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ARO Liquidation, Inc. DEF 14A 2011
def14a
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 þ
Filed by a Party other than the Registrant o
Check the appropriate box:
o   Preliminary Proxy Statement
o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ   Definitive Proxy Statement
o   Definitive Additional Materials
o   Soliciting Material Pursuant to §240.14a-12
 
AÉROPOSTALE, INC.
 
(Name of Registrant as Specified In Its Charter)
 
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ   No fee required.
o   Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1)   Title of each class of securities to which transaction applies:
 
     
     
 
 
  (2)   Aggregate number of securities to which transaction applies:
 
     
     
 
 
  (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
     
     
 
 
  (4)   Proposed maximum aggregate value of transaction:
 
     
     
 
 
  (5)   Total fee paid:
 
     
     
 
o   Fee paid previously with preliminary materials.
 
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)   Amount Previously Paid:
 
     
     
 
 
  (2)   Form, Schedule or Registration Statement No.:
 
     
     
 
 
  (3)   Filing Party:
 
     
     
 
 
  (4)   Date Filed:
 
     
     
 


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AÉROPOSTALE, INC.
112 West 34th Street, 22nd Floor
New York, NY 10120
646-485-5410

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 16, 2011
 
To the Stockholders of Aéropostale, Inc.:
 
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Aéropostale, Inc., a Delaware corporation (the “Company”), will be held at the Company’s executive offices at 112 West 34th Street New York, New York, 10120, on June 16, 2011 at 2:00 p.m., local time, for the following purposes:
 
1. To elect ten (10) directors to the Board of Directors to serve for terms of one year or until their successors are elected and qualified;
 
2. To approve an extension of the term of our Amended and Restated 2002 Long-Term Incentive Plan as well as certain other administrative updates to the Plan (See Annex A included herewith),
 
3. To hold an advisory vote on executive compensation;
 
4. To hold an advisory vote on the frequency of the advisory vote on executive compensation;
 
5. To ratify the selection by the Audit Committee of the Board of Directors, of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 28, 2012; and
 
6. To transact such other business as may properly come before the meeting or any adjournment thereof.
 
The Board of Directors has fixed the close of business on April 21, 2011 as the record date for determining stockholders entitled to notice of, and to vote at, the Annual Meeting and at any adjournment thereof.
 
Your vote is important. Stockholders of record can give proxies by calling a toll-free telephone number, by using the Internet or by mailing their signed proxy cards. Whether or not you plan to attend the meeting, please vote by telephone or via the Internet or sign, date and return the enclosed proxy card in the envelope provided. Instructions are included on your proxy card. You may change your vote by submitting a later dated proxy (including a proxy via telephone or the Internet) or by attending the meeting and voting in person.
 
Help us make a difference by eliminating paper proxy mailings to your home or business: with your consent, we will provide all future proxy voting materials and annual reports to you electronically. Instructions for consenting to electronic delivery can be found on your proxy card. Your consent to receive stockholder materials electronically will remain in effect until canceled.
 
-s- Edward M. Slezak
Edward M. Slezak
Secretary
 
May 6, 2011


 

 
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AÉROPOSTALE, INC.
112 West 34th Street, 22nd Floor
New York, NY 10120
646-485-5410
 
ANNUAL MEETING OF STOCKHOLDERS
June 16, 2011
 
 
 
 
PROXY STATEMENT
 
 
 
 
 
Our Board of Directors is soliciting proxies for the 2011 Annual Meeting of Stockholders. This Proxy Statement contains important information for you to consider when deciding how to vote on the matters brought before the meeting. Please read it carefully.
 
In this Proxy Statement:
 
  •  “We” and “the Company” mean Aéropostale, Inc. Our executive offices are located at 112 West 34th Street, New York, New York 10120; and
 
  •  “Annual Meeting” means the 2011 Annual Meeting of Stockholders to be held on June 16, 2011, at 2:00 p.m. at our executive offices at 112 West 34th Street, New York, New York, 10120, and any adjournment or postponement thereof.
 
Our 2010 Annual Report to Stockholders, which includes our financial statements, is available to review with this Proxy Statement. We are mailing notices of our Annual Meeting (or, for those who request it, a hard copy of this proxy statement, the enclosed form of proxy and our 2010 Annual Report) to our stockholders beginning on or about May 6, 2011.
 
ABOUT THE MEETING
 
All shares represented by properly executed proxies received by the Company prior to the meeting will be voted in accordance with the stockholders’ directions. A proxy may be revoked by written notice mailed to the Company (Attention: Edward M. Slezak, General Counsel and Secretary) or delivered in person at the meeting, by filing a duly executed, later dated proxy or by attending the meeting and voting in person.
 
What is the purpose of the annual meeting?
 
At our Annual Meeting, stockholders will act upon the matters outlined in the notice of meeting on the cover page of this Proxy Statement, namely, electing ten (10) directors, approving the extension of the term of our 2002 Long Term Incentive Plan, advisory votes on executive compensation and the frequency of such vote, ratifying the appointment of our independent registered public accounting firm and acting upon any other matter to come properly before the Annual Meeting.
 
Who is entitled to vote at the meeting?
 
Only stockholders of record at the close of business on April 21, 2011, the record date for the meeting, are entitled to receive notice of and to participate in the Annual Meeting. If you were a stockholder of record on that date, you will be entitled to vote all of the shares that you held on that date at the Annual Meeting or any postponements or adjournments of the Annual Meeting.
 
What if my shares are held in “Street Name” by a broker?
 
If you are the beneficial owner of shares held in “street name” by a broker, then your broker, as the record holder of the shares, must vote those shares in accordance with your instructions. If you do not give instructions to your broker, then your broker can vote your shares with respect to “discretionary” items, but not with respect to


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“non-discretionary” items. On non-discretionary items, such as the election of directors, approving the extension of the term of our 2002 Long Term Incentive Plan, advisory votes on executive compensation and the frequency of such vote, for which you do not give instructions, the shares will be treated as “broker non-votes.” A discretionary item is a proposal that is considered routine under the rules of the New York Stock Exchange, such as the ratification of our auditors. Shares held in street name may be voted by your broker on discretionary items in the absence of voting instructions given by you.
 
What are the voting rights of the holders of Aéropostale’s common stock?
 
Holders of our common stock are entitled to one (1) vote, for each share held of record, on all matters submitted to a vote of the stockholders, including the election of directors. Stockholders do not have cumulative voting rights.
 
Who can attend the meeting?
 
Subject to space availability, all holders of our common stock as of the record date, or their duly appointed proxies, may attend the meeting. Admission to the meeting will be on a first-come, first-serve basis. Registration will begin at 1:30 p.m. If you attend, please note that you may be asked to present valid photo identification, such as a driver’s license or passport. Cameras, recording devices and other electronic devices will not be permitted at the meeting. Please also note that if you hold your shares in “street name” (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at the meeting.
 
What constitutes a quorum?
 
The presence at the meeting, in person or by proxy, of the holders of record of the issued and outstanding shares of capital stock representing a majority of the votes entitled to be cast at the meeting constitutes a quorum, thereby permitting the meeting to conduct its business. As of the record date, April 21, 2011, 80,723,152 shares of our common stock were issued and outstanding. Thus, the presence, in person or by proxy, of the holders of common stock representing at least 40,361,577 votes will be required to establish a quorum.
 
Proxies received but marked as abstentions will be included in the calculation of the number of votes considered to be present at the meeting for quorum purposes.
 
What if a quorum is not present at the meeting?
 
If a quorum is not present at the scheduled time of the Annual Meeting, we may adjourn the Annual Meeting, either with or without a vote of the stockholders. If we propose to have the stockholders vote whether to adjourn the meeting, the people named in the enclosed proxy will vote all shares of our common stock for which they have voting authority in favor of the adjournment. An adjournment will have no effect on the business that may be conducted at the Annual Meeting.
 
How do I vote?
 
1. You may vote by mail.  If you properly complete and sign the enclosed proxy card and return it in the enclosed envelope, it will be voted in accordance with your instructions. The enclosed envelope requires no additional postage if mailed either in the United States or Canada.
 
2. You may vote by telephone.  If you are a registered stockholder (if you hold your common stock in your own name), you may submit your voting instructions by telephone by following the instructions printed on the proxy card. If you submit your voting instructions by telephone, you do not have to mail in your proxy card.
 
3. You may vote on the Internet.  If you are a registered stockholder (if you hold your common stock in your own name), you may vote on the Internet by following the instructions printed on the proxy card. If you vote on the Internet, you do not have to mail in your proxy card.
 
If you are a registered stockholder and attend the Annual Meeting, you may deliver your completed proxy card in person or vote in person by ballot at the meeting. If your shares are held in “street name” and you wish to vote at the Annual Meeting, you will need to obtain a proxy form from the institution that holds your shares.


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Can I change my vote after I submit my Proxy?
 
Yes, you may revoke your proxy at any time before it is voted at the Annual Meeting by:
 
  •  signing and returning another proxy card with a later date;
 
  •  submitting another proxy by telephone or on the Internet (your latest telephone or Internet voting instructions are followed);
 
  •  giving written notice of revocation to the Company’s Secretary prior to or at the Annual Meeting; or
 
  •  voting at the Annual Meeting.
 
Your attendance at the meeting will not have the effect of revoking your proxy unless you give written notice of revocation to the Corporate Secretary of the Company before the polls are closed on the date of the Annual Meeting. Any written notice revoking a proxy should be sent to our Corporate Secretary at 112 West 34th Street, New York, New York 10120 and must be received before the polls are closed.
 
How does the Board of Directors recommend I vote on the Proposals?
 
Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of the Board of Directors. The Board’s recommendation is set forth together with the description of each item in this proxy statement. In summary, your Board recommends that you vote:
 
  •  FOR election of the ten (10) nominees to the Board of Directors;
 
  •  FOR an extension of the term of our Amended and Restated 2002 Long-Term Incentive Plan as well as certain other administrative updates to the Plan;
 
  •  FOR our executive compensation program;
 
  •  FOR a triennial advisory vote on our executive compensation program;
 
  •  FOR ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 28, 2012 (“fiscal 2011”).
 
With respect to any other matter that properly comes before the meeting, the proxy holders will vote as recommended by the Board of Directors or, if no recommendation is given, in their own discretion.
 
What are my voting options on each Proposal?
 
You have several choices on each of the matters to be voted upon at the Annual Meeting. On the election of directors, by checking the appropriate box on your proxy card, you may: (a) vote for all of the director nominees as a group; (b) withhold authority to vote for all director nominees as a group; or (c) vote for all director nominees as a group except those nominees you identify as directors for whom your vote is withheld. On Proposals 2, 3 and 5, by checking the appropriate box, you may: (a) vote “For” the Proposal; (b) vote “Against” the Proposal; or (c) “Abstain” from voting on the Proposal by checking “Abstain”. On Proposal 4, the advisory vote on the frequency of the vote on executive compensation, you may indicate a preference for each year, every two years, every three years or you may “abstain”.
 
Why did I receive a notice regarding the internet availability of the proxy materials instead of a paper copy of the proxy materials?
 
In an effort to be environmentally responsible and to reduce the costs of printing and distributing its proxy materials, as it did last year, Aéropostale is taking advantage of the SEC rule that allows companies to furnish their proxy materials over the internet to some or all of their shareholders. As a result, we are sending to our shareholders a notice regarding the internet availability of the proxy materials instead of a paper copy of its proxy materials. This notice explains how you can access the proxy materials over the internet and also describes how to request to receive a paper copy of the proxy materials by mail or a printable copy electronically.


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How many votes are required to approve the Proposals?
 
For Proposal 1, pursuant to our bylaws and Delaware law, directors receiving a plurality of the votes represented and entitled to vote at the meeting shall be required. As to Proposal 2, the affirmative vote of a majority of the shares of our common stock represented and entitled to vote at the meeting is required to approve this Proposal. For Proposals 3 and 5, pursuant to our bylaws and Delaware law, an affirmative vote of a majority of shares of common stock represented and entitled to vote at the meeting is required to approve these Proposals. Abstentions will have no effect on the outcome of Proposal 1, but will have the same effect as a vote “Against” Proposals 2, 3 and 5. Broker non-votes have the same effect as a vote “Against” Proposals 2 and 3.
 
How will abstentions be treated?
 
If you abstain from voting on one or more proposals, we will still include your shares for purposes of determining whether a quorum is present.
 
What is the effect of a “broker non-vote” on the proposals to be voted on at the 2011 Annual Shareholders’ Meeting?
 
A “broker non-vote” occurs if your shares are not registered in your name and you do not provide the record holder of your shares (usually a bank, broker, or other nominee) with voting instructions on a matter as to which, under NYSE rules, a broker may not vote without instructions from you, but the broker nevertheless provides a proxy. A broker non-vote is considered present for purposes of determining whether a quorum exists, but is not considered a “vote cast” or “entitled to vote” with respect to such matter.
 
Under NYSE rules, the election of directors, as well as Proposals 2, 3 and 4 are not matters on which a broker may vote without your instructions. Therefore, if you do not provide instructions to the record holder of your shares with respect to Proposals 1 through 4, a broker non-vote as to your shares will result. The ratification of the appointment of independent accountants is a routine item under NYSE rules. As a result, brokers who do not receive instructions as to how to vote on that matter generally may vote on that matter in their discretion.
 
If your shares are held of record by a bank, broker, or other nominee, we urge you to give instructions to your bank, broker, or other nominee as to how you wish your shares to be voted so you may participate in the shareholder voting on these important matters.
 
What happens if a nominee for Director is unable to stand for election?
 
If a nominee is unable to stand for election, our Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority.
 
Where can I find voting results of the meeting?
 
We will announce preliminary voting results at the meeting and publish final results in a Form 8-K filed with the Securities and Exchange Commission once the final voting results have been tabulated.
 
Is my vote confidential?
 
Proxy instructions, ballots and voting tabulations that identify individual stockholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Aéropostale or to third parties except as necessary to meet applicable legal requirements, or to allow for the tabulation of votes and certification of the vote, or to facilitate a successful proxy solicitation by our Board of Directors. Occasionally, stockholders provide written comments on their proxy card, which will be forwarded to Aéropostale management, as appropriate.
 
Who will bear the cost for soliciting votes for the meeting?
 
The expenses of soliciting proxies to be voted at the meeting will be paid by Aéropostale. Following the original mailing of soliciting materials, we may also solicit proxies by mail, telephone, fax or in person. Following the original mailing of soliciting materials, we will request that brokers, custodians, nominees and other record holders of common stock forward copies of the proxy statement and other soliciting materials to persons for whom they hold shares of common stock and request authority for the exercise of proxies.


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All share and per share amounts were given retroactive recognition to the three-for-two common stock split that was effective on March 5, 2010.
 
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
 
Ownership of Common Stock
 
The following table shows, as of April 21, 2011, certain information with regard to the beneficial ownership of the Company’s Common Stock by: (i) each person known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock; (ii) each of the Company’s directors and nominees; (iii) each executive officer named in the summary compensation table below; and (iv) all directors and executive officers as a group.
 
                 
    Shares
    Beneficially Owned(1)
    (#)   (%)
 
5% Beneficial Owners
               
Blackrock, Inc.(2)
40 East 52nd Street
New York, NY 10022
    8,598,522       10.65  
FMR LLC(3)
82 Devonshire Street
Boston, MA 02109
    5,470,500       6.78  
Hussman Strategic Growth Fund(4)
c/o Ultimus Fund Solutions, LLC
225 Pictoria Drive, Suite 450
Cincinnati, OH 45246
    5,250,000       6.50  
Wellington Management Company, LLP(5)
280 Congress Street
Boston, MA 02210
    5,108,979       6.33  
The Vanguard Group(6)
100 Vanguard Boulevard
Malverne, PA 19355
    4,178,415       5.18  
Directors and Executive Officers
               
Thomas P. Johnson(7)
    205,357       *  
Michael J. Cunningham(7)
    153,101       *  
Mary Jo Pile(7)
    16,114       *  
Marc D. Miller(7)
    14,002       *  
Barbara A. Pindar(7)
    15,631       *  
Edward M. Slezak(7)
    15,673       *  
Julian R. Geiger
    337       *  
Bodil Arlander
    40,672       *  
Ronald R. Beegle
    21,172       *  
Robert B. Chavez
    36,922       *  
Evelyn Dilsaver(7)
    39,741       *  
John N. Haugh(7)
    37,771       *  
Karin Hirtler-Garvey(7)
    51,547       *  
John D. Howard
    74,127       *  
David B. Vermylen(7)
    67,297       *  
All directors and executive officers as a group (15 persons)(7)
Address: 112 West 34th Street
New York, New York 10120
    789,464       0.98  
 
 
Represents less than 1% of the outstanding shares of the Company’s common stock.
 
(1) Unless otherwise indicated, each of the stockholders has sole voting and dispositive power with respect to the shares of common stock beneficially owned. The percent is based upon the 80,723,152 shares outstanding on


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April 21, 2011 and the number of shares, if any, as to which the named person has the right to acquire upon options becoming exercisable or restricted stock vesting within 60 days of April 21, 2011. No officer or director has pledged any shares which they own.
 
(2) Share ownership for Blackrock, Inc. was obtained from a Schedule 13G, dated February 3, 2011, and filed with the Securities and Exchange Commission.
 
(3) Share ownership for FMR LLC was obtained from a Schedule 13G, dated February 14, 2011, and filed with the Securities and Exchange Commission.
 
(4) Share ownership for Hussman Econometrics Advisors, Inc. was obtained from a Schedule 13G, dated March 10, 2011, and filed with the Securities and Exchange Commission.
 
(5) Share ownership for Wellington Management Company, LLP was obtained from a Schedule 13G, dated February 14, 2011, and filed with the Securities and Exchange Commission.
 
(6) Share ownership for The Vanguard Group was obtained from a Schedule 13G, dated February 14, 2011, and filed with the Securities and Exchange Commission.
 
(7) Includes the following shares for options and shares of common stock underlying restricted stock awards exercisable within 60 days of April 21, 2011:
 
         
Mr. Johnson
    78,908  
Mr. Cunningham
    68,263  
Ms. Pile
    5,681  
Mr. Miller
    5,119  
Ms. Pindar
    5,681  
Mr. Slezak
    6,806  
Ms. Dilsaver
    16,875  
Mr. Haugh
    16,875  
Ms. Hirtler-Garvey
    16,875  
Mr. Vermylen
    33,750  
All directors and executive officers as a group
    254,833  
 
PROPOSAL 1
 
ELECTION OF DIRECTORS
 
 
At the meeting, the stockholders will be asked to elect ten (10) directors. The Board has nominated, upon the recommendation of our Nominating and Corporate Governance committee, ten(10) members to the Board, comprised on nine (9) incumbent Board members and one (1) new Board member, each named below.
 
On March 11, 2011, Bodil Arlander, a member of our Board of Directors, advised us that she would not stand for re-election at our 2011 annual meeting. Pursuant to our Bylaws, our Board has set the number of directors at eleven, a vacancy will therefore be created after our Shareholder Meeting. We are actively recruiting for an additional independent Board member to fill that vacancy, and when an appropriate candidate is selected, that person will be appointed to the Board by our existing Directors, to serve until our next annual meeting or until a successor is elected.
 
Proxies solicited by the Board of Directors will, unless otherwise directed, be voted to elect the ten (10) nominees named below to constitute the entire Board. Each nominee shall be elected for a term of one year or until such nominee’s successor is elected and qualified. Pursuant to our bylaws, the Board of Directors has resolved that the size of our Board of Directors shall be fixed, from time to time, by a vote of a majority of the members of the Board of Directors. Information regarding the nominees is set forth below.


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The Board seeks independent directors who represent a mix of backgrounds and experiences that will enhance the quality of the Board’s deliberations and decisions. Candidates shall have substantial experience with one or more publicly traded national or multinational companies or shall have achieved a high level of distinction in their chosen fields. Board membership should reflect diversity in its broadest sense, including persons diverse in geography, gender, and experience. The Board evaluates each individual in the context of the Board as a whole, with the objective of recommending a group of members that can best support the success of our business and represent our shareholder’s interests through the exercise of sound judgment and utilization of their diverse backgrounds, skill sets and experiences.
 
Information Regarding Nominees
 
Ronald R. Beegle, 48, has served as director since August 2003 and is a founding partner of Goode Partners LLC, a private equity firm focused on investments in small to middle market consumer product, retail, and restaurant companies. Prior to forming Goode Partners, from 2004 through 2005, Mr. Beegle was the Chairman of Credit Suisse Group’s Global Consumer/Retail Investors Unit. Previously, Mr. Beegle had been employed by Gap, Inc. from 1996 until 2003 and had most recently served as Chief Operating Officer of the company’s flagship Gap division. While at Gap, Inc., he also served as Senior Vice President of Operations and Finance of Banana Republic and Executive Vice President and General Manager of Gap, Inc. Direct. He is a member of the Audit and Nominating and Corporate Governance Committees of the Board. Mr. Beegle’s qualifications to serve on the Board include his demonstrated leadership and knowledge of financial, operational and strategic issues facing retail companies gained through his experience as a COO of a major retail company. Mr. Beegle also provides a finance and strategic investment perspective and expertise to the Board.
 
Robert B. Chavez, 56, has served as a director since April 2004 and currently is the President and Chief Executive Officer of Hermes of Paris, Inc., which he joined in August 2000. Between 1992 and August 2000 Mr. Chavez was the Chief Executive Officer at Etienne Aigner. Mr. Chavez was also President of Frederic Fekkai (Hair Services and Products), a division of Chanel, Inc. from May 2000 through July 2000. Mr. Chavez is a member of the Compensation Committee and a member of the Nominating and Corporate Governance Committee of the Board. Mr. Chavez’s qualifications to serve on the Board include his demonstrated business leadership expertise gained through his service as CEO of a major luxury brand retailer, as well as his brand management expertise, and his financial and operational expertise. In addition, through his years of service in the retail industry, Mr. Chavez is able to provide valuable operational and strategic expertise to the Board.
 
Michael J. Cunningham, 53, was appointed to President in December 2010 after serving as President and Chief Financial Officer from February 2010, Executive Vice President and Chief Financial Officer from March 2004 to February 2010 and as Senior Vice President and Chief Financial Officer from August 2000 to March 2004. Mr. Cunningham previously served as Chairman and Co-Founder of Compass International Services Corporation from 1997 to 1999. Prior to that, he held various senior executive positions for American Express Company from 1984 to 1997, including Vice President Operations and Vice President Finance. Mr. Cunningham’s qualifications to serve on the Board include his years in leadership roles at Aéropostale, as well as his extensive knowledge of our Company, its history and culture. Mr. Cunningham, a Certified Public Accountant, also provides extensive business, financial, accounting and operational expertise. As our former CFO, Mr. Cunningham possesses extensive knowledge of financial reporting rules and regulations, evaluating financial results and generally overseeing the financial reporting process of a public company.
 
Evelyn Dilsaver, 56, has served as director since October 2007. Ms. Dilsaver was formerly a member of The Charles Schwab Corporation from December 1991 through September 2007, holding various senior management positions within the organization including Executive Vice President, The Charles Schwab Corporation and President and Chief Executive Officer of Charles Schwab Investment Management. Prior to becoming President and Chief Executive Officer of Charles Schwab Investment Management, from July 2003 to July 2004, Ms. Dilsaver held the position of Senior Vice President, Asset Management Products and Services. Ms. Dilsaver is a Certified Public Accountant. Ms. Dilsaver is also a member of the board of directors and audit committee of the publicly traded company Tempur-Pedic as well as the board of directors of a privately held corporation. Ms. Dilsaver is a member of the Audit Committee of the Board and a member of the Nominating and Corporate Governance Committee of the Board. Ms. Dilsaver’s qualifications to serve on the Board include her finance and brokerage


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expertise at a major brokerage firm, as well as her financial and leadership experience gained in those positions. Through her service on the boards of other public and private companies, Ms. Dilsaver also brings valuable finance, accounting and operational expertise to the Board.
 
Julian R. Geiger, 65, elected in February 2010, in accordance with the terms of his employment contract, to end his service as Chief Executive Officer. Mr. Geiger continues to serve as Chairman of our Board of Directors and as a part-time advisor to the Company. Mr. Geiger had served as our Chairman and Chief Executive Officer from August 1998 to February 2010. From 1996 to 1998, he held the position of President and Chief Executive Officer of Federated Specialty Stores, a division of Federated Department Stores, Inc., which included Aéropostale. Before joining Federated, he was President of the Eagle Eye Kids wholesale and retail divisions of Asian American Partners from 1993 to 1996. Prior to that time, Mr. Geiger held a wide range of merchandising positions from 1975 to 1993 at R.H. Macy & Co., Inc., including President of Merchandising for Macy’s East responsible for Young Men’s, Juniors, Misses Coats and Misses Swimwear. Mr. Geiger’s qualifications to serve on the Board include his many years of leadership experience at Aéropostale, as well as his in-depth knowledge of our Company, its history and the retail industry in general, all gained through more than thirty years of service at major retail organizations as well as his thirteen years of service as our Chairman and Chief Executive Officer. With his extensive knowledge of the retail industry, Mr. Geiger also provides the Board and our Company with broad expertise in merchandising, strategic planning and operational execution.
 
John N. Haugh, 48, has served as a director since June 2007. Mr. Haugh is currently President Bear for Build-A-Bear Workshop, Inc. From January 2008 through December 2008 he served as President of IT’SUGAR LLC. Mr. Haugh served as President of Mars Retail Group from January 2004 through December 2007, where he lead all retail business operations for this subsidiary of Mars, Incorporated. Earlier in his career, Mr. Haugh held marketing, operations and sales roles with General Mills, Inc., Carlson Companies, Inc. and Universal Studios, Inc. He is also on the Advisory Board for Archway Marketing Holdings, Inc. Mr. Haugh is a member of the Compensation and Nominating and Corporate Governance Committees of the Board. Mr. Haugh’s qualifications to serve on the Board include his broad executive experience and brand management expertise gained through the various executive positions he has held throughout his career. Mr. Haugh also provides the Board with expertise in brand building, merchandising, operations and corporate strategy initiatives.
 
Karin Hirtler-Garvey, 54, has served as a director since August 2005. Ms. Hirtler-Garvey is currently the Chief Risk Executive for Ally Financial Inc., serving in that role since May 2010. Ms. Hirtler-Garvey originally joined Ally in May 2009, taking a brief sabbatical from April to May 2010. Previously, Ms. Hirtler-Garvey was a principal in a start-up real estate development venture based in New Jersey. Prior to that, Ms. Hirtler-Garvey was Chief Operating Officer, Global Markets for Bank of America (formerly NationsBank). Ms. Hirtler-Garvey joined Bank of America in September 1995 and held various senior management positions within the organization until March 2005. Prior to becoming Chief Operating Officer, Global Markets, from April to October 2004, Ms. Hirtler-Garvey held the position of President of Trust and Credit Banking Products. From June 2001 to March 2004, Ms. Hirtler-Garvey held the position of Chief Financial Officer/Chief Operating Officer for the Wealth and Investment Management division. Ms. Hirtler-Garvey is a Certified Public Accountant. Ms. Hirtler-Garvey is also a member of the board of directors of the publicly traded company Medley Capital Corporation, as well as a director of one privately held corporation. Ms. Hirtler-Garvey is Chairperson of the Audit Committee and a member of the Nominating and Corporate Governance Committee of the Board. Ms. Hirtler-Garvey is also the Company’s Lead Independent Director. Ms. Hirtler-Garvey’s qualifications to serve on the Board include extensive financial accounting knowledge that is critical to our Board. As a former CFO and COO at global banking organizations, Ms. Hirtler-Garvey has extensive knowledge of financial reporting rules and regulations, evaluating financial results and generally overseeing the financial reporting process of a public company. Ms. Hirtler-Garvey also provides the board with extensive experience in the area of risk awareness and risk mitigation.
 
John D. Howard, 58, has served as a director since August 1998 and is currently the Chief Executive Officer of Irving Place Capital Management, L.P. From its inception in 1997 until 2008, Mr. Howard was the head of Bear Stearns Merchant Banking LLC, an affiliate of Bear, Stearns & Co. Inc., as well as a Senior Managing Director of Bear, Stearns & Co. Inc. From 1990 to 1997, he was a Co-Chief Executive Officer of Vestar Capital Partners, Inc., a private investment firm . Mr. Howard is also a member of the board of directors of the publicly traded companies New York & Company, Inc. and Universal Hospital Services, Inc., as well as a director of several privately held


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corporations. Mr. Howard’s qualifications to serve on the Board include his entrepreneurial and merchant banking experience as well as his expertise in financial and business related matters gained through his years in the merchant banking industry. In addition, through his years of service on the boards of public and private companies, including other apparel retailers, Mr. Howard is able to provide diverse and valuable financial, strategic and operational expertise to the Board.
 
Thomas P. Johnson, 53, was promoted to Chief Executive Officer in December 2010 after serving as our Co-Chief Executive Officer from February 2010 and as Executive Vice President and Chief Operating Officer from March 2004 to February 2010. Mr. Johnson rejoined us in January 2001 as Senior Vice President — Director of Stores. Mr. Johnson had served as Senior Vice President, Vice President, Regional Manager and District Manager with Federated Specialty Stores from 1989 to 1996. In the interim, he served as Senior Vice President — Director of Stores for David’s Bridal, Inc. in 2000 and as Senior Vice President — Director of Stores for Brooks Brothers, Inc. from 1997 to 2000. Mr. Johnson also held various field positions at Gap, Inc. as Regional Manager for Banana Republic, District Manager and Store Manager for Gap, Inc. from 1981 to 1989. Mr. Johnson’s qualifications to serve on the Board include his years in leadership roles at Aéropostale, as well as his extensive knowledge of our Company, its history and culture, as well as the retail industry generally. Mr. Johnson has served as a senior executive at several major retail organizations as well as ten years of service at Aéropostale in various leadership positions, including his current role as Chief Executive Officer and Board member. With his extensive knowledge of the retail industry, Mr. Johnson also provides the Board and our Company with broad expertise in store operations, strategic planning and organizational structure.
 
David B. Vermylen, 60, has served as a director since May 2003. Since January 2005 he has been President & COO of TreeHouse Foods and is a member of its Board of Directors. Previously, Mr. Vermylen had been employed by Keebler Company from 1996 until 2002 and had served as its Chief Executive Officer and President from 2001. Mr. Vermylen is Chairman of the Nominating and Corporate Governance Committee and a member of the Compensation Committee of the Board. Mr. Vermylen’s qualifications to serve on the Board include his demonstrated leadership qualities and knowledge of operational and strategic issues gained through his years of experience as a COO of a public company. Mr. Vermylen provides the Board a diverse background of experiences as well as his corporate governance acumen.
 
Each of the directors listed above has agreed to serve, if elected, and management has no reason to believe that they will be unavailable to serve. In the event that any of the nominees is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who may be designated by the present Board of Directors to fill the vacancy. Unless otherwise instructed, the proxy holders will vote the proxies received by them FOR the election of each of the directors listed above. The proxies solicited by this Proxy Statement cannot be voted for a greater number of persons than the number of nominees named.
 
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS YOU VOTE
“FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.
 
 
During the fiscal year ended January 29, 2011 (“fiscal 2010”), our Board of Directors met formally six (6) times. The Board has a standing Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee. Our Board and Committees also met, as necessary, on an informal basis throughout the year. During fiscal 2010, each of the Company’s current directors participated in at least 75% of the aggregate number of meetings of the Board of Directors and meetings of the Board Committee or Committees upon which such director is or was a member.
 
Leadership Structure
 
We now separate the roles of our CEO and our Chairman. As specified in our Bylaws, our CEO is responsible for the general management, oversight, supervision and control of the business and affairs of our Company, and ensuring that all orders and resolutions of the Board are carried into effect. Our Chairman, on the other hand, is charged with presiding over all meetings of the Board and our shareholders, and providing advice and counsel to our


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CEO and our Company’s other executive officers regarding our business and operations. In connection with the Board’s annual self-evaluation process, as required by our Corporate Governance Guidelines, the Board evaluates its organization and processes to ensure that the Board is functioning effectively. We believe that our separate CEO and Chairman structure is the most appropriate and effective leadership structure for our Company and our shareholders. Additionally, we also have a Lead Independent Director who presides over all meetings of the non-management independent Board members.
 
The Board’s Role in Risk Oversight
 
The Audit Committee reviews and discusses with management the Company’s processes and policies with respect to risk assessment and risk management, including the Company’s enterprise-wide risk management program. In addition, the Company’s risk oversight process involves the entire Board receiving information from executive management on a variety of matters, including operations, legal, regulatory, finance and strategy, as well as information regarding any material risks associated with each matter. The full Board (or the appropriate Board committee, if the Board committee is responsible for the oversight of the matter) receives this information through updates from the appropriate members of executive management to enable it to understand and monitor the Company’s risk management practices. When a Board committee receives an update, the chairperson of the relevant Board committee reports on the discussion to the full Board during the Board committee reports portion of the next Board meeting. This enables the Board and the Board committees to coordinate the risk oversight role.
 
 
The Board has determined that each of Ms. Arlander, Mr. Beegle, Mr. Chavez, Ms. Dilsaver, Ms. Hirtler-Garvey, Mr. Haugh, Mr. Howard and Mr. Vermylen have no material relationship with the Company other than in her or his capacity as a director of the Company and that each is “independent” in accordance with applicable NYSE standards. Following the Annual Meeting of stockholders, if all director nominees are elected to serve as our directors, independent directors will constitute more than two-thirds of our Board. Mr. Johnson and Mr. Cunningham are executive officers of the Company, and Mr. Geiger is a former executive officer of the Company. Therefore, Mr. Johnson, Mr. Cunningham and Mr. Geiger are not “independent” in accordance with applicable NYSE standards.
 
In making these determinations, the Board took into account all factors and circumstances that it considered relevant, including, where applicable, the existence of any employment relationship between the director (or nominee) or a member of the director’s (or nominee’s) immediate family and the Company; whether within the past three years the director (or nominee) has served as an executive officer of the Company; whether the director (or nominee) or a member of the director’s (or nominee’s) immediate family has received, during any twelve-month period within the last three years, direct compensation (other than director fees) from the Company in excess of $120,000; whether the director (or nominee) or a member of the director’s (or nominee’s) immediate family has been, within the last three years, a partner or an employee of the Company’s internal or external auditors; and whether the director (or nominee) or a member of the director’s (or nominee’s) immediate family is employed by an entity that is engaged in business dealings with the Company. The Board has not adopted categorical standards with respect to director independence. The Board believes that it is more appropriate to make independence determinations on a case by case basis in light of all relevant factors.
 
 
For our 2010 fiscal year, our independent directors were paid a $30,000 annual retainer. In addition to the annual retainer, each Board member received $1,500 for each board meeting attended and $500 for each telephonic meeting. Also in addition to the annual retainer, our Lead Independent Director was paid a $25,000 annual retainer, our Audit Committee chairperson was paid a $20,000 retainer, our Compensation Committee chairperson was paid a $10,000 retainer and our Nominating and Corporate Governance chairperson was paid a $7,500 retainer. Each Committee member was paid $1,500 for each Committee meeting attended; $500 for each telephonic Committee meeting attended and is reimbursed for travel expenses relating to attending Board, Committee or Company business meetings. New independent directors receive an initial grant of restricted stock when appointed to the Board. No stock option grants have been awarded to our Board members in recent years. Each incumbent director is


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eligible to receive a number of restricted shares equal to an annual dollar amount set by the Company in conjunction with its third party compensation consultant, which is dependent upon the Company’s achievement of annual financial targets. Directors who are employees of the Company or are otherwise not considered independent do not receive separate compensation for serving as directors.
 
Fiscal 2010 Director Compensation.  The following table sets forth compensation earned by the individuals who served as non-associated (independent) directors of the Company during fiscal 2010.
 
                         
    Fees Earned or
  Stock
   
    Paid in Cash
  Awards
  Total
Name
  ($)   ($)(1)   ($)
 
Ms. Arlander
    49,000       104,018       153,018  
Mr. Beegle
    58,250       104,018       162,268  
Mr. Chavez
    46,250       104,018       150,268  
Ms. Dilsaver
    61,250       104,018       165,268  
Mr. Haugh
    49,250       104,018       153,268  
Ms. Hirtler-Garvey
    96,750       104,018       200,768  
Mr. Howard
    36,000       104,018       140,018  
Mr. Vermylen
    53,000       104,018       157,018  
 
 
(1) Stock awards were granted under the Aéropostale 2002 Long-Term Incentive Plan.
 
Outstanding Equity Awards at Fiscal Year-End.  The following table provides information relating to outstanding awards held by independent directors of the Company as of the fiscal year ended January 29, 2011.
 
                                                 
    Option Awards   Stock Awards
                        Market
                    Number
  Value of
    Number of
  Number of
          of Shares
  Shares or
    Securities
  Securities
          or Units
  Units
    Underlying
  Underlying
          of Stock
  of Stock
    Unexercised
  Unexercised
  Option
      That Have
  That Have
    Options
  Options
  Exercise
  Option
  Not
  Not
    (#)
  (#)
  Price
  Expiration
  Vested
  Vested
Name
  (Exercisable)   (Unexercisable)   ($)   Date   (#)   ($) (4)
 
Ms. Arlander
                            3,637 (3)     88,525  
Mr. Beegle
                            3,637 (3)     88,525  
Mr. Chavez
                            3,637 (3)     88,525  
Ms. Dilsaver
    16,875       5,625 (1)     13.78       10/18/2015              
                              3,637 (3)     88,525  
Mr. Haugh
    16,875       5,625 (2)     18.71       6/20/2015              
                              3,637 (3)     88,525  
Ms. Hirtler-Garvey
    16,875             10.94       8/18/2013              
                              3,637 (3)     88,525  
Mr. Howard
                            3,637 (3)     88,525  
Mr. Vermylen
    33,750             10.37       3/12/2012              
                              3,637 (3)     88,525  
 
 
(1) Options vest on October 10, 2011.
 
(2) Options vest on June 20, 2011.
 
(3) Shares vested on March 26, 2011.
 
(4) Market value based on the closing price of $24.34 on the last trading day of fiscal 2010 (January 28, 2011).


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Does the Company have a Code of Ethics?
 
Our Code of Business Conduct and Ethics is applicable to all our officers, directors and employees, including the principal executive officer, the principal financial officer and the principal accounting officer. The Code is available on the Investor Relations portion of our website (www.aeropostale.com). We intend to post amendments to or waivers from the Code, if any, (to the extent applicable to our chief executive officer, principal financial officer or principal accounting officer or Directors) on our website.
 
How do stockholders communicate with the Board?
 
The Board provides a process for interested parties to send communications to the full Board, the independent members of the Board and the members of the Audit Committee. Any director may be contacted by writing to him or her, c/o General Counsel and Secretary, Aéropostale, Inc., 112 West 34th Street, New York, New York 10120 or e-mail at investorrelations@aeropostale.com to the attention of the General Counsel. Communications that are not related to a director’s duties and responsibilities as a Board member, an independent director or an Audit Committee member may be excluded by the Office of the General Counsel, including, without limitation, solicitations and advertisements; junk mail; product-related communications; job referral materials such as resumes; surveys; and any other material that is determined to be illegal or otherwise inappropriate. The directors to whom such information is addressed are informed that the information has been removed and that it will be made available to such directors upon request. Directors may at any time review a log of all correspondence received by the Company that is addressed to members of the Board and request copies of any such correspondence. Concerns, if any, relating to accounting, internal controls or auditing matters would be brought immediately to the attention of the Company’s Chief Financial Officer and/or General Counsel and handled in accordance with procedures established by the Audit Committee with respect to such matters.
 
Copies of the Company’s code of conduct, corporate governance materials, related person transaction policy and committee charters
 
The Company’s code of conduct, corporate governance materials, related person transaction policy, as well as the charters of the Audit Committee, Compensation Committee and Nominating and Governance Committee of the Board of Directors, are all available on the Company’s website at www.aeropostale.com. Stockholders may also request a printed copy of any of those materials, free of charge by writing to the following: General Counsel and Secretary, Aéropostale, Inc., 112 West 34th Street, New York, New York 10120.
 
 
Audit Committee.  The Board of Directors maintains an Audit Committee, currently consisting of the following Board members, Ms. Hirtler-Garvey (Chairperson), Mr. Beegle and Ms. Dilsaver. The Board has determined that Ms. Hirtler-Garvey, Ms. Dilsaver and Mr. Beegle are all qualified as financial experts within the meaning of the SEC regulations. The Board has also determined that each member of the Audit Committee possesses the accounting and financial management expertise, within the meaning of the standards of the New York Stock Exchange, to be considered “financially literate”. All members of our Audit Committee have been determined to be independent by our Board of Directors, as that term is defined by SEC regulations relating to audit committee independence, the listing standards of New York Stock Exchange and the Company’s Corporate Governance Guidelines.
 
The Audit Committee of the Board is instrumental in the Board’s fulfillment of its oversight responsibilities relating to (i) the integrity of the Company’s financial statements, (ii) the Company’s compliance with regulatory requirements, (iii) the qualifications, independence and performance of the Company’s independent auditors and (iv) the performance of the Company’s internal audit function. The Audit Committee meets with management and the Company’s independent registered public accounting firm. The Audit Committee met five (5) times during fiscal 2010 and also met informally, either in person or by phone, on a number of other occasions during fiscal 2010. The Committee schedules its meetings to ensure that it devotes appropriate attention to all of its tasks. The Committee’s meetings include, whenever appropriate, executive sessions with the Company’s independent registered public accounting firm without the presence of the Company’s management.


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In connection with the New York Stock Exchange’s adopting its revised Corporate Governance Standards, we amended the Company’s Audit Committee Charter in November 2004. The full text of the Committee’s charter is available on the Investor Relations portion of our website at www.aeropostale.com.
 
In carrying out these responsibilities, the Audit Committee, among other things, appoints, and monitors the performance of, the independent registered public accounting firm; oversees and reviews accounting policies and practices and internal controls; oversees and monitors the Company’s financial statements and audits; oversees matters relating to communications with the independent registered public accounting firm and management; reviews the annual report to be included with the Company’s proxy statement; and oversees, to the extent it deems necessary, matters related to related party transactions, if any.
 
As part of its oversight of the Company’s financial statements, the Committee reviews and discusses with both management and the Company’s independent registered public accounting firm the Company’s annual financial statements and quarterly operating results prior to their issuance. During fiscal 2010, management advised the Committee that each set of financial statements had been prepared in accordance with generally accepted accounting principles. Management also reviewed significant accounting and disclosure matters with the Committee. These reviews included discussions with the independent registered public accounting firm about matters required to be discussed pursuant to PCAOB AU 380, Communication With Audit Committees, and SEC Rule 2-07, Communication With Audit Committees, of Regulation S-X. The Audit Committee discussed the adoption of, or changes to, the Company’s significant accounting policies and procedures, if any, and significant internal audit procedures with the independent registered public accounting firm, internal audit and management. The Committee also discussed with our independent registered public accounting firm matters relating to its independence, including a review of audit and non-audit fees and the disclosures made to the Committee pursuant to PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence and the Audit Committee has received a written disclosure letter as required by that standard. The Audit Committee has also received, reviewed and discussed with the Company’s independent registered public accounting firm the report required by section 10A(k) of the Securities Exchange Act of 1934. The Report of the Audit Committee can be found on page 45 of this Proxy Statement.
 
Compensation Committee.  The Board of Directors also has a Compensation Committee, currently consisting of Ms. Arlander (Chairperson), Mr. Chavez, Mr. Haugh and Mr. Vermylen. The Compensation Committee of the Board (i) oversees the Company’s compensation and benefits philosophy and policies generally, (ii) evaluates the performance of our chief executive officer and oversees and sets compensation for our chief executive officer, (iii) oversees the evaluation process and compensation structure for other members of the Company’s senior management and (iv) fulfills the other responsibilities set forth in its charter. The Compensation Committee met formally three (3) times during fiscal 2010 and also met informally, either in person or by phone, on a number of other occasions during fiscal 2010. The Board has determined that each of the Compensation Committee members is “independent” in accordance with applicable NYSE standards. The Compensation Discussion and Analysis can be found beginning on page 22 of this Proxy Statement and the Compensation Committee’s Report can be found on page 44 of this Proxy Statement.
 
Nominating and Corporate Governance Committee.  The Board of Directors also has a Nominating and Corporate Governance Committee consisting of Mr. Vermylen (Chairman), Mr. Beegle, Mr. Chavez, Ms. Dilsaver, Mr. Haugh and Ms. Hirtler-Garvey. The Nominating and Corporate Governance Committee of the Board identifies and recommends to the Board candidates who are qualified to serve on the Board and its committees. The Nominating and Corporate Governance Committee considers and reviews the qualifications of any individual nominated for election to the Board by stockholders. It also proposes a slate of candidates for election as directors at each Annual Meeting of stockholders. The Nominating and Corporate Governance Committee also develops and recommends to the Board, and reviews from time to time, a director compensation program, as well as establish corporate governance principles for the Company, while also overseeing compliance with those governance principles. The Board has determined that each of the Nominating and Corporate Governance members is “independent” in accordance with applicable NYSE standards.
 
The Nominating and Corporate Governance Committee will consider candidates for Board membership suggested by its members, other Board members, by management and by stockholders, in all cases applying similar


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criteria. Stockholders who wish to submit candidates for Board membership must submit all required information, consistent with the below criteria, in writing to the Chairman of the Nominating and Corporate Governance Committee c/o the General Counsel of the Company at 112 West 34th Street, New York, New York 10120.
 
The Nominating and Corporate Governance Committee, at the direction of the Chairman, makes an initial determination as to whether to conduct a full evaluation of a prospective candidate. This initial determination is based on whatever information is provided to the Committee with the recommendation of the prospective candidate, as well as the Committee’s own knowledge of the prospective candidate, which may be supplemented by inquiries to the person making the recommendation or others. The preliminary determination is based primarily on the need for additional Board members to fill vacancies or expand the size of the Board and the likelihood that the prospective nominee can satisfy the evaluation factors described below. If the Committee determines, in consultation with the other Board members as appropriate, that additional consideration is warranted, it may request that additional information about the prospective nominee’s background and experience be gathered and a report be prepared for the Committee. The Committee then would evaluate the prospective nominee against the standards and qualifications set out in the Company’s Corporate Governance Guidelines, including, independence, integrity, experience, sound judgment in areas relevant to the Company’s businesses and willingness to commit sufficient time to the Board, all in the context of an assessment of the perceived needs of the Board at that point in time. The Committee will also measure candidates against the criteria it sets, including skills and attributes that reflect the values of the Company. The Nominating and Corporate Governance Committee will also be responsible for reviewing with the Board, on an annual basis, the criteria it believes appropriate for Board membership.
 
The Committee will also consider such other relevant factors as it deems appropriate, including the current composition of the Board, the balance of management and independent directors, the need for Audit Committee expertise and the evaluations of other prospective nominees. Depending on the needs of the Company at the time, the prospective nominees and such other factors as the Committee deems in its business judgment to be relevant, the Committee will take such other steps as are necessary to evaluate the prospective nominee, including, if warranted, one or more of the members of the Committee interviewing the prospective nominee. After completing this evaluation and other steps of the process the Committee would make a recommendation to the full Board as to the persons who should be nominated by the Board, and the Board determines the nominees after considering the recommendation and report of the Committee.
 
The Nominating and Corporate Governance Committee recommended to the Board of Directors that the nominees listed in this Proxy Statement stand for election at our 2011 Annual Meeting. The Nominating and Corporate Governance Committee met formally two (2) times during fiscal 2010 and also met informally, either in person or by phone, on a number of other occasions during fiscal 2010.
 
Meetings of the Company’s Non-Management Directors
 
The non-management directors meet at scheduled executive sessions of the Board of Directors and our Lead Independent Director presides over those meetings.


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PROPOSAL 2
 
PROPOSAL TO APPROVE AN EXTENSION OF THE TERM OF OUR AMENDED AND
 
Our stockholders are asked to act upon a Proposal to approve and ratify the Company’s Second Amended and Restated 2002 Long-Term Incentive Plan (the “Incentive Plan”), which amends and restates our Amended and Restated 2002 Long-Term Incentive Plan, as amended (the “2002 Plan”). The effect of the Incentive Plan is to extend the term of the 2002 Plan from the 2002 Plan’s scheduled expiration date on May 15, 2012 to a date that is 10 years from the date our stockholders approve the Incentive Plan, and to make certain technical amendments in compliance with Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).
 
The affirmative vote of a majority of the shares present at the Meeting and entitled to vote on the subject matter is required to adopt the Incentive Plan. Our executive officers and directors have an interest in this Proposal by virtue of their being eligible to receive awards under the Incentive Plan.
 
General
 
The Board of Directors of the Company (the “Board”) and the stockholders previously adopted and approved the 2002 Plan. The Board has adopted the Incentive Plan subject to stockholder approval. The purpose of the Incentive Plan is to promote the long-term growth and profitability of the Company and its subsidiaries by (i) providing certain directors, officers and employees of, and certain other individuals who perform services for, or to whom an offer of employment has been extended by, the Company and its subsidiaries, with incentives to maximize stockholder value and otherwise contribute to the success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of responsibility. Under the Incentive Plan, awards may include cash and equity based awards, including stock options, restricted stock, performance-based awards and stock appreciation rights, issuable under any of the Company’s existing benefit plans.
 
The Incentive Plan will become effective when approved by our stockholders at the 2011 Annual Meeting of Stockholders. The Incentive Plan is being submitted to our stockholders in compliance with New York Stock Exchange requirements and to allow for certain performance-based cash and equity compensation that is paid thereunder to be deductible by the Company for federal income tax purposes under Section 162(m) of the Code. Section 162(m) places a $1 million annual limit on the amount of compensation paid to each of the Company’s named executive officers that may be deducted by the Company for federal income tax purposes, generally, unless such compensation constitutes “qualified performance-based compensation,” which is based on the achievement of pre-established performance goals set by a committee of the Board and/or the Board itself pursuant to an incentive plan that has been approved by our stockholders.
 
Stockholder approval of the Incentive Plan will constitute stockholder reapproval of the performance criteria in the Incentive Plan (which have not been significantly changed under the 2002 Plan and which are described below) and will satisfy the stockholder approval requirements of Section 162(m) for five years. If the Incentive Plan is not approved by our stockholders, the 2002 Plan will continue in full force in accordance with its terms as they were in effect immediately prior to the adoption of the Amended and Restated 2002 Plan, and the Incentive Plan will not take effect.
 
The 2002 Plan was amended at the Company’s 2007 annual meeting of stockholders to permit the grant of options to purchase up to 2,589,619 shares (giving effect to a stock split since the 2002 Plan was adopted).
 
A summary of the principal provisions of the Incentive Plan is set forth below. The summary is qualified by reference to the full text of the Incentive Plan, which is attached as Annex A to this Proxy Statement.
 
Description of the Incentive Plan
 
The Incentive Plan is administered by the Compensation Committee. The Compensation Committee selects those key executives of the Company with significant operating and financial responsibility who are likely to be “covered employees” (within the meaning of Section 162(m) of the Code) in respect of the relevant Fiscal year, to be eligible to earn annual incentive compensation payments under the Incentive Plan.


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Under the Incentive Plan, awards may include cash and equity based awards, including stock options, restricted stock, performance-based awards and stock appreciation rights (“SARs”). Award opportunities may be expressed in dollar amounts, as a multiple of salary or pursuant to a formula. The performance goals selected by the Compensation Committee for awards intended to meet the performance-based exemption under Section 162(m) of the Code, shall be based on any of the following criteria, either alone or in any combination, and on either a consolidated or business unit level, as the Compensation Committee may in each case determine:
 
  •  sales revenue
 
  •  gross profit
 
  •  gross margin
 
  •  operating income
 
  •  net income
 
  •  earnings per share
 
  •  return on assets
 
  •  return on equity
 
  •  return on investment
 
  •  price of the Company’s common stock
 
  •  sales productivity
 
  •  comparable store sales growth
 
  •  market share
 
The foregoing terms may have any reasonable definitions that the Compensation Committee may specify, which may include or exclude any or all of the following items, as the Compensation Committee may specify: extraordinary, unusual or non-recurring items; effects of accounting changes; effects of currency fluctuations; effects of financing activities (e.g., effect on earnings per share of issuing convertible debt securities); expenses for restructuring or productivity initiatives; non-operating items; discontinued operations; acquisition expenses; and effects of acquisitions and divestitures. Any of the foregoing criteria may apply to a participant’s award opportunity for any year in its entirety or to any designated portion of the award opportunity, as the Compensation Committee may specify.
 
Except with respect to awards intended to satisfy Section 162(m) of the Code to the extent such section and the regulations issued pursuant to such section limit the Compensation Committee’s discretion, the Compensation Committee may adjust the performance goals for any performance cycle as it deems equitable, for example, in recognition of unusual or non-recurring events affecting the Company’s performance or changes in applicable tax laws or accounting principles.
 
Shares Available for the Incentive Plan
 
Currently, an aggregate of 3,608,120 shares of Common Stock remain to be issued pursuant to the Incentive Plan. No award may be made to a participant in any single calendar year to the extent such award would exceed 10% of the Shares authorized under the Incentive Plan. Such Shares may be in whole or in part authorized and un-issued or held by the Company as treasury shares. If any grant under the Incentive Plan (including grants under any prior version of the Incentive Plan) expires or terminates unexercised, becomes unexercisable or is forfeited as to any Shares, or is tendered or withheld as to any shares in payment of the exercise price of the grant or the taxes payable with respect to the exercise, then such unpurchased, forfeited, tendered or withheld Shares shall thereafter be available for further grants under the Incentive Plan unless, in the case of options granted under the Incentive Plan, related SARs are exercised. Since the 3,608,120 shares of Common Stock remaining to be issued pursuant to the Incentive Plan greatly exceeds the number of shares issued under the Plan in recent years, extending the term of the


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existing Incentive Plan, which would otherwise expire in approximately one year, is believed by our Compensation Committee and management to be appropriate and advisable.
 
Benefits Under the 2002 Plan
 
The amount of options, restricted shares and performance shares received by the indicated persons and groups under the Incentive Plan from its inception in 2002 through April 21, 2011 is as follows:
 
                         
        Restricted
  Performance
    Options
  Shares
  Shares
Name of Individual or Group
  (#)(1)   (#)(1)   (#)(1)
 
Thomas P. Johnson
    220,658       406,562       16,054  
Michael J. Cunningham
    210,014       256,799       11,238  
Mary Jo Pile
    53,100       58,042       14,550  
Marc D. Miller
    49,163       42,771       13,726  
Barbara A. Pindar
    36,675       44,309       14,550  
Edward M. Slezak
    55,463       46,202       15,976  
Julian R. Geiger
    777,698       676,312       64,216  
Bodil Arlander
          25,466        
Ronald R. Beegle
    67,500       37,841        
Robert B. Chavez
    33,750       41,216        
Evelyn Dilsaver
    22,500       27,159        
John N. Haugh
    22,500       25,190        
Karin Hirtler-Garvey
    33,750       36,716        
John D. Howard
          25,466        
David B. Vermylen
    67,500       37,841        
All executive officers, as a group
    1,825,434       2,015,296       254,938  
All directors who are not executive officers, as a group
    247,500       256,895        
All employees who are not executive officers, as a group
    3,343,754       845,720        
 
 
(1) For further details, see Annex A for the Second Amended and Restated 2002 Long-Term Incentive Plan.
 
The Company’s 1998 and 2002 plans, and the 2007 amendment to the 2002 Plan, have all been approved by the Company’s shareholders. To date, no Company options, restricted shares or performance shares have been granted outside of these shareholder approved plans.
 
Federal Income Tax Consequences
 
Taxation under Section 409A of the Internal Revenue Code
 
Under Section 409A of the Internal Revenue Code, which was added by the American Jobs Creation Act of 2004, generally effective beginning in 2005, compensation deferred under nonqualified deferred compensation plans that do not satisfy election, distribution and funding restrictions will be subject to current income tax inclusion, a 20% tax and interest and penalty assessments in the year(s) of deferral, to the extent not subject to a substantial risk of forfeiture and not previously included in gross income.
 
Tax Consequences to the Company
 
There will be no tax consequences to us except that we will be entitled to a deduction when a participant recognizes ordinary income. Any such deduction will be subject to any applicable limitations of Section 162(m) of the Code. We may be required to pay employment taxes with respect to any compensation taxed as ordinary income recognized by a participant as a result of an award.


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With respect to nonqualified stock options, we are generally entitled to deduct and the optionee recognizes taxable income in an amount equal to the excess of the fair market value of the shares at the time of exercise over the amount the optionee pays to receive those shares (e.g., the exercise price). A participant receiving incentive stock options will not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant will not recognize taxable income at the time of exercise. However, the excess of the fair market value of the Common Stock received over the option price is an item of tax preference income potentially subject to the alternative minimum tax. If stock acquired upon exercise of an incentive stock option is held for a minimum of two years from the date of grant and one year from the date of exercise, the gain or loss (in an amount equal to the excess of the fair market value on the date of sale over the price paid for such shares (e.g., the exercise price)) upon disposition of the stock will be treated as a long-term capital gain or loss, and the Company will not be entitled to any deduction. If the holding period requirements are not met, the incentive stock option will be treated as one which does not meet the requirements of the Code for incentive stock options and the tax consequences described for nonqualified stock options will apply.
 
The current federal income tax consequences of other awards authorized under the Incentive Plan generally follow certain basic patterns:
 
  •  SARs are taxed and deductible in substantially the same manner as nonqualified stock options;
 
  •  nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant); and
 
  •  stock-based performance awards and other types of awards are generally subject to tax at the time of payment.
 
In each of the foregoing cases, the Company will generally have a corresponding deduction at the time the participant recognizes income, subject to Code Section 162(m) with respect to covered employees.
 
Vote Required
 
In accordance with New York Stock Exchange listing requirements, adoption of the amendment to extend the term of our Incentive Plan requires an affirmative vote of the holders of a majority of shares of common stock cast on such Proposal, in person or by proxy, provided that the total vote cast on the Proposal represents over 50% of the outstanding shares of common stock entitled to vote on the Proposal. Votes “for” and “against” and abstentions count as votes cast, while broker non-votes do not count as votes cast. All outstanding shares, including broker non-votes, count as shares entitled to vote. Thus, the total sum of votes “for,” plus votes “against,” plus abstentions, which is referred to as the “NYSE Votes Cast,” must be greater than 50% of
 
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
A VOTE “FOR” THE APPROVAL OF THE COMPANY’S SECOND AMENDED
AND RESTATED 2002 LONG TERM INCENTIVE PLAN.


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PROPOSAL 3
 
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, requires that we provide our shareholders with the opportunity to vote to approve, on a advisory basis, the compensation of our named executives officers. As described in detail under the heading “Compensation Discussion and Analysis,” we believe that executive compensation should be closely linked with our Company financial performance and, to this end, our executive compensation programs are designed to, among other things, reward our named executive officers for their contribution to the achievement of short-term and long-term strategic and operational goals and to align executive compensation and shareholder interests through performance and equity-based plans. Shareholders are urged to read the Compensation Discussion and Analysis, which discusses in detail how our compensation policies and procedures implement our compensation philosophy.
 
This advisory vote is not intended to address any specific element of compensation; rather, the vote relates to the overall compensation of our named executive officers. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee. To the extent there is any significant vote against our executive compensation program as disclosed in this proxy statement, the Compensation Committee will evaluate whether any actions are necessary to address the concerns of our shareholders. Accordingly, we are asking our shareholders to approve, on an advisory basis, the overall compensation of the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, the compensation tables and the accompanying narrative disclosures set forth in the proxy statement for this Annual Meeting.
 
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR”
ADVISORY APPROVAL OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS
AS DISCLOSED IN THIS PROXY STATMENT.


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PROPOSAL 4
 
 
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires us to submit a non-binding, advisory vote to shareholders at least once every six years to determine shareholder preference as to whether advisory votes on executive compensation should be held every one, two or three years. In satisfaction of this requirement, shareholders are being asked to indicate their preference as to whether an advisory vote with respect to executive compensation should be presented every one, two or three years as reflected by their votes for each of these alternatives in connection with this Proposal.
 
In voting on this Proposal, you should mark your proxy for one, two or three years based on your preference as to the frequency with which an advisory vote on executive compensation should be held. If you have no preference, you should abstain. Please note that when casting a vote on this Proposal, you will not be voting to approve or disapprove the Board’s recommendation. The optimal frequency of vote necessarily turns on a judgment about the relative benefits and burdens of each of the options. There have been diverging views expressed on this question and the Board believes there is a reasonable basis for each of the options. Although this vote is advisory and not binding on the Board or the Company, the Board intends to adopt the frequency selection that receives the highest number of votes cast by shareholders.
 
Our Board has determined that an advisory vote on executive compensation that occurs once every three years is the most appropriate alternative for the Company and, accordingly, our Board recommends that you vote for a three-year interval for the advisory vote on executive compensation. In determining to recommend that the shareholders select a frequency of once every three years, the Board considered how an advisory vote at such frequency will permit us to thoughtfully consider and evaluate the results of an advisory vote, discuss the implications of the vote with shareholders to the extent needed, develop and implement any desired changes and provide both us and our shareholders with sufficient time to evaluate the effectiveness of such changes. In this regard, because the advisory vote on executive compensation occurs after we have already implemented our executive compensation programs for the current year, and because the different elements of compensation are designed to operate in an integrated manner and to complement one another, we expect that in certain cases it may not be appropriate or feasible to fully address and respond to any one year’s advisory vote on executive compensation by the time of the following year’s annual meeting of shareholders.
 
The Board believes a three-year interval also permits evaluation of our compensation program, objectives and practices, which include a significant long-term component, in the context of our long-term business results for such period, while avoiding overemphasis on fluctuations in our operating results that may occur over a shorter period of time.
 
THE BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
OPTION OF ONCE EVERY THREE YEARS AS THE FREQUENCY WITH WHICH SHAREHOLDERS ARE PROVIDED WITH AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.


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PROPOSAL 5
 
 
Deloitte & Touche LLP has been the Company’s independent registered public accounting firm since 1998, and has reported on the Company’s consolidated financial statements included in our annual report. The Audit Committee appoints the Company’s independent registered public accounting firm, and the Audit Committee has reappointed Deloitte & Touche LLP as the Company’s independent registered public accounting firm for fiscal 2011. In the event that the stockholders do not ratify the reappointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm, the Audit Committee will reconsider the selection of the independent registered public accounting firm. A representative of Deloitte & Touche LLP will be present at the Annual Meeting, will have an opportunity to make a statement and will be available to respond to appropriate questions.
 
Vote Required
 
In accordance with New York Stock Exchange listing requirements, and pursuant to our bylaws and Delaware law, an affirmative vote of a majority of shares of common stock represented and entitled to vote at the Annual Meeting is required to approve this Proposal. Abstentions will have the effect of a vote “Against” this Proposal. Broker non-votes will not result from this Proposal.
 
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
YOU VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.


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EXECUTIVE OFFICER COMPENSATION
 
Compensation Discussion and Analysis
 
Executive Summary
 
Aéropostale has a long history of exceptional growth and achievement, including fourteen consecutive years of same store sales increases. Our unique culture supported by our core values of integrity, respect, teamwork, and compassion, are one of the driving forces behind our success. While 2010 presented certain challenges for our business, some of our more noteworthy achievements for the year included:
 
  •  increasing total net sales by 8% to $2.4 billion
 
  •  increasing same stores sales 1% for the year, compared to a 10% increase last year
 
  •  delivering net earnings of $2.49 per diluted share, a 10% increase over earnings of $2.27 per share last year
 
  •  achieving operating margins in excess of 16%
 
  •  increasing net sales from our e-commerce business by 24% to $160 million
 
  •  improving sales productivity to $626 per square foot
 
  •  returning over $257 million to shareholders through our share repurchase program, bringing the total program to $905 million in repurchases since its inception
 
Following a record breaking year for Aéropostale in 2009, and against the backdrop of a challenging retail environment in 2010, we were still able to achieve 95% of our operating profit goal and 98% of our earnings per share goal — the key metrics utilized in our Annual Incentive Plan (AIP).
 
In addition to these financial accomplishments, we continued to focus on several key initiatives. In 2010, we:
 
  •  expanded ‘P.S. from Aéropostale’ to 47 stores
 
  •  opened our flagship store in the Times Square section of New York City
 
  •  opened our 10th international store in the United Arab Emirates
 
  •  made significant investments in infrastructure and technology
 
  •  were recognized as one of Fortune Magazine’s “100 Best Companies to Work For”
 
Executive Transition
 
In December 2010, Ms. Meads announced her intentions to leave Aéropostale to pursue other interests. At that time, Mr. Johnson was appointed sole Chief Executive Officer of the Company. Also at that time, certain additional internal leadership positions were established.
 
Mr. Michael J. Cunningham expanded his role and assumed additional responsibilities over planning and allocation, construction, logistics and real estate. He remains responsible for the finance organization, investor relations and information technology. As part of Mr. Cunningham’s transition, Mr. Marc Miller was promoted to Chief Financial Officer reporting directly to Mr. Cunningham. Mr. Miller remains responsible for strategic planning and new business development, including international expansion.
 
In addition, Ms. Mary Jo Pile was promoted to Executive Vice President, Customer Engagement, with additional responsibilities over marketing including e-commerce and Mr. Edward M. Slezak added international negotiations and compliance to his responsibilities.
 
The Company believes that these changes align key areas of the business more effectively, offer growth opportunities, and provide continuity to the Aéropostale teams. Additionally, to further emphasize continuity, the Company entered into a consulting agreement with Mr. Geiger to assist the merchandising team during the transition of Ms. Meads.


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Many of the compensation actions in 2010 were directly related to the promotions and expanded responsibilities of our executives. The Compensation Committee met both formally and informally with our independent compensation consultant, Towers Watson, to evaluate the compensation of our Named Executive Officers as they transitioned into their new roles. We believe that the compensation arrangements made with our executives are appropriate and reflect the level of responsibility of their roles for an organization of our size. Details of those actions are provided under Elements of our Compensation Program.
 
 
The following is a list of the Company’s executive officers, followed by their biographical information (other than for Mr. Johnson and Mr. Cunningham whose biographical information appears in the section of this proxy statement entitled “Election of Directors — Nominees”).
 
             
Executive Officer
 
Age
 
Position
 
Thomas P. Johnson
    53     Chief Executive Officer
Michael J. Cunningham
    53     President
Mary Jo Pile
    54     Executive Vice President - Customer Engagement
Marc D. Miller
    41     Senior Vice President and Chief Financial Officer
Barbara A. Pindar
    56     Senior Vice President Planning and Allocation
Edward M. Slezak
    42     Senior Vice President, General Counsel and Secretary
 
Mary Jo Pile was promoted to Executive Vice President — Customer Engagement in December 2010. Prior to this appointment, Ms. Pile served as our Senior Vice President and Chief Stores Officer since May 2005. From 2001 to 2005, Ms. Pile held the position of Executive Vice President of Stores for Express/Express Men’s. Prior to that, Ms. Pile held the position of Vice President of Stores for Express and The Limited from 1997-2001.
 
Marc D. Miller was promoted to Chief Financial Officer in December 2010. Prior to this appointment, Mr. Miller held the positions of Senior Vice President of Strategic Planning, Business Development and E-Commerce from April 2007, Group Vice President of Strategic Planning, Business Development and E-Commerce from April 2006, and Vice President of Strategic Planning and Business Development from February 2005. Prior to joining Aéropostale, Mr. Miller held executive management positions at Footstar, Inc., and Tradeout, Inc.
 
Barbara A. Pindar has served as Senior Vice President of Planning and Allocation since December 2005. Previously, she held the position of Senior Vice President, Inventory Management for the Pottery Barn brand division of Williams-Sonoma. Prior to that, from 1986 to 2002, Ms. Pindar held various senior executive positions for Limited Brands, Inc., including Vice President, Merchandise Planning and Analysis for Victoria’s Secret Direct.
 
Edward M. Slezak was promoted to Senior Vice President, General Counsel and Secretary in April 2006. Prior to this appointment, Mr. Slezak held the positions of Group Vice President and General Counsel from March 2005 and Vice President and General Counsel from November 2004. From 2002 to 2004, Mr. Slezak held the position of Vice President and General Counsel of Acclaim Entertainment, Inc.. Prior to that, Mr. Slezak was a senior associate in the corporate department at the law firm of Cadwalader, Wickersham & Taft, LLP.
 
Executive Compensation Philosophy
 
We seek to apply a consistent philosophy of compensation for all executive officers. The primary goal of the compensation program is to link total executive compensation to performance that enhances stockholder value. Accordingly, our philosophy is based on the following core principles:
 
To Pay for Performance
 
We believe in paying for results. Individuals in leadership roles are compensated based on a combination of total Company and individual performance factors. Total Company performance is evaluated primarily based on the


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degree to which our pre-established financial targets are met. Individual performance is evaluated based upon several leadership factors, including:
 
  •  Attaining specific financial objectives;
 
  •  Building and developing individual skills and a strong leadership team; and,
 
  •  Developing an effective infrastructure to support business growth and profitability.
 
In addition, a significant portion of total compensation is delivered in the form of equity-based award opportunities to directly link compensation with increases in stockholder value.
 
To Pay Competitively
 
We are committed to providing a total compensation program designed to retain our high caliber performers and to also attract superior leaders to the Company. To achieve this goal, we annually compare our pay practices and overall pay levels to other leading specialty retail organizations, and, where appropriate, with non-specialty retail organizations when establishing our pay guidelines. Please see Executive Compensation Practices for greater detail.
 
To Pay Equitably
 
We believe that it is important to apply generally consistent guidelines for all executive officer compensation programs. In order to deliver equitable pay levels, the Committee considers depth and scope of accountability, complexity of responsibility, and executive performance, both individually and collectively as a team.
 
Compensation Governance
 
Our executive compensation program is overseen by the Compensation Committee of our Board of Directors. Compensation Committee members are appointed by our Board and meet the independence and other requirements of the New York Stock Exchange and other applicable laws and regulations. Compensation Committee members are selected based on their knowledge and experience in compensation matters from their professional roles.
 
The role of the Compensation Committee and information about its meetings are set forth on page 13 of this Proxy Statement. The Compensation Committee’s charter was last amended in 2004 and is available on the Company’s website at www.aéropostale.com.
 
Compensation Consultants
 
As provided for in the Compensation Committee Charter, the Compensation Committee retained, for the third consecutive fiscal year, Towers Watson (“the consultant” or the “compensation consultant”) as its independent compensation consultant to assist in the evaluation of CEO and executive officer compensation levels and program design. Specifically, the consultant provided the Compensation Committee with market trend information, data and recommendations to enable the Committee to make informed decisions and to stay abreast of changing market practices, helping the Committee to appropriately balance external forces with our objectives, values and compensation philosophy. In addition, the consultant provided analysis on the alignment of pay and performance and assisted in the process of preparing this disclosure. The Committee, in conjunction with recommendations from management, determines the work to be performed by the consultant and has the ultimate authority to retain and terminate the compensation consultant. The consultant works with management to gather data required in preparing analyses for Committee review.
 
Towers Watson was directed to review the company’s compensation programs and practices and to provide recommendations and suggestions which are consistent with the Company’s compensation philosophy. In fiscal 2010, Towers Watson was also engaged by the Committee for the following executive compensation work:
 
  •  assisted with compensation programs during a time of leadership transition, providing guidance on retention awards and the development of executive contracts
 
  •  provided market trend and competitive information


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  •  reviewed both short- and long-term incentive program design, including bonus carry-over proposal and execution,
 
  •  assessed compensation plan risk
 
  •  assisted with development of a new 2011 peer group
 
  •  assisted with the development of the Compensation Discussion & Analysis section of this Proxy Statement
 
  •  assisted with the establishment of a modified bonus opportunity range for fiscal 2011
 
Other than the aforementioned engagement, Towers Watson maintains no other direct or indirect business relationship with the Company. All executive compensation services provided by the consultant are conducted under the direction and authority of the Compensation Committee and all work performed by Towers Watson is approved by the Chairman of the Compensation Committee. Management has not engaged a separate compensation consultant.
 
During fiscal 2010, our Compensation Committee Chairperson, certain members of our Compensation Committee, and Aéropostale management interviewed four additional executive compensation consulting firms in an effort to compare their service offerings to those services we are currently receiving from Towers Watson and to also ensure that we continue to enjoy the best possible representation for the Company. At the end of the review process, the Committee, with input from management decided to continue retaining Towers Watson as the Compensation Committee’s executive compensation consultant. We do however continue to monitor the performance of our consultant through an internal evaluation process as well as through comparisons of services offered by other major consulting firms in the executive compensation arena.
 
Additionally, as stated in our Compensation Committee Charter, the Compensation Committee has the authority to engage additional consulting firms to assist them in performing their duties. Accordingly, in the second half of fiscal 2010, the Committee hired Hay Group to perform a market analysis on certain executive compensation practices. Also earlier in fiscal 2010, Company management hired Hay Group to perform an organizational structure analysis for certain levels of our organization.
 
Committee Delegation
 
Company management, including our Senior Vice President of Human Resources, Vice President of Compensation and Benefits, and General Counsel, prepared the compensation materials and attended our Compensation Committee meetings. This Company management team, in conjunction with the Company’s Chief Executive Officer, President, and SVP Chief Financial Officer, propose compensation program designs, levels and components and make recommendations on the compensation levels and stock awards for employees, other than for themselves. The Compensation Committee makes the final determination regarding certain proposals including the compensation of our Chief Executive Officer and those executive officers listed in this proxy statement. The Committee also meets in executive session with Towers Watson and without management present in order to review management’s proposals.
 
Risk Assessment
 
The Compensation Committee considers, in establishing and reviewing the executive compensation program, whether the program encourages risks which are within reason, likely to have a material adverse effect on the Company. In fiscal 2010, the Compensation Committee received from its compensation consultant an annual review of the factors to consider in determining the extent to which the features of the Company’s compensation programs aggravate or mitigate risk. In reviewing these considerations, in light of the Company’s broad-based plans, including those which the named executive officers participate in, the Committee determined that our


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compensation programs are not reasonably likely to have a material adverse effect on the Company. A review of these features and Aéropostale’s compensation programs is highlighted below:
 
       
 Feature     Aéropostale’s Compensation Design
 
Philosophy and Pay Mix
   
•   Our philosophy is to structure our compensation programs in a manner which manages and mitigates risk.
     
•   The mix of pay, and blend of equity is appropriately balanced between fixed and variable, short- and long-term, and time and performance based.
 
Plan Design and Structure
   
•   Maximum payout levels for bonuses payable upon achievement of corporate goals and performance awards are capped.
     
•   The payout curves are appropriately calibrated to afford for reasonable leverage.
     
•   There is considerable alignment between pay and performance.
     
•   Committee exercises the appropriate level of discretion.
     
•   Performance Share Plan uses overlapping cycles.
 
Performance Metrics
   
•   All bonus eligible employees participate in the same annual incentive compensation program.
     
•   Goals and thresholds are appropriately calibrated.
     
•   Measures reflect business priorities, focus on the bottom-line, are influenced by participants efforts and aligned with shareholders’ interests, and cannot be easily manipulated.
 
Program Governance
   
•   The Plan Design is reviewed and approved by the Compensation Committee.
     
•   Management recommends and the Compensation Committee approves goals and performance hurdles; these are based on the business plan.
 
 
 
The Compensation Committee noted that the Company does not engage in the practices that aggravate risk and further noted a number of design features of the Company’s cash and equity incentive programs reduce the likelihood of excessive risk-taking. For example, the Compensation Committee believes that the bonus program appropriately balances risk and desire to focus executives on specific short-term goals important to the Company’s success. Further, a significant portion of the compensation provided to the named executive officers is in the form of long-term equity awards that are important to help further align executives’ interests with those of the Company’s stockholders. The Compensation Committee determined and the full Board of Directors concurred that, the Company’s compensation programs do not encourage excessive risk and instead encourage behaviors that support sustainable value creation.
 
Executive Compensation Practices
 
The Committee annually reviews our executive compensation to ensure it best reflects our compensation philosophy. In determining the overall compensation level for our executives, the Company and the Committee reviewed publicly available data for a peer group consisting of 14 national and regional, specialty and department store retail organizations to benchmark the appropriateness and competitiveness of our compensation program.


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Each year, this list of peer companies is reviewed and compiled by the Committee’s compensation consultant in conjunction with input from Company management, and is then ratified by the Compensation Committee. For our 2010 fiscal year, the comparison companies were:
 
         
Abercrombie & Fitch Co. 
  Coach, Inc.   New York & Company, Inc.
American Eagle Outfitters, Inc. 
  Columbia Sportswear Company   Phillips — Van Heusen Corporation
Ann Taylor Stores Corporation
  Perry Ellis International, Inc.   Quiksilver, Inc.
bebe stores inc.
  Guess?, Inc.   Urban Outfitters, Inc.
Charlotte Russe Holding, Inc. 
  J. Crew Group, Inc.    
 
These peer companies were chosen because of their general similarity to Aéropostale in business, merchandise focus, frequent competition with the Company for executive talent and, in certain cases, size of business and geographic proximity of their corporate locations, and has remained constant for the past three fiscal years.
 
In February 2011, the Compensation Committee reviewed and ratified a new peer group for the upcoming fiscal year. Together with management, Towers Watson reviewed and recommended companies based on the following criteria:
 
  •  revenue size ($1.4 — $4.4 Billion) — roughly one-half to two-times the size of Aéropostale
 
  •  industry — apparel, retail, accessories, and luxury goods
 
  •  financial criteria — market capitalization, operating income, net income, etc.
 
  •  historical precedent — maintaining consistency to as great a degree as practicable
 
  •  recruitment markets — companies reflect those where we source and compete for talent
 
In evaluating the current peer group against the selection criteria, the following companies were removed:
 
  •  Charlotte Russe Holding Inc. is no longer a publicly-held company
 
  •  Perry Ellis International Inc., bebe stores inc., and New York & Company Inc., fell below the revenue range
 
  •  J.Crew Group, Inc. is no longer a publicly-held company
 
  •  Columbia Sportswear Company is not a direct competitor
 
The following is a list of companies that were added to our peer group as a result of meeting many of the selection criteria:
 
     
Charming Shoppes Inc. 
  Express, Inc.
Chico’s FAS Inc. 
  Genesco, Inc.
The Children’s Place Retail Stores, Inc. 
  The Gymboree Corp.
Collective Brands, Inc. 
  Fossil, Inc
Dress Barn (Ascena Retail Group)
  Liz Claiborne, Inc.
 
The resulting set of 18 retailers and mall-based stores provides a well-rounded cross section of Aéropostale’s markets for executive talent. The complete peer group that will be used in fiscal 2011 is as follows:
 
         
Abercrombie & Fitch Co. 
  Coach, Inc.   Guess?, Inc.
American Eagle Outfitters, Inc. 
  Collective Brands, Inc.   Liz Claiborne Inc.
Ann Taylor Stores Corporation
  Dress Barn (Ascena Retail Group)   Phillips — Van Heusen Corporation
Charming Shoppes Inc. 
  Express, Inc.   Quiksilver, Inc.
Chico’s FAS Inc. 
  Fossil, Inc.   The Gymboree Corp.
The Children’s Place Retail Stores, Inc. 
  Genesco Inc.   Urban Outfitters, Inc.
 
The principal elements of our executive compensation are base salary, short-term performance-based incentive compensation and long-term equity-based incentive programs. The Committee has designed our executive


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compensation programs to reward an individual’s contributions to the improvement of Company performance. The Committee evaluates and administers the compensation of our officers in an integrated manner, making compensation decisions around program design and pay adjustments that align with our compensation philosophy, current market practices and our total compensation program objectives. When setting the amount of compensation to be awarded in a given year, the Committee considers the relative proportion of total compensation delivered on a current and long-term basis and in the form of cash and equity prior to making changes to compensation levels.
 
The Committee believes that, in addition to current and long-term compensation, it is important to provide our executive officers with competitive post-employment compensation. Post-employment compensation consists of two main types — retirement benefits and termination provisions. The Committee believes that retirement benefits and termination provisions are important components in a well-structured executive officer compensation package, and the Committee seeks to ensure that the combined package is competitive at the time the package is negotiated with the executive officer. Our retirement programs are described below on page 39.
 
The Committee reviewed all components of the named executive officers’ total direct compensation for the years 2008, 2009 and 2010, including, but not limited to, salary, bonus, equity-based compensation, perquisites, and payout obligations under the Company’s non-qualified deferred compensation plan and its supplemental executive retirement plan. The Committee concluded that compensation levels are reasonable and in the best interests of Aéropostale and its stockholders.
 
Annual Compensation
 
Summary Compensation Table.  The following table sets forth information concerning total compensation earned by or paid to our Chief Executive Officer, our Chief Financial Officer and our next three other most highly compensated executive officers who served in such capacity as of January 29, 2011 (the “named executive officers”) for services rendered to us during the three most recent fiscal years.
 
                                                                 
                                  Change in
             
                                  Pension
             
                                  Value and
             
                            Non-Equity
    Nonqualified
             
                            Incentive
    Deferred
             
                Stock
    Option
    Plan
    Compensation
    All Other
       
          Salary
    Awards
    Awards
    Compensation
    Earnings
    Compensation
    Total
 
Name and Principal Position
  Year     ($) (1)     ($) (2)(3)(6)     ($) (2)(3)     ($) (4)     ($) (5)     ($) (8)     ($)  
 
Mr. Geiger
    2010       38,462       730,200 (7)           53,425       561,934       453,568       1,837,589  
Chairman of the Board of
    2009       1,000,000                   3,000,000       1,275,560       8,209,425       13,484,985  
Directors and former Chief Executive Officer
    2008       1,000,000                   3,000,000       3,188,561       14,746       7,203,307  
Mr. Johnson
    2010       898,077       2,000,000             1,124,260       821,060       17,757       4,861,154  
Chief Executive Officer
    2009       735,769       1,000,000             1,471,538       783,531       67,560       4,058,398  
      2008       700,654                   1,400,000       231,799       64,746       2,397,199  
Ms. Meads
    2010       898,077       2,000,000             1,113,750       515,022       17,267       4,544,116  
Former Co-Chief Executive
    2009       817,885       1,500,000             2,044,713       406,215       17,560       4,786,373  
Officer
    2008       784,615       1,043,901       538,928       2,000,000       284,716       17,246       4,669,406  
Mr. Cunningham
    2010       549,039       800,000             464,260       317,527       17,757       2,148,583  
President
    2009       476,827       1,300,039             953,654       272,369       17,560       3,020,449  
      2008       450,096                   675,000       108,932       17,246       1,251,274  
Ms. Pile
    2010       474,615       320,000             594,397       21,236       17,757       1,428,005  
Executive Vice President -
    2009       383,000       443,055             385,000       19,303       17,560       1,247,918  
Customer Engagement
    2008       368,923       221,370       73,247       372,000       16,497       17,246       1,069,283  
Mr. Miller
    2010       356,654       270,000             226,067       16,742       15,007       884,470  
Senior Vice President
    2009       319,115       393,055             320,630       14,363       30,502       1,077,665  
and Chief Financial Officer
    2008       296,308       197,325       73,247       302,000       12,332       6,246       887,458  
Ms. Pindar
    2010       398,000       270,000             252,000       21,103       17,757       958,860  
Senior Vice President
    2009       385,154       393,055             387,000       19,568       17,560       1,202,337  
Planning and Allocation
    2008       371,923       221,370       73,247       375,000       13,430       17,246       1,072,216  
Mr. Slezak
    2010       363,308       270,000             230,174       19,947       15,007       898,436  
Senior Vice President, General
    2009       348,462       393,055             350,000       17,301       14,810       1,123,628  
Counsel and Secretary
    2008       337,692       197,325       73,247       340,000       16,125       14,746       979,135  


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(1) Reflects base salary earned through the 52-week fiscal years ended January 29, 2011 (“fiscal 2010”), January 30, 2010 (“fiscal 2009”) and January 31, 2009 (“fiscal 2008”).
 
(2) The value of stock and option awards reflects the fiscal 2010, 2009 and 2008 grant date fair value for these awards, recognized under the provisions of Accounting Standards Codification (“ASC”) Topic 718, “Compensation — Stock Compensation” (“ASC 718”). Stock awards include non-vested and performance shares, as described in the Compensation Discussion and Analysis section. Generally, the aggregate grant date fair value is the amount that the Company expects to expense in its financial statements over the award’s vesting schedule. These amounts may not correspond to the actual value that will be realized by the named executive officers. See Note 10 to our consolidated financial statements included in Form 10-K for the year ended January 29, 2011 for a further discussion.
 
(3) Stock and option awards were granted under our 2002 Amended and Restated Long-Term Incentive Plan.
 
(4) The amounts represent the bonuses earned in fiscal 2010, 2009 and 2008 pursuant to our Annual Incentive Plan (“AIP”) and paid in April 2011, March 2010 and March 2009, respectively.
 
(5) For fiscal 2010, the amounts included in the Aéropostale Supplemental Executive Retirement Plan (“SERP”) plan are comprised entirely of changes between fiscal 2009 and fiscal 2010 in the actuarial present value of the accumulated pension benefits of the following named executive officers:
 
Mr. Geiger, Mr. Johnson, Mr. Cunningham and Ms. Meads. See Note 11 to our consolidated financial statements “Retirement Benefit Plans” in our Form 10-K for the year ended January 29, 2011 for a description for the assumptions made for calculating the Pension Value.
 
For fiscal 2009, the amounts included in the Aéropostale SERP plan are comprised entirely of changes between fiscal 2008 and fiscal 2009 in the actuarial present value of the accumulated pension benefits of the following named executive officers:
 
Mr. Geiger, Mr. Johnson, Mr. Cunningham and Ms. Meads. See Note 11 to our consolidated financial statements “Retirement Benefit Plans” in our Form 10-K for the year ended January 30, 2010 for a description for the assumptions made for calculating the Pension Value.
 
For fiscal year 2008, the amounts included in the Aéropostale SERP plan are comprised entirely of changes between fiscal 2007 and fiscal 2008 in the actuarial present value of the accumulated pension benefits:
 
Mr. Geiger, Mr. Johnson, Mr. Cunningham and Ms. Meads. See Note 10 “Retirement Benefit Plans” in our Form 10-K for the year ended January 31, 2009 for a description for the assumptions made for calculating the Pension Value.
 
(6) Upon termination of employment for Ms. Meads $1,500,000 of stock awards were forfeited.
 
(7) Granted in February 2010 pursuant to Mr. Geiger’s Employment Agreement dated February 2008.


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(8) The following table represents all other compensation paid to the executive officers during fiscal 2010, 2009 and 2008.
 
                                                         
            Housing or
               
        Auto
  Relocation
  401K Match
  MERP
  Other
  Total
Name and Principal Position
  Year   ($)   ($)   ($)   ($) (1)   ($) (2)   ($)
 
Mr. Geiger
    2010       327             3,000       276       449,965       453,568  
      2009       8,500             3,000       3,310       8,194,615       8,209,425  
      2008       8,500             3,000       3,246             14,746  
Mr. Johnson
    2010       8,500             5,750       3,507             17,757  
      2009       8,500       50,000       5,750       3,310             67,560  
      2008       8,500       50,000       3,000       3,246             64,746  
Ms. Meads
    2010       8,010             5,750       3,507             17,267  
      2009       8,500             5,750       3,310             17,560  
      2008       8,500             5,500       3,246             17,246  
Mr. Cunningham
    2010       8,500             5,750       3,507             17,757  
      2009       8,500             5,750       3,310             17,560  
      2008       8,500             5,500       3,246             17,246  
Ms. Pile
    2010       8,500             5,750       3,507             17,757  
      2009       8,500             5,750       3,310             17,560  
      2008       8,500             5,500       3,246             17,246  
Mr. Miller
    2010       8,500             3,000       3,507             15,007  
      2009       24,192 (3)           3,000       3,310             30,502  
      2008                   3,000       3,246             6,246  
Ms. Pindar
    2010       8,500             5,750       3,507             17,757  
      2009       8,500             5,750       3,310             17,560  
      2008       8,500             5,500       3,246             17,246  
Mr. Slezak
    2010       8,500             3,000       3,507             15,007  
      2009       8,500             3,000       3,310             14,810  
      2008       8,500             3,000       3,246             14,746  
 
 
(1) MERP — Medical Executive Reimbursement Plan for all Senior Vice-President level and above to supplement the Company’s current insurance coverage.
 
(2) In accordance with the terms of Mr. Geiger’s Employment Agreement, this amount represents certain cash payments made during 2010 and 2009 which were in lieu of other benefits Mr. Geiger had received during prior years of his employment with the Company, including the replacement of (i) annual equity awards and (ii) the increase in retirement benefits.
 
(3) Includes a retroactive payment covering multiple years of car allowance.
 
Base Salary
 
The Compensation Committee annually reviews and adjusts, where appropriate, the base salaries of the Company’s executive officers listed in this Proxy Statement. In determining the appropriate level of base salary compensation, the Compensation Committee considers a number of factors including each executive officer’s job responsibilities, individual contributions, number of years of service to the Company, Company performance for the prior year, current salary and peer group data provided by the compensation consultant. As illustrated above, Aéropostale has designed its compensation structure around a generally balanced allocation between fixed compensation, and performance based variable compensation, such as bonus and equity compensation.
 
As mentioned previously, the compensation arrangements in general and base salary increases specifically were adjusted for our Chief Executive Officer and the executive officers who appear in this proxy in conjunction with their new contracts, promotions, or increased responsibility. Mr. Miller, Ms. Pile, Mr. Slezak, and Ms. Pindar also received base salary increases during our annual review cycle in March 2010.
 
Annual Incentive and Bonus Plan
 
Aéropostale’s culture is driven by our strong pay for performance orientation. All of our executives participate in the same bonus program and are measured against the same financial goals to reinforce performance and ensure everyone is aligned. Our compensation program awards annual bonuses based upon the Company obtaining certain


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annual financial targets in accordance with our financial plan. The Company’s annual financial plan is established by management and ratified by our Board at the beginning of each fiscal year. The Annual Incentive Plan (“AIP”) is designed to motivate and reward employees by aligning a substantial portion of their total compensation directly with the Company’s financial success, specifically operating income.
 
With regard to our CEO, our President, and the former Co-CEO, their AIP bonus is determined based upon not only Company operating income growth (“OI”), but the Company’s diluted earnings per share (“EPS”) growth as well. The two components, operating income and earnings per share, are weighted equally. Typically, our CFO is also measured against both EPS and operating income growth; however, due to the timing of Mr. Miller’s promotion to CFO, he was only measured against operating income for the 2010 fiscal year. He will now be measured against both metrics commencing with fiscal 2011. Management determined, in conjunction with the Compensation Committee, that those three positions within the Company are able to make policies and decisions which can directly impact the Company’s EPS, and as such, in order to further align those executives with the Company’s shareholder value, half of their AIP bonus is determined based upon year over year EPS growth targets as set by our Compensation Committee. All other employees’ bonuses are determined solely based upon Company operating income growth.
 
The AIP contains a tiered payment structure based upon the Company’s annual financial performance. Those tiers are Threshold (achieving 90% of the Company’s annual financial plan), Target (achieving 100% of the Company’s annual financial plan) and maximum (achieving 110% or greater of the Company’s annual financial plan). The AIP is a cash bonus plan and is determined formulaically, as described above. However, the Company does maintain some flexibility to award certain limited discretionary bonus amounts to employees in limited circumstances. Only those executives at the Senior Vice President level and below are eligible for a discretionary bonus.
 
                                             
Consolidated Operating Income*   Consolidated Earnings Per Share*
Threshold
  Target
  Maximum
  Threshold
  Target
  Maximum
($)   ($)   ($)   ($)   ($)   ($)
    (In thousands, except per share data)
 
  371,916       413,240       454,564       2.34       2.60       2.86  
 
The Company’s actual performance in 2010 was $393,328(*) in Operating Income and $2.54(*) in Earnings Per Share which was slightly below target and yielded payouts of 76% of target for the OI component and 89% of target for the EPS component.
 
 
(*) Excludes settlement loss related to SERP payments in fiscal 2010 of $6.5 million, or $0.05 per diluted share.
 
The following table illustrates the actual performance and the weight of each financial measurement:
 
                                         
                    Resulting AIP
            Operating Income
  as a Percentage
    Earnings Per Share   Growth   of Target
    Performance
  Weight
  Performance
  Weight
  Payout
Named Executive Officer
  (% of Target)   (%)   (% of Target)   (%)   (%)
 
Mr. Johnson
    89 %     50 %     76 %     50 %     82.5 %
Ms. Meads
    89 %     50 %     76 %     50 %     82.5 %
Mr. Cunningham
    89 %     50 %     76 %     50 %     82.5 %
Ms. Pile
    89 %           76 %     100 %     76 %
Mr. Miller
    89 %           76 %     100 %     76 %
Ms. Pindar
    89 %           76 %     100 %     76 %
Mr. Slezak
    89 %           76 %     100 %     76 %
 
Some of our Named Executive Officers in this Proxy Statement also received a payment under a one-time program established by our Compensation Committee, called the “carry-over bonus”. The carry-over bonus was established and accounted for in fiscal 2009, when the Company achieved a record breaking 54% increase in its operating income, all during a period of macro-economic turmoil and a difficult retail environment. In recognition of this financial performance, the Compensation Committee approved a one-time bonus award based on the


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Company meeting a minimum of threshold level financial performance for fiscal 2010. This additional bonus was paid with the AIP in fiscal 2011 when all other annual bonuses were paid. The Chief Executive Officer and the Compensation Committee believed that the carry-over bonus was critical to retain employees during a senior leadership transition period. Mr. Johnson, Ms. Meads, and Mr. Cunningham were not eligible to participate in the carry-over bonus program.
 
The parameters of the carry-over bonus approved by the Compensation Committee were as follows:
 
  •  Employees at the Senior Vice President level and below were eligible for the carry-over bonus program
 
  •  The maximum of the carry-over award was 10% of the excess operating income for fiscal 2009. The actual aggregate amount paid was $3.5 million
 
  •  The carry-over bonus was distributed in fiscal 2011 since the Company achieved the threshold level of operating income in fiscal 2010
 
  •  The portion of the carry-over bonus that an employee earned was based on the employee’s target bonus and fiscal year salary earnings
 
  •  Only those employees who participated in the fiscal 2009 AIP and reached a threshold level of performance for that year were eligible for the 2010 carry-over bonus
 
The table below reflects fiscal 2010 AIP and carry-over bonus payout:
 
                                                         
                                        Total
 
                      AIP
                Bonus as a %
 
    As a Percentage of Base Pay     Bonus
    Carry-Over
    Total Bonus
    Of Base
 
    Threshold
    Target
    Maximum
    Paid
    Bonus Paid
    Paid
    Salary
 
Name
  (%)     (%)     (%)     ($)     ($)     ($)     (%)  
 
Mr. Johnson
    75 %     150 %     300 %     1,124,260             1,124,260       123.75 %
Ms. Meads
    75 %     150 %     300 %     1,113,750             1,113,750       123.75 %
Mr. Cunningham
    50 %     100 %     200 %     464,260             464,260       82.50 %
Ms. Pile
    38 %     75 %     150 %     237,890       156,507       394,397       78.88 %
Mr. Miller
    25 %     50 %     100 %     136,358       89,709       226,067       63.00 %
Ms. Pindar
    25 %     50 %     100 %     152,000       100,000       252,000       63.00 %
Mr. Slezak
    25 %     50 %     100 %     138,835       91,339       230,174       63.00 %
 
Long-Term Equity
 
We believe that equity awards of our common stock under the Aéropostale Amended and Restated 2002 Long-Term Incentive Plan are an important factor in aligning the long-term financial interests of our equity-eligible employees with the interests of our stockholders. Additionally, long-term compensation increases the likelihood that we will be able to retain top performers. Management continually evaluates the use of equity-based awards and intends to continue to use such awards in the future as part of designing and administering our compensation program. The percentage mix of the components of our equity awards depends upon the employee’s level within the organization.
 
At the end of fiscal 2006, we introduced performance shares as an additional form of long-term equity compensation and gradually eliminated the use of stock options. Executives at the Senior Vice President level and above are granted a 50/50 mix of performance shares and restricted stock. The combination of performance and time-based equity has been a successful component of our overall compensation program providing the right balance of performance and retention awards.
 
The design of our performance-based equity awards help to align the interests of our executive officers with those of our stockholders. Because they are tied to key performance measures, they also support our key brand and human capital strategies. Performance shares represent an unsecured promise by the Company to award common shares to certain executives, contingent upon the Company’s achievement of pre-determined three year financial performance goals. The number of performance shares to be awarded to the employee is not finalized until the Company’s independent registered public accounting firm has issued their audit opinion on the Company’s consolidated financial statements. With regard to Performance Shares, there are two financial measures against


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which the Company’s performance is measured; diluted earnings per share and operating income. Financial performance for each measure is based upon cumulative targets determined over the applicable three-year period. Each measure is separate and distinct and the actual number of shares awarded at the end of the three-year cycle is additive in determining the total number of performance shares issued.
 
The performance share grant awarded in 2008 and measured against the three-year performance in fiscal 2008, 2009, and 2010 achieved a performance level of 200% of target. The table below reflects the performance-based equity award Company financial measures and actual performance over the aforementioned three-year period:
 
                                 
    Threshold
  Target
  Maximum
  Actual
Three-Year Cumulative Financial Measure
  ($)*   ($)*   ($)*   ($)*
    (In thousands, except per share data)
 
Operating income
    684,455       760,506       836,557       1,024,222  
Earnings Per Share
    4.29       4.77       5.25       6.28  
 
 
(*) Excludes settlement loss related to SERP payments in fiscal 2010 of $6.5 million, or $0.05 per diluted share.
 
Grants of Plan-Based Awards.  The following table provides information relating to plan-based awards granted to named executive officers during the fiscal year ended January 29, 2011.
 
                                                                         
                                All Other
   
        Estimated Future Payouts
  Estimated Future Payouts
  Stock Awards:
  Grant Date
        Under Non-Equity Incentive Plan
  Under Equity Incentive Plan
  Number of
  Fair Value
        Awards   Awards   Shares of Stock
  of Stock and
    Grant
  Threshold
  Target
  Maximum
  Threshold
  Target
  Maximum
  or Units
  Option Awards
Name
  Date    ($)   ($)    ($)   (#) (1)   (#) (1)   (#) (1)   (#)(2)   ($)(3)(4)(5)
 
Mr. Johnson
    2/12/2010                                           43,092       1,000,000  
      3/26/2010       681,370       1,362,740       2,725,480       17,483       34,966       69,932             1,000,000  
Ms. Meads
    2/12/2010                                           43,092       1,000,000  
      3/26/2010       675,000       1,350,000       2,700,000       17,483       34,966       69,932             1,000,000  
Mr. Cunningham
    3/26/2010       281,370       562,740       1,125,480                         13,987       400,000  
      3/26/2010                         6,994       13,987       27,974             400,000  
Ms. Pile
    3/26/2010       187,500       375,000       750,000                         4,721       135,000  
      4/27/2010                                           1,608       50,000  
      3/26/2010                         2,361       4,721       9,442             135,000  
Mr. Miller
    3/26/2010       89,709       179,418       358,836                         4,721       135,000  
      3/26/2010                         2,361       4,721       9,442             135,000  
Ms. Pindar
    3/26/2010       100,000       200,000       400,000                         4,721       135,000  
      3/26/2010                         2,361       4,721       9,442             135,000  
Mr. Slezak
    3/26/2010       91,339       182,678       365,356                         4,721       135,000  
      3/26/2010                         2,361       4,721       9,442             135,000  
 
 
(1) Equity incentive awards (performance shares) were granted in accordance with the 2002 Amended and Restated Plan. The performance shares vest at the end of three years of continuous service with us, and the number of shares ultimately awarded is contingent upon meeting cumulative consolidated EPS and consolidated operating income targets, each weighted at 50%.
 
(2) Stock awards were granted in accordance with the 2002 Amended and Restated Long-Term Incentive Plan. Stock awards are non-vested shares of Aéropostale common stock that are payable as shares at the end of the vesting period.
 
(3) Column (l) represents the fair values of stock awards granted during the year in accordance with ASC 718. Stock awards granted on February 12, 2010 have a fair value of $23.21. Stock awards granted on March 26, 2010 have a grant date fair value of $28.60. Stock awards granted on April 27, 2010 have a grant date fair value of $31.10.
 
(4) In February 2010, upon their promotions to Co-CEOs Mr. Johnson and Ms. Meads each received a grant of restricted stock valued at $1,000,000 which vest ratably over a two-year period. Additionally, along with the annual grant cycle, they were each awarded performance shares valued at $1,000,000. Performance shares are typically awarded as part of the annual award cycle so that all executives are measured based on the same three-


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year financial criteria and time frame. All of the other executive officers received equity awards as part of the annual award cycle.
 
(5) Upon termination of employment for Ms. Meads $1,500,000 of stock awards were forfeited.
 
The Compensation Committee may continue to grant equity incentives to the Company’s equity eligible employees consistent with the Company’s compensation philosophies. The Compensation Committee delegates administrative aspects of equity grants to management.
 
All equity grants are issued on the date they are approved by the Compensation Committee, except for new hires, whose grant date is the first day of their employment, with all such grants only being made when the Company is not in a trading blackout period. In addition, the Compensation Committee’s approval of grants of awards is not conditioned nor linked to the timing of the Company’s release of financial information. Non-vested stock awarded to executive officers vests at the end of three years of continuous service with us, except for certain grants more particularly described as above. From time to time, for retention and other competitive reasons, the Company will award non-vested stock with vesting periods other than a three-year cliff vesting. Although no longer granted, the exercise price for stock options is the last sales price reported for the Common Stock as reported on the NYSE on the date upon which the Award is granted. Stock options generally vest over four years on a pro rata basis and expire after eight years.
 
Allocation Among Components
 
We utilize the particular elements of compensation described above because we believe that it provides a well-proportioned mix of fixed compensation, retention value and at-risk compensation, which produces short-term and long-term performance incentives and rewards. Although there is no formal policy for a specific allocation between current and long-term compensation, or between cash and non-cash compensation, the Committee has established a pay mix for executive officers that places emphasis on those elements that are based upon performance. This approach generally reflects current market practice and provides our executive officers with attractive levels of current pay while encouraging officers to remain with our Company for the long-term. Certain components of our non-cash, long-term compensation are performance-based and can be realized only if the Company achieves certain financial goals during the relevant performance period. By following this approach, we provide our executives a measure of security in the minimum level of compensation that the individual is eligible to receive while also motivating the executive to focus on the business metrics that will produce a high level of performance for the Company and long-term wealth creation for the executive, as well as reduce the risk of recruitment by competitors.
 
This mix of compensation is weighted toward at-risk and long-term pay, which is subject to the Company’s performance (annual incentives and long-term incentives) as illustrated in the charts in the prior section. Maintaining this pay mix results in a pay-for-performance orientation of our overall compensation program for our executives.
 
Other Benefits and Perquisites
 
Our executive officer compensation program also includes other benefits and perquisites. These benefits include annual matching contributions to executive officers’ 401(k) plan accounts, MERP, Company partially-paid medical benefits, group term life insurance coverage and an auto allowance of $8,500 per year. These benefits also include benefit accruals under our supplemental executive retirement plan. We annually review these other benefits and perquisites with the Compensation Committee and the compensation consultant, and make adjustments as warranted based on competitive practices and our Company’s financial performance.
 
Post-Termination Compensation and Benefits
 
Our executive officers are also entitled to post-termination benefits in the event that their employment with us is terminated. For those executive officers who have an employment agreement with us, a description of the termination events that trigger post termination pay and benefits can be found in the section of this Proxy Statement entitled Employment Agreements. In addition, pursuant to Company policy, all Senior Vice Presidents of the Company receive one (1) year of post termination pay upon involuntary termination without cause. Our Compensation Committee, in conjunction the compensation consultant, has reviewed the severance costs to the


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Company associated with the Company’s severance-eligible employees. Specific information regarding benefits individuals would be eligible to receive upon termination of their employment with the Company is illustrated in the table on page 40.
 
Impact of Accounting and Tax
 
The Compensation Committee takes into account the various tax and accounting implications of compensation vehicles employed by us.
 
When determining amounts of stock incentive plan grants awarded to our executives, employees and Board members, the Compensation Committee examines the accounting cost associated with the grants. Under ASC 718, grants of stock-based compensation result in an accounting charge for us, which is amortized over the requisite service period, or vesting period of the instruments.
 
Section 162(m) of the Internal Revenue Code of 1986 limits the deductibility of executive compensation paid by a publicly-held company to $1,000,000 per covered employee per year. This limitation generally does not apply to performance-based compensation under a plan that is approved by the stockholders of a company that also meets certain other technical requirements. Our 2002 Amended and Restated Long-Term Incentive Plan was re-approved by stockholders on June 16, 2006 and therefore awards under the plan are eligible to be exempt from Section 162(m), assuming those awards meet the other criteria for Section 162(m) deductibility. The Compensation Committee intends to utilize performance-based compensation programs that meet the deductibility requirements under Section 162(m). However, the Compensation Committee may approve compensation that may not be deductible if the Committee determines that such compensation is in the best interests of the Company which may include for example, the payment of certain non-deductible compensation necessary in order to attract and retain individuals with superior talent.
 
2011 Compensation Decisions
 
For fiscal 2011 the AIP will continue to be based upon the Company’s achievement of targeted operating income goals and, as stated above, in certain circumstances, EPS growth as well. In anticipation of industry-wide global inflationary pressures and rising product costs that are expected to reduce our overall profitability, the Compensation Committee has approved an elongated bonus opportunity range for our executives.
 
For the past five fiscal years, the Company has paid bonuses against a financial performance range of 90% of Threshold, 100% of Target, and 110% at Maximum with a corresponding bonus opportunity range of 50%, 100%, and 200% respectively. Given the expected reduction in our overall profitability, the Company, together with our independent consultant, established an elongated range with a bonus opportunity of 25% of target at a financial performance level of 80%. Conversely, financial performance of 110% of target was modified to provide a bonus opportunity payout of 150% as compared to 200% in 2010 and a new maximum level of 120% of financial target was added that provides a bonus opportunity of 200% of target.
 
The following charts illustrate the former and the modified bonus opportunity for all of our Named Executive Officers. The bonus targets are as follows:
 
             
    Operating Income / Earnings Per Share
    Threshold
  Target
  Maximum
Fiscal Year
  (%)   (%)   (%)
 
2010
  90% of Target   100% of Target   110% of Target
2011
  80% of Target   100% of Target   120% of Target
 
The bonus payout levels are as follows:
 
             
    Threshold
  Target
  Maximum
Fiscal Year
  (%)   (%)   (%)
 
2010
  50% of Target   100% of Target   200% of Target
2011
  25% of Target   100% of Target   200% of Target


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We strongly believe that the modifications made to our bonus payout range for fiscal 2011 are in line with our overall philosophy of retaining our executives while motivating them to continue to strive for higher levels of performance. Providing an additional point of entry into our bonus program will keep our executives engaged and focused on greater levels achievement as the Company navigates through a volatile year for our business.
 
Outstanding Equity Awards at Fiscal Year-End.  The following table provides information relating to outstanding awards held by named executive officers at fiscal year end, January 29, 2011.
 
                                                                 
    Option Awards   Stock Awards
                            Equity
  Equity
                            Incentive
  Incentive
                            Plan Awards:
  Plan Awards:
                        Market
  Number of
  Market or
                    Number
  Value of
  Unearned
  Payout Value
    Number of
  Number of
          of Shares
  Shares or
  Shares, Units
  of Unearned
    Securities
  Securities
          or Units
  Units
  or Other
  Shares, Units or
    Underlying
  Underlying
          of Stock
  of Stock
  Rights
  Other Rights
    Unexercised
  Unexercised
  Option
      That Have
  That Have
  That Have
  That Have
    Options
  Options
  Exercise
  Option
  Not
  Not
  Not
  Not
    (#)
  (#)
  Price
  Expiration
  Vested
  Vested
  Vested
  Vested
Name
  (Exercisable)   (Unexercisable)   ($)   Date   (#)   ($) (13)   (#)   ($)(13)
 
Mr. Geiger
                            30,000 (1)     730,200              
Mr. Johnson
    20,925             14.89       3/9/2013                          
      22,500             12.83       4/4/2014                          
      26,612       8,871 (2)     17.82       3/28/2015                          
                              30,024 (5)     730,784              
                              21,546 (6)     524,430              
                              21,546 (7)     524,430              
                                          60,048 (5)     1,461,568  
                                          13,986 (9)     340,419  
Ms. Meads
    16,875       16,875 (3)     18.15       3/26/2015                          
      33,937       16,968 (4)     18.86       3/25/2016                          
                              23,625 (8)     575,033              
                              21,546 (6)     524,430              
                                          63,450 (8)     1,544,373  
Mr. Cunningham
    20,925             14.89       3/9/2013                          
      22,500             12.83       4/4/2014                          
      18,629       6,210 (2)     17.82       3/28/2015                          
                              22,518 (5)     548,088              
                              9,552 (10)     232,496              
                              13,987 (9)     340,444              
                                          45,036 (5)     1,096,176  
                                          5,595 (9)     136,182  
Ms. Pile
          3,375 (2)     17.82       3/28/2015                          
            4,613 (4)     18.86       3/25/2016                          
                              7,838 (8)     190,777              
                              7,298 (5)     177,633              
                              6,947 (11)     169,090              
                              4,721 (9)     114,909              
                              1,608 (12)     39,139              
                                          7,800 (8)     189,852  
                                          14,596 (5)     355,267  
                                          1,888 (9)     45,954  


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    Option Awards   Stock Awards
                            Equity
  Equity
                            Incentive
  Incentive
                            Plan Awards:
  Plan Awards:
                        Market
  Number of
  Market or
                    Number
  Value of
  Unearned
  Payout Value
    Number of
  Number of
          of Shares
  Shares or
  Shares, Units
  of Unearned
    Securities
  Securities
          or Units
  Units
  or Other
  Shares, Units or
    Underlying
  Underlying
          of Stock
  of Stock
  Rights
  Other Rights
    Unexercised
  Unexercised
  Option
      That Have
  That Have
  That Have
  That Have
    Options
  Options
  Exercise
  Option
  Not
  Not
  Not
  Not
    (#)
  (#)
  Price
  Expiration
  Vested
  Vested
  Vested
  Vested
Name
  (Exercisable)   (Unexercisable)   ($)   Date   (#)   ($) (13)   (#)   ($)(13)
 
Mr. Miller
          2,813 (2)     17.82       3/28/2015                          
            4,613 (4)     18.86       3/25/2016                          
                              6,975 (8)     169,772              
                              7,298 (5)     177,633              
                              5,211 (11)     126,836              
                              4,721 (9)     114,909              
                                          6,976 (8)     169,796  
                                          14,596 (5)     355,267  
                                          1,888 (9)     45,954  
Ms. Pindar
          3,375 (2)     17.82       3/28/2015                          
            4,613 (4)     18.86       3/25/2016                          
                              7,838 (8)     190,777              
                              7,298 (5)     177,633              
                              5,211 (11)     126,836              
                              4,721 (9)     114,909              
                                          7,800 (8)     189,852  
                                          14,596 (5)     355,267  
                                          1,888 (9)     45,954  
Mr. Slezak
          4,500 (2)     17.82       3/28/2015                          
            4,613 (4)     18.86       3/25/2016                          
                              6,975 (8)     169,772              
                              7,298 (5)     177,633              
                              5,211 (11)     126,836              
                              4,721 (9)     114,909              
                                          6,976 (8)     169,796  
                                          14,596 (5)     355,267  
                                          1,888 (9)     45,954  
 
 
(1) These equity grants vested on January 31, 2011 pursuant to Mr. Geiger’s employment agreement.
 
(2) Option vested on March 28, 2011.
 
(3) Options vested on March 26, 2011.
 
(4) Options vested 1/2 on March 25, 2011 and 1/2 will vest on March 25, 2012.
 
(5) Shares will vest on March 25, 2012.
 
(6) Shares vested on February 12, 2011.
 
(7) Shares will vest on February 12, 2012.
 
(8) Shares vested on March 25, 2011.
 
(9) Shares will vest on March 26, 2013.
 
(10) Shares will vest on September 28, 2011.
 
(11) Shares will vest on January 28, 2012.

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(12) Shares will vest on April 27, 2013.
 
(13) Market value based on the closing price of $24.34 on the last trading day of fiscal 2010 (January 28, 2011).
 
Option Exercises and Stock Vested Information.  The following table provides information relating to option awards exercised and restricted stock awards vested during the fiscal year ended January 29, 2011.
 
                                 
    Option Awards   Stock Awards
    Number of Shares
  Value Realized
  Number of Shares
  Value Realized
    Acquired on Exercise
  on Exercise
  Acquired on Vesting
  on Vesting
Name
  (#)   ($) (1)   (#)   ($) (2)
 
Mr. Geiger
    42,187       433,091              
      70,966       374,646              
                  63,152       1,465,126  
                  64,216       1,822,450  
Mr. Johnson
                15,789       451,408  
                  31,199       706,657  
                  16,054       455,613  
Ms. Meads
                90,000       2,573,100  
Mr. Cunningham
                9,551       223,111  
                  11,052       315,976  
                  24,960       565,344  
                  11,238       318,934  
Ms. Pile
    4,219       83,565              
      3,375       62,798              
      10,125       137,870              
      4,612       58,004              
                  6,750       192,983  
                  6,750       191,565  
Mr. Miller
    2,812       25,968              
      3,937       69,191              
      2,306       18,897              
                  5,625       160,819  
                  6,750       191,565  
Ms. Pindar
    6,975       138,459              
      6,750       85,460              
      4,612       53,595              
                  6,750       192,983  
                  6,750       191,565  
Mr. Slezak
    4,500       56,345              
      3,937       68,941              
      4,612       52,950              
                  7,875       225,146  
                  9,000       255,420  
 
 
(1) Value Realized on Exercise is based on the market price at the time of the exercise less the exercise price, multiplied by the number of shares underlying the exercised options.
 
(2) Valued Realized on Vesting is based on the market price at the close of business on the day of vesting, multiplied by the number of shares that have vested.


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Pension Benefits.  The following table reflects the present value for each of the named executive officer of their accumulated benefits under the Aéropostale SERP Plan and the Aéropostale Long-Term Deferred Incentive Compensation Plan as of January 29, 2011.
 
                             
        Number of
  Present
   
        Years
  Value of
  Payments
        Credited
  Accumulated
  During Last
    Plan
  Service
  Benefit
  Fiscal Year
Name
  Name   (#)   ($)   ($)
 
Mr. Geiger
  Aéropostale, Inc. SERP PLAN(1)     30             16,653,583  
Mr. Johnson
  Aéropostale, Inc. SERP PLAN(1)     18       2,583,765        
Ms. Meads
  Aéropostale, Inc. SERP PLAN(1)     4       1,275,030        
Mr. Cunningham
  Aéropostale, Inc. SERP PLAN(1)     10       1,014,101        
Ms. Pile
  Aéropostale, Inc. LTIP PLAN     5       71,273        
Mr. Miller
  Aéropostale, Inc. LTIP PLAN     5       54,509        
Ms. Pindar
  Aéropostale, Inc. LTIP PLAN     5       102,808        
Mr. Slezak
  Aéropostale, Inc. LTIP PLAN     6       69,012        
 
 
(1) Our supplemental executive retirement plan or “SERP” is a non-qualified defined benefit plan for certain officers. The plan is non-contributory and not funded and provides benefits based on years of service and compensation during employment. Participants are fully vested upon entrance in the plan. Retirement benefits under the plan are based on the employee’s highest average compensation (base earnings plus bonuses) during any five years within the ten-year period prior to retirement. Our SERP provides that a maximum of 30 years of benefit service may be credited to a participant. The supplemental retirement benefit is payable as a lump sum equal to the actuarial present value of an annual life annuity payable at age 65 of 1.5% of the participant’s highest average compensation less 2.5% of the participant’s estimated social security benefit, multiplied by years of service up to the maximum of 30 years, and offset by retirement benefits accrued as of July 31, 1998 under the Supplementary Executive Retirement Plan of Federated Department Stores, Inc. and the Federated Department Stores’ pension plan. The actuarial assumptions used for determining lump sum payments are determined at the time of the employee’s separation and include the “applicable mortality assumption” as prescribed by the Secretary of the Treasury under Section 417(e)(3) of the Internal Revenue Code and the annual rate of interest on 30-year Treasury securities for the second calendar month preceding the beginning of the calendar year in which the payment is made. The number of years of benefit service that have been credited to our named executive officers, as of December 31, 2010, are 30 years for Mr. Geiger, 18 years for Mr. Johnson, 10 years for Mr. Cunningham and 4 years for Ms. Meads. Thomas Johnson, CEO and Michael Cunningham, President, were enrolled in our SERP effective February 1, 2004. Mindy Meads, former Co-CEO was enrolled in our SERP effective March 19, 2007.
 
The amounts shown in the Pension Benefits Table above are actuarial present values of the benefits accumulated through the date shown. An actuarial present value is calculated by estimating the expected future lump sum payment at retirement and discounting the payment to reflect the time value of money. The assumed retirement age for each executive is the plan’s normal retirement age, which is the earliest age at which the executive could retire without any reduction due to age. Actual benefit present values will vary from these estimates depending on many factors, including an executive’s actual retirement age and the lump sum interest rate in effect at that time. The assumptions used for determining the present values of the accumulated pension benefits are outlined below:
 
     
    January 29, 2011
 
Discount rate
  5.50%
Retirement age
  Age 65
Form of benefit
  Lump sum
Assumed lump sum interest rate
  5.00%
Lump sum mortality table
  2011 Applicable Mortality Table
under IRC Section 417(e)(3)


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Each Participant receives an annual incentive amount, under our Long-Term Deferred Incentive Compensation Plan, equal to the following:
 
(a) 5% of such Participant’s compensation if the participant has less than 6 years of service;
 
(b) 10% of such Participant’s compensation if the participant has 6 or more years of service.
 
Interest will be credited to each Participant’s account on the last day of the plan year. The interest rate to be used to calculate the interest shall be the annual rate of 10-year Treasury Constant Maturities as of November 30th of the plan year.
 
The table below shows the amounts that the following individuals would be eligible to receive upon termination of their employment with the Company, assuming that termination occurred on January 29, 2011, the last day of our 2010 fiscal year:
 
                                                                     
    Potential Payouts Upon Termination
                Termination Type
                            Change in
  Change in
   
                Termination
          Control with
  Control with
   
                w/o Cause or
          Termination
  Termination
   
                Executive
          for Cause or
  w/o Cause or
   
                Termination
  Involuntary
  Change of
  Resignation
  Resignation
   
        Volun-
  Death or
  for Good
  Termination
  Control w/o
  w/o Good
  for Good
   
        tary Quit
  Disability
  Reason
  for Cause
  Termination
  Reason
  Reason
  Retirement
Name
  Benefit   ($)   ($)   ($)   ($)   ($)   ($)   ($)   ($)
 
Mr. Johnson(1)
  Payment of salary                 2,691,667                         2,850,000        
    Payment of bonus           1,124,260       1,124,260                         1,425,000        
    Acceleration of non-vested stock(2)           1,779,692       524,454             1,779,644       1,779,644       1,779,644        
    Acceleration of performance shares(2)           1,087,855                   1,801,987       1,801,987       1,801,987        
    Acceleration of stock options (2)(3)           57,839       57,839                         57,839        
    Retirement plan payment     3,072,964       3,072,964       3,072,964       3,072,964       3,072,964       3,072,964       3,072,964       3,072,964  
                                                                     
    Total     3,072,964       7,122,610       7,471,184       3,072,964       6,654,595       6,654,595       10,987,434       3,072,964  
                                                                     
Mr. Cunningham(1)
  Payment of salary                 1,770,833                         1,250,000        
    Payment of bonus           464,260       464,260                         625,000        
    Acceleration of non-vested stock(2)           1,121,027       232,496             1,121,028       1,121,028       1,121,028        
    Acceleration of performance shares(2)           776,177                   1,232,358       1,232,358       1,232,358        
    Acceleration of stock options (2)(3)           40,489       40,489                         40,489        
    Retirement plan payment     1,201,743       1,201,743       1,201,743       1,201,743       1,201,743       1,201,743       1,201,743       1,201,743  
                                                                     
    Total     1,201,743       3,603,696       3,709,821       1,201,743       3,555,129       3,555,129       5,470,618       1,201,743  
                                                                     
Ms. Pile
  Payment of salary                 500,000                         500,000        
    Payment of bonus                                                
    Acceleration of non-vested stock(2)           691,548                   691,548       691,548       691,548        
    Acceleration of performance shares(2)           442,018                   591,073       591,073       591,073        
    Acceleration of stock options (2)(3)           47,284                               47,284        
    Retirement plan payment     51,007       115,997       115,997             115,997       115,997       115,997       51,007  
                                                                     
    Total     51,007       1,296,847       615,997             1,398,618       1,398,618       1,945,902       51,007  
                                                                     


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    Potential Payouts Upon Termination
                Termination Type
                            Change in
  Change in
   
                Termination
          Control with
  Control with
   
                w/o Cause or
          Termination
  Termination
   
                Executive
          for Cause or
  w/o Cause or
   
                Termination
  Involuntary
  Change of
  Resignation
  Resignation
   
        Volun-
  Death or
  for Good
  Termination
  Control w/o
  w/o Good
  for Good
   
        tary Quit
  Disability
  Reason
  for Cause
  Termination
  Reason
  Reason
  Retirement
Name
  Benefit   ($)   ($)   ($)   ($)   ($)   ($)   ($)   ($)
 
Mr. Miller
  Payment of salary                 425,000                         425,000        
    Payment of bonus                                                
    Acceleration of non-vested stock(2)           589,150                   589,150       589,150       589,150        
    Acceleration of performance shares(2)           421,961                   571,017       571,017       571,017        
    Acceleration of stock options (2)(3)           43,620                               43,620        
    Retirement plan payment     38,106       89,444       89,444             89,444       89,444       89,444       38,106  
                                                                     
    Total     38,106       1,144,175       514,444             1,249,611       1,249,611       1,718,231       38,106  
                                                                     
Ms. Pindar
  Payment of salary                 400,000                         400,000        
    Payment of bonus                                                
    Acceleration of non-vested stock(2)           610,155                   610,155       610,155       610,155       610,155  
    Acceleration of performance shares(2)           442,018                   591,073       591,073       591,073       442,018  
    Acceleration of stock options (2)(3)           47,284                               47,284        
    Retirement plan payment     102,808       102,808       102,808             102,808       102,808       102,808       102,808  
                                                                     
    Total     102,808       1,202,265       502,808             1,304,036       1,304,036       1,751,320       1,154,981  
                                                                     
Mr. Slezak
  Payment of salary                 383,000                         383,000        
    Payment of bonus                                                
    Acceleration of non-vested stock(2)           589,150                   589,150       589,150       589,150        
    Acceleration of performance shares(2)           421,961                   571,017       571,017       571,017        
    Acceleration of stock options (2)(3)           54,619                               54,619        
    Retirement plan payment     50,156       124,734       124,734             124,734       124,734       124,734       50,156  
                                                                     
    Total     50,156       1,190,464       507,734             1,284,901       1,284,901       1,722,520       50,156  
                                                                     
 
 
(1) Reflects employment contracts dated March 7, 2011 and effective December 1, 2010. Restricted stock and performance share award grants in conjunction with the execution of the employment contract have not been included in the table. See employment agreements below for further details.
 
(2) Equity awards valued using closing price of $24.34 per share as of January 29, 2011.
 
(3) Accelerated vesting of stock options triggered upon termination within one year from a “change of control” of the Company, as that term is defined in the applicable employment agreement or equity grant agreement, as the case may be.
 
 
Thomas P. Johnson
 
We entered into an employment agreement (the “Employment Agreement”) with Thomas P. Johnson, our Chief Executive Officer, effective December 1, 2010 (“Effective Date”) that is in effect for three (3) years from the

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Effective Date. During the employment period, Mr. Johnson receives an annual base salary of $950,000, an annual incentive bonus, and medical and other benefits, including an automobile allowance in the amount of $8,500 per year. Mr. Johnson has an opportunity to earn an annual bonus of up to 300% of Mr. Johnson’s then applicable base salary, dependent upon the Company’s and his individual performance. Mr. Johnson’s annual bonus is capped at three times his base salary in respect of any fiscal year. The annual bonus is payable pursuant to the terms of the our Annual Incentive Bonus Plan.
 
Mr. Johnson also received a one-time sign-on grant of 42,544 shares of our restricted stock equating to, on the grant date, $1,000,000. This restricted stock vests 50% per year from the grant date. In addition, Mr. Johnson will also receive a grant of 63,830 shares of restricted stock equating to, on the grant date, $1,500,000. This restricted stock fully vests two years from the grant date. At the time of the Company’s next annual equity grant period, Mr. Johnson will receive an award of Company restricted stock, in the form of performance shares, which will have a grant date value of $1,500,000. This award will vest three years from the date of that grant.
 
Mr. Johnson is entitled to participate in any benefit plan we maintain for our senior executive officers, including any life, medical, accident, or disability insurance plan, and any pension, profit sharing, retirement, deferred compensation or savings plan for our senior executive officers. We also will reimburse the reasonable expenses incurred by Mr. Johnson in the performance of his duties and indemnify Mr. Johnson against any loss or liability suffered in connection with such performance.
 
We are entitled to terminate the Employment Agreement with or without “Cause” (as defined in the Employment Agreement). Mr. Johnson is entitled to terminate his Employment Agreement for “Good Reason” (as defined in the Employment Agreement) which includes a reduction in base salary, a material alteration in duties and responsibilities, any material amendments to our long term incentive plan which adversely affects Mr. Johnson, or for certain other specified reasons, including relocating the Registrant’s corporate offices greater than a 50 mile radius from their current location. In the event of a “Change of Control” (as defined in the Employment Agreement) of the Company and the Employment Agreement being terminated within two (2) years of such Change of Control, without Cause by us or with Good Reason by Mr. Johnson, then Mr. Johnson will be entitled to a severance payment equal to three times the sum of (i) his annual base salary payable and (ii) the target bonus amount which would have been owed to Mr. Johnson for the applicable fiscal year in which the termination of the agreement occurred. In addition, at the time of a Change of Control all unvested restricted stock and unvested performance shares outstanding shall fully vest.
 
Other than after a Change of Control, if we terminate Mr. Johnson’s employment without Cause or if Mr. Johnson resigns his position for Good Reason, he will be entitled to receive the greater of his base salary for the remainder of the term of the Employment Agreement or one and one quarter times his then applicable base salary. Mr. Johnson will also be entitled to receive a pro rata portion of the annual bonus that would have been payable for the fiscal year in which such termination occurs. In addition, all unvested options, unvested restricted stock, and unvested performance shares shall continue to vest for a period of one year from the termination of the Employment Agreement. Lastly, in the event the Employment Agreement ends on its term with no further action by either party, Mr. Johnson will receive severance equal to one and one quarter times his then applicable base salary and he will be subject to the “Restricted Period” referenced below.
 
If Mr. Johnson’s employment terminates prior to the end of the contract term for any reason other than due to his death or disability, then he will be restricted from engaging in competitive activities during the “Restricted Period” (as defined in the Employment Agreement) and he will also be restricted from soliciting Company employees during the Restricted Period.
 
There are also additional customary provisions contained in the Employment Agreement. For greater detail, please see the full text of the Employment Agreement which is filed herewith.


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Michael J. Cunningham
 
We entered into an employment agreement (the “Employment Agreement”) with Michael J. Cunningham, our President, effective December 1, 2010 (“Effective Date”) that is in effect for three (3) years from the Effective Date. During the employment period, Mr. Cunningham receives an annual base salary of $625,000, an annual incentive bonus, and medical and other benefits, including an automobile allowance in the amount of $8,500 per year. Mr. Cunningham has an opportunity to earn an annual bonus of up to 200% of Mr. Cunningham’s then applicable base salary, dependent upon the Company’s and his individual performance. Mr. Cunningham’s annual bonus is capped at two times his base salary in respect of any fiscal year. The annual bonus is payable pursuant to the terms of our Annual Incentive Bonus Plan.
 
Mr. Cunningham also received a one-time sign-on grant of 21,277 shares of restricted stock equating to, on the grant date, $500,000. This restricted stock vests 50% per year from the grant date. In addition, Mr. Cunningham received a grant of 21,277 shares of restricted stock equating to, on the grant date, $500,000. This restricted stock fully vests two years from the grant date. At the time of the Company’s next annual equity grant period, Mr. Cunningham will receive an award of Company restricted stock, in the form of performance shares, which will have a grant date value of $500,000. This award will vest three years from the date of that grant.
 
Mr. Cunningham is entitled to participate in any benefit plan we maintain for our senior executive officers, including any life, medical, accident, or disability insurance plan, and any pension, profit sharing, retirement, deferred compensation or savings plan for our senior executive officers. We also will reimburse the reasonable expenses incurred by Mr. Cunningham in the performance of his duties and indemnify Mr. Cunningham against any loss or liability suffered in connection with such performance.
 
We are entitled to terminate the Employment Agreement with or without “Cause” (as defined in the Employment Agreement). Mr. Cunningham is entitled to terminate his Employment Agreement for “Good Reason” (as defined in the Employment Agreement) which includes a reduction in base salary, a material alteration in duties and responsibilities, any material amendments to our long term incentive plan which adversely affects Mr. Cunningham, or for certain other specified reasons, including relocating the Registrant’s corporate offices greater than a 50 mile radius from their current location. In the event of a “Change of Control” (as defined in the Employment Agreement) of the Company and the Employment Agreement being terminated within two (2) years of such Change of Control, without Cause by us or with Good Reason by Mr. Cunningham, then Mr. Cunningham will be entitled to a severance payment equal to two times the sum of (i) his annual base salary payable and (ii) the target bonus amount which would have been owed to Mr. Cunningham for the applicable fiscal year in which the termination of the agreement occurred. In addition, at the time of a Change of Control all unvested restricted stock and unvested performance shares outstanding shall fully vest.
 
Other than after a change of control, if we terminate Mr. Cunningham’s employment without Cause or if Mr. Cunningham resigns his position for Good Reason, he will be entitled to receive the greater of his base salary for the remainder of the term of the Employment Agreement or one and one quarter times his then applicable base salary. Mr. Cunningham will also be entitled to receive a pro rata portion of the annual bonus that would have been payable for the fiscal year in which such termination occurs. In addition, all unvested options, unvested restricted stock, and unvested performance shares shall continue to vest for a period of one year from the termination of the Employment Agreement. Lastly, in the event the Employment Agreement ends on its term with no further action by either party, Mr. Cunningham will receive severance equal to one and one quarter times his then applicable base salary and he will be subject to the “Restricted Period” referenced below.
 
If Mr. Cunningham’s employment terminates prior to the end of the contract term for any reason other than due to his death or disability, then he will be restricted from engaging in competitive activities during the “Restricted Period” (as defined in the Employment Agreement) and he will also be restricted from soliciting Company employees during the Restricted Period.
 
There are also additional customary provisions contained in the Employment Agreement. For greater detail, please see the full text of the Employment Agreement which is filed herewith.


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Conclusion
 
We are providing our shareholders with an advisory vote to approve the compensation of our named executive officers, as disclosed in this proxy statement, including this Compensation Discussion and Analysis and the supporting tables (see Proposal No. 3 Advisory Vote on Executive Compensation). The information set forth reflects both the Compensation Committee and management’s commitment to implementing pay for performance programs that are aligned purposefully to balance risk and reward. We believe that our compensation programs have been successful in driving the performance of our executives to meet our short and long-term goals. We seek your support and think that it is appropriate because, as detailed in this Compensation Discussion and Analysis, we have a comprehensive executive compensation program that is designed to link our executives’ compensation as closely as possible with the Company’s performance and to align the executives’ interests with yours as our shareholders.
 
Separately, shareholders are provided an advisory vote on the desired frequency with which to have a say-on-pay vote (see Proposal No. 4). Given the structure of our business, and that the structure of our compensation programs do not change on an annual basis, we recommend that shareholders have the ability to provide this advisory vote on the named executive officers compensation programs on a triennial basis.
 
Compensation Committee Interlocks and Insider Participation
 
No member of the Compensation Committee of our Board of Directors and none of our executive officers serve, and we anticipate that no member of our Compensation Committee nor any of our executive officers will serve, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.
 
 
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s officers, directors and persons who are beneficial owners of more than ten percent of the Company’s Common Stock (“reporting persons”) to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Reporting persons are required by Securities and Exchange Commission regulations to furnish the Company with copies of all Section 16(a) forms filed by them. Based on its review of the copies of Section 16(a) forms received by it, the Company believes that, during fiscal 2010, all reporting persons complied with applicable filing requirements.
 
 
The following Report of the Compensation Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other Company filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent the Company specifically incorporates this Proxy Statement by reference therein.
 
To:  The Board of Directors
 
As members of the Compensation Committee, we are responsible for administering the Company’s incentive plans, including the 1998 Stock Option Plan, 2002 Long-Term Incentive Plan and Annual Incentive Bonus Plan. In addition, we review compensation levels of members of senior management, evaluate the performance of senior management and consider management succession and related matters. The Compensation Committee reviews compensation for the executive officers of the Company with the Board.
 
The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis with management. Based on this review and discussions, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
 
COMPENSATION COMMITTEE
Bodil Arlander (Chairperson)
Robert B. Chavez
David B. Vermylen
John N. Haugh


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The following report of the Audit Committee shall not be deemed to be soliciting material or to be filed with the Securities and Exchange Commission under the Securities Act of 1933 or the Securities Exchange Act of 1934 or incorporated by reference in any document so filed.
 
To:  The Board of Directors
 
As members of the Audit Committee, we are responsible for the oversight of all aspects of the Company’s financial reporting, internal control and audit functions. We adopted a charter in May 2002 and revised this charter in November of 2004. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. We have reviewed and discussed the Company’s financial statements with management.
 
We selected Deloitte & Touche LLP (“Deloitte”) to be the Company’s independent registered public accounting firm, and they were responsible for expressing an opinion on the consolidated financial statements in the Annual Report for fiscal 2010. We have received written confirmation from Deloitte & Touche LLP of their independence within the meaning of the Securities Act administered by the Securities and Exchange Commission and the requirements of PCAOB Ethics and Independence Rule 3526, Communication with Audit Committees Concerning Independence, and have discussed Deloitte & Touche LLP’s independence. We have discussed with Deloitte those matters required by PCAOB AU 380, Communication With Audit Committees, and SEC Rule 2-07, Communication With Audit Committees, of Regulation S-X. In addition, a representative of Deloitte will be in attendance at the Annual Meeting.
 
In reliance on the reviews and discussions noted above, we recommended to the Board of Directors that the audited financial statements be included in the Company’s annual report on Form 10-K for the year ended January 29, 2011 for filing with the Securities and Exchange Commission.
 
AUDIT COMMITTEE
Karin Hirtler-Garvey (Chairperson)
Ronald R. Beegle
Evelyn Dilsaver


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The following table sets forth the fees billed by Deloitte & Touche LLP for each of the past two fiscal years for audit and fees billed in each of the past two fiscal years for other related services: