and Vice President of Investor Relations.  Prior to Sears, Mr. Westenberger was with Kraft Foods, Inc.  He began his career at Price Waterhouse LLP, predecessor to PricewaterhouseCoopers LLP, and is a certified public accountant.
 
Charles E. Whetzel, Jr. joined the Company in 1992 as Executive Vice President-Operations.  Mr. Whetzel was named Executive Vice President-Manufacturing in 1997, Executive Vice President-Global Sourcing in 2000, and Executive Vice President and Chief Sourcing Officer in 2005.  Mr. Whetzel began his career at Aileen, Inc. in 1971 in the Quality function and was later promoted to Vice President of Apparel.  Following Aileen, Inc., Mr. Whetzel held positions of increased responsibility with Health-Tex, Inc., Mast Industries, Inc., and Wellmade Industries, Inc.  In 1988, Mr. Whetzel joined Bassett-Walker, Inc. and was later promoted to Vice President of Manufacturing for The HD Lee Company, Inc.
 

 
11

 

COMPENSATION DISCUSSION AND ANALYSIS
 
Overview

This Compensation Discussion and Analysis, or CD&A, is intended to provide information regarding the Company’s executive compensation program and practices.  This CD&A covers a variety of topics, including: the Company’s compensation philosophy regarding executive compensation, the role of our Compensation Committee in setting the compensation of our named executive officers, and our executive compensation decisions for fiscal 2008.
 
During fiscal 2008, the Company announced that Frederick J. Rowan, II was retiring as Chief Executive Officer and resigning his position as Chairman of the Company’s Board of Directors, effective August 1, 2008.  The Company agreed to treat Mr. Rowan's retirement as a termination for "good reason" under the terms of his employment agreement.  The Company also announced that Michael D. Casey, the Company’s sitting Chief Financial Officer, was being promoted to Chief Executive Officer effective August 1, 2008.  In addition, the Board of Directors appointed Andrew B. North, the sitting Vice President of Finance, to serve as interim Chief Financial Officer effective August 1, 2008.  On August 7, 2008, Mr. Casey was elected to the Company’s Board of Directors.  Richard F. Westenberger joined the Company as Executive Vice President and Chief Financial Officer on January 19, 2009.

Compensation Philosophy

The Company is committed to achieving long-term, sustainable growth and increasing shareholder value.  The Company’s compensation program for our named executive officers is designed to support these objectives and encourage strong financial performance on an annual and long-term basis by linking a significant portion of our named executive officers’ total compensation to Company performance in the form of incentive compensation.  The principal elements of the compensation structure for our named executive officers, which are discussed in more detail below, are base salary, annual performance bonus, and equity incentives.
 
Together, we refer to these three elements as total direct compensation.  In addition, the Company offers perquisites and other personal benefits to our named executive officers.  Our named executive officers may also receive special bonuses, in recognition of special circumstances or for superior performance.

The Company’s compensation philosophy is to set our named executive officers’ compensation at levels that will attract, motivate, and retain superior executive talent in a highly competitive environment.  To be consistent with this philosophy, our Compensation Committee aims to set our named executive officers’ total direct compensation between the fiftieth and seventy-fifth percentiles of compensation paid to similar executive positions at companies in the Total Remuneration Survey (the “Retail Survey”) conducted by the Hay Group, an independent compensation consultant engaged by our Compensation Committee, with maximum total direct compensation targeted in the top quartile if superior performance is achieved.  We also reference the proxy compensation data of companies in our peer group.
 
The Retail Survey is comprised of approximately 100 companies in the retail and wholesale industry and provides comparable compensation information by controlling for differences in companies’ revenue size and the differences in the scopes of responsibility of different executives.  Our peer group is comprised of 14 companies in the retail or wholesale industries that primarily conduct business in apparel or related accessories, have revenues between $900 million and $3.8 billion.  In fiscal 2008, our peer group was comprised of the following companies:

Abercrombie & Fitch
 
Gymboree
Aeropostale
 
J. Crew
American Eagle Outfitters
 
Oxford Industries
Chico’s
 
Pacific Sunwear
The Children’s Place
 
Quicksilver
Coach
 
Timberland
Coldwater Creek
 
Tween Brands


 
12

 

Role of the Compensation Committee

Our Compensation Committee sets the total direct compensation of our named executive officers.  Our Compensation Committee also sets the financial performance targets for our named executive officers’ annual performance bonuses and the performance vesting terms for their equity awards.  Our Compensation Committee has engaged the Hay Group to advise it on executive and director compensation matters and provide the Committee with data to benchmark the base salary, annual performance bonus, and long-term equity incentive compensation of our named executive officers.  The Hay Group serves at the direction of the Compensation Committee, and meets privately with the Compensation Committee and with its Chairman.   
 
To maintain the effectiveness of our executive compensation program, and to keep it consistent with our compensation philosophy, our Compensation Committee regularly reviews the reasonableness of our named executive officers’ compensation and compares it with compensation data from the Retail Survey and our peer group.
 
In making compensation determinations for our named executive officers, our Compensation Committee principally takes into account:

            (i)
the nature and scope of each officer’s responsibilities;
 
             (ii)
the Company’s performance; and
 
               (iii)
the comparative compensation data of companies in the Retail Survey and our peer group.

Our Compensation Committee also considers the recommendations of our Chief Executive Officer regarding the base salary, annual performance bonus, and long-term equity incentives of our named executive officers, other than himself.  In addition, our Chief Executive Officer makes recommendations to the Compensation Committee regarding the structure of our executive compensation program generally.  

Total Direct Compensation

In setting a total direct compensation target for each named executive officer, our Compensation Committee considers both objective and subjective factors, including the scope of each officer’s responsibilities, Company performance, prior equity awards, potential future earnings from equity awards, retention needs, and comparative compensation data of companies in the Retail Survey and our peer group.  The Company’s compensation philosophy is to set total direct compensation for each of our named executive officers between the fiftieth and seventy-fifth percentile of similar executive positions at companies in our peer group, and to set our named executive officers total direct compensation in the top quartile if superior performance is achieved.
 
In fiscal 2008, as set forth in more detail in the Fiscal 2008 Summary Compensation Table, the total direct compensation of each of our named executive officers was as follows:
 
   
Total Direct
Compensation
 
Chief Executive Officer
  $ 2,058,187  
Vice President of Finance and Interim Chief Financial Officer
  $ 433,573  
President
  $ 1,749,079  
President of Retail Stores
  $ 1,588,487  
Chief Sourcing Officer
  $ 1,215,830  
Former Chief Executive Officer
  $ 4,829,092  

Although no changes have been made to the Company’s overall compensation philosophy or structure, the Company has taken measures in fiscal 2009 to control and reduce costs in response to current global economic conditions that will impact executive compensation in fiscal 2009.  These measures include holding our employees’ base salaries consistent with 2008 levels, exclusive of employee promotions, including the salaries of our named executive officers, and suspending the Company’s 401(k) matching program, effective April 17, 2009.


 
13

 

Base Salary

The Company’s compensation philosophy is to set our named executive officers’ base salaries at approximately the fiftieth percentile of the base salaries paid to similar executive positions in the Retail Survey and our peer group, while making adjustments in light of the objective and subjective factors discussed above.
 
The following table details the base salaries we provided in fiscal 2008 to each of our named executive officers and their corresponding base salaries for fiscal 2009:

   
Base Salary
 
Named Executive Officer
 
Fiscal 2008
   
Fiscal 2009
 
Michael D. Casey                                                                                
  $ 700,000 (a)   $ 700,000  
Chief Executive Officer
               
                 
Andrew B. North                                                                                
  $ 250,000 (b)   $ 250,000  
Vice President of Finance and Interim Chief Financial Officer
               
                 
Richard F. Westenberger                                                                                
  $ --     $ 400,000 (c)
    Executive Vice President and Chief Financial Officer
               
                 
Joseph Pacifico                                                                                
  $ 650,000     $ 650,000  
President
               
                 
James C. Petty                                                                                
  $ 425,000     $ 425,000  
President of Retail Stores
               
                 
Charles E. Whetzel, Jr.                                                                                
  $ 425,000     $ 425,000  
Executive Vice President and Chief Sourcing Officer
               
                 
Frederick J. Rowan, II                                                                                
  $ 850,000 (d)   $ --  
Former Chairman of the Board and Chief Executive Officer
               
                 
 

 
     (a)  
Prior to his promotion on August 1, 2008 to Chief Executive Officer, Mr. Casey’s base salary was $450,000.  The amount shown reflects his base salary following his promotion.
 
     (b)  
Mr. North served as Interim Chief Financial Officer from August 1, 2008 until January 19, 2009.  Mr. North continues to serve as Vice President of Finance.
 
     (c)  
Mr. Westenberger joined the Company as Executive Vice President and Chief Financial Officer effective January 19, 2009.
 
     (d)  
Mr. Rowan retired as Chief Executive Officer effective August 1, 2008.

Annual Performance Bonus

The Company makes annual cash performance bonuses a significant component of our named executive officers’ targeted total direct compensation, while maintaining the Company’s compensation philosophy to target total direct compensation between the fiftieth and seventy-fifth percentiles of similar executive positions in the Retail Survey and our peer group, and in the top quartile when superior performance is achieved.  We believe this design aligns the interests of our named executive officers with the interests of our shareholders.
 
Our Compensation Committee approves a target bonus for each named executive officer that is based on a percentage of their base salaries.  In establishing these bonus targets, the Compensation Committee considers our named executive officers’ potential total direct compensation in light of the Company’s compensation philosophy and comparative compensation data.  The named executive officers can earn their target bonuses based upon the Company’s achievement of financial performance targets pre-determined by the Compensation Committee.

 
14

 

In accordance with our Amended and Restated Annual Incentive Compensation Plan (the “Incentive Compensation Plan”), for fiscal 2008, the Compensation Committee used three financial performance metrics to determine the amount, if any, of annual performance bonuses to be paid under our Incentive Compensation Plan: net sales (weighted at 25%), adjusted earnings before interest and taxes (“adjusted EBIT”) (weighted at 25%), and adjusted earnings per share (“adjusted EPS”) (weighted at 50%).  Our Compensation Committee selected net sales, adjusted EBIT, and adjusted EPS as performance metrics because it believes they are key financial measures that are aligned with the interests of our shareholders and help to measure the quality of our earnings.
 
Our Compensation Committee has the discretion not to award performance bonuses, even if the Company achieves its financial performance targets, and to take into account personal performance in determining the percentage of each named executive officer’s annual performance bonus to be paid, if any.
 
Our named executive officers could have earned from 0% to 200% of their target performance bonus in fiscal 2008 based upon the Company’s achievement of the following financial targets, weighted at the following percentages:
 
   
Net Sales
($ in billions)
(25%)
   
Adjusted
EBIT
($ in millions)
(25%)
   
Adjusted
EPS
(50%)
 
25% of Target Performance Bonus
  $ 1.447     $ 146.2     $ 1.32  
100% of Target Performance Bonus
  $ 1.490     $ 154.6     $ 1.40  
200% of Target Performance Bonus
  $ 1.560     $ 162.5     $ 1.48  

Based on the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37 in fiscal 2008, our named executive officers', other than our former interim Chief Financial Officer, each earned approximately 62% of their performance bonus target (representing 100% of the net sales target, 0% of the adjusted EBIT target, and 75% of the adjusted EPS target).  Our former interim Chief Financial Officer earned 80% of his performance bonus target.

Internal Revenue Code Section 162(m)

Section 162(m) of the Internal Revenue Code of 1986, as amended, imposes a $1 million limit on the amount that a public company may deduct for compensation paid to a company’s principal executive officer and the company’s three most highly compensated executive officers other than its principal financial officer.  This limitation generally does not apply to performance-based compensation that is awarded under a plan that is approved by the shareholders of a company and that also meets certain other technical requirements.  Our compensation program for our named executive officers generally operates within the deductibility requirements under Section 162(m).  However, the Compensation Committee realizes that exceptions may occur.

Equity Incentives

Our Amended and Restated 2003 Equity Incentive Plan (“Equity Incentive Plan”) allows for various types of equity awards, including stock options, restricted stock, stock appreciation rights, and deferred stock.  Awards under our Equity Incentive Plan are granted to recruit, motivate, and retain employees and in connection with promotions or increased responsibility.  Our Compensation Committee has only awarded time and performance-based stock options and time and performance-based restricted stock, although it could use other forms of equity awards in the future.
 
All awards under our Equity Incentive Plan must be approved by our Compensation Committee.  Our Compensation Committee determines the type, timing, and amount of equity awards granted to each of our named executive officers after considering their previous equity awards, base salary, and target annual performance bonus in light of the Company’s compensation philosophy.  Our Compensation Committee also considers the comparative compensation data in the Retail Survey and our peer group, and our desire to retain and motivate our named executive officers and to align their goals with the long-term goals of our shareholders.
 
Our Compensation Committee’s practice is to approve grants of stock options and restricted stock at regularly scheduled meetings.  Our Compensation Committee may also make equity grants at special meetings or by unanimous written consent.  In the future, our Compensation Committee may select a date subsequent to a regularly scheduled meeting on which to grant equity awards.  Our Compensation Committee sets the exercise prices of equity awards at the closing price of our common stock on the NYSE on the date of grant.
 

 
15

 

In considering the value of equity awards, we calculate the value of stock option awards by using the Black-Scholes option pricing valuation method and the value of restricted stock awards equal to the closing price of our common stock on the date of grant.  In addition, our Compensation Committee regularly reviews the equity ownership of our named executive officers compared to the Company’s minimum ownership guidelines.  Under the Company’s minimum ownership guidelines, no named executive officer can sell Company stock (other than to cover the tax obligations resulting from the vesting of Company restricted stock), unless he owns shares of Company stock with a total market value in excess of a multiple of his base salary.  The multiples for our named executive officers are as follows: Chief Executive Officer and President - seven times their base salary; Chief Sourcing Officer - five times his base salary; our President of Retail Stores and Chief Financial Officer - three times their base salaries.  Each of our named executive officers has complied with these ownership guidelines.
 
In March 2004, our Compensation Committee granted Mr. Casey, then our Chief Financial Officer, 200,000 time-based stock options that vested in five equal, annual installments based on his continued employment with the Company.  In each of February 2006 and February 2007, our Compensation Committee granted Mr. Casey 12,000 stock options and 12,000 shares of restricted stock, each of which vest in four equal, annual installments based on his continued employment with the Company.  In August 2008, following Mr. Casey’s promotion to Chief Executive Officer, our Compensation Committee granted Mr. Casey 125,000 time-based stock options that vest in four equal, annual installments based upon Mr. Casey’s continued employment with the Company.  Mr. Casey was also granted 75,000 performance-based shares of restricted stock.  Fifty percent of these shares will be eligible to vest upon the Company’s reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in fiscal 2010 (over fiscal 2009) of at least 4%.  If this threshold earnings per share growth is achieved in fiscal 2009 and 2010, then these eligible shares will vest, in varying percentages, from 33% to 100%, based on the Company’s compound annual growth rate in earnings per share from fiscal 2009 to 2010 ranging between 4% and 8%.  The remaining 50% of these shares will then vest in equal amounts on December 31, 2011 and December 31, 2012 based on his continued employment with the Company.  In March 2009, Mr. Casey was granted 100,000 time-based stock options and 50,000 shares of restricted stock, each of which vest in four equal, annual installments based on his continued employment with the Company.  Pursuant to a Company policy, while employed by the Company, Mr. Casey shall not sell any of these vested restricted shares, other than to cover any associated tax obligations, until the fourth anniversary of the date of grant.
 
In September 2003, our Compensation Committee granted our former interim Chief Financial Officer and current Vice President of Finance, Mr. North, 22,560 time-based and 37,440 performance-based stock options, each of which vested in five equal, annual installments based on Mr. North’s continued employment with the Company.  In February 2006, our Compensation Committee granted Mr. North 2,800 time-based stock options and 1,200 shares of restricted stock, each of which vest in four equal, annual installments based on his continued employment with the Company.  In each of February 2007 and December 2007, our Compensation Committee granted Mr. North 6,000 time-based stock options and 3,000 shares of restricted stock, each of which vest in four equal, annual installments based on his continued employment with the Company.  In March 2009, our Compensation Committee granted Mr. North 10,000 time-based stock options and 5,000 shares of restricted stock, each of which vest in four equal, annual installments based on his continued employment with the Company.
 
In February 2009, our Compensation Committee granted our current Chief Financial Officer, Mr. Westenberger, 20,000 time-based stock options and 10,000 shares of restricted stock, each of which vest in four equal, annual installments based upon Mr. Westenberger’s continued employment with the Company.  Pursuant to a Company policy, while employed by the Company, Mr. Westenberger shall not sell any of these vested restricted shares, other than to cover any associated tax obligations, until the fourth anniversary of the date of grant.
 
In March 2004, our Compensation Committee granted our President 200,000 time-based stock options that vested in five equal, annual installments based on Mr. Pacifico’s continued employment with the Company.  In November 2005, we granted our President 200,000 performance-based stock options.  These options vest in February 2010 based upon Mr. Pacifico’s continued employment with the Company, the Company’s achievement of fiscal 2009 adjusted net income of at least $116 million, and an individual performance criterion.  In fiscal 2007, we made assumptions that these performance criteria will not be met and that these shares will not vest.  In July 2008, our Compensation Committee granted our President 200,000 time-based stock options that vest in three equal, annual installments based on Mr. Pacifico’s continued employment with the Company.
 
In June 2007, our Compensation Committee granted our President of Retail Stores 40,000 time-based stock options and 10,000 shares of restricted stock, each of which vest in four equal, annual installments based upon Mr. Petty’s continued employment with the Company.  In July 2008, our Compensation Committee granted our President of Retail Stores 75,000 time-based stock options and 25,000 shares of restricted stock, each of which vest in four equal, annual installments based upon Mr. Petty’s continued employment with the Company.  In March 2009, Mr. Petty was granted 25,000 time-based stock options and 7,000 shares of restricted stock, each of which vest in four equal, annual installments based on his continued employment with the Company.  Pursuant to a Company policy, while employed by the Company, Mr. Petty shall not sell any of these vested restricted shares, other than to cover any associated tax obligations, until the fourth anniversary of the date of grant.
 

 
16

 

 
In May 2005, our Compensation Committee granted our Chief Sourcing Officer 60,000 stock options that vest in four equal, annual installments based on Mr. Whetzel’s continued employment with the Company.  In May 2005, our Compensation Committee also granted our Chief Sourcing Officer 40,000 shares of restricted stock that cliff vest in May 2009 based on Mr. Whetzel’s continued employment with the Company.  In July 2008, our Compensation Committee granted our Chief Sourcing Officer 40,000 stock options and 10,000 shares of restricted stock, each of which vest in four equal, annual installments based on Mr. Whetzel’s continued employment with the Company.  In March 2009, Mr. Whetzel was granted 20,000 time-based stock options and 5,000 shares of restricted stock, each of which vest in four equal, annual installments based on his continued employment with the Company.  Pursuant to a Company policy, while employed by the Company, Mr. Whetzel shall not sell any of these vested restricted shares, other than to cover any associated tax obligations, until the fourth anniversary of the date of grant.
 
In May 2005, our Compensation Committee granted our former Chief Executive Officer 400,000 performance-based stock options.  These options were scheduled to vest in varying percentages in February 2009 based upon Mr. Rowan’s continued employment with the Company, the Company’s achievement of specified levels of fiscal 2008 adjusted net income ranging from $75 million to $100 million, and an individual performance criterion.  Due to Mr. Rowan’s retirement, which was treated as a termination for "good reason," the vesting of these options was accelerated.

Employment Agreements
 
The Company maintains employment agreements that provide our Chief Executive Officer and certain named executive officers with, among other things, minimum base salary levels, annual performance bonus targets, and severance benefits.  The material terms of these agreements are summarized briefly below.
 
Michael D. Casey
 
Mr. Casey served as Chief Financial Officer in fiscal 2008 through July 31, 2008, and as Chief Executive Officer for the remainder of fiscal 2008.  In accordance with the terms of Mr. Casey's employment agreement, which was entered into in August 2001, his base salary shall be no less than $250,000, and his annual performance bonus target shall be no less than 65% of his base salary.  Mr. Casey entered into his employment agreement prior to his promotion to Chief Executive Officer.  In recognition of this, and taking into consideration comparative compensation data, the Compensation Committee set Mr. Casey’s fiscal 2008 base salary as Chief Financial Officer at $450,000 and his performance bonus target at 87.5% of his base salary, and set his fiscal 2008 base salary as Chief Executive Officer at $700,000 and his performance bonus target at 150% of his base salary.  It is expected that the Company and Mr. Casey will enter into a new employment agreement that reflects Mr. Casey's promotion to Chief Executive Officer.  Based upon the achievement of the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr. Casey received an annual performance bonus of $651,000, or 93% of his most recent base salary and 62% of his target incentive.
 
Joseph Pacifico
 
In accordance with the terms of our President’s employment agreement entered into in August 2001, his base salary shall be no less than $420,000 and his annual performance bonus target shall be no less than 65% of his base salary.  Mr. Pacifico entered into this employment agreement prior to being promoted to President in June 2004.  In recognition of an increase in the scope of his responsibilities resulting from his promotion to President, and taking into consideration comparative compensation data, the Compensation Committee set our President’s fiscal 2008 base salary at $650,000 and his performance bonus target at 100% of his base salary.  Based upon the achievement of the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr. Pacifico received an annual performance bonus of $403,000, or 62% of his most recent base salary and of his target incentive.
 
James C. Petty
 
In accordance with the terms of our President of Retail Stores’ employment agreement entered into in May 2008, his base salary shall be no less than $400,000 and his annual performance bonus target shall be no less than 75% of his base salary.  In fiscal 2008, we set our President of Retail Stores’ base salary at $425,000 and his performance bonus target at 75% of his base salary.  Based upon the achievement of the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr. Petty received an annual performance bonus of $200,000, or 47% of his most recent base salary and 62% of his target incentive.
 

 
17

 

Charlie E. Whetzel, Jr.
 
In accordance with the terms of our Chief Sourcing Officer’s employment agreement entered into in August 2001, his base salary shall be no less than $285,000 and his annual performance bonus target shall be no less than 65% of his base salary.  Mr. Whetzel entered into his employment agreement prior to his promotion to Chief Sourcing Officer and an increase in the scope of the responsibilities of his position.  In recognition of this, and taking into consideration comparative compensation data, the Compensation Committee set our Chief Sourcing Officer’s fiscal 2008 base salary at $425,000 and his performance bonus target at 87.5% of his base salary.  Based upon the achievement of the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, Mr. Whetzel received an annual performance bonus of $230,563, or 54% of his most recent base salary and 62% of his target incentive.
 
Richard F. Westenberger
 
In accordance with the terms of our Chief Financial Officer’s employment arrangement entered into in January 2009, his base salary shall be no less than $400,000 and his annual performance bonus target shall be no less than 75% of his base salary.

Potential Payments Upon a Termination or Change in Control

Termination

In the event that our Chief Executive Officer, President, or Chief Sourcing Officer is terminated by the Company for “cause,” retires, becomes disabled, or dies, the executive or his estate will be provided his base salary and fringe, medical, and other benefits through the termination of his employment.  If any of these named executive officers is terminated “without cause,” or if any of these named executive officers terminates his employment for “good reason,” the named executive officer shall receive his base salary and medical and dental benefits for 24 months following the date of his termination, provided the named executive officer complies with confidentiality, intellectual property assignment, non-competition, and non-solicitation obligations, which generally last for a period of one to two years.

Our Chief Executive Officer, President, or Chief Sourcing Officer shall also receive the annual performance bonus that he would have earned as if he had been employed at the end of the year in which his employment was terminated.  The determination of whether an annual performance bonus is payable to the named executive officer may take into account whether the Company achieved its performance targets, but may not take into account whether personal performance targets for the named executive officer were achieved.  The vesting of equity incentives for these named executive officers is not required to be accelerated in the event of a termination of employment.  The total payments made to these named executive officers shall comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.

In the event, our President of Retail Stores is terminated by the Company for “cause,” resigns, or dies, the executive or his estate will be provided his base salary through the termination of his employment.  If our President of Retail Stores becomes disabled, the executive shall continue to receive his base salary and fringe benefits until the Company terminates his employment for disability.  If our President of Retail Stores is terminated “without cause,” or if he terminates his employment for “good reason,” he shall receive his base salary for 24 months following the date of his termination, provided the executive officer complies with confidentiality, intellectual property assignment, non-competition, and non-solicitation obligations, which generally last for a period of two years.

In the event our Chief Financial Officer is terminated by the Company for “cause,” he shall receive his base salary then in effect, together with medical and dental benefits, for 12 months following the date of his termination.  In addition, our Chief Financial Officer shall also receive the annual performance bonus, if any, pro-rated for the amount of time he was employed by the Company in the year in which his employment was terminated.

Our former interim Chief Financial Officer and current Vice President of Finance is eligible for severance compensation in accordance with the Company’s general severance policy, which provides one week of severance for each year of service in the case of termination.

In determining whether a termination occurred with or without “cause,” “cause” is generally deemed to exist when the named executive officer has: been convicted of a felony (or the entering of a plea of guilty or no contest to a felony); committed an act of fraud involving an act of dishonesty for personal gain which is materially injurious to the Company; willfully breached his obligations of confidentiality, intellectual property assignment, non-competition, or non-solicitation against the Company; willfully engaged in gross misconduct which is materially injurious to the Company; or, after a cure period, willfully refused to perform his duties.

 
18

 

In determining whether a named executive officer, with the exception of our President of Retail Stores, has “good reason” to terminate his employment, “good reason” is generally deemed to exist when the Company has: materially reduced a named executive officer’s duties, responsibilities, or status; assigned to the executive a material amount of additional duties that are significantly inconsistent with his previous duties; required the executive to relocate; or materially breached his employment agreement.  In determining whether our President of Retail Stores has “good reason” to terminate his employment, “good reason” is generally deemed to exist when the Company has materially reduced the President of Retail Stores’ duties, responsibilities, or status, or materially breached his employment agreement.

Based upon a hypothetical termination “without cause” or for “good reason” as of January 3, 2009, the severance and other benefits certain of our named executive officers would have been entitled to are as follows:

   
Chief
Executive
Officer
   
Interim
Chief
Financial
Officer
   
President
   
President
of Retail
Stores
   
Chief
Sourcing
Officer
 
Base Salary 
  $ 1,400,000     $ 28,846     $ 1,300,000     $ 850,000     $ 850,000  
Performance Bonus                                              
    651,000       --       403,000       --       230,563  
Health and Other Benefits 
    29,170       --       29,170       --       29,170  
Total                                        
  $ 2,080,170     $ 28,846     $ 1,732,170     $ 850,000     $ 1,109,733  

In addition, our named executive officers, with the exception of our former interim Chief Financial Officer, are entitled to receive any benefits that they would have been entitled to under our 401(k) plan and supplemental retirement plans, if any.  These severance benefits are provided under the terms of each of our named executive officers’ employment agreements, if any.

Change in Control

In the event of a change in control of the Company, all unvested stock options shall vest and the Compensation Committee has the ability to remove the vesting restrictions on all unvested shares of restricted stock.  The closing price on the NYSE of the Company’s common stock on the last trading day of fiscal 2008 was $19.24 per share.  Based upon a hypothetical change in control of the Company on January 3, 2009, the intrinsic value of accelerated stock option vesting and the value of accelerated vesting of restricted shares for our named executive officers would have been as follows:

   
Chief
Executive
Officer
   
Interim
Chief
Financial
Officer
   
President
   
President
of  Retail
Stores
   
Chief
Sourcing
Officer
 
Option Value                                              
  $ 344,900     $ --     $ 1,189,400     $ 379,500     $ 202,400  
Restricted Stock Value                                              
    1,731,600       98,124       --       625,300       962,000  
Total Value        
  $ 2,076,500     $ 98,124     $ 1,189,400     $ 1,004,800     $ 1,164,400  

Retirement Benefits of Former Chief Executive Officer

    In connection with Mr. Rowan's retirement, the Company paid Mr. Rowan severance benefits of $346,538 in fiscal 2008 and $78,462 in fiscal 2009, and a lump sum payment of $1,947,020 in fiscal 2009.  In addition, Mr. Rowan was entitled to receive the annual performance bonus that he would have earned had he been employed at the end of fiscal 2008.  Under the terms of his employment agreement, Mr. Rowan’s annual performance bonus target shall be no less than 150% of his base salary.  In fiscal 2008, the Compensation Committee set our former Chief Executive Officer’s performance bonus target at 150% of his base salary.  Based upon the achievement of the Company’s net sales of $1.5 billion, adjusted EBIT of $143.4 million, and adjusted EPS of $1.37, our former Chief Executive Officer received an annual performance bonus of $790,500, or 93% of his base salary and 62% of his target incentive.
 

 
19

 

As part of Mr. Rowan’s employment agreement, the Company provided him with a supplemental executive retirement plan (“SERP”) which provides a defined benefit according to a formula based on his final average annual salary during the highest 36 consecutive months of his last 60 months of employment, offset by other external retirement benefits and Social Security benefits to which he is entitled.  Based on the value of his other retirement and Social Security benefits, Mr. Rowan began to receive his monthly benefit payment of $18,990 starting in August 2008 and will continue to receive $227,878 annually for his lifetime.  The plan is fully funded through two insurance policies, and the Company was not required to make any premium payments in fiscal 2008.  The Company included taxable income of $17,855 in Mr. Rowan’s income, representing the taxes on the increase in the present value of the accumulated benefit in fiscal 2008 up to the date of his retirement and associated tax gross-up.
 
Pursuant to his employment agreement, the Company had also provided Mr. Rowan with life insurance equal to 250% of his annual base salary.  This life insurance benefit was provided through two split-dollar life insurance policies.  Upon Mr. Rowan’s retirement on August 1, 2008, the split-dollar arrangement was terminated and $891,922 of the cash value of the policies was used to reimburse the Company for premium payments made prior to fiscal 2003.  Upon termination of the split-dollar arrangement, Mr. Rowan incurred $816,396 of taxable compensation which was included in his fiscal 2008 taxable income.  This amount consisted of a cash surrender value of $483,804 and associated tax gross-up of $332,592.

Perquisites and Other Benefits

The Company provides perquisites and other benefits to our Chief Executive Officer, President, and Chief Sourcing Officer, and in fiscal 2008, to our former Chief Executive Officer.  In fiscal 2008, the Compensation Committee established a perquisite allowance from which these named executive officers were reimbursed for certain perquisites, including automobile allowances, financial and tax planning, health club dues, and related tax gross-up payments.  Amounts from the perquisite allowance that remain unused at the end of the fiscal year are forfeited.
 
The fiscal 2008 perquisite allowances for certain of our named executive officers were:

   
Chief
Executive
Officer
   
President
   
Chief
Sourcing
Officer
   
Former Chief
Executive
Officer
 
Perquisite Allowance
  $ 30,000     $ 45,000     $ 30,000     $ 35,000 (a)
 

 
  (a)  
Pro-rated to reflect his retirement on August 1, 2008.

In addition to the perquisite allowances, our President is provided a country club membership.  Our former Chief Executive Officer was provided a country club membership in fiscal 2008 during his employment.  Additional information on named executive officer perquisites can be found in the footnotes to the Fiscal 2008 Summary Compensation Table on page 22 of this proxy statement.

Pursuant to the Company’s 401(k) plan, in fiscal 2008, the Company provided its executives the same level of matching contributions available to all eligible employees, which is equal to 100% of each named executive officer’s first 3% of pre-tax contributions and 50% of each executive officer’s next 2% of pre-tax contributions each year, subject to Internal Revenue Service limitations.  In fiscal 2008, each of our named executive officers, with the exception of our former interim Chief Financial Officer, received $9,200 in matching contributions.  Our former interim Chief Financial Officer received $6,200 in matching contributions in fiscal 2008.  Effective April 17, 2009, the Company has suspended this matching contribution for all employees, including our named executive officers.

The Company also made premium payments on behalf of certain of our named executive officers, on their personally owned insurance policies.  In fiscal 2008, including the associated tax gross-ups, the Company made payments of $69,505 on behalf of our Chief Executive Officer, $192,876 on behalf of our President, and $99,043 on behalf of our Chief Sourcing Officer.

The Company also provides our Chief Executive Officer, President, Chief Sourcing Officer, and former Chief Executive Officer with an excess supplementary health insurance policy that reimburses our executives for certain qualified health expenses not covered under the Company’s ERISA medical plan.

 
20

 

COMPENSATION COMMITTEE REPORT
 
The Compensation Committee of the Board has reviewed and discussed with Company management the Compensation Discussion and Analysis included in this proxy statement.  Based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement for filing with the SEC.
 

 
Submitted by the Compensation Committee
 
Mr. Paul Fulton, Chairman
Mr. A. Bruce Cleverly
Mr. John R. Welch
 


 
21

 

FISCAL 2008 SUMMARY COMPENSATION TABLE
 
The table below provides information concerning the compensation of our named executive officers.

In the “Salary” column, we disclose the base salary paid to each of our named executive officers during fiscal 2008, 2007, and 2006.

In the “Bonus” column, we disclose the cash bonuses earned during fiscal 2008, 2007, and 2006, other than amounts earned pursuant to the Company’s Incentive Compensation Plan.

In the “Stock Awards” and “Option Awards” columns, we disclose the fiscal 2008, 2007, and 2006 compensation expense the Company recorded in accordance with SFAS 123R relating to awards of stock or options, without a reduction for assumed forfeitures.  For restricted stock, the SFAS 123R fair value is calculated using the closing price on the NYSE of our stock on the date of grant and the related expense is recorded ratably over the vesting period.  For time-based and performance-based stock options, the SFAS 123R fair value is calculated based on assumptions summarized in Note 6 to our audited consolidated financial statements, which are included in our fiscal 2008 Annual Report on Form 10-K.  For time-based stock options, we recognize the related expense ratably over the vesting period.  For performance-based stock options and restricted stock awards that cliff vest, if we assume the performance criteria will be met and restricted stock awards will cliff vest, we record the related expense ratably over the vesting period.

In the column “Non-Equity Incentive Plan Compensation,” we disclose the dollar value of all compensation earned in fiscal 2008, 2007, and 2006 pursuant to the Company’s Incentive Compensation Plan.

In the column “Nonqualified Deferred Compensation Earnings,” we disclose the dollar value of any earnings from an aggregate change in the actuarial present value of the named executive officers accumulated benefit under all defined benefit and pension plans.

In the column “All Other Compensation,” we disclose the dollar value of all other compensation that could not properly be reported in other columns of the Fiscal 2008 Summary Compensation Table, including perquisites, amounts reimbursed for the payment of taxes, and insurance premiums paid by the Company for the benefit of our named executive officers.

Name and Principal Position
 
Fiscal
Year
 
Salary
($)
   
Bonus
($)
   
Stock
Awards
($)
(b)
   
Option
Awards
($)
(c)
   
Non-Equity
Incentive Plan
Compensation
($)
   
Nonqualified
Deferred
Compensation
Earnings
($)
(d)
   
All Other
Compensation
($)
(e)
   
Total
($)
 
                                                     
Michael D. Casey                                 
 
2008
  $ 540,385 (a)   $ --     $ 309,716     $ 435,586     $ 651,000     $ --     $ 121,500     $ 2,058,187  
Chief Executive Officer
 
2007
  $ 375,000     $ --     $ 160,369     $ 334,134     $ --     $ --     $ 124,459     $ 993,962  
(previously Chief Financial Officer)
 
2006
  $ 375,000     $ --     $ 89,689     $ 302,069     $ 328,125     $ --     $ 119,036     $ 1,213,919  
                                                                     
Andrew B. North                                 
 
2008
  $ 232,115     $ --     $ 31,262     $ 63,996     $ 100,000     $ --     $ 6,200     $ 433,573  
Vice President of Finance and
                                                                   
   Interim Chief Financial Officer
                                                                   
                                                                     
Joseph Pacifico                                 
 
2008
  $ 642,308     $ --     $ --     $ 432,210     $ 403,000     $ --     $ 271,561     $ 1,749,079  
President
 
2007
  $ 600,000     $ --     $ --     $ 261,446     $ --     $ --     $ 264,148     $ 1,125,594  
   
2006
  $ 600,000     $ --     $ --     $ 880,962     $ 600,000     $ --     $ 284,210     $ 2,365,172  
                                                                     
James C. Petty                                 
 
2008
  $ 412,500     $ 593,596 (f)   $ 113,334     $ 177,158     $ 200,000     $ --     $ 91,899     $ 1,588,487  
President of Retail Stores
                                                                   
                                                                     
Charles E. Whetzel, Jr.                                 
 
2008
  $ 417,308     $ --     $ 241,507     $ 162,232     $ 230,563     $ --     $ 164,220     $ 1,215,830  
Executive Vice President and
 
2007
  $ 375,000     $ --     $ 219,297     $ 130,195     $ --     $ --     $ 159,390     $ 883,882  
Chief Sourcing Officer
 
2006
  $ 375,000     $ --     $ 219,297     $ 130,193     $ 328,125     $ --     $ 153,105     $ 1,205,720  
                                                                     
Frederick J. Rowan, II                                 
 
2008
  $ 497,615     $ --     $ --     $ 2,241,343     $ 790,500     $ 10,581     $ 1,289,053     $ 4,829,092  
Former Chairman of the Board and
 
2007
  $ 812,000     $ --     $ --     $ 326,666     $ --     $ 0     $ 150,432     $ 1,289,098  
Chief Executive Officer
 
2006
  $ 812,000     $ 1,000,000 (g)   $ --     $ 849,172     $ 1,218,000     $ 0     $ 143,603     $ 4,022,775  
                                                                     
 


 
22

 
(a)
Prior to Mr. Casey’s promotion to Chief Executive Officer on August 1, 2008, his base salary for the 2008 fiscal year was $450,000.  After his promotion and for the balance of the 2008 fiscal year, his base salary was $700,000.
 
  (b) 
The amounts disclosed in this column for Messrs. Casey, North, Petty, and Whetzel reflect the expense we recorded in accordance with SFAS 123R for the following grants:
 
        (i)
Mr. Casey was granted 12,000 shares of restricted stock on each of February 16, 2006 and February 15, 2007 with a grant date fair value of $34.32 and $22.19 per share, respectively.  Both grants vest in four equal, annual installments following the date of grant.  Mr. Casey was also granted 75,000 shares of performance-based restricted stock on August 7, 2008 with a grant date fair value of $17.92 per share.  Fifty percent of these shares will be eligible to vest upon the Company’s reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in fiscal 2010 (over fiscal 2009) of at least 4%.  If this threshold earnings per share growth is achieved in fiscal 2009 and 2010, then these eligible shares will vest, in varying percentages, from 33% to 100%, based on the Company’s compound annual growth rate in earnings per share from fiscal 2009 to 2010 ranging between 4% and 8%.  The remaining 50% of these shares will then vest in equal amounts on December 31, 2011 and December 31, 2012 based on his continued employment with the Company.  In fiscal 2008, we have assumed that these performance criteria will be met and that these shares will vest.  
 
       (ii)
Mr. North was granted 1,200 shares of restricted stock on February 16, 2006 with a grant date fair value of $34.32 per share, 3,000 shares of restricted stock on February 15, 2007 with a grant date fair value of $22.19 per share, and 3,000 shares of restricted stock on December 3, 2007 with a grant date fair value of $22.79 per share.  These grants vest in four equal, annual installments following the date of grant.
 
      (iii)
Mr. Petty was granted 10,000 shares of restricted stock on June 5, 2007 with a grant date fair value of $27.06 per share.  Mr. Petty was also granted 25,000 shares of restricted stock on July 1, 2008 with a grant date fair value of $14.18 per share.  Both grants vest in four equal, annual installments following the date of grant.
 
      (iv)
Mr. Whetzel was granted 40,000 shares of restricted stock on May 13, 2005 with a grant date fair value of $22.01 per share.  These shares cliff vest on May 13, 2009.  We have assumed these shares will vest on May 13, 2009, and in accordance with SFAS 123R, we record expense for these grants ratably over the four-year vesting period.  Mr. Whetzel was also granted 10,000 shares of restricted stock on July 1, 2008 with a grant date fair value of $14.18 per share.  These shares vest in four equal, annual installments following the date of grant.
 
 (c)
The amounts disclosed in this column represent the expense we recorded in accordance with SFAS 123R for the following grants:
 
        (i)
Mr. Casey was granted 200,000 time-based stock options on March 22, 2004 with a Black-Scholes fair value of $6.56 per share and an exercise price of $14.81 per share.  These shares vest in five equal, annual installments following the date of grant.  Mr. Casey was also granted 12,000 time-based stock options on February 16, 2006 with a Black-Scholes fair value of $15.59 per share and an exercise price of $34.32 per share, 12,000 time-based stock options on February 15, 2007 with a Black-Scholes fair value of $10.01 per share and an exercise price of $22.19 per share, and 125,000 time-based stock options on August 6, 2008 with a Black-Scholes fair value of $7.13 per share and an exercise price of $17.90 per share.  The stock options granted to Mr. Casey in fiscal 2006, 2007, and 2008 vest in four equal, annual installments following the date of grant.
 
       (ii)
Mr. North was granted 60,000 time-based stock options on September 17, 2003 with a Black-Scholes fair value of $4.88 per share and an exercise price of $6.98 per share.  These shares vest in five equal, annual installments following the date of grant.  Mr. North was also granted 2,800 time-based stock options on February 16, 2006 with a Black-Scholes fair value of $15.59 per share and an exercise price of $34.32 per share, 6,000 time-based stock options on February 15, 2007 with a Black-Scholes fair value of $10.01 per share and an exercise price of $22.19 per share, and 6,000 time-based stock options on December 3, 2007 with a Black-Scholes fair value of $9.15 per share and an exercise price of $22.79 per share.  The stock options granted to Mr. North in fiscal 2006 and 2007 vest in four equal, annual installments following the date of grant.
 
      (iii)
Mr. Pacifico was granted 200,000 time-based stock options on March 22, 2004 with a Black-Scholes fair value of $6.56 per share and an exercise price of $14.81 per share.  These shares vest in five equal, annual installments following the date of grant.  Mr. Pacifico was also granted 200,000 performance-based stock options on November 10, 2005 with a Black-Scholes fair value of $12.68 and an exercise price of $31.18 per share.  Subject to the achievement of individual and Company performance targets, these stock options vest in February 2010.  In fiscal 2007, we assumed these performance criteria will not be met and that these shares will not vest.  Prior to fiscal 2007, we assumed that 100% of these shares would vest.  In accordance with SFAS 123R, we record performance-based stock option expense based upon the probability of performance target achievement, and we adjust any previously recorded expense if assumptions regarding the achievement of performance targets change.  Mr. Pacifico was granted 200,000 time-based stock options on July 1, 2008 with a Black-Scholes fair value of $4.89 per share and an exercise price of $14.18 per share.  These shares vest in three equal, annual installments following the date of grant.
 
      (iv)
Mr. Petty was granted 40,000 time-based stock options on June 5, 2007 with a Black-Scholes fair value of $12.15 per share and an exercise price of $27.06 per share.  Mr. Petty was also granted 75,000 time-based stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per share and an exercise price of $14.18 per share.  These shares vest in four equal, annual installments following the date of grant.
 
       (v)
Mr. Whetzel was granted 60,000 time-based stock options on May 13, 2005 with a Black-Scholes fair value of $8.71 per share and an exercise price of $22.01 per share.  Mr. Whetzel was also granted 40,000 time-based stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per share and an exercise price of $14.18 per share.  Both grants vest in four equal, annual installments following the date of grant.
 
           (vi)
Mr. Rowan was granted 400,000 performance-based stock options on May 13, 2005 with a Black-Scholes fair value of $7.76 per share and an exercise price of $22.01 per share.  These stock options were scheduled to vest in February 2009, subject to the achievement of individual and Company performance criteria.  Due to Mr. Rowan’s termination for "good reason" on August 1, 2008, the vesting of these shares was accelerated and the Company recognized approximately $2.2 million of stock-based compensation expense during fiscal 2008, in accordance with SFAS 123R.
 
 (d) 
Amount represents the increase in the present value of Mr. Rowan’s SERP in fiscal 2008.
 
  (e) 
The amounts shown as “All Other Compensation” for fiscal 2008 consist of the following:
 
Name
 
Insurance
Premium
Payments
(i)
   
Excess
Personal
Liability
Insurance
Premiums
   
Medical
Reimbursements
(ii)
   
401(k)
Company
Match
   
Perquisites
(iii)
   
Severance Compensation
(iv)
   
Relocation
   
Tax
Gross-Ups
(v)
   
Total
 
Michael D. Casey
  $ 40,000     $ 3,400     $ 5,777     $ 9,200     $ 30,315     $ --     $ --     $ 32,808     $ 121,500  
Andrew B. North
  $ --     $ --     $ --     $ 6,200     $ --     $ --     $ --     $ --     $ 6,200  
Joseph Pacifico
  $ 111,000     $ 3,400     $ 9,603     $ 9,200     $ 41,502     $ --     $ --     $ 96,856     $ 271,561  
James C. Petty
  $ --     $ --     $ --     $ 9,200     $ --     $ --     $ 74,085     $ 8,614     $ 91,899  
Charles E. Whetzel, Jr.
  $ 57,000     $ 3,400     $ 20,069     $ 9,200     $ 24,194     $ --     $ --     $ 50,357     $ 164,220  
Frederick J. Rowan, II
  $ --     $ 3,400     $ 5,992     $ 9,200     $ 36,413     $ 878,239     $ --     $ 355,809     $ 1,289,053  
 
 
 
       (i)
Payments to Messrs. Casey, Pacifico, and Whetzel relate to contributions made to individual whole-life insurance policies paid by the Company.
 
      (ii)
Amounts relate to medical reimbursements and related costs pursuant to a supplemental executive medical reimbursement plan.
 

 
23

 


 
      (iii)
Mr. Casey’s perquisites are comprised of $26,906 for automobile-related costs, $1,909 for a health club membership, $750 for financial planning, and $750 for a service award; Mr. Pacifico’s perquisites are comprised of $26,728 for automobile-related costs, $6,376 for a health club membership, $4,298 for country club dues, and $4,100 for financial planning; Mr. Whetzel’s perquisites are comprised of $18,360 for automobile-related costs, $3,925 for financial planning, and $1,909 for a health club membership; and Mr. Rowan’s perquisites are comprised of $18,545 for financial planning, $9,823 for fundraising activities, $3,097 for automobile-related costs, $2,997 for country club dues, and $1,951 in reimbursable medical expense pursuant to his separation agreement.
 
      (iv)
Mr. Rowan’s severance compensation is comprised of $483,804 related to the termination of his split-dollar arrangement, $346,538 of severance benefits, and $47,897 for office furniture given to Mr. Rowan.
 
       (v)
Mr. Casey’s gross-ups are comprised of $29,505 for insurance premium payments, $2,508 for excess personal liability insurance, $435 for automobile-related costs, and $360 for a service award; Mr. Pacifico’s gross-ups are comprised of $81,876 for insurance premium payments, $7,796 for automobile-related costs, $4,676 for county club dues, and $2,508 for excess personal liability insurance; Mr. Petty’s gross-up is comprised of $8,614 for relocation reimbursements; Mr. Whetzel’s gross-ups are comprised of $42,043 for insurance premium payments, $5,806 for automobile-related costs, and $2,508 for excess personal liability insurance; and Mr. Rowan’s gross-ups are comprised of $332,592 for insurance premium payments, $9,785 for financial planning, $7,274 for the increase in the present value of his SERP agreement, $2,508 for excess personal liability insurance, $2,211 for country club dues, and $1,439 for reimbursable medical expenses.
 
  (f)
Special one-time bonus related to the reimbursement for a loss on sale of Mr. Petty’s former residence and associated tax gross-ups.
 
  (g)
Bonus award earned in fiscal 2006 based on the Company’s achievement of performance criteria related to the integration of OshKosh.  This award was paid in fiscal 2007.
 

 
24

 

FISCAL 2008 GRANTS OF PLAN-BASED AWARDS
 
The following table provides information concerning each grant of plan-based awards made to a named executive officer in fiscal 2008.  This includes incentive compensation awards granted under our Incentive Compensation Plan and stock option and restricted stock awards granted under our Equity Incentive Plan.  The threshold, target, and maximum columns reflect the range of estimated payouts under these plans for fiscal 2008.  The exercise price disclosed is equal to the closing market price of our common stock on the date of grant.  The last column reports the aggregate SFAS 123R value of all awards made in fiscal 2008 as if they were fully vested on the grant date.
 
           
Estimated Future Payouts Under
Non-Equity Incentive Plan Awards (a)
   
Estimated Future Payouts Under
Equity Incentive Plan Awards
             
Name
Award
Type
 
Equity
Award
Grant
Date
   
Threshold
($)
   
Target
($)
   
Maximum
($)
   
Threshold
(#)
   
Target
(#)
   
Maximum
(#)
   
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
   
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
 
                                                         
Michael D. Casey
Cash Bonus
    --     $ 262,500     $ 1,050,000     $ 2,100,000       --       --       --     $ --     $ --  
 
Shares (b)
 
8/7/2008
    $ --     $ --     $ --       --       75,000       75,000     $ --     $ 1,344,000  
 
Options (c)
 
8/6/2008
    $ --     $ --     $ --       --       125,000       125,000     $ 17.90     $ 891,250  
                                                                           
Andrew B. North
Cash Bonus
    --     $ 31,250     $ 125,000     $ 250,000       --       --       --     $ --     $ --  
 
Shares
    --     $ --     $ --     $ --       --       --       --     $ --     $ --  
 
Options
    --     $ --     $ --     $ --       --       --       --     $ --     $ --  
                                                                           
Joseph Pacifico
Cash Bonus
    --     $ 162,500     $ 650,000     $ 1,300,000       --       --       --     $ --     $ --  
 
Shares
    --     $ --     $ --     $ --       --       --       --     $ --     $ --  
 
Options (d)
 
7/1/2008
    $ --     $ --     $ --       --       200,000       200,000     $ 14.18     $ 978,000  
                                                                           
James C. Petty
Cash Bonus
    --     $ 79,688     $ 318,750     $ 637,500       --       --       --     $ --     $ --  
 
Shares (e)
 
7/1/2008
    $ --     $ --     $ --       --       25,000       25,000     $ --     $ 354,500  
 
Options (f)
 
7/1/2008
    $ --     $ --     $ --       --       75,000       75,000     $ 14.18     $ 436,500  
                                                                           
Charles E. Whetzel, Jr.
Cash Bonus
    --     $ 92,969     $ 371,875     $ 743,750       --       --       --     $ --     $ --  
 
Shares (e)
 
7/1/2008
    $ --     $ --     $ --       --       10,000       10,000     $ --     $ 141,800  
 
Options (f)
 
7/1/2008
    $ --     $ --     $ --       --       40,000       40,000     $ 14.18     $ 232,800  
                                                                           
Frederick J. Rowan, II
Cash Bonus
    --     $ 318,750     $ 1,275,000     $ 2,550,000       --       --       --     $ --     $ --  
 
Shares
    --     $ --     $ --     $ --       --       --       --     $ --     $ --  
 
Options
    --     $ --     $ --     $ --       --       --       --     $ --     $ --  
                                                                           
 
 
  (a)
The amounts shown under “Threshold” represent 25% of the target performance bonus, assuming threshold level performance is achieved for all performance measures.  The amounts shown under “Target” represent 100% of the target performance bonus.  The amounts shown under “Maximum” represent 200% of the target performance bonus.
 
  (b)
Shares of performance-based restricted stock granted to Mr. Casey on August 7, 2008 pursuant to the Company’s Equity Incentive Plan.  Fifty percent of these shares will be eligible to vest upon the Company’s reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in fiscal 2010 (over fiscal 2009) of at least 4%.  If this threshold earnings per share growth is achieved in fiscal 2009 and 2010, then these eligible shares will vest, in varying percentages, from 33% to 100%, based on the Company’s compound annual growth rate in earnings per share from fiscal 2009 to 2010 ranging between 4% and 8%.  The remaining 50% of these shares will then vest in equal amounts on December 31, 2011 and December 31, 2012 based on his continued employment with the Company.  In fiscal 2008, we have assumed that these performance criteria will be met and that these shares will vest.
 
  (c)
Time-based stock options granted to Mr. Casey on August 6, 2008 pursuant to the Company’s Equity Incentive Plan.  These stock options vest ratably in four equal, annual installments following the date of grant.

 (d)
Time-based stock options granted to Mr. Pacifico on July 1, 2008 pursuant to the Company’s Equity Incentive Plan.  These stock options vest ratably in three equal, annual installments following the date of grant.

(e)
Shares of restricted stock granted to Mr. Petty and Mr. Whetzel on July 1, 2008 pursuant to the Company’s Equity Incentive Plan.  These restricted shares vest ratably in four equal, annual installments following the date of grant.

(f)
Time-based stock options granted to Mr. Petty and Mr. Whetzel on July 1, 2008 pursuant to the Company’s Equity Incentive Plan.  These stock options vest ratably in four equal, annual installments following the date of grant.



 
25

 

OPTION EXERCISES AND STOCK VESTED IN FISCAL 2008
 
The following table provides information concerning our named executive officers’ exercises of stock options and vesting of restricted stock during fiscal 2008.  The table reports, on an aggregate basis, the number of securities acquired upon exercise of stock options, the dollar value realized upon exercise of stock options, the number of shares of restricted stock that have vested, and the dollar value realized upon the vesting of restricted stock.
 
   
Option Awards
   
Stock Awards
 
Name
 
Number of
Shares Acquired
on Exercise
(#)
   
Value Realized
on Exercise
($) (a)
   
Number of
Shares Acquired
on Vesting
(#)
   
Value Realized
on Vesting
($) (b)
 
Michael D. Casey
    --     $             --       6,000     $  125,520  
Andrew B. North
    --     $ --       1,800     $ 36,329  
James C. Petty
    --     $ --       2,500     $ 38,400  
Frederick J. Rowan, II
    548,356     $ 9,353,608       --     $ --  
 

 
(a)
Aggregate dollar amount was calculated by multiplying the number of shares acquired by the difference between the market price of the underlying securities at the time of exercise and the exercise price of the stock options.
 
 (b)
Aggregate dollar amount was calculated by multiplying the number of shares acquired on vesting by the market price of the Company’s stock on the date of vesting.
 

 
26

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2008 YEAR-END
 
The following table provides information regarding unexercised stock options, stock that has not yet vested, and equity incentive plan awards for each named executive officer outstanding as of the end of fiscal 2008.  Each outstanding award is represented by a separate row that indicates the number of securities underlying the award.
 
   
Option Awards
   
Stock Awards
 
Name
 
Number of
Securities
Underlying
Unexercised
Options
(#)
(Exercisable)
   
Number of
Securities
Underlying
Unexercised
Options
(#)
(a)
(Unexercisable)
   
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(b)
   
Option
Exercise
Price
($)
   
Option
Expiration
Date
   
Equity Incentive
Plan Awards:
Number of
Unearned Shares,
Units or
Other Rights
That Have
Not Vested
(#)
(c)
   
Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned Shares,
Units or Other
Rights That Have
Not Vested
($)
(d)
 
                                           
Michael D. Casey
    243,488       --       --     $ 3.08    
8/15/2011
      --     $ --  
      160,000       40,000       --     $ 14.81    
3/22/2014
      --     $ --  
      6,000       6,000       --     $ 34.32    
2/16/2016
      --     $ --  
      3,000       9,000       --     $ 22.19    
2/15/2017
      --     $ --  
      --       125,000       --     $ 17.90    
8/6/2018
      --     $ --  
      --       --       --     $ --       --       90,000     $ 1,731,600  
                                                         
Andrew B. North
    32,500       --       --     $ 6.98    
9/17/2013
      --     $ --  
      1,400       1,400       --     $ 34.32    
2/16/2016
      --     $ --  
      1,500       4,500       --     $ 22.19    
2/15/2017
      --     $ --  
      1,500       4,500       --     $ 22.79    
12/3/2017
      --     $ --  
      --       --       --     $ --       --       5,100     $ 98,124  
                                                         
Joseph Pacifico
    389,688       --       --     $ 3.08    
8/15/2011
      --     $ --  
      160,000       40,000       --     $ 14.81    
3/22/2014
      --     $ --  
      --       --       200,000     $ 31.18    
11/10/2015
      --     $ --  
      --       200,000       --     $ 14.18    
7/1/2018
      --     $ --  
                                                         
James C. Petty
    10,000       30,000       --     $ 27.06    
6/5/2017
      --     $ --  
      --       75,000       --     $ 14.18    
7/1/2018
      --     $ --  
      --       --       --     $ --       --       32,500     $ 625,300  
                                                         
Charles E. Whetzel, Jr.
    389,688       --       --     $ 3.08    
8/15/2011
      --     $ --  
      45,000       15,000       --     $ 22.01    
5/13/2015
      --     $ --  
      --       40,000       --     $ 14.18    
7/1/2018
      --     $ --  
      --       --       --     $ --       --       50,000     $ 962,000  
                                                         
Frederick J. Rowan, II
    1,060,710       --       --     $ 3.08    
8/1/2011
      --     $ --  
 

 
 (a)
 Unexercised options relate to the following awards:
 
         (i) 
Mr. Casey was granted 200,000 time-based stock options on March 22, 2004 with a Black-Scholes fair value of $6.56 per share and an exercise price of $14.81 per share.  These stock options vest in five equal, annual installments following the date of grant.  Mr. Casey was also granted 12,000 time-based stock options on both February 16, 2006 and February 15, 2007 with a Black-Scholes fair value of $15.59 per share and $10.01 per share, and an exercise price of $34.32 per share and $22.19 per share, respectively.  In addition, Mr. Casey was granted 125,000 time-based stock options on August 6, 2008 with a Black-Scholes fair value of $7.13 per share and an exercise price of $17.90 per share.  The stock options granted to Mr. Casey in fiscal 2006, 2007, and 2008 vest in four equal, annual installments following the date of grant.
 
         (ii)  
Mr. North was granted 2,800 time-based stock options on February 16, 2006 with a Black-Scholes fair value of $15.59 per share and an exercise price of $34.32 per share.  Mr. North was also granted 6,000 time-based stock options on February 15, 2007 with a Black-Scholes fair value of $10.01 per share and an exercise price of $22.19 per share.  In addition, Mr. North was granted 6,000 time-based stock options on December 3, 2007 with a Black-Scholes fair value of $9.15 per share and an exercise price of $22.79 per share.  The stock options granted to Mr. North in fiscal 2006 and 2007 vest in four equal, annual installments following the date of grant.
 
        (iii)  
Mr. Pacifico was granted 200,000 time-based stock options on March 22, 2004 with a Black-Scholes fair value of $6.56 per share and an exercise price of $14.81 per share.  These stock options vest in five equal, annual installments following the date of grant.  Mr. Pacifico was also granted 200,000 time-based stock options on July 1, 2008 with a Black-Scholes fair value of $4.89 per share and an exercise price of $14.18 per share.  These stock options vest in three equal, annual installments following the date of grant.
 

 
27

 

        (iv)  
Mr. Petty was granted 40,000 time-based stock options on June 5, 2007 with a Black-Scholes fair value of $12.15 per share and an exercise price of $27.06 per share.  Mr. Petty was also granted 75,000 time-based stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per share and an exercise price of $14.18 per share.  The stock options granted to Mr. Petty in fiscal 2007 and 2008 vest in four equal, annual installments following the date of grant.
 
         (v)  
Mr. Whetzel was granted 60,000 time-based stock options on May 13, 2005 with a Black-Scholes fair value of $8.71 per share and an exercise price of $22.01 per share.  Mr. Whetzel was also granted 40,000 time-based stock options on July 1, 2008 with a Black-Scholes fair value of $5.82 per share and an exercise price of $14.18 per share,.  The stock options granted to Mr. Whetzel in fiscal 2005 and 2008 vest in four equal, annual installments following the date of grant.
 
 (b)
Unexercised, unearned stock options relate to the following awards:
 
        (i)
Mr. Pacifico was granted 200,000 performance-based stock options on November 10, 2005 with a Black-Scholes fair value of $12.68 and an exercise price of $31.18 per share.  Subject to the achievement of individual and Company performance targets, these stock options vest in February 2010.  We have assumed that these performance criteria will not be met and that these shares will not vest.
 
 (c)
Equity Incentive Plan awards relate to the following grants:
 
        (i)
Mr. Casey was granted 12,000 shares of restricted stock on both February 16, 2006 and February 15, 2007 with a grant date fair value of $34.32 per share and $22.19 per share.  These grants vest in four equal, annual installments following the date of grant.  Mr. Casey was also granted 75,000 shares of performance-based restricted stock on August 7, 2008 with a grant date fair value of $17.92 per share.  Fifty percent of these shares will be eligible to vest upon the Company’s reporting of adjusted EPS growth in fiscal 2009 (over fiscal 2008) and in fiscal 2010 (over fiscal 2009) of at least 4%.  If this threshold earnings per share growth is achieved in fiscal 2009 and 2010, then these eligible shares will vest, in varying percentages, from 33% to 100%, based on the Company’s compound annual growth rate in earnings per share from fiscal 2009 to 2010 ranging between 4% and 8%.  The remaining 50% of these shares will then vest in equal amounts on December 31, 2011 and December 31, 2012 based on his continued employment with the Company.  In fiscal 2008, we have assumed that these performance criteria will be met and that these shares will vest.
 
       (ii)
Mr. North was granted 1,200 shares of restricted stock on February 16, 2006 with a grant date fair value of $34.32 per share.  Mr. North was also granted 3,000 shares of restricted stock on both February 15, 2007 and December 3, 2007 with a grant date fair value of $22.19 and $22.79 per share, respectively.  All grants vest in four equal, annual installments following the date of grant.
 
      (iii)
Mr. Petty was granted 10,000 shares of restricted stock on June 5, 2007 with a grant date fair value of $27.06 per share.  Mr. Petty was also granted 25,000 shares of restricted stock on July 1, 2008 with a grant date fair value of $14.18 per share.  Both grants vest in four equal, annual installments following the date of grant.
 
      (iv)
Mr. Whetzel was granted 40,000 shares of restricted stock on May 13, 2005 with a grant date fair value of $22.01 per share.  These shares cliff vest on May 13, 2009.  We have assumed these shares will vest on May 13, 2009 and in accordance with SFAS 123R, we record the related expense for these grants ratably over the four-year vesting period.  Mr. Whetzel was also granted 10,000 shares of restricted stock on July 1, 2008 with a grant date fair value of $14.18 per share.  This grant vests in four equal, annual installments following the date of grant.