Edgar Filing: Vera Bradley, Inc.

Definitive Proxy Statement

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

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VERA BRADLEY, INC.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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LOGO

2208 Production Road

Fort Wayne, Indiana 46808

April 11, 2013

Dear Shareholder:

You are cordially invited to attend the 2013 Annual Meeting of Shareholders of Vera Bradley, Inc., to be held at 11:00 A.M., Eastern Time, on May 30, 2013 at our offices located at 11222 Stonebridge Road, Roanoke, Indiana 46783.

The attached Notice of 2013 Annual Meeting of Shareholders and Proxy Statement provide information concerning the matters to be considered and voted on at the Annual Meeting. Please take the time to read carefully each of the proposals.

Regardless of the number of shares you hold or whether you plan to attend the meeting in person, your vote is important. Accordingly, please vote your shares as soon as possible in accordance with the instructions you received. Voting your shares prior to the Annual Meeting will not prevent you from voting your shares in person, if you subsequently choose to attend the meeting.

Thank you for your continued support of Vera Bradley.

Sincerely,

LOGO

Michael C. Ray

Chief Executive Officer

LOGO

2208 Production Road

Fort Wayne, Indiana 46808

NOTICE OF 2013 ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD MAY 30, 2013

The Annual Meeting of Shareholders of Vera Bradley, Inc. will be held at our offices located at 11222 Stonebridge Road, Roanoke, Indiana 46783 on May 30, 2013 at 11:00 A.M., Eastern Time, for the following purposes:

To elect four Class III directors to the Board of Directors;

To ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for fiscal 2014; and

To transact any other business as may properly come before the meeting or any adjournments or postponements of the meeting.

You are entitled to vote at the Annual Meeting and at any adjournments or postponements of the meeting if you were a shareholder at the close of business on March 25, 2013.

Please submit your proxy card as soon as possible in accordance with your instructions so that your shares can be voted at the Annual Meeting. For specific instructions on voting, please refer to the instructions on your enclosed proxy card.

By Order of the Board of Directors,

LOGO

Anastacia S. Knapper

Secretary

April 11, 2013

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Shareholders To Be Held on May 30, 2013: This Notice of Annual Meeting and Proxy Statement and our Fiscal 2013 Annual Report are available in the “Investor Relations” section of our website at www.verabradley.com.

Table of Contents


QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE 2013 ANNUAL MEETING OF SHAREHOLDERS			1

PROPOSALS TO BE VOTED ON BY VERA BRADLEY’S SHAREHOLDERS			5

PROPOSAL NO. 1 ELECTION OF DIRECTORS			5
Nominees for Election as Class III Directors at the 2013 Annual Meeting			5
Directors Continuing in Office			6
Family Relationships			8
Board of Directors Qualifications			9
Board Independence			9
Committees			9
Director Nominations			10
Meeting Attendance			11
Compensation Committee Interlocks and Insider Participation			11
Fiscal 2013 Director Compensation			11
Summary of Director Compensation			12
Indemnification of Directors and Officers			13
Board Leadership Structure			13
Communications with Directors			14
Code of Ethics			14
Corporate Governance Guideline			14
Risk Oversight			14
Audit Committee Report			15
PROPOSAL NO. 2 RATIFICATION OF INDEPENDENT AUDITORS			16
Proposal			16
Change in Independent Registered Public Accounting Firm			16
Vote Required and Board Recommendation			17

EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS			18

Compensation Committee Report			18
Compensation Discussion and Analysis			18
Executive Summary			18
How We Make Executive Compensation Decisions			19
Philosophy and Objectives of Our Executive Compensation Program			20
Elements of Our Executive Compensation Program			20
Determining the Amount of Each Element of Compensation			23
Agreements with Named Executive Officers			26
Effect of Accounting and Tax Treatment on Compensation Decisions			27
Summary Compensation Table			27
Fiscal 2013 Grants of Plan-Based Awards			28
Outstanding Equity Awards at 2013 Fiscal Year-End			29
Fiscal 2013 Option Exercises and Shares Vested			30
Fiscal 2013 Pension Benefits			30
Fiscal 2013 Nonqualified Deferred Compensation			30
Potential Payments Upon Termination or Change in Control			30
Compensation and Risk			32
2010 Equity and Incentive Plan			33

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			34

Related Party Transactions for Fiscal 2013			34

SHARE OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			36

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			37

REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS, NOMINATION OF DIRECTORS AND OTHER BUSINESS OF SHAREHOLDERS			38

VERA BRADLEY, INC.

PROXY STATEMENT

QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS

AND THE 2013 ANNUAL MEETING OF SHAREHOLDERS

Q.	*Why am I receiving these materials?*

We are providing these proxy materials to you in connection with the solicitation, by the Board of Directors of Vera Bradley, Inc. (the “Company” or “Vera Bradley”), of proxies to be voted at the Company’s 2013 Annual Meeting of Shareholders and at any adjournments or postponements of the meeting. The Annual Meeting will be held on May 30, 2013 beginning at 11:00 A.M., Eastern Time, at the Company’s offices located at 11222 Stonebridge Road, Roanoke, Indiana 46783. As a shareholder, you are invited to attend the Annual Meeting and are entitled and requested to vote on the proposals described in this Proxy Statement. This Proxy Statement and the accompanying proxy card are being mailed to shareholders starting on April 11, 2013. The mailing address of the Company’s principal executive offices is 2208 Production Road, Fort Wayne, Indiana 46808.

Q.	*What proposals will be voted on at the Annual Meeting?*

A.	Two proposals are scheduled to be voted on at the Annual Meeting:

•

The election of four Class III directors to the Board of Directors; and

•

The ratification of the appointment of Ernst & Young LLP (“E&Y”) as our independent registered public accounting firm for fiscal 2014.

Our Board of Directors is not aware of any other matter that will be presented at the Annual Meeting. If any other matter is properly presented at the Annual Meeting, the persons named on your proxy will, in the absence of your instructions to the contrary, vote the shares for which such persons have voting authority in accordance with their discretion on the matter.

Q.	*What are the Board of Directors’ voting recommendations?*

A.	The Company’s Board of Directors recommends that you vote your shares:

•

“FOR” the election of each of the Class III director nominees to the Board of Directors; and

•

“FOR” the ratification of the appointment of E&Y as our independent registered public accounting firm for fiscal 2014.

Q.	*Who is entitled to vote?*

Only holders of record of our common shares at the close of business on March 25, 2013 (the “Record Date”), will be entitled to notice of, and to vote at, the Annual Meeting, or any postponements and adjournments thereof. If you hold your shares in “street name” and wish to vote your shares in person at the Annual Meeting, you must obtain a legal proxy from your broker, bank or other nominee (who is the shareholder of record), giving you the right to vote the shares; otherwise, your broker, bank or other nominee will vote for you pursuant to voting instructions provided by you. On the Record Date, 40,566,584 common shares were issued and outstanding. Each common share is entitled to one vote on each matter presented at the Annual Meeting.

Q.	*What do I need to do now?*

Please carefully consider the information in this Proxy Statement and respond as soon as possible so that your shares will be represented at the meeting. You can respond by following the instructions for granting a proxy to vote on the proxy card or, for shares held by your broker, on the voting instruction card that your

broker provides to you. Alternatively, you may attend the Annual Meeting and vote your shares in person, in which case, only your in-person votes will count. Remember that you will need to obtain a legal proxy from your bank, broker or nominee if your shares are held in “street name” and you wish to vote in person at the Annual Meeting.

Q.	*Do I need to attend the meeting?*

A.	No. You may authorize your shares to be voted by following the instructions on the proxy card or, for shares held by your broker, on the voting instruction card that your broker provides to you.

Q.	*If I wish to attend the meeting, what identification must I show to attend?*

A.	All shareholders should bring a driver’s license, passport or other form of government-issued identification to verify their identities. In addition:

•

If your shares are held through a broker or other financial institution (known as “street name”), you will need to bring either (1) a letter from your broker stating that you held the Company’s shares through that institution as of the Record Date, or (2) a copy of the notice of Annual Meeting document you received in the mail.

•

If you are a registered shareholder (meaning, your shares are held directly with the Company’s transfer agent) whose shares are registered in your own name, you do not need anything additional because we can check your name against the list of registered shareholders at the door.

Shareholders whose shares are held jointly or through a company, group or other institution may bring one other person with them to attend the meeting. Please understand that, for security reasons, we cannot admit to the meeting people who lack the proper identification.

Q.	*How do I vote shares that are held by my broker?*

A.	If you have shares held by a broker or other nominee, you may instruct your broker or other nominee to vote your shares by following the instructions that your broker or nominee provides to you. Most brokers offer voting by mail, telephone and the Internet.

Q.	*What is the quorum requirement for the Annual Meeting?*

A quorum is necessary for the Company’s shareholders to conduct business at the Annual Meeting. The presence at the meeting, in person or by proxy, of the holders of a majority of the shares entitled to vote on the Record Date will constitute a quorum, permitting us to conduct the business of the meeting. Proxies received but marked as abstentions, if any, and broker non-votes described below, will be included in the calculation of the number of shares considered to be present at the meeting for quorum purposes.

Q.	*What is the voting requirement to approve each of the proposals?*

Four Class III directors have been nominated for election at the Annual Meeting. Class III directors will be elected by a plurality of the votes properly cast in the election of directors at the Annual Meeting. This means that the four nominees who receive the largest number of “FOR” votes cast will be elected as directors. Shareholders cannot cumulate votes in the election of directors.

The proposal to ratify the appointment of our independent registered public accounting firm will be approved if the votes properly cast favoring the proposal exceed the votes properly cast opposing the proposal.

Q.	*What does it mean if I receive more than one proxy or voting instruction card?*

A.	It means your shares are registered differently or are in more than one account. Please provide voting instructions for all proxy and voting instruction cards you receive.

Q.	*Who will count the vote?*

A.	A representative of Broadridge Financial Solutions, Inc., the Company’s mailing agent, will tabulate the votes. Anastacia S. Knapper, the Company’s Secretary, will act as the inspector of election.

Q.	*How are broker non-votes counted? What if I abstain?*

A.	Your broker will NOT be able to vote your shares with respect to the election of directors, if you have not provided directions to your broker. We strongly encourage you to vote your shares and exercise your right to vote as a shareholder.

When a proposal is not a routine, uncontested matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a broker non-vote. Abstentions and broker non-votes will be counted for purposes of determining whether a quorum is present, but will generally have no effect on either of the proposals because they are not considered votes cast.

Q.	*Can I revoke my proxy or change my vote?*

A.	Yes. You may revoke your proxy or change your voting instructions at any time prior to the vote at the Annual Meeting by:

•

providing written notice to the Secretary of the Company;

•

delivering a valid, later-dated proxy or a later-dated vote on the Internet or by telephone; or

•

attending the Annual Meeting and voting in person.

Please note that your attendance in person at the Annual Meeting will not cause your previously granted proxy to be revoked unless you specifically so request. Shares held in street name may be voted in person by you at the Annual Meeting only if you obtain a signed proxy from the record holder giving you the right to vote the shares. If your shares are held in street name, you must contact your brokerage firm or bank to change your vote or obtain a proxy to vote your shares if you wish to cast your votes in person at the meeting.

Q.	*Who will bear the cost of soliciting votes for the Annual Meeting?*

The Company is soliciting your proxy and will pay the entire cost of preparing, assembling, printing, mailing and distributing these proxy materials. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone or by electronic and facsimile transmission by our directors, officers and employees, who will not receive any additional compensation for such solicitation activities. We may reimburse brokerage firms and other persons representing beneficial owners of our common shares for their expenses in forwarding solicitation material to such beneficial owners.

Q.	*I share an address with another shareholder, and we received only one paper copy of the proxy materials. How may I obtain an additional copy of the proxy materials?*

The Company has adopted a procedure called “householding,” which the Securities and Exchange Commission (the “SEC”) has approved. Under this procedure, the Company is delivering a single copy of this Proxy Statement to multiple shareholders who share the same address unless the Company has received contrary instructions from one or more of the shareholders. This procedure reduces the Company’s printing costs, mailing costs and fees. Shareholders who participate in householding will continue to be able to access and receive separate proxy cards. Upon written or oral request, a separate copy of this Proxy Statement will be promptly delivered to any shareholder at a shared address to which the Company delivered a single copy. To receive a separate copy of this Proxy Statement, or a separate copy of future proxy statements, shareholders may write or call Broadridge Financial Solutions, Inc. at the following

address and telephone number: Householding Department, 51 Mercedes Way, Edgewood, New York 11717 or 1-800-542-1061. Shareholders who hold shares in street name may contact their brokerage firm, bank, broker-dealer or other similar organization to request information about householding.

Q.	*Can I access the Company’s proxy materials and Annual Report electronically?*

This Proxy Statement and copies of the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013, as filed with the SEC, are available to shareholders free of charge in the “Investor Relations” section of the Company’s website at www.verabradley.com or by writing to Vera Bradley, Inc., 2208 Production Road, Fort Wayne, Indiana 46808.

Q.	*Where can I find the voting results of the Annual Meeting?*

A.	The Company will announce preliminary voting results at the Annual Meeting and publish preliminary results, or final results if available, in a Current Report on Form 8-K within four business days of the Annual Meeting.

PROPOSALS TO BE VOTED ON BY VERA BRADLEY’S SHAREHOLDERS

PROPOSAL NO. 1

ELECTION OF CLASS III DIRECTORS

We have a classified Board of Directors consisting of four Class I directors, three Class II directors, and four Class III directors, who will serve until the annual meetings of shareholders to be held in 2014, 2015 and 2013, respectively, and until their respective successors are duly elected and qualified. At each annual meeting of shareholders, directors are elected for a term of three years to succeed those directors whose terms expire at the annual meeting.

The term of the Class III directors will expire at the upcoming Annual Meeting. Accordingly, four people are to be elected to serve as Class III directors at the Annual Meeting. Our Nominating and Corporate Governance Committee has nominated for election by the shareholders to the Class III positions, Barbara Bradley Baekgaard, Richard Baum, Patricia R. Miller, and Frances P. Philip, the current Class III members of the Board. If elected, Mses. Baekgaard, Miller and Philip and Mr. Baum will serve as Class III directors until our annual meeting of shareholders in 2016 and until their successors are duly elected and qualified.

The Board of Directors has no reason to believe that any of Mses. Baekgaard, Miller or Philip or Mr. Baum will be unable to serve as a director. If, however, any nominee becomes unavailable, the proxies will have discretionary authority to vote for a substitute nominee.

Unless authority to do so is withheld, the persons named as proxies will vote “FOR” the election of Mses. Baekgaard, Miller and Philip and Mr. Baum.

Background information on each of the directors, including the director nominees, appears below.

If a quorum is present and voting, the four nominees for Class III directors receiving the highest number of votes will be elected as Class III directors. Abstentions and broker non-votes will have no effect on the vote.

Nominees for Election as Class III Directors at the 2013 Annual Meeting

Barbara Bradley Baekgaard, age 74, Co-Founder, Chief Creative Officer and Director

Barbara Bradley Baekgaard co-founded Vera Bradley in 1982 and has served as a director since then. From 1982 through June 2010, she also served as Co-President. From the outset, Ms. Bradley Baekgaard has provided leadership and strategic direction in our brand’s development by providing creative vision to areas such as marketing, product design, assortment planning, and the design and visual merchandising of our stores. In May 2010, she was appointed Chief Creative Officer. She currently serves as a board member of the Indiana University Melvin and Bren Simon Cancer Center Development Board and the Vera Bradley Foundation for Breast Cancer.

As Co-Founder of Vera Bradley, Ms. Bradley Baekgaard serves a key leadership role on our Board of Directors and provides the Board with a broad array of institutional knowledge and historical perspective as well as an in-depth knowledge of business strategy, branding, product development, and store design.

Richard Baum, age 66, Director

Richard Baum has served as a director since October 2011. Mr. Baum is the managing partner of Consumer Growth Partners, a private equity firm with an exclusive investment focus on specialty retail and branded consumer products companies, which he helped to found in 2005. Prior to founding Consumer Growth Partners, Mr. Baum spent more than a decade serving in various equity research roles with Credit Suisse, Goldman Sachs

and Sanford Bernstein. During this time, he was consistently ranked as one of Wall Street’s top specialty retail analysts. He also has extensive experience in retail operations, merchandising and strategic planning. Mr. Baum holds a J.D. Degree from Harvard Law School and a B.A. in Economics from the University of Michigan.

Mr. Baum brings to the Board of Directors particular knowledge and experience in finance and capital structure, strategic planning, consumer brand strategy and retail merchandising.

Patricia R. Miller, age 74, Co-Founder and Director

Patricia R. Miller co-founded Vera Bradley in 1982 and has served as a director since then. From 1982 through June 2010, she also served as Co-President. From the outset, Ms. Miller has provided leadership and strategic direction to the business, guiding the development of our operations and supply chain infrastructure and the growth of our employee base. Ms. Miller has also regularly provided a face for Vera Bradley. In June 2010, she was appointed National Spokesperson for the Company where she continued to promote our brand until her retirement in October 2012. Ms. Miller served as the first Secretary of Commerce for the State of Indiana and the Chief Executive Officer of the Indiana Economic Development Corporation from 2005 to 2006. Ms. Miller serves as a director for the Indiana University Foundation and for the Vera Bradley Foundation for Breast Cancer.

As Co-Founder of Vera Bradley, Ms. Miller brings to our Board of Directors a broad array of institutional knowledge and historical perspective. Ms. Miller also provides insight and perspective on general strategic and business matters, stemming from her executive and finance experience as Secretary of Commerce for the State of Indiana and as Chief Executive Officer of the Indiana Economic Development Corporation.

Frances P. Philip, age 55, Director

Frances P. Philip has served as a director since May 2011. From 1994 to 2011, Ms. Philip held positions of increasing responsibility at L.L. Bean, including Chief Merchandising Officer from 2002 to 2011. Prior to working at L.L. Bean, Ms. Philip was one of three principals who launched the innovative fresh flower catalog, Calyx & Corolla, and she served in a variety of roles with other specialty retailers, including The Nature Company, Williams-Sonoma, and The Gap. Ms. Philip is a graduate of Harvard Business School and also serves on the boards of A.T. Cross Company, a privately-held designer and marketer of branded personal and business accessories; Crane & Co., Inc., a privately-held manufacturer of US currency paper and fine cotton papers used for business and personalized stationery; and the Coastal Humane Society.

Ms. Philip brings to our Board of Directors extensive experience in product design and development, multi-channel merchandising and the retail and consumer products industry.

VERA BRADLEY’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE

“FOR” THE ELECTION OF THE FOREGOING NOMINEES

TO THE BOARD OF DIRECTORS.

Directors Continuing in Office

Class I Directors Serving until the 2014 Annual Meeting

Karen Kaplan, age 53, Director

Karen Kaplan has served as a director since October 2012. Ms. Kaplan has served as President of Hill Holliday, one of the nation’s largest advertising agencies, since 2003, and has served in various roles for Hill Holliday since 1982. Ms. Kaplan is a Trustee of Fidelity Investments where she serves on the Audit Committee and Governance and Nominating Committee, and is a Director of Delta Dental and DentaQuest, where she chairs the Nominating and Governance Committee and serves on the Compensation and Executive Committees. In addition, Ms. Kaplan currently serves as Chairman of the Greater Boston Chamber of Commerce, on the Board

of Governors of the Chief Executives’ Club of Boston, and on the Board of the Massachusetts Conference for Women. Ms. Kaplan is a Trustee of the Post Office Square Trust, as well as a member of the Clinton Global Initiative. She is also the immediate past President of the Massachusetts Women’s Forum.

Ms. Kaplan brings to our Board of Directors significant marketing and branding experience, as well as a strong tactical and financial background.

John E. Kyees, age 66, Director

John E. Kyees has served as a director since April 2010. Mr. Kyees retired in 2010 after serving as the Chief Investor Relations Officer of Urban Outfitters, Inc. Mr. Kyees also served as Chief Financial Officer of Urban Outfitters, Inc. from 2003 to 2010. Mr. Kyees formerly held the position of Chief Financial Officer and Chief Administrative Officer for bebe stores, Inc., a retail chain headquartered in San Francisco, California, from 2002 to 2003. Prior to joining bebe, Mr. Kyees served as Chief Financial Officer for Skinmarket, a startup teenage cosmetic retailer, from 2000 to 2002. Mr. Kyees is currently a director and member of the audit committee of Destination XL Group, Inc., a publicly-traded specialty retailer of men’s clothing; a director and member of the audit committee of Hot Topic, Inc., a publicly-traded mall and web-based specialty retailer of apparel, accessories, music and gift items; and a director and member of the audit committee of Rackwise Inc., a publicly-traded provider of data center infrastructure management software. In addition, Mr. Kyees is also a director of Arhaus Furniture, a privately-held retailer.

Mr. Kyees brings to our Board of Directors over 40 years of experience in the consumer products retail and manufacturing industries. He has over 30 years of experience as a chief financial officer and nine years serving in that role for a public company. Institutional Investor magazine selected Mr. Kyees as a top specialty retail chief financial officer on five separate occasions, evidencing his strong skills in corporate finance, strategic, and accounting matters.

Matthew McEvoy, age 51, Director

Matthew McEvoy has served as a director since July 2011. Mr. McEvoy is Senior Vice President of Strategy and New Business Development at Burberry Group plc. Prior to joining Burberry in 2002, Mr. McEvoy worked for nearly fifteen years at Goldman Sachs, where he held positions of increasing responsibility, including Vice President of the Retail and Apparel Focus Group from 1993 to 2001. Mr. McEvoy is a graduate of Harvard Business School and Harvard College.

Mr. McEvoy brings to the Board of Directors extensive experience in retail operations and strategic planning, years of experience as a Senior Vice President of an international retail public company, and a proven track record of driving international growth and expansion.

Michael C. Ray, age 52, Chief Executive Officer and Director

Michael C. Ray has served as our Chief Executive Officer since 2007 and as a director since June 2010. From 2004 to 2007, Mr. Ray served as our Executive Vice President of Sales and Marketing, and served in a variety of roles since joining the Company in 1998 as Director of Finance. He is a board member of the Riley Children’s Foundation in Indianapolis, Indiana.

Mr. Ray has been instrumental in our growth and the development and execution of our long-term strategic plans. He provides our Board of Directors with an in-depth knowledge of our products, industry, challenges, and opportunities, and he communicates management’s perspective on important matters.

Class II Directors Serving until the 2015 Annual Meeting

Robert J. Hall, age 54, Chairman of the Board of Directors

Robert J. Hall has served as a director since 2007 and as Chairman of the Board since September 2010. Mr. Hall currently serves as President of Green Gables Partners, a private investment firm that he founded in 2010. Prior to the founding of Green Gables, Mr. Hall started Andesite Holdings, a private equity firm, in 2007. Mr. Hall served as an Executive Director for UBS Financial Services from 2000 to 2007. Mr. Hall serves as a director of FlyLow Gear Co., a manufacturer of outerwear, and New World Stoneworks LLC, a retailer of stone products. Mr. Hall also serves as the Chairman of the Board of the Mid-Atlantic region of Teach for America, is a member of the Board of the Philadelphia School Partnership, and serves as trustee of The Holderness School.

Mr. Hall provides our Board of Directors with insight and perspective on general strategic and financial matters, stemming from his extensive experience in investment banking, investment management, financial planning, and private placements.

P. Michael Miller, age 75, Director

P. Michael Miller has served as a director since 1990. From 1990 through June 2010, he also served as our Secretary and Treasurer. Mr. Miller is a senior partner in the law firm of Hunt Suedhoff Kalamaros LLP. He has been a partner with the firm since 1997. Mr. Miller also serves as a director of the Vera Bradley Foundation for Breast Cancer.

Mr. Miller has been involved with Vera Bradley since its inception and brings to our Board of Directors a broad array of institutional knowledge and historical perspective. Mr. Miller also provides insight and guidance on legal and business matters, stemming from his experience as a practicing attorney.

Edward M. Schmults, age 50, Director

Edward M. Schmults has served as a director since September 2010. Since 2009, Mr. Schmults has served as the Chief Executive Officer of Wild Things, LLC, a privately-held company that provides technical apparel, packs and bags to the U.S. military, federal and state law enforcement agencies and the consumer market. From 2005 to 2009, Mr. Schmults served as the Chief Executive Officer of FAO Schwarz, a toy retailer. Prior to joining FAO Schwarz, he was employed at RedEnvelope, Inc., a catalog and internet retailer of affordable luxury goods, where he started as Senior Vice President of Operations in 2004 and was promoted to Chief Operating Officer in 2005. Mr. Schmults was a consultant in the Entrepreneur-in-Residence program at Benchmark Capital in London in 2003. From 2000 to 2003, he served as President of Global Sales for Freeborders, an enterprise software company. Mr. Schmults previously served on the board of directors of Recreational Equipment, Inc. (REI), a retailer of outdoor clothing and equipment, from 2007 to 2010. He currently serves on the Board of Trustees of the National Outdoor Leadership School and is a member of the National Council of the American Prairie Foundation.

Mr. Schmults brings to our Board of Directors over 20 years of experience in branded consumer products, direct-to-consumer sales, finance, information technology, and socially responsible business practices.

Family Relationships

Several members of our Board of Directors and our management team are related to one another. P. Michael Miller is the husband of Patricia R. Miller. Robert J. Hall and Michael C. Ray are sons-in-law of Barbara Bradley Baekgaard. Accordingly, Robert J. Hall and Michael C. Ray are brothers-in-law.

Board of Directors Qualifications

We believe that our Board of Directors as a whole should encompass a range of talent, skill, diversity, and expertise enabling it to provide sound guidance with respect to our operations and interests. In addition to considering a candidate’s background and accomplishments, candidates are reviewed in the context of the current composition of our Board of Directors and the evolving needs of our business. Our Board of Directors identifies candidates for election to the Board of Directors and reviews their skills, characteristics and experience.

Our Board of Directors seeks directors with strong reputations and experience in areas relevant to the strategy and operations of our business, particularly industries and growth segments that we serve. We believe each of our current directors has experience that meets this objective. We believe that our Board of Directors collectively has experience in core management skills, such as strategic and financial planning, public company financial reporting, corporate governance, risk management and leadership development.

Our Board of Directors also believes that each of our current directors has other key attributes that are important to an effective board: integrity and demonstrated high ethical standards; sound judgment; analytical skills; the ability to engage management and each other in a constructive and collaborative fashion; diversity of origin, background, experience and thought; and the commitment to devote significant time and energy to service on our Board of Directors.

Board Independence

Our Board of Directors has determined that Barbara Bradley Baekgaard, Robert J. Hall, Patricia R. Miller, P. Michael Miller, and Michael C. Ray are not independent under the listing standards of The NASDAQ Stock Market. See “Family Relationships” and “Certain Relationships and Related Party Transactions” for a description of such relationships. Our Board of Directors has affirmatively determined that Richard Baum, Karen Kaplan, John E. Kyees, Matthew McEvoy, Frances P. Philip and Edward M. Schmults satisfy the independence requirements of The NASDAQ Stock Market for service on our Board of Directors and each of its committees.

Committees

Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Our Board has affirmatively determined that all members of these committees satisfy the independence requirements of The NASDAQ Stock Market.

Audit Committee. Our Audit Committee reviews and recommends to the Board of Directors internal accounting and financial controls and accounting principles and auditing practices to be employed in the preparation and review of our financial statements. In addition, our Audit Committee has the authority to engage, oversee and dismiss public accountants to audit our annual financial statements and determine the scope of the audit to be undertaken by such accountants. Our Audit Committee also reviews the fairness of related party transactions in accordance with the rules of The NASDAQ Stock Market.

Our Audit Committee consists of Richard Baum, John E. Kyees and Matthew McEvoy, with Mr. Kyees serving as chairman. As determined by our Board of Directors, Mr. Kyees is an Audit Committee financial expert under applicable SEC rules implementing the Sarbanes-Oxley Act of 2002. Our Audit Committee has a charter which is available on our corporate website at www.verabradley.com. Our website is not part of this Proxy Statement.

Compensation Committee. Our Compensation Committee reviews and recommends to our Chief Executive Officer and the Board of Directors policies, practices and procedures relating to the compensation of managerial employees and the establishment and administration of certain employee benefit plans for managerial employees. The Compensation Committee has the authority to administer our 2010 Equity and Incentive Plan and advise and consult with our officers regarding managerial personnel policies.

Our Compensation Committee consists of Karen Kaplan, Frances P. Philip and Edward M. Schmults, with Mr. Schmults serving as chairman. Our Compensation Committee has a charter which is available on our corporate website at www.verabradley.com. Our website is not part of this Proxy Statement.

Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee assists the Board of Directors with its responsibilities regarding the identification of individuals qualified to become directors, the selection of the director nominees for the next annual meeting of shareholders and the selection of director candidates to fill any vacancies on the Board of Directors. It also reviews and makes recommendations to the Board regarding the preparation and review of, and compliance with, corporate governance policies and reviews and makes recommendations to the Board regarding succession planning for the Chief Executive Officer and tenure and retirement policies for directors.

Our Nominating and Corporate Governance Committee consists of Richard Baum, Frances P. Philip and Edward M. Schmults, with Ms. Philip serving as chairman. Our Nominating and Corporate Governance Committee has a charter which is available on our corporate website at www.verabradley.com. Our website is not part of this Proxy Statement.

Director Nominations

In accordance with our Corporate Governance Guidelines, the Nominating and Corporate Governance Committee reviews the appropriate skills and characteristics required of directors in the context of prevailing business conditions and for making recommendations regarding the size and composition of the Board, all on an annual basis. The objective is a Board that brings to the Company a variety of perspectives and skills that are derived from high-quality business and professional experience and that are aligned with the Company’s strategic objectives.

The Nominating and Corporate Governance Committee considers nominees recommended by directors, officers, employees, shareholders, and others based upon each candidate’s qualifications, including whether a candidate possesses any of the specific qualities and skills desirable in certain members of the Board. Nominees for the Board must be committed to enhancing long-term shareholder value and possess a high level of personal and professional ethics, sound business judgment, appropriate experience and achievements, personal character and integrity. Board members are expected to understand our business and the industry in which we operate, regularly attend Board and committee meetings, participate in meetings and decision making processes in an objective and constructive manner and be available to advise our officers and management. Evaluations of candidates generally involve a review of background materials, internal discussions, and interviews with selected candidates, as appropriate. Upon selection of a qualified candidate, the Nominating and Corporate Governance Committee recommends the candidate to the Board. The Nominating and Corporate Governance Committee may engage consultants or third-party search firms to assist in identifying and evaluating potential nominees.

As described in our Corporate Governance Guidelines, the Board also seeks members from diverse backgrounds so that the Board consists of members with a broad spectrum of experience and expertise and with a reputation for integrity. Directors should have experience in positions with a high degree of responsibility, be leaders in the companies or institutions with which they are affiliated, and be selected based upon contributions that they can make to the Company. Once the Nominating and Corporate Governance Committee has confirmed that an individual meets the general qualifications for a director, and has further determined that such individual is appropriately qualified to serve on our Board, the Nominating and Corporate Governance Committee then considers the extent to which the membership of the candidate on the Board would promote a diversity of perspectives, backgrounds and experiences among the directors, including expertise and experience in a variety of substantive matters pertaining to our business; however, the Board does not believe the subjective and varying nature of this nomination process lends itself to a formal policy or fixed rules with respect to the diversity of the Board.

The Nominating and Corporate Governance Committee will consider director candidates recommended by shareholders. The Nominating and Corporate Governance Committee will evaluate director candidates in light of several factors, including the general criteria set forth above. Shareholders who wish to recommend individuals for consideration by the Nominating and Corporate Governance Committee to become nominees for election to the Board at an annual meeting of shareholders must do so in accordance with the procedures set forth in “Requirements, Including Deadlines, For Submission of Proxy Proposals, Nomination of Directors and Other Business of Shareholders” section of this Proxy Statement and in compliance with our bylaws. To date, the Nominating and Corporate Governance Committee has not received a director nomination from a shareholder.

Meeting Attendance

Our Board of Directors held 7 meetings during fiscal 2013. Each of the standing committees of the Board of Directors held the number of meetings indicated below. During fiscal 2013, each of our directors attended at least 75% of the total number of meetings of the Board and all of the committees of the Board of which such director was a member held during the period in which such director served, except that Ms. Kaplan was unable to attend the first meeting of the Board of Directors held immediately after her election due to the fact that this meeting was scheduled prior to her election. Directors are encouraged to attend our annual meetings of shareholders, and all directors serving at that time attended the shareholders meeting held on May 24, 2012.

The following table sets forth the three standing committees of the Board of Directors and the number of meetings held by each committee during fiscal 2013:


Audit	Compensation	Nominating and Corporate Governance
13	7	5

Compensation Committee Interlocks and Insider Participation

The members of the Compensation Committee as of February 2, 2013 were Karen Kaplan, Frances P. Philip and Edward M. Schmults. None of the members of the Compensation Committee are now serving or previously have served as employees or officers of the Company or any subsidiary, nor has any member of the Compensation Committee engaged in any transaction with the Company required to be disclosed pursuant to Item 404 of Regulation S-K. None of the Company’s executive officers serve as directors of, or in any compensation related capacity for, companies with which members of the Compensation Committee are affiliated.

Fiscal 2013 Director Compensation

The following table summarizes compensation that our non-employee directors earned during fiscal 2013 for services as members of our Board of Directors.


Name⁽¹⁾	Fees Earned or Paid in Cash		Stock Awards⁽²⁾		Total
Richard Baum	$	69,000	$	50,005	$	119,005
Stephen J. Hackman⁽³⁾		35,450		—		35,450
Robert J. Hall		85,000		50,005		135,005
Karen Kaplan⁽⁴⁾		15,644		—		15,644
John E. Kyees		76,750		50,005		126,755
Matthew McEvoy		59,000		50,005		109,005
Patricia R. Miller⁽⁵⁾		11,500		50,005		61,505
P. Michael Miller		42,500		50,005		92,505
Frances P. Philip		71,000		50,005		121,005
Edward M. Schmults		66,000		50,005		116,005

(1)	We did not pay our employee directors, Mr. Ray and Ms. Bradley Baekgaard, any compensation for their services on our Board of Directors in fiscal 2013.

(2)	Represents the aggregate grant date fair value of restricted stock awarded during the fiscal year computed in accordance with FASB ASC Topic 718. Additional information regarding the calculation of these values is included in Notes 2 and 9 to our consolidated financial statements.

(3)	Mr. Hackman resigned as a director effective October 3, 2012. Mr. Hackman was granted stock awards of $50,005 for his services during the year; however those awards were forfeited upon his resignation.

(4)	Ms. Kaplan was appointed a director of the Company effective October 3, 2012.

(5)

Although Ms. Miller served as the National Spokesperson, her position was part-time up until her retirement on October 31, 2012. For that reason, the Compensation Committee determined that Ms. Miller should receive restricted stock units in exchange for her service as a director. As of the effective date of her retirement, Ms. Miller also received meeting fees as described herein under “—Summary of Director Compensation.”

Summary of Director Compensation

Fiscal 2013

Our non-employee director compensation program was originally adopted in fiscal 2011. At that time, our outside compensation consultant reviewed our cash compensation for non-employee directors. In reviewing total compensation for our non-employee directors, our consultant evaluated the cash compensation programs and long-term equity incentive programs for non-employee directors of comparable companies. All directors other than Mr. Ray and Ms. Baekgaard participate in our non-employee director compensation program. Prior to her retirement, Ms. Miller received equity compensation as described below, but she did not receive cash compensation for her services as a director until her retirement from the Company in October, 2012.

Under our fiscal 2013 cash compensation program, we paid each of our non-employee directors a cash retainer of $34,000 annually, a per meeting fee of $2,000 for both Board and committee meetings and $500 for telephonic meetings. In addition, we paid our Audit Committee chair an additional retainer of $8,750 and each of our other committee chairs an additional retainer of $5,000. We paid the chairperson of our Board of Directors an additional $40,000 retainer.

We also paid each of our non-employee directors, as well as Ms. Miller, an annual equity grant with a value of approximately $50,000. On March 16, 2012, our Compensation Committee granted 1,513 restricted stock units to each of our non-employee directors and Ms. Miller. These restricted stock units vest and settle in our common shares, on a one-for-one basis, in equal installments on each of the first three anniversaries of the grant date. The applicable award agreement also provides that the units shall vest immediately upon the death or disability of the director and upon the occurrence of a change in control of the Company, as defined in the agreement.

All of our directors are reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of the Board of Directors and its committees.

Fiscal 2014

In March 2013, our Board of Directors approved a revised compensation program for non-employee directors. In doing so, the Board reviewed the recommendations of the Compensation Committee, along with a review by our outside compensation consultant of non-employee director compensation among peer group companies. In reviewing total compensation for our non-employee directors, our consultant evaluated the cash compensation programs and long-term equity incentive programs for non-employee directors of comparable companies. As was the case previously, all directors other than Mr. Ray and Ms. Baekgaard participate in our non-employee director compensation program.

Under the revised cash compensation program, we will pay each of our non-employee directors a cash retainer of $55,000 annually, and will eliminate all meeting fees for both Board and committee meetings. We will pay the chairperson of our Board of Directors an additional $30,000 retainer, and the lead director an additional retainer of $10,000. In addition, we will pay the following annual retainers for committee service:


Audit Committee Chair	$	15,000
Audit Committee Members	$	10,000
Compensation Committee Chair	$	10,000
Compensation Committee Members	$	7,000
Nominating and Corporate Governance Committee Chair	$	8,750
Nominating and Corporate Governance Committee Members	$	6,000

We will also pay each of our non-employee directors an annual equity grant with a value of $85,000. On March 7, 2013, our Compensation Committee approved the grant of 3,597 restricted stock units to each of our non-employee directors, with a grant date of March 29, 2013. These restricted stock units vest and settle in our common shares, on a one-for-one basis, on the first anniversary of the grant date. The applicable award agreement also provides that the units shall vest immediately upon the death or disability of the director and upon the occurrence of a change in control of the Company, as defined in the agreement.

All of our directors will continue to be reimbursed for reasonable travel and other expenses incurred in connection with attending meetings of the Board of Directors and its committees.

Generally, the Board reviews director compensation on a bi-annual basis.

Stock Ownership Guidelines

In March 2013, the Board of Directors adopted stock ownership guidelines which require that all directors hold shares of the Company’s common stock with a value equal to four times the annual director retainer. Directors have until March 2018 to comply with these guidelines and new directors will have a compliance period of five years from the date of their election to become compliant.

Indemnification of Directors and Officers

Our second amended and restated articles of incorporation provide for indemnification, to the fullest extent permitted by the Indiana Business Corporation Law, as amended (the “IBCL”), of our directors and officers against liability and reasonable expenses that may be incurred by them in connection with proceedings to which the directors or officers are made a party by reason of their relationship to the Company. Our second amended and restated articles of incorporation and amended and restated bylaws also provide for indemnification of our directors and officers where they have acted in good faith and in a manner they reasonably believed to be in, or not opposed to, our best interests, and in the case of criminal proceedings, they had reasonable cause to believe the action was lawful or they had no reasonable cause to believe the action was unlawful. We have obtained insurance that insures our directors and officers against specified losses.

In addition, we have entered into separate indemnification agreements with our directors and executive officers. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. These indemnification agreements may require us to indemnify our directors and executive officers for related expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement that were actually and reasonably incurred or suffered by a director or executive officer in an action or proceeding arising out of his or her service as one of our directors or executive officers.

Board Leadership Structure

Our Board of Directors believes that one of its most important functions is to protect shareholders’ interests through independent oversight of management, including the Chief Executive Officer; however, the Board of Directors does not believe that effective management oversight necessarily mandates a particular management

structure, such as a separation of the role and identities of the Chairman of the Board of Directors and Chief Executive Officer. The Board considers it important to retain flexibility to exercise its judgment as to the most appropriate management structure for us, based on the particular circumstances facing us from time to time. Currently, the positions of Chairman of the Board of Directors and Chief Executive Officer are held by separate persons because the Board of Directors has determined that this structure aids in the oversight of management and is in the best interests of the Company and its shareholders at this point in time.

In addition, the independent directors have appointed John E. Kyees, Chairman of the Company’s Audit Committee, to serve as Lead Independent Director. The Lead Independent Director, among other things, chairs executive sessions of the independent directors, serves as a spokesperson for the independent directors and serves as a liaison between the Company’s other independent directors and the Company’s management, auditors and counsel between Board meetings. The Board believes this structure allows all of the independent directors to participate in the full range of the Board’s responsibilities with respect to its oversight of the Company’s management. The Board of Directors has determined that this leadership structure is appropriate given the size and complexity of the Company, the number of directors overseeing the Company and the Board of Directors’ oversight responsibilities. Further, the Board of Directors believes that these responsibilities appropriately and effectively complement our Chairman of the Board and Chief Executive Officer structure.

Communications with Directors

Shareholders may communicate with our directors by transmitting correspondence to our investor relations desk via the internet at http://investors.verabradley.com/contactBoard.cfm or to our Secretary at:

Secretary and General Counsel

c/o Vera Bradley, Inc.

5620 Industrial Road

Fort Wayne, Indiana 46825

The Secretary will, as appropriate, forward communications to the Board of Directors or to any individual director, directors, or committee to whom the communication is directed.

Code of Ethics

We have adopted a code of ethics, our Conflict of Interest and Business Ethics Policy, applicable to all directors, officers, employees, representatives, agents, and consultants of the Company. In addition to being subject to the Conflict of Interest and Business Ethics Policy, our Chief Executive Officer, Chief Financial Officer, Treasurer, and Corporate Controller are also subject to our Code of Ethics for Senior Financial Officers. Both our Conflict of Interest and Business Ethics Policy and our Code of Ethics for Senior Financial Officers are available on our website, www.verabradley.com, under “Investor Relations, Corporate Governance.” Any amendment to, or waiver from, a provision of our Conflict of Interest and Business Ethics Policy or Code of Ethics for Senior Financial Officers that applies to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions and that relates to any element of the Policy or the Code enumerated in paragraph (b) of Item 406 of Regulation S-K shall be disclosed by posting such information on our website.

Corporate Governance Guidelines

We have adopted Corporate Governance Guidelines, applicable to the Board of Directors. Our Corporate Governance Guidelines are available on our website, www.verabradley.com, under “Investor Relations, Corporate Governance.”

Risk Oversight

In its governance role, and particularly in exercising its duty of care and diligence, the Board of Directors is responsible for ensuring that appropriate risk management policies and procedures are in place to protect the

Company’s assets and business. While the Board of Directors has the ultimate oversight responsibility for the risk management process, it has delegated to the Audit Committee the initial responsibility of overseeing the Company’s risk assessment and risk management. In fulfilling its delegated responsibility, the Audit Committee has directed management to ensure that an approach to risk management is implemented as part of the day-to-day operations of the Company, and to design internal control systems with a view to identifying and managing material risks.

On a periodic basis (not less than quarterly), the Audit Committee reviews and discusses with our management, the Company’s significant financial risk exposure and the steps that management has taken to monitor, control and report such risks. In addition, the Audit Committee regularly evaluates the Company’s policies, procedures and practices with respect to enterprise risk assessment and risk management, including discussions with management about material risk exposures and the steps being taken to monitor, control and report such risks. The Audit Committee reports its activities to the full Board of Directors on a regular basis (not less than annually) and in that regard makes such recommendations to the Board of Directors with respect to risk assessment and management as it may deem necessary and appropriate.

Audit Committee Report

Management is responsible for the preparation, presentation and integrity of Vera Bradley’s consolidated financial statements and the Company’s internal control over financial reporting. The independent registered public accounting firm of PricewaterhouseCoopers, LLP, or PwC, was responsible in fiscal 2013 for performing an integrated audit of the Company’s consolidated financial statements and the effectiveness of the Company’s controls over financial reporting. The Audit Committee’s responsibility is to monitor and oversee these processes. The Audit Committee is also responsible for selecting and evaluating the independence of the Company’s independent registered public accounting firm and for pre-approving the services rendered by that firm.

In this context, the Audit Committee reports as follows:

The Audit Committee has reviewed and discussed with management Vera Bradley’s audited consolidated financial statements for the fiscal year ended February 2, 2013;

The Audit Committee has discussed with representatives of PwC the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T;

The Audit Committee has received and reviewed the written disclosures and the letter from PwC required by applicable requirements of the Public Company Accounting Oversight Board regarding PwC’s communications with the Audit Committee concerning independence, and has discussed with PwC its independence; and

The Audit Committee has considered whether the provision by PwC of non-audit services to Vera Bradley is compatible with maintaining PwC’s independence.

Based on these procedures and discussions, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements referred to above be included in Vera Bradley’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013, for filing with the Securities and Exchange Commission.

Audit Committee

John E. Kyees, Chairman

Richard Baum

Matthew McEvoy

PROPOSAL NO. 2

RATIFICATION OF INDEPENDENT AUDITORS

Proposal

The Audit Committee has selected Ernst & Young LLP, or E&Y, as our independent registered public accounting firm to audit the consolidated financial statements of Vera Bradley for the fiscal year ending February 1, 2014. The Audit Committee and the Board of Directors seek to have the shareholders ratify the Audit Committee’s appointment of E&Y. Representatives of E&Y will be present at the Annual Meeting and will have the opportunity to make a statement, if they desire to do so, and to respond to appropriate questions. E&Y was appointed to serve as our independent registered public accounting firm for the fiscal year ending February 1, 2014 on January 29, 2013. PricewaterhouseCoopers LLP, or PwC, served as our independent registered public accounting firm for fiscal 2013. See “— Changes in Independent Registered Public Accounting Firm” below. The Company does not expect that a representative from PwC will be present at the Annual Meeting.

Principal Accounting Fees and Services

The following table sets forth the aggregate fees billed to Vera Bradley for the fiscal years ended February 2, 2013 and January 28, 2012 by PwC:


	Fiscal 2013		Fiscal 2012
Audit Fees⁽¹⁾	$	607,500	$	614,000
Audit-Related Fees⁽²⁾		17,240		14,500
Tax Fees		—		—
All Other Fees⁽³⁾		4,200		5,550

Total	$	628,940	$	634,050

(1)

Audit Fees for fiscal 2013 and fiscal 2012 consist of fees for professional services rendered by PwC in connection with the integrated audit of the consolidated financial statements and the effectiveness of the Company’s controls over financial reporting and reviews of our interim consolidated financial statements.

(2)	Audit-Related Fees consist of fees related to employee benefit plan audits.

(3)	All Other Fees consist of fees for products and services other than the above-described services. In both years, these fees related primarily to subscriptions to online research databases.

The Audit Committee has adopted a policy that requires the Audit Committee to pre-approve, prior to engagement, all audit and permissible non-audit services provided by the independent registered public accounting firm on an individual basis. All of the services described in the table above were pre-approved by the Audit Committee. The Audit Committee considered the services listed above to be compatible with maintaining PwC’s independence.

Change in Independent Registered Public Accounting Firm

The Audit Committee completed a competitive process to review the appointment of the Company’s independent registered public accounting firm for the year ending February 1, 2014.

As a result of this process, on January 29, 2013, the Audit Committee appointed E&Y as the Company’s independent registered public accounting firm for the fiscal year ending February 1, 2014, and dismissed PwC from that role, effective as of the date of PwC’s completion of the audit services for the fiscal year ended February 2, 2013 and the filing of the Company’s 2013 Annual Report on Securities and Exchange Commission Form 10-K.

PwC’s reports on the Company’s consolidated financial statements as of and for the fiscal years ended February 2, 2013 and January 28, 2012 did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. The audit reports of PwC on the

effectiveness of internal control over financial reporting as of February 2, 2013 and January 28, 2012 did not contain any adverse opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. During the fiscal years February 2, 2013 and January 28, 2012, and the subsequent interim period through April 2, 2013, there were (i) no “disagreements” as that term is defined in Item 304(a)(1)(iv) of Regulation S-K, between the Company and PwC on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of PwC, would have caused PwC to make reference to the subject matter of the disagreement in their reports on the financial statements for such years, and (ii) no “reportable events” as that term is defined in Item 304(a)(1)(v) of Regulation S-K.

During the fiscal years ended February 2, 2013 and January 28, 2012, and the subsequent interim period through April 2, 2013, neither the Company nor anyone acting on its behalf has consulted with E&Y with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report nor oral advice was provided to the Company that E&Y concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue or (ii) any matter that was either the subject of a “disagreement” (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions) or “reportable event” (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

Vote Required and Board Recommendation

This proposal will be approved if a quorum is present, in person or by proxy, at the Annual Meeting and the votes properly cast favoring the proposal exceed the votes properly cast opposing the proposal. Abstentions and broker non-votes will each be counted as present for purposes of determining the presence of a quorum but will not have any effect on the outcome of the proposal.

VERA BRADLEY’S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF E&Y AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL 2014.

EXECUTIVE COMPENSATION DISCUSSION AND ANALYSIS

Compensation Committee Report

The Compensation Committee of the Board of Directors has reviewed and discussed the following Compensation Discussion and Analysis with management and, based on such review and discussion, has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and in the Company’s annual report on Form 10-K for the fiscal year ended February 2, 2013.

SUBMITTED BY THE COMPENSATION COMMITTEE

Edward M. Schmults, Chair

Karen Kaplan

Frances P. Philip

Compensation Discussion and Analysis

This is a presentation of the material elements of our compensation practices for our named executive officers. The following executives are our “named executive officers” for fiscal 2013, as that term is defined by the Securities and Exchange Commission:

•

Michael C. Ray, Chief Executive Officer

•

Kevin J. Sierks, Vice President — Corporate Controller, Interim Chief Financial Officer*

•

Barbara Bradley Baekgaard, Chief Creative Officer

•

Kimberly F. Colby, Executive Vice President — Design

•

Matthew C. Wojewuczki, Executive Vice President — Global Operations

•

Jeffrey A. Blade, former Executive Vice President — Chief Financial and Administrative Officer*

Effective January 11, 2013, Mr. Blade resigned as Chief Financial and Administrative Officer. On the same date, Mr. Sierks was appointed Interim Chief Financial Officer. Mr. Blade is disclosed herein because he is a “named executive officer” of the Company for fiscal 2013, as determined pursuant to Regulation S-K Item 402(a)(3)(iv), despite the fact that he is currently not employed by the Company.

To assist in understanding our named executive officer compensation program, we have included a discussion of our compensation policies and decisions for periods before and after fiscal 2013 where relevant. Our compensation program is designed to provide some common standards throughout the Company. Therefore, much of what is disclosed below applies to executives in general and is not limited to our named executive officers.

The information provided in this section should be read together with the tables and narratives that accompany the information presented.

Executive Summary

Business Highlights

Financial Performance. Fiscal 2013 represented another outstanding year for our Company, as reflected in our full-year results. We feel that the strength and appeal of our brand and our product portfolio, our significant multi-channel distribution capabilities, and the ongoing loyalty of our customers, resulted in solid growth in all of our distribution channels during the year.

•

For the fiscal year ended February 2, 2013, net revenues increased 17% from the prior fiscal year to $541.1 million.

•

Revenues in our Direct segment increased 30% from the prior fiscal year to $292.6 million, with comparable-store sales increasing 3.4% compared to fiscal 2012.

•

Revenues in our Indirect segment increased 6% from the prior fiscal year to $248.6 million.

•

Gross profit for fiscal 2013 increased 20% to $308.3 million resulting in a gross profit margin of 57.0% versus 55.9% in the prior fiscal year. The gross profit margin increase during fiscal 2013 was primarily due to operational efficiencies, lower freight expense, positive channel mix and lower input costs.

•

Operating income for fiscal 2013 increased to $110.1 million, or 20.4% of net revenues, compared to $96.2 million in the prior fiscal year.

•

Net income for fiscal 2013 was $68.9 million, or $1.70 per diluted share, compared to $57.9 million, or $1.43 per diluted share, in fiscal 2012.

•

Cash flow from operations for fiscal 2013 of $51.5 million enabled us to reduce long-term debt by $10.0 million to $15.0 million and fund the completion of the $22 million distribution center expansion, and end the year with cash and cash equivalents of $9.6 million.

Operational Achievements. In fiscal 2013, we remained focused on executing our growth strategies, which include growing in underpenetrated markets and expanding our store base and product offering. To that end, in fiscal 2013 we:

•

Opened 17 full-price stores and three outlet stores.

•

Continued to build our partnership with Dillard’s, with Vera Bradley product being sold in all 284 Dillard’s locations.

•

Completed an approximately 200,000 square-foot expansion of our distribution facility in Roanoke, Indiana.

We believe the combination of our expanding product offerings and continued growth in underpenetrated markets will lead to meaningful growth opportunities in the coming years.

How We Make Executive Compensation Decisions

Role of the Compensation Committee

The Compensation Committee is responsible to the Board for overseeing the development and administration of our compensation programs. The Compensation Committee is composed of three independent directors and is responsible for the review and approval of all aspects of executive compensation. The Committee is supported in its work by the head of the Human Resources Department, her staff, and an independent executive compensation consultant, as described below.

Role of Management

Our Compensation Committee generally seeks input from Mr. Ray when discussing the performance and compensation levels of the other named executive officers. The Compensation Committee also works with Mr. Ray, the chief financial officer, and the head of our human resources department in evaluating the financial, accounting, tax, and retention implications of our various compensation programs. Neither Mr. Ray nor any of our other executives, participates in deliberations relating to his or her own compensation.

Role of the Compensation Consultant

The Compensation Committee has retained Meridian Compensation Partners, LLC as its executive compensation consultant. Meridian is retained by and reports directly to the Compensation Committee and the Committee may replace the consultant or hire additional consultants at any time. A Meridian representative attends Compensation Committee meetings, as requested, and communicates with the chair of the Compensation Committee between meetings. Our Compensation Committee, however, makes all decisions regarding the compensation of our named executive officers.

Meridian was not given a narrow list of instructions, but rather was engaged to provide the Committee with information and advice that might assist the Committee in performing its duties. During fiscal 2013, Meridian services included the following:

•

updated the Committee on regulatory changes impacting compensation plans;

•

provided information on market trends, practices, and other data;

•

reviewed the Company’s compensation peer group and conducted a competitive analysis of compensation for executives and outside directors;

•

assisted in reviewing and designing various compensation program elements; and

•

updated provided guidance and advice related to the overall executive compensation structure.

Philosophy and Objectives of Our Executive Compensation Program

Our executive compensation program is designed to encourage our named executive officers to focus on building shareholder value, maximizing growth and profitability, and continuing to maintain our unique culture and build our strong brand. We strive to provide our named executive officers with a compensation package that is competitive within our industry. We also view compensation practices as a means for communicating our goals and for motivating and rewarding employees in relation to their achievements.

Our objective is to provide a competitive total rewards compensation package to attract and retain key personnel and drive effective results. Our executive compensation program provides for the following main elements:

•

base salaries, which are designed to allow us to attract and retain qualified candidates in a highly competitive market;

•

annual incentive compensation, which provides additional cash compensation and is designed to support our pay-for-performance philosophy;

•

equity compensation, in order to compete for executive talent and align the interests of our employees, including our named executive officers, with those of the Company’s shareholders; and

•

a comprehensive benefits package that is available to all of our employees.

A detailed description of these components is provided below.

Elements of Our Executive Compensation Program

Peer Group and Benchmarking. At least annually, the Compensation Committee, with the assistance of Meridian, conducts a review of a peer group used for executive compensation comparisons to ensure all peer companies remain an appropriate basis for comparison. In selecting peer companies, the Compensation Committee aims to identify companies with similar characteristics as us: are in the retail industry or another related industry, have a strong consumer brand, are highly profitable and fast growing, and are of a comparable size (based on revenue, operating income and market capitalization). Based on these criteria, the Compensation Committee utilized data from the following 19 peer companies when making fiscal 2013 pay decisions:


bebe stores, inc.	Body Central Corp.	The Buckle, Inc.
Cache, Inc.	Kenneth Cole Productions, Inc.	Crocs, Inc.
Destination Maternity Corporation	The Finish Line, Inc.	G-III Apparel Group, Ltd.
K-Swiss Inc.	lululemon athletica inc.	Steven Madden, Ltd
Maidenform Brands, Inc.	Movado Group, Inc.	Oxford Industries, Inc.
rue21, inc.	Under Armour, Inc.	The Wet Seal, Inc.
Zumiez Inc.

Base Salary. We utilize base salary as the primary means of providing compensation for performing the essential elements of an executive’s job. Base salaries are intended to provide a certain level of fixed compensation commensurate with an executive’s position, responsibilities and contributions to the Company. We believe our base salaries are set at levels that allow us to attract and retain executives in competitive markets. With these principles in mind, base salaries are reviewed at least annually by our Compensation Committee, and may be adjusted from time to time based on the results of this review. Meridian prepares a report for the Compensation Committee annually that contains an assessment of the executive officers’ compensation, including base salary, annual cash incentives, and equity-based incentives, relative to comparable positions at the peer group companies.

Annual Incentive Compensation. Our annual incentive compensation, in the form of an annual cash bonus, is intended to compensate our named executive officers for meeting our short-term corporate objectives and to incentivize our named executive officers to meet these objectives by tying the entire cash incentive to financial goals. In fiscal 2013, these financial objectives were weighted equally between net revenue and net income. The Compensation Committee selected net revenue because, we believe as a company still in the early stages of growth, top line growth is important to our shareholders and to the ultimate performance of the Company. Top line growth, however, must be accompanied by improvement to the bottom line; so the Compensation Committee selected net income as a second performance metric. In the future, as the Company grows and circumstances change, the Compensation Committee will review the application of other performance measures. The Compensation Committee typically sets a target level of performance at which the full target bonus can be earned. The Compensation Committee also sets a threshold level of performance below which no bonus is earned and a maximum level of performance that results in a maximum bonus.

Long-Term Incentive Compensation. We also grant long-term equity awards under our executive compensation program in order to compete for executive talent and align the interests of our employees, including our named executive officers, with those of the Company’s shareholders. These awards are intended to motivate executives by tying a portion of their incentive compensation to the performance of our common stock over the long-term. We believe these awards also serve as motivation to executives to continue to improve the long-term performance of the Company. In fiscal 2013, the Compensation Committee granted time-based and performance-based restricted stock units to align our executive’s interests with those of our shareholders, to serve as a long-term retention tool and to provide an immediate ownership stake in the newly public company. Please see “Executive Summary — Response to Advisory Vote on Executive Compensation” for a discussion of changes made to fiscal 2013 long-term incentive compensation.

Benefits. The named executive officers are eligible for the same level and offering of benefits available to other employees. Our benefits, such as our basic health benefits, 401(k) plan, life insurance, paid time off, matching charitable gifts program, tuition reimbursement and discounts on certain company products, are intended to provide a stable array of support to our employees and their families throughout various stages of their careers, and these core benefits are provided to all employees. The 401(k) plan allows participants to defer amounts of their annual compensation before taxes, up to the cap set by the Internal Revenue Code, which was $17,000 per person for calendar year 2012. Employees’ elective deferrals are immediately vested and non-forfeitable upon contribution to the 401(k) plan. We currently provide matching contributions equal to 50% of an employee’s individual contribution, up to a maximum of 10% of the participant’s annual salary and subject to certain other limits, including vesting requirements.

Response to Advisory Vote on Executive Compensation. At the 2011 Annual Meeting of Shareholders, we were pleased that approximately 80% of the votes cast on the advisory vote on our executive compensation program voted in support of the compensation paid to the named executive officers. In addition, shareholders also voted to approve a future advisory vote on compensation at the 2014 Annual Meeting. Following the 2011 meeting, we continued to have ongoing discussions with our shareholders on this topic. In setting fiscal 2013 executive compensation, the Compensation Committee reviewed the results of the shareholder vote and, based on the significant support we received, determined that the results of the vote did not call for any major changes to the executive compensation plans.

The Committee did revise executive compensation programs in fiscal 2013 and retained many of those changes in setting fiscal 2014 compensation. Specifically, to more closely reflect competitive and market practices and to better link compensation to long-term performance, changes to compensation included the following:

Long-term incentive:

•

In fiscal 2012, each named executive officer received a grant of time-based restricted stock units which provides for vesting in three equal annual installments on the first, second and third anniversaries of the grant date.

•

In fiscal 2013 (the period covered by this CD&A), the Compensation Committee approved a long-term incentive grant to each named executive officer which was made up of 60% performance-based restricted stock units and 40% time-based restricted stock units. The performance-based restricted stock units provide for vesting at the end of a three-year performance period, and the number of units actually earned will depend on our net income performance over that performance period, with threshold and maximum performance levels set at 90% and 110%, respectively, of target performance. The time-based restricted stock units provide for vesting in three equal annual installments on the first, second and third anniversaries of the grant date. We believe that moving from time-based equity compensation to a mix of time-based and performance-based equity compensation will serve to better align management and shareholder interests, as well as achieve a better balance between fixed and variable elements of compensation.

•

For fiscal 2014, the Compensation Committee again adopted a long-term incentive grant to each named executive officer which was made up of 60% performance-based restricted stock units and 40% time-based restricted stock units, with terms that are substantially similar to those of the fiscal 2013 grant. Threshold and maximum performance levels were set at 93% and 107%, respectively, of target performance. Before making the decision to narrow the range of threshold and maximum performance, the Compensation Committee and management engaged in a rigorous goal setting process that resulted in setting maximum performance levels that they believe will require exceptional effort and performance by the management team.

Annual Incentive:

•

In fiscal 2012, bonus payouts were determined based 50% on net revenue and 50% on net income performance. Threshold performance for both net revenue and net income, below which no payout would be earned, was set at 85% of the target performance and would result in the named executive officer earning a payout of 50% of his or her target bonus. Maximum performance for both net revenue and net income was set at 115% of the target performance and would result in the named executive officer earning a payout of up to 150% of his or her target bonus.

•

For fiscal 2013 (the period covered by this CD&A), the Compensation Committee again decided to base potential bonus payouts 50% on net revenue and 50% on net income performance. However, both threshold and maximum performance measures were adjusted. Threshold and maximum performance levels were set at 90% and 110%, respectively, of target performance. Before making the decision to narrow the range of threshold and maximum performance, the Compensation Committee and management engaged in a rigorous goal setting process that resulted in setting maximum performance levels that they believe will require exceptional effort and performance by the management team. In addition, to be more in line with competitive market practice and to reward executives for performance, the Compensation Committee adjusted the payout maximum from 150% to 200%. We believe that narrowing the range of threshold performance better ensures that the annual incentive plan pays only for performance that is in line with expectations.

•

For fiscal 2014, the Compensation Committee adopted an annual bonus structure that is substantially similar to that of 2013. Both threshold and maximum performance measures were adjusted. Threshold

and maximum performance levels were set at 93% and 107%, respectively, of target performance. Before making the decision to narrow the range of threshold and maximum performance, the Compensation Committee and management engaged in a rigorous goal setting process that resulted in setting maximum performance levels that they believe will require exceptional effort and performance by the management team.

In addition, we believe that appropriate corporate governance of our executive compensation program is enhanced by a number of practices, including: engagement by the Compensation Committee of its own independent consultant; the absences of tax gross-ups contained in any of our compensation programs (including no excise tax gross-ups); and the absence of employment agreements providing for substantial severance payments.

Determining the Amount of Each Element of Compensation

Overview. The amount of each element of our compensation program is determined by our Compensation Committee on an annual basis taking into consideration our results of operations, long-term and short-term goals, the competitive market for our named executive officers, individual performance and general economic factors. Our approach has been to provide executives with a base salary, annual bonus opportunity and long-term incentive opportunity that generally are competitive with the level of those elements paid for comparable positions at comparable companies. Once the level of compensation is set for the year, the Compensation Committee may revisit its decisions if there are material developments during the year, such as promotions, changes in responsibilities, or other factors, that may warrant a change in compensation. After the year is over, the Compensation Committee reviews our financial performance to determine the achievement of annual incentive compensation targets and to assess the overall functioning of our compensation plans against our goals. The Compensation Committee believes that the overall design of the Company’s compensation program and the amounts paid to the named executives are appropriate and are in keeping with the compensation philosophy and objectives of the compensation program.

Interim Chief Financial Officer. In setting executive officer compensation, the Compensation Committee reviews the compensation of those officers of the Company who report directly to Mr. Ray. As of March 2012, when fiscal 2013 compensation was set, Mr. Sierks was serving as Vice President — Corporate Controller and reported directly to Mr. Blade, who was then serving as Executive Vice President — Chief Financial and Administrative Officer. As such, the Compensation Committee did not review Mr. Sierks fiscal 2013 compensation. Upon Mr. Sierks’ appointment as Interim Chief Financial Officer, the Compensation Committee did not review Mr. Sierks’ compensation due to the interim nature of the appointment and the fact that there was no change to Mr. Sierks’ compensation as a result of this appointment. Mr. Sierks is included in the compensation tables that follow, but the analysis with respect to the Compensation Committee’s actions in setting fiscal 2013 compensation does not include Mr. Sierks for the foregoing reasons.

Base Pay. In its March 2012 review of base salaries for fiscal 2013, our Compensation Committee considered the Company’s overall approach to merit increases, which was based upon a target level of a 4% merit increase which was then adjusted up or down based upon an employee’s performance; any changes in his or her role or responsibility; and the information provided by the compensation consultant, Meridian Compensation Partners, LLC, regarding base salaries for executives within the peer group companies. Our objective is generally to be within the competitive range of the peer group median, on average, for base salaries of our executive officers, including our named executive officers. We consider a range of +/-15% around the market median (50^th percentile) to be competitive but still capable of recognizing differences among executives.

After consideration of this information, the Compensation Committee decided to adjust Mr. Ray’s base salary by 4% for fiscal 2013, which is approximately 20% lower than the 50^th percentile of comparable CEOs. Mr. Blade’s fiscal 2013 base salary was raised by 4.0%, and. Ms. Colby received a 3.5% base salary increase for fiscal 2013, keeping each in line with their individual performance and the budgeted merit increase, as well

as within the competitive range of the peer group median. Mr. Wojewuczki’s fiscal 2013 base salary was increased by 4%, which is slightly over the competitive range of the peer group median, but reflects his personal performance and significant level of responsibility within the Company. As a founder of the Company, Ms. Baekgaard was not considered for an increase to her base salary for fiscal 2013.

The following table shows base salary rate increases for each of our named executive officers for fiscal 2013:


Name and Principal Position	Fiscal 2012 Base Salary Rate⁽¹⁾		Fiscal 2013 Base Salary Rate⁽²⁾		Fiscal 2013 Percentage Increase
Michael C. Ray Chief Executive Officer	$	576,446	$	599,504		4.0	%

Kevin Sierks Vice President — Corporate Controller, and Interim Chief Financial Officer		235,014		236,964		0.8	%⁽³⁾

Barbara Bradley Baekgaard Chief Creative Officer		465,764		465,764		0.0	%

Kimberly F. Colby Executive Vice President — Design		393,562		407,337		3.5	%

Matthew C. Wojewuczki Executive Vice President — Global Operations		367,692		382,400		4.0	%

Jeffrey A. Blade former Executive Vice President — Chief Financial and Administrative Officer		361,634		376,099		4.0	%

(1)	Effective March 13, 2011. This amount represents a base rate of pay; actual earnings during a fiscal year may vary based upon a variety of factors, including the number of weeks in the fiscal year.

(2)	Effective February 26, 2012. This amount represents a base rate of pay; actual earnings during a fiscal year may vary based upon a variety of factors, including the number of weeks in the fiscal year.

(3)	Mr. Sierks was hired effective December 12, 2011.

Annual Incentive Compensation. Annual incentive compensation opportunities are provided under the 2010 Equity and Incentive Plan (the “2010 Plan”), described further in “— 2010 Equity and Incentive Plan” below. Our Compensation Committee establishes the goals for our Annual Incentive Bonus Program on an annual basis, and the payouts, if any, are typically made after the end of each fiscal year following the Compensation Committee’s determination of the extent to which the goals have been achieved. The Compensation Committee, however, has the authority to modify or adjust awards upon the occurrence of certain unusual or nonrecurring events. The Compensation Committee did not modify or adjust awards made for fiscal 2013.

Bonus payouts for fiscal 2013 were determined based 50% on net revenue and 50% on net income performance. The following table sets forth the goals for net revenue and net income, as well as actual performance for fiscal 2013 and the bonus opportunity associated with each:


*($ in millions)*	Net Revenue	Net Income	Bonus Opportunity
Threshold	$510.9	$67.3	50%
Target	$567.7	$74.8	100%
Maximum	$624.5	$82.3	200%
Fiscal 2013 Actual Results	$541.1	$68.9	68.5%

The following table sets forth each named executive officer’s threshold, target, and maximum annual bonus opportunity as a percentage of eligible earnings for fiscal 2013:


Name	Fiscal 2013 Threshold/Target/Maximum Bonus as a Percentage of Eligible Earnings⁽¹⁾
Michael C. Ray		37.5% /75% /150%
Kevin J. Sierks		22.5% /45% /84.4%
Barbara Bradley Baekgaard		25% /50% /100%
Kimberly F. Colby		25% /50% /100%
Matthew C. Wojewuczki		25% /50% /100%
Jeffrey A. Blade		25% /50% /100%

(1)	Eligible earnings are defined as gross wages earned under regular employment status during the fiscal year, excluding any incentive payments and taxable fringe benefits.

The Compensation Committee selected net revenue as a performance measure for the Annual Incentive Plan because, we believe as a company still in the early stages following a public offering, top line growth is important to our shareholders and to the ultimate performance of the Company. Top line growth, however, must be accompanied by improvement to the bottom line, so the Compensation Committee selected net income as a second performance metric.

The Compensation Committee strove to set the annual target bonus opportunity in fiscal 2013 for our named executive officers generally to approach the 60^th percentile of comparable positions at comparable companies within the peer group, consistent with our company-wide approach of targeting annual incentive opportunities near the peer group 60^th percentile for all employees. Messrs. Blade and Wojewuczki, and Ms. Colby all had a fiscal 2013 target bonus opportunity of 50% of their fiscal 2013 base salary, which corresponded in each case with our company-wide approach of aligning target bonuses with the peer group 60^th percentile. There is no peer group data for Ms. Baekgaard’s role within the Company. Her target bonus was set at 50% of her fiscal 2013 base salary, in alignment with the other named executive officers.

Mr. Ray’s target bonus opportunity for fiscal 2013 was set at 75% of his fiscal 2013 base salary, which is below the 60^th percentile of comparable positions within the peer group.

Long-Term Incentive Compensation. In fiscal 2013, the Compensation Committee granted time-based and performance-based restricted stock units, to align our executive’s interests with those of our shareholders, to serve as a long-term retention tool and to provide an ownership stake in the Company. These grants were made pursuant to the 2010 Plan. The time-based restricted stock units vest and settle in our common shares, on a one-for-one basis in three equal annual installments on the first, second and third anniversaries of the date of grant. The performance-based restricted stock units provide for vesting at the end of a three-year performance period, and the number of units earned will depend on our net income performance over that performance period. The applicable award agreement also provides that the units shall vest immediately upon the named executive officer’s disability (as defined in the 2010 Plan) or death and upon the later of (i) the occurrence of a change in control (as defined in the 2010 Plan), and (ii) the termination of the named executive officer’s employment by the Company other than for cause (as defined in the 2010 Plan) during the time period beginning three months prior to the public announcement of a proposed change in control and ending twelve months after a change in control. See “— Potential Payments Upon Termination or Change In Control.”

Mr. Ray was granted 15,158 performance-based restricted stock units and 10,105 time-based restricted stock units, which was equal in value to approximately 125% of his fiscal 2013 base salary. Messrs. Blade and Wojewuczki and Mses. Baekgaard and Colby all received grants which were equal in value to approximately 60% of their fiscal 2012 base salary. This equaled 4,564 performance-based restricted stock units and 3,043 time-based restricted stock units for Mr. Blade; 4,641 performance-based restricted stock units and 3,094 time-based

restricted stock units for Mr. Wojewuczki; 5,661 performance-based restricted stock units and 3,774 time-based restricted stock units for Ms. Baekgaard; and 4,944 performance-based restricted stock units and 3,296 time-based restricted stock units for Ms. Colby. Mr. Sierks received a grant which was equal in value to approximately 50% of his fiscal 2013 base salary, resulting in a grant of 2,400 performance-based restricted stock units and 1,600 time-based restricted stock units.

The size of each individual restricted share grant was based primarily on a combination of internal pay equity considerations and overall dilution of current ownership. We also reviewed, solely as a reference point and not for benchmarking purposes, market data on long-term incentive opportunities within the compensation peer group.

Overall Mix of Compensation. Annually, the Compensation Committee considers the total compensation opportunities for each named executive officer and determines how total potential compensation should be allocated across the different elements of compensation. The Compensation Committee does not follow a definitive policy when determining the mix of and structure for total compensation. Instead, it considers factors such as achievement of corporate and individual goals, level of experience, responsibilities, demonstrated performance, time with the corporation, risk, and retention considerations.

Generally, the Compensation Committee considers market practices as reflected in the peer group data provided by its compensation consultant to obtain a baseline of total potential compensation for each named executive officer. Using this as a starting point, the Compensation Committee engages in discussions with the objective of ensuring that a material portion of each named executive officer’s total compensation is at-risk and dependent on the Company’s financial performance. Care is taken to balance the incentives to drive performance in the short-term versus the long-term. In this way, we encourage named executive officers to vigorously pursue increased performance while discouraging incentives to take excessive risks that may be beneficial in the short term, but harmful in the long run. We believe that this aligns the interests of the named executive officers with those of the shareholders year-over-year, as well as over the long term.

Agreements with Named Executive Officers

Executive Officer Employment Agreements. None of our named executive officers is a party to an employment agreement with the Company.

Executive Severance Policy. Severance arrangements with executives have traditionally been determined on a case-by-case basis. We have a general severance policy for employees that provides for one week of pay for each year of service with us, with a minimum total payment of two weeks of pay, in the event of an involuntary termination of the employee by us.

The Company negotiated an offer letter with Mr. Sierks which provides that, in the event he is terminated by us for any reason other than death, disability or just cause (as defined in his offer letter), he will be entitled to a severance payment equal to nine month’s base salary and a pro-rata bonus for the portion of the year prior to his termination, to the extent that a bonus would be payable for the year based on Company performance.

Former Chief Financial and Administrative Officer. On January 7, 2013, Jeffery A. Blade, at that time the Chief Financial and Administrative Officer of the Company, informed the Company that he intended to resign from his position, effective January 11, 2013. In connection with his resignation, and by mutual agreement, Mr. Blade received the severance benefits set forth in his offer letter with the Company in exchange for a release of any and all claims he may have against the Company, pursuant to a Resignation Agreement. The terms of the Resignation Agreement were consistent with the terms of Mr. Blade’s offer letter, which provided that, in the event Mr. Blade was terminated without just cause (as defined in his offer letter), he would be entitled to a severance payment equal to one year’s base salary and a pro-rata bonus for the portion of the year prior to his termination. In addition, Mr. Blade agreed not to compete with the Company and not to solicit the Company’s customers or employees for a period of 12 months following the date of his resignation and to maintain the confidentiality of certain of the Company’s information in exchange for a payment of $62,200.

Change in Control. The 2010 Plan permits the potential acceleration of outstanding awards in the event of an involuntary termination of employment of an executive in connection with a change in control, as defined in the 2010 Plan, in accordance with the applicable award agreements. See “— Potential Payments on Termination or Change in Control.”

Effect of Accounting and Tax Treatment on Compensation Decisions

In the review and establishment of our compensation programs, we consider, among other factors, the anticipated accounting and tax implications to us and our executives. Section 162(m) of the Internal Revenue Code may impose a limit on the amount of compensation that we may deduct in any one year with respect to our chief executive officer, chief financial officer and each of our next three most highly compensated executive officers, unless specific and detailed criteria are satisfied. Performance-based compensation, as defined in the Internal Revenue Code, is fully deductible if the programs are approved by shareholders and meet other requirements. We will seek to maintain flexibility in compensating our executives in a manner designed to promote our corporate goals, and therefore we have not adopted a policy requiring all compensation to be deductible. Our Compensation Committee will assess the impact of Section 162(m) on our compensation practices and determine what further action, if any, is appropriate. The 2010 Plan allows us to provide compensation that meets the deductibility requirements of Section 162(m). Because of our initial public offering, however, compensation under the 2010 Plan is not subject to Section 162(m) until the earliest to occur of (i) the expiration of the 2010 Plan, (ii) an amendment of the 2010 Plan that results in a material modification of the 2010 Plan, (iii) the issuance of all of our common shares that have been reserved for issuance under the 2010 Plan, or (iv) our 2014 annual meeting of shareholders.

Summary Compensation Table

The table below shows information concerning the annual compensation for services to the Company in all capacities of the Company’s named executive officers during the last three completed fiscal years. Information regarding fiscal 2011 compensation for Ms. Baekgaard and fiscal 2011 and fiscal 2012 compensation for Mr. Sierks is omitted, because these individuals were not named executive officers during the relevant year.


Name and Principal Position	Fiscal Year		Salary		Bonus⁽¹⁾		Stock Awards⁽²⁾		Non-Equity Incentive Plan Compensation⁽³⁾		All Other Compen- sation			Total Compen- sation
Michael C. Ray Chief Executive Officer		2013	$	608,430	$	—	$	748,290	$	312,581	$	*		$	1,669,301
		2012		573,395		—		687,527		356,078		*			1,617,000
		2011		529,080		839,908		2,250,000		465,061		*			4,084,049

Kevin J. Sierks Vice President — Corporate Controller, and Interim Chief Financial Officer		2013		241,371		—		118,480		82,956		*			442,807


Barbara Bradley Baekgaard Chief Creative Officer		2013		474,721		—		279,465		162,592		35,880	⁽⁴⁾		952,658
Barbara Bradley Baekgaard Chief Creative Officer		2012		465,764		—		279,470		241,033		31,854	⁽⁵⁾		1,018,121

Kimberly F. Colby Executive Vice President — Design		2013		413,601		—		244,069		141,658		*			799,328
		2012		391,882		—		227,397		202,799		*			822,078
		2011		376,426		572,665		1,534,600		275,732		*			2,759,423

Matthew C. Wojewuczki Executive Vice President — Global Operations		2013		388,091		—		229,110		132,921		*			750,122
		2012		365,748		—		210,522		189,275		*			765,545
		2011		343,356		572,665		1,533,800		251,508		*			2,701,329

Jeffrey A. Blade former Executive Vice President — Chief Financial and Administrative Officer		2013		360,030		—		225,320		123,310		448,297	⁽⁶⁾		1,156,957
		2012		356,255		—		189,015		184,362		*			729,632
		2011		238,685		572,665		1,533,800		174,837		142,502	⁽⁷⁾		2,662,489

*	Total value less than $10,000.

(1)	Represents cash bonuses paid to reimburse each named executive officer for the required tax withholding obligation upon filing a Section 83(b) election with respect to restricted stock awarded during the fiscal year.

(2)

Represents the aggregate grant date fair value of restricted stock and restricted stock units awarded during the fiscal year computed in accordance with FASB ASC Topic 718. The grant date fair value of each individual award of restricted stock and restricted stock units is set forth in the Fiscal 2013 Grants of Plan-Based Awards table below. Additional information regarding the calculation of these values is included in Notes 2 and 9 to our consolidated financial statements.

(3)	Represents annual incentive compensation paid under the Company’s Annual Incentive Bonus Program.

(4)	Represents 401(k) matching contributions made by the Company of $9,080, lease payment for automobile of $10,651, housing provisions of $14,625, and other taxable fringe benefits with a total value less than $10,000.

(5)	Represents 401(k) matching contributions made by the Company of $11,010, lease payment for automobile of $10,864, and other taxable fringe benefits with a total value less than $10,000.

(6)

Pursuant to Mr. Blade’s offer letter, in the event he was terminated by us without just cause (as defined in his offer letter), he was entitled to a severance payment equal to one year’s base salary. In addition, Mr. Blade received a cash payment of $62,200 in exchange for an agreement not to compete with the Company and not to solicit the Company’s customers or employees for a period of 12 months following the date of his resignation and to maintain the confidentiality of certain of the Company’s information. Remaining amount represents other taxable fringe benefits with a total value less than $10,000.

(7)	Mr. Blade was hired by the Company on April 29, 2010. The amount reported as “All Other Compensation” represents relocation expenses paid to Mr. Blade in connection with his employment with the Company.

Fiscal 2013 Grants of Plan-Based Awards

The following table sets forth information regarding grants of plan-based awards in fiscal 2013. In this table “TRSU” stands for time-based restricted stock unite and “PRSU” stands for performance-based restricted stock unit.


				Estimated Future Payouts Under Non-Equity Incentive Plan Awards⁽¹⁾						All Other Stock Awards⁽²⁾
	Type of Award	Grant Date		Threshold		Target		Maximum		Number of Shares or Units (#)		Grant Date Fair Value of Stock Awards⁽³⁾

Michael C. Ray	Annual Incentive			$	228,161	$	456,323	$	912,645
	TRSUs		March 27, 2012								10,105	$	299,310
	PRSUs		March 27, 2012								15,158		448,980

Kevin J. Sierks	Annual Incentive				54,308		108,617		203,717
	TRSUs		March 27, 2012								1,600		47,392
	PRSUs		March 27, 2012								2,400		71,088

Barbara Bradley Baekgaard	Annual Incentive				118,680		237,361		474,721
	TRSUs		March 27, 2012								3,774		111,786
	PRSUs		March 27, 2012								5,661		167,679

Kimberly F. Colby	Annual Incentive				103,400		206,801		413,601
	TRSUs		March 27, 2012								3,296		97,628
	PRSUs		March 27, 2012								4,944		146,441

Matthew C. Wojewuczki	Annual Incentive				97,023		194,046		388,091
	TRSUs		March 27, 2012								3,094		91,644
	PRSUs		March 27, 2012								4,641		137,466

Jeffrey A. Blade	Annual Incentive				90,008		180,015		360,030
	TRSUs		March 27, 2012								3,043		90,134
	PRSUs		March 27, 2012								4,564		135,186

(1)	Awards available under the Company’s fiscal 2013 Annual Incentive Bonus Program. Amounts shown above are based upon actual fiscal 2013 eligible earnings. Actual amounts earned under the program are disclosed in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table.

(2)

Awards made under the 2010 Plan to certain employees and directors, including our named executive officers. TRSUs vest in three equal annual installments on the first, second and third anniversaries of the grant date. PRSUs have a three-year cliff-vesting schedule based on continued employment and performance. The performance feature is based on net income growth over the three-year performance period. In addition, vesting would be accelerated in the event of death, disability or a termination of employment in connection with a change in control. See “— Potential Payments on Termination or Change in Control.” If the Company were to declare any cash dividend on its common shares, an equivalent amount per RSU would be credited to an account for each holder and paid to the holder in cash (or forfeited) at the time the shares underlying the RSU are delivered to the holder (or forfeited). Amounts in this account would bear interest at the prime rate reported in the Midwest Edition of The Wall Street Journal from the date of deposit until paid to the holder or forfeited in accordance with the 2010 Plan.

(3)	Represents the grant date fair value of each award computed in accordance with FASB Topic 718.

Outstanding Equity Awards at 2013 Fiscal Year-End

The following table sets for the information regarding outstanding equity awards as of February 2, 2013.


	Stock Awards
	Time-based Awards					Performance-based Awards
	Number of Shares or Units that Have Not Vested (#)			Market Value of Shares or Units that Have Not Vested⁽⁵⁾		Number of Shares or Units that Have Not Vested (#)			Market Value of Shares or Units that Have Not Vested⁽⁵⁾
Michael C. Ray		10,105	⁽¹⁾	$	260,709		15,158	⁽²⁾	$	391,076
		11,082	⁽³⁾		285,916		—			—
Kevin J. Sierks		1,600	⁽¹⁾		41,280		2,400	⁽²⁾		61,920
		2,122	⁽⁴⁾		54,748		—			—
Barbara Bradley Baekgaard		3,774	⁽¹⁾		97,369		5,661	⁽²⁾		146,054
		4,505	⁽³⁾		116,229		—			—
Kimberly F. Colby		3,296	⁽¹⁾		85,037		4,944	⁽²⁾		127,555
		3,666	⁽³⁾		94,583		—			—
Matthew C. Wojewuczki		3,094	⁽¹⁾		79,825		4,641	⁽²⁾		119,738
		3,394	⁽³⁾		87,565		—			—
Jeffrey A. Blade		—			—		—			—

(1)

Represents grants of time-based restricted stock units made under the 2010 Plan. These restricted stock units will vest in three equal annual installments on the first, second and third anniversaries of the grant date. In addition, vesting would be accelerated in the event of death, disability, or termination of employment in connection with a change in control. See “— Potential Payments on Termination or Change in Control”.

(2)

Represents grants of performance-based restricted stock units made on March 27, 2012 under the 2010 Plan. These restricted stock units have a three-year cliff-vesting schedule based on continued employment and performance. The performance feature is based on net income growth over the three-year performance period. In addition, vesting would be accelerated in the event of death, disability, or termination of employment in connection with a change in control. See “— Potential Payments on Termination or Change in Control”.

(3)

Represents grants of time-based restricted stock units made on March 29, 2011 under the 2010 Plan. These restricted stock units will vest in three equal annual installments on the first, second and third anniversaries of the grant date. In addition, vesting would be accelerated in the event of death, disability, or termination of employment in connection with a change in control. See “— Potential Payments on Termination or Change in Control”.

(4)

Represents grants of time-based restricted stock units made on December 12, 2011 under the 2010 Plan. These restricted stock units will vest in three equal annual installments on the first, second and third anniversaries of the grant date. In addition, vesting would be accelerated in the event of death, disability, or termination of employment in connection with a change in control. See “— Potential Payments on Termination or Change in Control”.

(5)	Based on the closing price of $25.80 of the Company’s common shares on February 1, 2013 (the last trading day prior to the end of the fiscal year) as reported by The NASDAQ Stock Market.

Fiscal 2013 Option Exercises and Shares Vested

We have no outstanding stock options.

The following table shows the number of restricted stock units which vested for each named executive officer in fiscal 2013:


	Number of Shares or Units Acquired on Vesting (#)		Net Value Realized on Vesting⁽¹⁾
Michael C. Ray		5,641	$	168,096
Kevin J. Sierks		1,060		26,415
Barbara Bradley Baekgaard		2,352		70,084
Kimberly F. Colby		1,932		57,568
Matthew C. Wojewuczki		1,746		52,028
Jeffrey A. Blade		1,573		46,872

(1)	Computed by multiplying the number of shares vested by the Company’s closing stock price the day prior to the scheduled vesting date(s).

Fiscal 2013 Pension Benefits

Aside from our 401(k) plan, we do not maintain any pension plan or arrangement under which our named executive officers are entitled to participate or receive post-retirement benefits.

Fiscal 2013 Nonqualified Deferred Compensation

We do not maintain any nonqualified deferred compensation plan or arrangements under which our named executive officers are entitled to participate.

Potential Payments Upon Termination or Change in Control

Our named executive officers (other than Mr. Sierks) are not specifically entitled to any severance payments upon termination of employment or upon a change in control. Severance arrangements with executives have typically been determined on a case-by-case basis in the past. However, we maintain an informal general severance policy that provides all employees, including our named executive officers, with one week of pay for each year of service with the Company, with a minimum total payment of two weeks’ pay, in the event of an involuntary termination of the employee by the Company. The following table shows the value of severance benefits that would have been payable in a lump sum to each of our named executive officers under this formula, assuming an involuntary termination of employment, other than for good cause, as of February 2, 2013:


Name	Severance
Michael C. Ray	$	161,168
Kevin J. Sierks		177,723
Barbara Bradley Baekgaard		268,710
Kimberly F. Colby		187,752
Matthew C. Wojewuczki		66,087

The foregoing amounts would not be increased or decreased solely by reason of a change in control of the Company.

Under the 2010 Plan, any unvested restricted stock units held by a named executive officer would vest upon the named executive officer’s disability (as defined in the 2010 Plan) or death while employed by the Company and upon the later of (a) the occurrence of a change in control (as defined in the 2010 Plan), and (b) the termination of the named executive officer’s employment by the Company other than for cause (as defined in the 2010 Plan) during the time period beginning three months prior to the public announcement of a proposed change in control and ending twelve months after a change in control. Information regarding the number and dollar value of unvested restricted stock units that would have vested February 2, 2013 for each named executive officer if his or her employment with the Company had been terminated by reason of death, disability or termination of employment by the Company during the period described above prior to or after a change in control of the Company is set forth in the table under “— Outstanding Equity Awards at 2013 Fiscal Year-End”, above.

The 2010 Plan defines a “change in control” to mean the occurrence of any one or more of the following: (a) the acquisition of ownership, directly or indirectly, beneficially or of record, by any Person or group (within the meaning of the Exchange Act and the rules of the Securities and Exchange Commission as in effect on the date of the award), other than (i) Barbara Baekgaard, Patricia Miller, Michael Ray and Kim Colby and their respective heirs and descendants and any trust established for their benefit, (ii) the Company or a corporation owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company, or (iii) any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its affiliates, of securities of the Company representing more than twenty-five percent (25%) of the combined voting power of the Company’s then outstanding securities; (b) the occupation of a majority of the seats (other than vacant seats) on the board of directors by persons who were neither (i) nominated by the board nor (ii) appointed by directors so nominated; or (c) the consummation of (i) an agreement for the sale or disposition of all or substantially all of the Company’s assets, or (ii) a merger, consolidation or reorganization of the Company with or involving any other corporation, other than a merger, consolidation or reorganization that results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least fifty percent (50%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation or reorganization.

The 2010 Plan provides that, in the absence of a definition in an employment agreement, (a) “cause” is defined as (i) theft or embezzlement, or attempted theft or embezzlement, of money or property of the Company or its affiliates, perpetration or attempted perpetration of fraud, or participation in a fraud or attempted fraud, on the Company or its affiliates, or unauthorized appropriation of, or attempt to misappropriate, any tangible or intangible assets or property of the Company or its affiliates; (ii) act or acts of disloyalty, moral turpitude, or material misconduct that is injurious to the interest, property, value, operations, business or reputation of the Company or its affiliates, or conviction of a crime that results in injury to the Company or its affiliates; or (iii) repeated refusal (other than by reason of disability) to carry out reasonable instructions from the named executive officer’s superiors or the Board; in addition, the named executive officer’s employment will be deemed to have terminated for cause if, after the named executive officer’s employment has terminated, facts and circumstances are discovered that would have justified a termination for cause; and (b) “disability” means (i) any permanent physical or mental incapacity or disability rendering the named executive officer unable or unfit to perform effectively the duties and obligations of his or her office, or (ii) any illness, accident, injury, physical or mental incapacity or other disability, which condition is expected to be permanent or long-lasting and has rendered the named executive officer unable or unfit to perform effectively the duties and obligations of his or her office for a period of at least 180 days in any twelve-consecutive month period (in either case, as determined in the good faith judgment of the Committee).

Severance Agreement with Kevin J. Sierks

Payments to Jeffrey A. Blade Upon Resignation

As discussed above, Jeffrey A. Blade resigned as Executive Vice President – Chief Financial and Administrative Officer of the Company effective January 11, 2013. Mr. Blade was not serving as an executive officer of the Company at February 2, 2013. The following chart illustrates the actual payments made to Mr. Blade under his Resignation Agreement:


Name	Lump Sum Cash Payment⁽¹⁾		Bonus⁽²⁾
Jeffrey A. Blade	$	438,299	$	123,310

(1)

(2)

Pursuant to Mr. Blade’s offer letter, in the event he was terminated by us without just cause (as defined in his offer letter), he was entitled to a pro-rata bonus for the portion of the year prior to his termination, to the extent that a bonus would be payable for the year based on company performance.

Compensation and Risk

The Compensation Committee has evaluated the risk profile of our compensation policies and practices and concluded that they do not motivate imprudent risk taking. In our evaluation, we reviewed our employee compensation structures and noted numerous factors and design elements that manage and mitigate risk without diminishing the incentive nature of the compensation, including a unique and strong company culture that attracts passionate and motivated employees who are excited about our products and our brand (as opposed to being motivated by purely financial considerations); a balanced mix between cash and equity and annual and longer-term incentives under our executive compensation program; the large percentage ownership of our shares by senior management, which ensures that their interests are aligned with the long-term interests of the Company and our shareholders; reasonable limits on annual incentive awards (as determined by a review of our current business plan); with respect to annual incentive awards, a balanced mix of performance measures, linear payouts between target levels and maximum payouts capped at 200% of target for fiscal 2013; and subjective considerations (including a review of individual performance) and discretion in compensation decisions, which limit the influence of formulae or objective factors on excessive risk taking.

We also reviewed our compensation programs for certain design features that may have the potential to encourage excessive risk-taking, including over-weighting towards annual incentives, highly leveraged payout curves, unreasonable thresholds, and steep payout cliffs at certain performance levels that may encourage short-term business decisions to meet payout thresholds. We concluded that our compensation programs do not include such elements. In addition, we analyzed our overall enterprise risks and how compensation programs may impact individual behavior in a manner that could exacerbate these enterprise risks. In view of these analyses, we concluded that we have a balanced pay and performance program that does not encourage excessive risk-taking that is reasonably likely to have a material adverse effect on the Company.

2010 Equity and Incentive Plan

In connection with our initial public offering, we approved the Vera Bradley, Inc. 2010 Equity and Incentive Plan (referred to herein as the 2010 Plan). The principal purposes of the 2010 Plan are to optimize the profitability and growth of the Company through short-term and long-term incentives that are consistent with the Company’s objectives and that link participants’ interests to those of the Company’s shareholders; to give participants an incentive for excellence in individual performance; to promote teamwork among participants; and to give the Company a significant advantage in attracting and retaining key employees, directors, and consultants. Our 2010 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance based awards (including performance shares, performance units and annual performance bonus awards), and other stock or cash-based awards. There were 5,527,539 common shares, in the aggregate, available for awards under the 2010 Plan as of March 31, 2013.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

All transactions since the completion of our initial public offering between us and our directors, executive officers, principal shareholders, and their affiliates are approved by our Audit Committee, and are on terms no less favorable to us than those that we could obtain from unaffiliated third parties. Our Audit Committee is responsible for reviewing the fairness of related party transactions in accordance with the rules of The NASDAQ Stock Market. Our Audit Committee operates under a written charter pursuant to which it must approve, prior to consummation, any related-party transaction, which includes any transaction or series of similar transactions in which we are to be a participant, the amount exceeds $120,000, and a “related person” (as defined under SEC rules) has a direct or indirect material interest. Based on its consideration of all relevant facts and circumstances, the Audit Committee decides whether or not to approve the particular transaction and will generally approve only those transactions that are negotiated at arm’s length and have terms and conditions that are reasonable and customary.

Related Party Transactions for Fiscal 2013

Other than the transactions described below, since January 28, 2012, there has not been, and there is not currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeded or will exceed $120,000 and in which any of our directors, executive officers, holders of more than five percent of any class of our voting securities or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. We believe that we have executed all of the transactions set forth below on terms no less favorable to us than we could have obtained from unaffiliated third parties.

Leasing Arrangements

We are party to a triple net lease with Great Dane Realty, LLC (“Great Dane”), a company owned by Barbara Bradley Baekgaard, an officer, director, and greater than ten percent shareholder (the “Great Dane Lease”). The Great Dane Lease is for approximately 39,249 square feet of office and warehouse space in a building located adjacent to our distribution center in Fort Wayne, Indiana. Pursuant to the Great Dane Lease, we are responsible for all repairs, maintenance, alterations and restorations and for maintaining adequate levels of public liability, property damage, windstorm, fire and extended coverage insurance. At Great Dane’s request, we will subordinate the Great Dane lease to any mortgage placed on the leased premises. The Great Dane Lease provides for aggregate payments of $176,620 per year for a three-year term, which ends on November 30, 2013 and includes a right of first refusal and options for us to purchase the property. We are required to construct certain improvements, which are to be paid for by Great Dane, and our base rent will increase in an amount equal to the cost of such improvements amortized over the three-year term of the Great Dane Lease using an assumed interest rate of 5%.

We are also party to a lease extension (the “Lease Extension”) with Milburn, LLC (“Milburn”) extending the term of the triple net lease with Milburn from March 1, 2011 to February 28, 2013. The Milburn Lease is for the lease of our corporate headquarters located at 2208 Production Road, Fort Wayne, Indiana. The Milburn Lease was extended on the same terms and conditions as were in place before the extension. Pursuant to the Milburn Lease, which is subordinate to any mortgages placed on the premises, the Company is responsible for all repairs, maintenance, alterations and restorations and for maintaining adequate levels of fire and extended coverage, liability, and mortgage insurance. Milburn is a leasing company in which Barbara Bradley Baekgaard owns a 50% interest and Patricia R. Miller and P. Michael Miller, each a director and greater than ten percent shareholder of the Company, each owns a 25% interest. The Milburn Lease provides for aggregate payments of $168,000 a year. The Lease Extension ended on February 28, 2013. Since that time we have continued to occupy the building on the basis of a month-to-month tenancy, paying rent of $12,000 per month.

Certain Employees of the Company

Joan Reedy, the sister of Barbara Bradley Baekgaard, is employed by us in a public relations role. As the daughter of our namesake, Vera Bradley, she attends retail events to share our history with our customers. For fiscal 2013, she received compensation of $62,045 for her service as an Indirect sales consultant or ambassador.

Kathleen Ray, the sister-in-law of Michael C. Ray and the niece of Barbara Bradley Baekgaard, is employed by us as an Indirect sales consultant, and previously was engaged by us as an independent sales representative. In fiscal 2013, she received compensation of $131,478 for her service as an Indirect sales consultant.

Bryan Ray, the brother of Michael C. Ray, is employed by us as an SAP System Administrator. In fiscal 2013, he received compensation of $124,940.

Relationship with Ice Miller LLP

Stephen J. Hackman, former director, is also a partner of Ice Miller LLP, a law firm engaged from time to time by the Company to perform legal services. During fiscal 2013, the Company paid $337,959 to Ice Miller LLP for legal services. Of this amount, Mr. Hackman received approximately $4,100. Mr. Hackman resigned from his position as a director, effective October 3, 2012.

Indemnification Agreements and Directors and Officers Liability Insurance

Our second amended and restated articles of incorporation will provide for indemnification, to the fullest extent permitted by the IBCL, of our directors and officers against liability and reasonable expenses that may be incurred by them in connection with proceedings to which the directors or officers are made a party by reason of their relationship to the Company. A general description of these provisions is contained under the heading “Indemnification of Directors and Officers.” In addition, we carry directors’ and officers’ liability insurance to provide our directors and officers with insurance coverage for losses arising from claims based on breaches of duty, negligence, errors and other wrongful acts. The Company has also agreed to indemnify all of its directors against loss or expense arising from such individuals’ service to the Company and its subsidiaries and affiliates and to advance attorneys’ fees and other costs of defense to such individuals in respect of claims that may be eligible for indemnification under certain circumstances.

Vera Bradley Foundation for Breast Cancer

The Company routinely makes charitable contributions of 10% of the net proceeds from the sale of inventory of certain designated patterns to the Vera Bradley Foundation for Breast Cancer (the “Foundation”). The Foundation was founded by the founders of the Company, Barbara Bradley Baekgaard and Patricia R. Miller. Ms. Baekgaard and Ms. Miller are directors and employees of the Company, and also serve on the board of directors of the Foundation. In addition, P. Michael Miller, a director of the Company, serves on the board of directors of the Foundation. In fiscal 2013, the total amount contributed by the Company to the Foundation was approximately $1,000,000.

SHARE OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding ownership of our common shares as of March 31, 2013 for the following individuals:

•

each person known to us to own beneficially more than 5% of our outstanding common shares;

•

each of our executive officers named in the summary compensation table;

•

each of our directors; and

•

all of our executive officers and directors as a group.

Beneficial ownership is determined in accordance with the rules of the SEC. Except as described below, in computing the number of shares beneficially owned by a person and the percentage ownership of that person, common shares subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days of March 31, 2013, are deemed outstanding but are not deemed outstanding for computing the percentage ownership of any other person. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. All of the shares reflected in the table are common shares. Percentage of beneficial ownership is based on 40,602,546 common shares outstanding as of March 31, 2013. Unless otherwise indicated, the address of each beneficial owner listed below is c/o Vera Bradley, Inc., 2208 Production Road, Fort Wayne, Indiana 46808.


Name of beneficial owner	Common Shares beneficially owned
Name of beneficial owner	Shares		%
5% Beneficial Owners
FMR LLC⁽¹⁾		2,312,589		5.7	%
Joan B. Hall⁽²⁾		8,847,216		21.8	%

Directors and Executive Officers
Michael C. Ray⁽³⁾		10,659,773		26.3	%
Barbara Bradley Baekgaard		4,052		*
Patricia R. Miller⁽⁴⁾		7,016,420		17.3	%
P. Michael Miller⁽⁴⁾		7,016,420		17.3	%
Richard Baum		504		*
Robert J. Hall⁽⁵⁾		8,847,216		21.8	%
Karen Kaplan		—		*
John E. Kyees		19,029		*
Matthew McEvoy		4,511		*
Frances P. Philip		1,011		*
Edward M. Schmults		1,310		*
Kevin Sierks		3,775		*
Kimberly F. Colby⁽⁶⁾		982,949		2.4	%
Mathew C. Wojewuczki⁽⁷⁾		103,832		*
Directors and Executive Officers as a Group (18 persons)		18,944,873		46.7	%

*	Represents beneficial ownership of less than one percent of the outstanding shares of common shares.

(1)

Information contained in the columns above and this footnote is based on a report on Schedule 13G filed with the SEC on February 14, 2013 by FMR LLC. Various persons have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, these shares. The principal place of business for FMR LLC is 82 Devonshire Street, Boston, Massachusetts 02109.

(2)	Represents 36,747 shares held by Robert J. Hall, Mrs. Hall’s spouse, and 8,810,469 shares held by the Barbara B. Baekgaard 2009 Grantor Retained Annuity Trust, of which Mrs. Hall is a co-trustee.

(3)	Represents 962,308 shares held by Michael C. Ray, 885,996 shares held by the Michael Ray 2009 Grantor Retained Annuity Trust, 1,000 shares held by Mr. Ray’s son, and 8,810,469 shares held by the Barbara B. Baekgaard 2009 Grantor Retained Annuity Trust, of which Mr. Ray serves as co-trustee.

(4)

P. Michael Miller and Patricia R. Miller are husband and wife. Collectively, they beneficially own an aggregate of 7,016,420 common shares. Of these shares, 1,599,839 shares held by the Miller 2007 Dynasty Trust of which Mr. Miller is the trustee; 1,683,340 shares held by the Patricia R. Miller 2007 Family Trust, of which Mr. Miller is trustee; 3,682,942 shares held by Patricia R. Miller; and 50,299 shares held by P. Michael Miller.

(5)	Represents 36,747 shares held by Robert J. Hall and 8,810,469 shares held by the Barbara B. Baekgaard 2009 Grantor Retained Annuity Trust, of which Mr. Hall’s spouse is a co-trustee.

(6)	Represents 511,056 shares held by Kimberly F. Colby, 155,214 shares held by the Colby Gift Trust and 316,679 shares held by the Colby 2009 Annuity Trust.

(7)	Represents 103,532 shares held by Matthew C. Wojewuczki and 300 shares held in Matthew C. Wojewuczki Trust.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires Vera Bradley’s executive officers, Directors and persons who beneficially own more than 10% of our common shares to file initial reports of ownership and reports of changes in ownership with the Securities and Exchange Commission. Such persons are required by Commission regulations to furnish Vera Bradley with copies of all Section 16(a) forms filed by such persons. Based solely on Vera Bradley’s review of such forms furnished to it and written representations from certain reporting persons, Vera Bradley believes that all filing requirements applicable to its executive officers, directors and more than 10% shareholders were complied with during fiscal year 2013, except that: (a) a Form 3 for Karen Kaplan was filed late due to an administrative error; (b) Form 5s for both Patricia R. Miller and P. Michal Miller were untimely following changes to the beneficial ownership of their holdings; (c) a Form 4 for Frances P. Philip was filed late due to an administrative error; (d) a Form 4 for Matthew McEvoy was filed late due to an administrative error; and (e) Form 3s for Joan Hall and the Barbara B. Baekgaard 2009 Grantor Retained Annuity Trust were untimely following changes to the trustees, resulting in changes in the beneficial ownership of shares previously beneficially owned by Barbara Bradley Baekgaard.

REQUIREMENTS, INCLUDING DEADLINES, FOR SUBMISSION OF PROXY PROPOSALS, NOMINATION OF DIRECTORS AND OTHER BUSINESS OF SHAREHOLDERS

In order to submit shareholder proposals for the 2014 annual meeting of shareholders for inclusion in the Company’s Proxy Statement pursuant to SEC Rule 14a-8, materials must be received by the Secretary at the Company’s principal office in Fort Wayne, Indiana, no later than December 12, 2013.

The proposals must comply with all of the requirements of SEC Rule 14a-8. Proposals should be addressed to: Anastacia S. Knapper, Vice President — General Counsel and Secretary, Vera Bradley, Inc., 2208 Production Road, Fort Wayne, Indiana 46808. As the rules of the SEC make clear, simply submitting a proposal does not guarantee its inclusion.

The Company’s amended and restated bylaws also establish an advance notice procedure with regard to director nominations and shareholder proposals that are not submitted for inclusion in the Proxy Statement, but that a shareholder instead wishes to present directly at an annual meeting. To be properly brought before the 2014 annual meeting, a notice of the nomination or the matter the shareholder wishes to present at the meeting, the shareholder must have given written notification thereof, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Company no earlier than 120 days and not later than 90 days in advance of the date of the Company’s Proxy Statement released to shareholders in connection with the previous year’s annual meeting of shareholders. As a result, any notice given by or on behalf of a shareholder pursuant to these provisions of the Company’s amended and restated bylaws (and not pursuant to SEC Rule 14a-8) must be received no earlier than December 12, 2013, and no later than January 11, 2014. All director nominations and shareholder proposals must comply with the requirements of the Company’s amended and restated bylaws, a copy of which may be obtained at no cost from the Secretary of the Company.

Other than the two proposals described in this Proxy Statement, Vera Bradley does not expect any matters to be presented for a vote at the Annual Meeting. If you grant a proxy, the persons named as proxy holders on the proxy card will have the discretion to vote your shares on any additional matters properly presented for a vote at the Annual Meeting. If for any unforeseen reason, any one or more of Vera Bradley’s nominees is not available as a candidate for director, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board of Directors.

The chairman of the meeting may refuse to allow the transaction of any business not presented beforehand, or to acknowledge the nomination of any person not made in compliance with the foregoing procedures.

VERA BRADLEY, INC.

2208 PRODUCTION ROAD

FORT WAYNE, IN 46808

VOTE BY INTERNET - www.proxyvote.com

Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.

ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS

If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years.

VOTE BY PHONE - 1-800-690-6903

Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions.

VOTE BY MAIL

Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.


TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
		M58413-P35175 KEEP THIS PORTION FOR YOUR RECORDS

DETACH AND RETURN THIS PORTION ONLY

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.

VERA BRADLEY, INC.

For All

Withhold

All

For All

Except

To withhold authority to vote for any individual

nominee(s), mark “For All Except” and write the

number(s) of the nominee(s) on the line below.

The Board of Directors recommends you vote FOR the

following Class III Directors:

1. Election of Directors

Nominees:

01)

Barbara Bradley Baekgaard

02)

Richard Baum

03)

Patricia R. Miller

04)

Frances P. Philip

The Board of Directors recommends you vote FOR the following proposal:

For

Against

Abstain

2. To ratify the Audit Committee’s appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm for fiscal 2014.

NOTE: In their discretion, the proxy holders may vote on such other business as may properly come before the Annual Meeting, or any adjournment thereof.

For address changes/comments, mark here.

(see reverse for instructions)

Please indicate if you plan to attend this meeting.

¨ ¨

Yes No

Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor,

administrator, or other fiduciary, please give full title as such. Joint owners should each sign

personally. All holders must sign. If a corporation or partnership, please sign in full corporate

or partnership name by authorized officer.

Signature [PLEASE SIGN WITHIN BOX]

Date

Signature (Joint Owners)

Date

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:

The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.

M58414-P35175

VERA BRADLEY, INC.

Annual Meeting of Shareholders

Thursday, May 30, 2013 11:00 AM EDT

11222 Stonebridge Road

Roanoke, Indiana 46783

The undersigned hereby appoints Michael C. Ray, Kevin Sierks and Anastacia S. Knapper, or any of them, as true and lawful agents and proxies with full power of substitution in each, to attend and represent the undersigned on all matters to come before the Annual Meeting of Shareholders and to vote as designated on the reverse side, all the common shares of Vera Bradley, Inc., held of record by the undersigned on March 25, 2013, during or at any adjournment or postponement of the Annual Meeting of Shareholders to be held at 11:00 A.M., EDT at the Company’s offices at 11222 Stonebridge Road, Roanoke, Indiana 46783 on Thursday, May 30, 2013. I hereby acknowledge receipt of the Notice of Annual Meeting of Shareholders and the accompanying Proxy Statement, the terms of which are incorporated by reference, and revoke any proxy previously given by me with respect to such meeting.

This proxy will be voted as directed, or if no direction is indicated, the proxy holders will vote the shares represented by this proxy “FOR” Proposals 1 and 2, and in the discretion of the proxy holders on any other matter that may properly come before the meeting.



				Address Changes/Comments:

(If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.)

Continued and to be signed on reverse side