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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12.
TOO, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
N/A
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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[TOO, INC. LOGO]
8323 WALTON PARKWAY
NEW ALBANY, OHIO 43054
(614) 775-3500
April 7, 2004
Dear Stockholder:
You are cordially invited to attend our 2004 annual meeting of
stockholders. The meeting will be held on Thursday, May 13, 2004, at 9:00 a.m.
Eastern Time, at our corporate offices, located at 8323 Walton Parkway, New
Albany, Ohio. If you need assistance in finding the location of the meeting,
please call our Investor Relations department at (614) 775-3500.
At the meeting, we will:
- elect two directors to the Board;
- consider and vote upon a proposal to re-approve the material
terms of the Incentive Compensation Performance Plan; and
- transact other business as may come before the meeting.
We will also report on our financial and operating performance during 2003, and
update stockholders on our strategy for future growth.
It is very important that your shares be represented and voted at the
meeting. After reading the enclosed proxy statement, please sign, date and
return the enclosed proxy card, or take advantage of voting your proxy over the
telephone or the Internet.
We encourage you to take advantage of voting on the Internet because it is
an easy process and the least expensive way for us to tabulate your vote. Also,
if you vote on the Internet, you will have the option at that time to enroll in
Internet delivery of our proxy materials in the future.
We look forward to seeing you at the annual meeting.
Sincerely,
/s/ Michael W. Rayden
Michael W. Rayden
Chairman, President and Chief Executive Officer
[TOO, INC. LOGO]
8323 WALTON PARKWAY
NEW ALBANY, OHIO 43054
(614) 775-3500
NOTICE OF 2004 ANNUAL MEETING OF STOCKHOLDERS
May 13, 2004
The Annual Meeting of Stockholders of Too, Inc. will be held on Thursday,
May 13, 2004, at 9:00 a.m. Eastern Time at the corporate offices of Too, Inc.,
8323 Walton Parkway, New Albany, Ohio, to conduct the following items of
business:
1. To elect two directors, each to serve a three-year term expiring at
the 2007 annual meeting of stockholders.
2. To consider and vote upon a proposal to re-approve the material
terms of the Incentive Compensation Performance Plan.
3. To transact other business properly coming before the meeting or any
adjournment thereof.
Stockholders who owned shares of our stock at the close of business on
March 26, 2004, are entitled to vote at the annual meeting. A complete list of
these stockholders will be available at our corporate offices prior to the
annual meeting.
By Order of the Board of Directors,
/s/ Michael W. Rayden
Michael W. Rayden
Chairman, President and Chief Executive Officer
TABLE OF CONTENTS
Information About the Annual Meeting and Voting........................................................................... 1
Election of Directors..................................................................................................... 3
Nominees and Directors................................................................................................. 3
Information Concerning the Board of Directors and Corporate Governance ................................................ 5
Committees of the Board of Directors................................................................................... 5
Executive Officers..................................................................................................... 7
Security Ownership of Directors and Management......................................................................... 9
Executive Compensation.................................................................................................... 10
Summary Compensation Table............................................................................................. 10
Stock Options.......................................................................................................... 11
Equity Compensation Plan Information................................................................................... 12
Director Compensation.................................................................................................. 13
Employment Agreements with Certain Executive Officers.................................................................. 13
Report of the Stock Option and Compensation Committee..................................................................... 16
Compensation Philosophy................................................................................................ 16
Principal Compensation Elements........................................................................................ 17
CEO Compensation....................................................................................................... 18
Section 162(m)......................................................................................................... 18
Compensation Committee Interlocks and Insider Participation............................................................... 18
Stockholder Return Graph.................................................................................................. 19
Proposal to Re-Approve the Material Terms of the Incentive Compensation Performance Plan.................................. 20
Audit Committee Report.................................................................................................... 22
Share Ownership of Principal Stockholders................................................................................. 23
Section 16(a) Beneficial Ownership Reporting Compliance................................................................... 24
Independent Accountants................................................................................................... 24
Fees of the Independent Accountants for the Fiscal Year Ended January 31, 2004............................................ 24
Stockholder Proposals..................................................................................................... 25
Solicitation Expenses..................................................................................................... 25
Certain Matters Relating to Proxy Materials and Annual Reports............................................................ 25
Other Matters............................................................................................................. 26
Amended and Restated Audit Committee Charter.............................................................................. A-1
Incentive Compensation Performance Plan................................................................................... B-1
INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
The Board of Directors of Too, Inc. is soliciting your proxy to vote at
the 2004 Annual Meeting of Stockholders (or any adjournment of the meeting).
This proxy statement summarizes the information you need to know to vote at the
annual meeting. Throughout the proxy statement, the terms "We," "Our," "Too,"
and the "Company" refer to Too, Inc.
We began mailing this proxy statement and the enclosed proxy card on or
about April 7, 2004, to all stockholders entitled to vote. Our 2003 Form 10-K
Annual Report is being sent with this proxy statement.
DATE, TIME AND PLACE OF MEETING
Date: May 13, 2004
Time: 9:00 a.m. Eastern Time
Place: Too, Inc.
8323 Walton Parkway
New Albany, Ohio 43054
SHARES ENTITLED TO VOTE
Stockholders entitled to vote are those who owned our common stock at the
close of business on the record date, March 26, 2004. As of the record date,
there were 34,417,808 shares of Too, Inc. common stock outstanding. Each share
of common stock that you own entitles you to one vote.
VOTING YOUR PROXY
Whether or not you plan to attend the annual meeting, we urge you to vote.
Stockholders of record can give proxies by mailing their signed proxy cards or
by voting telephonically or on the Internet. Submitting your completed proxy
card, or voting telephonically or on the Internet, will not affect your right to
attend the annual meeting and vote.
The enclosed proxy card indicates the number of shares of our common stock
that you own as of the record date.
Instructions for the three methods of voting your proxy are listed on your
proxy card. If you complete and submit your proxy correctly, one of the
individuals named on your proxy card (your "proxy") will vote your shares as you
have directed. If you submit the proxy but do not make specific choices, your
proxy will follow the Board's recommendations and vote your shares:
- "FOR" the election of both nominees for director (as described on
page 3); and
- "FOR" the proposal to re-approve the material terms of the Incentive
Compensation Performance Plan (as described on page 20).
If any other matter is presented at the annual meeting, your proxy will
vote in accordance with his or her best judgment. At the time this proxy
statement went to press, we knew of no other matters, beyond the approval of the
aforementioned matters, to be acted on at the annual meeting.
-1-
REVOKING YOUR PROXY
You may revoke your proxy by:
- submitting a later dated proxy;
- notifying our Secretary in writing before the meeting that you have
revoked your proxy; or
- voting in person at the meeting.
VOTING IN PERSON
If you plan to attend the meeting and vote in person, a ballot will be
available when you arrive. However, if your shares are held in the name of your
broker, bank or other nominee, you must bring a letter from the nominee
indicating that you are the beneficial owner of the shares as of the close of
business on March 26, 2004, the record date for voting, and that you are
authorized to vote those shares at the annual meeting.
QUORUM REQUIREMENT
A quorum of stockholders is necessary to hold a valid meeting. The
presence at the meeting, in person or by proxy of the holders of shares
representing at least one-third of the votes of the common stock entitled to
vote constitutes a quorum. Abstentions and broker "non-votes" are counted as
present for establishing a quorum. A broker non-vote occurs on an item when a
broker is not permitted to vote on that item absent instruction from the
beneficial owner of the shares and no instruction is given.
VOTES NECESSARY
ITEM VOTE NECESSARY*
---- ---------------
Election of Directors Directors are elected by a plurality of the
votes represented by the shares of common
stock present at the meeting in person or by
proxy. This means that the director nominee
with the most affirmative votes for a
particular position is elected for that
position.
Re-Approval of the Material Terms The affirmative vote of the majority of
of the Incentive Compensation shares present at the meeting in person
Performance Plan or by proxy and entitled to vote.
Transaction of Other Business A plurality of the votes represented by
the shares of common stock present at
the meeting in person or by proxy.
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* Under New York Stock Exchange rules, if your broker holds your shares in its
name, your broker is permitted to vote your shares on these items even if it
does not receive voting instructions from you.
For the election of directors, proxies that are marked "Withhold
Authority" and broker non-votes will not count toward a nominee's achievement of
a plurality, and, thus, will have no effect. As to each other matter submitted
to our stockholders for approval at the annual meeting, for purposes of
determining the number of shares of our common stock voting on the matter, (1)
abstentions will be counted and will have the effect of a negative vote, and (2)
broker non-votes will not be counted and, thus, will have no effect.
-2-
ELECTION OF DIRECTORS
The Board of Directors has nominated two directors for election at the
annual meeting. Each of the nominees is currently serving as a director. If you
re-elect them, each will hold office for a three-year term expiring at the 2007
annual meeting or until his or her successor has been elected.
Your proxy will vote for each of the nominees unless you specifically
withhold authority to vote for a particular nominee. If any nominee is unable to
serve, your proxy may vote for another nominee proposed by the Board. We do not
know of any nominee of the Board who would be unable to serve as director if
elected.
Stockholders wishing to nominate directors for election may do so by
delivering to the Chairperson of the Nominating Committee of the Company, not
less than 14 days nor more than 50 days before a meeting of the stockholders
called for the election of directors, a notice stating: (a) the name, age,
business address and, if known, residence address of each nominee proposed in
the notice; (b) the principal occupation or employment of each nominee; (c) the
number of shares of common stock of the Company beneficially owned by each
nominee; and (d) such other information as is required by the Company's bylaws.
No person may be elected as a director of the Company unless he or she has been
nominated by a stockholder in this manner or by the Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF BOTH OF THE FOLLOWING
NOMINEES OF THE BOARD OF DIRECTORS:
NOMINEES AND DIRECTORS
Nominees of the Board of Directors for election at the 2004 annual meeting
David A. Krinsky Age 55
Mr. Krinsky is a partner at the law firm of O'Melveny and Myers LLP in
Newport Beach, California. Before joining the firm as a partner in 1994, he was
a partner at the law firm of Pettis, Tester, Kruse & Krinsky. Mr. Krinsky is a
corporate attorney who specializes in mergers and acquisitions and securities
law. Mr. Krinsky was first elected to the Board of Directors in August 1999.
Kenneth J. Strottman Age 55
Mr. Strottman is the founder, President and Chief Executive Officer of
Strottman International, Inc., a marketing agency specializing in developing
promotional programs targeting children and families. Before founding his firm
in 1983, Mr. Strottman served as Vice President, Marketing, at Mattel, Inc. Mr.
Strottman was first elected to the Board of Directors in August 1999.
-3-
Directors whose terms continue until the 2005 annual meeting
Philip E. Mallott Age 46
Mr. Mallott is an independent financial consultant and part-time retail
stock analyst employed by Coker & Palmer. Prior to his current position, Mr.
Mallott spent 16 years in retail financial management. He retired as Vice
President and Chief Financial Officer of Intimate Brands, Inc. in February 2000,
a position he held since 1995. Mr. Mallott also serves on the board of directors
of Big Lots, Inc., a publicly held company. Mr. Mallott was first elected to the
Board of Directors in February 2000.
Michael W. Rayden Age 55
Mr. Rayden has served as our President and Chief Executive Officer since
March 1996. He was elected Chairman of the Board of the Company in August 1999.
Before joining the Company, he served as President, Chief Executive Officer and
Chairman of the Board of Pacific Sunwear of California, Inc. from 1990 to 1996,
President and Chief Executive Officer of The Stride Rite Corporation from 1987
to 1989 and President and Chief Executive Officer of Eddie Bauer Inc. from 1984
to 1987. Mr. Rayden also serves on the board of directors of Strottman
International, Inc., a privately held company. Mr. Rayden was first elected to
the Board of Directors in August 1999.
Directors whose terms continue until the 2006 annual meeting
Elizabeth M. Eveillard Age 57
Ms. Eveillard is an independent consultant. Ms. Eveillard served as Senior
Managing Director, Retailing and Apparel Group, Bear, Stearns & Co., Inc. from
2000 to 2002 and as a consultant to May 2003. Prior to that time, Ms. Eveillard
served as the Managing Director, Head of Retailing Industry, Paine Webber
Corporation from 1988 to 2000. From 1972 to 1988, Ms. Eveillard held various
executive positions including Managing Director in the Merchandising Group with
Lehman Brothers. Ms. Eveillard also serves on the board of directors of Retail
Ventures, Inc. and Mayor's Jewelers, Inc., both publicly held companies. Ms.
Eveillard was first elected to the Board of Directors in February 2003.
Nancy J. Kramer Age 48
Ms. Kramer is Chief Executive of Resource, a professional services firm
specializing in interactive marketing solutions for national brands. Resource
was founded by Ms. Kramer in 1981. Ms. Kramer was first elected to the Board of
Directors in August 1999.
Fredric M. Roberts Age 61
Mr. Roberts is President of F.M. Roberts & Company, Inc., an investment
banking firm that Mr. Roberts established in 1980. Mr. Roberts served as 1993
Chairman of the Board of Governors of the National Association of Securities
Dealers ("NASD"). From 1994 to 1996, he was a member of the Nasdaq Stock Market
Board of Directors and its Executive Committee. Mr. Roberts also serves on the
board of directors of PCA International, Inc. and Cost Plus, Inc., a publicly
held company. Mr. Roberts was first elected to the Board of Directors in
February 2003.
-4-
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND CORPORATE GOVERNANCE
Our Board of Directors held four meetings in fiscal year 2003. During
fiscal year 2003, all of the directors attended 75 percent or more of the total
number of meetings of the Board (held during the period for which such person
was a director) and committees of the Board (held during the period for which
such person served), except that Mr. Roberts attended two of the three meetings
of the Stock Option and Compensation Committee meetings held in fiscal year 2003
after he was appointed to the Committee.
It is the Company's expectation that all members of the Board of Directors
attend the annual meeting of stockholders. All members of the Company's Board of
Directors were present at the Company's 2003 annual meeting of stockholders,
except for Mr. Mallott.
Upon consideration of the criteria and requirements regarding director
independence set forth in the rules of the New York Stock Exchange ("NYSE"), the
Board of Directors has determined that a majority of its members are
independent. Specifically, the Board has determined that each of Ms. Eveillard,
Ms. Kramer, and Messrs. Krinsky, Mallott, Roberts, and Strottman meets the
standards of independence established by NYSE Rule 303A.02. For a director to be
considered independent, the Board must determine that a director does not have
any direct or indirect material relationship with the Company. The Board has
established guidelines to assist it in determining director independence, which
conform to, or are more exacting than, the independence requirements in the NYSE
listing rules. The independence guidelines are set forth on pages 2-4 of the
Company's Corporate Governance Principles, which can be obtained on the
Company's website as described below.
The Company's Board of Directors welcomes communications from
stockholders. Stockholders may send communications to the Board of Directors, or
to any Director, c/o Too, Inc., 8323 Walton Parkway, New Albany, Ohio 43054.
During fiscal year 2003 and early fiscal year 2004, in response to the SEC
initiatives, the new NYSE listing requirements, and the corporate governance
requirements of the Sarbanes-Oxley Act of 2002, the Board of Directors adopted
Corporate Governance Principles, an Amended and Restated Audit Committee
Charter, a Stock Option and Compensation Committee Charter, and a Nominating and
Governance Committee Charter. The Board of Directors also adopted a Code of
Business Conduct and Ethics, which is applicable to all of the Company's
directors, officers, and associates, and a Code of Ethics for Senior Financial
Officers. All of the above are available in the governance section of the
investor relations page of our website, www.tooinc.com.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has standing Audit, Stock Option and Compensation,
and Nominating and Governance Committees. Each of the committees consists solely
of directors who meet the standards of independence established by NYSE Rule
303A.02, including the more stringent independence standard required for audit
committees.
Audit Committee
The Audit Committee of the Board of Directors selects the firm to be
employed as our independent public accountants, reviews the scope of their audit
and fees, including services provided for the review of the quarterly results
and related filings, as well as reviews and approves any non-audit fees. In
addition, the Audit Committee consults with the independent auditors about the
plan of audit, the resulting audit report and the accompanying management
letter. The Audit Committee also confers with the independent auditors about the
adequacy of internal accounting controls, as appropriate, outside of the
presence of management. The members of the Company's Audit Committee are Philip
E. Mallott, Chairman, Elizabeth M. Eveillard, and Kenneth J. Strottman. Ms.
Eveillard was appointed to the Audit Committee in February 2003. David A.
Krinsky was also a member of the Audit Committee until February 2004. The Board
of Directors has determined that Mr. Mallott, Chairman, meets the requirements
of a "financial expert" as set forth in Section 401(h) of Regulation S-K
-5-
promulgated by the SEC. The Audit Committee held six meetings in fiscal year
2003. A copy of the Amended and Restated Audit Committee Charter is attached
hereto as Appendix A.
Stock Option and Compensation Committee
The Stock Option and Compensation Committee of the Board of Directors
reviews executive compensation and administers the Company's stock option and
incentive compensation performance plans. Its members are Fredric M. Roberts,
Chairman, Nancy J. Kramer and Kenneth J. Strottman. Mr. Roberts was appointed to
the Stock Option and Compensation Committee in February 2003. The Stock Option
and Compensation Committee held four meetings in fiscal year 2003.
Nominating and Governance Committee
The Nominating and Governance Committee consists of Nancy J. Kramer,
Chairperson, Elizabeth M. Eveillard and Fredric M. Roberts. Ms. Eveillard and
Mr. Roberts were appointed to the Nominating Committee in February 2003.
Previously, Michael W. Rayden served as a member of and Kenneth J. Strottman
served as Chairman of the Nominating and Governance Committee. The Nominating
and Governance Committee makes recommendations to the Board of Directors
regarding the size and composition of the Board, establishes procedures for the
nomination process, recommends candidates for election to the Board of
Directors, and leads the Board in its annual evaluation of the Board's
performance. When considering potential candidates, the Nominating and
Governance Committee looks for candidates who, as a group, meet the Company's
strategic needs; possess high personal values and integrity; have an
understanding of the regulatory and policy environment in which the Company does
its business; and have substantial experience which is of particular relevance
to the Company. The Company generally does not pay any third parties to identify
or evaluate, or assist in identifying or evaluating, potential nominees.
The Nominating and Governance Committee also has the responsibility to
develop and recommend to the Board of Directors a set of corporate governance
principles applicable to the Company. The Company's Corporate Governance
Principles are posted on the Company's website at www.tooinc.com as described
previously.
The Nominating and Governance Committee will consider director nominations
made by stockholders for the 2005 annual meeting of stockholders provided that
the names of such nominees are submitted in writing within the time period
described above under "Election of Directors."
The Nominating and Governance Committee will also consider the
recommendations of stockholders regarding potential director candidates. In
order for stockholder recommendations regarding possible director candidates for
director to be considered by the Nominating and Governance Committee:
- such recommendations must be provided to the Nominating and
Corporate Governance Committee c/o Too, Inc., 8323 Walton Parkway,
New Albany, Ohio 43054, in writing at least 120 days prior to the
date of the next scheduled annual meeting;
- the nominating stockholder must meet the eligibility requirements to
submit a valid shareholder proposal under Rule 14a-8 of the
Securities Exchange Act of 1934, as amended, and
- the stockholder must described the qualifications, attributes,
skills, or other qualities of the recommended director candidate.
The Nominating and Governance Committee held one meeting in fiscal year
2003.
-6-
EXECUTIVE OFFICERS
In addition to Mr. Rayden, the following persons are our executive
officers:
Sally A. Boyer Age 43
Ms. Boyer has served as our President and General Manager - Justice Stores
since August 2003. Previously, Ms. Boyer served as our President of
Merchandising for Limited Too from August 2002 to August 2003, as Executive Vice
President of Planning, Allocation, and Merchandising Operations from February
2001 to July 2002, as Senior Vice President-Merchandising Operations since June
2000, and as Vice President Merchandising Operations since May 1998. Ms. Boyer
also held various positions with us and The Limited, Inc., including Vice
President-Planning and Distribution from 1995 to 1998. Before joining The
Limited, Inc. in 1991, she served as a Financial Consultant for Andersen
Consulting from 1990 to 1991, a Merchandise Planner for The Limited, Inc. from
1989 to 1990 and Merchandise Controller of Youthland, Inc. from 1984 to 1989.
Ms. Boyer served on our Board of Directors from August 2002 until March 2004.
Scott M. Bracale Age 42
Mr. Bracale has served as our Executive Vice President-Marketing, Catalog
and Web since August 2002. Previously, Mr. Bracale served as Senior Vice
President-General Manager-Catalog, Internet from February 2000 to July 2002, and
as Vice President and General Manager-Catalog from December 1998 to January
2000. Prior to joining the Company, Mr. Bracale was Vice President of Bass Pro
Shops Catalog Division from 1995 to 1998.
Kent A. Kleeberger Age 52
Mr. Kleeberger has served as our Executive Vice President - Chief
Financial Officer since August 2002. He also serves as our Secretary and
Treasurer. Mr. Kleeberger also served as our Chief Operating Officer from August
2002 until February 2004. He served as our Executive Vice President-Chief
Financial Officer, Logistics and Systems from February 2001 to July 2002. Mr.
Kleeberger joined the Company as Vice President and Chief Financial Officer in
March 1998 following a 10-year career with The Limited, Inc., including as Vice
President-Controller of Victoria's Secret Catalogue from 1991 to 1995 and
Corporate Controller of The Limited, Inc. from 1995 to 1998. Mr. Kleeberger also
serves on the board of directors of Shoe Carnival, Inc., a publicly held
company. Mr. Kleeberger served on our Board of Directors from February 2000
until March 2004.
William E. May, Jr. Age 55
Mr. May has served as our Executive Vice President - Chief Operating
Officer since February 2004. Prior to joining the Company, Mr. May served as
President and Chief Executive Officer, Wholesale for Fleming Company from June
2002 until November 2003. He also served as Vice President, Gap Global
Distribution for Gap, Inc. from March 1999 until June 2002. Mr. May has also
held roles as Executive Vice President/Chief Operating Officer for Nash Finch
Company, Senior Vice President Operations, Marketing, Procurement and MIS for
Spartan Stores and other executive positions in the food industry.
Joan E. Munnelly Age 51
Ms. Munnelly has served as our Executive Vice President of Design -
Justice Stores since June 2003. Previously, Ms. Munnelly served as our Executive
Vice President-Merchandising and Design for Casual and Active Sportswear for
Limited Too from August 2002 to June 2003. Ms. Munnelly served as Senior Vice
President-General Merchandise Manager and Design/Sportswear from February 2000
to July 2002, and as Vice President-General Merchandise Manager of Casual
Sportswear from September 1999 to January 2000. Prior to joining the Company,
Ms. Munnelly was Vice President of Merchandising for Just Nikki and Velvet
Pixies, divisions of Claire's Inc. from June 1997 to September 1999.
-7-
James C. Petty Age 43
Mr. Petty has served as our President and General Manager - Limited Too
since August 2003. Previously, Mr. Petty served as our Executive Vice
President-Stores and Realty from August 2002 to August 2003, as Senior Vice
President-Stores from June 2000 to July 2002, and as our Vice President-Stores
from June 1997 to May 2000. Mr. Petty also held various positions involving
store management and operations with Old Navy, Inc., Banana Republic, Inc. and
The Gap, Inc. during his 13-year tenure with The Gap and its subsidiaries,
including Vice President-Store Operations of Old Navy, Inc. from 1994 to 1997
and Vice President-Store Operations of Banana Republic, Inc. from 1991 to 1994.
Ronald Sykes Age 62
Mr. Sykes has served as our Senior Vice President-Human Resources since
October 2000. Prior to joining the Company, he was a principal since October
1999 at Walker-Sykes Associates, LLC, an executive search firm. Mr. Sykes owned
his own executive search firm, Ron Sykes & Associates, from August 1998 to
October 1999. From April 1995 to August 1998, he was a senior human resources
executive with The Limited Stores Inc. Mr. Sykes has held similar positions with
F & R Lazarus, Stride Rite Corporation, Jordan Marsh, A & S/Jordan Marsh, and
Macy's East.
-8-
SECURITY OWNERSHIP OF DIRECTORS AND MANAGEMENT
Below is a table with information providing the number of shares of Too,
Inc.'s common stock beneficially owned by each of the directors of the Company,
executive officers listed in the Summary Compensation Table below, and all of
the directors and executive officers of Too, Inc. as a group.
NUMBER OF
SHARES OF COMMON
STOCK BENEFICIALLY PERCENT
NAME OWNED(1)(2) OF CLASS
---- ----------- --------
Sally A. Boyer................................................................................... 130,825(3) *
Scott M. Bracale................................................................................. 85,476(4) *
Elizabeth M. Eveillard .......................................................................... 4,250 *
Kent A. Kleeberger............................................................................... 140,248(5) *
Nancy J. Kramer.................................................................................. 18,794(6) *
David A. Krinsky................................................................................. 18,750(6) *
Philip E. Mallott................................................................................ 17,708(7) *
James C. Petty................................................................................... 97,805(8) *
Michael W. Rayden................................................................................ 1,265,576(9) 3.6%
Fredric M. Roberts............................................................................... 1,250(10) *
Kenneth J. Strottman............................................................................. 31,250(6)(11) *
All directors and executive officers as a group (14 persons)..................................... 1,913,732(12) 5.3%
----------
* Less than 1%
(1) Unless otherwise indicated, each named person has voting and investment
power over the listed shares and such voting and investment power is
exercised by the named person or shared with a spouse.
(2) Reflects ownership as of February 29, 2004.
(3) Includes options to purchase 96,332 shares exercisable within 60 days
after February 29, 2004.
(4) Includes options to purchase 85,015 shares exercisable within 60 days
after February 29, 2004.
(5) Includes options to purchase 128,764 shares exercisable within 60 days
after February 29, 2004.
(6) Includes options to purchase 18,750 shares exercisable within 60 days
after February 29, 2004.
(7) Includes options to purchase 15,000 shares exercisable within 60 days
after February 29, 2004.
(8) Includes options to purchase 82,986 shares exercisable within 60 days
after February 29, 2004.
(9) Includes options to purchase 1,025,098 shares exercisable within 60 days
after February 29, 2004.
(10) Includes options to purchase 1,250 shares exercisable within 60 days after
February 29, 2004.
(11) Includes 2,500 shares owned by Mr. Strottman's family members, for which
Mr. Strottman disclaims beneficial ownership.
(12) Includes options to purchase 1,589,445 shares exercisable within 60 days
after February 29, 2004 held by all directors and executive officers as a
group.
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EXECUTIVE COMPENSATION
The following table shows the compensation paid by Too, Inc. to each of
the named executive officers of the Company for each of the last three fiscal
years.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
------------------------------------------- ---------------------
OTHER ALL OTHER
ANNUAL SECURITIES COMPEN-
FISCAL COMPENSA- RESTRICTED UNDERLYING SATION
YEAR SALARY($) BONUS($)(1) TION($)(2) AWARDS(3) OPTIONS ($)(4)
---- ------- --------- ----- ---------- ------- -------
Michael W. Rayden..................... 2003 1,044,231 288,000 5,784 -- 125,000 321,543
Chairman of the Board, Chief 2002 940,285 1,892,663 6,044 $2,605,000 100,000 556,538
Executive Officer and 2001 911,638 1,266,320 5,713 -- 100,000 2,255,751
President
Kent A. Kleeberger.................... 2003 420,000 70,560 1,535 $ 399,000 -- 117,016
Executive Vice President - 2002 393,846 380,076 1,471 -- 65,000 149,859
Chief Financial Officer 2001 338,461 253,200 1,238 -- 25,000 117,382
Sally A. Boyer........................ 2003 420,000 70,560 1,441 $ 399,000 -- 107,473
President and General Manager - 2002 389,615 375,276 1,369 -- 65,000 138,877
Justice Stores 2001 338,461 253,200 1,238 -- 25,000 106,231
Scott M. Bracale...................... 2003 400,000 57,600 -- $ 399,000 -- 79,874
Executive Vice President - 2002 380,962 344,753 1,173 -- 45,000 106,132
Marketing and Catalog/Web 2001 342,692 235,500 1,140 -- 20,000 84,181
James C. Petty........................ 2003 386,058 54,000 1,171 $ 399,000 -- 80,869
President and General Manager - 2002 353,269 315,818 1,160 -- 45,000 109,091
Limited Too 2001 312,116 213,000 978 -- 10,000 86,398
(1) Represents the total of the performance-based incentive compensation for
the spring and fall selling seasons.
(2) Represents reimbursement of taxes on benefits paid on behalf of the listed
officers.
(3) Represents for each executive officer, the restricted stock awards for the
specified fiscal year under the Too, Inc. 1999 Stock Option and
Performance Incentive Plan. Information set forth above is based on the
closing price of the Company's common stock on the date on which the
awards were made.
On August 12, 2003, each of Mr. Kleeberger, Ms. Boyer, and Messrs. Bracale
and Petty received an award of 25,000 shares of restricted stock, valued
at $15.96 per share. After achieving a certain level of sales increase for
2004, the awards vest 100% on August 12, 2007, subject to continued
employment with the Company.
Mr. Rayden received an award of 100,000 shares of restricted stock on
February 12, 2002, valued at $26.05 per share. The award vests 20% per
year beginning on February 12, 2003, based on continued employment with
the Company and provided that the Company achieved at least a 5% increase
in gross sales for Fall 2002 over Fall 2001. On February 12, 2003, 20,000
shares of the restricted stock vested.
As of January 31, 2004, the aggregate restricted stock holdings and the
value of such holdings for each of the named executive officers were: Mr.
Rayden, 80,000 shares, $1,224,000; Mr. Kleeberger, 25,000 shares,
$382,500; Ms. Boyer,
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25,000 shares, $382,500; Mr. Petty, 25,000 shares, $382,500; and Mr.
Bracale, 25,000 shares, $382,500 (based on the $15.30 fair market value of
the Company's common stock on January 31, 2004).
Dividends will not be paid or accrue with respect to shares of restricted
stock until such shares vest.
(4) For Fiscal 2003, includes group term insurance premiums in the amounts of
$2,180, $948, $900, and $861, paid on behalf of executive officers
Kleeberger, Boyer, Bracale and Petty, respectively, executive life
insurance premiums in the amount of $10,470 paid on behalf of Mr. Rayden
and contributions and employer matching contributions to the qualified
retirement plan and the non-qualified supplemental retirement and
alternative savings plans in the amounts of $311,073, $114,836, $106,525,
$78,974, and $80,008 for officers Rayden, Kleeberger, Boyer, Bracale and
Petty, respectively.
STOCK OPTIONS
The following table shows certain information regarding stock options
granted to the executive officers named in the Summary Compensation Table during
the 2003 fiscal year.
OPTIONS GRANTED IN FISCAL YEAR 2003
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS AT ASSUMED
------------------------------------------------ ANNUAL RATES
NUMBER OF % OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR OPTION TERMS($)(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------- ----------- --------- ---- -- ---
Michael W. Rayden..................... 125,000 28% 15.16 2/11/2013 1,191,755 3,020,142
Kent A. Kleeberger.................... -- -- -- -- -- --
Sally A. Boyer........................ -- -- -- -- -- --
Scott M. Bracale...................... -- -- -- -- -- --
James C. Petty........................ -- -- -- -- -- --
(1) The amounts under the columns labeled "5%" and "10%" are included by the
Company pursuant to certain rules promulgated by the Securities and
Exchange Commission and are not intended to forecast future appreciation,
if any, in the price of the Company's common stock. Such amounts are based
on the assumption that the option holders hold the options granted for
their full term. The actual value of the options will vary in accordance
with the market price of the Company's stock.
The following table provides certain information regarding the value of
stock options at the end of the fiscal year held by the executive officers named
in the Summary Compensation Table:
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AGGREGATED OPTION EXERCISES IN 2003 FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL OPTIONS AT FISCAL
SHARES VALUE YEAR-END(#)(2) YEAR-END($)(3)
ACQUIRED ON REALIZED -------------------------- -----------------------------
NAME EXERCISE (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------ ----------- ------------- ----------- -------------
Michael W. Rayden..................... 17,579 154,297 811,020 422,828 4,611,495 488,379
Kent A. Kleeberger.................... 0 0 105,214 96,523 128,818 0
Sally A. Boyer........................ 11,130 37,093 72,782 101,314 0 0
Scott M. Bracale...................... 0 0 66,465 63,083 77,553 0
James C. Petty........................ 0 0 64,436 71,244 37,095 0
(1) Value realized was calculated based on the number of shares exercised
multiplied by the excess of the fair market value of a share of Too, Inc.
common stock on the date of exercise over the exercise price of the stock
option.
(2) Represents exercisable and unexercisable Too, Inc. stock options for the
individual as of January 31, 2004.
(3) Represents the total gain which would have been realized if all
in-the-money options held at fiscal year-end had been exercised,
determined by multiplying the number of shares underlying the options by
the difference between the option exercise price and fair market value at
year-end ($15.30 on January 30, 2004). An option is in-the-money if the
fair market value of the underlying shares exceeds the exercise price of
the option.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth additional information as of January 31,
2004, concerning shares of our common stock that may be issued upon the exercise
of options and other rights under our existing equity compensation plans and
arrangements, divided between plans approved by our stockholders and plans or
arrangements not submitted to our stockholders for approval. The information
includes the number of shares covered by, and the weighted average exercise
price of, outstanding options and other rights and the number of shares
remaining available for future grants excluding the shares to be issued upon
exercise of outstanding options, warrants, and other rights.
NUMBER OF SECURITIES
REMAINING AVAILABLE
NUMBER OF SECURITIES FOR ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED
WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (A))
(A) (B) (C)
--------- ------ -------
Equity compensation plans approved
by security holders 3,286,700 $18.20 615,656
Equity compensation plans not
approved by security holders -- -- --
--------- ------ -------
Total 3,286,700 $18.20 615,656
========= ====== =======
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DIRECTOR COMPENSATION
Associates and officers who are directors receive no additional
compensation for services as directors. In 2003, cash compensation for
non-associate directors included the following:
- an annual retainer of $25,000 for service on the Board of Directors,
paid quarterly in arrears;
- an annual retainer of $7,500 for service as Chairman of the Audit
Committee;
- an annual retainer of $4,000 for service as Chairman of the Stock
Option and Compensation Committee;
- $1,000 for each Board meeting attended ($400 for a telephonic
meeting);
- $600 for each committee meeting attended ($200 for a telephonic
meeting); and
- $200 for each action in writing that our Board or any committee
takes.
In addition, under our 1999 Non-Associate Director Stock Plan, each
director who is not an associate of our Company receives:
- an initial grant to purchase 5,000 shares of our common stock;
- an annual grant of options to purchase 5,000 shares of our common
stock at a price equal to the fair market value of the shares at the
grant date; and
- after three years of services as a director, a one-time grant of
options to purchase 15,000 shares.
EMPLOYMENT AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
We entered into amended and restated employment agreements with Mr.
Rayden, Mr. Kleeberger, Ms. Boyer, Mr. Bracale, Ms. Munnelly, Mr. Petty and Mr.
Sykes effective September 15, 2003. Except for Mr. Rayden, whose agreement has
an initial term of five years, each agreement has an initial term of three
years, after which it will renew automatically for additional one year periods
on the same terms and conditions, unless either party provides notice to the
other of an intention not to extend it at least 90 days prior to the anniversary
date. Furthermore, if a change in control (as defined in the agreement) occurs
during the term of the agreement, the term of the agreement will be extended for
two years from the date of the change in control.
Each employment agreement provides for a minimum annual base salary, plus
any increases in base compensation as may be authorized by the Board of
Directors after the date of the agreement. The agreements also provide for each
officer's continued participation in the Company's incentive compensation and
stock option plans and other benefits as described in the agreements.
The employment agreements require the Company to compensate each officer
and provide him or her with certain benefits if his or her employment is
terminated before the agreement expires. The compensation and benefits each
officer is entitled to receive vary depending upon whether his or her employment
is terminated: (1) by the Company for cause (as defined in the officer's
agreement), or voluntarily by the officer, or in the case of Mr. Rayden, other
than for good reason (as defined in his agreement); (2) by the Company other
than for cause, or in the case of Mr. Rayden, for good reason; (3) involuntarily
due to disability; (4) upon retirement; or (5) upon the officer's death, under
which circumstance the applicable compensation and benefits are payable to the
officer's beneficiaries.
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If the officer's employment is terminated by the Company for cause,
voluntarily by the officer, or in the case of Mr. Rayden, if his employment is
terminated by the Company for cause or by Mr. Rayden for other than good reason
(as defined in his agreement), the officer's severance benefits payable under
the employment agreement will include:
- any accrued base salary and accrued vacation not paid as of the
termination date;
- vested benefits as of the termination date under the Company's
benefit, retirement, incentive and other plans; and
- in Mr. Rayden's case, continued payment of life insurance premiums
through the end of the calendar year.
If the officer's employment is terminated by the Company other than for
cause, or in the case of Mr. Rayden, for good reason (as defined in his
agreement), the officer's severance benefits payable under the employment
agreement will include:
- any accrued base salary and accrued vacation not paid as of the
termination date;
- a pro-rated bonus amount;
- vested benefits as of the termination date under the Company's
benefit, retirement, incentive and other plans;
- continued payment of 100% of base salary for 12 months for Mr. Sykes
and Ms. Munnelly, continued payment of 100% of base salary for 18
months for Ms. Boyer and Messrs. Bracale, Kleeberger and Petty, and
in the case of Mr. Rayden, a lump sum amount equal to two times the
sum of (i) base salary and (ii) the greater of Mr. Rayden's (a)
annual par target bonus opportunity in the year of termination or
(b) the actual annual bonus earned by Mr. Rayden in the year prior
to the year of termination;
- continued insurance benefits for one year for Mr. Sykes and Ms.
Munnelly, 18 months for Ms. Boyer and Messrs. Bracale, Kleeberger
and Petty and, in Mr. Rayden's case, two years;
- outplacement services and related travel costs up to a maximum of
$10,000 (or, in Mr. Rayden's case, $30,000);
- acceleration of vesting of stock awards by 12 additional months for
Ms. Boyer and Messrs. Bracale, Kleeberger and Petty, and in Mr.
Rayden's case, acceleration of vesting stock awards by 24 additional
months and continued payment of life insurance premiums through the
end of the calendar year; and
- employment continuation period for disability benefits for one year
for Mses. Boyer and Munnelly, and Messrs. Bracale, Kleeberger, Petty
and Sykes.
If the officer's employment is terminated involuntarily due to disability,
the officer's severance benefits payable under the employment agreement will
include:
- any accrued base salary and accrued vacation not paid as of the
disability date;
- a pro-rated bonus amount;
- vested benefits as of the termination date under the Company's
benefit, retirement, incentive and other plans;
- 100%, 80% and 60%, respectively, of base salary for the first,
second and third 12 months following the disability date (reduced by
amounts received by the officer under the Company's disability
plans);
- additional salary benefits if the officer is disabled beyond 36
months; and
- in Mr. Rayden's case, continued payment of life insurance premiums
through the end of the calendar year.
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Notwithstanding the above, the salary continuation payments will cease upon the
earlier of (a) the disability ceasing to exist or (b) the officer's retirement.
If the officer's employment is terminated by reason of his or her
retirement, the officer's severance benefits will include the following:
- accrued base salary and accrued vacation not paid as of the
termination date;
- a pro-rated bonus amount; and
- vested benefits as of the termination date under the Company's
benefit, retirement, incentive and other plans.
If the officer's employment is terminated by reason of his or her death,
the Company's sole obligation will be to pay the officer's spouse, estate or
designated beneficiary, as the case may be, the same amounts due the officer if
he or she had retired, as described above.
The employment agreements also prohibit the officer from becoming directly
or indirectly connected with any business or entity that competes directly or
indirectly with the Company during the officer's employment with the Company and
for a period of one year (or in the case of Mr. Rayden, two years) from the date
of termination if employment is terminated: (1) by the Company for any reason,
(2) by the officer for any reason, or (3) by reason of either the Company's or
the officer's decision not to extend the term of the agreement. Mr. Rayden's
non-competition period will terminate after a change in control, upon a
termination by the Company for other than cause, or upon a termination by Mr.
Rayden for good reason. The non-competition periods of the other officers will
terminate upon termination by the Company other than for cause after a change in
control, or by the officer for good reason after a change in control.
We also entered into executive agreements with Mr. Rayden, Mr. Kleeberger,
Ms. Boyer, Mr. Bracale, Ms. Munnelly, and Mr. Petty effective September 15,
2000, and with Mr. Sykes effective October 30, 2000. Each agreement has an
initial term of three years, after which it will renew automatically for
additional one year periods on the same terms and conditions, unless the Company
provides notice to the officer of an intention not to extend the executive
agreement at least 30 days prior to the anniversary date. Furthermore, if a
change in control (as defined in the executive agreement) occurs during the term
of the executive agreement, the term of the agreement will be extended for two
years from the date of the change in control.
Under each executive agreement, the Company must provide severance
benefits to the officer if his or her employment is terminated (other than on
account of death or disability or for cause):
- by the Company at any time six months prior to a change in control
if such termination was in contemplation of such change in control
and was done to avoid the effects of the agreement;
- by the Company within 24 months after a change in control;
- by the officer for good reason (as defined in the executive
agreement) at any time within 24 months after a change in control;
or
- in the case of Mr. Rayden, by him with or without good reason during
the period beginning on the one year anniversary date of a change in
control and lasting for 30 days.
In addition to accrued compensation, bonuses, vested benefits and stock
options, the officer's severance benefits payable under the executive agreement
include:
- a lump sum cash payment equal to the sum of: (1) any accrued base
salary and vacation time payable as of the termination and (2) the
officer's base annual salary (as defined in the agreement)
multiplied by three;
-15-
- a lump sum cash payment equal to the sum of: (1) the pro-rated bonus
amount (as defined in the agreement) and (2) the highest annual
incentive compensation to which the officer would be entitled
multiplied by three;
- 36 months of continued insurance benefits;
- outplacement services and related travel costs up to a maximum of
$10,000 (or, in Mr. Rayden's case, $60,000).
Under the executive agreements, a change in control shall be deemed to
occur upon: (1) the acquisition by any person of 25% or more of the voting power
of the Company's outstanding securities; (2) a merger or consolidation of the
Company; (3) a sale of 50% or more of the Company's assets; (4) the liquidation
or dissolution of the Company; or (5) any transaction that has the same effect
as any of the foregoing.
RELATED PARTY TRANSACTIONS
The Company does not believe that there were any relationships or related
party transactions of a nature required to be disclosed under the applicable SEC
rules during fiscal year 2003.
The following Compensation Committee Report, Performance Graph, and Audit
Committee Report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any of our
filings under the Securities Act of 1933, or the Securities Exchange Act of
1934, except to the extent that we specifically incorporate this information by
reference, and shall not otherwise be deemed filed under such Acts.
REPORT OF THE STOCK OPTION AND COMPENSATION COMMITTEE
Our Stock Option and Compensation Committee has the power, among other
things, to do the following:
- review and approve our executive compensation philosophy and
policies and the application of such policies to the compensation of
our executive officers;
- determine the annual salary, bonus, stock grants and options, and
other benefits, direct and indirect, of our executives officers;
- review new executive compensation programs;
- establish and periodically review policies for the administration of
our executive compensation programs;
- approve certain employment arrangements with new employees.
COMPENSATION PHILOSOPHY
We seek to apply a consistent compensation philosophy for all of our
leadership group associates, including our executive officers. The primary goals
of our compensation program are to:
- attract and retain qualified executives;
- reward current and past individual performance;
- provide short-term and long-term incentives for good and excellent
future performance; and
- link total compensation for individual performance and our
performance to enhance stockholder value.
-16-
Accordingly, we have structured total compensation for our leadership
group associates to provide a portion of the compensation as fixed compensation
and a portion of the compensation as a variable amount based on performance. Our
philosophy is built on the following basic principles:
- To Pay for Outstanding Performance
We believe in paying for results. Individuals in leadership roles are
compensated based on a combination of total Company, business unit and
individual performance factors. Total Company performance is evaluated primarily
based on the degree by which financial targets are met or exceeded. In addition,
a significant portion of total compensation is in the form of equity-based
awards which ties into increases in stockholder value.
- To Pay Competitively
We are committed to providing a total compensation program designed to
attract the best senior leaders to our business and retain the best and most
consistent performers. To achieve this goal, we will periodically compare our
pay practices and overall pay levels with other leading retail, and where
appropriate, non-retail companies, and adjust our compensation guidelines based
on this review.
- To Pay Equitably
We believe that it is important to apply generally consistent guidelines
for substantially all associate compensation programs across our Company,
considering the size of unit, area of responsibility, complexity, development
stage, and performance of our Company, along with the performance of the
individual executive.
PRINCIPAL COMPENSATION ELEMENTS
The principal elements of our executive compensation packages are base
salary, performance-based cash incentive compensation, and equity-based
long-term incentive programs.
Base Salary
The Committee annually reviews and approves the employment of each
executive officer, including the base salary. In determining salary adjustments,
the Committee considers the size and responsibility of the individual's
position, the business unit's overall performance, the individual's overall
performance and future potential, and the base salaries paid by competitors to
employees in comparable positions. Individual performance is measured against
the following factors: seasonal and annual business goals, business growth and
brand execution goals, and the recruitment and development of future leadership
talent. The Committee considers these factors subjectively in the aggregate, and
accords none a formula weight.
Performance-Based Cash Incentive Compensation
We have employed a performance-based cash incentive compensation program
for specified key leadership positions along with certain other members of the
Company's management that provides for incentive payments based on the level of
achievement of pre-established financial goals for each six-month operating
season. The goals under this plan for spring 2003 and fall 2003 were based on
operating income. Goals, however, also may be based on other financial measures,
including the price of the Company's or an affiliate's common stock, stockholder
return, return on equity, return on investment, return on capital, sales
productivity, comparable store sales growth, economic profit, economic value
added, net income, gross margin, sales, free cash flow, earnings per share,
operating company contribution or market share. These goals are generally
determined prior to or near the beginning of each season, and are based on an
analysis of historical performance and growth expectations for our business,
expectations of the public markets and progress toward achieving our long-range
strategic plan for the business. Target cash incentive compensation
opportunities are established annually for eligible executives stated as a
specific percentage of base salary, ranging from 10 percent to 150 percent of
base salary.
-17-
The amount of incentive compensation paid to participating executives can range
from zero to double their targets, based upon the extent to which performance
goals are achieved or exceeded. The maximum amount payable to any participant
may not exceed $3,000,000 in any year under the incentive program.
Equity-Based Incentive Programs
The Committee believes that continued emphasis on equity-based
compensation opportunities encourages performance that enhances stockholder
value, thereby further linking leadership and stockholder objectives. We believe
that the magnitude and vesting schedule of the award also serve to retain key
performers.
The award opportunity level for each eligible participant depends on the
individual's responsibility level and potential within the Company, competitive
practices, and the market price of our common stock.
In 2003, the Company awarded restricted stock awards or stock options to
key executives in the amounts set forth in the Summary Compensation Table on
page 10 and the Option Grants in Fiscal Year 2003 table on page 11,
respectively. The restricted stock awards are based on the achievement of
certain pre-established financial goals. The option program utilizes vesting
periods to encourage retention of key executives. The exercise price for each
option granted equals the fair market value of the underlying common stock on
the date of grant.
CEO COMPENSATION
We entered into an employment agreement with Mr. Rayden, effective
September 15, 2003. Under the terms of his employment agreement, Mr. Rayden may
receive equity compensation such as restricted stock, stock options, and
deferred compensation at the Compensation Committee's discretion. The terms of
Mr. Rayden's employment agreement are described above in this proxy statement
under the section entitled "Employment Agreements with Certain Executive
Officers."
In February 2003, the Company awarded 125,000 stock option shares in Too,
Inc. to Mr. Rayden.
SECTION 162(M)
Internal Revenue Code Section 162(m) bars a deduction to any publicly held
corporation for compensation paid to a "covered employee" in excess of $1
million per year unless performance criteria are set by the Compensation
Committee within 90 days prior to the beginning of a performance period (or such
earlier or later date as is permitted by Section 162(m)). Generally, we intend
that compensation paid to our "covered employees" shall be deductible to the
fullest extent permitted by law.
Stock Option and Compensation Committee
Fredric M. Roberts, Chairman
Nancy J. Kramer
Kenneth J. Strottman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Fredric M. Roberts, Nancy J. Kramer and Kenneth J. Strottman, who are not
employees of the Company, are members of the Stock Option and Compensation
Committee. Since 1993, Mr. Rayden has served as a member of the advisory board
of Strottman International, Inc., a privately held company, of which Mr.
Strottman is President and Chief Executive Officer. In his capacity as an
advisory board member, Mr. Rayden has no power to direct the activities of
Strottman International, Inc. or to set the compensation of Mr. Strottman.
-18-
STOCKHOLDER RETURN GRAPH
The following graph shows a comparison, over a fifty-four month period, of
the cumulative total return for Too, Inc. common stock, the Standard & Poor's
SmallCap 600 Index and the Standard & Poor's Apparel Retail Index, each of which
assumes an initial investment value of $100 on August 9, 1999, the first day of
trading of Too, Inc.'s stock, on a "when-issued" basis, on the New York Stock
Exchange. The comparison also assumes the reinvestment of any dividends.
COMPARISON OF 54 MONTH CUMULATIVE TOTAL RETURN*
AMONG TOO, INC., THE S & P SMALLCAP 600 INDEX
AND THE S & P APPAREL RETAIL INDEX
[CUMULATIVE TOTAL RETURN LINEGRAPH]
Cumulative Total Return
--------------------------------------------------------------------------
8/9/99 1/29/00 2/2/01 2/1/02 2/1/03 1/31/04
TOO, INC. 100.00 103.79 112.73 164.61 100.91 92.73
S & P SMALLCAP 600 100.00 104.62 125.88 129.72 106.01 156.75
S & P APPAREL RETAIL 100.00 83.94 78.36 55.32 48.94 64.37
* $100 invested on 8/9/99 in stock or on 7/31/99 in index-including reinvestment
of dividends.
Copyright(c) 2002, Standard & Poor's, a division of The McGraw-Hill Companies,
Inc. All rights reserved.
www.researchdatagroup.com/S&P.htm
-19-
PROPOSAL TO RE-APPROVE THE MATERIAL TERMS OF THE
INCENTIVE COMPENSATION PERFORMANCE PLAN
INTRODUCTION
At the annual meeting, the Company's stockholders will be requested to
consider and act upon a proposal to re-approve the material terms of the
Incentive Compensation Performance Plan (the "Incentive Plan").
On August 11, 1999, the board of directors and the Company's sole
stockholder at the time, Limited Brands, Inc. (f/k/a/ The Limited, Inc.)
approved the Incentive Plan, effective upon completion of the spin-off of the
Company from Limited Brands, Inc. The purpose of the Incentive Plan is to give
the Company a competitive advantage in attracting, retaining and motivating key
executives and to provide the Company with the ability to provide incentive
compensation that is linked to financial measures, which is not subject to the
deduction limitation rules described below.
DESCRIPTION
The following summary of certain material terms of the Incentive Plan that
stockholders are being asked to re-approve, does not purport to be complete and
is qualified in its entirety by the terms of the Incentive Plan, a copy of which
is attached hereto as Appendix B.
The Incentive Plan is administered by the Stock Option and Compensation
Committee. The Stock Option and Compensation Committee selects those key
executives of the Company with significant operating and financial
responsibility, which shall include those individuals who are likely to be
"covered employees," within the meaning of Section 162(m) of the Internal
Revenue Code (the "Code"), in respect of the relevant fiscal year, to be
eligible to earn seasonal or annual incentive compensation payments under the
Incentive Plan. During the 2003 fiscal year, approximately 100 individuals
participated in the Incentive Plan and approximately 110 individuals have been
selected to participate in the 2004 fiscal year. The Company expects a
comparable number will be selected for participation in the Incentive Plan in
future years.
Under the Incentive Plan, performance goals are established by the Stock
Option and Compensation Committee in respect of each Spring and/or Fall selling
season or fiscal year. The performance goals selected by the Stock Option and
Compensation Committee are based on any one or more of the following:
- price of the Company's common stock or the stock of any affiliate;
- shareholder return;
- return on equity;
- return on investment;
- return on capital;
- sales productivity;
- comparable store sales growth;
- economic profit;
- economic value added;
- net income;
- operating income;
- gross margin;
- sales;
- free cash flow;
- earnings per share;
- operating company contribution; or
- market share.
-20-
Any performance goals established will have a minimum and maximum award level
and may be based on an analysis of historical performance and growth
expectations for the Company, financial results of other comparable businesses
and progress towards achieving the Company's long-range strategic plan. These
performance goals and determination of results are based entirely on financial
measures. After performance goals are established, discretion may not be used to
modify award results except as permitted under Section 162(m) of the Code. If
minimum performance levels are not met, no payments will be made.
Annual incentive compensation targets established for eligible executives
range from 10% to 150% of base salary. The target incentive compensation
percentage for each executive is based on the level and functional
responsibility of his or her position, size of the business for which the
executive is responsible, and competitive practices. The amount of incentive
compensation paid to executives can range from zero to double their targets,
based upon the extent to which performance goals are achieved or exceeded.
Except as otherwise permitted by Section 162(m) of the Code, the minimum level
at which an executive will earn any incentive payment, and the level at which an
executive will earn the maximum incentive payment of double the target, will
generally be established by the Stock Option and Compensation Committee prior to
the commencement of each bonus period (or such earlier or later date as is
permitted by Section 162(m)). Actual payouts will be based on either a
straight-line or pre-established graded interpolation based on these minimum and
maximum levels of actual performance.
The maximum dollar amount which may be paid in any year under the
Incentive Plan to any participant is $3,000,000.
The Board of Directors of the Company may amend the Incentive Plan at any
time.
REASON FOR STOCKHOLDER APPROVAL
The Incentive Plan has been designed to take into account certain limits
on the ability of a public corporation to claim tax deductions for compensation
paid to certain highly compensated executive officers. Section 162(m) of the
Code generally denies a corporate tax deduction for annual compensation
exceeding $1 million paid to the chief executive officer and the four other most
highly compensated officers of a public corporation. However, "qualified
performance-based compensation" is exempt from this limitation. Qualified
performance-based compensation is compensation paid based solely upon the
achievement of objective performance goals, the material terms of which are
approved by the stockholders of the paying corporation. The rules pertaining to
Section 162(m) require stockholder re-approval of the material terms of the
performance-based plan at least once every five years. Inasmuch as the Company's
sole stockholder approved the Incentive Plan in August 1999, the stockholders of
the Company are thus now being asked to re-approve the material terms of the
Incentive Plan, as described above. The Board of Directors believes that in the
absence of an incentive cash compensation plan such as the Incentive Plan, the
Company would have difficulty attracting and retaining senior level executives
having the experience and abilities necessary to manage the Company's
businesses.
BENEFITS UNDER THE INCENTIVE PLAN
Due to the Company's disappointing performance in the 2003 fiscal year,
there were no payments or accruals made under the Incentive Plan. Each of the
executive officers named in the Summary Compensation Table on page 10 has been
granted incentive compensation opportunities for the 2004 fiscal year under the
Incentive Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RE-APPROVAL OF THE
MATERIAL TERMS OF THE INCENTIVE PLAN.
-21-
AUDIT COMMITTEE REPORT
The primary responsibility of the Audit Committee is to assist the Board
of Directors in fulfilling its oversight responsibilities relating primarily to
the quality and integrity of Too, Inc.'s financial reporting process and
reports, its systems of internal accounting and controls, and the independent
audit of its financial statements. Management is responsible for preparing the
financial statements, and the outside auditor is responsible for auditing those
financial statements. The Audit Committee, which consists of three independent
directors, functions in accordance with a written charter adopted by the Board
of Directors. The Amended and Restated Audit Committee Charter is attached
hereto as Appendix A. The Charter requires the Audit Committee to perform a
self-assessment and review the Charter annually.
In fulfilling its oversight responsibilities, the Audit Committee reviewed
and discussed the audited financial statements in the Annual Report on Form 10-K
for the fiscal year ended January 31, 2004, with management and the outside
auditors, including their judgment about the quality and appropriateness of
accounting principles, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements. In addition, the Audit
Committee discussed with the outside auditors the matters required to be
communicated under generally accepted auditing standards by Statement on
Auditing Standards 61. The Audit Committee also discussed with the outside
auditors the auditors' independence from management and the Company, and
discussed the matters contained in the outside auditors' formal written
statement received by the Company and required by the Independence Standards
Board Standard No. 1.
The Audit Committee discussed with the Company's outside auditors the
overall scope and plan for their audit. The Audit Committee met separately with
the outside auditors, with and without management present, to discuss the
results of their examinations, including the integrity, adequacy, and
effectiveness of the accounting and financial reporting processes and controls,
and the overall quality of Too, Inc.'s reporting.
In reliance on the reviews and discussions referred to above, the Audit
Committee recommended to the Board, and the Board has approved, that the audited
financial statements be included in the Annual Report on Form 10-K for the year
ended January 31, 2004, for filing with the Securities and Exchange Commission.
Audit Committee
Philip E. Mallott, Chairman
Elizabeth M. Eveillard
Kenneth J. Strottman
-22-
SHARE OWNERSHIP OF PRINCIPAL STOCKHOLDERS
The following table shows the names of owners of the Company's common
stock who, on February 29, 2004 (unless otherwise noted), were known by Too,
Inc. to be beneficial owners of more than 5% of the shares of common stock of
the Company.
AMOUNT
BENEFICIALLY PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) OF CLASS(2)
------------------------------------ -------- -----------
Mac-Per-Wolf Company......................... 2,760,550(3) 8.0%
310 S. Michigan Ave. Suite 2000
Chicago, Illinois 60604
Kern Capital Management, LLC................. 2,046,400(4) 6.0%
114 West 47th Street, Suite 1296
New York, New York 10036
FMR Corp..................................... 1,989,100(5) 5.8%
82 Devonshire Street
Boston, Massachusetts 02109
Cramer Rosenthal McGlynn, LLC................ 1,742,500(6) 5.1%
520 Madison Avenue
New York, New York 10022
-------------
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission which generally attribute beneficial
ownership of securities to persons who possess sole or shared voting power
and or investment power with respect to those securities.
(2) "Percent of Class" is calculated by dividing the number of shares
beneficially owned by the total number of outstanding shares of the
Company on February 29, 2004, plus the number of shares such person has
the right to acquire within 60 days of February 29, 2004.
(3) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 22, 2004, by Mac-Per-Wolf Company
("Mac-Per-Wolf") and Janus Small Cap Value Fund ("Janus Fund"). Perkins,
Wolf, McDonnell and Company, LLC ("PWMC"), a wholly owned subsidiary of
Mac-Per-Wolf, is an investment adviser which furnishes investment advice
to certain individual and institutional clients (collectively, the
"Managed Portfolios"). Janus Fund, an investment company and one of the
Managed Portfolios to which PWMC provides investment advice, is deemed to
beneficially own 1,860,000 shares or approximately 5.4% of the Company's
common stock.
(4) Based on the Schedule 13G of Kern Capital Management, LLC filed with the
Securities and Exchange Commission on February 13, 2004.
(5) Based on information contained in a Schedule 13G filed with the Securities
and Exchange Commission on February 18, 2004, by FMR Corp. ("FMR"), Edward
C. Johnson 3d, Abigail P. Johnson, Fidelity Management & Research Company
("Fidelity") and Fidelity Low Priced Stock Fund ("Fidelity Fund").
Fidelity is a wholly-owned subsidiary of FMR and, as an investment
adviser, deemed to beneficially own 1,989,100 shares or approximately 5.8%
of the Company's common stock as a result of acting as investment adviser
to various investment companies including the Fidelity Fund, which is
deemed to beneficially own 1,800,000 shares or approximately 5.24% of the
Company's
-23-
common stock. Mr. Johnson and Ms. Johnson, along with other members of the
Johnson family, through their ownership of Class B voting common stock of
FMR and the execution of a shareholders' voting agreement are deemed to be
a controlling group under the Investment Company Act of 1940 with respect
to FMR and, thus, both Mr. Johnson and Ms. Johnson are deemed to
beneficially own 1,989,100 shares or 5.79% of the Company's common stock.
(6) Based on the Schedule 13G of Cramer Rosenthal McGlynn, LLC filed with the
Securities and Exchange Commission on February 6, 2004.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers, directors, and greater than 10% stockholders to file reports of
ownership and changes in ownership of the Company's securities with the
Securities and Exchange Commission. SEC regulations require that copies of the
reports be provided to the Company. Based on our review of such reports, we
believe that all reporting persons complied with all filing requirements during
the fiscal year ended January 31, 2004.
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP served as the independent accountants for the
Company for the 2003 fiscal year and throughout the periods covered by the
consolidated financial statements. Representatives of PricewaterhouseCoopers LLP
are expected to attend the annual meeting in order to respond to questions from
stockholders, and they will have the opportunity to make a statement.
FEES OF THE INDEPENDENT ACCOUNTANTS
The following table shows the aggregate fees billed to the Company by its
independent accountants, PricewaterhouseCoopers LLP, for services rendered
during the fiscal years ended February 1, 2003 and January 31, 2004.
FISCAL YEAR ENDED
-----------------
JANUARY 31, FEBRUARY 1,
2004 2003
-------- --------
Audit Fees $252,100 $202,800
Audit-Related Fees(1) 8,000 --
Tax Fees(2) 40,200 56,400
All Other Fees(3) -- 187,400
(1) Includes fees for accounting research on discontinued operations during
the fiscal year ended February 1, 2003.
(2) Includes fees for services related to tax compliance and tax planning.
(3) Includes one-time fees for services rendered in connection with the
Company's follow-on offering of common stock in May 2002 and fees
associated with the audit of the third-party administrator for the
Company's health care benefit plan during the fiscal year ended February
1, 2003.
The audit committee has considered whether the provision of services other than
those performed in connection with the "Audit Fees" above is compatible with
maintaining the principal accountant's independence.
-24-
The Audit Committee has a policy that the Committee will pre-approve all
audit and non-audit services provided by the independent auditors. The Audit
Committee may delegate pre-approval authority to a member of the Committee. The
decisions of the member to whom pre-approval authority is delegated must be
presented to the full Committee at its next scheduled meeting. The Audit
Committee has delegated pre-approval authority to the Chairman.
STOCKHOLDER PROPOSALS
Stockholder proposals to be included in the proxy statement for the 2005
Annual Meeting of Stockholders should be submitted to the Secretary of the
Company at our corporate offices by December 10, 2004, but not before November
10, 2004. The Company may omit from the proxy statement and form of proxy
relating to the next annual meeting of stockholders any proposals which are not
received by the Secretary by December 10, 2004, or which are received before
November 10, 2004. Any stockholder proposal submitted outside the processes of
Rule 14a-8 under the Securities and Exchange Act of 1934 for presentation at our
2005 Annual Meeting will be considered untimely for purposes of Rule 14a-4 and
14a-5 if notice thereof is received by the Company after February 25, 2004. To
be submitted at the meeting, any such proposal must be a proper subject for
stockholder action under the laws of the State of Delaware.
Stockholder nominations for the Board of Directors to be elected at the
2005 Annual Meeting of Stockholders should be submitted not less than 14 days,
nor more than 50 days, before the 2005 Annual Meeting.
SOLICITATION EXPENSES
The Company will pay the expense of preparing, assembling, printing and
mailing the proxy form and the form of material used in solicitation of proxies.
Our associates may solicit proxies by telephone, mail services, electronic mail,
mailgram, facsimile, telegraph, cable and personal interview.
CERTAIN MATTERS RELATING TO PROXY MATERIALS AND ANNUAL REPORTS
The Securities and Exchange Commission has adopted amendments to its rules
regarding delivery of proxy statements and annual reports to stockholders
sharing the same address. We may now satisfy these delivery rules by delivering
a single proxy statement and annual report to an address shared by two or more
of our stockholders. This delivery method is referred to as "householding" and
can result in significant costs savings for us. To take advantage of this
opportunity, we have delivered only one proxy statement and annual report to
multiple stockholders who share an address, unless we received contrary
instructions from the impacted stockholders prior to the mailing date. We
undertake to deliver promptly upon written or oral request a separate copy of
the proxy statement or annual report, as requested, to a stockholder at a shared
address to which a single copy of those documents was delivered. If you prefer
to receive separate copies of a proxy statement or annual report, either now or
in the future, you can request a separate copy of the proxy statement or annual
report by writing to us at the following address: Investor Relations, Too, Inc.,
8323 Walton Parkway, New Albany, Ohio 43054, Attention: Robert C. Atkinson, or
by telephoning us at (614) 775-3500.
If you are currently a stockholder sharing an address with another Too,
Inc. stockholder and wish to have your future proxy statements and annual
reports householded, please contact Investor Relations at the above address or
telephone number.
-25-
OTHER MATTERS
Copies of the exhibits to our 2003 Form 10-K Annual Report may be
obtained, at a reasonable charge for copying and mailing, by writing to us at
the following address: Investor Relations, Too, Inc., 8323 Walton Parkway, New
Albany, Ohio 43054, Attention: Robert C. Atkinson, or by telephoning us at (614)
775-3500.
The Board of Directors knows of no other matters to be brought before the
annual meeting. However, if other matters should come before the meeting, each
of the persons named in the proxy intends to vote in accordance with their
judgement on such matters.
By Order of the Board of Directors,
/s/ Michael W. Rayden
Michael W. Rayden
Chairman, President & Chief Executive Officer
-26-
APPENDIX A
TOO, INC.
AMENDED AND RESTATED CHARTER
OF THE AUDIT COMMITTEE
AS ADOPTED FEBRUARY 10, 2004
I. AUDIT COMMITTEE PURPOSE
The purpose of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities of:
- the integrity of the Company's financial statements;
- the Company's compliance with legal and regulatory
requirements;
- the independent auditor's qualifications and independence; and
- the performance of the Company's internal audit function and
independent auditors.
The Audit Committee shall prepare the audit committee report as required
by the Securities and Exchange Commission (the "Commission") to be
included in the Company's annual proxy statement.
II. AUDIT COMMITTEE COMPOSITION AND MEETINGS
The Audit Committee shall be comprised of three or more directors as
determined by the Board. Audit Committee members shall meet the
independence, experience and other requirements of the New York Stock
Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the rules and regulations of the
Commission. All members of the Audit Committee shall be financially
literate and at least one member of the Audit Committee shall be a
financial expert as defined by the Commission. Audit committee members
shall not simultaneously serve on the audit committees of more than two
other public companies.
Audit Committee members shall be appointed by the Board on the
recommendation of the Nominating and Governance Committee and shall serve
until their successors are appointed and qualified. Audit Committee
members may be replaced by the Board. If an Audit Committee Chair is not
designated or present, the members of the Audit Committee may designate a
Chair by majority vote of the Audit Committee membership.
The Audit Committee shall meet at least quarterly, or more frequently as
circumstances dictate. The Audit Committee shall meet periodically with
management, the internal auditors, and the independent auditor in separate
executive sessions. The Audit Committee Chair shall prepare and/or approve
an agenda in advance of each meeting. The Audit Committee may request any
officer or employee of the Company's outside counsel or independent
auditor to attend a meeting of the Committee or to meet with any member
of, or consultants to, the Committee.
III. AUDIT COMMITTEE AUTHORITY, RESPONSIBILITIES AND DUTIES
The Audit Committee shall have the responsibility to directly appoint,
retain, compensate, evaluate and terminate the Company's independent
auditor. The Audit Committee shall have the sole authority to approve all
audit engagement fees and terms, as well as all significant non-audit
engagements with the independent auditor. The Audit Committee shall be
directly responsible for the oversight of the work of the independent
auditor and any other registered public accounting firm employed by the
Company (including resolution of disagreements between management and the
independent auditor regarding financial reporting) for the purpose of
preparing or issuing an audit report or related work. The independent
auditor and any other such registered public accounting firm employed by
the Company shall report directly to the Audit Committee.
The Audit Committee shall pre-approve all auditing services and permitted
non-audit services (including the fees and terms thereof) to be performed
for the Company by its independent auditor or other registered public
accounting firm, subject to the de minimus exceptions for non-audit
services described in Section 10A(i)(1)(B) of the Exchange Act that are
approved by the Audit Committee prior to the completion of the audit.
-A-1-
The Audit Committee may form and delegate authority to subcommittees
consisting of one or more members of the Audit Committee when appropriate,
including the authority to grant pre-approvals of audit and permitted
non-audit services, provided that decisions of such subcommittee to grant
pre-approvals shall be presented to the full Audit Committee at its next
scheduled meeting.
The Committee is authorized by the Board to investigate any matter within
its terms of reference. The Audit Committee shall have the authority, to
the extent it deems necessary or appropriate to carry out its duties, to
use resources from within the Company or to obtain advice and assistance
from outside legal, accounting or other advisors as the Audit Committee
deems necessary to carry out its duties. The Committee is authorized to
seek information from any of the Company's directors, officers or
employees, and from any outside advisors of the Company, for the purpose
of fulfilling its duties and the Board shall, if so requested, direct such
persons to cooperate with the Committee.
The Company shall provide for appropriate funding, as determined by the
Audit Committee, for payment of any expenses relating to the use of
Company resources for investigative purposes, and for payment of
compensation to the independent auditor for the purpose of rendering or
issuing an audit report and to any advisors employed by the Audit
Committee.
The Audit Committee shall make regular reports to the Board. The Audit
Committee shall review and reassess the adequacy of this Charter annually
and recommend any proposed changes to the Board for approval. The Audit
Committee shall have the Charter published at least every three years in
accordance with the Commission's regulations. The Audit Committee shall
annually review the Audit Committee's own performance.
Consistent with the duties and obligations above, the Audit
Committee, shall also:
Financial Statement and Disclosure Matters
1. Review and discuss the Company's annual audited financial statements with
management and the independent auditor, including disclosures made in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, and recommend to the Board whether the audited financial
statements should be included in the Company's Annual Report on Form 10-K.
2. Review and discuss with management and the independent auditor the
Company's quarterly financial statements, including disclosures made in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, prior to the filing of its Form 10-Q, including the results of
the independent auditor's review of the quarterly financial statements.
3. Discuss with management and the independent auditor significant financial
reporting issues and judgments made in connection with the preparation of
the Company's financial statements, including any significant changes in
the Company's selection or application of accounting principles, any major
issues as to the adequacy of the Company's internal controls, and any
special steps adopted in light of material control deficiencies.
4. Review and discuss reports from the independent auditors submitted to the
Audit Committee under Section 10A(k) of the Exchange Act, which reports
shall include:
(a) all critical accounting policies and practices to be used;
(b) all alternative treatments of financial information within generally
accepted accounting principles that have been discussed with
management officials of the issuer, ramifications of the use of such
alternative disclosures and treatments, and the treatment preferred
by the registered public accounting firm; and
-A-2-
(c) other material written communications between the independent
auditor and management, such as any management letter or schedule of
unadjusted differences.
5. Discuss with management the Company's earnings press releases, including
the use of "pro forma" or "adjusted" non-GAAP information, as well as
financial information and earnings guidance provided to analysts and
rating agencies. Such discussion may be done generally (consisting of
discussing the types of information to be disclosed and the types of
presentations to be made). The Audit Committee need not discuss in advance
each earnings release or each instance in which the Company may provide
earnings guidance.
6. Discuss with management and the independent auditor the effect of
regulatory and accounting initiatives, as well as off-balance sheet
structures on the Company's financial statements.
7. Discuss with management the Company's major financial risk exposures and
the steps management has taken to monitor and control such exposures,
including the Company's risk assessment and risk management policies and
guidelines. The Audit Committee is not required to be the sole body
responsible for risk assessment and management, but it must discuss
guidelines and policies to govern the process by which risk assessment and
management is undertaken.
8. Discuss with the independent auditor the matters required to be discussed
by Statement on Accounting Standards No. 61 relating to the conduct of the
audit, including any problems or difficulties encountered in the course of
the audit work, any restrictions on the scope of activities or access to
requested information, and any significant disagreements with management.
9. Review disclosures made to the Audit Committee by the Company's Chief
Executive Officer and Chief Financial Officer during their certification
process for the Form 10-K and Form 10-Q about any significant deficiencies
in the design or operation of internal controls or material weaknesses
therein and any fraud involving management or other employees who have a
significant role in the Company's internal controls.
Oversight of the Company's Relationship with the Independent Auditor
10. Obtain and review a report from the independent auditor, at least
annually, describing:
(a) the independent auditor's internal quality-control procedures;
(b) any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional authorities
within the preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to deal with any
such issues; and
(c) all relationships between the independent auditor and the Company.
After review, the Audit Committee shall evaluate the qualifications,
performance, and independence of the independent auditor, including
considering whether the auditor's quality controls are adequate and the
provisions of permitted non-audit services is compatible with maintaining
the auditor's independence, and taking into account the opinions of
management and internal auditors. This evaluation shall include the review
and evaluation of the lead or coordinating partner of the independent
auditor, and should ensure the rotation of such lead or coordinating
partner of the independent auditor as required by law. The Audit Committee
should further consider whether, in order to assure continuing auditor
independence, there should be regular rotation of the audit firm itself.
The Audit Committee shall present its conclusions with respect to the
independent auditor to the Board.
11. Establish policies for the Company's hiring of employees or former
employees of the independent auditor who participated in any capacity in
the audit of the Company.
-A-3-
12. Meet with the independent auditor prior to the audit to discuss the
planning and staffing of the audit.
Oversight of the Company's Internal Audit Function
13. Review the appointment and replacement of the senior internal auditing
executive or the entity performing the internal audit function.
14. Review the significant reports to management prepared by the internal
auditing department (or the entity performing the internal audit function)
and management's responses.
15. Discuss with the independent auditor and management the internal audit
department (or the entity performing the internal audit function)
responsibilities, budget, and staffing and any recommended changes in the
planned scope of the internal audit.
Compliance Oversight Responsibilities
16. Obtain from the independent auditor assurance that Section 10A(b) of the
Exchange Act has not been implicated.
17. Review reports and disclosures of insider and affiliated party
transactions.
18. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's Code of Business Conduct and Ethics.
19. Establish procedures for the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters, and the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
20. Discuss with management and the independent auditor any correspondence
with regulators or governmental agencies and any published reports which
raise material issues regarding the Company's financial statements or
accounting policies.
21. On at least an annual basis, review with the Company's counsel, any legal
matters that could have a significant impact on the organization's
financial statements, the Company's compliance with applicable laws and
regulations, and inquiries received from regulators or governmental
agencies.
Other Audit Committee Responsibilities
22. Maintain minutes of meetings and periodically report to the Board of
Directors on significant results of the foregoing activities.
23. Perform any other activities consistent with this Charter, the Company's
by-laws, and governing law, as the Committee or the Board deems necessary
or appropriate.
LIMITATION OF AUDIT COMMITTEE'S ROLE
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements and disclosures are
complete and accurate and are in accordance with generally accepted accounting
principles and applicable rules and regulations. These are the responsibilities
of management and the independent auditor.
-A-4-
APPENDIX B
TOO, INC.
INCENTIVE COMPENSATION PERFORMANCE PLAN
The Too, Inc. Incentive Compensation Performance Plan (the "INCENTIVE
PLAN") is intended to satisfy the applicable provision of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "CODE"). The Incentive Plan shall
be administered by the Stock Option and Compensation Committee (the "COMMITTEE")
of the Board of Directors of Too, Inc. (the "COMPANY"). The Committee shall
select those key executives of the Company with significant operating and
financial responsibility, which shall include those individuals who are likely
to be "covered employees" (within the meaning of Section 162(m) of the Code),
for the relevant fiscal year, to be eligible to earn seasonal or annual cash
incentive compensation payments to be paid under the Incentive Plan.
In respect of each Spring and/or Fall selling season or fiscal year, the
Committee may establish performance goals for the Company. The performance goals
selected by the Committee shall be based on any one or more of the following:
price of the Company's common stock, par value $.01 per share, or the stock of
any affiliate, shareholder return, return on equity, return on investment,
return on capital, sales productivity, comparable store sales growth, economic
profit, economic value added, net income, operating income, gross margin, sales,
free cash flow, earnings per share, operating company contribution or market
share. These factors shall have a minimum performance standard below which, and
a maximum performance standard above which, no payments will be made. These
performance goals may be based on an analysis of historical performance and
growth expectations for the business, financial results of other comparable
businesses and progress towards achieving the long-range strategic plan for the
business. These performance goals and determination of results shall be based
entirely on financial measures. The Committee may not use any discretion to
modify award results except as permitted under Section 162(m) of the Code.
Annual incentive compensation targets may be established for eligible
executives ranging from 10% to 150% of base salary. Executives may earn their
target incentive compensation if the business achieves the pre-established
performance goals. The target incentive compensation percentage for each
executive will be based on the level and functional responsibility of his or her
position, size of the business for which the executive is responsible, and
competitive practices. The amount of incentive compensation paid to
participating executives may range from zero to double their targets, based upon
the extent to which performance goals are achieved or exceeded. Except as
otherwise permitted by Section 162(m) of the Code, the minimum level at which a
participating executive will earn any incentive payment, and the level at which
an executive will bear the maximum incentive payment of double the target, must
be established by the Committee prior to the commencement of each bonus period
(or such earlier or later date as is permitted by Section 162(m)). Actual
payouts must be based on either a straight-line or pre-established interpolation
based on these minimum and maximum levels and the performance goals.
The maximum dollar amount to be paid for any year under the Incentive Plan
to any participant may not exceed $3,000,000.
-B-1-
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
TOO, INC.
ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael W. Rayden and Kent A. Kleeberger,
or either of them acting alone, as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse side of this ballot, all of the shares of Common Stock of Too,
Inc. (the "Company") that the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held at 9:00 A.M. Eastern Daylight Time on May 13,
2004, at the Company's corporate offices located at 8323 Walton Parkway, New
Albany, Ohio, and any adjournment or postponement thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED STOCKHOLDER. IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD
OF DIRECTORS AND FOR RE-APPROVAL OF THE MATERIAL TERMS OF THE INCENTIVE
COMPENSATION PERFORMANCE PLAN.
PLEASE VOTE YOUR PROXY PROMPTLY BY FOLLOWING THE
VOTING INSTRUCTIONS ON THE REVERSE SIDE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
ANNUAL MEETING OF STOCKHOLDERS OF
TOO, INC.
MAY 13, 2004
PROXY VOTING INSTRUCTIONS
MAIL - Date, sign and mail your proxy card in the envelope provided as soon as
possible.
-OR-
TELEPHONE - Call toll-free 1-800-PROXIES (1-800-776-9437) from any touch-tone
telephone and follow the instructions. Have your proxy card available when you
call.
-OR-
INTERNET - Access "WWW.VOTEPROXY.COM" and follow the on-screen instructions.
Have your proxy card available when you access the web page.
Please detach along perforated line and mail in the envelope provided IF you are
not voting via telephone or the Internet.
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PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN
HERE: X
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1. Election of Directors:
NOMINEES:
[ ] FOR ALL NOMINEES [ ] David A. Krinsky
[ ] Kenneth J. Strottman
[ ] WITHHOLD AUTHORITY
FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See instructions below)
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "FOR ALL EXCEPT" and fill in the circle next to each nominee you with
to withhold, as shown here: ?
2. Re-approval of the material terms of the Incentive Compensation Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To transact such other business properly coming before the meeting or
adjournments thereof.
To change the address on your account, please check the box at right [ ]
and indicate your new address in the address space above. Please not
that changes to the registered name(s) on the account may not be submitted
via this method.
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Signature of Stockholder Date Signature of Stockholder Date
NOTE: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.