UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by
the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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VALUEVISION MEDIA, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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VALUEVISION
MEDIA, INC.
6740 Shady Oak Road
Eden Prairie, Minnesota
55344-3433
May 21, 2008
To our Shareholders:
You are cordially invited to attend the Annual Meeting of
Shareholders of ValueVision Media, Inc., a Minnesota
corporation, to be held at our offices located at 6690 Shady Oak
Road (Human Resources Entrance), Eden Prairie, Minnesota, on
Wednesday, June 11, 2008 at 9:00 a.m. central time.
The enclosed notice of annual meeting of shareholders and proxy
statement describe the matters to come before the meeting.
We hope that you will be able to attend the meeting in person.
Whether or not you plan to attend the meeting, please take the
time to vote. You may vote through the internet, by calling a
toll-free telephone number or by completing the enclosed proxy
card and mailing it in the enclosed envelope. See the enclosed
proxy card for more details on voting. Please send your proxy
through the internet, telephone or mail as soon as possible so
that your proxy is received prior to the meeting. This will
assure that your shares will be represented at the meeting and
voted in accordance with your wishes.
Sincerely,
Rene G. Aiu
President and Chief Executive Officer
YOUR VOTE IS IMPORTANT
Even if you own only a few shares, and whether or not you
expect to be present at the meeting, please sign, date and
promptly mail the enclosed proxy in the postage-paid reply
envelope provided. It is important that your shares be
represented.
VALUEVISION
MEDIA, INC.
6740 Shady Oak Road
Eden Prairie, Minnesota
55344-3433
NOTICE OF
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 2008
To the Shareholders of ValueVision Media, Inc.:
The annual meeting of shareholders of ValueVision Media, Inc.
will be held at our offices located at 6690 Shady Oak Road, Eden
Prairie (Human Resources Entrance), Minnesota on Wednesday,
June 11, 2008 at 9:00 a.m. central time, or at any
adjournments or postponements thereof. The meeting is being held
for the purpose of considering and taking appropriate action
with respect to the following:
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1.
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to elect eight directors, five of whom will be elected by the
holders of shares of our common stock voting separately as a
class and three of whom will be elected by the holders of shares
of our Series A Redeemable Convertible Preferred Stock
voting separately as a class; and
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2.
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to ratify the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the fiscal
year ending January 31, 2009;
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as well as to transact such other business as may properly come
before the meeting or any adjournments thereof.
Only shareholders of record at the close of business on
April 18, 2008 will be entitled to receive notice of and to
vote at the meeting or any adjournments thereof. This notice and
proxy statement will first be sent to shareholders on or about
May 21, 2008.
A proxy card for the meeting is enclosed. Whether or not you
plan to attend the meeting in person, you are requested to vote
your proxy either (1) through the internet at the address
listed on the proxy card, (2) by calling a toll-free
telephone number listed on the proxy card or (3) by
marking, signing and dating the proxy card and mailing it in the
enclosed envelope. If you have returned your proxy through the
internet, telephone or mail, you may revoke your proxy by
following the instructions in the enclosed proxy statement and
vote on all matters submitted at the meeting at any time prior
to the meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN
FAVOR OF EACH OF THE PROPOSALS, INCLUDING VOTING IN FAVOR OF THE
NOMINEES TO THE BOARD OF DIRECTORS.
By Order of the Board of Directors
Rene G. Aiu
President and Chief Executive Officer
May 21, 2008
Eden Prairie, Minnesota
PROXY
STATEMENT
FOR THE
2008
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 11, 2008
GENERAL
INFORMATION
The enclosed proxy is being solicited by our board of directors
for use in connection with our annual meeting of shareholders to
be held on Wednesday, June 11, 2008 at our offices located
at 6690 Shady Oak Road (Human Resources Entrance), Eden Prairie,
Minnesota, at 9:00 a.m., central time, and at any
adjournments or postponements. Our telephone number is
(952) 943-6000.
The mailing of this proxy statement and our board of
directors form of proxy to shareholders will commence on
or about May 21, 2008.
The board of directors requests that you vote on the proposals
described in this proxy statement. You are invited to attend the
meeting, but you do not need to attend the meeting in order to
vote your shares. Instead, you may follow the instructions below
to vote your shares over the telephone or on the internet, or
you can complete, sign and return the enclosed proxy card.
What is
the purpose of the Annual Meeting?
At the annual meeting we will ask our shareholders to vote on
these matters:
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1.
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to elect a board of directors of eight directors, to serve until
the next annual meeting of shareholders or until their
successors have been duly elected and qualified, five of whom
are elected by the holders of our common stock voting separately
as a class and three of whom are elected by the holders of our
Series A redeemable convertible preferred stock, known as
our preferred stock, voting separately as a class; and
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2.
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to ratify the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the fiscal
year ending January 31, 2009;
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as well as to transact other business that may properly be
brought before the meeting.
Who is
entitled to vote at the meeting?
Only shareholders of record at the close of business on
April 18, 2008 will be entitled to vote at the meeting or
adjournments thereof. At the close of business on the record
date, we had 33,550,834 shares of our common stock
outstanding and entitled to vote. In addition, there were
5,339,500 shares of preferred stock outstanding and
entitled to vote, all of which were held by GE Capital Equity
Investments, Inc., known as GE Commercial Finance. Every share
is entitled to one vote on each matter that comes before the
meeting.
With respect to proposal 1, the holders of the common
stock, voting separately as a class, are entitled to elect five
directors and the holders of the preferred stock, voting
separately as a class, are entitled to elect three directors.
The holders of the common stock and the preferred stock will
vote together as one class at the meeting on proposal 2,
with the holders of the preferred stock voting on an as
converted to common stock basis, meaning the holders of
preferred stock will be entitled to 5,339,500 votes on
proposal 2. The common stock and preferred stock are
collectively referred to in this proxy statement as the voting
securities.
Who is
entitled to attend the meeting?
Subject to space availability, all shareholders as of the record
date, or their duly appointed proxies, may attend the meeting in
person. Since seating is limited, admission to the meeting will
be on a first-come, first-served basis. Registration will begin
at 8:30 a.m. Cameras, recording devices and other
electronic devices will not be permitted at the meeting.
Please also note that if you hold your shares in street
name (that is, through a broker or other nominee), and you
wish to vote your shares at the meeting, instead of by proxy,
you will need to bring a copy of a brokerage statement
reflecting your stock ownership as of the record date.
What
constitutes a quorum?
With respect to proposal 1, the presence, in person or by
properly executed proxy, of the holders of a majority of the
outstanding shares of (a) the common stock entitled to a
separate class vote on five directors at the meeting will
constitute a quorum for purposes of this class vote and
(b) the preferred stock entitled to a separate class vote
on three directors at the meeting will constitute a quorum for
purposes of these class votes. The presence, in person or by
properly executed proxy, of the holders of a majority of the
outstanding shares of voting securities entitled to vote at the
meeting (with the preferred stock considered on an as converted
to common stock basis) will constitute a quorum for the combined
class votes on proposal 2.
If a quorum is present, the meeting can proceed. Proxies
received but marked as abstentions and broker non-votes will be
included in the calculation of the number of shares considered
to be present at the meeting for purposes of determining whether
there is a quorum.
How do I
vote?
Proxies in the accompanying form that are properly signed and
returned to us, voted by telephone or through the internet in
accordance with the voting instructions set forth below, and not
revoked, will be voted in the manner specified.
To vote by mail (preferred shareholders must vote by mail):
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Mark your selections on the proxy card.
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Date and sign your name exactly as it appears on your proxy card.
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Mail the proxy card in the enclosed postage-paid envelope (we
must receive the mailed proxy card prior to the meeting).
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To vote by internet:
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Go to the web site printed on your proxy card 24 hours a
day, seven days a week.
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Complete the electronic ballot and submit your voting
instructions.
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To vote by telephone:
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From a touch-tone telephone, call the toll-free number printed
on your proxy card or electronic notification, 24 hours a
day, seven days a week.
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Follow the simple recorded instructions.
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If you are a registered shareholder and attend the annual
meeting, you may deliver your proxy in person. If you hold your
shares in street name, you need to obtain a proxy
form from the institution that holds your shares. Shareholders
who hold shares through a broker or agent should follow the
voting instructions received from that broker or agent.
May I
change my vote after I return my proxy card?
Yes. Even after you have submitted your proxy, you may change
your vote at any time before the proxy is exercised by filing
with our corporate secretary either a notice of revocation or a
duly executed proxy bearing a later date. Alternatively, if you
have voted by telephone or through the internet, you may change
your vote by calling the toll-free number again and following
the instructions, or by accessing the web site and following the
instructions. The powers of the proxy holders will be suspended
if you attend the meeting in person and so request, although
attendance at the meeting will not by itself revoke a previously
granted proxy.
What vote
is required to elect directors?
Election of Directors.
With respect to
proposal 1, five directors are to be elected by the holders
of our common stock voting separately as a class and three
directors are to be elected by the holders of our preferred
stock voting separately as a class. In each separate class vote,
the directors will be elected by each receiving a plurality of
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the votes cast by the holders of the outstanding shares of
common stock and preferred stock, as applicable, present in
person or by proxy and entitled to vote.
Other Items.
The affirmative vote of the
holders of a majority of the outstanding shares of voting
securities (voting as a single class) present in person or by
proxy and entitled to vote is required to ratify
proposal 2. For all other items that properly come before
the meeting, the affirmative vote of a majority of the
outstanding voting securities entitled to vote and present in
person or represented by proxy at the meeting is required for
approval. A properly executed proxy marked ABSTAIN
with respect to any such matter will be counted for purposes of
determining whether there is a quorum and will be considered
present in person or by proxy and entitled to vote.
What is
the effect of an abstention or withhold
vote on the proposals to be voted on at the meeting?
A share voted abstain with respect to any proposal
is considered as present and entitled to vote with respect to
that proposal, but is not considered a vote cast with respect to
that proposal. Therefore, an abstention will not have any effect
on the election of directors. Because other proposals requires
the affirmative vote of the holders of a majority of the voting
securities present and entitled to vote on each proposal in
order to pass, an abstention will have the effect of a vote
against each of the other proposals. A withhold vote
with respect to any director nominee will be counted for
purposes of determining whether there is a quorum and will have
the effect of a vote against the nominee.
What is
the effect of a broker non-vote on the proposals to
be voted on at the meeting?
A broker non-vote occurs if your shares are not
registered in your name and you do not provide the record holder
of your shares (usually a bank, broker, or other nominee) with
voting instructions on a matter and the record holder is not
permitted to vote on the matter without instructions from you
under applicable New York Stock Exchange rules. These rules
apply to us notwithstanding the fact that shares of our common
stock are traded on The Nasdaq Global Market. A broker non-vote
is considered present for purposes of determining whether a
quorum exists, but is not considered a vote cast or
entitled to vote with respect to such matter.
Therefore, broker non-votes will not have any effect on any of
the matters to be voted on at the meeting.
Under New York Stock Exchange rules, the election of directors
and the ratification or appointment of independent accountants
are routine items. As a result, brokers who do not receive
instructions as to how to vote on these matters generally may
vote on these matters in their discretion.
What is
the recommendation of the board of directors on my voting my
shares?
Our board of directors recommends a vote
for
the
election of each of the nominees to the board of directors set
forth in proposal 1 to constitute the board of directors
and
for
the ratification of Deloitte &
Touche LLP as our independent registered public accounting firm.
If any other matters come up for a vote at the meeting, the
proxy holders will vote in line with the recommendations of the
board of directors or, if there is no recommendation, at their
own discretion.
What if I
do not specify a choice for a matter when returning a
proxy
Unless you indicate otherwise, the persons named as proxies on
the proxy card will vote your shares
for
the
election of each of the nominees to the board of directors set
forth in proposal 1 to constitute the board of directors
and
for
the ratification of Deloitte &
Touche LLP as our independent registered public accounting firm.
May the
meeting be adjourned?
If a quorum is not present to transact business at the meeting
or if we do not receive sufficient votes in favor of the
proposals by the date of the meeting, the persons named as
proxies may propose one or more adjournments of the meeting. Any
adjournment would require the affirmative vote of a majority of
the shares present in person or represented by proxy at the
meeting.
3
Who pays
the expenses incurred in connection with the solicitation of
proxies?
We will pay the cost of soliciting proxies in the accompanying
form. In addition to solicitation by the use of the mail,
certain directors, officers and regular employees may solicit
proxies by telephone, the internet, email or personal interview,
and may request brokerage firms and custodians, nominees and
other record holders to forward soliciting materials to the
beneficial owners of our shares. We will reimburse them for
their reasonable out-of-pocket expenses in forwarding these
materials.
How may I
obtain additional copies of the annual report?
Our annual report for our fiscal year ended February 2,
2008, including audited financial statements, is enclosed. The
annual report is also available online at
www.valuevisionmedia.com. For additional printed copies, which
are available without charge, please contact our corporate
secretary by mail at ValueVision Media, Inc., 6740 Shady Oak
Road, Eden Prairie, Minnesota
55344-
3433,
Attention: Corporate Secretary.
What is
the deadline for submitting a shareholder proposal for including
in the proxy statement for our 2009 annual meeting?
We must receive shareholder proposals intended to be presented
at the 2009 annual meeting of shareholders that are requested to
be included in the proxy statement for that meeting at our
principal executive office no later than January 17, 2009.
The inclusion of any shareholder proposals in those proxy
materials will be subject to the requirements of the proxy rules
adopted under the Securities Exchange Act of 1934, including
Rule 14a-8.
Written copies of all shareholder proposals should be sent to
ValueVision Media, Inc., 6740 Shady Oak Road, Eden Prairie,
Minnesota
55344-3433,
Attention: Corporate Secretary.
4
PROPOSAL
#1
ELECTION OF
DIRECTORS
Eight directors will be elected at the meeting. Five of the
directors will be voted upon and elected by the holders of
shares of common stock voting separately as a class. Three of
the directors will be voted upon and elected by the holders of
shares of preferred stock voting separately as a class. Each
director will hold office until the next annual meeting of
shareholders and until his or her successor is elected and
qualified, or his or her earlier resignation or removal. All of
these director nominees have consented to serve as a director,
if elected.
Assuming shareholders elect all the director nominees named in
this proxy statement at the annual meeting, we will continue to
have eight directors. The board of directors has authority under
our by-laws to fill vacancies and to increase or, upon the
occurrence of a vacancy, decrease the boards size between
annual meetings. Your proxy holder will vote your shares for the
boards nominees unless you instruct otherwise. If a
nominee is unable to serve as a director, your proxy holder may
vote for any substitute nominee proposed by the board of
directors. If none is proposed, the size of the board of
directors may be reduced accordingly.
Our corporate governance and nominating committee has nominated
five directors to be elected by the holders of the common stock.
Previously, our board of directors included six directors
elected by the holders of common stock; however, our board of
directors reduced the size of the board effective immediately
prior to the commencement of the annual meeting as a result of
James Barnett announcing his intention not to run for
re-election.
The following table sets forth certain information concerning
the persons who are nominated for election to the board of
directors.
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Name
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Age
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Director Since
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Positions Currently Held with Our Company
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Common Stock Directors
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Rene G. Aiu
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2008
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President, Chief Executive Officer
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John D. Buck
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2004
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Executive Chairman of the Board
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Michael S. Geller
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1993
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Director
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Robert J. Korkowski
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67
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1993
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Director
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George Vandeman
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68
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2005
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Director
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Preferred Stock Directors
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Bonnie S. Hammer
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57
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Director nominee
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Douglas V. Holloway
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2004
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Director
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Patrick O. Kocsi
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Director nominee
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Nominees
for Election by Holders of Shares of Common Stock
Rene G. Aiu
joined us as president and chief
executive officer in March 2008. Previously, Ms. Aiu served
as an independent consultant and provided new business
development services in the television shopping and interactive
television areas to major corporate clients, including
InterActive Corporation and Liberty Global Inc. from
July 2005 until she accepted her position with us. During
the period January 2004 until June 2007 she also was a director
of Jupiter SHOP Channel Japan. From February 2003 through May
2005, Ms. Aiu was the president and chief executive officer
of
Parti-TV
Japan, a venture of Liberty Global Inc. and Sumitomo Corporation
through Jupiter TV, Japan. Ms. Aiu was the president and
chief executive officer of Jupiter SHOP Channel Japan from
April 2000 through February 2003, and was promoted to the
position of chairman and chief executive officer from February
2003 through December 2003. Before joining Jupiter SHOP Channel
Japan, Ms. Aiu worked in various capacities as an
international business consultant in the television shopping
arena and from February 1992 through July 1995 was senior vice
president of marketing, sales, programming &
production at Home Shopping Network. Prior to her position at
Home Shopping Network, Ms. Aiu held senior level management
positions at JC Penny Television Shopping Network, Cable Value
Network, which later merged with QVC, and Twentieth Century Fox.
From time to time in her professional career, including since
July 2005, Ms. Aiu worked on various TV shopping
5
related projects in a consultancy capacity across the globe with
TCI International, HSN International and Liberty Global.
John D. Buck
currently serves as executive
chairman of our board of directors. From October 25, 2007
to March 3, 2008, Mr. Buck served as our interim chief
executive officer. His previous experience includes serving as
chief executive officer of Medica, Minnesotas second
largest health insurer, from February 2002 to May 2003.
Previously, Mr. Buck worked for Fingerhut Companies from
1996 to October, 2000 where he held executive positions of
increasing responsibility, concluding with service as president
and chief operating officer. He currently serves as
non-executive chairman of the board of Medica and serves on the
board of directors of Patterson Companies, Inc. and Halo
Innovations. Previously, Mr. Buck held senior executive
management positions at Graco Inc., Honeywell Inc., and Alliant
Techsystems Inc.
Marshall S. Geller
is founder and senior managing
director of St. Cloud Capital, a Los Angeles based private
equity fund formed in December 2001. Mr. Geller has spent
more than 40 years in corporate finance and investment
banking, including 21 years as senior managing director for
Bear, Stearns & Co., with oversight of all operations
in Los Angeles, San Francisco, Chicago, Hong Kong and the
Far East. Currently he serves as a director on the boards of
1st Century Bank N.A., GP Strategies Corporation, SCPIE
Holdings Inc., National Holdings Corp. and Guidance Software,
Inc. Mr. Geller is also on the board of governors of Cedars
Sinai Medical Center, Los Angeles, serves on the Deans
Advisory Council for the College of Business &
Economics at California State University, Los Angeles and
recently was appointed to the Little Hoover Commission, an
independent California state oversight agency.
Robert J. Korkowski,
from 1989 until his
retirement in 1996, was the senior vice president of finance and
a director of Opus Corporation, a privately held real estate
development and construction company. From 1986 to 1989,
Mr. Korkowski was the vice president and chief financial
officer of National Computer Systems, Inc., an information
systems company. From 1974 to 1986, Mr. Korkowski was
executive vice president and chief financial officer of G.
Heileman Brewing Company. Mr. Korkowski served as a
director of Redline Performance Products, Inc. beginning in 2003
until August 2004. On August 28, 2004, Redline Performance
Products filed a voluntary petition for relief under
Chapter 7 of the United States Bankruptcy Code with the
United States Bankruptcy Court for the District of Minnesota.
George A. Vandeman
has been the principal of
Vandeman & Co., a private investment firm, since he
retired in July 2000 from Amgen Inc., the worlds largest
biotechnology company. From 1995 to 2000, Mr. Vandeman was
senior vice president and general counsel of Amgen and a member
of its Operating Committee. Immediately prior to joining Amgen
in July 1995, Mr. Vandeman was a senior partner and head of
the mergers and acquisitions practice at the international law
firm of Latham & Watkins, where he worked for nearly
three decades. Mr. Vandeman is a member and past chair of
the board of councilors at the University of Southern California
Law School and is a director of Maguire Properties, Inc.
Nominees
for Election by Holders of Shares of Preferred Stock
Bonnie S. Hammer
was named president, cable
entertainment and cable studios for NBC Universal in
March 2008. In this role, Ms. Hammer added executive
responsibility for NBCU Cable Studios and NBC Universals
Emerging Networks to her existing duties as president, USA
Network and SCI FI Channel. She had served as president of SCI
FI since April 2001, adding responsibility for USA Network in
May 2004. Her responsibilities include oversight of original
scripted content for NBCUs cable group and external cable
channels, as well as leadership of the Emerging Networks group,
which includes the Chiller, Sleuth and Universal HD. Joining the
company in 1989, Ms. Hammers previous titles include
executive vice president, general manager of SCI FI Channel and
senior vice president of SCI FI Programming & USA
Original Productions. Prior to joining Universal Television,
Ms. Hammer was an original programming executive at
Lifetime Television Network, where she executive produced
several award-winning documentaries for the networks
acclaimed Signature Series. Ms. Hammer is a member of the
board of directors for A&E Networks and the Sundance
Channel. She also serves on the board of the International Radio
and Television Society (IRTS) and on the Celebration of
Womens Achievements in Television and Radio steering
committee for the Paley Center for Media. Additionally,
Ms. Hammer is a mentor for Women in Film &
Television.
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Douglas V. Holloway
has been president of cable
investments for NBC Universal Cable since May 2004, and in this
capacity oversees NBC Universals joint ventures in cable,
which include our company, A&E Networks, NBC Weather Plus
and National Geographic International. From 1998 until he
assumed his current position, Mr. Holloway was president of
network distribution and affiliate relations for USAi (which
became Universal Television upon the sale of USAi to Vivendi in
2002), where his responsibilities included distribution,
affiliate marketing and affiliate relations for USA Network, SCI
FI Channel, Trio and News World International. Previously, he
held senior positions for USAi and USA Network.
Mr. Holloway currently serves on the boards of directors of
the Cable and Telecommunications Association for Marketing
(CTAM), the CTAM Foundation, the National Association for
Multi-Ethnicity in Communications (NAMIC), the NAMIC Foundation
and the Westchester Clubman Foundation, and is a member of the
board of trustees for Emerson College.
Patrick O. Kocsi
is a managing director at GE
Commercial Finance. He joined General Electric in 1991 in the
financial management program in GE Plastics. In 1996,
Mr. Kocsi joined GE Capital in business development,
working on acquisitions in the U.S., Brazil and Germany. In
1997, he moved to what is now known as GE Commercial Finance and
began overseeing investments in media, industrial and
transportation companies, as well as technology companies.
Currently, his primary focus is on GE Commercial Finances
investments in media, communication and entertainment companies,
as well as security and sensing related technologies. He is a
board member or board observer at five privately held companies
in the GE Commercial Finance portfolio.
OUR BOARD
OF DIRECTORS RECOMMENDS THAT YOU VOTE
FOR THE ELECTION OF EACH OF THE EIGHT NOMINEES LISTED ABOVE
TO CONSTITUTE OUR BOARD OF DIRECTORS.
PROPOSAL
#2
RATIFICATION OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
Deloitte & Touche LLP have been our independent
registered public accounting firm since fiscal 2002. Upon
recommendation from our audit committee, our board of directors
selected Deloitte & Touche LLP to serve as our
independent registered public accounting firm for our fiscal
year ending January 31, 2009, subject to ratification by
our shareholders. While it is not required to do so, our board
of directors is submitting the selection of this firm for
ratification in order to ascertain the view of our shareholders.
If the selection is not ratified, our audit committee will
reconsider its selection. Proxies solicited by our board of
directors will, unless otherwise directed, be voted to ratify
the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for our fiscal
year ending January 31, 2009.
Deloitte &
Touche LLP Attendance at Annual Meeting
A representative of Deloitte & Touche LLP will be
present at the meeting and will be afforded an opportunity to
make a statement if the representative so desires and will be
available to respond to appropriate questions during the meeting.
7
Fees
Billed by Deloitte & Touche LLP
In addition to reimbursement for certain out-of-pocket expenses,
the following table presents the aggregate fees billed for
professional services by Deloitte & Touche LLP in our
fiscal year ended February 2, 2008, known as fiscal 2007,
and our fiscal year ended February 3, 2007, known as fiscal
2006, for these various services:
|
|
|
|
|
|
|
|
|
|
|
Fiscal 2007
|
|
|
Fiscal 2006
|
|
Description of Fees
|
|
Amount
|
|
|
Amount
|
|
|
Audit Fees
|
|
$
|
510,242
|
|
|
$
|
469,655
|
|
Audit-Related Fees
|
|
|
6,600
|
|
|
|
20,577
|
|
|
|
|
|
|
|
|
|
|
Total Audit and Audit-Related Fees
|
|
|
516,842
|
|
|
|
490,232
|
|
Tax Fees:
|
|
|
|
|
|
|
|
|
Tax Compliance Fees
|
|
|
81,000
|
|
|
|
98,000
|
|
Tax Consultation and Advice Fees
|
|
|
60,000
|
|
|
|
71,000
|
|
|
|
|
|
|
|
|
|
|
Total Tax Fees
|
|
|
141,000
|
|
|
|
169,000
|
|
All Other Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
657,842
|
|
|
$
|
659,232
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
The audit fees set forth above for fiscal 2007 and fiscal 2006
consist of fees billed by Deloitte & Touche LLP for
audit services in connection with their review of our interim
financial statements for the first three quarters of each fiscal
year and for the audit of our fiscal year-end financial
statements and the effectiveness of internal controls over
financial reporting, in addition to fees for audit services that
are normally provided by an independent registered public
accounting firm in connection with statutory and regulatory
filings or engagements, such as comfort letters, consents
related to Securities and Exchange Commission registration
statements and other services related to Securities and Exchange
Commission matters for the fiscal year.
Audit-Related
Fees
The audit-related fees set forth above for fiscal 2007 and
fiscal 2006 consist of fees billed by Deloitte &
Touche LLP for employee benefit plan audits,
agreed-upon
procedure letters and consultation regarding other accounting
matters.
Tax
Fees
The tax compliance fees set forth above consist solely of fees
billed by Deloitte & Touche LLP for preparation of
federal, state and local income tax returns and Internal Revenue
Service audit assistance. The tax consultation and advice fees
set forth above for fiscal 2007 and fiscal 2006 consist of fees
billed for tax planning regarding various federal and state
income and sales and use tax matters, as well as assistance with
employee compensation matters.
All Other
Fees
We were not billed any amounts by Deloitte & Touche
LLP for other products and services during fiscal 2007 or fiscal
2006.
Approval
of Independent Registered Public Accounting Firm Services and
Fees
The audit committee charter requires that our audit committee
approve the retention of our independent registered public
accounting firm for any non-audit service and consider whether
the provision of these non-audit services by our independent
registered public accounting firm is compatible with maintaining
our independent auditors independence, prior to engagement
for these services. Our audit committee actively monitors the
relationship between audit and non-audit services provided. All
of the services listed under the headings Audit-Related Fees and
Tax Fees were pre-approved by our audit committee.
8
Report of
the Audit Committee
The role of our committee is one of oversight of our
companys management and independent registered public
accounting firm with regard to our companys financial
reporting and controls respecting accounting and risk of
material loss. In performing our oversight function, we relied
upon advice and information received in our discussions with
management and the independent registered public accounting firm.
Our committee has (i) reviewed and discussed our audited
financial statements for fiscal 2007 with our companys
management; (ii) discussed with our companys
independent registered public accounting firm the matters
required to be discussed by Statement on Auditing Standards
No. 61 regarding communication with audit committees
(Codification of Statements on Auditing Standards, AU sec. 380);
(iii) received the written disclosures and the letter from
our companys independent registered public accounting firm
required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees); and
(iv) discussed with our companys independent
registered public accounting firm the independent registered
public accounting firms independence. Based on this review
and discussions with management and the independent registered
public accounting firm, our committee recommended to the board
of directors that the audited financial statements be included
in our companys annual report on
Form 10-K
for fiscal 2007 and filed with the Securities and Exchange
Commission.
The Audit
Committee
Robert J. Korkowski
(Chair)
James J. Barnett
Douglas V. Holloway
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
FOR
PROPOSAL 2 TO RATIFY THE APPOINTMENT OF
DELOITTE & TOUCHE LLP.
9
CORPORATE
GOVERNANCE
Shareholder
Communications with the Board of Directors
Persons interested in communicating with the board of directors
are encouraged to contact the chairman of the board, all outside
directors as a group or an individual director by submitting a
letter or letters to the desired recipients in sealed envelopes
labeled with chairman of the board or the names of
specified directors. This letter should be placed in a larger
envelope and mailed to ValueVision Media, Inc., 6740 Shady Oak
Road, Eden Prairie, Minnesota
55344-3433,
Attention: Corporate Secretary. The corporate secretary will
forward the sealed envelopes to the designated recipients.
Attendance
at Shareholder Meetings
The directors are encouraged, but not required, to attend all
meetings of our shareholders. Seven of our then-serving
directors attended our 2007 annual meeting of shareholders.
Director
Independence
Messrs. Geller, Holloway, Korkowski, Kocsi and Vandeman, as
well as Ms. Hammer, constituting a majority of the board of
directors or director nominees, have been determined to be
independent as that term is used in Section 10A of the
Exchange Act of 1934 and as that term is defined in
Rule 4200(a)(15) of the Nasdaq Marketplace Rules. Jay
Ireland, who resigned from the board of directors on
June 29, 2007, and James Barrett and Ronald Herman, who
chose not to stand for re-election to the board of directors,
were determined to be independent during their periods of
service with our company. John Buck was determined to be
independent except during the period of time from
October 25, 2007 until March 3, 2008 when he also
served as the interim chief executive officer of our company
while a search process was underway for a new chief executive
officer.
Committees
of the Board of Directors
Committees established and maintained by the board of directors
include the audit committee, the human resources and
compensation committee, known as the compensation committee, and
the corporate governance and nominating committee, known as the
nominating committee. The compensation committee has established
a stock-based awards and performance-based compensation
subcommittee, known as the equity awards subcommittee. From time
to time the board of directors also may establish additional
committees for specific purposes.
The directors current committee memberships are indicated
in the table below:
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|
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|
|
|
|
|
|
|
|
|
|
|
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|
|
Audit
|
|
|
Compensation
|
|
|
Governance
|
|
|
Equity Awards
|
|
Director
|
|
Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Subcommittee
|
|
|
Common Stock Directors
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
Rene G. Aiu
|
|
|
|
|
|
|
|
|
|
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|
|
|
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James J. Barnett
|
|
|
Member
|
|
|
|
|
|
|
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|
|
|
|
|
|
John D. Buck
|
|
|
|
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|
|
Chair
|
|
|
|
Member
|
|
|
|
|
|
Michael S. Geller
|
|
|
|
|
|
|
|
|
|
|
Member
|
|
|
|
|
|
Robert J. Korkowski
|
|
|
Chair
|
|
|
|
Member
|
|
|
|
Member
|
|
|
|
Member
|
|
George A. Vandeman
|
|
|
|
|
|
|
Member
|
|
|
|
Chair
|
|
|
|
Member
|
|
Preferred Stock Directors
|
|
|
|
|
|
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|
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|
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|
Ronald J. Herman, Jr.
|
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|
|
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Member
|
|
|
|
|
|
|
|
|
|
Douglas V. Holloway
|
|
|
Member
|
|
|
|
|
|
|
|
Member
|
|
|
|
|
|
Audit
Committee
At the beginning of fiscal 2007, the audit committee consisted
of Robert Korkowski (Chair), James Barnett, Marshall Geller and
Ronald Herman. On June 28, 2007, Mr. Herman was
appointed to the compensation committee and resigned from the
audit committee and Douglas Holloway was appointed in his place
to the audit committee. On
10
May 1, 2008, Marshall Geller resigned from the audit
committee due to other time commitments. All members of the
audit committee are independent as that term is used in
Section 10A of the Securities Exchange Act of 1934, as that
term is defined in Rule 4200(a)(15) of the Nasdaq
Marketplace Rules and as that term is defined by
Section 301 of the Sarbanes-Oxley Act of 2002. The board of
directors has determined that Mr. Korkowski, a member of
the audit committee, is an audit committee financial expert as
defined by the Securities and Exchange Commissions
regulations.
The audit committee assists the board of directors in carrying
out its oversight responsibilities for our financial reporting
process, audit process and internal controls. The audit
committee:
|
|
|
|
|
reviews our audited financial statements and recommends to the
board of directors that the audited financial statements be
included in our annual report on
Form 10-K,
|
|
|
|
recommends to the board of directors the selection of the
independent registered public accounting firm to audit our books
and records,
|
|
|
|
reviews our accounting and auditing principles and procedures
with a view toward providing for adequate internal controls and
reliable financial records,
|
|
|
|
approves all fees of, as well as the provision of any non-audit
services by, our independent registered public accounting
firm, and
|
|
|
|
reviews our quarterly reports on
Form 10-Q
and our earnings press releases before they are publicly issued.
|
To this end, the audit committee oversees our financial
reporting process by, among other things, reviewing and
reassessing the audit committee charter, reviewing with the
independent auditors the plans and results of the auditing
engagement, recommending and taking action to oversee the
independence of our independent registered public accounting
firm and recommending to the board of directors the engagement
of our independent registered public accounting firm. The audit
committee charter was amended in 2004 and complies with the
standards set forth in Securities and Exchange Commission and
stock exchange regulations. A copy of the audit committee
charter is available on our website at www.valuevisionmedia.com.
Human
Resources and Compensation Committee
At the beginning of fiscal 2007, the human resources and
compensation committee consisted of John Buck (Chair), Jay
Ireland, Robert Korkowski and George Vandeman. On June 29,
2007, Mr. Ireland resigned from the board of directors and
from the compensation committee and Ronald Herman was appointed
to the compensation committee. All members of the compensation
committee during fiscal 2007 were independent directors as that
term is defined in Rule 4200(a)(15) of the Nasdaq
Marketplace Rules; except that John Buck was not deemed
independent during the period of time from October 25, 2007
until March 3, 2008 when he also served as the interim
chief executive officer of our company.
The responsibilities of the compensation committee are set forth
in the compensation committee charter, which is reviewed
regularly and amended as appropriate in light of Securities and
Exchange Commission and stock exchange regulations, and which is
available on our website at www.valuevisionmedia.com.
Among other duties, the compensation committee has the
responsibility to:
|
|
|
|
|
establish executive compensation strategy, including base
salary, incentive compensation and any other compensation
elements;
|
|
|
|
assure that all executive officers are compensated in a manner
consistent with such strategy, internal considerations,
competitive practices and the requirements of regulatory
agencies (e.g., Internal Revenue Service, Securities and
Exchange Commission, etc.);
|
|
|
|
annually review and approve the components of and total cash
compensation for our senior executive officers, and approve any
other off-cycle changes to compensation for senior executives;
|
|
|
|
oversee our stock-based incentive plans and approve all grants
to company officers made in connection with those plans;
|
11
|
|
|
|
|
review and make recommendations to the board of directors
regarding (i) the components of and total cash compensation
for our chief executive officer, and (ii) stock-based
grants to our chief executive officer;
|
|
|
|
review and, if appropriate, recommend to the board of directors
any employment agreements or severance arrangements for the
chief executive officer or other members of senior management,
including
change-in-control
provisions, plans or agreements;
|
|
|
|
monitor our employee benefit plans and discharge the duties
imposed on the committee by the terms of those plans;
|
|
|
|
oversee work of the equity awards subcommittee;
|
|
|
|
oversee succession planning for the chief executive officer and
other members of the senior executive team;
|
|
|
|
annually evaluate the performance of the committee and the
adequacy of the committees charter, and report the
evaluation to the board of directors; and
|
|
|
|
perform other duties or functions deemed appropriate by the
board of directors.
|
Compensation decisions for the named executive officers and the
other corporate officers directly reporting to the chief
executive officer are made by the compensation committee. For
the chief executive officer, the compensation decisions are made
by the board of directors upon the recommendation of the
committee. Under its charter, the compensation committee has the
authority to engage, review and approve the payment of fees to
or terminate advisors and consultants as it deems necessary to
assist the fulfillment of its responsibilities.
The compensation committees meeting agendas are determined
by its chair, with the assistance of the human resources
department and the corporate secretary. The committee reports on
its actions regarding executive compensation to the board of
directors for all corporate officers except in the case of the
chief executive officer. For the chief executive officer, the
committee will make a recommendation to the board of directors
for review and action.
The committee is supported by our human resources and legal
departments upon request. In addition, the committee has engaged
Towers Perrin, a global human resources consulting firm, to
conduct periodic reviews of its total compensation program for
executive officers. The chair of the committee reviews fees paid
to outside consultants to ensure that the consultant maintains
its objectivity and independence while rendering advice to the
committee. Under a policy established by the committee, Towers
Perrin only performs work for the committee, the board of
directors and other committees of the board of directors, and is
not retained by our management for other benefits, compensation
or recruiting services, or any other purposes.
Stock-based
Awards and Performance-Based Compensation Subcommittee
The equity awards subcommittee has the authority to approve or
recommend to the board of directors for approval, as the case
may be, all equity-based awards. At the beginning of fiscal
2007, the subcommittee consisted of Messrs. Buck (Chair),
Korkowski and Vandeman. Beginning at the time when Mr. Buck
began his service as interim chief executive officer on
October 25, 2007 he no longer served on the subcommittee.
All members of the subcommittee were independent directors
during their period of service on the subcommittee as that term
is defined by Internal Revenue Service regulations for purpose
of compliance with the requirements of section 162(m) of the
Internal Revenue Code.
Corporate
Governance and Nominating Committee
At the beginning of fiscal 2007, the governance committee
consisted of George Vandeman (Chair), John Buck, Marshall
Geller, Robert Korkowski and Douglas Holloway. All members of
the compensation committee during fiscal 2007 were independent
directors as that term is defined in Rule 4200(a)(15) of
the Nasdaq Marketplace Rules.
The corporate governance and nominating committee advises and
makes recommendations to the board of directors on all matters
concerning the selection of candidates as nominees for election
as directors, corporate governance, performance of the chief
executive officer, compensation of directors and other matters
as specified in the governance committees charter or as
directed by the board of directors. The governance committee has
12
recommended to the board of directors that each of the nominees
listed for election to the board of directors in proposal 1
be elected to the board of directors. The responsibilities of
the governance committee are set forth in the governance
committee charter, which is reviewed regularly in light of
Securities and Exchange Commission and stock exchange
regulations and is available on our website at
www.valuevisionmedia.com.
Search
Committee of the Board
On October 21, 2007 the board appointed Messrs. Buck,
Herman, Holloway, Korkowski and Vandeman to serve as the members
of a committee to supervise the search for a new chief executive
officer. From that date the committee was in frequent
communication and conducted a number of candidate interviews.
The work of the search committee concluded successfully with the
appointment of our new president and chief executive officer,
Rene G. Aiu, on March 3, 2008.
Director
Qualifications and Shareholder Nominations for
Directors
The governance committee charter describes the attributes we
seek in considering director candidates. The governance
committee will consider persons recommended by shareholders in
selecting nominees for election to the board of directors. The
governance committee recommends qualified individuals who, if
added to the board of directors, will provide the mix of
director characteristics and diverse experiences, perspectives
and skills appropriate for our company. We have determined that
a majority of our directors should be independent directors. The
governance committee uses the following additional guidelines,
which are set forth in its charter, in analyzing the
qualifications for directors:
The committee will consider the ability of the director
candidate to devote sufficient time to fulfilling his or her
duties as a director, the candidates judgment, skill,
experience with businesses and other organizations in industries
related to the business of our company (such as consumer
merchandising and retail; TV home shopping; TV programming and
media; retail operations and fulfillment; direct response
marketing;
e-commerce
and technology; finance; mergers and acquisitions and corporate
law), experience as an executive with a publicly traded company,
the interplay of the candidates experience with the
experience of other board members and the extent to which the
candidate would be a desirable addition to the board of
directors and any committees of the board of directors.
Shareholders who wish to suggest qualified candidates should
write to: ValueVision Media, Inc., 6740 Shady Oak Road, Eden
Prairie, Minnesota
55344-
3433,
Attention: Corporate Governance and Nominating Committee,
c/o Corporate
Secretary. All recommendations should state in detail the
qualification of the persons for consideration by the governance
committee and should be accompanied by an indication of the
persons willingness to serve.
Business
Ethics Policies
We have adopted a business ethics policy applicable to all of
our directors and employees, including our principal executive
officer, principal financial officer, principal accounting
officer, controller and other employees performing similar
functions. A copy of this business ethics policy is available on
our website at www.valuevisionmedia.com. In addition, we have
adopted a code of ethics for our chief executive officer and
senior financial management; this policy is also available on
our website at www.valuevisionmedia.com. We intend to satisfy
the disclosure requirements under
Form 8-K
regarding an amendment to, or waiver from, a provision of our
codes of ethics by posting this information on our website at
the address specified above.
Attendance
and Meetings of the Board of Directors and Its
Committees
Our business and affairs are managed by the board of directors,
which held 12 meetings during fiscal 2007. During fiscal 2007,
the audit committee held 12 meetings, the compensation committee
held eight meetings and the governance committee held five
meetings. The equity awards subcommittee met three times in
fiscal 2007. During fiscal 2007, each director attended 75% or
more of the aggregate of the total number of meetings of the
board of directors and total number of meetings held by all
committees and subcommittees of the board of directors on which
he served.
13
Compensation
Committee Interlocks and Insider Participation
No member of the compensation committee is now or has ever been
an officer or employee of our company or of any of our
subsidiaries except for Mr. Buck during the period of time from
October 25, 2007 until March 3, 2008 when he also
served as the interim chief executive officer of our company.
None of our executive officers has served on the board of
directors or on the compensation committee of any other entity,
any officers of which served either on our board of directors or
on our compensation committee. One member of the compensation
committee, Mr. Herman, is an officer of GE Commercial
Finance, which together with NBC Universal holds approximately
29% of our equity securities on a diluted basis and which has
entered into a number of agreements with our company, including
a shareholder agreement, distribution and marketing agreement
and trademark license agreement, all as more fully described in
the section below entitled Certain Transactions.
Pursuant to the distribution and marketing agreement, our
company paid NBC Universal approximately $930,000 in fees in
fiscal 2007 for services relating to cable and satellite
distribution and marketing.
14
SECURITY
OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of our securities as of April 18, 2008
based on a total of 33,550,834 shares of common stock and
5,339,500 shares of preferred stock outstanding as of that
date by (i) each person known by us to be the beneficial
owner of more than 5% of the outstanding shares of common stock
or preferred stock, (ii) each of the directors and nominees
for election to the board of directors, (iii) our chief
executive officer and each of the other executive officers named
in the summary compensation table who is or was an executive
officer during fiscal 2007 and (iv) all directors and
executive officers as a group. Shareholders listed below possess
sole voting and investment power with respect to their shares
unless otherwise indicated and have a mailing address of 6740
Shady Oak Road, Eden Prairie, Minnesota
55344-3433.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Percent of
|
Name and Address
|
|
Title of Class
|
|
Beneficially Owned
|
|
Class
|
|
Directors and Director Nominees:
|
|
|
|
|
|
|
|
|
|
|
James J. Barnett(1)
|
|
Common Stock
|
|
|
93,560
|
|
|
|
*
|
|
John D. Buck(2)
|
|
Common Stock
|
|
|
174,522
|
|
|
|
*
|
|
Marshall S. Geller(3)
|
|
Common Stock
|
|
|
281,560
|
|
|
|
*
|
|
Robert J. Korkowski(4)
|
|
Common Stock
|
|
|
203,211
|
|
|
|
*
|
|
George A. Vandeman(5)
|
|
Common Stock
|
|
|
46,000
|
|
|
|
*
|
|
Bonnie Hammer(6)
|
|
Common Stock
|
|
|
8,490,052
|
|
|
|
23.9
|
%
|
|
|
Preferred Stock
|
|
|
5,339,500
|
|
|
|
100.0
|
%
|
Ronald J. Herman, Jr.(7)
|
|
Common Stock
|
|
|
5,339,500
|
|
|
|
13.7
|
%
|
|
|
Preferred Stock
|
|
|
5,339,500
|
|
|
|
100.0
|
%
|
Douglas V. Holloway(6)
|
|
Common Stock
|
|
|
8,490,052
|
|
|
|
23.9
|
%
|
|
|
Preferred Stock
|
|
|
5,339,500
|
|
|
|
100.0
|
%
|
Patrick O. Kocsi(7)
|
|
Common Stock
|
|
|
5,339,500
|
|
|
|
13.7
|
%
|
|
|
Preferred Stock
|
|
|
5,339,500
|
|
|
|
100.0
|
%
|
Named Executive Officers:
|
|
|
|
|
|
|
|
|
|
|
Frank P. Elsenbast(8)
|
|
Common Stock
|
|
|
112,601
|
|
|
|
*
|
|
Nathan E. Fagre(9)
|
|
Common Stock
|
|
|
131,407
|
|
|
|
*
|
|
Michael Murray(10)
|
|
Common Stock
|
|
|
96,580
|
|
|
|
*
|
|
Geoffrey W. Smith(11)
|
|
Common Stock
|
|
|
26,666
|
|
|
|
*
|
|
William J. Lansing(12)
|
|
Common Stock
|
|
|
1,783,553
|
|
|
|
5.0
|
%
|
Bryan Venberg
|
|
Common Stock
|
|
|
|
|
|
|
*
|
|
All directors and executive officers as a group
|
|
Common Stock
|
|
|
14,995,659
|
|
|
|
36.0
|
%
|
(15 persons)(13)
|
|
Preferred Stock
|
|
|
5,339,500
|
|
|
|
100.0
|
%
|
Other 5% or Greater Shareholders:
|
|
|
|
|
|
|
|
|
|
|
Fine Capital Partners, L.P.(14)
|
|
Common Stock
|
|
|
3,434,910
|
|
|
|
10.2
|
%
|
Fine Capital Advisors, LLC
|
|
|
|
|
|
|
|
|
|
|
Debra Fine
152 West 57th Street
37th Floor
New York, New York 10019
|
|
|
|
|
|
|
|
|
|
|
GE Capital Equity Investments, Inc.(15)
|
|
Common Stock
|
|
|
5,339,500
|
|
|
|
13.7
|
%
|
201 Merrit 7
|
|
Preferred Stock
|
|
|
5,339,500
|
|
|
|
100.0
|
%
|
Norwalk, Connecticut 06851
|
|
|
|
|
|
|
|
|
|
|
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
|
|
|
|
|
|
|
|
|
|
|
NBC Universal, Inc.(15)
|
|
Common Stock
|
|
|
8,489,052
|
|
|
|
23.9
|
%
|
30 Rockefeller Plaza
|
|
Preferred Stock
|
|
|
5,339,500
|
|
|
|
100.0
|
%
|
New York, New York 10112
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Percent of
|
Name and Address
|
|
Title of Class
|
|
Beneficially Owned
|
|
Class
|
|
Capital Research Global Investors(16)
|
|
Common Stock
|
|
|
1,900,000
|
|
|
|
5.7
|
%
|
SMALLCAP World Fund, Inc.
|
|
|
|
|
|
|
|
|
|
|
333 South Hope Street
Los Angeles, California 90071
|
|
|
|
|
|
|
|
|
|
|
Soundpost Partners, LP
|
|
|
|
|
|
|
|
|
|
|
Jamie Lester
Lyrical Partners, L.P.
|
|
|
|
|
|
|
|
|
|
|
Jeffrey Keswin(17)
|
|
Common Stock
|
|
|
2,805,774
|
|
|
|
8.4
|
%
|
405 Park Avenue, 6th Floor
New York, New York 10002
|
|
|
|
|
|
|
|
|
|
|
Mark A. Riely(18)
|
|
Common Stock
|
|
|
2,302,259
|
|
|
|
6.9
|
%
|
122 East 55th Street
New York, New York 10022
|
|
|
|
|
|
|
|
|
|
|
Wentworth, Hauser & Violich, Inc.(19)
|
|
Common Stock
|
|
|
1,833,700
|
|
|
|
5.5
|
%
|
353 Sacramento Street, Suite 600
San Francisco, California 94111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Less than 1%
|
|
(1)
|
|
Includes options to purchase 80,560 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(2)
|
|
Includes options to purchase 95,280 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(3)
|
|
Includes options to purchase 110,560 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(4)
|
|
Includes options to purchase 75,000 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(5)
|
|
Includes options to purchase 30,000 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(6)
|
|
As an officer of NBC Universal, Inc., this individual may be
deemed to have beneficial ownership of all shares that are
beneficially owned by NBC Universal, Inc. See note
(15) below. This individual disclaims beneficial ownership
of all of the shares that are beneficially owned by NBC
Universal, Inc.
|
|
(7)
|
|
As an officer of GE Commercial Finance, this individual may be
deemed to have beneficial ownership of all shares that are
beneficially owned by GE Commercial Finance. See note
(15) below. This individual disclaims beneficial ownership
of all of the shares that are beneficially owned by GE
Commercial Finance.
|
|
(8)
|
|
Includes options to purchase 105,337 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(9)
|
|
Includes options to purchase 125,700 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(10)
|
|
Represents options to purchase 96,580 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(11)
|
|
Represents options to purchase 26,667 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(12)
|
|
Represents options to purchase 1,783,553 shares that are
presently exercisable or may become exercisable within
60 days of April 18, 2008.
|
|
(13)
|
|
Includes (a) options to purchase 2,529,236 shares of
common stock that are presently exercisable or will become
exercisable within 60 days of April 18, 2008 granted
to directors and executive officers, (b) warrants to
purchase 2,036,858 shares of common stock that are
presently exercisable or will become exercisable within
60 days of April 18, 2008 granted to NBC Universal,
Inc. that are deemed to be beneficially owned by
|
16
|
|
|
|
|
certain directors who have disclaimed beneficial ownership and
(c) shares of common stock and preferred stock beneficially
owned by certain directors who have disclaimed beneficial
ownership (see notes (6) and (7) above).
|
|
(14)
|
|
Information with respect to Fine Capital Partners, L.P., Fine
Capital Advisors, LLC and Debra Fine is provided in reliance
upon information included in a Schedule 13D/A filed on
November 6, 2007. Fine Capital Partners, L.P., Fine Capital
Advisors, LLC and Debra Fine each have sole voting and
dispositive power with respect to all of the shares.
|
|
(15)
|
|
Information with respect to GE Commercial Finance, NBC
Universal, Inc., General Electric Capital Corporation, known as
GE Capital, General Electric Capital Services, Inc., known as
GECS, General Electric Company, known as GE, and National
Broadcasting Company Holdings, Inc., known as NBCHI is provided
in reliance upon information included in a Schedule 13D/A
filed on April 13, 2007. General Electric Capital Services,
Inc., General Electric Company and National Broadcasting Company
Holdings, Inc. disclaim beneficial ownership with respect to all
shares of common stock and preferred stock. Common stock shown
for GE Commercial Finance includes 5,339,500 shares of
common stock issuable upon conversion of the
5,339,500 shares of preferred stock. In addition, common
stock shown for NBC Universal, Inc. includes
6,452,194 shares of common stock and 2,036,858 shares
of common stock issuable upon exercise of certain warrants for
which NBC has sole dispositive power. See Certain
Transactions Strategic Alliance with GE Commercial
Finance and NBC Universal. Under certain agreements, GE
Commercial Finance, NBC Universal, Inc. and GE Capital, as the
parent company of GE Commercial Finance, may be deemed to share
voting power and dispositive power with respect to
5,339,500 shares of common stock (5,339,500 shares of
common stock issuable upon conversion of the
5,339,500 shares of preferred stock). See Certain
Transactions Strategic Alliance with GE Commercial
Finance and NBC and Trademark License
Agreement with NBC Universal. GECS, GE and NBCHI disclaim
beneficial ownership with respect to all shares of common stock
and preferred stock. The address of GECS and the address of GE
is 3135 Easton Turnpike, Fairfield, Connecticut 06431; and the
address of NBCHI is 30 Rockefeller Plaza, New York,
New York 10112.
|
|
(16)
|
|
Information with respect to Capital Research Global Investors, a
division of Capital Research and Management Company and SMALLCAP
World Fund, Inc. is provided in reliance upon information
included in a Schedule 13G filed on February 11, 2008.
Capital Research Global Investors has sole voting and
dispositive power with respect to all of the shares and SMALLCAP
World Fund, Inc. has sole voting and dispositive power with
respect to none of the shares. Capital Research Global Investors
disclaims beneficial ownership in the shares except to the
extent of their pecuniary interest in the shares.
|
|
(17)
|
|
Information with respect to Soundpost Partners, LP, Jaime
Lester, Lyrical Partners, L.P. and Jeffrey Keswin is provided in
reliance upon information included in a Schedule 13D filed
on November 13, 2007. Soundpost Partners, LP and Jaime
Lester share voting and dispositive power with respect to all of
the shares with Lyrical Partners, L.P. and Jeffrey Keswin.
|
|
(18)
|
|
Information with respect to Mark A. Riely is provided in
reliance upon information included in a Schedule 13D filed
on December 6, 2007. Mr. Riely shares voting and
dispositive power with respect to 1,500,205 of the shares,
including 1,314,390 shares owned by Media Group Investors,
L.P., which has a sole general partner, Media Group Management,
Inc., of which Mr. Riely is a 75% shareholder, and
185,815 shares owned by Media Group Investments, Ltd.,
which has as its investment advisor Vercingetorix Corp., of
which Mr. Riely is a 50% shareholder. Mr. Riely has
sole voting and dispositive power with respect to 802,054 of the
shares.
|
|
(19)
|
|
Information with respect to Wentworth, Hauser &
Violich, Inc. is provided in reliance upon information included
in a Schedule 13G filed on February 13, 2008.
Wentworth, Hauser & Violich, Inc. has sole voting and
dispositive power with respect to all of the shares. Wentworth,
Hauser & Violich, Inc. disclaims beneficial ownership
in the shares except to the extent of their pecuniary interest
in the shares.
|
17
EXECUTIVE
COMPENSATION
Compensation
Discussion and Analysis
This section contains a discussion of the material elements of
the compensation program covering our chief executive officer,
chief financial officer, our three other currently-serving most
highly compensated executive officers, and two highly
compensated former executive officers who ceased employment with
our company during fiscal 2007, all of whom are referred to in
this proxy statement as the named executive officers.
Overview
of Our Compensation Program
The compensation committee is charged, under its charter, with
the oversight of our human resources management and employee
compensation and benefits, including compensation of our named
executive officers and other designated company executives. Our
named executive officers for fiscal 2007 consist of our interim
president and chief executive officer, chief financial officer,
senior vice president and general counsel, vice
president operations, and vice president
internet, as well as our former president and chief executive
officer and our former senior vice president human
resources, operations and customer service who ceased employment
with our company during fiscal 2007. The compensation committee
also oversees compensation for all other company officers.
Our
Compensation Strategy and Objectives
Our executive compensation policies are designed to provide
competitive levels of compensation that integrate pay with our
annual objectives and long-term goals, reward improved corporate
performance, recognize individual initiative and achievements,
motivate individuals to generate growth in corporate earnings,
align executive and shareholder interests, and attract and
retain superior executive talent. The compensation committee
evaluates both performance and compensation to ensure that the
compensation provided to key leadership remains competitive
relative to executives in similar positions at peer companies.
The committee believes compensation provided by our company to
our executives, including the named executive officers, should
include both cash and equity-based compensation that reward
performance, based on established goals and measurable business
results and, in the case of equity-based compensation, increases
in our companys common stock price.
Role
of the Compensation Committee and the Chief Executive
Officer
The compensation committee has the primary responsibility for
assisting the board of directors in succession planning for the
chief executive officer and overseeing the development of
succession planning for the other named executives. The
compensation committee also annually reviews the elements of the
chief executive officers total compensation in light of
the goals and objectives of the compensation program and the
annual performance evaluation of the chief executive officer
(which is initially conducted by the governance committee), and
makes recommendations to the board of directors. The committee
is assisted in this process by its compensation consultant,
Towers Perrin, as discussed below. The chief executive officer
does not play a role in determining his or her own compensation,
except to the extent of discussing performance goals and his or
her annual performance evaluation.
The chief executive officer and the committee together review
and assess the performance of the other named executives on an
annual basis and the committee determines their compensation,
based in part on initial recommendations of the chief executive
officer. In reaching compensation decisions for the other named
executive officers, the committee and the chief executive
officer are assisted by the human resources department and the
committees compensation consultant. The other named
executives do not play a role in determining their own
individual compensation, other than discussing their own
performance goals and annual performance evaluations with the
chief executive officer.
Role
of our Compensation Consultant
The compensation committee has engaged Towers Perrin, a global
human resources consulting firm, to assist the committee in
developing the compensation programs for the chief executive
officer and the other named
18
executives, as well as our directors and other company officers.
Towers Perrin works for the compensation and governance
committees; it does not perform other consulting or advisory
work for our company and receives no compensation from us except
in connection with the matters assigned to it by the
compensation or governance committee. The compensation
consultant from Towers Perrin attends compensation committee and
corporate governance committee meetings and in some cases, board
of director meetings, including executive sessions, when so
requested by the committee chairman or the chairman of the board.
How We
Set Executive Compensation
Based on our compensation strategy and objectives, the
compensation committee has structured our base salary, annual
management incentive plan and long-term compensation programs
(both cash and non-cash). To ensure competitiveness of each
element of our compensation program, including base pay and
annual and long-term incentives, the committee generally directs
Towers Perrin to conduct an annual review of our total
compensation for the named executive officers and the other
corporate officers. Towers Perrin provides the committee with
relevant market data, including data from both published surveys
and proxy sources, and alternatives to consider when making
compensation decisions for the named executive officers and the
other corporate officers.
The committee compares each element of total compensation
against an established peer group as well as data from published
survey sources. The peer group, which is reviewed periodically
and updated by the committee, consists of publicly traded
specialty retail,
e-commerce,
media and mail order/catalog companies. Data from published
salary surveys is reviewed for comparison positions in
organizations with similar revenues. Published salary surveys
include Towers Perrin, Mercer and Watson Wyatt benchmark surveys
as well as the Towers Perrin media/retail survey.
The companies included in our peer group for proxy pay
comparison in fiscal 2007 included:
|
|
|
|
|
1 800 FLOWERS.COM Inc.
|
|
Finlay Enterprises Inc.
|
|
priceline.com Inc.
|
Alloy Inc.
|
|
GSI Commerce Inc.
|
|
School Specialty Inc.
|
Amazon.com, Inc.
|
|
IAC/InterActive Corp.
|
|
The E. W. Scripps Co.
|
Blair Corp.
|
|
Liberty Media Interactive
|
|
Sharper Image Corp.*
|
The Bombay Company Inc.
|
|
Overstock.com Inc.
|
|
Systemax Inc.
|
Coldwater Creek Inc.
|
|
PC Mall Inc.
|
|
Zale Corp.
|
eBay Inc.
|
|
|
|
|
|
|
|
*
|
|
Since the proxy pay comparison was completed, Sharper Image
filed for bankruptcy.
|
We compete with many larger retailers for executive talent.
Therefore, the committees philosophy generally is to set
total compensation (base pay, annual and long-term incentives)
for the named executive officers at market competitive levels of
compensation paid for similar roles in comparator organizations.
Actual base pay levels are determined giving consideration to
external market data, internal equity/value, our companys
performance, individual experience, qualifications and
performance, and overall affordability. Annual incentives are
designed to provide market competitive incentives for meeting
challenging annual targets and greater incentives for exceeding
aggressive annual targets. Long-term incentives are designed to
compensate executives by providing market competitive total
direct compensation and align executive performance with
shareholder interests.
Our compensation strategy allows for a substantial portion of
compensation to be allocated to annual and long-term incentives.
We do not maintain an established compensation mix (i.e.,
percentage of pay allocated between base pay and incentive pay,
either annual or long-term). Instead, the committee reviews
executive compensation data to determine the appropriate pay mix
and competitive level for each named executive officer. In May
2007, the committee approved a compensation mix for the named
executive officers that resulted on average in total direct
compensation (base salary, target annual incentive and
annualized expected value of long-term incentives) of
approximately 40% base pay and 60% incentive pay (annual and
long-term incentives). In December 2007, as discussed in the
stock options section of this discussion, our board of directors
approved a special stock option grant for all officers as a
retention and incentive tool. This resulted in greater emphasis
on incentive pay, as base salaries did not change.
19
Components
of Our Fiscal 2007 Executive Compensation Program
The elements in the executive compensation program for fiscal
2007 were base salary compensation, short-term incentive
compensation through an annual management bonus plan, long-term
incentive compensation through a cash-based long-term incentive
plan and stock options, and miscellaneous benefits and
perquisites (consisting primarily of a car allowance, a 401(k)
plan and customary health benefits). The car allowance
perquisite was discontinued in fiscal 2008. Each element of
compensation is described below.
Base
Salary
We pay competitively to our relevant labor market for talent.
Actual pay levels are determined with consideration given to
external market data, internal equity/value, individual
performance, our companys performance and overall
affordability.
The committee reviews base salaries of the named executive
officers. In its review, the committee considers external and
comparable proxy data, internal equity/value and individual
performance of the officer. Base salary compensation is
typically considered annually as part of our performance review
process. In addition, base salary compensation is reviewed upon
a promotion or substantial change in job responsibility.
Annual
Performance-Based Compensation
Annual incentive compensation for executives is based primarily
on attainment of specified corporate financial results, as
determined by the compensation committee, with market
competitive incentives for meeting challenging targets and
greater incentives for exceeding aggressive targets. We
developed our management incentive plan to provide annual
incentives to our senior executives, align executive performance
incentives with shareholder interests, and to encourage these
executives to remain in our employ through annual cash incentive
awards. All officers are eligible to participate in the
management incentive plan. The incentive plan rewards
participants with annual incentive cash compensation for
attaining pre-determined company goals and in some cases,
individual goals. Awards are based on actual results measured
against the attainment of performance targets selected by the
committee based on measures reflecting of one or more of the
following: earnings or earnings per share; EBITDA or EBITDA
per share; net earnings or net earnings per share (profit
after taxes); inventory levels or inventory turnover; total net
sales; total gross profit or total gross profit percentage;
operating cash flow or free cash flow; economic value added;
accounts receivable (measured in terms of days sales
outstanding); operating expenses; operating income; total
shareholder return; return on equity; pre-tax and pre-interest
expense return on average invested capital, which may be
expressed on a current value basis; profit before taxes or
profit after taxes less our cost of capital; or sales growth
(gross sales or net sales). Any of these targets may relate to
one or any combination of two or more of corporate, group, unit,
division, affiliate or individual performance. We originally
adopted a management incentive plan in 2002 and our shareholders
approved our current plan in 2007. The plan is subject to
compensation committee oversight and modification and may be
modified during the fiscal year as appropriate.
At its first meeting in each fiscal year, in February or March,
the compensation committee reviews and approves the components
of the management incentive plan for the upcoming fiscal year,
including the minimum, target and maximum levels for each
component in the plan. No payment is approved for the named
executive officers unless we achieve a minimum performance level
as defined by the fiscal years approved plan. For fiscal
2007, the committee established a maximum payout level of 200%
of the target. The management incentive plan includes various
incentive levels based on the executives job level and
impact on company operations, with fiscal 2007 award targets
ranging from 43% to 120% of base salary for the named executive
officers.
For fiscal 2007, the named executive officers annual
incentives under this plan were based 60% on the achievement of
EBITDA (as defined by the compensation committee for purposes of
calculating payment of annual incentives under the Management
Incentive Plan and for calculating payments under the Long Term
Incentive Plan, herein after referred to as EBITDA, as
adjusted) goals and 40% on the achievement of sales goals.
Reduced annual incentives would have been paid if at least 88%
of the EBITDA, as adjusted, goal was achieved
and/or
if at
least 97% of the sales goal had been achieved. However, based on
actual fiscal 2007 results, no annual incentive payments were
made as the minimum thresholds for EBITDA, as adjusted, and
sales thresholds required for payment were not attained as
determined by the compensation committee. The adjustments to
EBITDA and the thresholds are discussed in more detail below.
20
Specific financial and business performance goals that are
intended to meet shareholder expectations have been identified
for fiscal 2008. The purpose of this plan is to focus and align
the organization by communicating and rewarding the achievement
of company and individual performance goals. As part of rolling
out the fiscal 2008 incentive plan, all officers incentive
targets were reduced by 15% in order to fund company-wide
participation for all eligible employees without increasing the
overall company expense for the fiscal 2008 plan.
For fiscal 2008, our chief executive officers annual
incentive will be based 100% on the achievement of company
goals, with 70% based on the achievement of EBITDA goals, as
EBITDA may be adjusted in the committees discretion to
exclude non-recurring items or otherwise reflect corporate
developments; 15% based on the achievement of return rate goals
and 15% based on the achievement of active core customer growth
goals. For all other officers, annual incentives will be based
75% on the achievement of company goals (weighted 70%/15%/15% to
achievement of EBITDA, as it may be adjusted, return rate and
core customer growth respectively) and 25% on the achievement of
specific individual goals. For all participants, return rate and
active core customer goals exclude the impact of sales of
computers and electronics. However, no payments for any of the
company or individual performance measures will be made unless
the company achieves a minimum threshold of EBITDA, as it may be
adjusted, and a minimum threshold of cash flow.
2007
Performance Targets for Annual Incentive Compensation
Our annual incentive compensation performance targets in 2007
were designed to encourage the achievement of high single-digit
sales increases and a significant increase in EBITDA, as
adjusted, profitability over fiscal 2006. For fiscal 2007, the
target payout for the named executive officers was based on
achieving actual sales and EBITDA, as adjusted, performance in
line with pre-approved annual target levels of
$831.2 million in sales and $18.6 million in EBITDA,
as adjusted. In fiscal 2007, our actual sales level was
$782 million, an increase of 2% over fiscal 2006, and our
actual EBITDA, as adjusted, was $6.9 million compared to an
EBITDA, as adjusted, of $14.7 million the prior year. In
the first quarter of fiscal 2007, the compensation
committee decided to exclude from annual incentive plan and
long-term
incentive plan (LTIP) compensation calculations in
fiscal 2007 any benefit or penalty relating to
non-recurring
non-operating
gains or losses realized by our company in connection with the
then-recently
completed sale of our 12.5% equity interest stake in Ralph
Lauren Media LLC (RL Media). Accordingly, EBITDA, as adjusted
and net income, as adjusted, for fiscal 2007 annual
incentive plan and LTIP calculation purposes, did not include
the impact of the approximately $40 million pre-tax gain
from the sale of RL Media. The committee also determined to
adjust the fiscal 2007 annual incentive plan and LTIP
targets for EBITDA, as adjusted, and net income, as adjusted,
downward by $3 million to reflect the loss of the
previously-anticipated
positive contribution to those measures from equity income from
the companys stake in RL Media. Because our performance in
fiscal 2007,as adjusted in this manner, fell below the targets,
as adjusted, the named executive officers did not receive any
payments from our annual management incentive plan. EBITDA, as
adjusted, is defined, and a reconciliation to net income is
provided, in our annual report on
form 10-K
for fiscal 2007, which has been filed with the Securities and
Exchange Commission.
Long-Term
Incentive Compensation
Stock
Options
Awards of stock options and restricted stock grants are designed
to motivate sustained share price growth over the long-term and
to align the executives interests with those of
shareholders. Our equity compensation plans permit our company
to grant stock options and restricted stock to key personnel,
consultants and members of our board of directors. Our equity
compensation plans also provide the ability for our company to
grant other forms of equity awards, such as performance shares;
however, to date no equity awards other than stock options or
restricted stock have been made.
The compensation committee has established an equity awards
administration policy and guidelines for executives and other
employees. Equity-based compensation is consistent with the
committees overall compensation philosophy by aligning the
long-term incentives of management and designated employees with
the long-term interests of shareholders and providing a valuable
tool for management and employee retention. The policy addresses
the required approvals for any equity awards, a regular equity
award grant cycle tied to annual performance reviews and
scheduled meetings of the compensation committee, establishment
of grant dates, fair market value and exercise prices for stock
options, standards for the size of the equity awards based on
the position
21
and performance of the individual at our company, the impact of
stock trading blackout periods and public announcements, and
internal controls and recordkeeping. Stock options generally are
granted at our regularly scheduled April/May compensation
committee meeting. On occasion we will make equity compensation
grants outside of our annual grant cycle for new hires and
promotions or recognition or retention purposes. All grants to
executive officers are approved by the compensation committee
with an effective date of grant on or after the date of such
approval. If the grant date is after the date of approval, it is
on a date that is specified by the committee at the time of
approval. We generally do not grant equity awards by written
consent but instead seek to have equity grants awarded during
in-person or telephonic meetings of the compensation committee
or the board of directors. We have no practice or policy of
coordinating or timing the release of company information around
grant dates.
The committee also has established (i) the stock-based
awards and performance-based subcommittee, which has the
authority to approve or recommend to the board of directors for
approval, as the case may be, all equity-based awards for
company executives; and (ii) a management committee of
company employees, known as the equity awards committee, which
has been delegated limited authority to approve equity-based
awards to other employees under the oversight and pursuant to
grant guidelines established by the compensation committee. The
compensation committee believes that, to the extent possible,
equity awards should be made on a regular annual grant cycle
tied to meetings scheduled in advance of either the subcommittee
or the equity awards committee.
During fiscal 2007, restricted stock awards were granted to John
Buck, representing compensation received for serving as the
companys interim president and chief executive officer
from October 25, 2007 through the end of the fiscal year
2007. The grants are summarized on the Grants of Plan Based
Awards table. In addition to his role as chairman of the board
of directors, Mr. Buck served as our interim president and
chief executive officer following the employment cessation of
William Lansing, our former chief executive officer, on
October 25, 2007. The board of directors approved a
compensation program for Mr. Buck for fulfilling this
interim role. Under the initial program, Mr. Buck was to be
paid at a rate of $40,000 per month and could elect to receive
the compensation in cash, restricted stock or stock options in
the month prior to performing actual services. On
December 18, 2007, a modification to this compensation
program was approved by the board of directors, whereby
Mr. Buck received a grant of 8,500 shares of
restricted stock for each month of service as our interim
president and chief executive officer. In making the
modification to the compensation program, the board of directors
recognized that Mr. Buck had been devoting more time and
effort as our interim president and chief executive officer than
originally anticipated. The revised program also aligned
Mr. Bucks compensation more closely with the creation
of shareholder value. The shares of restricted stock vested on
March 3, 2008, when Rene G. Aiu joined our company as our
new president and chief executive officer.
In December 2007, our board of directors approved stock option
grants for all officers, including the named executive officers,
as a retention and incentive tool. In lieu of an annual grant,
the stock-based awards and performance-based compensation
subcommittee approved stock option grants for officers at the
rate of twice the normal annual grant. The special grant was
designed as a tool both for retention and incentivizing officers
during a critical leadership and business transition. The grants
vest over a four year period, with half of the grant vesting in
2009 and half in 2011. As part of this special grant, no base
salary increases for these officers will be approved in 2008.
Additionally, recipients of this special stock option grant will
forego annual stock option grants in 2008 and 2009. The details
of the specific grants are listed on the Grants of Plan Based
Awards table.
Performance-Based
Long-Term Incentive Plan
We established the 2006 long-term incentive plan, known as the
LTIP, in fiscal 2005. The purpose of the plan was to provide
designated key employees with financial incentives tied to our
companys success in achieving challenging multi-year
financial and business goals. The LTIP was established to assist
us in our ability to retain key employees at a time when the
stock options outstanding under our stock option programs were
largely out of the money, to reinforce a performance culture by
rewarding measurable results over time and to tie a meaningful
portion of key employees total compensation to the
achievement of multi-year corporate goals and objectives.
Under the LTIP, for each performance period the compensation
committee selects financial or operational performance measures
and established targets for these measures that must be achieved
in order for the participating employees to receive awards under
the plan. The initial performance period under the LTIP covered
the two-year
22
period of fiscal 2006 and 2007. For the initial period, the
compensation committee determined that qualification for an
incentive award under the plan would be tied to our
companys attainment of targets established for four
specific financial and business measures at the end of each of
fiscal year 2006 and fiscal year 2007. These measures were: net
sales; EBITDA, as adjusted; net income; and gross margin dollars
per hour. Awards could be earned for achievement of the
specified targets for each of the four measures at the rate of
up to 50% of the potential incentive award for fiscal 2006 and
at the rate of up to 100% of the potential incentive award for
fiscal 2007; however, the awards were not cumulative (i.e., only
the greater of the potential awards for fiscal 2006 or 2007 were
paid, with fiscal 2007 results weighted higher to promote
retention). The compensation committee of the board of directors
administers the LTIP and has the authority in its sole
discretion to calculate and, in its discretion to reduce, the
awards payable under the LTIP and to exclude one-time or
extraordinary events from the applicable calculations of payable
amounts. The potential cost of the LTIP for the initial two-year
performance period, if all performance measures were achieved at
100%, was an aggregate amount of approximately $5 million.
Actual payments made in March 2008 resulted in an aggregate
payment of approximately $1.1 million. As stated above, in
the first quarter of fiscal 2007 the compensation committee
approved certain adjustments to the calculation of EBITDA, as
adjusted, and net income, as adjusted, under the 2007 annual
incentive plan and the LTIP, in connection with the sale of the
companys stake in RL Media. These adjustments had a
significant downward impact on the calculated levels of EBITDA,
as adjusted and net income, as adjusted, in fiscal 2007 as
compared to the target levels for purposes of these two plans
and on the calculated payments awarded under the 2007 annual
incentive plan and the 2006-2007 LTIP. The board of directors
authorized the LTIP to operate only for the initial performance
period of fiscal 2006 and 2007; the LTIP could be extended in
future periods only upon an affirmative written determination by
the board of directors. At this time, no determination has been
made to continue the LTIP for future periods.
With the exceptions of Mr. Buck and Mr. Smith, all of
our named executive officers were selected to participate in the
plan for the initial performance period, as well as nine other
officers. The officers designated by the compensation committee
to participate under the LTIP were eligible to receive a 100%
payout of their target award equal to their base salary and
annual incentive objective (as in effect at the beginning of
fiscal 2006) if all of the targets set for each of the four
plan measures were fully achieved at the end of fiscal 2007,
provided that the participant remained an employee in good
standing of our company at the time of payment under the plan
(March 2008). In the event all of the targets were not fully
achieved during the initial performance period, the participant
was eligible to receive a lesser amount under the LTIP based on
our companys performance under the established measures;
however, no amount was awarded with respect to a specific plan
measure unless at least 60% of the plan measure target was
achieved. Following fiscal 2007 results, LTIP payments for
participants in good standing at the time of payment (March
2008) were paid at 52% of their target award. LTIP payments
received by our named executive officers in good standing at the
time of payment are included in the Summary Compensation Table.
The preceding summary description of the plan is qualified in
its entirety by reference to the terms of the plan, which is
attached as an exhibit to a report on
Form 8-K
which was filed with the Securities and Exchange Commission on
January 18, 2006.
Performance
Targets for the Long-Term Incentive Plan
Our LTIP included four specific performance targets for 2006 and
2007, as discussed above. For fiscal years 2006 and 2007, we had
established pre-approved performance targets prior to the
beginning to the initial performance period.
For fiscal 2006, performance targets were set at
$741 million for net sales; $9 million for EBITDA, as
adjusted; a loss of $(13) million for net income, as
adjusted; and $31,100 for gross margin dollars per hour. Our
results for fiscal 2006 as determined by the compensation
committee were net sales of $767 million; EBITDA, as
adjusted of $14.7 million; net loss, as adjusted of
($7) million and gross margin dollars per hour of $30,600.
For fiscal 2007 performance targets were set at
$800 million for net sales; $22 million for EBITDA, as
adjusted; a loss of ($3) million for net income, as
adjusted; and $34,500 for gross margin dollars per hour. Our
results for fiscal 2007 as determined by the compensation
committee were net sales of $782 million; EBITDA, as
adjusted of $6.9 million; net loss, as adjusted of
($9) million and gross margin dollars per hour of $31,100.
EBITDA, as adjusted is defined, and a reconciliation to net
income is provided, in our annual report on
Form 10-K
for fiscal 2006 and fiscal 2007, which have been filed with the
Securities and Exchange Commission.
23
As a result, LTIP payments for participants in good standing at
the time of payment (March 2008) were paid at 52% of their
target award. This is result of the combined effect of fiscal
year results and weighting.
Retirement
Plan
We provide a qualified defined contribution plan, our 401(k)
plan, for all eligible employees including the named executive
officers. Participants can defer a portion of their eligible
compensation on a pre-tax basis up to the applicable Internal
Revenue Service limits. We provide a match equal to 50% of the
first 6% of pay that is contributed to the plan up to Internal
Revenue Service compensation limits. All company matching
contributions vest 20% per year of vesting service and a
participant is fully vested after five years.
We do not provide a defined benefit plan.
Perquisites
We provide limited perquisites to executives. Select named
executive officers received an auto allowance in fiscal 2007 and
commuting expenses as noted in the Summary Compensation Table.
William Lansing, our former chief executive officer, received
annual tax preparation support as noted in the Summary
Compensation Table.
In fiscal 2008, as a result of reviewing our compensation
strategy, we no longer provide auto allowances or tax
preparation support as perquisites to our executives.
Compensation
of New Executive Officers Hired in Fiscal 2008
Several new senior officers were hired in early fiscal 2008,
including our president and chief executive officer, Rene G.
Aiu, who joined our company on March 3, 2008. On
March 4, 2008, Ms. Aiu was appointed to our board of
directors. Mr. Buck stepped down as interim chief executive
officer on March 3, 2008 and will continue to serve as
executive chairman of our board of directors. On April 1,
2008, we announced the addition of three senior officers: Glenn
Leidahl, our chief operating officer; Terry Curtis, our senior
vice president customer analytics and sales
planning; and John Gunder, our senior vice president
media and on-air sales. All three senior officers report
directly to our chief executive officer.
Rene G.
Aiu
Ms. Aius compensation consists of base salary, annual
and long-term incentives as well as eligibility for severance as
stated in her offer letter and released in a report on
Form 8-K
filed with the Securities and Exchange Commission on
March 7, 2008. As part of her compensation package,
Ms. Aiu receives an annualized base salary of $600,000 and
a target annual incentive opportunity of 75% of her base salary,
with the opportunity to achieve up to 150% of her base salary if
our companys financial performance meets or exceeds the
maximum award level goals. However, as described in the Annual
Performance-Based Compensation section of this discussion, her
fiscal 2008 annual incentive target was reduced by 15%. Her
incentive opportunity in our annual management incentive plan
will also be prorated in fiscal 2008 based on her hire date. A
portion of her fiscal 2008 incentive payment is guaranteed at a
minimum value of $300,000 with $150,000 paid upon hire and the
balance paid within 90 days of the end of fiscal 2008. The
fiscal 2008 annual incentive balance payable following the end
of the fiscal year will be the greater of (a) $150,000 or
(b) the actual 2008 incentive earned less $150,000.
Ms. Aius long-term incentives include an option to
purchase 750,000 shares of our common stock at a price per
share of $5.19, the closing price of our common stock of
March 3, 2008, her employment start date. This option vests
in 1/3 increments upon each anniversary of her employment start
date and expires ten years from the date of grant. She will also
receive an additional grant of an option to purchase
200,000 shares of our common stock with an exercise price
equal to the closing price of our common stock on the date of
grant, which grant will be made at the first board of directors
meeting following the first anniversary of her start date with
our company, but in no event later than April 30, 2009, so
as long as she remains the chief executive officer at that time.
In the event Ms. Aius employment is terminated
without cause or she resigns from employment for good reason (as
defined in her offer letter), she is eligible to receive the
greater of (a) the severance pay and other transition
benefits as defined in our severance guidelines in effect at the
time of her termination or (b) 24 months of
24
target cash compensation, where the monthly target cash
compensation is equal to 1/12 of her base salary plus 1/12 of
her annual target incentive opportunity (which is 75% of her
base salary) as of the date of termination. In the event of
termination without cause or resignation for good reason within
12 months following a change of control of our company, in
addition to the payments described in this paragraph, and
otherwise due under any other agreements we enter into with
Ms. Aiu, we shall pay or make available to Ms. Aiu a
pro-rata portion of her target annual incentive opportunity
amount for the fiscal year in which the removal or resignation
occurs. Any tax liability imposed upon or incurred including tax
liability relating to Section 280G, Section 4999 or
Section 409A of the Internal Revenue Code will be
Ms. Aius responsibility. All transition and severance
pay or benefits are conditional upon her execution of an
effective agreement that complies with applicable laws in which
she releases our company and all related parties from any and
all claims against them.
In addition to our companys standard relocation package,
we provided Ms. Aiu with an additional payment of
$50,000 net after applicable taxes for the purpose of
covering additional transitional expenses.
Glenn K.
Leidahl
Mr. Leidahls compensation consists of base salary,
annual and long-term incentives as well as eligibility for
severance as stated in his offer letter and released in a report
on
Form 8-K
filed with the Securities and Exchange Commission on
April 4, 2008. As part of his compensation package,
Mr. Leidahl receives an annualized base salary of $350,000,
a signing bonus of $50,000, and a target annual incentive
opportunity of 50% of his base salary, with the opportunity to
achieve up to 100% of his base salary if our companys
financial performance meets or exceeds the maximum award level
goals. However, as described in the Annual Performance-Based
Compensation section of this discussion, his fiscal 2008 annual
incentive target was reduced by 15%. His incentive in our annual
management incentive plan will also be prorated in fiscal 2008
based on his hire date. A portion of his fiscal 2008 incentive
payment is guaranteed at a minimum value of $80,000 which was
paid upon hire. The fiscal 2008 balance payable following the
end of the fiscal year will be the actual incentive earned less
$80,000.
Mr. Leidahls long-term incentives include an option
to purchase 225,000 shares of our common stock at a price
per share of $5.74, the closing price of our common stock of
April 1, 2008, his employment start date. This option vests
in
1
/
3
increments upon each anniversary of his employment start date
and expires ten years from the date of grant.
In the event Mr. Leidahls employment is terminated
without cause or he resigns from employment for good reason, he
is eligible to receive the greater of (a) the severance pay
and other transition benefits as defined in our severance
guidelines for executive officers in effect at the time of his
termination or (b) 12 months of his base salary at the
time of termination plus 12 months of medical coverage
under COBRA. Any tax liability imposed upon or incurred
including tax liability relating to Section 280G,
Section 4999 or Section 409A of the Internal Revenue
Code will be Mr. Leidahls responsibility. All
transition and severance pay or benefits are conditional upon
his execution of an effective agreement that complies with
applicable laws in which he releases our company and all related
parties from any and all claims against them.
Terry T.
Curtis
Mr. Curtis compensation consists of base salary,
annual and long-term incentives as well as eligibility for
severance as stated in his offer letter. As part of his
compensation package, Mr. Curtis receives an annualized
base salary of $320,000 and a target annual incentive
opportunity of 45% of his base salary with the opportunity to
achieve up to 90% of his base salary if our companys
financial performance meets or exceeds the maximum award level
goals. However, as described in the Annual Performance-Based
Compensation section of this discussion, his fiscal 2008 annual
incentive target was reduced by 15%. His incentive in our annual
management incentive plan will also be prorated in fiscal 2008
based on his hire date. A portion of his fiscal 2008 incentive
payment is guaranteed at a minimum value of $70,000 which was
paid upon hire. The fiscal 2008 balance payable following the
end of the fiscal year will be the actual incentive earned less
$70,000.
Mr. Curtis long-term incentives include an option to
purchase 150,000 shares of our common stock at a price per
share of $5.74, the closing price of our common stock of
April 1, 2008, his employment start date. This option vests
in
1
/
3
increments upon each anniversary of his employment start date
and expires ten years from the date of grant.
25
In the event Mr. Curtis employment is terminated
without cause or he resigns from employment for good reason, he
is eligible to receive the greater of (a) the severance pay
and other transition benefits as defined in our severance
guidelines for executive officers in effect at the time of his
termination or (b) 12 months of his base salary at the
time of termination plus 12 months of medical coverage
under COBRA. Any tax liability imposed upon or incurred
including tax liability relating to Section 280G,
Section 4999 or Section 409A of the Internal Revenue
Code will be Mr. Curtis responsibility. All
transition and severance pay or benefits are conditional upon
his execution of an effective agreement that complies with
applicable laws in which he releases our company and all related
parties from any and all claims against them.
John D.
Gunder
Mr. Gunders compensation consists of base salary,
annual and long-term incentives as well as eligibility for
severance as stated in his offer letter. As part of his
compensation package, Mr. Gunder receives an annualized
base salary of $240,000 and a target annual incentive
opportunity of 45% of his base salary with the opportunity to
achieve up to 90% of his base salary if our companys
financial performance meets or exceeds the maximum award level
goals. However, as described in the Annual Performance-Based
Compensation section of this discussion, his fiscal 2008 annual
incentive target was reduced by 15%. His incentive in our annual
management incentive plan will be prorated in fiscal 2008 based
on his hire date. A portion of his fiscal 2008 incentive payment
is guaranteed at a minimum value of $50,000 which was paid upon
hire. The fiscal 2008 balance payable following the end of the
fiscal year will be the actual incentive earned less $50,000.
Mr. Gunders long-term incentives include an option to
purchase 150,000 shares of our common stock at a price per
share of $5.74, the closing price of our common stock of
April 1, 2008, his employment start date. This option vests
in
1
/
3
increments upon each anniversary of his employments start date
and is exercisable ten years from the date of grant.
In the event Mr. Gunders employment is terminated
without cause or he resigns from employment for good reason, he
is eligible to receive the greater of (a) the severance pay
and other transition benefits as defined in our severance
guidelines for executive officers in effect at the time of his
termination or (b) 12 months of his base salary at the
time of termination plus 12 months of medical coverage
under COBRA. Any tax liability imposed upon or incurred
including tax liability relating to Section 280G,
Section 4999 or Section 409A of the Internal Revenue
Code will be Mr. Gunders responsibility. All
transition and severance pay or benefits are conditional upon
his execution of an effective agreement that complies with
applicable laws in which he releases our company and all related
parties from any and all claims against them.
Accounting
and Tax Considerations
Our general approach to the design of compensation programs and
practices is to seek to meet the standards of Internal Revenue
Code sections 162(m) and 409A in order to receive the most
favorable tax treatment for our company for expenses relating to
executive compensation. Section 162(m) of the Internal
Revenue Code disallows a tax deduction to public companies for
compensation over $1 million paid to our chief executive
officer or any of the four other most highly compensated
executive officers (subject to certain exceptions). The existing
management incentive plan, approved by the shareholders at the
2007 annual meeting, is consistent with Section 162(m). The
board of directors and the compensation committee generally
intend that any grants of options or performance units under the
omnibus stock plans and awards made under the management
incentive plan meet the requirements of Section 162(m). The
committee believes, however, that in order to retain the
flexibility to compensate its executive officers in a
competitive environment in accordance with the principles
discussed above, it would be inadvisable to adopt a strict
policy of compliance with Section 162(m) in all cases. The
2006-2007
LTIP was not compliant with Section 162(m). The committee
will continue to consider future opportunities for compliance
with Section 162(m) that it feels are in the best interests
of our company and its shareholders. With respect to compliance
with Section 409A of the Internal Revenue Code, while we do
not maintain a deferred compensation plan, we currently
structure our compensation programs and practices to comply with
Section 409A and we plan to make any amendments as
necessary within the required time periods.
26
Compensation
Committee Report
The compensation committee of our board of directors has
discussed and reviewed the Compensation Discussion and Analysis
with management. Based upon this review and discussion, the
compensation committee recommended to the board of directors
that the Compensation Discussion and Analysis be included in
this proxy statement.
The Human Resources
And
Compensation Committee
John D. Buck (Chair)
Ronald J. Herman Jr.
Robert J. Korkowski
George A. Vandeman
Summary
Compensation Table
The following table shows, for each of our named executive
officers for fiscal 2007 and 2006 (if applicable), information
concerning compensation earned for services in all capacities
during fiscal 2007 and 2006. When setting total compensation for
each of the named executive officers, the compensation committee
reviews tally sheets that show the executives current
compensation, including equity and non-equity based compensation.
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Stock
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Option
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Non-Equity
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All Other
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Salary
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Awards
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Awards
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Incentive Plan
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Compensation
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Total
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Name and Principal Position
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Year
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($)
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($)(1)
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($)(2)
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Compensation ($)(3)
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($)(4)
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($)
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John Buck
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2007
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(5)
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12,544
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12,544
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Interim President and
Chief Executive Officer
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2006
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(7)
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Frank Elsenbast
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2007
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294,231
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27,152
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183,225
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14,903
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(4)
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519,511
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Senior Vice President and
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2006
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269,231
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21,079
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126,179
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13,272
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(4)
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429,761
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Chief Financial Officer
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Nathan Fagre
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2007
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309,231
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139,558
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202,071
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13,816
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(4)
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664,676
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Senior Vice President,
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2006
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296,769
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9,820
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126,179
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12,528
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(4)
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445,296
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General Counsel and Secretary
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Geoffrey Smith
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2007
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Vice President Internet
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2006
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(7)
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237,692
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96,393
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85,944
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(6)
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420,029
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Michael Murray
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2007
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(8)
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Vice President Operations
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2006
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(7)
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123,185
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10,861
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268,913
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(9)
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402,959
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William J. Lansing(10)
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2007
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634,231
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2,805,382
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(11)
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3,439,613
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Former President and
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2006
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850,000
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1,287,024
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39,459
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(12)
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2,176,483
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Chief Executive Officer
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Bryan Venberg(13)
|
|
|
2007
|
|
|
|
202,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
290,121
|
(14)
|
|
|
492,813
|
|
Former Senior Vice
|
|
|
2006
|
|
|
|
244,231
|
|
|
|
|
|
|
|
48,715
|
|
|
|
126,179
|
|
|
|
11,924
|
(4)
|
|
|
431,049
|
|
President Human Resources, Operations and
Customer Service
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts shown do not reflect compensation actually received by
the named executive officer. Instead, the amounts shown are the
compensation costs recognized by our Company in fiscal 2007 for
stock awards as determined pursuant to FAS 123R.
|
|
(2)
|
|
Amounts shown do not reflect compensation actually received by
the named executive officer. Instead, the amounts shown are the
compensation costs recognized by our Company in fiscal 2006
and/or 2007 for option awards as determined pursuant to
FAS 123R. These compensation costs reflect certain option
awards granted in and prior to fiscal 2006 and 2007. The
assumptions used to calculate the value of option awards are set
forth under Note 6, Shareholders Equity and
Redeemable Preferred Stock Stock-Based
Compensation of the Notes to Consolidated Financial
Statements included in our Annual Report on
Form 10-K
for fiscal 2006 filed
|
27
|
|
|
|
|
with the Securities and Exchange Commission on April 17,
2007 and for fiscal 2007 filed with the Securities and Exchange
Commission on April 29, 2008.
|
|
(3)
|
|
For fiscal 2006, amounts represent performance-based
compensation paid for performance through the annual management
incentive plan. For fiscal 2007, amounts represent the
performance-based compensation paid for performance through the
long-term incentive plan (LTIP) covering fiscal 2006 and fiscal
2007. No performance-based compensation was paid through the
annual management incentive plan for fiscal 2007.
|
|
(4)
|
|
Represents receipt of an auto allowance as well as company match
in our 401(k) Plan. Unless otherwise noted, named executive
officers were eligible for an annual auto allowance equal to
$6,600 per year. We provide a company match in the 401(k) plan
equal to 50% for the first 6% of eligible compensation deferred,
up to IRS compensation limits.
|
|
(5)
|
|
Consists solely of Mr. Bucks compensation for serving
as our interim chief executive officer. Mr. Bucks
compensation for serving as a director is set forth under
Director Compensation for Fiscal 2007.
|
|
(6)
|
|
Includes $82,621 in commuting expenses, in addition to 401(k)
plan company match.
|
|
(7)
|
|
Not a named executive officer in fiscal 2006.
|
|
(8)
|
|
Not eligible for payment through the LTIP covering fiscal 2006
and fiscal 2007 due to employment termination on May 21,
2007.
|
|
(9)
|
|
Includes $243,000 in severance pay, as a result of a layoff
connected with restructuring our operations on May 21,
2007. Mr. Murray was rehired by us on November 8,
2007. Also includes $8,627 of accrued vacation, paid out upon
layoff per policy in addition to commuting expenses ($7,260),
auto allowance ($3,300) and 401(k) plan company match.
|
|
(10)
|
|
On October 25, 2007, at the request of our board of
directors, Mr. Lansing stepped down as our Chief Executive
Officer.
|
|
(11)
|
|
Includes $2,720,000 in severance pay, as a result of cessation
of employment on October 25, 2007. Also includes $49,038 of
accrued vacation, paid out upon cessation per policy in addition
to auto allowance ($13,500), tax preparation assistance
($16,959) and 401(k) plan company match.
|
|
(12)
|
|
Includes $18,000 in auto allowance and $14,859 in tax
preparation assistance, in addition to company match in our
401(k) plan.
|
|
(13)
|
|
On October 26, 2007, at the request of our board of
directors, Mr. Venberg stepped down as our Senior Vice
President Human Resources, Operations and Customer
Service.
|
|
(14)
|
|
Includes $266,600 in severance pay, as a result of cessation of
employment on October 26, 2007. Also includes $15,000 of
accrued vacation, paid out upon cessation per policy in addition
to auto allowance ($5,077) and 401(k) plan company match.
|
28
Grants of
Plan-Based Awards in Fiscal 2007
The following table sets forth certain information concerning
plan-based awards granted to the named executive officers during
fiscal 2007. The majority of grants during fiscal 2007 were for
our cash-based annual management incentive plan and stock option
awards.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Number of
|
|
Exercise or
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares of
|
|
Securities
|
|
Base Price of
|
|
Grant Date Fair
|
|
|
|
|
|
|
Estimated Possible Payouts Under Non-Equity Incentive Plan
Awards(1)
|
|
Stock or
|
|
Underlying
|
|
Stock or
|
|
Value of
|
|
|
Date of
|
|
Grant
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Option Awards
|
|
Stock or Option
|
Name
|
|
Action
|
|
Date
|
|
($)
|
|
($)
|
|
($)
|
|
(#)
|
|
(#)
|
|
($/SH)
|
|
Awards ($)
|
|
John Buck
|
|
|
11/23/2007
|
|
|
|
11/23/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,649
|
(2)
|
|
|
|
|
|
|
6.41
|
|
|
|
49,030
|
(4)
|
|
|
|
12/27/2007
|
|
|
|
12/27/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,270
|
(2)
|
|
|
|
|
|
|
6.39
|
|
|
|
72,015
|
(4)
|
|
|
|
1/31/2008
|
|
|
|
1/31/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,500
|
(2)
|
|
|
|
|
|
|
6.28
|
|
|
|
53,380
|
(4)
|
Frank Elsenbast
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
150,000
|
|
|
|
300,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
(3)
|
|
|
6.48
|
|
|
|
725,000
|
(5)
|
Nathan Fagre
|
|
|
|
|
|
|
|
|
|
|
93,600
|
|
|
|
156,000
|
|
|
|
312,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
(3)
|
|
|
6.48
|
|
|
|
580,000
|
(5)
|
Geoffrey Smith
|
|
|
|
|
|
|
|
|
|
|
64,800
|
|
|
|
108,000
|
|
|
|
216,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(3)
|
|
|
6.48
|
|
|
|
290,000
|
(5)
|
Michael Murray
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
100,000
|
|
|
|
200,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
(3)
|
|
|
6.48
|
|
|
|
290,000
|
(5)
|
William Lansing
|
|
|
|
|
|
|
|
|
|
|
612,000
|
|
|
|
1,020,000
|
|
|
|
2,040,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bryan Venberg
|
|
|
|
|
|
|
|
|
|
|
70,200
|
|
|
|
117,000
|
|
|
|
234,000
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects possible payouts under awards made to our executive
officers under our annual management incentive plan. Payment of
these awards was contingent upon our company achieving its sales
and EBITDA, as adjusted, targets for fiscal 2007. No payment was
made under our annual management incentive plan for fiscal 2007.
|
|
(2)
|
|
Restricted stock grants represent compensation received for
serving as our interim chief executive officer from
November 16, 2007 through the end of fiscal year 2007. The
restricted stock vested in its entirety upon hire of new
President and Chief Executive Officer on March 3, 2008.
|
|
(3)
|
|
Stock option grants vest over a four year period, with half of
the grant vesting on December 13, 2009 and the remaining
half vesting on December 13, 2011.
|
|
(4)
|
|
Amounts shown equal the number of shares granted at the fair
value on date of grant.
|
|
(5)
|
|
Amounts shown do not reflect compensation actually received by
the named executive officer. Instead, amounts shown are the
total compensation costs to be recognized by our company over
the options vesting period as determined pursuant to
FAS 123R. These compensation costs reflect option awards
granted in fiscal 2007. The assumptions used to calculate the
value of option awards are set forth under Note 6,
Shareholders Equity and Redeemable Preferred Stock
Stock-Based Compensation of the notes to
consolidated financial statements included in our Annual Report
on
form 10-K
for fiscal 2006 filed with the Securities and Exchange
Commission on April 29, 2008.
|
29
Outstanding
Equity Awards at Fiscal 2007 Year-End
The following table sets forth certain information concerning
equity awards outstanding to the named executive officers at the
end of fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Plan
|
|
|
Awards:
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
|
Market
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Value of
|
|
|
|
|
|
|
|
|
|
Market Value
|
|
|
Unearned
|
|
|
Unearned
|
|
|
|
|
|
|
Number of
|
|
|
of Shares
|
|
|
Shares,
|
|
|
Shares,
|
|
|
|
|
|
|
Shares or
|
|
|
or Units
|
|
|
Units or
|
|
|
Units or
|
|
|
|
|
|
|
Units of Stock
|
|
|
of Stock
|
|
|
Other Rights
|
|
|
Other Rights
|
|
|
|
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
That Have
|
|
|
|
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
|
Not Vested
|
|
Name
|
|
Grant Date
|
|
|
(#)
|
|
|
($)
|
|
|
(#)
|
|
|
($)
|
|
|
John Buck
|
|
|
11/23/2007
|
|
|
|
7,649
|
|
|
|
46,888
|
|
|
|
|
|
|
|
|
|
|
|
|
12/27/2007
|
|
|
|
11,270
|
|
|
|
69,085
|
|
|
|
|
|
|
|
|
|
|
|
|
1/31/2008
|
|
|
|
8,500
|
|
|
|
52,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
Securities
|
|
|
|
|
|
|
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
|
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
|
|
|
|
|
Option
|
|
Options
|
|
Exercise
|
|
|
|
|
|
|
(#)
|
|
(#)
|
|
Price
|
|
Option
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
Unexercisable
|
|
($/Share)
|
|
Expiration Date
|
|
Frank Elsenbast
|
|
|
5/23/2001
|
|
|
|
2,333
|
|
|
|
|
|
|
$
|
20.55
|
|
|
5/23/2007,2008,2009(4)
|
|
|
|
4/16/2002
|
|
|
|
5,000
|
|
|
|
|
|
|
$
|
19.90
|
|
|
4/16/2008,2009,2010(4)
|
|
|
|
11/25/2002
|
|
|
|
4,590
|
|
|
|
|
|
|
$
|
14.77
|
|
|
11/25/2008,2009,2010(4)
|
|
|
|
5/9/2003
|
|
|
|
2,800
|
|
|
|
|
|
|
$
|
12.35
|
|
|
5/9/2009
|
|
|
|
11/17/2003
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
15.73
|
|
|
11/17/2009,2010,2011(4)
|
|
|
|
7/1/2004
|
|
|
|
4,950
|
|
|
|
|
|
|
$
|
13.02
|
|
|
7/1/2014
|
|
|
|
8/12/2004
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
10.54
|
|
|
8/12/2014
|
|
|
|
1/7/2005
|
|
|
|
25,000
|
|
|
|
|
|
|
$
|
13.12
|
|
|
1/7/2015
|
|
|
|
3/2/2005
|
|
|
|
10,664
|
|
|
|
|
|
|
$
|
12.82
|
|
|
3/2/2015
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
250,000(1
|
)
|
|
$
|
6.48
|
|
|
12/13/2017
|
Nathan Fagre
|
|
|
4/5/2001
|
|
|
|
20,000
|
|
|
|
|
|
|
$
|
12.94
|
|
|
4/5/2007,2008,2009(4)
|
|
|
|
2/2/2002
|
|
|
|
11,500
|
|
|
|
|
|
|
$
|
18.15
|
|
|
2/2/2007,2008
|
|
|
|
11/25/2002
|
|
|
|
37,040
|
|
|
|
|
|
|
$
|
14.77
|
|
|
11/25/2008,2009,2010(4)
|
|
|
|
5/9/2003
|
|
|
|
14,000
|
|
|
|
|
|
|
$
|
12.35
|
|
|
5/9/2009
|
|
|
|
7/1/2004
|
|
|
|
16,500
|
|
|
|
|
|
|
$
|
13.02
|
|
|
7/1/2014
|
|
|
|
3/2/2005
|
|
|
|
26,660
|
|
|
|
|
|
|
$
|
12.82
|
|
|
3/2/2015
|
|
|
|
12/21/2006
|
|
|
|
|
|
|
|
100,000(2
|
)
|
|
$
|
12.70
|
|
|
12/21/2016
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
200,000(1
|
)
|
|
$
|
6.48
|
|
|
12/13/2017
|
Geoffrey Smith
|
|
|
8/14/2006
|
|
|
|
10,000
|
|
|
|
20,000(3
|
)
|
|
$
|
10.74
|
|
|
8/14/2016
|
|
|
|
5/24/2007
|
|
|
|
|
|
|
|
50,000(3
|
)
|
|
$
|
10.48
|
|
|
5/24/2017
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
100,000(1
|
)
|
|
$
|
6.48
|
|
|
12/13/2017
|
Michael Murray
|
|
|
6/24/2004
|
|
|
|
75,000
|
|
|
|
|
|
|
$
|
12.62
|
|
|
6/24/2014
|
|
|
|
7/1/2004
|
|
|
|
8,250
|
|
|
|
|
|
|
$
|
13.02
|
|
|
7/1/2014
|
|
|
|
3/2/2005
|
|
|
|
13,330
|
|
|
|
|
|
|
$
|
12.82
|
|
|
3/2/2015
|
|
|
|
12/13/2007
|
|
|
|
|
|
|
|
100,000(1
|
)
|
|
$
|
6.48
|
|
|
12/13/2017
|
William Lansing
|
|
|
12/1/2003
|
|
|
|
1,400,000
|
|
|
|
|
|
|
$
|
15.46
|
|
|
10/25/2009(5)
|
|
|
|
7/1/2004
|
|
|
|
196,350
|
|
|
|
|
|
|
$
|
13.02
|
|
|
04/24/2008(6)
|
|
|
|
3/2/2005
|
|
|
|
187,203
|
|
|
|
|
|
|
$
|
12.82
|
|
|
04/24/2008(6)
|
Bryan Venberg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
|
|
|
(1)
|
|
Stock option grants become exercisable over a four year period,
with half of the grant vesting on December 13, 2009 and the
remaining half vesting on December 13, 2011. Options expire
ten years from date of grant.
|
|
(2)
|
|
Stock option grant becomes exercisable in three equal
installments beginning on December 21, 2008. Options expire
10 years from date of grant.
|
|
(3)
|
|
Options vest in three equal installments beginning on the first
anniversary of the date of grant. Options expire 10 years
from date of grant.
|
|
(4)
|
|
Options vested in three equal installments beginning on the
first anniversary of the date of grant. The expiration date of
each vesting segment for these options expires five years after
the vesting date.
|
|
(5)
|
|
Options expire two years following employment cessation date.
|
|
(6)
|
|
Options expired six months following employment cessation date.
|
Option
Exercises and Stock Vested
There were no stock options that were exercised by our named
executive officers during fiscal 2007. There were no stock
awards provided to the named executive officers that vested
during fiscal 2007.
Pension
Benefits
We currently do not provide any pension benefits to our named
executive officers.
Nonqualified
Deferred Compensation
We currently do not provide any nonqualified deferred
compensation plans to our named executive officers.
Employment
Agreements and Potential Payments Upon Termination or
Change-In-Control
We have entered into severance and
change-in-control
agreements with two of our named executive officers, Frank
Elsenbast and Nathan Fagre, which are summarized below. John
Buck, our interim president and chief executive officer at the
end of fiscal 2007, does not have any employment, severance or
change-in-control
agreements with the company and therefore is not entitled to any
potential payments upon termination or
change-in-control.
The potential payments upon termination or change in control
presented in the following tables assume a change in control
date of February 2, 2008 and a change of control stock
price of $6.13, which was the closing sale price of our common
stock on February 2, 2008. The calculations also assume
aggregate values of medical and dental insurance benefits based
on current plan design and full rates where applicable.
Frank
Elsenbast and Nathan Fagre
On December 7, 2005, we entered into change of control and
severance agreements with each of Mr. Elsenbast and
Mr. Fagre. The agreements provide for severance payments
equal to 24 months of the executives salary and
automobile allowance in the event that there is a change of
control of our company and subsequently their employment is
terminated without cause by us or is terminated for good reason
by the executive. In this case, the executive is also entitled
to receive a pro-rata share of his annual incentive target in
the fiscal year in which the termination of employment occurs,
and continued medical and dental benefits for the 24 month
period (or, at the executives option, reimbursement for
obtaining health coverage under COBRA). In the event that the
executives employment is terminated either by us without
cause or by the employee for good reason in the absence of a
change of control of our company, then the executive is entitled
to receive 18 months of salary and automobile allowance, a
pro-rata share of the actual annual incentive that would have
been payable for the fiscal year in which the termination
occurred, and medical and dental benefits for a period of
18 months. In order to receive any of these benefits
described above, the executive would need to enter into a
release of claims against us and agree not to compete against us
for 18 to 24 months. The agreements expire December 7,
2008.
31
On December 13, 2007, the board of directors approved
changes to the severance arrangements for Mr. Elsenbast and
Mr. Fagre. Under the approved changes, during the period
from December 13, 2007 until the end of fiscal 2008, in the
event these officers are terminated from employment by our
company without cause or for good reason by the officer, then
these officers will receive an enhanced severance payment equal
to two times their base salaries and two times their annual
incentive objective. This enhanced limited-duration enhanced
severance program was approved to ensure that the officer team
would remain in place during the Chief Executive Officer
transition period.
Geoffrey
Smith and Michael Murray
Mr. Smith and Mr. Murray, while neither have an
employment, severance or
change-in-control
agreement with the company, are eligible for severance pay under
company guidelines as in effect from time to time.
Potential
Payments
The following tables set forth the benefits and payments that
the named executive officers would have received had their
employment terminated on February 2, 2008. No named
executive officers are entitled to any payments in the event of
their death or disability, or in the event of termination of
their employment either voluntarily or for cause. Moreover, no
named executive officer is entitled to any potential payment in
connection with a change in control without termination of
employment. The named executive officers set forth below are the
only named executive officers who would be entitled to any
payments in the event their employment terminated on
February 2, 2008.
|
|
|
|
|
|
|
|
|
|
|
Frank Elsenbast
|
|
|
|
Qualifying
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
|
Unrelated to a
|
|
|
Control &
|
|
|
|
Change in
|
|
|
Qualifying
|
|
|
|
Control
|
|
|
Termination
|
|
Benefit
|
|
($)
|
|
|
($)(2)
|
|
|
Cash Severance:
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
600,000
|
|
|
|
600,000
|
|
Bonus
|
|
|
300,000
|
|
|
|
300,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
900,000
|
|
|
|
900,000
|
|
|
|
|
|
|
|
|
|
|
Other Benefits:
|
|
|
|
|
|
|
|
|
Health & Welfare(1)
|
|
|
15,787
|
|
|
|
21,049
|
|
Car Allowance
|
|
|
9,900
|
|
|
|
13,200
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
25,687
|
|
|
|
34,249
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
925,687
|
|
|
|
934,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Values shown are aggregate.
|
|
(2)
|
|
Full value of incremental benefits are shown, but amounts in
excess of the 280G limit would be cut back as the
executives agreement caps benefits at the 280G wage base
limit.
|
32
|
|
|
|
|
|
|
|
|
|
|
Nathan Fagre
|
|
|
|
Qualifying
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
|
Unrelated to a
|
|
|
Control &
|
|
|
|
Change in
|
|
|
Qualifying
|
|
|
|
Control
|
|
|
Termination
|
|
Benefit
|
|
($)
|
|
|
($)(2)
|
|
|
Cash Severance:
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
624,000
|
|
|
|
624,000
|
|
Bonus
|
|
|
312,000
|
|
|
|
312,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
936,000
|
|
|
|
936,000
|
|
|
|
|
|
|
|
|
|
|
Other Benefits:
|
|
|
|
|
|
|
|
|
Health & Welfare(1)
|
|
|
15,787
|
|
|
|
21,049
|
|
Car Allowance
|
|
|
9,900
|
|
|
|
13,200
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
25,687
|
|
|
|
34,249
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
961,687
|
|
|
|
970,249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Values shown are aggregate.
|
|
(2)
|
|
Full value of incremental benefits are shown, but amounts in
excess of the 280G limit would be cut back as the
executives agreement caps benefits at the 280G wage base
limit.
|
|
|
|
|
|
|
|
|
|
|
|
Geoffrey Smith
|
|
|
|
Qualifying
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
|
Unrelated to a
|
|
|
Control &
|
|
|
|
Change in
|
|
|
Qualifying
|
|
|
|
Control
|
|
|
Termination
|
|
Benefit
|
|
($)
|
|
|
($)
|
|
|
Cash Severance:
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
480,000
|
|
|
|
480,000
|
|
Bonus
|
|
|
216,000
|
|
|
|
216,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
696,000
|
|
|
|
696,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Murray
|
|
|
|
Qualifying
|
|
|
|
|
|
|
Termination
|
|
|
Change in
|
|
|
|
Unrelated to a
|
|
|
Control &
|
|
|
|
Change in
|
|
|
Qualifying
|
|
|
|
Control
|
|
|
Termination
|
|
Benefit
|
|
($)
|
|
|
($)
|
|
|
Cash Severance:
|
|
|
|
|
|
|
|
|
Base Salary
|
|
|
450,000
|
|
|
|
450,000
|
|
Bonus
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
650,000
|
|
|
|
650,000
|
|
|
|
|
|
|
|
|
|
|
DIRECTOR
COMPENSATION FOR FISCAL 2007
We use a combination of cash and stock-based compensation to
attract and retain qualified board members. In setting director
compensation, we consider the significant amount of time that
directors spend in fulfilling their duties as directors,
committee members and chairs. The governance committee also
reviews analyses completed by Towers Perrin relative to director
compensation. Towers Perrin provides the governance committee
with relevant market data, including data from proxy sources in
our peer group, and alternatives to consider when making
compensation decisions for director compensation.
33
The summary below represents compensation paid to directors
during fiscal 2007. The director compensation program consists
of an annual cash retainer for all board members, additional
cash retainers for the non-executive chairman, committee chairs
and audit committee members and an annual stock-based grant.
Additionally, the non-executive chairman receives an annual
stock option grant equal to 20,000 options, a compensation
program change approved during fiscal 2007. As approved on
June 28, 2007, the annual retainer for directors increased
from $50,000 to $65,000. The annual grant of 8,000 restricted
shares of common stock, subject to one-year vesting remained
unchanged. The three directors who are elected by the holders of
the preferred stock do not receive compensation for their
service as directors pursuant to the terms of our shareholders
agreement with GE Commercial Finance (the holder of the
preferred stock). In addition, William Lansing, our former chief
executive officer, did not receive any additional compensation
for his service on the board of directors.
The following table shows information concerning compensation
provided to each of our non-employee directors for services
provided as a director during fiscal 2007. We did not include
any amounts paid to John Buck in connection with his service as
our interim chief executive officer following October 25,
2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
Paid In Cash
|
|
|
Stock Awards
|
|
|
Option Awards
|
|
|
Compensation
|
|
|
Total
|
|
Name
|
|
($)
|
|
|
($)(6)
|
|
|
($)(6)
|
|
|
($)
|
|
|
($)
|
|
|
James J. Barnett
|
|
|
68,750
|
(1)
|
|
|
53,527
|
|
|
|
|
|
|
|
|
|
|
|
122,277
|
|
John D. Buck
|
|
|
139,057
|
(2)
|
|
|
53,527
|
|
|
|
98,200
|
|
|
|
|
|
|
|
290,784
|
|
Marshall S. Geller
|
|
|
80,750
|
(3)
|
|
|
53,527
|
|
|
|
|
|
|
|
|
|
|
|
134,277
|
|
Robert J. Korkowski
|
|
|
103,807
|
(4)
|
|
|
53,527
|
|
|
|
|
|
|
|
|
|
|
|
157,334
|
|
George A. Vandeman
|
|
|
95,807
|
(5)
|
|
|
53,527
|
|
|
|
|
|
|
|
|
|
|
|
149,334
|
|
|
|
|
(1)
|
|
Consists of: $58,750 annual board retainer and $10,000 for
serving as a member of the audit committee.
|
|
(2)
|
|
Consists of: $61,500 annual board retainer, $40,500 for serving
as chair of the board of directors, $12,000 for serving as Chair
of the compensation committee and $25,057 as the fiscal 2007
portion for service on the search committee of the board.
|
|
(3)
|
|
Consists of: $58,750 annual board retainer, $12,000 for serving
as chair of the board of directors and $10,000 for serving as a
member of the audit committee.
|
|
(4)
|
|
Consists of: $58,750 annual board retainer, $20,000 for serving
as chair of the audit committee and $25,057 as the fiscal 2007
portion for service on the search committee of the board.
|
|
(5)
|
|
Consists of: $58,750 annual board retainer, $12,000 for serving
as chair of the governance committee and $25,057 as the fiscal
2007 portion for service on the search committee of the board.
|
|
(6)
|
|
Amounts shown do not reflect compensation actually received by
the directors. Instead, the amounts shown reflect the dollar
amount recognized for financial statement reporting purposes for
the stock and/or option awards granted in fiscal 2007 in
accordance with FAS 123R.
|
The governance committee annually reviews and makes
recommendations to the board of directors as to director
compensation issues at its June board meeting, with advice and
benchmarking analysis from Towers Perrin. Under the current
director compensation structure, each director would receive an
annual retainer of $65,000 (payable quarterly). In addition, the
chairman of the board receives a supplemental annual retainer of
$65,000 and an annual grant of 20,000 stock options; the
chairman of the audit committee receives a supplemental annual
retainer of $20,000; the chairman of the compensation or
governance committee receives a supplemental annual retainer of
$12,000 annually, $10,000 annually. Furthermore, under the
current compensation program, each director would be awarded
8,000 shares of restricted stock at the June meeting,
subject to a one-year vesting requirement. Directors do not
receive any per-meeting fees. All directors are reimbursed for
their reasonable out-of-pocket expenses incurred in attending
meetings of the board of directors and committees.
As released in a report on
Form 8-K
on March 3, 2008, Mr. Buck resigned as interim
president and chief executive officer but will be continuing as
executive chairman of the board. The board of directors
requested that Mr. Buck continue devoting additional time
to the affairs of our company in support of the new chief
executive officer during a transitional period of a number of
months during fiscal year 2008. During this transition period,
the board of directors has authorized and approved a retainer
for Mr. Buck of $10,000 per month for this transitional
support and advice, in addition to the previously approved and
announced compensation for his service as chairman of the board
and chairman of the human resources and compensation committee
of the board of directors.
34
CERTAIN
TRANSACTIONS
Strategic
Alliance with GE Commercial Finance and NBC Universal
NBC
Universal Trademark License Agreement
On November 16, 2000, we entered into a trademark license
agreement with NBC Universal, known as NBCU pursuant to which
NBCU granted us an exclusive, worldwide license for a term of
ten years to use certain NBC trademarks, service marks and
domain names to rebrand our business and corporate name and
website. We subsequently selected the names ShopNBC and
ShopNBC.com.
Under the license agreement we have agreed, among other things,
to (i) certain restrictions on using trademarks, service
marks, domain names, logos or other source indicators owned or
controlled by NBCU, (ii) the loss of our rights under the
license with respect to specific territories outside of the
United States in the event we fail to achieve and maintain
certain performance targets in such territories, (iii) not
own, operate, acquire or expand our business to include certain
businesses without NBCUs prior consent, (iv) comply
with NBCUs privacy policies and standards and practices,
and (v) not own, operate, acquire or expand our business
such that one-third or more of our revenues or our aggregate
value is attributable to certain services (not including
retailing services similar to our existing
e-commerce
operations) provided over the internet. The license agreement
also grants to NBCU the right to terminate the license agreement
at any time upon certain changes of control of our company, in
certain situations upon the failure by NBCU to own a certain
minimum percentage of our outstanding capital stock on a fully
diluted basis, and certain other situations. On March 28,
2007, we extended the term of the license by six months, such
that the license would continue through May 15, 2011, and
provide that certain changes of control involving a financial
buyer would not provide the basis for an early termination of
the license by NBCU.
Strategic
Alliance with NBC Universal and GE Commercial Finance
In March 1999, we entered into a strategic alliance with NBCU
and GE Commercial Finance. Pursuant to the terms of the
transaction, NBCU and GE Commercial Finance acquired
5,339,500 shares of our Series A Redeemable
Convertible Preferred Stock between April 1999 and June 1999,
and NBCU was issued a warrant to acquire 1,450,000 shares
of our common stock, known as the distribution warrants, with an
exercise price of $8.29 per share, under a distribution and
marketing agreement discussed below. In addition, we issued to
GE Commercial Finance a warrant, known as the investment
warrant, to increase its potential aggregate equity stake
(together with its affiliates, including NBCU) at the time of
exercise to approximately 40%. The preferred stock is
convertible into an equal number of shares of our common stock,
subject to anti-dilution adjustments, has a mandatory redemption
on the tenth anniversary of its issuance or upon a change of
control at $8.29 per share, participates in dividends on the
same basis as the common stock and has a liquidation preference
over the common stock and any other junior securities. On
July 6, 1999, GE Commercial Finance exercised the
investment warrant and acquired an additional
10,674,000 shares of our common stock for an aggregate of
$178.4 million, or $16.71 per share. Following the exercise
of the investment warrant, the combined ownership of our company
by GE Commercial Finance and NBCU on a diluted basis was
approximately 40%. In February 2005, GE Commercial Finance sold
2,000,000 shares of our common stock to several purchasers.
In July 2005, GE Commercial Finance entered into agreements to
sell an additional 2,604,932 shares of our common stock in
privately negotiated transactions to a number of different
purchasers; this sale was completed on September 15, 2005.
As of the end of fiscal 2007, GE Commercial Finance and NBCU
currently have a combined ownership in our company of
approximately 29% on a diluted basis.
GE
Commercial Finance Shareholder Agreement
In March 1999, we also entered into a shareholder agreement with
GE Commercial Finance, which provides for certain corporate
governance and standstill matters. The shareholder agreement
(together with the certificate of designation of the preferred
stock) initially provided that GE Commercial Finance and NBCU
would be entitled to designate nominees for two out of seven
members of our board of directors so long as their aggregate
beneficial ownership was at least equal to 50% of their initial
beneficial ownership, and one out of seven members so long as
their aggregate beneficial ownership was at least 10% of the
adjusted outstanding shares of common stock, as
35
defined in the shareholder agreement. The shareholder agreement
also requires the consent of GE Commercial Finance prior to our
entering into any material agreements with certain restricted
parties (broadcast networks and internet portals in certain
limited circumstances). Finally, we are prohibited from
exceeding certain thresholds relating to the issuance of voting
securities over a twelve-month period, the payment of quarterly
dividends, the repurchase of common stock, acquisitions
(including investments and joint ventures) or dispositions, and
the incurrence of debt greater than the larger of
$40 million or 30% of our total capitalization. We are also
prohibited from taking any action that would cause any ownership
interest by us in TV broadcast stations from being attributable
to GE Commercial Finance, NBCU or their affiliates.
The shareholder agreement provides that during the standstill
period (as defined in the shareholder agreement), subject to
certain limited exceptions, GE Commercial Finance and NBCU are
prohibited from: (i) any asset/ business purchases from us
in excess of 10% of the total fair market value of our assets;
(ii) increasing their beneficial ownership above 39.9% of
our shares; (iii) making or in any way participating in any
solicitation of proxies; (iv) depositing any securities of
our company in a voting trust; (v) forming, joining or in
any way becoming a member of a 13D Group with
respect to any voting securities of our company;
(vi) arranging any financing for, or providing any
financing commitment specifically for, the purchase of any
voting securities of our company; (vii) otherwise acting,
whether alone or in concert with others, to seek to propose to
us any tender or exchange offer, merger, business combination,
restructuring, liquidation, recapitalization or similar
transaction involving us, or nominating any person as a director
of our company who is not nominated by the then incumbent
directors, or proposing any matter to be voted upon by our
shareholders. If, during the standstill period, any inquiry has
been made regarding a takeover transaction or
change in control, each as defined in the
shareholder agreement, that has not been rejected by the board
of directors, or the board of directors pursues such a
transaction, or engages in negotiations or provides information
to a third party and the board of directors has not resolved to
terminate such discussions, then GE Commercial Finance or NBCU
may propose to us a tender offer or business combination
proposal.
In addition, unless GE Commercial Finance and NBCU beneficially
own less than 5% or more than 90% of the adjusted outstanding
shares of common stock, GE Commercial Finance and NBCU shall not
sell, transfer or otherwise dispose of any securities of our
company except for transfers: (i) to certain affiliates who
agree to be bound by the provisions of the shareholder
agreement, (ii) that have been consented to by us,
(iii) pursuant to a third-party tender offer,
(iv) pursuant to a merger, consolidation or reorganization
to which we are a party, (v) in a bona fide public
distribution or bona fide underwritten public offering,
(vi) pursuant to Rule 144 of the Securities Act of
1933, or (vii) in a private sale or pursuant to
Rule 144A of the Securities Act of 1933; provided, that in
the case of any transfer pursuant to clause (v) or (vii),
the transfer does not result in, to the knowledge of the
transferor after reasonable inquiry, any other person acquiring,
after giving effect to such transfer, beneficial ownership,
individually or in the aggregate with that persons
affiliates, of more than 10% of the adjusted outstanding shares
of the common stock.
The standstill period will terminate on the earliest to occur of
(i) the ten-year anniversary of the shareholder agreement,
(ii) our entering into an agreement that would result in a
change in control (subject to reinstatement),
(iii) an actual change in control, (iv) a
third-party tender offer (subject to reinstatement), or
(v) six months after GE Commercial Finance and NBCU can no
longer designate any nominees to the board of directors.
Following the expiration of the standstill period pursuant to
clause (i) or (v) above (indefinitely in the case of
clause (i) and two years in the case of clause (v)), GE
Commercial Finance and NBCUs beneficial ownership position
may not exceed 39.9% of our diluted outstanding stock, except
pursuant to issuance or exercise of any warrants or pursuant to
a 100% tender offer for our company.
On March 19, 2004, we agreed with NBCU and GE Commercial
Finance to amend the shareholder agreement as follows:
(i) to increase the authorized size of our board of
directors to nine from seven; (ii) to permit NBCU and GE
Commercial Finance together to appoint three directors instead
of two to our board of directors; and (iii) to provide that
NBCU and GE Commercial Finance would no longer have the right to
have its director-nominees serve on the audit, compensation or
nominating and governance committees, in the event the
committees must be comprised solely of independent
directors under applicable laws or Nasdaq regulations. In that
case, NBCU and GE Commercial Finance have the right to have an
observer attend all of these committee meetings, to the extent
permitted by applicable law or regulation.
36
GE
Commercial Finance Registration Rights Agreement
Pursuant to the investment agreement, we entered into a
registration rights agreement with GE Commercial Finance
providing GE Commercial Finance, NBCU and their affiliates and
any transferees and assigns, an aggregate of five demand
registrations and unlimited piggy-back registration rights.
NBC
Universal Distribution and Marketing Agreement
We entered into a distribution and marketing agreement with NBCU
dated March 8, 1999 that provides NBCU with the exclusive
right to negotiate on our behalf for the distribution of our
home shopping television programming. NBCU may terminate the
distribution agreement if we enter into certain significant
affiliation agreements or a transaction resulting in a change in
control. As compensation for these services, we agreed to pay
NBCU an annual fee which is currently approximately $930,000 per
year, and issued NBCU 1,450,000 distribution warrants. The
exercise price of the distribution warrants was $8.29 per share.
In fiscal 2004, NBCU exercised a portion of the original
distribution warrants in a cashless exercise acquiring
101,509 shares of common stock. In fiscal 2005, NBCU
exercised all remaining original distribution warrants in a
cashless exercise acquiring 281,199 additional shares of common
stock. On March 28, 2007, we agreed with NBCU to reduce the
amount of the annual fee payable to NBCU to the current rate of
approximately $930,000. NBC could earn additional warrants to
the extent that it successfully negotiates additional
distribution agreements for our company (including renewals of
existing distribution agreements). During 2008, a majority of
our distribution agreements are scheduled to expire. If NBC
successfully negotiates extensions or renewals of these
agreements under the parameters established by us, it could be
entitled to receive substantial numbers of additional warrants
from us under a formula set forth in the distribution agreement;
some elements of the formula include the length of the new or
renewed contract, the number of subscribers covered by the
contract, and the current market price of our common stock at
the effective date of the new agreements.
Credit
Card Agreement with Affiliate of GE Commercial Finance
In the third quarter of fiscal 2006, we introduced a new private
label and co-branded revolving consumer credit card program. The
program is made available to all qualified consumers for the
financing of purchases of products and services from us and for
the financing of purchases from other retailers. The program is
intended to be used by cardholders for purchases made primarily
for personal, family or household use. The issuing bank, which
is an affiliate of GE Commercial Finance, is the sole owner of
the account issued under the program and absorbs all losses
associated with non-payment by cardholders. The issuing bank
pays fees to us based on the number of credit card accounts
activated and on card usage. Once a customer is approved to
receive a ShopNBC private label or co-branded credit card and
the card is activated, the customer is eligible to participate
in our credit card rewards program. Under the rewards program,
points are earned on purchases made with the credit cards at
ShopNBC and other retailers where the co-branded card is
accepted. Cardholders who accumulate the requisite number of
points are issued a $50 certificate award towards the future
purchase of our merchandise. The certificate award expires after
twelve months if unredeemed. The program provides a number of
benefits to customers in addition to the awards program,
including deferred billing options and other special offers.
During fiscal 2007 and fiscal 2006, customer use of the private
label and co-branded cards accounted for approximately 20% and
17% of our television and internet sales, respectively. We
believe that the use of the ShopNBC credit card furthers
customer loyalty and reduces our overall bad debt exposure since
the credit card issuing bank bears the risk of bad debt on
ShopNBC credit card transactions.
Agreement
with RightNow Technologies, Inc.
In July 2004, we entered into an agreement with RightNow
Technologies, Inc under which we paid RightNow Technologies
approximately $171,000 during fiscal 2006 and $46,000 during
fiscal 2007 to utilize certain proprietary customer service
technologies developed by RightNow Technologies and for payment
of annual software maintenance fees relating to this technology.
Our former president and chief executive officer, William J.
Lansing, serves on the board of directors of RightNow
Technologies.
37
Related
Person Transactions Approval Policy
In February 2007, our board of directors adopted a written
related person transaction approval policy, which sets forth our
companys policies and procedures for the review, approval
or ratification of any transaction required to be reported in
our filings with the Securities and Exchange Commission. This
policy applies to any financial transaction, arrangement or
relationship (including any indebtedness or guarantee of
indebtedness) or any series of similar transactions,
arrangements or relationships in which we are a participant and
in which a related person has a direct or indirect interest
where such persons interest in the transaction(s) involves
at least $100,000 in value. In order for the transaction,
arrangement or relationship to be subject to this policy, there
must a financial aspect to the transaction, which may, for
example, involve payments between us and the related person or
otherwise providing value to one of the parties.
Under the policy, a related person is any (1) person who is
or was since the beginning of the last fiscal year an executive
officer, director or nominee for election as a director of our
company; (2) greater than 5% beneficial owner of our common
stock; or (3) immediate family member of the foregoing.
Immediate family member include a persons spouse, parents,
stepparents, children, stepchildren, siblings, mothers-and
fathers-in-law,
sons- and daughters-in law, and brothers- and
sisters-in-law
and anyone residing in such persons home, except for
tenants or employees.
Prior to entering into any related person transaction, the audit
committee of our board of directors must be presented with the
relevant information about the proposed transaction, in order
for the committee to assess whether the related person
transaction is beneficial to our company and the proposed terms
are fair to us. The committee is authorized to approve, deny, or
approve subject to specified conditions, any related party
transaction in its sole discretion. The policy also outlines
certain factors that the audit committee may take into account
in considering a related person transaction, and itemizes
certain routine transactions which are exempt from the policy.
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and
the regulations promulgated thereunder require directors and
certain officers and persons who own more than ten percent of
our common stock to file reports of their ownership of our
common stock and changes in their ownership with the Securities
and Exchange Commission. To our knowledge, none of our directors
or executive officers failed to file on a timely basis any
reports during fiscal 2007.
38
OTHER
MATTERS
As of the date of this proxy statement, the board of directors
knows of no matters that will be presented for consideration at
the meeting other than as described in this proxy statement. If
any other matters shall properly come before the meeting or any
adjournments or postponements thereof and be voted upon, the
enclosed proxy will be deemed to confer discretionary authority
on the individuals named as proxies therein to vote the shares
represented by the proxies as to any matters. The persons named
as proxies intend to vote or not to vote in accordance with the
recommendation of the management of our company.
Our fiscal 2007 annual report and our annual report on
Form 10-K
for fiscal 2007, including financial statements, are being
mailed with this proxy statement.
Shareholders who wish to obtain an additional copy of our annual
report on
form 10-K
for fiscal 2007 may do so without charge by writing to us
at ValueVision Media, Inc., 6740 Shady Oak Road, Eden Prairie,
Minnesota
55344-3433,
Attention: Corporate Secretary.
By Order of the Board of Directors
Rene G. Aiu
President and Chief Executive Officer
39
COMMON STOCK PROXY CARD
COMMON STOCK PROXY
VALUEVISION MEDIA, INC.
PROXY FOR 2008 ANNUAL MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.
VALUEVISION MEDIA, INC. PROXY
The undersigned, a shareholder of ValueVision Media, Inc., hereby appoints Rene G. Aiu and Frank P.
Elsenbast, and each of them, as proxies, with full power of substitution, to vote on behalf of the
undersigned the number of shares which the undersigned is then entitled to vote, at the annual
meeting of shareholders of ValueVision Media, Inc. to be held at 6690 Shady Oak Road (Human
Resources Entrance), Eden Prairie, Minnesota, on Wednesday, June 11, 2008 at 9:00 a.m., central
time, and at any and all postponements and adjournments thereof, with all the powers which the
undersigned would possess if personally present, upon the matters set forth herein. When properly
executed, this proxy will be voted on the proposals set forth herein as directed by the
shareholder, but if no direction is made in the space provided, the proxies will vote FOR all
nominees in proposal 1 and FOR proposal 2 and at their discretion on any other business as may
properly come before the meeting.
The undersigned hereby revokes all previous proxies relating to the shares covered hereby and
acknowledges receipt of the notice and proxy statement relating to the meeting.
See reverse for voting instructions.
COMPANY #
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES IN THE SAME MANNER
AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE TOLL FREE 1-800-560-1965 QUICK *** EASY *** IMMEDIATE
Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a week, until 12:00 p.m.
(CT) on June 10, 2008.
Please have your proxy card and the last four digits of your Social Security Number or Taxpayer
Identification Number available. Follow the simple instructions the voice provides you.
VOTE BY INTERNET HTTP://WWW.EPROXY.COM/VVTV/ QUICK *** EASY *** IMMEDIATE
Use the Internet to vote your proxy 24 hours a day, 7 days a week until 12:00 p.m. (CT) on June
10, 2008.
Please have your proxy card and the last four digits of your Social Security Number or Taxpayer
Identification Number available. Follow the simple instructions to obtain your records and create
an electronic ballot.
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 ValueVision Media, Inc., c/o Shareowner Services, P.O. Box 64873, St. Paul, MN
55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of directors:
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01 Rene G. Aiu
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04 Robert J. Korkowski
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02 John D. Buck
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05 George A. Vandeman
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03 Marshall S. Geller
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Vote FOR all
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Vote WITHHELD
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nominees
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from all nominees
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(except as marked)
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(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE NUMBER(s) OF THE NOMINEE(s) IN THE BOX PROVIDED TO THE RIGHT.)
2. Proposal to ratify Deloitte & Touche LLP as independent registered public accounting firm for
the current fiscal year.
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For
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Against
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Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE
VOTED FOR EACH PROPOSAL
Address Change? Mark Box
o
Indicate changes below:
Date
Signature(s) in Box
Please sign exactly as your name(s) appear on proxy. If held in joint tenancy, all persons must
sign. Trustees, administrators, etc., should include title and authority. Corporations should
provide full name of corporation and title of authorized officer signing the proxy.
PREFERRED STOCK PROXY CARD
PREFERRED STOCK PROXY
VALUEVISION MEDIA, INC.
PROXY FOR 2008 ANNUAL MEETING OF SHAREHOLDERS THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF
DIRECTORS. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS.
VALUEVISION MEDIA, INC. PROXY
The undersigned, a shareholder of ValueVision Media, Inc., hereby appoints Rene G. Aiu and Frank P.
Elsenbast, and each of them, as proxies, with full power of substitution, to vote on behalf of the
undersigned the number of shares which the undersigned is then entitled to vote, at the Annual
Meeting of Shareholders of ValueVision Media, Inc. to be held at 6690 Shady Oak Road (Human
Resources Entrance), Eden Prairie, Minnesota, on Wednesday, June 11, 2008 at 9:00 a.m., central
time, and at any and all postponements and adjournments thereof, with all the powers which the
undersigned would possess if personally present, upon the matters set forth herein. When properly
executed, this proxy will be voted on the proposals set forth herein as directed by the
shareholder, but if no direction is made in the space provided, the proxies will vote FOR all
nominees in proposal 1 and FOR proposal 2 and at their discretion on any other business as may
properly come before the meeting.
The undersigned hereby revokes all previous proxies relating to the shares covered hereby and
acknowledges receipt of the notice and proxy statement relating to the meeting.
See reverse for voting instructions.
COMPANY #
Please detach here
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2.
1. Election of directors:
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01 Bonnie S. Hammer
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Vote FOR
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Vote WITHHELD
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02 Douglas V. Holloway
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all nominees
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from all nominees
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03 Patrick O. Kocsi
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(except as marked)
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(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, WRITE
THE NUMBER(s) OF THE NOMINEE(s) IN THE BOX PROVIDED TO THE RIGHT.)
2. Proposal to ratify Deloitte & Touche LLP as independent registered public accounting firm for
the current fiscal year.
o
For
o
Against
o
Abstain
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE
VOTED FOR EACH PROPOSAL
Address Change? Mark Box
o
Indicate changes below:
Date
Signature(s) in Box
Please sign exactly as your name(s) appear on Proxy. If held in joint tenancy, all persons must
sign. Trustees, administrators, etc., should include title and authority. Corporations should
provide full name of corporation and title of authorized officer signing the proxy.
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