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.
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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
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calculated and state how it was determined):
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maximum aggregate value of transaction:
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previously with preliminary
materials.
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Check box if
any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid previously.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its
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____________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS To
Be Held on May 4, 2010
____________________
To the
Stockholders:
NOTICE IS HEREBY
GIVEN that the Annual Meeting of Stockholders of Geeknet, Inc. (the “Company”),
a Delaware corporation, will be held on Tuesday, May 4, 2010 at 9:00 a.m.,
Eastern Daylight Time, at the offices of the Company’s ThinkGeek subsidiary
located at 11216 Waples Mill Road, Fairfax, VA22030-6099, for the following
purposes:
(1)
To elect two
(2) Class I directors to serve for a three-year term and until their
successors are duly elected and qualified (Proposal
One);
(2)
To ratify the
appointment of Stonefield Josephson, Inc. as the Company’s independent
registered public accounting firm for the fiscal year ending December 31,2010 (Proposal Two); and
(3)
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 8, 2010 are entitled to notice of
and to vote at the meeting.
Pursuant
to the rules adopted by the U.S. Securities and Exchange Commission, we are
furnishing proxy materials to our stockholders primarily via the Internet,
instead of mailing printed copies of those materials to each stockholder. On or
about March 24, 2010, we expect to send to our stockholders (other than
those who previously requested electronic or paper delivery) a Notice of
Internet Availability of Proxy Materials (“Notice”) containing instructions on
how to access our proxy materials, including our Proxy Statement and our 2009
Annual Report on Form 10-K. The Notice also instructs you on how to access your
proxy card to vote through the Internet or by telephone.
This
new process is designed to expedite stockholders’ receipt of proxy materials,
lower the cost of the Annual Meeting of Stockholders, and help conserve natural
resources. If you previously elected to receive our proxy materials
electronically, you will continue to receive these materials via e-mail unless
you elect otherwise. However, if you would prefer to receive printed proxy
materials, please follow the instructions included in the Notice.
YOUR
VOTE IS IMPORTANT
This
Proxy Statement is furnished in connection with our solicitation of proxies, on
behalf of the Board of Directors, for the 2010 Annual Meeting of Stockholders.
The Proxy Statement and the related proxy form are being distributed on or about
March 24, 2010. For specific instructions on how to vote your shares,
please refer to the instructions on the Notice you received in the mail or, if
you requested to receive printed proxy materials, 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 or
Notice;
•
Vote by mail by completing and
returning a written proxy card;
or
•
Attend our 2010 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 3, 2010. 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 if you requested to receive printed proxy materials,
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.
The matters to be
acted upon at the Annual Meeting of Stockholders (the “Meeting”) are described
in the Notice of Annual Meeting of Stockholders, the Notice of Internet
Availability of Proxy Materials (“Notice”) and this Proxy Statement. The Proxy
is solicited on behalf of the Board of Directors of Geeknet, Inc. (the
“Company”) for use at our Meeting to be held at the offices of the Company’s
ThinkGeek subsidiary located at 11216 Waples Mill Road, Fairfax, VA22030-6099,
on Tuesday, May 4, 2010, at 9:00 a.m. Eastern Daylight Time, and at any
adjournment(s) thereof, for the purposes set forth herein. Our telephone number
is (650) 694-2100.
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, 2009 (“Fiscal Year 2009”), was mailed or
made available on the Internet, as applicable, on March 24, 2010 to all
stockholders entitled to vote at the Meeting.
STOCKHOLDERS
MAY RECEIVE A COPY OF THE COMPANY’S 2009 ANNUAL REPORT ON FORM 10-K, NOT
INCLUDING EXHIBITS, AT NO CHARGE. IF A STOCKHOLDER PREFERS A COPY OF THE 2009
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., 650 CASTRO STREET, SUITE 450, MOUNTAIN VIEW, CA94041, ATTN:
INVESTOR RELATIONS.
Record
Date and Share Ownership
Stockholders of
record at the close of business on March 8, 2010 (which we will refer to as the
“Record Date” throughout this Proxy Statement) are entitled to notice of and to
vote at the 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, 250,000,000 shares of our Common Stock were
authorized and 60,545,579 shares of the Company’s Common Stock were outstanding.
As of the Record Date, 10,000,000 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
or Notice to vote again prior to 11:59 p.m. Eastern Daylight Time (“EDT”)
on May 3, 2010 (specific instructions for using the telephone voting
system are provided on the proxy card and in the
Notice);
—
By Internet
: Use the Internet voting site listed on the proxy card or
Notice to vote again prior to 11:59 p.m. EDT on May 3, 2010 (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 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
capital stock held by such stockholder.
With respect to the
election of directors pursuant to “Proposal One — To elect two (2)
Class I directors to serve for a three-year term and until their successors are
duly elected and qualified,” directors will be elected by a plurality vote of
the shares of our Common Stock present or represented and entitled to vote on
this matter at the Meeting.
With respect to the
ratification of Stonefield Josephson, Inc. as the Company’s Independent
Registered Public Accountants For the Fiscal Year Ending December 31, 2010
pursuant to “Proposal Two — To ratify the appointment of Stonefield
Josephson, Inc. as the Company’s independent registered public accounting firm
for the fiscal year ending December 31, 2010,” if a quorum is present and
voting, the affirmative vote of a majority of the votes cast is needed to ratify
the appointment of Stonefield Josephson, Inc. 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, 2010 (“Fiscal
Year 2010”).
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 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 or not 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.
In general, Delaware law provides that a quorum consists of a majority of shares
entitled to vote and present or represented by proxy at the
Meeting.
The Inspector will
treat shares that are voted WITHHELD or ABSTAIN, or “broker non-votes,” 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 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, assuming that a quorum is obtained. When
proxies are properly dated, executed and returned, the shares represented by
such proxies will be voted at the 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 the nominees for directors set forth herein and (ii) the
ratification of Stonefield Josephson, Inc. as our independent registered public
accounting firm for Fiscal Year 2010. With respect to such other business as may
properly come before the 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 2011 Annual Meeting of Stockholders must be received by us at our principal
offices at 650 Castro Street, Suite 450, Mountain View, CA94041, Attention:
General Counsel, not earlier than October 25, 2010 nor later than
November 24, 2010 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 from the floor
are subject to the advance notice procedures described below under “Transaction
of Other Business.”
Any stockholder may
present a matter from the floor for consideration at a meeting so long as
certain procedures are followed. Under our bylaws, as amended, in order for a
matter to be deemed properly presented by a stockholder for consideration at our
2011 Annual Meeting of Stockholders, timely notice must have been delivered, as
described above. The stockholder’s notice must set forth, as to each proposed
matter, the following: (i) the name and address of the stockholder proposing
such business; (ii) a representation that the stockholder is a holder of record
of our stock entitled to vote at the meeting and intends to appear in person or
by proxy to introduce the business specified in the notice; (iii) such other
information regarding the proposal as would be required to be included in a
proxy statement filed pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), had the matter been proposed by
our Board of Directors; and (iv) if the proposal is for the nomination of
directors, a description of all arrangements or understandings between the
stockholder and the nominee(s) pursuant to which the nomination(s) are to be
made by the stockholder and the consent of each nominee to serve as a director.
The chairman of the meeting may refuse to acknowledge any matter not made in
compliance with the foregoing procedure.
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) 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.,
650 CASTRO STREET, SUITE 450, MOUNTAIN VIEW, CA94041, ATTN: INVESTOR RELATIONS,
or call (650) 694-2100 or (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 Meeting is as set forth in this
Proxy Statement. If any other matter(s) are properly brought before the 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.
PROPOSAL
ONE
TO
ELECT TWO (2) CLASS I DIRECTORS TO
SERVE
FOR A THREE-YEAR TERM AND UNTIL THEIR
SUCCESSORS
ARE DULY ELECTED AND QUALIFIED
General
Our Board of
Directors has eight authorized directors and currently consists of eight
members. We have a classified Board of Directors, which is divided into three
classes, each with terms expiring at different times. The three classes are
currently comprised of the following directors:
—
Class I
consists of Scott E. Howe, Scott L. Kauffman and Suzanne M. Present, who
will serve until the annual meeting of stockholders to be held in
2010;
—
Class II
consists of Andrew Anker, Robert A. Bowman and Michael Sileck, who
will serve until the annual meeting of stockholders to be held in 2011;
and
—
Class III
consists of Robert M. Neumeister, Jr. and David B. Wright, who will serve
until the annual meeting of stockholders to be held in
2012.
At each annual
meeting of stockholders, the successors to directors whose terms will then
expire will be elected to serve from the time of election and qualification
until the third annual meeting following election and until their successors
have been duly elected and qualified. Any additional directorships resulting
from an increase in the number of directors will be distributed among the three
classes so that, as nearly as possible, each class will consist of an equal
number of directors.
Information
Regarding the Nominees
The term of the
three Class I directors, Ms. Present, Mr. Kauffman and Mr. Howe, will expire on
the date of the Meeting. Mr. Howe is not standing for re-election to the Board
of Directors. Accordingly, concurrently with the Meeting, the size of our Board
of Directors will be reduced to seven members.
On March 11,2010, the Nominating and Governance Committee, which is comprised of Messrs.
Anker, Neumeister and Sileck, recommended, and the Board of Directors, on
March 16, 2010, determined, that it is in the best interests of the Company
to nominate the two (2) Class I directors for election to the Board of
Directors. The nominees, each of whom is standing for reelection, for election
by the stockholders to these two positions are:
—
Scott L.
Kauffman; and
—
Suzanne M.
Present.
We are not aware of
any reason that any nominee will be unable or will decline to serve as a
director. The term of office of each person elected as a Class I director at the
Meeting will continue until our annual meeting of stockholders held in 2013 and
until a successor has been elected and qualified. 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 two
(2) nominees named above, each of whom is 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
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
Directors will be
elected by a plurality vote of the shares of our Common Stock present or
represented and entitled to vote on this matter at the Meeting. Accordingly, the
two (2) nominees receiving the highest number of affirmative votes of shares
represented and voting on this proposal at the Meeting will be elected directors
of the Company. Votes withheld from a nominee and broker non-votes will be
counted for purposes of determining the presence or absence of a quorum but,
because directors are elected by a plurality vote, 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” THE NOMINEES TO SERVE AS CLASS I DIRECTORS.
Information
Regarding the Nominees and Other Members of the Board of Directors
The following table
sets forth the names, ages and present positions with the Company as of the
Record Date for each Class I director nominee and each Class II and
Class III director who will continue to serve on our Board of Directors
following the Annual Meeting.
Name
Age
Position
Scott L.
Kauffman
54
Class I
Director, President and Chief Executive Officer
Suzanne M.
Present(3)
51
Class I
Director
Andrew Anker
(1)
(2)
44
Class II
Director
Robert A.
Bowman (1)
54
Class II
Director
Michael
Sileck(1)
(2)
49
Class II
Director
Robert M.
Neumeister, Jr.
(2)
60
Class III
Director
David B.
Wright (1)(3)
60
Class III
Director
(1)
Member of the
Audit Committee.
(2)
Member of the
Nominating and Governance
Committee.
(3)
Member of the
Compensation Committee.
Scott L. Kauffman
has served as our President and Chief Executive Officer and as a member
of our Board of Directors since January 2009. From May 2008 to
December 2008, Mr. Kauffman was President, Chief Executive Officer and a
director of PopTok Ltd., a media software company. From September 2006 to March
2008, Mr. Kauffman was President and Chief Operating Officer and a director of
BlueLithium, Inc., an online advertising network that was acquired by Yahoo!
Inc. in October 2007. From June 2004 to August 2006, Mr. Kauffman served as
President and Chief Executive Officer and a director of Zinio, Inc., a provider
of digital publishing and marketing services. Prior to joining Zinio, Mr.
Kauffman served as President and Chief Executive Officer and a director of
MusicNow LLC, a digital music service, from February 2003 to June 2004. From
April 2001 to February 2003, Mr. Kauffman was President and Chief Executive
Officer and a director of Coremetrics, Inc., a provider of digital
marketing optimization solutions. Mr. Kauffman currently serves on the boards of
directors of MDC Partners Inc., a public company, and Coremetrics,
Inc.
Mr. Kauffman
has served in executive management roles with Internet technology companies for
more than a decade. As our President and Chief Executive Officer,
Mr. Kauffman possesses deep knowledge and understanding of Geeknet’s
business, strategy, operations and employees. His service on the board of
directors of MDC Partners also provides Mr. Kauffman a strong understanding
of his role as a director of a publicly-traded company.
Suzanne M.
Present has served on our Board of Directors since September 2008. Since
June 1998, Ms. Present has been a co-founder and principal of Gladwyne Partners,
LLC, a private partnership fund manager. Ms. Present currently serves on
the boards of directors of The Electric Sheep Company, Inc., a privately-held
developer of content and technologies for virtual worlds; and Anshe Chung
Studios, Limited, a privately-held Chinese-based developer of content for
virtual worlds.
Ms. Present is
independent and brings to the Board of Directors decades of finance and banking
expertise in a wide range of industries including technology, retail and media.
Her extensive experience on the boards of directors of public and private
companies and on audit committees has provided her with strong
consensus-building skills and a firm understanding of her role as a
director.
Andrew
Anker has served on our Board of Directors since September 2004. Mr.
Anker has served as the executive vice president of corporate development of Six
Apart Limited (“Six Apart”) since June 2004. Six Apart is a provider of personal
publishing systems and services. From July 2003 through May 2004, Mr. Anker was
a private investor. From March 1999 through June 2003, Mr. Anker was a general
partner with August Capital, a venture capital fund focused on investing in
early-stage technology companies. Mr. Anker has been a member of the board of
directors of Ebates Shopping, Inc. since February 2007.
Mr. Anker is
independent and brings to the Board of Directors extensive service on the boards
of directors of Internet technology companies. Mr. Anker has served in
senior management roles with numerous Internet technology companies, including
Wired Digital, which he founded in 1994. Mr. Anker’s twelve years of
finance experience and service on the audit committees of other public companies
has provided Mr. Anker with the financial acumen necessary to serve on our
Audit Committee.
Robert A.
Bowman has served on our Board of Directors since February 2010.
Mr. Bowman has served as the President and Chief Executive Officer of Major
League Baseball Advanced Media LP, the interactive media company of Major League
Baseball, since 2000. Mr. Bowman also serves as President of the Michigan
Education Trust and is a member of the board of directors of Blockbuster, Inc.,
The Warnaco Group Inc. and Take-Two Interactive Software, Inc. From September
2003 until August 2008, Mr. Bowman served on the board of directors of World
Wrestling Entertainment Inc.
Mr. Bowman is
independent and brings to the Board of Directors an accomplished career with
global media companies. Mr. Bowman’s service as Treasurer for the State of
Michigan and an investment banker with Goldman Sachs & Co. provide him with
the financial acumen necessary to serve on our Audit Committee. His service on
the boards of directors of public companies provides him with a strong
understanding of his role as a director.
Michael
Sileck joined our Board of Directors in June 2009. Mr. Sileck has
been an independent consultant since January 2009. Prior to that, he was
the Chief Operating Officer of World Wrestling Entertainment, Inc., a public
company providing global sports entertainment, from February 2007 until December
2008, and its Chief Financial Officer from June 2005 to February 2007.
Additionally, from June 2005 until December 2008, Mr. Sileck was a director of
World Wrestling Entertainment, Inc. From March 2002 to March 2005, Mr. Sileck
served as the Senior Vice President and Chief Financial Officer of Monster
Worldwide, Inc. Prior to that, Mr. Sileck was the Chief Financial Officer and
Senior Vice President of USA Networks, Inc. from September 1999 to February
2002. Mr. Sileck is also a director of Switch & Data Facilities Company,
Inc. and Unifi, Inc.
Mr. Sileck is
independent and has extensive experience in the finance and media industries,
including serving as chief financial officer for various global media and
entertainment companies. Mr. Sileck’s experience as a finance
executive, qualification as a Certified Public Accountant and service on audit
committees of other public companies has provided him with the financial acumen
and consensus-building skills necessary to serve as Chairman of our Audit
Committee.
Robert M.
Neumeister, Jr., has served on our Board of Directors since June 2001 and
has served as Chairman of our Board of Directors since December 2007. From June
2008 to January 2009, Mr. Neumeister also served as our Interim President and
Chief Executive Officer. From April 2006 until April 2007, Mr. Neumeister served
as executive vice president and chief financial officer of Linux Networx, Inc.,
a provider of Linux supercomputing technology. From November 2005 through March
2006, Mr. Neumeister was a private investor. From January 2003 through October
2005, Mr. Neumeister served as chief financial officer for Dex Media, Inc., a
company providing local and national advertisers with directory, Internet and
direct marketing solutions. From September 2001 through December 2002, Mr.
Neumeister served as chief financial officer for Myriad Proteomics, Inc., a
company engaged in mapping the human proteome. Mr. Neumeister is a member of the
board of directors of Symmetricom, Inc. and was a member of the board of
directors of Covad Communications Group from April 2006 to April
2008.
Mr. Neumeister is
independent and, as the longest serving member of our Board of Directors, brings
to our Board of Directors an intimate familiarity with the evolution of
Geeknet’s business, operations and employees. Mr. Neumeister’s expertise in
strategic planning, consensus management and general management provide critical
insight to our Board of Directors. His international experience also provides
Mr. Neumeister with a valuable understanding of the challenges facing a global
company. Mr. Neumeister’s extensive service as the chief financial officer and
chief accounting officer of several public companies provide a strong background
in corporate governance and fiduciary responsibility necessary to serve as
Chairman of our Nominating and Governance Committee.
David B.
Wright has served on our Board of Directors since December 2001. Since
February 2010, Mr. Wright has served as president and chief executive officer of
GridIron Systems, a privately-held company that deploys appliance software
technology to maximize application performance for enterprise customers.
From June 2006 until December 2009, Mr. Wright has served as chairman and chief
executive officer for Verari Systems, Inc., a developer of platform-independent
blade servers and storage systems. From August 2004 through May 2006, Mr. Wright
served as executive vice president, office of the chief executive officer,
strategic alliances and global accounts, for EMC Corporation (“EMC”), a provider
of products, services, and solutions for information storage and management.
From October 2003 until August 2004, Mr. Wright served as an EMC executive vice
president and president of EMC’s Legato Systems division, which develops,
markets and supports enterprise class storage software products and services.
From October 2000 until its acquisition by EMC in October 2003, Mr. Wright
served as president and chief executive officer of Legato Systems, Inc. Mr.
Wright serves on the board of directors of Verisk Analytics, Inc. and
ActivIdentity Corp.
Mr. Wright is
independent and brings to the Board of Directors decades of service with various
global technology companies. His extensive service as an executive officer with
technology companies and service on the boards of directors of public companies
as lead independent director, compensation committee chairman and an audit
committee member provide him with the knowledge and leadership experience
necessary to serve as Chairman of our Compensation Committee. Mr. Wright
also provides critical insights with respect to acquisition transactions, having
been involved in over twenty such transactions. His international experience
also provides Mr. Wright with a valuable understanding of the challenges
facing a global company.
See “Corporate
Governance” and “Executive Compensation — Compensation of Directors”
below for additional information regarding the Board of
Directors.
PROPOSAL
TWO
TO
RATIFY THE APPOINTMENT OF STONEFIELD JOSEPHSON, INC.
AS
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee
has selected Stonefield Josephson, Inc. (“Stonefield Josephson”), an independent
registered public accounting firm, to audit our financial statements for Fiscal
Year 2010 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. Stonefield Josephson was also selected by our Audit Committee to
audit our financial statements for Fiscal Year 2009. Notwithstanding the
selection or a 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 Company’s best interest and the interest of 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 Stonefield Josephson will be available
in person and/or telephonically at the 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 Stonefield Josephson for the Company’s fiscal year ended December31, 2009 (“Fiscal Year 2009”), the five month period ended December 31,2008 and the fiscal year ended July 31, 2008 (in thousands):
Year
Ended
December
31
Five
Months Ended
December
31
Year
Ended
July
31
Stonefield
Josephson Fees
2009
2008
2008
Audit Fees
(1)
$
352
$
185
$
386
Audit Related
Fees (2)
-
-
-
Total
Stonefield Josephson Fees
$
352
$
185
$
386
(1)
“Audit fees” includes
fees for professional services principally related to the integrated
audits of the Company’s annual and quarterly financial statements and
internal control over financial reporting, consultation on matters that
arise during a review or audit, reviews of SEC filings and statutory audit
fees.
(2)
“Audit Related fees”
includes 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 Stonefield
Josephson, 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. Thus, all of the services described above under
audit-related fees, tax fees and all other fees were approved by the Audit
Committee pursuant to its pre-approval policies and procedures.
Independence
Assessment by Audit Committee
The Company’s Audit
Committee considered the provision of the services provided by Stonefield
Josephson as set forth herein, and determined that such services are compatible
with maintaining Stonefield Josephson’s independence.
Vote
Required; Recommendation of the Board of Directors
If a quorum is
present and voting, the affirmative vote of the Votes Cast is needed to ratify
the appointment of Stonefield Josephson as the Company’s independent registered
public accounting firm, to audit the consolidated financial statements of the
Company for Fiscal Year 2010.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING “FOR” THE RATIFICATION OF THE
APPOINTMENT OF STONEFIELD JOSEPHSON AS THE COMPANY’S INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM, TO AUDIT THE CONSOLIDATED FINANCIAL STATEMENTS OF THE
COMPANY FOR FISCAL YEAR 2010.
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 Sarbanes-Oxley Act of
2002, as well as rules proposed and promulgated by the SEC and the Financial
Industry Regulatory Authority. We will comply with all applicable new rules and
will implement other corporate governance “best practices” as we deem
appropriate. We believe that we already have procedures in place to safeguard
our stockholders’ interests, including the following:
Board
of Directors
Our Board of
Directors is composed of seven non-employee directors and one employee director,
our President and Chief Executive Officer. The non-employee members of our Board
of Directors hold regular executive sessions.
Committees. The
Board of Directors has three standing committees: the Audit Committee, the
Compensation Committee and the Nominating and Governance Committee. Each of our
committees is comprised solely of independent directors as determined pursuant
to the Nasdaq Listing Rules. Each committee reviews its mandate as legislative
and regulatory developments and business circumstances warrant. The Audit
Committee and Compensation Committees conducted their annual reviews of their
respective charters during Fiscal year 2009 and determined that no changes were
necessary. The Nominating and Governance Committee re-examined and revised its
charter in October 2009. Charters for each of the committees of our Board of
Directors are available on our Web site at: http://geek.net/investors/corporate-governance/.
Independence of the Board of
Directors. The Board of Directors has determined that, with
the exception of Scott L. Kauffman, who is the President and Chief Executive
Officer of the Company, all of the members of the Board of Directors are
“independent directors” as defined in the Nasdaq Listing Rules. In determining
the independence of our directors, the Board of Directors reviewed the
applicable laws and regulations of the SEC and the Nasdaq Listing Rules, and
considered all transactions in which the Company and any director had any
interest, including those discussed under “Related Party Transactions”
below.
Leadership Structure of our Board of
Directors. During Mr. Neumeister’s tenure as the Company’s Interim Chief
Executive Officer and President from June 2008 to January 2009, the Company
combined the roles of its principal executive officer and chairman of the Board
of Directors. Given that Mr. Neumeister had served as the Chairman of
the Board of Directors since December 2007, the Board of Directors believed that
doing so would promote continuity and stability as the Company conducted its
search for a new chief executive officer and would also facilitate interactions
with the Board of Directors, and oversight of management during the transition
period.
Upon Mr. Kauffman’s
appointment as Chief Executive Officer, President and director in January 2009,
the Board of Directors reassessed its leadership structure and decided to once
again separate the roles of principal executive officer and Chairman of the
Board of Directors. The Board of Directors recognized that, as the
Company grows into a more mature public company and its challenges, operations
and strategies become increasingly demanding and complex, such separation allows
the chief executive officer to focus on the day-to-day management of the
Company, while freeing an independent, non-employee Chairman of the Board of
Directors to focus on the key responsibilities of the Board of Directors of
maximizing shareholder value and providing independent oversight of
management.
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,
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, the Audit Committee discusses our policies with respect to risk
assessment and risk management and reviews, at least annually, the Company’s
risk management policies, 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., 650 Castro
Street, Suite 450, Mountain View, CA94041. 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. Mr. Neumeister and Ms. Present attended the Company’s 2008 Annual
Meeting of Stockholders.
Meetings
of the Board of Directors and Committees
Our Board of
Directors held a total of seven (7) meetings during Fiscal Year 2009 and a total
of five (5) meetings during the transition period from August 1, 2008
through December 31, 2008 (“2008T”). No director serving throughout Fiscal
Year 2009 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.
At
December 31, 2009, the Audit Committee consisted of Messrs. Sileck, Anker
and Wright, 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. Sileck is an independent director and qualifies as the
“audit committee financial expert” as that term is defined in Item 401(h) 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 five (5) meetings during Fiscal Year 2009 and four (4)
meetings during 2008T.
At
December 31, 2009, the Compensation Committee consisted of Ms. Present and
Messrs. Howe and Wright, each of whom is “independent,” as such term is defined
by the Marketplace Rules of NASDAQ. Mr. Howe’s term as a director will end at
the Annual Meeting and he is not standing for re-election to the Board of
Directors. 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 plans and employee benefit plans. The
Compensation Committee held five (5) meetings during Fiscal Year 2009 and one
(1) meeting during 2008T.
At
December 31, 2009, the Nominating and Governance Committee consisted of
Messrs. Anker, Neumeister, and Sileck, each of whom is “independent,” as such
term is defined by the Marketplace Rules of NASDAQ. The Nominating and
Governance Committee held two (2) meetings during Fiscal Year 2009 and one (1)
meeting during 2008T.
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., 650 Castro Street, Suite 450, Mountain View, CA94041.
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. While the Nominating and
Governance Committee has not established specific minimum qualifications for
director candidates, the Nominating and Governance Committee believes that
candidates and nominees should reflect a Board of Directors that is
predominately independent, that represents a diversity of viewpoints and
backgrounds and that is comprised of directors who (i) are of high
integrity, (ii) have broad, business-related knowledge and experience,
(iii) have qualifications that will increase overall effectiveness of the
Board of Directors and (iv) meet other requirements as may be required by
applicable rules, such as financial literacy or financial expertise with respect
to Audit Committee members. 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.
Compensation
Committee Interlocks and Insider Participation
Our Board of
Directors established the Compensation Committee in October 1999. Prior to
establishing the Compensation Committee, our Board of Directors as a whole
performed the functions delegated to the Compensation Committee. 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.
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
·
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.
Employee
Matters
In October 2002, we
adopted a Code of Business Conduct and Ethics (the “Code of Conduct”), which has
been executed by all of the Company’s employees and directors. Our Code of
Conduct is available on our Web site at http://geek.net/investors/corporate-governance/.
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.
EXECUTIVE
OFFICERS
The name, age,
position and a brief account of the business experience of our President and
Chief Executive Officer and each of our other executive officers as of the
Record Date are set forth below.
Mr.
Kauffman’s biographical information can be found above under “Proposal
One — To elect two (2) Class I directors to serve for a three-year
term and until their successors are duly elected and qualified.”
Scott
Collison has served as Chief Product Officer since October
2009. Mr. Collison joined Geeknet as its Vice President, Strategy and
Business Development following Geeknet's acquisition of Ohloh Corporation in
June 2009. Mr. Collison was a founder of Ohloh Corporation and served as
its Chief Executive Officer from June 2004 through June 2009. From April
2001 to June 2004, Mr. Collison was the Senior Director of Platform Strategy at
Microsoft Corporation.
Patricia S.
Morris has served as Senior Vice President and Chief Financial Officer
since July 2006. From June 2004 to June 2006, Ms. Morris served as vice
president, finance of IGN Entertainment, Inc., an Internet media and services
provider focused on the videogame and entertainment enthusiast markets (now a
unit of Fox Interactive Media, Inc.). From April 2004 to June 2004, Ms. Morris
served as vice president, finance of Liberate Technologies (“Liberate”), a
provider of software for digital cable television systems. From December 2003 to
April 2004, Ms. Morris also performed consulting services for Liberate. From
December 2002 to April 2004, Ms. Morris was chief accounting officer at Sagent
Technology, Inc., a business intelligence solutions provider. Ms. Morris joined
Sagent in August 2001 as director, sales operations.
Caroline
Offutt has served as Vice President and General Manager, ThinkGeek, since
December 2006, and as President of ThinkGeek, Inc., since July 2009. Ms. Offutt
joined the Company as Director, General Manager, ThinkGeek in December 2004.
From September 2003 to December 2004, Ms. Offutt served as director,
merchandising and operations at Tactical Express, LLC, a direct marketer of
federal law enforcement gear. From March 2001 to September 2003, Ms. Offutt
served as director, operations at Safety-911, Inc., a direct marketer of public
safety equipment.
Michael
Rudolph has served as Chief Marketing Officer since October 2009.
Prior to that, he served as Vice President, Marketing from February 2008 until
October 2009. From November 2006 until February 2008, he served as Vice
President, General Manager, SourceForge.net. Mr. Rudolph joined the Company in
July 2006 as Vice President, SourceForge.net Marketplace. From
December 2001 to July 2006, Mr. Rudolph was director, marketing at eBay, Inc., a
company that offers Internet platforms for global commerce, payments and
communications.
James Jay
Seirmarco has served as Chief Technology Officer since October 2009, and
as Vice President, Media Operations from February 2008 through October
2009. Mr. Seirmarco also served as General Counsel from August 2001
through March 2010. In June 2006, Mr. Seirmarco was appointed Corporate
Secretary. From July 2005 through October 2006, Mr. Seirmarco served as
Vice President and General Manager, SourceForge.net. Mr. Seirmarco joined
the Company in August 2000 as Corporate Counsel.
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.
Respectfully
Submitted By:
MEMBERS OF
THE COMPENSATION COMMITTEE
David B.
Wright, Chairman
Scott E.
Howe
Suzanne M.
Present
Compensation
Discussion and Analysis
EXECUTIVE
COMPENSATION
Overview
of Compensation Program and Philosophy
Geeknet, Inc.
(“Geeknet” or the “Company”) has designed its executive compensation program and
philosophy to attract, motivate and retain talented executives responsible for
the success of Geeknet, which operates in the online media and e-commerce
industries, two extremely competitive and rapidly changing fields of endeavor.
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
and individual contributions 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 and/or stock options, while carefully
considering both stockholder dilution and financial accounting
compensation expense; and
•
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.
The Compensation
Committee uses these objectives as a guide in establishing the compensation
programs, practices and packages offered to Geeknet’s executive officers and in
assessing the proper allocation between long- and short-term incentive
compensation and cash and non-cash compensation. However, there is no
pre-established policy or target for the allocation between long- and short-term
incentive compensation and cash and non-cash compensation.
Role
and Authority of Our Compensation Committee
The current members
of the Compensation Committee are directors David B. Wright (Chair), Scott E.
Howe and Suzanne M. Present. 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. Mr. Howe’s term as a director will end at the Annual Meeting and
he is not standing for re-election to the Board of Directors.
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 named executive officers. 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/investors/corporate-governance/.
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 of
the Company’s Chief Executive Officer and other executive
officers;
•
Reviewing and
approving corporate goals and objectives relative to the compensation of
the Company’s Chief Executive Officer and executive management, 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 named executive officers. 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. The Compensation Committee may
delegate any of its responsibilities to one or more directors or to members of
management, to the extent permitted by applicable law. The Compensation
Committee has authorized members of management to make salary adjustments under
guidelines approved by the Compensation Committee for all employees other than
named executive officers.
Role
of Executive Officers in Compensation Decisions
The Compensation
Committee on occasion meets with Mr. Kauffman, the Company’s President and Chief
Executive Officer, to obtain recommendations with respect to the compensation
programs, practices and packages for the Company’s executive officers (aside
from Mr. Kauffman himself) and other key employees. The Compensation Committee
considers, but is not bound to and does not always accept, Mr. Kauffman’s
recommendations. Mr. Kauffman and other executives 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 makes decisions with respect to Mr. Kauffman’s
compensation package without him present.
Role
of Compensation Consultant
Since 2007, the
Compensation Committee has engaged J. Richard & Co. (“Richard & Co.”), a
consulting company specializing in executive officer and director compensation,
to conduct an annual competitive review and analysis of the Company’s executive
compensation program and make recommendations for the Company’s executive
officer compensation. Richard & Co. serves at the discretion of the
Compensation Committee.
Selection
of Fiscal Year 2009 Peer Companies
For Fiscal Year
2009, Richard & Co. recommended, and 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 “Fiscal Year 2009 Peer Companies”:
The principal
components of Geeknet’s executive officer 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.
The Compensation
Committee reviews the entire executive compensation program at least annually.
The Compensation Committee is aided in this review by its compensation
consultant (which was Richard & Co. in Fiscal Year 2009). However, 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 named executive officer, the Compensation Committee considers both
individual and corporate factors. In general, compensation is targeted at the
following percentiles, as compared to the applicable peer
companies:
Components of Compensation
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 named executive officers and other employees to compensate
them for services rendered on a day-to-day basis during the fiscal year. As used
herein, named executive officers are: (i) each of the two persons who
served as the Company’s Principal Executive Officer (PEO) at any time during
Fiscal Year 2009; (ii) the Company’s Principal Financial Officer (PFO); and
(iii) the three most highly compensated executive officers other than the
PEO and PFO who were serving at the end of the last completed fiscal year. As
described above, the Compensation Committee reviews information provided by
Richard & Co. with respect to similarly-situated individuals at peer
companies to assist it in determining base salary for each named executive
officer. In addition, the Compensation Committee considers each executive
officer’s experience, skills, knowledge, responsibilities and performance and,
with respect to its Chief Executive Officer, Geeknet’s performance as a whole.
For newly hired executive officers, the Compensation Committee considers the
base salary of the individual at his or her prior employment and any unique
personal circumstances that motivated the executive to leave that 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 executive officer base salaries in the first quarter
of each fiscal year. Increases 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.
There were no base
salary increases for named executive officers in Fiscal Year 2009; however, on
February 8, 2010, the Compensation Committee increased Mr. Kauffman’s base
salary from $400,000 to $440,000. In addition to targeting base
salaries for named executive officers 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 as set forth in “The High-Tech Global
Compensation Survey: Executive Functional Area,” provided by Culpepper and
Associates, Inc. (“Culpepper”), to which the Company subscribes. Culpepper
provides up-to-date, verified data for executive positions at comparable
companies based on revenue, geographic location and industry
sector.
Variable
Incentive Awards
To focus each
executive officer on the importance of achieving Geeknet’s goals, a substantial
portion of the officer’s potential annual compensation is in the form of
variable incentive pay that is tied to achievement of those goals. Accordingly,
Geeknet maintains bonus programs under which executive officers are eligible to
receive bonuses.
Bonus Programs.
The Company offers cash incentive bonus programs for named executive
officers, management and other key employees. These programs are designed to
provide cash incentives to, and reward the efforts of, named executive officers
in maximizing the short- and long-term financial performance of the business.
The Compensation Committee has discretion to increase or decrease bonuses under
the incentive bonus programs based on factors determined by the Compensation
Committee.
The table below
describes for each named executive officer eligible to participate in a Company
bonus program (i) the target percentage of base salary, (ii) the potential award
range as a percentage of base salary, and (iii) the actual award earned for
Fiscal Year 2009.
Mr.
Kauffman’s bonus was guaranteed at 100% of his target for the six months
from January 1, 2009 to June 30,2009.
(2)
The bonus
percentage allocations for the third fiscal quarter were fifty percent
(50%) based on meeting Media revenue targets, twenty-five percent (25%)
based on meeting E-Commerce revenue targets and twenty-five percent (25%)
based on meeting E-Commerce gross margin targets. If Geeknet attained
between 100% and 150% of its quarterly Media revenue target, between 70%
and 150% of its E-Commerce revenue and/or gross margin targets, then the
percentage attainment of such quarterly targets was multiplied by such
named executive officer’s applicable potential quarterly bonus (i.e.,
pro rata
payout).
(3)
The bonus
percentage allocations for the fourth fiscal quarter were forty percent
(40%) based on meeting Media revenue targets, forty percent (40%) based on
meeting E-Commerce revenue targets and twenty percent (20%) based on
meeting adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) targets. If Geeknet attained between 70% and 150% of either
of its quarterly revenue and/or adjusted EBITDA targets, then the
percentage attainment of such quarterly targets was multiplied by such
named executive officer’s applicable potential quarterly bonus (i.e.,
pro rata
payout).
(4)
Ms. Morris’s
bonus percentage allocations for the six months from January 1, 2009 to
June 30, 2009 were sixty percent (60%) based on meeting Media revenue
targets, twenty percent (20%) based on meeting E-Commerce revenue targets
and twenty percent (20%) based on meeting E-Commerce gross margin targets.
If Geeknet attained between 100% and 150% of its quarterly Media, between
70% and 150% of its E-Commerce revenue and/or gross margin targets, then
the percentage attainment of such quarterly targets was multiplied by Ms.
Morris’s applicable potential quarterly bonus (i.e., pro rata
payout).
(5)
Ms. Offutt’s
bonus percentage allocations for the six months from January 1, 2009 to
June 30, 2009 were forty-five percent (45%) based on meeting E-Commerce
revenue targets, forty-five percent (45%) based on meeting E-Commerce
gross margin and ten percent (10%) based on meeting certain objectives
established by the CEO for Ms. Offutt. If Geeknet attained
between 70% and 150% of either of its quarterly E-Commerce revenue and/or
E-Commerce gross margin targets, then the percentage attainment of such
annual targets was multiplied by Ms. Offutt’s applicable potential annual
bonus (i.e., pro
rata payout).
(6)
Mr. Rudolph’s
and Mr. Seirmarco’s bonus percentage allocations for the six months from
January 1, 2009 to June 30, 2009 were one hundred
percent (100%) based on meeting Media revenue targets. If
Geeknet attained between 100% and 150% of the revenue target, then the
percentage attainment of such quarterly targets was multiplied by such
named executive officer’s applicable potential quarterly bonus (i.e.,
pro rata
payout).
(7)
Ms. Offutt
was awarded an additional bonus of $47,501 in the fourth quarter of 2009
in recognition of the E-Commerce business segment’s
performance.
Long-Term,
Equity-Based Incentive Awards
The goal of
Geeknet’s long-term equity-based incentive program is to align the interests of
executive officers with Geeknet’s stockholders and to provide each executive
officer with a significant 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 selected peer
companies, the Compensation Committee, with the assistance of its compensation
consultant, 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 using a Black-Scholes valuation for equity awards that
is 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., burnrates);
•
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.
Use
of Restricted Stock
Since its 2006
fiscal year, Geeknet has accounted for stock-based awards in accordance with the
requirements of FASB ASC Topic 718 (formerly known as FASB Statement No. 123(R)
or “FAS 123(R)”). As a result of the passage of FAS 123(R), the Compensation
Committee determined that it was appropriate and in the Company’s interests to
grant a combination of stock options and restricted stock to director-level
employees and above on a going-forward basis.
For Fiscal Year
2009, the Compensation Committee weighed the relative costs and perceived
benefits of stock options and restricted stock and determined that, other than
the grant made to Mr. Neumeister pursuant to the Company’s non-employee,
director compensation policies, any and all grants to our named executive
officers should be and were in the form of stock options.
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. Under
Section 162(m) of the Internal Revenue Code, adopted in August 1993, and
regulations adopted there under by the Internal Revenue Service, publicly-held
companies may be precluded from deducting certain compensation paid to an
executive officer in excess of $1 million in a year. The regulations exclude
from this limit performance-based compensation and stock options provided
certain requirements, such as stockholder approval, are satisfied. The
Compensation Committee has decided that it is not appropriate at this time to
take any actions that would disqualify the Company’s stock option plan or
executive annual cash bonus plans from deduction.
Change
of Control and Severance Agreements
Set forth below is
a description of the plans and agreements that could result in potential payouts
to the named executive officers in the case of their termination of employment
and/or a Change of Control (1) of the
Company took place on December 31, 2009 (the last day of the Company’s Fiscal
Year 2009). The definitions for certain defined terms used in the following
disclosures are listed in the footnotes following the disclosure section
below.
Scott
L. Kauffman
Pursuant to
Mr. Kauffman’s employment agreement with the Company dated as of
December 3, 2008, if Mr. Kauffman’s employment with the Company is
terminated other than for Cause, death or Disability prior to a Change of
Control (as such terms are defined in the Employment Agreement) or after 12
months following a Change of Control, subject to his execution of a separation
and release of claims agreement, Mr. Kauffman will receive (i) a lump sum
payment equal to 12 months of his then-current base salary ($440,000),
(ii) a lump sum payment equal to up to one quarter of his target
discretionary bonus of 75% of his then-current base salary, prorated through the
date of his termination ($82,500), (iii) 12 months’ accelerated vesting of
his then unvested options ($393,750), and (iv) Company-paid coverage for
the cost of continuation coverage under the Company’s employment benefits plans
until the earlier of 12 months from his termination or the date on which he
and/or his dependents become covered under similar plans ($17,466).
If
Mr. Kauffman resigns for Good Reason (as defined in his employment
agreement) or is terminated other than for Cause, death or Disability within 12
months following a Change of Control, subject to his execution of a separation
and release of claims agreement, Mr. Kauffman will receive (i) a lump sum
payment equal to 12 months of his then-current base salary ($440,000);
(ii) a lump sum payment equal to one year of his target discretionary bonus
of 75% of his then-current base salary ($330,000); (iii) 18 months’
accelerated vesting of his then unvested options ($590,625); and
(iv) Company-paid coverage for the cost of continuation coverage under the
Company’s employment benefits plans until the earlier of 12 months from his
termination or the date on which he and/or his dependents become covered under
similar plans ($17,466).
Patricia
S. Morris
On July 16,2008, the Compensation Committee of the Board of Directors of the Company
approved the adoption of amended Change of Control and termination benefits for
Ms. Morris and authorized the Company to enter into an agreement with
Ms. Morris to reflect the following benefits:
(A) if Ms.
Morris’ employment is terminated by the Company at any time for any reason not
deemed by the Company to be for Cause (2) ,
then, in addition to receiving all accrued and then unpaid salary and vacation,
Ms. Morris will be entitled to receive: (i) compensation equal to six
months ($139,137) of her annual base salary; (ii) six months of Accelerated
Vesting (3)
($39,666); (iii) payment of the quarterly bonus ($34,784(6)), if
any, she would have been paid under the Company’s bonus plan for the entire
quarter in which such termination occurred; and (iv) six months of
reimbursement for COBRA health benefits coverage ($8,733); and
(B) if,
following a Change of Control, Ms. Morris’ employment is terminated by the
Company at any time for any reason not deemed by the Company to be for Cause, or
Ms. Morris is subject to Constructive Termination (5) ,
then, in addition to receiving all accrued and then unpaid salary and vacation,
Ms. Morris will be entitled to receive: (i) compensation equal to twelve
months of her annual base salary ($278,274); (ii) twelve months of
Accelerated Vesting (3)
($79,333); (iii) payment of the quarterly bonus ($34,784 (6)), if
any, she would have been paid under the Company’s bonus plan for the entire
quarter in which such termination occurred; and (iv) twelve months of
reimbursement for COBRA health benefits coverage ($17,466).
The awarding of any
the above described benefits will be contingent upon Ms. Morris entering into a
separation and release of claims agreement prepared by the Company.
Caroline
Offutt
On July 16,2008, the Compensation Committee of the Board of Directors of the Company
approved the adoption of amended Change of Control and termination benefits for
Ms. Offutt and authorized the Company to enter into an agreement with
Ms. Offutt to reflect the following benefits:
(A) if
Ms. Offutt’s employment is terminated by the Company at any time for any
reason not deemed by the Company to be for Cause, (2) then,
in addition to receiving all accrued and then unpaid salary and vacation,
Ms. Offutt will be entitled to receive: (i) compensation equal to six
months ($136,500) of her annual base salary; (ii) payment of the quarterly
bonus ($34,125 (6)), if
any, she would have been paid under the Company’s bonus plan for the entire
quarter in which such termination occurred; and (iii) six months of
reimbursement for COBRA health benefits coverage ($9,118); and
(B) if,
following a Change of Control, Ms. Offutt’s employment is terminated by the
Company at any time for any reason not deemed by the Company to be for Cause, or
Ms. Offutt is subject to Constructive Termination (5) ,
then, in addition to receiving all accrued and then unpaid salary and vacation,
Ms. Offutt will be entitled to receive: (i) compensation equal to
twelve months of her annual base salary ($273,000); (ii) twelve months of
Accelerated Vesting (3)
($27,766); (iii) payment of the quarterly bonus ($34,125 (6)), if
any, she would have been paid under the Company’s bonus plan for the entire
quarter in which such termination occurred; and (iv) twelve months of
reimbursement for COBRA health benefits coverage ($18,237).
The awarding of any
the above described benefits will be contingent upon Ms. Offutt entering into a
separation and release of claims agreement prepared by the Company.
Michael
Rudolph
On July 16,2008 the Compensation Committee of the Board of Directors of the Company
approved the adoption of amended Change of Control and termination benefits for
Mr. Rudolph, and authorized the Company to enter into an agreement with Mr.
Rudolph to reflect the following benefits:
(A) if Mr.
Rudolph’s employment is terminated by the Company at any time for any reason not
deemed by the Company to be for Cause, then, in addition to receiving all
accrued and then unpaid salary and vacation, Mr. Rudolph will be entitled to
receive: (i) compensation equal to three months ($56,234) of his annual
base salary; (ii) payment of the quarterly bonus ($28,117(6)), if
any, he would have been paid under the Company’s bonus plan for the entire
quarter in which such termination occurred; and (iii) three months of
reimbursement for COBRA health benefits coverage ($4,367); and
(B) if,
following a Change of Control, Mr. Rudolph’s employment is terminated by the
Company at any time for any reason not deemed by the Company to be for Cause, or
Mr. Rudolph is subject to Constructive Termination, then, in addition to
receiving all accrued an then unpaid salary and vacation, Mr. Rudolph will be
entitled to receive: (i) compensation equal to six months ($112,468) of his
annual base salary; (ii) six months of Accelerated Vesting ($51,566);
(iii) payment of the quarterly bonus ($28,117(6)), if
any, he would have been paid under the Company’s bonus plan for the entire
quarter in which such termination occurred; and (iv) six months of
reimbursement for COBRA health benefits coverage ($8,733).
The awarding of any
the above described benefits will be contingent upon Mr. Rudolph entering into a
separation and release of claims agreement prepared by the Company.
James
Jay Seirmarco
On January 15,2004, at the direction of the Compensation Committee of the Board of Directors,
the Company executed with Mr. Seirmarco an amendment to his August 9, 2000
employment offer letter, to insert provisions relating to Change of Control and
termination benefits.
If the Company
elects to terminate Mr. Seirmarco’s employment at any time for any reason not
deemed by the Company to be for Cause, Mr. Seirmarco will be entitled to
receive: (i) compensation equal to six months ($112,476) of his annual base
salary; (ii) six months of Accelerated Vesting ($39,666); and
(iii) two months of reimbursement for COBRA health benefits coverage
($2,747).
If following a
Change of Control, Mr. Seirmarco’s employment is terminated by the Company at
any time for any reason not deemed by the Company to be for Cause, or Mr.
Seirmarco is subject to Constructive Termination, then, in addition to receiving
all accrued and then unpaid salary and vacation, Mr. Seirmarco will be entitled
to receive: (i) compensation equal to six months ($112,476) of his annual
base salary; (ii) six months of accelerated vesting ($39,666); and
(iii) two months of reimbursement for COBRA health benefits coverage
($2,747). Mr. Seirmarco may, at any time during a six month Extended Exercise
Period, (4)
exercise his vested options and restricted stock awards with respect to shares
that have accelerated pursuant to a termination not deemed to be for
cause.
The awarding of
these benefits will be contingent, however, upon Mr. Seirmarco entering into a
separation and release of claims agreement prepared by the Company.
Definitions for Change of
Control and Severance Agreement Disclosures:
(1)
“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.
(2)
“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.
(3)
“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 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.
(4)
“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.
(5)
“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.
(6)
Assuming 100%
attainment of quarterly bonus.
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 Fiscal Year 2009, and the price per share of our Common Stock is the official
closing price on the NASDAQ Global Market as of that date ($1.19). 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, of 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 be different.
The intrinsic
value of accelerated stock options for each named executive officer is
zero because the exercise price of the stock options granted to each named
executive officer exceeded the closing price on the NASDAQ Global Market
as of last business day of Fiscal Year
2009.
The following table
sets forth all compensation paid or accrued during the past three fiscal years,
plus the transition period from August 1, 2008 through December 31,2008 (“2008T”), to: (i) the Company’s Principal Executive Officer (PEO); (ii)
the Company’s Principal Financial Officer (PFO); (iii) the 3 most highly
compensated executive officers other than the PEO and PFO who were serving at
the end of the last completed fiscal year; and (iv) one additional individual
for whom disclosure would have been provided pursuant to clause (iii) but for
the fact that the individual was not serving as an executive officer of the
company at the end of the last completed fiscal year.
Mr. Kauffman’s
employment with the Company began in
December 2008.
(2)
Mr.
Neumeister’s employment with the Company began in June 2008 and ended in
January 2009. During his term as Interim Chief Executive Officer, Mr.
Neumeister did not receive any non-employee director compensation for his
attendance at any meetings or his service on the Board of
Directors. During Fiscal Year 2009, Mr. Neumeister served as
Chair of the Nominating and Governance Committee of the Board of
Directors. Since December 2007, Mr. Neumeister has served as the Chairman
of the Board of Directors. During Fiscal Year 2009, but subsequent to Mr.
Neumeister’s term as as Interim Chief Executive Officer, the Company paid
Mr. Neumeister retainer fees and fees for attending meetings of the
Nominating and Governance Committee and Board of Directors. The Company
pays its retainer fees quarterly in advance and it has not been the
Company’s practice to request refunds from directors when they resign from
a committee or the Board of
Directors.
The following table
presents information concerning each grant of an award made to a named executive
officer in Fiscal Year 2009 under any plan.
GRANTS
OF PLAN-BASED AWARDS
Name
Grant
Date
All
Other Stock Awards: Number of Shares of Stocks
All
Other Option Awards: Number of Securities Underlying
Options
Mr.
Neumeister was employed by the Company as Interim Chief Executive Officer
from June 2008 until January 2009. From August 1, 2007 until June 4, 2008
and since January 4, 2009, Mr. Neumeister has served as a
non-employee, director. On December 3, 2009, Mr. Neumeister received
a restricted stock grant pursuant to the Company’s non-employee, director
compensation policies.
The following table
presents information concerning unexercised options and stock awards that have
not vested for each named executive officer outstanding as of the end of Fiscal
Year 2009. The market value of stock awards was determined using the
official closing price of our common stock on the NASDAQ Global Market at
December 31, 2009 of $1.19 per share.
Mr.
Neumeister was employed by the Company as Interim Chief Executive Officer
from June 2008 until January 2009. From August 1, 2007 until June 4, 2008
and since January 4, 2009, Mr. Neumeister has served as a non-employee,
director and received option grants and restricted stock grants pursuant
to the Company’s non-employee, director compensation
policies.
During Fiscal Year
2009, the named executive officers did not exercise any options. The following
table presents information concerning the aggregate number of shares that vested
under stock awards during Fiscal Year 2009 for each of the named executive
officers.
STOCK
VESTED
Stock Awards
Name
Number of
Shares
Acquired on
Vesting
Value Realized
on Vesting ($)
Scott L.
Kauffman. (1)
Chief
Executive Officer, President and Director
-
$
-
Robert M.
Neumeister, Jr. (2)
Interim
Chief Executive Officer, President, and Chairman of the Board of
Directors
The following table
summarizes our equity compensation plans as of December 31, 2009, all of which
have been approved by our stockholders:
Plan Category (1)
A
Number of Securities to Be
Issued upon Exercise
of Outstanding Options
B
Weighted Average
Exercise Price of
Outstanding
Options
C
Number of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plan
(Excluding Securities
Reflected in Column A)
Equity
compensation plans approved by stockholders
7,228,791
(2)
$
1.94
3,109,635
(1)
The table
does not include information for equity compensation plans assumed by the
Company in acquisitions. As of December 31, 2009, a total of 28,422
shares of the Company’s common stock remain outstanding and issuable upon
exercise of options granted under a plan assumed by the Company in its
acquisition of OSTG, Inc. The weighted average exercise price of all
outstanding options granted under this plan at December 31, 2009 was
$40.21. The Company does not grant additional awards under this assumed
plan.
(2)
Includes
4,829,043 options outstanding under the Company’s 2007 Equity Incentive
Plan, 1,917,248 options outstanding under the Company’s 1998 Stock Plan
and 482,500 options outstanding under the Company’s 1999 Director’s
Plan.
The following table
provides information concerning the compensation paid by the Company to each of
its non-employee directors for Fiscal Year 2009. Mr. Kauffman was an employee,
and did not receive additional compensation for his services as a director.
During Mr. Neumeister’s employment with the Company from June 2008 through
January 4, 2009, he did not receive additional compensation for his services as
a director. Mr. Neumeister’s compensation as an officer of the Company is
discussed above under “EXECUTIVE COMPENSATION”.
Name
Fees
Earned or
Paid in
Cash (2)
Stock
Awards (3)
Option
Awards (1) (4)
Total
Andrew
Anker
$
56,250
$
6,345
$
-
$
62,595
Robert A.
Bowman
-
-
-
-
Scott E.
Howe
42,833
6,345
-
49,178
Suzanne M.
Present
44,583
6,345
-
50,928
Michael
Sileck
34,500
-
56,784
91,284
David B.
Wright
44,708
6,345
-
51,053
Ram
Gupta
30,916
-
-
30,916
Carl
Redfield
10,125
-
-
10,125
(1)
Reflects the
aggregate grant date fair value of awards computed in accordance with FASB
ASC Topic 718 (formerly SFAS 123(R)) for Fiscal Year 2009. 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 year ended December 31, 2009, filed with the SEC on
February 26, 2010. These amounts do not correspond to the actual
value that may be recognized by the
directors.
(2)
The Company
pays in advance each quarter the retainer fees to its non-employee
directors. It is the Company’s practice to not request refunds of prepaid
retainer fees in the event that a director ceases to serve on the
Company’s Board of Directors or a committee during a quarter. The
following indicates the fees earned by each non-employee director during
Fiscal Year 2009, and the first quarter Fiscal Year 2010 retainer fees the
Company paid in December 2009:
Name
Fees
Earned
Fiscal Year
2009
Prepaid
Fiscal Year
2010
Retainer
Fees
Andrew
Anker
$
50,375
$
5,875
Scott E.
Howe
37,083
5,750
Suzanne M.
Present
38,833
5,750
Michael
Sileck
27,000
7,500
David B.
Wright
37,083
7,625
(3)
In Fiscal
Year 2009, the Company’s non-employee directors each received restricted
stock purchase rights for 5,000 shares of the Company’s common stock at a
purchase price per share equal to the par value of the Company’s common
stock ($.001), as follows:
Name
Grant Date
Stock
Award
Shares
Grant Date
Fair Value
Andrew
Anker
12/03/2009
5,000
$
6,345
Scott E.
Howe
12/03/2009
5,000
$
6,345
Suzanne M.
Present
12/03/2009
5,000
$
6,345
David B.
Wright
12/03/2009
5,000
$
6,345
(4)
As of
December 31, 2009, the aggregate number of shares underlying options
outstanding for each of the Company’s non-employee directors
was:
Name
Aggregate
Number of
Shares
Andrew
Anker
120,000
Scott E.
Howe
80,000
Suzanne M.
Present
70,000
Michael
Sileck
70,000
David B.
Wright
150,000
Standard
Director Compensation Arrangements
The Company uses a
combination of cash and equity compensation to attract and retain qualified
candidates to serve on its Board of Directors. The Compensation Committee
conducts an annual review of director compensation and, if appropriate,
recommends any changes in the type or amount of compensation to the Board of
Directors. In reviewing director compensation, the Compensation Committee takes
into consideration the compensation paid to non-employee directors of comparable
companies, including competitive non-employee director compensation data and
analyses prepared by compensation consulting firms and the specific duties and
committee responsibilities of particular directors. In addition, the
Compensation Committee may make recommendations or approve changes in director
compensation in connection with the Compensation Committee’s administration and
oversight of the Company’s stock plan. Any change in director compensation is
approved by the Board of Directors.
Cash
Compensation
The Company
reimburses its directors who are not officers or employees for expenses incurred
in attending any Board of Directors or committee meetings. Directors who are
also its officers or employees are not generally reimbursed for expenses
incurred in attending Board of Directors or committee meetings.
Each non-employee
director receives a $20,000 annual retainer, $2,500 for in-person attendance
throughout regularly-scheduled Board of Directors meetings, $1,250 for
telephonic participation throughout regularly-scheduled Board of Directors
meetings, and $500 for in-person attendance or telephonic participation for any
special unscheduled Board of Directors meetings. The chairperson of the Board of
Directors receives an additional annual retainer of $10,000.
The chairperson of
the Audit Committee of the Board of Directors (the “Audit Committee”) receives
an annual retainer of $10,000. The Audit Committee members receive an annual
retainer of $3,000 and receive $1,500 for in-person attendance or telephonic
participation for any Audit Committee meetings.
The chairperson of
the Compensation Committee receives an annual retainer of $7,500 and
Compensation Committee members receive an annual retainer of $3,000.
Compensation Committee members receive $500 for in-person attendance or
telephonic participation for any Compensation Committee meetings.
The chairperson of
the Nominating and Governance Committee of the Board of Directors receives an
annual retainer of $2,500, and the other members of the Nominating and
Governance Committee receive an annual retainer of $500. All Nominating and
Governance Committee members receive $500 for each Nominating and Governance
Committee meeting he or she attends in person or by telephone.
Retainer payments
are made on a quarterly basis immediately prior to the beginning of each quarter
for service to be provided during that quarter. It is the Company’s practice to
not request refunds of prepaid retainer fees in the event that a director ceases
to serve on the Company’s Board of Directors or a committee during a quarter.
All other director compensation payments set forth above are made on a quarterly
basis at the end of each quarter for service provided during that
quarter.
Equity
Compensation
Pursuant to the
Company’s compensation policies for independent, non-employee members of the
Company’s Board of Directors, as approved by the Compensation Committee of the
Board of Directors and detailed in Company’s Current Report Form 8-K dated
September 5, 2007 (SEC File No. 000-28369), each non-employee director who
joins the Board of Directors is granted an option to purchase 70,000 shares of
the Company’s Common Stock, vesting over a period of three years, with one
quarter vesting on the date of grant and one thirty-sixth vesting each month
thereafter. The vesting of this option automatically accelerates upon a change
of control of the Company.
Each non-employee
director who has been a member of the Board of Directors for at least nine
months prior to the date of the stockholders’ meeting will be granted an annual
right to purchase 10,000 restricted shares at $0.001 per share following each
annual stockholders’ meeting. The restricted shares will vest 50% immediately
and the remaining 50% on the one year anniversary of the grant.
On
April 29, 2009, the Board of Directors approved a change in the Company’s
fiscal year end from July 31 of each calendar year to December 31 of each
calendar year, effective as of January 1, 2009. In connection with
this change, the following Transitional Cash and Equity Compensation provisions
applied to the Company’s non-employee directors:
Transitional
Cash Compensation
Annual Retainer
Payments
Quarterly Payments
continued to be made based on the prior fiscal year until May 1, 2009, at which
time the Company began making quarterly retainer payments based on the new
fiscal year. The first quarterly retainer payment covering the
second fiscal quarter of the calendar year 2009 was pro rated and was equal to
two-thirds of the standard payment, in order to account for the prior retainer
payment previously made for the month of April 2009. Beginning
on July 1, 2009the Company paid then current directors the full quarterly
retainer amount for each fiscal quarter thereafter, based on the fiscal
year.
Per Meeting
Payments
On May 1, 2009, the
Company paid directors their per meeting payment amounts for the Board of
Directors and committee meetings attended by such directors for the three month
period covering February, March and April 2009. For the second fiscal
quarter of calendar year 2009, the Company paid directors their per meeting
payment amounts for Board of Directors and committee meetings attended by such
directors for the months of May and June 2009. Thereafter the Company made
all other non-retainer director compensation payments at the end of each quarter
for service provided during that quarter.
Transitional Equity
Compensation
In anticipation of
the Company’s transition from a fiscal to a calendar accounting year, on
December 3, 2008, each of the then current non-employee directors who had been a
member of the Board of Directors for at least nine months prior to such date was
granted a right to purchase 10,000 restricted shares of the Company’s common
stock at $0.001 per share (the “2008 Restricted Stock Grant”). Fifty percent
(50%) of the restricted shares subject to the 2008 Restricted Stock Grant vested
immediately upon grant and the remaining 50% vested on December 3, 2009, the
one-year anniversary of the grant, subject to the applicable director’s
continuing service to the Company
On December 3,2009, each of the then current non-employee directors who had been a member of
the Board of Directors for at least nine months prior to such date was granted a
right to purchase 5,000 restricted shares of the Company’s common stock at
$0.001 per share (the “Interim Restricted Stock Grant”). Fifty percent (50%) of
the restricted shares subject to the “Interim Restricted Stock Grant” vested
immediately upon grant and the remaining 50% will vest on June 3, 2010, the
six-month anniversary of the grant, subject to the applicable director’s
continuing service to the Company.
Beginning on the
date of the Annual Meeting, the Company will resume making grants according to
its previous non-employee director compensation policy and each non-employee
director who has been a member of the Board of Directors for at least nine
months prior to the date of the applicable stockholders’ meeting will be granted
an annual right to purchase 10,000 restricted shares of the Company’s common
stock at $0.001 per share following each annual stockholders’ meeting. The
restricted shares will vest 50% immediately and the remaining 50% on the
one-year anniversary of the grant.
Security
Ownership of Certain Beneficial Owners and Management
The following table
sets forth, as of March 8, 2010, certain information with respect to the
beneficial ownership of the Company’s Common Stock by (i) any person, known
by the Company to be the beneficial owner of more than 5% of its Common Stock,
(ii) each of its directors and each nominee seeking to become one of its
directors, (iii) each of its executive officers and former executive
officers named in the Summary Compensation Table appearing herein, and
(iv) all of its current executive officers and directors as a group. The
number and percentage of shares beneficially owned are based on the aggregate of
60,545,579 shares of Common Stock outstanding as of March 8, 2010. 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 and
individuals affiliated with Marlin Sams Fund, LP (14)
17,010,200
28.1
%
All current
directors and officers as a group (12 persons) (15)
13,013,484
20.9
%
*
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, 650 Castro Street, Suite 450, Mountain View, CA94041.
(2)
Includes
9,600,000 shares specified in footnote (14). Ms. Present is a member
of Gladwyne Marlin GenPar, LLC, which is a member of Marlin Sams GenPar,
LLC, a Delaware limited liability company and the general partner of the
Marlin Sams Fund, LP, a Delaware limited partnership. Ms. Present
disclaims beneficial ownership of shares held by the entities specified in
footnote (14) to the extent of her pecuniary interest in these entities.
Includes 45,208 shares subject to options that are exercisable within
sixty (60) days of March 8, 2010. Does not include 10,000 shares of
restricted stock under the Company’s 2007 Equity Incentive Plan (“2007
EIP”) which Ms. Present may be granted following the Company’s 2009
Annual Meeting on May 4, 2010 pursuant to non-employee director
compensation policies if Ms. Present is reelected to the Board of
Directors.
(3)
Includes
796,875 shares subject to options that are exercisable within sixty (60)
days of March 8, 2010.
(4)
Includes
33,333 shares of restricted stock under the Company’s 1998 Stock Plan,
66,666 shares of restricted stock under the Company’s 2007 EIP, and
397,394 shares subject to options that are exercisable within sixty (60)
days of March 8, 2010.
(5)
Includes
6,666 shares of restricted stock under the Company’s 1998 Stock Plan,
33,333 shares of restricted stock under the Company’s 2007 EIP, and
158,228 shares subject to options that are exercisable within sixty (60)
days of March 8, 2010.
(6)
Includes
26,666 shares of restricted stock under the Company’s 1998 Stock Plan,
33,333 shares of restricted stock under the Company’s 2007 EIP, and
135,416 shares subject to options that are exercisable within sixty (60)
days of March 8, 2010.
(7)
Includes
16,666 shares of restricted stock under the Company’s 1998 Stock Plan,
33,333 shares of restricted stock under the Company’s 2007 EIP, and
245,000 shares subject to options that are exercisable within sixty (60)
days of March 8, 2010.
(8)
Includes
2,500 shares of restricted stock under the Company’s 2007 EIP and 120,000
shares subject to options that are exercisable within sixty (60) days of
March 8, 2010. Does not include 10,000 shares of restricted stock under
the Company’s 2007 EIP which Mr. Anker may be granted following the
Company’s 2009 Annual Meeting on May 4, 2010 pursuant to non-employee
director compensation policies. Includes 22,000 shares Mr. Anker
acquired on June 27, 2008 which was previously reported in a SEC Form
4 (Statement of Changes in Beneficial Ownership of Securities)
(“Form 4”) filed on July 1, 2008. Includes 35,000 shares Mr.
Anker acquired on July 1, 2008, which was previously reported in a
Form 4 filed on July 3,2008.
(9)
Includes
20,416 shares subject to options that are exercisable within sixty (60)
days of March 8, 2010.
(10)
Includes
2,500 shares of restricted stock under the Company’s 2007 EIP and 80,000
shares subject to options that are exercisable within sixty (60) days of
March 8, 2010.
(11)
Includes
2,500 shares of restricted stock under the Company’s 2007 EIP and 140,000
shares subject to options that are exercisable within sixty (60) days of
March 8, 2010. Does not include 10,000 shares of restricted stock
under the Company’s 2007 EIP which Mr. Neumeister may be granted following
the Company’s 2009 Annual Meeting on May 4, 2010 pursuant to
non-employee director compensation policies. Includes 65,500 shares Mr.
Neumeister acquired on June 13, 2008 which was previously reported in a
Form 4 filed on June 17, 2008. From June 2008 until January
2009, Mr. Neumeister served as interim Chief Executive Officer with the
Company. Prior to June 4, 2008 and since January 2009, Mr.
Neumeister has served as a non-employee, director, and has he received
option grants and restricted stock grants pursuant to the Company’s
non-employee, director compensation
policies.
(12)
Includes
2,500 shares of restricted stock under the Company’s 2007 EIP and 32,083
shares subject to options that are exercisable within sixty (60) days of
March 8, 2010. Does not include 10,000 shares of restricted stock under
the Company’s 2007 EIP which Mr. Sileck may be granted following the
Company’s 2009 Annual Meeting on May 4, 2010 pursuant to non-employee
director compensation policies.
(13)
Includes
2,500 shares of restricted stock under the Company’s 2007 EIP and 150,000
shares subject to options that are exercisable within sixty (60) days of
March 8, 2010. Does not include 10,000 shares of restricted stock under
the Company’s 2007 EIP which Mr. Wright may be granted following the
Company’s 2009 Annual Meeting on May 4, 2010 pursuant to non-employee
director compensation policies.
(14)
The address
for Marlin Sams Fund, LP is 645 Fifth Avenue, New York, NY10022. Based
solely on information included in a Schedule 13D/A filed with the SEC on
December 14, 2009, as updated by Forms 4 filed with the SEC on
February 18, 2010 and February 26, 2010: Marlin Sams Fund, L.P. had sole
voting power and sole dispositive power over 9,600,000 of the shares
listed above; William M. Sams had sole voting power and sole dispositive
power over 6,600,000 of the shares listed above; Suzanne M. Present had
sole voting power and sole dispositive power over 55,000 of the shares
listed above; Marlin Sams GenPar, LLC had sole voting power and sole
dispositive power over 9,600,000 of the shares listed above; Gladwyne
Marlin GenPar, LLC had sole voting power and sole dispositive power over
none of the shares listed above; Michael Solomon had sole voting power and
sole dispositive power over 200,000 of the shares listed above; Candice
McCurdy had sole voting power and sole dispositive power over 200,000 of
the shares listed above; Chad McCurdy had sole voting power and sole
dispositive power over none of the shares listed above; and Mary Thomas
had sole voting power and sole dispositive power over 205,200 of the
shares listed above. Marlin Sams Fund, L.P., Marlin Sams GenPar, LLC, and
Gladwyne Marlin GenPar, LLC may be deemed to beneficially own 9,600,000
shares of the Company’s Common Stock. William M. Sams may be deemed to
beneficially own 16,200,000 shares of the Company’s Common Stock,
consisting of (i) 16,000,000 shares of Common Stock and (ii) 200,000
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. Suzanne M. Present may be deemed to beneficially own
9,650,000 shares of the Company’s Common Stock. Michael Solomon
may be deemed to beneficially own 9,800,000 shares of the Company’s Common
Stock. Candice McCurdy may be deemed to beneficially own 350,000 shares of
the Company’s Common Stock. Chad McCurdy may be deemed to beneficially own
150,000 shares of the Company’s Common Stock, and Mary Thomas may be
deemed to beneficially own 205,200 shares of the Company’s Common
Stock.
(15)
Includes the
shares beneficially owned by our current officers and directors set forth
on the above table as well as 2,320,620 shares subject to options that are
exercisable within sixty (60) days of March 8,2010.
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 6(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 2009, all of its executive officers, directors and
ten-percent stockholders complied with all applicable filing
requirements.
RELATED
PARTY TRANSACTIONS
In October 2002, we
adopted our 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 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 (i) compensation
agreements and other arrangements, which are described under “Change of Control
and Severance Agreements” and (ii) as described below.
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.
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://geek.net/investors/corporate-governance/). 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
consolidated financial statements in the Annual Report on Form 10-K for Fiscal
Year 2009 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 2009
The Audit Committee
discussed with Stonefield Josephson, Inc. (“Stonefield Josephson”), 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 of Form 10-K for Fiscal Year 2009 with accounting principles
generally accepted in the United States, Stonefield Josephson’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 under
Statement on Auditing Standards No. 61, (Communication with Audit Committees).
The Audit Committee has received the written disclosures and the letter from
Stonefield Josephson required by Independence Standards Board Standard
No. 1, (Independence Discussions with Audit Committees) and has discussed
with Stonefield Josephson its independence.
The Audit Committee
discussed with Stonefield Josephson 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 five (5) during Fiscal
Year 2009.
In reliance on the
reviews and discussions referred to above, the Audit Committee recommended, and
the Board of Directors approved, the inclusion the audited financial statements
in the Annual Report on Form 10-K for Fiscal Year 2009 for filing with the
Securities and Exchange Commission. The Audit Committee and the Board of
Directors have also recommended, subject to stockholder ratification, the
selection of Stonefield Josephson as the Company’s independent registered public
accounting firm for Fiscal Year 2010.
Respectfully
Submitted By:
MEMBERS OF
THE AUDIT COMMITTEE
Michael
Sileck, Chairman
Andrew
Anker
Robert A.
Bowman
OTHER
MATTERS
The Company knows
of no other matters to be submitted to the Meeting. If any other matters
properly come before the 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.
