Confidential, For Use of the Commission Only (as Permitted by Rule 14a-6(e)(2))
x
Definitive
Proxy Statement
¨
Definitive Additional Materials
¨
Soliciting Material Pursuant to §240.14a-12
GEEKNET, 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):
x
No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title
of each class of securities to which transaction applies: _______________________________________________
(2)
Aggregate number of securities to which transaction applies: _______________________________________________
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): _______________________________________
(4)
Proposed
maximum aggregate value of transaction: _____________________________________________________
(5)
Total fee paid: ___________________________________________________________________________________
¨
Fee paid previously with preliminary materials.
¨
Check
box if any part of the fee is offset as provided by Exchange Act Rule 240.0-11 and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS MAY 7, 2014
____________________
To Our Stockholders:
You are cordially invited to attend, and notice is hereby given of, the Annual Meeting of Stockholders (the “Annual Meeting”) of Geeknet, Inc.
(the “Company”), which will be held on Wednesday, May 7, 2014 at 8 a.m., Eastern Daylight Time, at the InterContinental New York Barclay Hotel on 111 East 48th Street, New York, NY10017, for the following purposes:
1.
To elect ten (10) directors nominated by our Board of Directors and named in the Proxy Statement;
2.
To
vote on a proposal to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2014;
3.
To conduct an advisory vote to approve Named Executive Officer compensation; and
4.
To transact such other business as may properly be brought before the meeting or any adjournment(s) thereof.
The
foregoing items of business are more fully described in the Proxy Statement accompanying this Notice. Only stockholders of record at the close of business on March 12, 2014 are entitled to notice of and to vote at the Annual Meeting.
The Company’s Chief Executive Officer, Kathryn K. McCarthy, has prepared a letter to stockholders which can be found on our website at http://geek.net/investor.cfm. I invite you to read the letter.
This Proxy Statement is furnished in connection with our solicitation of proxies, on behalf of the Board of Directors, for the 2014 Annual Meeting of Stockholders. The Proxy Statement and the related proxy card are being distributed on or about March 28, 2014. For specific instructions on how to vote your shares, please refer to your enclosed proxy card. You can vote your shares using one of the following methods:
•
Vote
through the Internet or by telephone by following the instructions shown on the proxy card;
•
Vote by mail by completing and returning a written proxy card; or
•
Attend our 2014 Annual Meeting of Stockholders and vote in person.
Votes submitted through the Internet or by telephone must be received by 11:59 p.m., Eastern Daylight Time, on May 6, 2014. Internet and telephone voting are available 24 hours per
day; if you vote via the Internet or telephone, you do not need to return a proxy card. Proxy cards submitted by mail must be received by the commencement of the Annual Meeting in order for your shares to be voted.
All stockholders are cordially invited to attend the meeting; however, to ensure your representation at the Annual Meeting, you are urged to vote via the Internet or telephone, or mark, sign, date and return the enclosed proxy card as promptly as possible in the pre-addressed envelope enclosed for that purpose. Any stockholder attending the Annual Meeting may vote in person even if he or she has voted via the Internet or telephone, or returned a proxy card but your proxy will be revoked automatically and only your vote at the Annual Meeting will be counted.
2
GEEKNET,
INC. 11216 Waples Mill Rd., Suite 100 Fairfax, VA22030
____________________
PROXY STATEMENT
____________________
INFORMATION CONCERNING SOLICITATION AND VOTING
General
The
matters to be acted upon at the Annual Meeting of Stockholders (the “Annual Meeting”) are described in the Notice of Annual Meeting of Stockholders (“Notice”) and this Proxy Statement. Your Proxy is solicited on behalf of the Board of Directors of Geeknet, Inc. (the “Company”) for use at our Annual Meeting to be held at The InterContinental New York Barclay Hotel on 111 East 48th Street, New York, NY10017 on May 7, 2014, at 8 a.m. Eastern Daylight Time, and at any adjournment(s) thereof, for the purposes set forth herein. Our telephone number is (877)
433-5638.
The Notice, including the Proxy Statement, the Proxy and our Securities and Exchange Commission (“SEC”) Annual Report on Form 10-K, containing financial statements for the fiscal year ended December 31, 2013 (“Fiscal Year 2013”), was mailed or made available on the Internet, as applicable, on or about March 28, 2014 to all stockholders entitled to vote at the Annual Meeting.
STOCKHOLDERS MAY RECEIVE A COPY OF THE COMPANY’S 2013 ANNUAL REPORT ON FORM 10-K, NOT INCLUDING EXHIBITS, AT NO CHARGE. IF A STOCKHOLDER PREFERS A COPY OF THE 2013 ANNUAL REPORT ON FORM 10-K INCLUDING EXHIBITS, THE STOCKHOLDER WILL BE CHARGED A REASONABLE FEE (WHICH SHALL BE LIMITED TO OUR REASONABLE
EXPENSES IN FURNISHING SUCH EXHIBITS). REQUESTS FOR COPIES MUST BE MADE BY SENDING A WRITTEN REQUEST TO GEEKNET, INC., 11216 WAPLES MILL RD., SUITE 100, FAIRFAX, VA22030, ATTN: INVESTOR RELATIONS.
Record Date and Share Ownership
Stockholders of record at the close of business on March 12, 2014 (which we will refer to as the “Record Date” throughout this Proxy Statement) are entitled to notice of and to vote at the Annual Meeting and at any adjournment(s) thereof. We have one class of stock issued and outstanding, designated as Common Stock, $0.001 par value
per share, and one class of undesignated Preferred Stock, $0.001 par value per share. As of the Record Date, 25,000,000 shares of our Common Stock were authorized and 6,662,413 shares of the Company’s Common Stock were outstanding. As of the Record Date, 1,000,000 shares of our Preferred Stock were authorized and no shares of our Preferred Stock were outstanding.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person giving it as follows:
1.
Delivering to us at our principal offices (Attention:
Investor Relations) a written notice of revocation before such proxy is used; or
2.
Delivering subsequent proxy instructions as follows:
•
By Phone : Use the toll free telephone number provided on the proxy card prior to 11:59 p.m. Eastern Daylight Time (“EDT”) on May 6, 2014 (specific instructions for using the telephone voting system are provided on the proxy card and in the Notice);
3
•
By
Internet : Use the Internet voting site listed on the proxy card prior to 11:59 p.m. EDT on May 6, 2014 (specific instructions for using the Internet voting system are provided on the proxy card and in the Notice);
•
By Mail : Sign, date and mail another proxy card bearing a later date and deliver such proxy card to our principal offices (Attention: Investor Relations) prior to the use of the original proxy; or
•
In
Person: Attend the Annual Meeting and vote your shares in person.
Voting
On all matters, each stockholder shall be entitled to one vote for each share of the Company’s Common Stock held by such stockholder.
With respect to “Proposal 1 — Election of Ten Directors,” each director nominee receiving the affirmative vote of a plurality of the shares of our Common Stock present or represented by proxy and voting at the Annual Meeting shall be elected as directors for a one year term. Abstentions and broker non-votes will have no effect on the election of directors.
With respect to “Proposal 2 — Ratification of the Appointment of Independent Registered Public
Accounting Firm,” if a quorum is present and voting, the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote is needed to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm, to audit the consolidated financial statements of the Company for our fiscal year ending December 31, 2014 (“Fiscal Year 2014”). Abstentions are treated as shares represented in person or by proxy and entitled to vote at the Annual Meeting and, therefore, will have the effect of a vote “against” the ratification of KPMG LLP as our independent registered public accounting firm. There will be no broker non-votes for this proposal.
With
respect to “Proposal 3 — Advisory Vote on Executive Compensation,” if a quorum is present and voting the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote at the annual meeting is required for approval of this proposal. Abstentions will have the same effect as a vote “against” the proposal. Broker non-votes will have no effect on the outcome of the vote.
Solicitation of Proxies
We will bear the cost of soliciting proxies. We may, upon request, reimburse brokerage firms and other persons representing beneficial owners of shares for their expenses in forwarding proxy solicitation materials to such beneficial owners. In addition, proxies may also be solicited by certain of our Directors, Officers and regular employees, without additional compensation, personally or by telephone
or facsimile.
Quorum; Abstentions; Broker Non-Votes
Votes cast by proxy or in person at the Annual Meeting (“Votes Cast”) will be tabulated by the inspector of elections (the “Inspector”) who will be one of our employees. The Inspector will also determine whether a quorum is present. Except in certain specific circumstances, the affirmative vote of a majority of shares present in person or represented by proxy at a duly held meeting at which a quorum is present is required under Delaware law for approval of proposals presented to stockholders. Our bylaws provide that a quorum is present when a majority of shares entitled to vote are present in person or represented by proxy at the Annual Meeting.
The Inspector will treat shares that
are voted WITHHELD or ABSTAIN as being present and entitled to vote for purposes of determining the presence of a quorum but will not treat such shares as votes in favor of approving any matter submitted to the stockholders for a vote. “Broker non-votes” will be counted as present but not entitled to vote and thus will not be counted for purposes of determining the number of Votes Cast with respect to a particular proposal; thus broker non-votes will not affect the outcome of any matter being voted on at the meeting. Abstentions will not affect the outcome of any matter being voted on at the meeting
4
except the proposal regarding ratification of the independent accountants and the vote on executive compensation, in
which case, abstentions will have the same effect as an “AGAINST” vote.
When proxies are properly dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If no specific instructions are given, the shares will be voted “for” (i) the election of each of the ten (10) nominees for directors set forth herein, (ii) the ratification of KPMG LLP as our independent registered public accounting firm for Fiscal Year 2014, and (iii) the advisory vote on the compensation of our named executive officers. With respect to such other business as may properly come before the Annual Meeting or any adjournment thereof, the shares will be voted in the discretion of the proxy holder.
Deadline for Receipt of Stockholder Proposals
Proposals
of stockholders that are intended for inclusion in our Proxy Statement relating to our 2015 Annual Meeting of Stockholders must be received by us at our principal offices at 11216 Waples Mill Rd., Suite 100, Fairfax, VA22030, Attention: Secretary, not later than November 28, 2014 and must satisfy the conditions established by the SEC and our bylaws for stockholder proposals in order to be included in our Proxy Statement for that meeting.
Stockholder proposals that are not intended to be included in our proxy materials for
such meeting but that are intended to be presented by the stockholder are subject to the advance notice procedures described below.
Stockholders may present proposals for action at a future meeting only if they comply with the requirements of the proxy rules established by the SEC and our bylaws. In order for a matter to be deemed properly presented by a stockholder for consideration at our 2015 Annual Meeting of Stockholders under our bylaws, it must be received by our Secretary not before January 7, 2015 and not later than February 6, 2015. If our 2015 Annual Meeting of Stockholders is not within thirty (30) days before or sixty (60) days after
May 7, 2015, the anniversary date of this year’s Annual Meeting, notice must be delivered no earlier than the one hundred and twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of the ninetieth day prior to such meeting or, if the first public notice of the meeting date is less than one hundred days before the meeting, ten days following any notice or publication of the meeting. The stockholder’s notice must comply with the requirements of our bylaws, which generally require that the notice set forth certain information that must be included concerning the stockholder’s proposal and ownership of our securities. The chairman of the meeting may refuse to acknowledge any matter not made in compliance with the
advance notice procedures set forth in our bylaws. A copy of our bylaws may be obtained from the Secretary at our address set forth above.
Stockholder Information
If you share an address with another stockholder, you may receive only one set of proxy materials (including our Annual Report on Form 10-K and proxy materials) unless you have previously provided contrary instructions. If you wish to receive a separate set of proxy materials, please request additional copies by contacting us at GEEKNET, INC., 11216 WAPLES MILL RD., SUITE 100, FAIRFAX, VA22030, ATTN: INVESTOR RELATIONS, or call (877) 825-4689.
Similarly, if you share an address with another stockholder and have received multiple copies of our proxy materials, you may contact us at the address above to request that only a single copy be delivered in the future.
Transaction of Other Business
As of the date of this Proxy Statement, the only business that the Board of Directors intends to present or knows that others will present at the Annual Meeting is as set forth in this Proxy Statement. If any other matter(s) are properly brought before the Annual Meeting, it is the intention of the persons named in the accompanying form of proxy to vote the proxy
on such matters in accordance with their discretion. By signing the proxy card, you are granting the persons named in the proxy a proxy entitling them to vote your shares with such discretion.
5
PROPOSAL 1: ELECTION OF TEN DIRECTORS
General
Our Board of Directors has ten (10) authorized directors and currently consists of ten (10) members.
Our stockholders are being asked to consider ten (10) nominees for election to our Board of Directors to serve for a one year term until the 2015 Annual Meeting of Stockholders.
Michael
Solomon resigned from the Board of Directors effective March 18, 2014.
Information Regarding the Nominees for Election
The Nominating and Governance Committee, which is comprised of Messrs. Smith, Hampel and Blank, recommended, and the Board of Directors determined, that it is in the best interest of the Company to nominate the ten (10) directors listed below for election to the Board of Directors. We are not aware of any reason that any nominee will be unable or will decline to serve as a Director. Each director elected at the 2014 Annual Meeting will have a term expiring at our next annual meeting of stockholders, and each such director will remain in office until a successor has been duly elected and qualified or such director's earlier
death, resignation, retirement, disqualification or removal. There are no arrangements or understandings between any of our Directors or Executive Officers and any other person pursuant to which he or she is or was to be selected as one of our Directors or Officers. There are no family relationships among Directors or Executive Officers of the Company.
Unless otherwise instructed, the proxy holders will vote the proxies received by them for the ten (10) nominees named above, all of whom are currently one of our Directors. Each nominee has consented to be named as a nominee in this Proxy Statement and to continue to serve as a Director if elected. If any nominee becomes unable or declines to serve as a Director or if additional persons are nominated at the 2014 Annual Meeting, the proxy holders intend to vote all proxies received by them
in such a manner as will assure the election of as many of the nominees listed above as possible (or, if new nominees have been designated by the Board of Directors, in such a manner as to elect such nominees), and the specific nominees to be voted for will be determined by the proxy holders.
Vote Required; Recommendation of the Board of Directors
If a quorum is present and voting, the ten (10) nominees for directors will be elected by a plurality of the votes cast. Votes withheld from a nominee and broker non-votes will be counted for purposes of determining the presence or absence of a quorum but will have no legal effect on the election of Directors once a quorum is present. See “Information Concerning Solicitation And Voting — Quorum; Abstentions; Broker Non-Votes.”
THE BOARD
OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” EACH OF THE NOMINEES TO SERVE AS DIRECTOR.
All of the nominees for directors are current Directors of the Company. Each member of our Board of Directors and each director nominee possess skills and experience which make them an important component of the Board as a whole. While consideration of the information presented below regarding each director and director nominee’s specific experience, qualifications, attributes and skills led our Board to the conclusion that she or he should serve as a director, we also believe that all of our directors and director nominees have a reputation for integrity, honesty and adherence to high ethical standards. They each have demonstrated business acumen and an ability to exercise sound judgment,
as well as a commitment of service to our Company and our Board.
Each director nominee serves as a current Director and attended at least 75% of all Board meetings (including committee meetings) applicable to such director nominee. The following table sets forth summary information for each director nominee as of the close of business on March 18, 2014:
6
Committees
Name
Age
Director
Since
Position with Company
Independent
AC
CC
NCGC
TC
Other Current Public Company Boards
Kathryn K. McCarthy
45
2013
Chairman, President and CEO
Matthew
C. Blank
63
2010
Director
X
X
X
Matthew Carey
49
2010
Director
X
X
X*
Thomas
Coughlin
64
2011
Director; Former consultant
X
Peter A. Georgescu
75
2010
Director
X
X*
X
Sir
Ronald Hampel
82
2010
Director
X
X
X
Kenneth G. Langone
78
2011
Director;
Former Chairman and CEO
Unifi, Inc.
Frank A. Riddick, III
57
2010
Director
X
X*
X
World
Wrestling Entertainment, Inc.
Eric Semler
46
2013
Director
X
X
Derek Smith
59
2010
Director**
X
X
X*
Number
of Committee Meetings
6
4
4
4
________________________________
* Committee Chairperson
** Lead Director
AC Audit Committee
CC Compensation Committee
NCGC Nominating and Corporate Governance Committee
TC Technology Committee
Kathryn
K. McCarthy has served on our Board of Directors and as our Chief Executive Officer and President since March 1, 2013, and Chairman of the Board since July 31, 2013. Prior to her promotion to CEO, Ms. McCarthy served as our Executive Vice President and Chief Financial Officer since January 2011. Prior to joining the Company, Ms. McCarthy spent 18 years at General Electric, Inc. As Vice President and CFO of GE Healthcare in London, UK, she contributed to delivering global growth, reducing costs and supporting mergers and acquisitions and integration activities. As Vice President of the GE Audit Staff, she led global audits and reported frequently to the audit committee and the board of directors. Previously, she was CFO of GE Transportation
Systems and held leadership positions within GE Plastics in Europe and the US.
Ms. McCarthy brings to the Board of Directors her financial and managerial experience as well an in-depth knowledge of the Company’s business and operations.
Matthew C. Blank has served on our Board of Directors since January 2010. Mr. Blank is the Chairman and Chief Executive Officer at Showtime Networks Inc., having assumed that role in 1995. Prior to joining Showtime Networks in 1988 as Executive Vice President, Marketing, Mr. Blank worked for Home Box Office Inc. for 12 years, departing as Senior Vice President of Consumer Marketing.
Mr. Blank is independent and brings to the Board of Directors decades of service in the entertainment industry,
with special knowledge and understanding of our target demographic consumer behavior and “pop culture.” He also provides expertise in corporate governance and compensation based on his years of serving as a CEO.
Matthew Carey has served on our Board of Directors since August 2010. Mr. Carey is Executive Vice President and Chief Information Officer for The Home Depot. Before joining The Home Depot in 2008, Mr. Carey served as Senior Vice President and Chief Technology Officer at eBay. Prior to joining eBay in 2006,
7
Mr. Carey spent more than 20 years with Wal-Mart, where he was Senior Vice President and Chief Technology Officer. Mr. Carey also
served on the board of directors of TransUnion from 2009 to 2012.
Mr. Carey is independent and brings to the Board of Directors experience with various global technology companies. His extensive service as an executive officer with technology companies provides him with the knowledge and leadership experience necessary to serve as Chairman of our Technology Committee.
Thomas Coughlin has served on our Board of Directors since August 2011 and served as a consultant to the Company for one year prior to his appointment to our Board of Directors. Mr. Coughlin spent a majority of his career with Wal-Mart, starting in 1979 in Wal-Mart’s security division, rising to Executive Vice President and Vice Chairman as a member of the
company’s board of directors, stepping down in 2005. During his tenure at Wal-Mart, he held positions in loss prevention, human resources, and operations and is widely recognized as a pioneer in leading the adoption of advanced information technologies, including radio frequency identifications, to transform business processes and operational efficiency in retail. See “Involvement in Certain Legal Proceedings” below for information about legal proceedings to which Mr. Coughlin has been a party.
Mr. Coughlin brings to the Board of Directors his years of expertise in the retail operations and management, which is of particular value to our business.
Peter A. Georgescu has served on our Board of Directors since August 2010. Mr. Georgescu is Chairman Emeritus of Young & Rubicam Inc., and served as that company’s Chairman and Chief Executive
Officer from 1994 until his retirement in January 2000. Until May 2011, Mr. Georgescu served as a Director of International Flavors & Fragrances. He has served on the board of directors of seven public companies, most recently Toys “R” Us, Inc., EMI Group PLC and Levi Strauss & Co., and chaired committees in each critical area: audit, nominating and governance and compensation. Mr. Georgescu’s experience has led him to be a major contributor in the Company’s Boardroom.
Mr. Georgescu is independent and brings to the Board of Directors his extensive finance expertise as well as decades of service in the consumer products industry.
Kenneth G. Langone has served on our Board of Directors since July 2010; until July
31, 2013, he was Chairman of the Board. From August 2010 until March 2013, Mr. Langone served as Chief Executive Officer of the Company. Mr. Langone is the founder and, since 1974, has been Chairman of the Board, Chief Executive Officer and President of Invemed Associates, LLC, a New York Stock Exchange firm engaged in investment banking and brokerage. He is a co-founder of The Home Depot, Inc. and was a director and member of the executive committee of its board for 30 years. He also serves on the board of Unifi, Inc.
Mr. Langone brings operating and management experience, including as chief executive officer of a financial services business, expertise in finance, strategic planning and business development and public company directorship and committee experience to the
Company as a result of his professional experiences. These experiences provide the Board of Directors with, among other things, financial and strategic planning expertise important to the oversight of the Company’s financial reporting and business strategy implementation.
Sir Ronald Hampel has served on our Board of Directors since May 2011. Sir Hampel has been Chairman of ISG (International Stadia Group), which provides forecasting and other consulting services to stadia and arenas, since January 2010. He previously spent 44 years with Imperial Chemical Industries PLC, a British chemical company, where he joined the board in 1985, became Chief Operating Officer in 1991, Chief Executive Officer in 1993 and was Chairman from 1995-1999. He was knighted in the 1995 New Year’s Honours. He was a Non-Executive
Director of Powell Duffryn PLC from 1983-1988, of Commercial Union Plc from 1987-1995, of BAE SYSTEMS plc from 1989-2002, of Alcoa Inc. from 1995-2005, of TI Automotive from 2007-2009, an Advisory Director of Teijin (Japan) from 2000-2005, Chairman of United Business Media from 1999-2002, and Chairman of Templeton Emerging Markets Investment Trust from 2003-2007.
8
Mr. Hampel is independent and brings to the Board of Directors decades of service in various industries, including sales, marketing and business forecasting, and corporate governance, which are of particular value to the Company. Sir Ronald chaired the UK Committee on Corporate
Governance formed in 1995 at the request of the then Government, the Bank of England, the London Stock Exchange and the CBI (Confederation of British Industry). The Hampel Committee established certain principles of governance which are now attached to the listing rules of the London Stock Exchange. The principles emphasize the need for full accountability of boards and for full disclosure of governance issues; they confirm the role of outside directors and members of boards both in developing prosperous growth and in ensuring good governance.
Frank A. Riddick, III has served on our Board of Directors since August 2010. Mr. Riddick is currently the Chief Executive Officer of Shale-Inland Holdings, LLC, a privately held stainless steel, pipe valve and fitting supplier principally to the petrochemical and food industries. Prior to such role, Mr. Riddick was the Chairman and Executive Chairman of Shale-Inland. From
March 2010 to February 2013, Mr. Riddick was the Chief Executive Officer of JMC Steel Group, a manufacturer of steel tubular, where he had been Chief Operating Officer since August 2009. Prior to that, he was a consultant for TowerBrook Capital Partners LP, a New York and London based private equity firm from May 2008 to August 2009. Mr. Riddick was President and Chief Executive Officer of Formica Corporation, a manufacturer of surfacing materials, from January 2002 to April 2008. He also served as President and Chief Operating Officer of Armstrong World Industries, Inc. from February 2000 to November 2001 where he also was Chief Executive Officer of Triangle Pacific Corp., a wholly owned subsidiary of Armstrong. From March 1995 to February 2000, he was Chief Financial Officer of Armstrong. Mr. Riddick has previously served as Controller and Treasurer of Chicago-based FMC Corporation. Mr. Riddick also serves as a board member and Chairman of the Audit Committee
of World Wrestling Entertainment, Inc. and is a former director of GrafTech International Ltd, a manufacturer of graphite and carbon products.
Mr. Riddick is independent and brings to the Board of Directors decades of service with various companies. His extensive service as an executive financial officer with various companies provides him with the knowledge and leadership experience necessary to serve as Chairman of our Audit Committee.
Eric Semler has served on our Board of Directors since July 2013. Mr. Semler is currently the President and Portfolio Manager at TCS Capital Management, LLC; and Semler Fund Limited. Mr. Semler is the Founder of TCS Capital Management, LLC. He serves as the managing member of TCS Capital GP, LLC. He served as Managing Director of WaterView Advisors, L.L.C. Prior to TCS, Mr. Semler was employed at Georgica Advisors LLC
in May 1998. From 1997 to 1998, he was a Principal in the media and communications group at Montgomery Securities. From 1994 to 1997, Mr. Semler was an Associate at BT Wolfensohn. He began his career as a journalist for The New York Times. He serves as a director of Personal, Inc., dealtime.com, Classic Media, Channel 13/WNET TV, WNYC radio in New York, and Shopping.com Ltd.
Mr. Semler is independent and brings to the Board of Directors service with various companies, particularly in the areas of technology, new media, and ecommerce.
Derek Smith has served on our Board of Directors since August 2010 and has served as Lead Director since March 2011. Mr. Smith has been Chairman and Chief Executive Officer of the Institute of Global Prescience, an interdisciplinary non-profit research, education and service organization, from 2008. From 1997 until 2008,
Mr. Smith was the Chairman and Chief Executive Officer of ChoicePoint Inc., a data services provider and aggregation company. Mr. Smith serves on the board of directors for the Georgia Aquarium. He also is a minority owner of the Atlanta Falcons.
Mr. Smith is independent and brings to the Board of Directors decades of service with various companies, particularly in the areas of technology and information processing, analysis, data protection all of which are important to our business. He has been involved with the creation of technology driven businesses including identity theft, and data management and protection.
9
No Family
Relationships
No Director has any family relationship with any Director, Executive Officer or person nominated or chosen by the Company to become a Director or Executive Officer.
See “Corporate Governance” and “Executive Compensation — Compensation of Directors” below for additional information regarding the Board of Directors.
Involvement in Certain Legal Proceedings
In January 2006, Mr. Coughlin pleaded guilty to charges of wire fraud and filing a false federal tax return in connection with the submission of false expense reimbursements and improper ordering of Wal-Mart company gift cards during his prior service as an officer of Wal-Mart Stores, Inc. (where he also served as a director). The
independent members of our Board of Directors were aware of the foregoing facts and unanimously determined that Mr. Coughlin’s continued service on our Board of Directors is in the best interest of the Company and its stockholders.
10
PROPOSAL 2: RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has selected KPMG LLP (“KPMG”), an independent registered public accounting firm, to audit our financial statements for Fiscal Year 2014, and based on
this selection, our Board of Directors has unanimously recommended that stockholders vote for ratification of such appointment. Although action by stockholders is not required by law, the Board of Directors has determined that it is desirable to request approval of this selection by our stockholders. Notwithstanding the selection or ratification, the Audit Committee, in its discretion, may direct the appointment of new independent registered public accountants, at any time during the fiscal year, if the Audit Committee determines that such a change would be in the best interest of the Company and its stockholders. In the event of a negative vote or ratification, the Audit Committee may reconsider its selection.
Attendance at the Annual Meeting
The Board of Directors expects that representatives
of KPMG LLP will be available in person and/or telephonically at the Annual Meeting, afforded the opportunity to make a statement if they desire to do so, and be available to respond to appropriate questions from stockholders.
Accounting Fees
The following table shows the fees paid or accrued by the Company for the audit and other services provided by KPMG LLP for the Company’s fiscal year ended December 31, 2013 (“Fiscal Year 2013”) and the fiscal year ended December 31, 2012:
Fiscal
Year
2013
2012
Audit Fees(1)
$
512,000
$
415,000
Audit-Related
Fees(2)
—
—
Audit and Related Fees
512,000
415,000
Tax
Fees
—
78,000
All Other Fees
2,000
2,000
Total
KPMG LLP Fees
$
514,000
$
495,000
(1) “Audit
Fees” includes fees for professional services principally related to the integrated audits of the Company’s annual financial statements and internal control over financial reporting, reviews of the Company’s interim financial information and consultation on matters that arise during a review or audit, reviews of SEC filings and statutory audit fees.
(2) “Audit-Related Fees” include fees which are for assurance and related services other than those included in Audit Fees.
Pre-approval Policies and Procedures
The Audit Committee has adopted a policy regarding
non-audit services provided by KPMG LLP, our independent registered public accounting firm. First, the policy ensures the independence of our auditors by expressly naming all services that the auditors may not perform and reinforcing the principle of independence regardless of the type of service. Second, certain non-audit services such as tax-related services are permitted but limited in proportion to the audit fees paid. Third, the Chairman of the Audit Committee pre-approves, with subsequent ratification by the Audit Committee, non-audit services not specifically permitted under this policy and the full Audit Committee reviews the annual plan and any subsequent engagements. All of the services described above under audit-related fees, were approved by the Audit Committee pursuant to these pre-approval policies and procedures.
Vote Required; Recommendation of the Board of Directors
If
a quorum is present and voting, the affirmative vote of holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote is needed to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm, to audit the consolidated
11
financial statements of the Company for Fiscal Year 2014. Abstentions will have the effect of a vote “AGAINST” the ratification of KPMG as our independent registered public accounting firm. There will be no broker non-votes for this proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE RATIFICATION OF THE APPOINTMENT OF KPMG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2014.
12
PROPOSAL 3: ADVISORY VOTE ON EXECUTIVE COMPENSATION
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, or the Dodd-Frank Act, enables our stockholders to vote to approve, on an advisory or non-binding basis, the compensation of our Named Executive Officers (“NEOs”) as disclosed in accordance with the SEC’s rules in the “Executive
Compensation” section of this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our NEOs’ compensation as a whole. This vote is not intended to address any specific item of compensation or any specific NEO, but rather the overall compensation of all of our NEOs and the philosophy, policies and practices described in this Proxy Statement.
The say-on-pay vote is advisory, and therefore not binding on the Company, the Compensation Committee or our Board of Directors. The say-on-pay vote will, however, provide information to us regarding investor sentiment about our executive compensation philosophy, policies and practices, which the Compensation Committee will be able to consider when determining executive compensation for the remainder of
the current fiscal year and beyond. Our Board of Directors and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the NEO compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
We believe that the information we have provided above and within the Executive Compensation section of this Proxy Statement demonstrates that our executive compensation program was designed and administered appropriately and is working to ensure management’s interests are aligned with our stockholders’ interests to support long-term economic as well as stockholder value creation.
Accordingly, we ask our stockholders to vote “FOR” the following resolution at the Annual Meeting:
“RESOLVED,
that the Company’s stockholders approve, on an advisory basis, the compensation of the Named Executive Officers, as disclosed in the Company’s Proxy Statement for the Annual Meeting of Stockholders pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the Summary Compensation Table and the other related tables and disclosure.”
Vote Required; Recommendation of the Board of Directors
If a quorum is present and voting, the affirmative vote of the holders of a majority of the shares of Common Stock present in person or represented by proxy and entitled to vote is required for advisory approval of this proposal. Abstentions are treated
as shares represented in person or by proxy and entitled to vote at the Annual Meeting and, therefore, will have the same effect as a vote “Against” the proposal. Broker non-votes will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE ADVISORY (NON-BINDING) VOTE APPROVING EXECUTIVE COMPENSATION.
13
CORPORATE GOVERNANCE
Statement on Corporate Governance
We regularly monitor developments in the area of corporate governance. We continue to study the laws affecting corporate governance,
including the rules proposed and promulgated by the SEC and the Financial Industry Regulatory Authority. We strive to implement corporate governance “best practices” as we deem appropriate.
Board of Directors
Our Board of Directors is currently composed of ten (10) Directors, all of whom, except for Ms. McCarthy, are non-employee Directors. Mr. Solomon resigned as a member of our Board of Directors effective March 18, 2014. The non-employee members of our Board of Directors hold regular executive sessions.
Committees. The Board of Directors has four standing committees: the Audit Committee, the Compensation Committee, the Nominating and Governance Committee and the Technology Committee. Each of our Audit, Nominating and Governance
and Compensation Committees are comprised solely of independent directors as determined pursuant to the Marketplace Rules of NASDAQ. Each Committee reviews its mandate as legislative and regulatory developments and business circumstances warrant. The Audit Committee, Nominating and Governance Committee and Compensation Committees conducted their annual reviews of their respective charters during Fiscal Year 2013. Charters for each of the Committees of our Board of Directors are available on our web site at: http://investors.geek.net/governance.cfm.
Independence of the Board of Directors. As required under the Marketplace Rules of NASDAQ, a majority of the members of a listed company's
board of directors must qualify as “independent,” as affirmatively determined by the board of directors. Our Board of Directors consults with our legal counsel to ensure that the Board of Directors’ determinations are consistent with all relevant securities and other laws and regulations regarding “independence of directors,” including those set forth in pertinent Marketplace Rules of NASDAQ as in effect, from time to time. The Board of Directors has determined that all of its members are “independent directors” as defined in the Marketplace Rules of NASDAQ, except Messrs. Langone, Solomon and Coughlin and Ms. McCarthy.
Leadership Structure of our Board of Directors. For several years, the Company has combined the roles of its principal executive officer and Chairman
of the Board of Directors. Mr. Langone served in this dual capacity from August 2010 until March 1, 2013 and Ms. McCarthy has served in this dual role since becoming Chairman of the Board on July 31, 2013. We believe this leadership structure is appropriate given that the Company has had, since March 2011, Mr. Derek Smith serving as the Lead Independent Director. The Company believes that our overall structure results in an effective balancing of responsibilities, experience and independent perspective to meet the current corporate governance needs and oversight responsibilities of the Board.
In addition to the duties of all Board members, the specific
responsibilities of the Lead Independent Director, Mr. Derek Smith, are to:
•
provide the Chairman of the Board with input as to the preparation of agenda for Board meetings;
•
provide leadership with respect to good governance practices;
•
provide the Chairman of the Board with input as to the quality,
quantity, and timeliness of the flow of information from the Company’s management that is necessary for the independent directors to effectively and responsibly perform their duties;
•
preside over executive sessions of the Board; and
•
act as a liaison between the independent Directors and the Chairman of the Board on sensitive issues.
14
Risk
Oversight. The role of the Board of Directors in the Company’s risk oversight process includes reviewing the Company’s key business risks, understanding how these risks could affect our Company and receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, business resources, information technology, security, privacy, investment and liquidity, and strategic and reputational risks. The full Board of Directors (or the appropriate Committee in the case of risks that are under the purview of a particular
Committee) receives these reports from the appropriate senior manager within the organization to enable it to understand our risk identification, risk management and risk mitigation strategies. This enables the Board of Directors and its Committees to coordinate the risk oversight role, particularly with respect to risk interrelationships. As part of its charter, each of the Board of Directors and the Audit Committee discusses our policies with respect to risk assessment and risk management and reviews, at least annually, the Company’s risk management assessment, including the Company’s investment policies.
Contacting the Board of Directors. Any stockholder who desires to contact our Chairman of the Board of Directors or the
other members of our Board of Directors may do so electronically by sending an email to the following address: ir@geek.net. Alternatively, a stockholder can contact our Chairman of the Board of Directors or the other members of the Board of Directors by writing to: Board of Directors, c/o Chairman of the Board of Directors, Geeknet, Inc., 11216 Waples Mill Rd., Suite 100, Fairfax, VA22030. Communications received electronically or in writing will be reviewed by the Company’s General Counsel and distributed to the Chairman of the Board
of Directors or the other members of the Board of Directors as appropriate, depending on the facts and circumstances outlined in the communication received.
Attendance at Annual Stockholder Meetings by the Board of Directors. The Company has not adopted a formal policy regarding attendance by members of the Board of Directors at the Company’s annual meeting of stockholders. The Company’s informal policy is that it encourages, but does not require, Directors to attend. All of the Directors, except Mr. Riddick, attended the Company’s 2013 Annual Meeting of
Stockholders.
Meetings of the Board of Directors and Committees
Our Board of Directors held a total of six (6) meetings during Fiscal Year 2013. No Director serving throughout Fiscal Year 2013 attended fewer than 75% of the aggregate of all meetings of the Board of Directors and the Committees of the Board of Directors upon which such Director served.
Audit Committee. At December 31, 2013, the Audit Committee consisted of Messrs. Riddick and Carey and Sir Hampel, each of whom is “independent” within the meaning set forth in the rules of the SEC and the Marketplace Rules of NASDAQ. Our Board of Directors has determined that Mr. Riddick is an independent director and qualifies as the “audit committee financial expert” as that term is defined in Item
407(d) of Regulation S-K of the Exchange Act. The Audit Committee reviews our internal accounting procedures and consults with, reviews the services provided by and selects our independent registered public accountants. In particular, the Audit Committee is responsible for overseeing the engagement, independence, and services of our independent auditors. The Audit Committee also serves to: (i) act as an independent and objective party to monitor our financial reporting process and internal control system; (ii) review and appraise the audit efforts of our independent auditors; (iii) evaluate our quarterly and annual financial performance as well as our compliance with laws and regulations; (iv) oversee management’s establishment and enforcement of financial policies and business practices; and (v) provide an open avenue of communication among the independent auditors, financial and senior management, counsel and the Board of Directors. The Audit Committee held six
(6) meetings during Fiscal Year 2013.
Compensation Committee. At December 31, 2013, the Compensation Committee consisted of Messrs., Georgescu, Riddick, Smith and Blank, each of whom is “independent,” as such term is defined by the Marketplace Rules of NASDAQ. The Compensation Committee reviews and recommends to the Board of Directors the salaries, incentive compensation and benefits of our officers and employees and administers our stock, bonus and employee benefit plans. Mr. Georgescu replaced Mr. Wright on May 7, 2013 as Chairman of the Compensation Committee and served for the remainder of Fiscal Year 2013. The Compensation Committee held four (4) meetings during Fiscal Year 2013.
15
Nominating
and Governance Committee. At December 31, 2013, the Nominating and Governance Committee consisted of Messrs. Smith and Blank and Sir Ronald Hampel, each of whom we determined was “independent,” as such term is defined by the Marketplace Rules of NASDAQ, at that time. Mr. Smith serves as Chairman of the Nominating and Governance Committee and also as the Lead Independent Director. The Nominating and Governance Committee held four (4) meetings during Fiscal Year 2013.
The Nominating and Governance Committee identifies and evaluates qualified individuals who may become Directors, determines the composition of the Board of Directors and its Committees and monitors the process to assess the effectiveness of the Board of Directors. The Nominating and Governance Committee considers nominees proposed by a number of sources, including management and
stockholders. To recommend a prospective nominee for the Nominating and Governance Committee’s consideration, stockholders should submit the candidate’s name and contact information, detailed biographical data and qualifications, information regarding any relationships between the candidate and the Company within the last three years and evidence of the nominating person’s ownership of Geeknet, Inc. Common Stock to the Company’s General Counsel in writing at the following address: Geeknet, Inc., 11216 Waples Mill Rd., Suite 100, Fairfax, VA22030.
The
consideration of any candidate for director will be based on the Nominating and Governance Committee’s assessment of the individual’s background, experience, skills and abilities, and if such characteristics qualify the individual to fulfill the needs of the Board of Directors at that time. In evaluating director candidates, the Committee assesses the Board’s overall composition in light of the Company’s current and expected structure and business needs, in order to assure that the Board has the appropriate combination and diversity of experience, knowledge, skills, backgrounds and viewpoints, as well as other qualifications, to carry out effectively the Board’s responsibilities. With regard to candidates who are properly recommended by stockholders or by other means, the Nominating and Governance Committee will review the qualifications of any such candidate, which review may, in
the Nominating and Governance Committee’s discretion, include interviewing references for the candidate, direct interviews with the candidate, or other actions that the Nominating and Governance Committee deems necessary or proper. The Committee also addresses succession planning for the management of the Company.
Technology Committee. At December 31, 2013, the Technology Committee consisted of Messrs. Carey, Coughlin, Georgescu, and Semler. Mr. Carey serves as Chairman of the Technology Committee. The Technology Committee reviews, approves, and recommends technology platform and personnel issues to ensure the Company is appropriately addressing trends in the industry. The
Technology Committee held four (4) meetings during Fiscal Year 2013.
Compensation Committee Interlocks and Insider Participation
No member of our Compensation Committee has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee. Since the formation of our Compensation Committee, none of its members has been an officer or employee of the Company. None of the Company’s executive officers served as a director or member of a compensation committee (or other committee serving an equivalent function) of any other entity, the executive officers of which served as a member of
our Board of Directors or Compensation Committee during the Fiscal Year 2013.
Compensation Practices as They Relate to Risk Management
The Compensation Committee believes that the Company’s executive compensation program does not encourage our management to take unreasonable risks relating to our business, particularly in light of the following factors:
•
our use of compensation tools which provide a balance of long- and short-term incentives with fixed and variable components;
•
the
cap on awards to limit windfalls; and
16
•
our practice of utilizing results-oriented performance as one of several factors considered in assessing the contributions of a particular executive and the overall compensation payable to that executive.
The Compensation Committee has also reviewed the Company’s compensation programs for employees generally and has concluded that these programs do not
create risks that are reasonably likely to have a material adverse effect on the Company.
The Compensation Committee reviewed our compensation programs, including executive compensation and major broad-based compensation programs for all employees. Based on that review, the Compensation Committee determined that our compensation programs do not, individually or in the aggregate, encourage executives or employees to undertake unnecessary or excessive risks that are reasonably likely to have a material adverse effect on us.
Employee Matters
In October 2002, we adopted a Code of Business Conduct and Ethics, updated and revised in July 2013 (the “Code of Conduct”), which has been executed by all of the
Company’s employees and Directors and is reviewed and acknowledged on an annual basis. Our Code of Conduct is available on our Web site at http://investors.geek.net/governance.cfm.
We require all employees and Directors to adhere to the Code of Conduct in addressing the legal and ethical issues encountered in conducting their work. Employees and Directors are required to report to our General Counsel any conduct that they believe in good faith to be an actual or apparent violation of the Code of Conduct.
In accordance with the Sarbanes-Oxley Act of 2002 and rules promulgated thereunder by the SEC, the Audit Committee has established procedures
to receive, retain and treat complaints received by us or the Audit Committee regarding accounting, internal accounting controls or auditing matters and to allow for the confidential, anonymous submission by our employees of concerns regarding questionable accounting or auditing matters. We are monitoring developments in this field and, if necessary or appropriate, will adopt new procedures consistent with new legislation or regulations.
Other Matters
Disclosure. We have established a Disclosure Committee comprised of certain senior executives and managers to specify, coordinate and oversee the review procedures that we use each quarter to prepare our periodic SEC filings.
Equity Plans. Our standard practice is to obtain stockholder approval before implementing equity compensation plans. From
time to time, we may also grant equity awards outside of our established equity plans to new executives as an inducement material to their entering into employment with us, as permitted by NASDAQ rules.
17
EXECUTIVE OFFICERS
Executive Officers as of the Record Date
The name, age, position and a brief account of the business experience of our executive officers as of the Record Date are set forth below:
Name
Age
Position
Kathryn
K. McCarthy
45
President, Chief Executive Officer;
Former Executive Vice President, Chief Financial Officer
Executive
Vice President, General Counsel and Chief Administrative Officer
Kathryn K. McCarthy – biography appears above.
Julie A. Pangelinan has served as Executive Vice President, Chief Financial Officer since August 12, 2013. From July 2011 until March 2013, she served as the Chief Financial Officer for Interstate Hotels and Resorts, Inc. From June 2009 until January 2011, she served as the Chief Financial Officer of Sunrise Senior Living Inc. (“Sunrise”) and also served as its Treasurer. She served as the Chief Accounting Officer of Sunrise from April 2006 to May 2009. Ms. Pangelinan served as Vice President of Accounting Policy at Marriott International, Inc., from April 2003 to April 2006 and as Senior Director of Accounting Policy from August 2000
to May 2003. Ms. Pangelinan started her career in public accounting with positions of increasing responsibility, including making Partner in 1999 at BDO Seidman, LLP. Ms. Pangelinan is a Certified Public Accountant and is a Member of the American Institute of Certified Public Accountants.
Kirk L. Somers has served as Executive Vice President, General Counsel and Chief Administrative Officer since March 1, 2013. From January 2013 until his appointment with the Company, he was a partner at the law firm of FisherBroyles, LLC. Prior to that, from November 2001 until January 2013 he was Executive Vice President responsible for legal, human resources, and investor
relations for Concurrent Computer Corporation, a provider of software, hardware and professional services for the video, data measurement and real-time computing market. Prior to joining Concurrent, from December 1998 to November 2001, Mr. Somers was the Assistant General Counsel for a company within divine, inc. (f/k/a eshare communication, Inc.), a developer and marketer of enterprise interactive management solutions, where he was responsible for corporate-wide development and enforcement of the company’s intellectual property portfolio as well as commercial contracts and other corporate matters. From December 1995 to December 1998, Mr. Somers was a partner in the law firm of Marshall & Melhorn in Toledo, Ohio practicing in the area of litigation. Prior to that, he was a Judge Advocate
in the United States Air Force.
Named Executive Officers
For purposes of this Proxy Statement, our Named Executive Officers (“NEOs”) are:
•
Kathryn K. McCarthy, our current President, Chief Executive Officer and Chairman of our Board of Directors;
•
Julie A. Pangelinan, our current Executive Vice President, Chief Financial Officer;
•
Kirk
L. Somers, our current Executive Vice President, General Counsel and Chief Administrative Officer;
•
Kenneth G. Langone, who served as our Chief Executive Officer and Chairman of our Board of Directors during 2013 and currently serves as a member of our Board of Directors;
•
Carol DiBattiste, who served as our General Counsel, Chief Administrative Officer and Executive Vice President during 2013; and
•
Ali
R. Sorbi, who served as our Chief Financial Officer during 2013.
18
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) has reviewed and discussed the following Compensation Discussion and Analysis with management and, based on such review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
During Fiscal Year 2013, we had a number of changes to the executive management team. On February 8, 2013, Carol DiBattiste notified the
Company of her resignation as EVP, General Counsel and Chief Administrative Officer for personal reasons. Effective March 1, 2013, Kathryn McCarthy, who was serving as EVP, Chief Financial Officer, was appointed by the Board of Directors as President, Chief Executive Officer, as Ken Langone stepped down from that role. Also, effective March 1, 2013, Kirk Somers was appointed EVP, General Counsel and Chief Administrative Officer. Ali Sorbi served as Chief Financial Officer from March 1, 2013 until his resignation on March 6, 2013. Julie Pangelinan joined the Company as EVP, Chief Financial Officer on August 12, 2013.
Our
Named Executive Officers, as determined under the rules of the Commission (collectively, the “NEOs”), for 2013 consist of our Chief Executive Officer (Kathryn K. McCarthy), our Chief Financial Officer (Julie A. Pangelinan), and our Chief Administrative Officer and General Counsel (Kirk L. Somers), as well as former officers, Mr. Langone, Ms. DiBattiste and Mr. Sorbi.
The Company has designed its executive compensation program and philosophy to attract, motivate and retain talented executives responsible for the success of the Company. With this in mind, Geeknet strives to set its compensation programs within the appropriate
competitive framework and based on a compensation philosophy of “pay for performance” that depends on the achievement of overall financial results by executives and employees. Within this overall philosophy, Geeknet’s objectives are to:
•
Motivate executive officers to achieve quantitative financial and qualitative non-financial goals and create a direct, meaningful link between achievement of these goals and individual executive compensation;
•
Align the financial interests of executive
officers with those of Geeknet’s stockholders by providing significant equity-based, long-term incentives in the form of restricted stock units and/or stock options, while carefully considering both stockholder dilution and financial accounting compensation expense;
•
Offer a total compensation program that takes into consideration the executive compensation practices of a specifically identified peer group of companies, including competitors of Geeknet; and
•
Align total
stockholder returns with the total compensation packages for Geeknet’s NEOs.
The Compensation Committee uses these objectives as a guide in establishing the compensation programs, practices and packages offered to Geeknet’s NEOs and in assessing the proper allocation between long- and short-term incentive compensation and cash and non-cash compensation. However, the Compensation Committee does not have a pre-established policy or target for the allocation between long- and short-term incentive compensation or for cash and non-cash compensation.
Role and Authority of Our Compensation Committee
The current members of the Compensation Committee are Directors Peter A. Georgescu (Chair), Matthew Blank, Frank A. Riddick,
III, and Derek Smith. Each of these individuals qualifies as (i) an “independent director” under the Marketplace Rules of NASDAQ, (ii) a “non-employee director” under Rule 16b-3 of the Securities Exchange Act of 1934, and (iii) an “outside director” under Section 162(m) of the Internal Revenue Code.
The Company’s Board of Directors created the Compensation Committee to carry out the Board of Directors’ responsibilities to: (i) oversee Geeknet’s compensation policies, plans and benefits programs; (ii) oversee the compensation of Geeknet’s Chief Executive Officer and other executive officers (including officers reporting under Section 16 of the Securities Exchange Act of 1934); (iii) evaluate and approve the executive officer compensation plans, policies and programs of Geeknet; and (iv) oversee the design of Geeknet’s
equity compensation and incentive plans. The Compensation Committee reviews and establishes the executive compensation packages offered to the Company’s Chief Executive Officer and other NEOs. In doing so, the Compensation Committee is responsible for ensuring that such packages are consistent with the Company’s compensation program and philosophy.
The Compensation Committee has adopted a written charter approved by the Board of Directors, which is available on Geeknet’s website at the “Corporate Governance” page, with URL http://geek.net/governance.cfm.
20
The Compensation Committee’s responsibilities are discussed in detail in the charter and include:
•
Reviewing and approving: (i) the annual base salary; (ii) the annual incentive bonus plans, including specific goals and amounts; (iii) equity compensation; (iv) employment agreements, severance arrangements and change in control arrangements; and (v) any other benefits or compensation arrangements for the Company’s
Chief Executive Officer and other NEOs;
•
Reviewing and approving corporate goals and objectives relative to the compensation of the Company’s Chief Executive Officer and NEOs, evaluating their performance in light of these and other factors related to the performance of Geeknet, including the accomplishment of Geeknet’s long-term business and financial goals; and
•
Overseeing the design
of Geeknet’s equity compensation and executive incentive plans and acting as the administrator of such plans for all employees.
The Compensation Committee has the final decision-making authority with respect to the compensation of the Company’s NEOs. In carrying out its responsibilities, the Compensation Committee may engage outside consultants and/or consult with Geeknet’s Human Resources department as the Compensation Committee determines to be appropriate. The Compensation Committee may obtain advice and assistance from internal or external legal, accounting or other advisers selected by the Compensation Committee.
Role of Executive Officers in Compensation Decisions
The Compensation Committee may on occasion meet with the
Company’s Chief Executive Officer to obtain recommendations with respect to the compensation programs, practices and packages for the Company’s NEOs. The Compensation Committee considers, but is not bound to and does not always accept, recommendations from the Chief Executive Officer. The Company’s Chief Executive Officer and other executive officers or employees sometimes attend the Compensation Committee’s meetings, but they leave the meetings as appropriate when the Compensation Committee intends to meet independently. The Compensation Committee would make any such decisions with respect the Chief Executive Officer’s compensation package, if any, without him or her being present at the applicable meetings.
Role of Compensation Consultant
Since
2007, the Compensation Committee has periodically engaged J. Richard & Co. (“Richard & Co.”), a consulting company specializing in executive officer and director compensation, and utilized Towers Watson, a global HR consulting service, to conduct competitive reviews and analyses of the Company’s executive compensation program and make recommendations for the compensation of the Company’s NEOs. Richard & Co. serve at the discretion of the Compensation Committee. The Compensation Committee has reviewed and considered information provided to the Compensation Committee by Richard & Co. and Towers Watson, the Compensation Committee members and the Company’s executive officers, and based on its
review and such factors as it deemed relevant, the Compensation Committee has concluded that the advice it receives from Richard & Co. and Towers Watson is objective and that Richard & Co.’s and Towers Watson’s work did not raise any conflicts of interest.
For Fiscal Year 2013, the Compensation Committee approved the following group of peer companies for use in conducting director and officer compensation analyses. These peer companies were intended to reflect Geeknet’s size, strategy, and business. The following companies are collectively referred to herein as the “Peer Companies”:
1-800-Flowers.com,
Inc.
Shutterfly, Inc.
Digital River, Inc.*
TechTarget, Inc.*
Move, Inc.*
TheStreet, Inc.*
Overstock.com, Inc.
Travelzoo
Inc.*
PetMed Express, Inc.
U.S. Auto Parts Network, Inc.
The Compensation Committee recently revised the list of Peer Companies. Beginning February 2014, the companies with an * were removed due to the sale of the Media business and the following companies were included in their stead: Blue Nile, Inc., Café Press Inc., Coastal Contacts Inc., Gaiam, Inc., Vitacost.com, Inc.
21
Because
each of the Peer Companies was traded on the NASDAQ Global Market as of January 1, 2013, data on the compensation practices of the Fiscal Year 2013 Peer Companies generally was gathered through publicly available information. These companies are reviewed annually to determine that they are appropriate for inclusion in the Company’s peer group.
Say on Pay and Say When on Pay
At our Annual Meeting of Stockholders held on May 10, 2011, we held an advisory vote on executive compensation and an advisory vote on the frequency of future executive compensation advisory votes. A majority of stockholders voted in favor of the
Company’s executive compensation and in favor of providing stockholders with an advisory vote on future executive compensation on an annual basis. In light of the voting results and other factors, the Board determined to provide stockholders with an advisory vote on future executive compensation every year. Accordingly, the next advisory vote on executive compensation will occur at the Annual Meeting to be held in 2014.
At our 2013 Annual Meeting of Stockholders, our executive compensation program received the support of over fifty-five percent (55%) of shares represented at the meeting. The Compensation Committee has considered the results of this vote and views this outcome as evidence of stockholder support of its executive compensation decisions and policies. Accordingly, the Compensation Committee has substantially maintained its executive compensation policies for 2014. As noted under “Proposal 3 — Advisory
Vote on Executive Compensation,” the Compensation Committee will continue to review stockholder votes on our executive compensation and determine whether to make any changes to the program in light of the results.
Components of Compensation
The principal components of Geeknet’s NEO compensation include:
•
Base salary;
•
Variable incentive cash bonus awards;
•
Long-term
equity-based incentive awards;
•
Severance and/or change of control protection;
•
Retirement benefits provided under a 401(k) plan; and
•
Generally available benefit programs.
The
Compensation Committee selected these components because it believes each is necessary to help Geeknet attract and retain the executive talent on which its success depends. These components allow Geeknet to reward performance throughout the fiscal year and to provide an incentive for executives to appropriately balance their focus on short-term and long-term strategic goals. The Compensation Committee believes that this set of components is effective and will continue to be effective in achieving the objectives of its compensation program and philosophy.
In addition to establishing base salaries for NEOs in part based upon recognition of individual contributions to the Company’s success and seeking to align compensation with specified peer groups, the Compensation Committee also endeavors to align such compensation with median base salary
increases, if any, for similarly-situated executives, derived from third party survey data.
The Compensation Committee reviews the Company’s executive compensation program at least annually. The Compensation Committee may at any time review one or more components as necessary or appropriate to ensure such components remain competitive and appropriately designed to reward performance. In setting compensation levels for a particular NEO, the Compensation Committee considers both individual and corporate factors. In general, compensation is targeted at the following percentiles, as compared to the applicable Fiscal Year 2013 Peer Companies:
22
Components
of Compensation
Potential Target
Base salary
50th percentile
Total cash compensation (base salary and bonus)
50th to 65th percentile
Long-term equity-based compensation
50th to 75th percentile
Base
Salary and Variable Incentive Awards
Base Salary. Geeknet provides base salary to its NEOs and other employees to compensate them for services rendered on a day-to-day basis during the fiscal year. As described above, the Compensation Committee reviews information provided by outside consultants and survey data with respect to similarly-situated individuals at peer companies to assist it in determining base salary for each NEO. In addition, the Compensation Committee considers each NEO’s experience, skills, knowledge, responsibilities and performance. For newly hired NEOs, the Compensation Committee considers the base salary of the individual at his or her prior employment and any unique personal circumstances that motivated or resulted in the executive to leave his or her prior position and join Geeknet. The Compensation Committee believes that targeting base salaries to the 50th percentile, when
coupled with higher targeted percentiles in variable compensation, strikes an effective balance between retention of executive talent and rewarding of achievement of planned revenue growth, total stockholder return and operating income growth.
The Compensation Committee typically reviews NEO base salaries in the second quarter of each fiscal year. Increases in base salary are considered within the context of the Company’s overall annual merit increase budget before specific individual and market competitive factors are considered. The Compensation Committee does not apply specific formulas to determine increases. In Fiscal Year 2013, the annualized base salaries for our employee NEOs were as follows:
Effective
March 1, 2013, Ms. McCarthy was promoted from Executive Vice President, Chief Financial Officer to President, Chief Executive Officer. Her salary did not change when she was promoted.
Variable Incentive Awards. The Company offers cash incentive bonus programs for NEOs, management and other key employees. These programs are designed to provide cash incentives to, and reward the efforts of, NEOs in maximizing the short- and long-term financial performance of the business.
On February 20, 2014, the Compensation Committee approved the Company’s 2013 Executive Bonus Plan (the “2013 Bonus
Plan”) and the amounts to be paid under the 2013 Bonus Plan to the Company’s executive officers for their service in the fiscal year ended December 31, 2013.
Under the 2013 Bonus Plan, the Compensation Committee decided to make the payment of annual cash awards based on three independent components with the following weightings: revenue (32.5%), Adjusted EBITDA (as defined in the 2013 Bonus Plan) (32.5%) and personal performance (35%). For the revenue and Adjusted EBITDA components, the Company must achieve at least 90% of the Company’s budgeted performance for revenue and Adjusted EBITDA, as applicable, for the
2013 Fiscal Year. If either the revenue or Adjusted EBITDA component is met at between 90% and 100% of budget, the payout for that component would be 80% of target bonus. If either component is met at 100% or more of budget, the payout for that component would be 100% of target bonus. The personal performance component would be paid out based on the percent of personal goals accomplished by the individual. The Compensation Committee may in its discretion reduce any component of a bonus awarded to an individual. “Adjusted EBITDA” means earnings
23
or loss from continuing operations before gain on sale of non-marketable securities, interest and other expense, income taxes, stock-based compensation and depreciation.
For
the fiscal year ended December 31, 2013, the Compensation Committee determined that the Company achieved 99% of the annual revenue budget of $139 million, thus triggering an 80% payout under that component of the 2013 Bonus Plan. The Company did not achieve 90% of the Adjusted EBITDA target of $5.7 million and consequently no payout was owed based on that component. The target bonus, as a percentage of salary paid in 2013, available to each executive officer of the Company under the 2013 Bonus Plan are as follows: Ms. McCarthy – 30%; Ms. Pangelinan – 30%; Mr. Somers – 30%.
The Compensation Committee determined that
each executive officer of the Company earned the following bonuses, as a percentage of salary paid in 2013, under the 2013 Bonus Plan for the fiscal year ended December 31, 2013: Ms. McCarthy – 15%; Ms. Pangelinan – 15%; Mr. Somers – 15%.
On February 20, 2014, the Compensation Committee also approved the 2014 Short-Term Incentive Plan (the “2014 Bonus Plan”) with weighted performance targets and bonus opportunities for 2014 substantially similar to those set forth for the 2013 Bonus Plan. However, in the case of the 2014 Bonus Plan, for 2014, if either the revenue or Adjusted EBITDA component is 110%, the payout for that component would be 120%.
Generally Available Benefit Programs
Our
executive officers, including our NEOs, are generally offered the same employee benefits offered to all U.S.-based full-time employees, as summarized in the following table:
Benefit
All Full-Time U.S. Based Employees
Executive Officers
Accidental Death & Dismemberment
x
x
Employee Discount
x
x
Employee
Stock Purchase Plan(1)
x
x
Gym Membership(2)
x
x
Health Insurance
x
x
Life Insurance
x
x
Long-Term
Disability
x
x
401(k) Matching Program(3)
x
x
Severance Plan
x
x
Short-Term Disability
x
x
(1) Commencing
in June 2012, employees of the Company have the opportunity to purchase shares of Geeknet. Inc. Common Stock (“GKNT Stock”) at a 5% discounted rate using after-tax payroll deductions.
(2) Commencing in January 2012, employee benefits include reimbursement of $17.50 per month for membership to XSport Fitness, a gym in the Northern Virginia area. Employees are responsible for paying their portion of the monthly fees, as well as health and welfare programs.
(3) Commencing in January 2012, Geeknet established a 401(k) match program whereby the Company matches 100% of the first 2% of a full-time employee's per pay period compensation contribution and 50% of the next 2% of such full-time employee's per pay
period compensation, for a total Company match of up to 3% per pay period of an employee's salary contribution to his/her 401(k) plan.
24
Long-Term, Equity-Based Incentive Awards
The goal of Geeknet’s long-term equity-based incentive program is to align the interests of its NEOs with Geeknet’s stockholders and to provide each NEO with an incentive to manage Geeknet from the perspective of an owner with an equity stake in the business. The Compensation Committee determines the size of long-term, equity-based incentives based on each executive’s position
within Geeknet and seeks to set a level that will create a meaningful opportunity for stock ownership. In addition, the Compensation Committee takes into account an individual’s recent performance, his or her potential for future responsibility and promotion, the number of unvested equity awards already held by each individual and comparable awards made to individuals in similar positions with the selected peer companies. The relative weight given to each of these factors varies among individuals at the Compensation Committee’s discretion.
In reviewing and analyzing the awards made to similarly situated individuals at the Fiscal Year 2013 Peer Companies, the Compensation Committee compares:
•
The
number of shares subject to awards granted to an individual in a given role or position;
•
The number of shares owned, the number of option shares and/or restricted stock granted by role or position as a percentage of total shares owned, option shares granted and restricted stock awards of total common shares outstanding;
•
The fair value of the grant determined in a manner consistent with FASB ASC Topic 718; and
•
The
individual’s vested and unvested equity positions.
On a total Company basis, when appropriate, the Compensation Committee also analyzes:
•
The number of shares used by a company during the year with respect to new equity awards (i.e., burn rates);
•
The number of shares subject to outstanding equity awards relative to the total number of shares issued and outstanding (i.e., issued equity overhang); and
•
The
number of shares subject to outstanding equity awards and available for future grants relative to the total number of shares issued and outstanding (i.e., total equity overhang).
We believe these comparisons provide important additional context for comparing the competitive level of our equity based compensation practices versus the market.
We have historically used a mix of restricted stock or restricted stock units (“RSUs”) and stock options. For Fiscal Year 2013, the Compensation Committee weighed the relative costs and perceived benefits of stock options and RSUs and determined that, for Fiscal Year 2013, new hire equity grants to our NEOs should be comprised of RSUs, and stock options on a 50/50 basis. Upon hiring, Ms. Pangelinan was granted an economic value of $80,000 in RSUs and $80,000 in an option to purchase Company stock, and Mr. Somers was
granted an economic value of $40,000 in RSUs and $40,000 in an option to purchase Company stock. The economic value was determined based on NASDAQ closing price of the Company’s common stock on the date of the grant. The RSUs and options vest in equal parts over three years on the anniversary of the grant (33% each year). No additional equity was granted to any NEO in 2013.
Change of Control and Severance Agreements
We have entered into employment agreements with each of our NEOs, other than Mr. Langone, that provide for severance upon a termination of employment and, in the case of Ms. McCarthy, enhanced severance and benefits in the event of certain terminations of employment in connection with a change in control. For a summary of the severance benefits under these employment agreements,
please see “—2013 Potential Payments upon Termination or Change of Control.”
Clawback Policy
Equity awards and bonuses paid to our senior executives and officers are subject to the Executive Incentive Compensation Recoupment Policy established by our Board of Directors. Under this policy, if the Company is required to prepare an accounting restatement for any fiscal quarter or year due to the material noncompliance of the Company with any financial reporting requirement, and the Board of Directors determines that the conduct of any person who was a senior executive or executive officer of the Company at the time of
the conduct (an "Affected Officer") contributed to the noncompliance which resulted in the obligation to restate the Company's financial statements, the Board of Directors may require the Affected Officer to repay to the Company all or part of (1) any bonus received by the Affected Officer that was calculated
25
based on the financial statements that were subsequently restated and/or (2) certain gains from the sale of equity awards, where Board of Directors determines the gain was affected by such financial statements.
Accounting
and Tax Considerations
Geeknet generally takes into consideration the accounting and tax effect of each component of compensation when establishing the compensation programs, practices and packages offered to Geeknet’s executive officers and aims to keep the compensation expenses associated with such programs, practices and packages within reasonable levels and an established budget.
Compliance with Section 162(m) of the Internal Revenue Code
Geeknet has considered the potential future effects of Section 162(m) of the Internal Revenue Code on the compensation paid to its executive officers. Section 162(m) of the Internal Revenue Code precludes publicly-held companies from deducting certain compensation paid to executive officers in excess of $1 million in a year. Performance-based compensation is not subject to the limits on deductibility
of Section 162(m) of the Internal Revenue Code, provided such compensation meets certain requirements, including stockholder approval of material terms of compensation.
The Compensation Committee strives to provide our NEOs with compensation programs that will preserve the tax deductibility of compensation paid by Geeknet, to the extent reasonably practicable and to the extent consistent with Geeknet’s other compensation objectives. The Compensation Committee believes, however, that stockholder interests are best served by not restricting the Compensation Committee’s discretion and flexibility in structuring compensation programs, even though such programs may result in certain non-deductible compensation expenses.
26
EXECUTIVE
COMPENSATION
The following tables set forth compensation earned by: (i) the Company’s principal executive officer (PEO); (ii) the Company’s principal financial officer (PFO); (iii) the three (3) most highly compensated executive officers, if any, other than the PEO and the PFO, in Fiscal Year 2013.
Executive
Vice President, General Counsel and Chief Administrative Officer
Kenneth G. Langone(7)
2013
$
—
$
—
$
50,000
$
—
$
—
$
50,000
Former
President, Chief Executive Officer and Chairman of Directors
2012
$
—
$
—
$
50,000
$
—
$
—
$
50,000
2011
$
—
$
—
$
50,000
$
—
$
—
$
50,000
Carol
DiBattiste(8)
2013
$
68,181
$
—
$
—
$
—
$
36,068
(9
)
$
104,249
Former
Executive Vice President, General Counsel and Chief Administrative Officer
2012
$
400,000
$
72,000
$
—
$
—
$
12,000
$
484,000
2011
$
268,205
$
134,127
$
1,990,625
$
—
$
—
$
2,392,957
Ali
R. Sorbi(10)
2013
$
31,209
$
—
$
—
$
—
$
66,239
(11
)
$
97,448
Former
Chief Financial Officer
(1) The amounts shown reflect the aggregate grant date fair value of stock awards as computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, Compensation-Stock Compensation (“FASB ASC Topic 718”) for the fiscal year of
the respective grant of such award. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the respective year of such grant. These amounts may not correspond to the actual value recognized by the NEOs.
(2) The amounts shown reflect the aggregate grant date fair value of option awards as computed in accordance with FASB ASC Topic 718 for the fiscal year of the respective grant of such award. The assumptions used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the respective year of such grant. These amounts may not correspond to the actual value recognized by the NEOs.
(3)
“All Other Compensation” includes the 401(k) matching contribution made by the Company for each of the NEOs.
(6) Mr. Somers’ “other compensation” also consists of $62,366 of travel expenses related to commuting from Atlanta, GA to Fairfax,
VA.
(7) Mr. Langone received no compensation in consideration for his services as Chief Executive Officer. On May 7, 2013, Mr. Langone received a stock award pursuant to the Company’s non-employee director compensation policies.
(8) Ms. DiBattiste resigned effective March 1, 2013.
(9) Ms. DiBattiste’s “other compensation” consists of a pay-out of her accrued vacation of $33,031.
(10) Mr. Sorbi was employed with the
Company in 2011 and 2012, but was only an NEO in Fiscal Year 2013. Mr. Sorbi resigned effective March 6, 2013.
(11) Mr. Sorbi’s “other compensation” consists of a pay-out of his accrued vacation of $8,660 and salary continuation of $56,591 following his resignation.
27
Grants of Plan-Based Awards
The following table presents information concerning the grant of an award made to an NEO in Fiscal Year 2013 under
the 2007 Equity Incentive Plan:
NEO*
Grant Date
All Other Stock Awards: Number of Shares of Stock(1)
All Other Stock Options: Number of Securities Underlying Options
(2) In his capacity as Director, Mr. Langone received 8,801 shares of Geeknet, Inc. common stock, which he elected to defer in accordance with the Geeknet Director Deferred Compensation Plan. As such, these awards are not reflected herein.
28
Option
Exercises and Stock Vested
During Fiscal Year 2013, certain of the NEOs had stock awards that vested, but none of the NEOs exercised option awards. The following table presents information concerning the aggregate number of shares that vested under stock awards during Fiscal Year 2013 for each of the NEOs.
Kenneth Langone (2) Director;
Former Chief Executive Officer, President and Chairman of the Board of Directors
—
$
—
Carol DiBattiste
Former General Counsel, Chief Administrative Officer, and Executive Vice President
26,042
$
412,505
(1) Certain
of these shares were surrendered to cover the tax liability for the release of such vested amount.
(2) Mr. Langone received a grant of 3,666 RSUs consistent with the Company’s non-employee Director compensation policies which vested on May 7, 2013. Mr. Langone elected to defer receipt of these shares until further notice. The Company is holding the shares on his behalf.
2013 Potential Payments upon Termination or Change of Control
Set forth below is a description of the plans and agreements that could result in potential payouts to the
NEOs in the case of their termination of employment and/or a Change of Control of the Company took place on December 31, 2013 (the last day of the Company’s Fiscal Year 2013).
Kathryn K. McCarthy
On December 14, 2010, the Board of Directors of the Company approved the adoption of a Change of Control and termination benefits for Ms. McCarthy and authorized the Company to enter into an agreement with Ms. McCarthy to reflect the following benefits:
(A) if
Ms. McCarthy’s employment is terminated by the Company at any time for any reason not deemed by the Company to be for Cause, death or disability, then, in addition to receiving all accrued and then unpaid salary and vacation, Ms. McCarthy will be entitled to receive: (i) compensation equal to six (6) months ($200,000) of her annual base salary in the form of salary continuation; and (ii) six (6) months of reimbursement for COBRA health benefits coverage ($0) (Ms. McCarthy waived her right for COBRA health benefits coverage); and
(B) if, following a Change of Control, Ms. McCarthy’s employment is terminated by the Company at any time for any reason not deemed by the
Company to be for Cause, death or disability, or Ms. McCarthy is subject to Constructive Termination, then, in addition to receiving all accrued and then unpaid salary and vacation, Ms. McCarthy will be entitled to receive: (i) compensation equal to six (6) months of her annual base salary ($200,000) in the form of salary continuation; (ii) Accelerated Vesting of her entire unvested award ($471,082); and (iv) six (6) months of reimbursement for COBRA health benefits coverage ($0).
The awarding of any the above described benefits will be contingent upon Ms. McCarthy entering into a separation and release of claims agreement prepared by the Company.
Carol DiBattiste
On February 8, 2013, Ms. DiBattiste
resigned, effective March 1, 2013. In connection with her resignation, the Compensation Committee accelerated 26,042 restricted shares granted to Ms. DiBattiste on which the restrictions were scheduled to lapse on April 29, 2013. As of March 1, 2013, the acceleration date, the market closing price was $15.84 making the fair value of the accelerated shares $412,505.
29
Julie A. Pangelinan
On August 12, 2013, the
Company entered into an employment agreement with Ms. Pangelinan that includes the following benefits:
(A) if Ms. Pangelinan’s employment is terminated by the Company for any reason not deemed by the Company to be for Cause, death or disability prior to the first anniversary of the commencement of her employment, she will be entitled to receive, in addition to receiving all accrued and then unpaid salary and vacation: (i) compensation equal to the number of months of base salary remaining in the year plus six (6) months ($175,000) of her annual base salary, not to exceed a total of twelve (12) months, in the form of salary continuation; and (ii) six (6) months of reimbursement for COBRA health benefits coverage ($10,335). If Ms. Pangelinan’s employment
is terminated by the Company for any reason not deemed by the Company to be for Cause, death or disability after the first anniversary of the commencement of her employment, she will be entitled to receive, in addition to receiving all accrued and then unpaid salary and vacation: (i) compensation equal to six months ($175,000) of her annual base salary in the form of salary continuation; and (ii) six (6) months of reimbursement for COBRA health benefits coverage ($10,335).
The awarding of any the above described benefits will be contingent upon Ms. Pangelinan entering into a separation and release of claims agreement prepared by the Company. Ms. Pangelinan’s severance
terminates if she enters into new employment while receiving severance.
On March 1, 2013, the Company entered into an employment agreement with Mr. Somers that includes the following benefits:
(A) if Mr. Somers’ employment is terminated by the Company for any reason not deemed by the Company to be for Cause, death or disability prior to the first anniversary of the commencement of his employment, he will be entitled to receive, in addition
to receiving all accrued and then unpaid salary and vacation: (i) compensation equal to the number of months of base salary remaining in the year plus six months ($162,500) of his annual base salary, not to exceed a total of 12 months, in the form of salary continuation; and (ii) six months of reimbursement for COBRA health benefits coverage ($12,406). If Mr. Somers’ employment is terminated by the Company for any reason not deemed by the Company to be for Cause, death or disability after the first anniversary of the commencement of his employment, he will be entitled to receive, in addition to receiving all accrued and then unpaid salary and vacation: (i) compensation equal to six (6) months ($162,500) of his annual base salary in the form of salary continuation; and (ii) six (6) months of reimbursement
for COBRA health benefits coverage ($12,406).
The awarding of any the above described benefits will be contingent upon Mr. Somers entering into a separation and release of claims agreement prepared by the Company.
Ali R. Sorbi
On March 6, 2013, Mr. Sorbi resigned from the Company, and the Company entered into a separation agreement with Mr. Sorbi. In addition to receiving all accrued and unpaid salary and vacation, in exchange for a mutual release of claims and entering into a three month covenant not to compete, the
Company paid Mr. Sorbi: (i) a lump sum payment of thirty one thousand dollars ($31,000) bonus in full settlement of his profit sharing amount for 2012 performance that would otherwise be paid in March 2013; (ii) compensation equal to three months ($56,591) of his annual base salary in the form of salary continuation; (iii) three months of reimbursement for COBRA health benefits coverage ($1,616); and (iv) continue his discount on ThinkGeek products on the same basis as active employees.
Definitions for Change of Control and Severance Agreement Disclosures:
For the purposes of the descriptions of the change and control and severance arrangements set forth above, the terms set forth below have the following meanings:
“Accelerated Vesting”
as used herein means: (i) the immediate vesting of a number of shares subject to such executive’s stock options with the Company, equal to the number of options that would normally vest over the applicable acceleration period, and (ii) the immediate vesting of a number of shares of restricted
30
stock in the Company held by such executive, if any, equal to the number of shares of restricted stock, if any, that would normally vest over the applicable acceleration period.
“Cause”
as used herein means any of the following: (i) any act of personal dishonesty involving an executive in connection with such executive’s responsibilities as an employee of the Company; (ii) the conviction of or plea of guilty or nolo contendere to a felony by an executive; (iii) a willful act by an executive which constitutes gross misconduct and which is injurious to the Company; or (iv) continued violations by an executive of such executive’s obligations as an employee of the Company which are demonstrably willful and deliberate on such executive’s part after there has been delivered to the executive a written demand for performance from the
Company which describes the basis for the Company’s belief that he or she has not substantially performed his or her duties.
“Change of Control” as used herein means the closing of: (i) a merger or consolidation of the Company with or into any other corporation or other entity, or the sale of all or substantially all of the assets of the Company, unless the stockholders of the Company immediately prior to such transaction hold at least 50% of the outstanding equity securities of the entity surviving such merger
or consolidation or the entity purchasing such assets, or (ii) a sale or transfer of more than 50% of the Company’s voting securities to a person or persons acting as a group, who is or are not controlled directly or indirectly by the Company, in a single transaction or series of related transitions.
“Constructive Termination” means an executive’s resignation within thirty (30) days following the expiration of any Company cure period (discussed below) following the occurrence of one or more of the following events without an executive’s consent: (i) the assignment to the executive of any duties or the reduction of the executive’s duties, either of which results in a material diminution
in an executive’s authority, duties or responsibilities with the Company in effect immediately prior to such assignment, or the removal of an executive from such position and responsibilities, unless an executive is provided with comparable authority, duties or responsibilities; provided, however, it being understood that a new position within a larger combined company does not constitute “Constructive Termination” if it is in the same area of operations and involves similar scope of management responsibility notwithstanding that an executive may not retain as senior a position overall within the larger combined company as an executive’s prior position; (ii) a material reduction of an executive’s base salary; (iii) a material change in the geographic location at which an executive must perform services (e.g., the relocation of an executive to a facility or a location less than
fifty (50) miles from an executive’s then-present location shall not be considered a material change in geographic location); or (iv) any material breach by the Company of any material provision of executive’s employment agreement. The executive will not resign for Constructive Termination without first providing the Company with written notice of the acts or omissions constituting the grounds for “Constructive Termination” within ninety (90) days of the initial existence of the grounds for “Constructive Termination” and a reasonable cure period of not less than thirty (30) days following the date of such notice.
“Extended Exercise Period” as used herein commences on
the first day after the executive’s employment with the Company is terminated and runs for the applicable extension period.
Estimated Payments upon Termination or Change of Control
The following table provides information concerning the estimated payments and benefits that would be provided in the circumstances described above. Payments and benefits are estimated assuming that the triggering event took place on the last business day of calendar year 2013 (December 31, 2013), and the price per share of our Common Stock is the official closing price on the NASDAQ Global Market as of that date ($18.09). There can be no assurance that a triggering event would produce the same
or similar results as those estimated below if such event occurs on any other date or at any other price, or if any other assumption used to estimate potential payments and benefits is not correct. Due to the number of factors that affect the nature and amount of any potential payments or benefits, any actual payments and benefits may differ from those set forth below.
31
Potential
Payments upon Involuntary Termination Other Than for Cause or Voluntary Termination for Good Reason
NEO
Type of Benefit
At Any Time ($)
After Change in Control or Constructive Termination ($)
The Company’s Nominating and Governance Committee review compensation for our non-employee Directors on a periodic basis. In 2013, each non-employee Director received an annual retainer consisting of RSUs of Geeknet Common Stock with a value of $50,000, determined by reference to the closing market price of Geeknet Common Stock on the date of
grant. Effective as of the Annual Meeting in 2014, the annual retainer for each non-employee Director shall increase to $75,000.
In 2013, the chairperson of each committee received additional RSUs of Geeknet Common Stock with a value of $10,000, determined by reference to the closing market price of Geeknet Common Stock on the date of grant. Effective as of the Annual Meeting in 2014, not only the chairperson of each committee but also the lead director shall receive additional RSUs with a value of $10,000. These RSUs will be granted and become fully vested on the date of grant, subject to their continued service as a non-employee Director through the next Annual Meeting.
In addition, newly appointed non-employee Directors will receive, on the date such person becomes a Director, a one-time grant of RSUs of Geeknet Common Stock with a value of $40,000, determined by reference
to the closing market price of Geeknet Common Stock on the date of grant. These RSUs will become fully vested on the day preceding the next Annual Meeting, subject to their continued service as a non-employee Director on such date.
Non-employee directors are reimbursed for out-of-pocket costs for attending each meeting of the Board or any Board committee of which they are a member. We do not have any pension or retirement plans for our non-employee directors. Employee directors do not receive any compensation for their Board service.
32
The following table provides information concerning the compensation paid by the
Company to each of its non-employee Directors for Fiscal Year 2013:
Name
Fees Earned or Paid in Cash
Stock Awards (1)
Option Awards
Total
Matthew
Blank
$
—
$
50,000
$
—
$
50,000
Matthew
Carey
$
—
$
60,000
$
—
$
60,000
Thomas
Coughlin
$
—
$
50,000
$
—
$
50,000
Peter
Georgescu
$
—
$
60,000
$
—
$
60,000
Sir
Ronald Hampel
$
—
$
50,000
$
—
$
50,000
Kenneth
Langone
$
—
$
50,000
$
—
$
50,000
(2)
Frank
A. Riddick, III
$
—
$
60,000
$
—
$
60,000
Eric
Semler
$
—
$
40,000
$
—
$
40,000
(3)
Derek
Smith
$
—
$
60,000
$
—
$
60,000
Michael
Solomon
$
—
$
50,000
$
—
$
50,000
(1) The
amount shown reflects the aggregate grant date fair value of restricted stock units as calculated pursuant to FASB ASC Topic 718 for Fiscal Year 2013. The assumption used in the valuation of these awards are set forth in the notes to our consolidated financial statements, which are included in our Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on February 26, 2014. As of December 31, 2013, the aggregate number of shares under stock awards and the aggregate number of shares underlying options outstanding for each of the Company’s non-employee Directors were:
Name
Share
Award: Number of RSUs
Grant Date Fair Value per Share
Grant Date
Aggregate Number of Unvested Restricted Stock Units Awards
Aggregate Number of Shares Underlying Option Awards Outstanding (A)
Security Ownership of Certain Beneficial Owners and Management
As of the close of business on March 18, 2014, the Company had an aggregate of 6,662,413 shares of Common Stock outstanding. The following
table sets forth certain information concerning the beneficial ownership of Geeknet’s Common Stock, as of the close of business on March 18, 2014 for the following: (1) each person or entity who is known by the Company to own beneficially more than 5% of the outstanding shares of the Company’s Common Stock; (2) each of its Directors and each nominee seeking to become one of its Directors; (3) each of the executive officers named in the Summary Compensation Table; and (4) all directors and executive officers of the Company as a group. The Company does not know of any arrangements,
including any pledge of its securities by any person, the operation of which may at a subsequent date result in a change of control of the Company.
Entities
affiliated with Impala Asset Management, LLC (9)
450,000
—
—
450,000
6.75
%
Current Directors and Officers, as a group, a total number of 12 persons
1,580,704
3,685
36,505
1,620,894
24.33
%
*
Represents
less than 1% of the outstanding shares Common Stock.
(1)
The address of each Officer and Director is c/o Geeknet, Inc., Attention: Investor Relations, 11216 Waples Mill Rd., Suite 100, Fairfax, VA22030.
(2)
The following Directors have elected to defer the noted number of shares in accordance with the Geeknet Director Deferred Compensation Plan and their awards are not reflected in the Number of Shares column:
Messrs. Langone (8,801 shares), Carey (10,101 shares), Georgescu (9,159 shares) and Smith (9,726 shares).
(3)
Awards are RSUs granted pursuant to the Company’s 2007 Equity Incentive Plan (as amended) and are subject to vesting within sixty (60) days of March 18, 2014.
(4)
Shares subject to options that are exercisable within sixty (60) days of March 18, 2014.
(5)
Reflects
the number of shares owned by Ms. DiBattiste as of her resignation effective on March 1, 2013.
(6)
On January 4, 2011, Ms. McCarthy was granted 78,125 RSUs vesting equally over three years or approximately 26,042 shares per year. With each vesting Ms. McCarthy surrendered shares to the Company to meet the minimum tax withholding requirements. She has not sold any shares on the open market.
(7)
Mr. Sorbi did not own shares as of his resignation on March
6, 2013.
(8)
The address for William M. Sams c/o Marlin Sams Fund, L.P. is 555 Madison Ave., New York, NY10022. Based on information provided by the Marlin Sams Fund, L.P., in its Schedule 13D/A filed with the SEC on March 18, 2014, the following table shows the voting and dispositive power over the shares listed:
34
Name
of Reporting Person/Beneficial Owner
Number of Shares
William M. Sams(A)
660,000
William M. Sams Suzanne Present Michael Solomon Marlin Sams Fund, L.P.
Marlin Sams GenPar, LLC
Gladwyne Marlin GenPar, LLC (shared voting and dispositive power)
25,000
685,000
(A)
20,000 shares of Common Stock held in the Irrevocable Trust of Michael Solomon FBO Grace Solomon for the benefit of Michael Solomon’s daughter, of which William M. Sams is the co-trustee with Constance Solomon, Michael Solomon’s wife.
(9)
The address for Impala Asset Management, LLC is 134 Main Street, New Canaan, CT06840. Based
on information provided by Impala Asset Management, LLC, an investment advisor registered under Section 203 of the Investment Advisors Act of 1940, Impala Asset Management, LLC may be deemed to beneficially own 450,000 shares by virtue of having sole voting and investment power over such shares.
Section 16(a) of the Exchange Act requires our Officers and Directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership
and changes in ownership with the SEC. Such Officers, Directors and ten-percent Stockholders are also required by SEC rules to furnish to the Company copies of all forms that they file pursuant to Section 16(a). Based solely on the Company’s review of the copies of such forms received, or written representations from certain reporting persons, the Company believes that during Fiscal Year 2013, all of its Executive Officers, Directors, and ten-percent Stockholders complied with all applicable filing requirements, except that due to administrative errors, a Form 4 for David Wright with a due date of December 6, 2012 was filed on March
18, 2013, and a Form 4 for Carol DiBattiste with a due date of March 5, 2013 was filed on March 8, 2013.
RELATED PARTY TRANSACTIONS
We have adopted a Code of Conduct, which governs, among other things, related-party transactions. Under our Code of Conduct, related party transactions are disfavored and are therefore avoided wherever possible. Nonetheless, if a related-party transaction with a non-executive officer or non-director is deemed “unavoidable,” such proposed transaction must first be fully disclosed to the Company’s Chief Financial Officer (“CFO”). If the CFO determines that the proposed related-party transaction
is material to the Company, then the transaction must be reviewed and approved in writing by the Audit Committee in advance of consummating the proposed transaction. In addition, any proposed related-party transaction involving a Director or Executive Officer of the Company must be reviewed and approved in writing in advance by the disinterested members of the Company’s Audit Committee.
In the Company’s last fiscal year, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which the
Company was or is to be a party in which the amount involved exceeds $120,000 and in which any Director, Executive Officer, holder of more than ten percent (10%) of its Common Stock, or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest other than compensation agreements and other arrangements, which are described under “Change of Control and Severance Agreements.”
Indemnification Agreements
The Company has entered into indemnification agreements with each of its Directors and Officers. Such indemnification agreements require the Company to indemnify its Directors and Officers to the fullest extent permitted by Delaware law.
36
REPORT
OF THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
The information contained in this report shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.
The Audit Committee is comprised solely of independent directors, as defined in the Marketplace Rules of the NASDAQ Stock Market, and operates under a written charter adopted by the Board of Directors (which can be accessed on our web
site at http://investors.geek.net/governance.cfm). As described more fully in its charter, the purpose of the Audit Committee is to oversee the Company’s accounting and financial reporting processes and audits of its financial statements; approve the hiring and firing of the independent auditors; assist the Board of Directors in oversight and monitoring of (i) the integrity of the Company’s financial statements, (ii) its compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications, independence and performance, and (iv) its internal accounting and financial controls; prepare the report that the rules of the SEC require to be included in its annual
Proxy Statement; provide the Board of Directors with the results of its monitoring and recommendations derived therefrom; and provide to the Board of Directors such additional information and materials as it may deem necessary to make the Board of Directors aware of significant financial matters that require the attention of the Board of Directors.
The Company’s management has primary responsibility for the preparation, presentation and integrity of its financial statements, accounting and financial reporting principles, internal controls and procedures designed to ensure compliance with accounting standards, applicable laws and regulations. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed the audited financial statements in the Annual Report on Form 10-K for Fiscal Year 2013 with management including
a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of the disclosures in the financial statements.
Review of Audited Financial Statements for Fiscal Year 2013
The Audit Committee discussed with KPMG LLP (“KPMG”), the Company’s independent registered public accounting firm, who are responsible for expressing an opinion on the conformity of the audited financial statements in the Annual Report on Form 10-K for Fiscal Year 2013 with accounting principles generally accepted in the United States, KPMG’s judgments as to the quality, not just the acceptability, of its accounting policies and such other matters as are required to be discussed with the Audit Committee pursuant to the Public Company Accounting
Oversight Board Auditing Standard No. 16 "Communications with Audit Committees”. The Audit Committee has received the written disclosures and the letter from KPMG required by the applicable requirements of the Public Company Accounting Oversight Board and has discussed with KPMG its independence.
The Audit Committee discussed with KPMG the overall scope and plans for the audit. The Audit Committee meets with the independent registered public accountants, with and without management present, to discuss the results of its examinations, its evaluations of our internal controls, and the overall quality of the Company’s financial reporting. The Audit Committee held six (6) such meetings during Fiscal Year 2013.
In reliance on the reviews and discussions referred to above, the Audit Committee
recommended, and the Board of Directors approved, the inclusion of the audited financial statements in the Annual Report on Form 10-K for Fiscal Year 2013 for filing with the SEC. The Audit Committee and the Board of Directors have also recommended, subject to stockholder ratification, the selection of KPMG as the Company’s independent registered public accounting firm for Fiscal Year 2014.
The Company knows of no other matters to be submitted to the Annual Meeting. If any other matters properly come before the Annual Meeting, it is the intention of the persons named in the enclosed form Proxy to vote the shares they represent as the Board of Directors may recommend.
