form8kapril22009.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of
The
Securities Exchange Act of 1934
Date of
Report (Date of earliest event reported) April 2, 2009
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CHARMING
SHOPPES, INC.
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(Exact
name of registrant as specified in its
charter)
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PENNSYLVANIA
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000-07258
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23-1721355
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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3750 STATE ROAD, BENSALEM,
PA 19020
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(Address
of principal executive offices) (Zip
Code)
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(215) 245-9100
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(Registrant’s
telephone number, including area
code)
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NOT APPLICABLE
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(Former
name or former address, if changed since last
report.)
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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o
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item
5.02. Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers;
Compensatory
Arrangements of Certain Officers.
On April
2, 2009, Charming Shoppes, Inc. (the “Company”) appointed James P. Fogarty as
President, Chief Executive Officer, and Director of the Company. Mr.
Fogarty was not immediately appointed to any committee of the Board of
Directors, but is expected to be appointed to various committees in the
future.
Mr.
Fogarty, 40, most recently was a Managing Director with Alvarez & Marsal
(“A&M”), a premier independent global professional services firm providing
leadership, problem-solving, and value-creation services across the industry
spectrum. He had also been a member of the A&M’s Executive
Committee for North America Restructuring. In his almost 15 years
with A&M, he provided performance improvement, crisis management, and
restructuring advisory services to numerous companies in various
sectors.
During
his tenure at A&M, Mr. Fogarty most recently served as President and Chief
Operating Officer of Lehman Brothers Holdings from September 2008 to the present
time. From September 2005 through February 2008, he was President and
Chief Executive Officer of American Italian Pasta Company, the largest producer
of dry pasta in North America. He served as the Chief Financial
Officer at Levi Strauss & Co. from 2003 to 2005. From December
2001 through September 2003, he served as Senior Vice President and Chief
Financial Officer of The Warnaco Group, a then $1.5 billion global apparel
maker, which emerged from bankruptcy in early 2003 after completing a successful
turnaround during his tenure.
In
connection with his appointment as President and Chief Executive Officer, the
Company and Mr. Fogarty signed an offer letter (the “Letter”) on April 2, 2009
setting out his compensation arrangement. Mr. Fogarty will receive an
annual base salary of $1,000,000 and is eligible to receive an annual bonus of
up to 200% of base salary (150% is the target level for such bonus) based on the
achievement of certain performance goals of the Company. The Company
agreed to pay, in April 2010, a guaranteed bonus of up to $1,500,000 for his
first year of employment to the extent Mr. Fogarty fails to achieve a bonus at
target. Mr. Fogarty is also eligible to participate in the Company’s
Long Term Incentive Program beginning in Spring 2011. The Letter also
provides for Mr. Fogarty’s participation in the Company’s retirement and other
employee benefit programs. In addition, Mr. Fogarty will be provided
with an annual automobile allowance of $15,000, an annual flexible perquisite
allowance of $20,000, temporary living and commuting expenses for the first 12
months of his employment, relocation assistance, and a household move
reimbursement.
Inducement
Grants
As an
inducement for Mr. Fogarty to enter into employment with the Company, the
Company granted him 2,000,000 stock appreciation rights
(“SARs”). Each SAR represents the right to receive, at
exercise, a number of shares of the Company’s common stock with a fair market
value at the date of exercise equal to the appreciation in value of the
Company’s common stock over the base amount. The base amount is $1.82
per share, which was the fair market value of the Company’s common stock on
April 2, 2009 (the grant date).
An amount
equal to 900,000 SARs is subject to time-based vesting. These SARs
will vest in four equal installments on the first, second, third and fourth
anniversaries of the grant date, subject only to Mr. Fogarty’s continued
employment with the Company. These SARs were granted under the terms
of the Company’s 2004 Stock Award and Incentive Plan.
Another
1,100,000 of the SARs is subject to performance-based vesting. These
SARs will vest in four equal installments on the last trading day of each of the
Company’s next four fiscal years, subject to Mr. Fogarty’s continued employment
with the Company and the closing price of the Company’s common stock equaling or
exceeding 120% of the base amount for five consecutive days during the
respective fiscal year. Vesting of the performance-based SARs will be
accelerated on the day on which the Company’s common stock equals or exceeds a
certain target stock price ($2.40 in fiscal 2010, $3.50 in fiscal 2011, $5.00 in
fiscal 2012, and $7.50 in fiscal 2013). However, vesting in any
fiscal year cannot exceed 275,000 SARs plus the number of SARs (if any) that did
not vest in a previous fiscal year. In addition, the number of shares
of the Company’s common stock with respect to which the SARs become exercisable
will be decreased as necessary so that the aggregate spread (fair market value
of the Company’s common stock on the vesting date over the base amount) in a
particular fiscal year does not exceed certain specified amounts ($159,500 in
fiscal 2010, $1,000,000 in fiscal 2011, $1,750,00 in fiscal 2012, $10,340,500 in
fiscal 2013, $3,666,667 in fiscal 2014, and $3,500,000 in fiscal 2015 through
2017). The performance-based SARs were granted under NASDAQ
Marketplace Rule 4350(i)(1)(A)(iv).
Both the
time-vest and performance-based SARs may be accelerated upon termination of Mr.
Fogarty’s employment other than for cause or good reason or within 24 months of
a change of control if the successor does not convert the SARs to stock
appreciation rights with equivalent terms. The SARs will terminate on
the seventh anniversary of the grant date, or earlier, for certain terminations
of employment.
Severance
Agreement
In
addition to the Letter, the Company also entered into a Severance Agreement (the
“Agreement”) with Mr. Fogarty dated as of April 2, 2009. Under the
Agreement, Mr. Fogarty would receive severance benefits upon a termination of
employment by the Company other than for “cause”, or upon a termination by the
executive for “good reason” (each as defined in the Agreement) (each a
“Qualifying Termination”). In the event of a Qualifying Termination,
Mr. Fogarty would receive severance equal to twice his annual base salary,
payable over 24 months, monthly reimbursements of COBRA health care premiums
during the 24-month severance period (or until he obtains similar coverage from
a subsequent employer, if earlier), his prorated annual bonus for the year of
termination, based on Company performance, and a lump sum payment equal to his
unpaid base salary and accrued and earned vacation pay. The Company
would also provide certain outplacement services.
If there
was a Qualifying Termination during the 24-months after a “change of control”
(as defined in the Agreement), instead of the severance benefits described
above, Mr. Fogarty would receive a lump sum severance amount equal to twice the
sum of his annual base salary and cash bonus (averaged over the past three
years), a lump sum payment equal to the cost of COBRA health care premiums and
life insurance and disability coverage for the 24-months after termination, a
prorated annual bonus at target for the year of termination, a lump sum payment
equal to his unpaid base salary, and accrued and earned vacation
pay. The Company would also provide certain outplacement
services.
Any
severance payment due to Mr. Fogarty may be postponed for six months in order to
comply with section 409A of the Internal Revenue Code (the
“Code”). At Mr. Fogarty’s option, if an excise tax under section 4999
of the Code is imposed on any payments, the amount of such payments may be
reduced to the section 280G threshold amount if such reduction provides Mr.
Fogarty with a greater net after-tax amount than would be the case if no
reduction was made.
Mr.
Fogarty is not entitled to severance payments due to termination for disability
or upon retirement or death. Additionally, if Mr. Fogarty is
terminated for cause or other than for good reason or retires, he will only
receive accrued base salary and vacation pay through the date of
termination.
The
Agreement has a three-year term which, at the end of the first year of the
three-year term and at the end of each year thereafter, automatically extends
for one additional year unless notice of non-renewal is delivered.
During
the term of the Agreement and for 24 months following any termination, Mr.
Fogarty is subject to non-competition and non-solicitation
provisions. He is also subject to confidentiality and
non-disparagement provisions. We may seek injunctive relief against
Mr. Fogarty for breach of these provisions. In addition, Mr. Fogarty
would forfeit payments under the Agreement for a breach of any of these
provisions.
Resignation of Interim Chief
Executive Officer
In
connection with Mr. Fogarty’s appointment, Alan Rosskamm resigned as the
Company’s Interim Chief Executive Officer on April 2, 2009. Mr.
Rosskamm will continue as the Company’s Chairman of the Board. The
Company thanks Mr. Rosskamm for his significant contribution and service as
Interim Chief Executive Officer.
Upon Mr.
Rosskamm’s appointment as Interim Chief Executive Officer, the Company granted
him 41,152 SARs. As a result of Mr. Fogarty’s appointment as
President, Chief Executive Officer and Director of the Company, Mr. Rosskamm’s
SARs vested.
The
foregoing descriptions of the Letter, the Agreement and the SARs are
qualified in their entirety by reference to the agreements, which are attached
as Exhibits 10.1, 10.2, 10.3 and 10.4 respectively, to this current report and
incorporated herein by reference.
The
Company issued a press release on April 3, 2009 with respect to the foregoing, a
copy which is attached as Exhibit 99.1 to this current report.
Item
9.01 Financial Statements and Exhibits.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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CHARMINGSHOPPES,
INC.
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(Registrant)
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Date: April
6, 2009
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/S/ ERIC M.
SPECTER
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Eric
M. Specter
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Executive
Vice President
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Chief
Financial Officer
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EXHIBIT
INDEX