Hamish Sandhu
has served as our Chief
Financial Officer since August 2007. From January 2006 until August 2007,
Mr. Sandhu was Chief Financial Officer of California Tan, Inc., a
consumer products company manufacturing and marketing lotion and equipment to
the indoor tanning industry. From September 2001 until December 2005,
Mr. Sandhu was Chief Financial Officer of Ancra International LLC, a
manufacturer of aircraft cargo systems and trucking restraint products. Mr. Sandhu
began his career at Deloitte & Touche LLP. Prior to that, Mr. Sandhu
held various Chief Financial and Corporate Controller positions at other
manufacturing and distribution based companies. Mr. Sandhu has a B.A.
degree in Economics and Accounting from Australian National University and
holds a Certified Public Accountants license.
Joe Dahan
has served as the president
and head designer for our Joes Jeans, Inc. subsidiary, or Joes, since
its formation in February 2001, Creative Director and a member of our
Board of Directors since October 2007.
Mr. Dahan is responsible for the design, development and marketing
of Joes products. From 1996 until 2001,
Mr. Dahan was the head designer for Azteca Production International, Inc.,
or Azteca, where he was responsible for the design, development and
merchandising of product lines developed by Azteca, a manufacturer of branded
and private label denim products. From
1989 until 1996, Mr. Dahan was engaged in the design and development of
apparel products for a company of which he was an owner and operator. Mr. Dahan became our Creative Director
and a member of our Board of Directors in connection with the completion of a
merger between us and JD Holdings Inc. in October 2007.
Kelly Hoffman
has served as a member of
our Board of Directors since June 2004. Mr. Hoffman has served as
Chairman of the Board of Directors and Chief Executive Officer of Varsity Media
Group Inc., a new media company dedicated to teenagers, since he founded the
company in 1998. From 1991 until 1998, Mr. Hoffman owned AOCO Operating, a
company that raised capital for the acquisition of property in Texas, Louisiana
and New Mexico. From 1989 until 1991, Mr. Hoffman served in a similar
position for Texakoma Financial, an oil and gas partnership that raised capital
for acquisition of property in Texas, Louisiana and New Mexico. Prior to that, Mr. Hoffman
served in various sales and marketing positions for PAZ Syndicate, a
conglomerate based in Tel Aviv, Israel that owned diverse interests worldwide.
Prior to that, Mr. Hoffman specialized in securing capital from investors
for investment in various limited partnerships for the oil and gas industry for
Paso Energy. Mr. Hoffman began his oil and gas career at Amoco Production
Company in Texas in various positions. Mr. Hoffman attended Texas Tech
University and majored in Business Administration.
Thomas ORiordan
has served as a
member of our Board of Directors since April 2006. Since March 2007, Mr. ORiordan
has served as Chief Executive Officer of American Sporting Goods Corporation, a
privately held manufacturer and retailer of athletic footwear with such brands
as And1, Avia, Ryka, Yukon, Triple 5 Soul, NSS and Nevados. From 2004 to 2007, Mr. ORiordan acted
in an executive consulting and advisory capacity to the senior management team
of Fila Holding Company, a publicly traded manufacturer and retailer of branded
footwear, apparel and accessories, and to other investment advisors and funds
in the retail and consumer products sector. From 1999 to 2004, Mr. ORiordan
served in various executive management capacities with Fila Holding Company,
ultimately serving as Chief Executive Officer from 2003 to 2004. From 1995 until 1998, Mr. ORiordan
served as Director of Operations of Adidas America, a publicly traded
manufacturer and retailer of branded athletic footwear, apparel and
accessories. From 1988 to 1995, Mr. ORiordan
was President of Tom ORiordan & Associates, a sales and marketing
company focused on the athletic footwear, apparel and sporting goods
industries. Mr. ORiordan began his career in sales for Brooks Shoe
Company. Mr. ORiordan received his
B.S. degree in Marketing and Management from Rider University.
Suhail R. Rizvi
has served as a member of
our Board of Directors since April 2003. Since 2004, Mr. Rizvi has
served as founder and Chief Investment Officer of Rizvi|Traverse Management LLC
and other related funds. Mr. Rizvi has over twenty years of private equity
investing experience for his own account and as a fiduciary for institutional
investors through various entities or funds as founder, principal or manager. Mr. Rizvi
also serves as Chairman of the Board of Directors of AG Holdings, a diversified
3
investment
company with interests in various manufacturing companies and as a member of
the Board of Directors for International Creative Management, Inc. a
global talent and literary agency. Mr. Rizvi received his B.S. degree in
Economics from the Wharton School of the University of Pennsylvania and sits on
the Wharton Undergraduate Executive Board.
Kent Savage
has served as a member of
our Board of Directors since July 2003. Since June 2006, Mr. Savage
has served as Founder and CEO of Famecast, Inc., a privately held online
entertainment site. From January 2004 until June 2005, Mr. Savage
served as Chief Executive Officer for Digital Lifestyles Group, Inc.
(DLFG.PK), a publicly traded manufacturer and distributor of personal
computers. From September 2002 until February 2003, Mr. Savage
served as co-founder, Chief Sales and Marketing Officer for TippingPoint
Technologies (NASDAQ: TPTI). From February 1999 until August 2001, Mr. Savage
served as co-founder, CEO and President for Netpliance, Inc. From April 1998
until February 1999, Mr. Savage served as General Manager, Broadband
for Cisco Systems Inc. Service Provider Line of Business. From July 1996
until April 1998, Mr. Savage served as Vice President, Sales and
Marketing for NetSpeed, Inc. Mr. Savage received his B.S. degree in
Business from Oklahoma State University, attended University of Virginias
Executive Leadership Program, and received his M.B.A. degree from Southern
Methodist University.
Code of
Business Conduct and Ethics
Our
Board of Directors adopted a Code of Business Conduct and Ethics for all of our
directors, officers and employees on May 22, 2003. Our Code of Business Conduct and Ethics is
available on our website at www.joesjeans.com or you may request a free copy of
our Code of Business Conduct and Ethics from our Chief Compliance Officer at
our corporate headquarters at the following address: 5901 S. Eastern Avenue,
Commerce, California 90040 or by calling (323) 837-3712. You may also find a copy of our Code of
Business Conduct and Ethics as Exhibit 14 originally filed with our Annual
Report on Form 10-K for the fiscal year ended November 29, 2003 filed
with the SEC on February 28, 2004.
To
date, there have been no waivers under our Code of Business Conduct and
Ethics. We intend to disclose any
amendments to our Code of Business Conduct and Ethics and any waiver granted
from a provision of such Code on a Form 8-K filed with the SEC within four
business days following such amendment or waiver or on our website at
www.joesjeans.com within four business days following such amendment or
waiver. The information contained or connected
to our website is not incorporated by reference into this Amendment No. 1
and should not be considered a part of this or any other report that we file or
furnish to the SEC.
Audit
Committee
The
Audit Committee, established in accordance with Section 3(a)(58)(A) of
the Securities Exchange Act of 1934, or Exchange Act, is currently comprised of
Messrs. Rizvi, Hoffman and ORiordan.
Mr. Rizvi serves as Chairman of the Audit Committee. Currently, all Audit Committee members are independent
under NASDAQ listing standards and as such term is defined in the rules and
regulations of the SEC, and Mr. Rizvi has also been designated to be an audit
committee financial expert as such term is defined in the rules and
regulations of the SEC. A copy of the
Audit Committee charter can be found on our website www.joesjeans.com under our
Investor Relations heading.
4
ITEM 11. EXECUTIVE
COMPENSATION.
Compensation
Discussion and Analysis
This
discussion and analysis will focus on the following: (1) the objectives of
the executive compensation policies and practices, (2) the objectives that
the compensation program is designed to reward; (3) each element of
compensation, (4) the rationale for each element of compensation, (5) the
methodologies utilized by us in determining the amounts to pay for each
element, and (6) how an element of compensation and our rationale for each
element fit together within our overall compensation objectives. This discussion relates to our Principal
Executive Officer, Principal Financial Officer, and our Creative Director, or
collectively, our Named Executive Officers.
Compensation
Philosophy
Our
executive compensation program is designed to provide proper incentive to
management to maximize performance in order to encourage creation of stockholder value and achievement of
strategic corporate objectives, attract and retain qualified, skilled and
dedicated executives on a long-term basis, reward past performance and provide
incentives for future performance.
In keeping with these objectives, our goal is to (1) align
the interests of the executive officers with the interests of our stockholders,
(2) ensure the long-term commitment of our management team, and (3) ensure
accountability for both our overall performance and the individuals
performance and contribution.
In setting the level of cash and equity
compensation, the Compensation Committee of our Board of Directors considers
various factors, including our overall perfor
mance and the individuals
performance during the year, the uniqueness and relative performance of the
executives skill set, the expected future contribution to us and competitive
conditions.
Elements
of Compensation
Our
compensation structure for our Named Executive Officers consists of a
combination of (1) base salary, (2) long-term incentive awards
(equity awards), (3) company paid
benefits, and (4) discretionary bonuses.
The Compensation Committee also takes into account certain change in
control provisions available to our Named Executive Officers.
Our Creative Director, Joe Dahan, is our only Named
Executive Officer with an employment agreement.
The employment agreement was entered into with him in connection with
the completion of the merger by and among, us, our Joes Jeans Subsidiary Inc.,
or Joes Subsidiary, and JD Holdings,
Inc., or JD Holdings.
Mr. Crossman
and Mr. Sandhu are both at-will employees.
Mr. Sandhu was given an employment offer letter in connection with
his offer of employment as our Chief Financial Officer in August 2007. The Compensation Committee is in the process
of discussing and preparing an employment agreement with Mr. Crossman for
his continued employment with us as the Compensation Committee believes that
this is an important part to ensure Mr. Crossmans long-term commitment to
us.
6
Engagement
of Compensation Consultant
In
September 2007, our Compensation Committee engaged a compensation consultant,
Mercer Human Resources Consulting, to serve as an independent advisor to the
Compensation Committee to conduct a review of the compensation for our Chief
Executive Officer and non-employee Directors, examine the pay level and
practices of a group of peer companies similar in terms of size and industry,
highlight trends in such compensation
and provide recommendations regarding our practices. Mercer prepared for our Compensation
Committee a competitive analysis of compensation utilizing comparable company
compensation data, including size and industry appropriate survey data and
advice around short and long-term incentive programs. The information prepared by Mercer provided
the Compensation Committee with data to allow them to evaluate and determine an
appropriate amount for a bonus and equity award grant for our Chief Executive
Officer for fiscal 2007 and compensation for non-employee directors. More particularly, this information provided
the basis for discussion of compensation for fiscal 2008 for our Chief
Executive Officer.
The peer companies selected for comparison purposes
included other apparel, footwear and accessories companies of a comparable size
with publicly available i
nformation.
The companies in the peer group were as follows:
·
True Religion
·
Cutter & Buck
·
Lacrosse Footwear
·
Iconix Brand Group
·
Everlast Worldwide
·
Sport-Haley
·
Chaus
·
Cygne Designs
·
Isaacs IC & Co.
·
Nitches
·
Cherokee
·
Peoples Liberation
The
information presented included data for the 75
th
percentile, 50
th
percentile, and 25
th
percentile.
Our Compensation Committee determined that based upon the data
presented, the total direct compensation for our Chief Executive Officer in
prior years was just below the 25
th
percentile due to a lack of cash
bonus opportunity. Thus, the
Compensation Committee believed that a cash bonus would be an important element
of compensation for fiscal 2007 and beyond for our Chief Executive Officer.
Base
Salary
Our
Compensation Committee reviews base salary for Chief Executive Officer on an
annual basis, and for fiscal 2007 considered the recommendation by the Chief Executive Officer for the other Named
Executive Officers other than the Chief Executive Officer. In fiscal 2007, our Chief Executive Officers
base salary was the same as his base salary for the prior year. The Compensation Committee utilized the data
from Mercer as a basis for the discussion of our Chief Executive Officers
salary for fiscal 2008.
Bonuses
Historically,
the Compensation Committee has not granted a bonus to our Chief Executive
Officer. As a result of the lack of
bonus opportunity in prior years and recognizing the importance of this element
of compensation, for fiscal 2007, the Compensation Committee elected to grant Mr. Crossman
a discretionary bonus in the amount of $300,000, $150,000 of which was payable
on or before the end of our 2007 fiscal year and $150,000 to be paid in
connection with the execution of an employment letter agreement in fiscal
2008. Factors that the Compensation Committee considered in
determining this bonus amount included Mr. Crossmans performance over the
past fiscal year along with our financial and strategic performance, which
included successfully selling the assets from our other business segments and
focusing our resources on our Joes® brand, completing the merger to acquire
the Joes® assets, regaining compliance with Nasdaq listing standards, and
competitive considerations, including the market data indicating that bonus
opportunity is an important element in cash compensation for a Chief Executive
Officer. This cash bonus was the first
cash bonus paid to Mr. Crossman since he commenced employment in March 2003.
7
Long-Term
Incentive Compensation
Our
Compensation Committee administers our 2004 Stock Incentive Plan and believes
that the long-term commitment of our employees, including our Named Executive
Officers, is an important factor in our future performance. The primary element used to promote the
long-term performance and commitment of our Named Executive Officers is
long-term incentive compensation through grants of stock options and restricted
stock. In fiscal 2007, the Compensation
Committee shifted from its past practice of granting options to purchase shares
of our common stock to granting restricted common stock. This decision to change past practices was in
part due to fluctuations in the market price of our common stock and the
decision to re-price out-of-the-money incentive stock options in fiscal 2006 as
part of a retention incentive. The
Compensation Committee believes that equity grants with time-based vesting
restrictions aid in retention and better align the interests of our Named
Executive Officers with those of our stockholders. Further, the equity grants motivate our Named
Executive Officers to make long-term decisions that are in our best interest
and to provide incentive to maximize stockholder value.
We
do not coordinate the timing of equity award grants with the release of
financial results or other material announcements by us and generally, we have made annual equity grants to our
Chief Executive Officer and non-employee directors in connection with our
annual meeting of stockholders.
We
believe that providing Named Executive Officers who have responsibility for our
management and growth with an opportunity to increase their stock ownership
aligns the interests of the executive officers with those of our stockholders.
Accordingly, the Compensation Committee also considers equity grants to be an
important aspect in compensating and providing incentives to management and
employees. The Compensation Committee
determines the number of shares for each stock incentive grant based upon the
executive officers role and responsibilities, the executive officers base
salary, the recommendation of our Chief Executive Officer of the job
performance of the individual. For the
equity grants to our Chief Executive Officer and our non-employee directors,
the Compensation Committee also utilized the data presented and compared with
comparable awards to individuals in similar positions in our industry.
Benefits
Benefits
offered to our Named Executive Officers
are substantially the same as those offered to all our regular employees
and generally include medical insurance, dental insurance, 401(k) plan,
disability insurance, life insurance and flexible spending account. For our Named Executive Officers, we pay all
premiums associated with such benefits as described in the footnote 6 to the
Summary Compensation Table.
Change
in Control Provisions
Our
Creative Director and our Chief Financial Officer have change in control
provisions in each persons employment agreement and employment offer letter,
respectively. These provisions provide
these Named Executive Officers with certain compensation arrangements in the
event that a change in control occurs.
In addition, our 2004 Stock Incentive Plan contains a change in control
provision which provides for the immediate vesting in full of all grants or
lapse of all restrictions for all grantees, including our Named Executive
Officers, in the event a change in control occurs.
8
Relationship
Between Elements and Objectives
In
determining the total amount and mixture of the compensation package for our
Chief Executive Officer, our Compensation Committee subjectively considers
individual performance, including past and expected contributions, overall
performance of the company as a whole, long-term goals and such other factors
as our Compensation Committee determines appropriate. The use of both cash compensation (salary and
bonus) and long-term compensation (equity awards) achieves the objectives of
attracting, motivating and retaining our Chief Executive Officer, other Named
Executive Officers and employees.
Long-term compensation realized through the use of equity awards
achieves the objectives of aligning managements interests with stockholders
interests and ensuring the long-term commitment of the management team. For fiscal 2007, our Compensation Committee determined that for our Chief
Executive Officer the total cash compensation should be higher than the 25
th
percentile for our peer group and elected to provide him with a bonus. For fiscal 2008, the Compensation Committee
considered, evaluated and discussed the data presented to provide the basis for
its discussion and decision regarding compensation.
Executive
Managements Involvement in
Compensation Policies
Our
Compensation Committee determines the compensation of our Chief Executive
Officer and directors and reviewed and approved our compensation of our
Creative Director and Chief Financial Officer based upon the recommendation
from our Chief Executive Officer regarding expected contributions, long term goals and other factors
appropriate to the respective positions.
Our Compensation Committee approves all grants of equity compensation,
including the pool for non-officer employees.
Tax
Considerations
We
generally intend to qualify executive compensation for deductibility without
limitation under section 162(m) of the Internal Revenue Code. Section 162(m) provides that, for
purposes of the regular income tax and the alternative minimum tax, the
otherwise allowable deduction for compensation paid or accrued with respect to
a covered employee of a publicly-held corporation (other than certain exempt
performance-based compensation) is limited to no more than $1 million per
year. None of the non-exempt
compensation we paid to any of our Named Executive Officers for 2007 exceeded
the $1 million limit.
Executive
Officer Compensation
The
following table provides certain
summary information concerning the compensation earned by our Named Executive
Officers in the position of the Principal Executive Officer, Principal
Financial Officer, and Creative Director for services rendered in all
capacities to us for the fiscal year ended November 30, 2007.
Summary
Compensation Table
Name and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Stock Awards
|
|
Option Awards
|
|
All Other Compensation (6)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc Crossman
|
|
2007
|
|
$
|
375,001
|
|
$
|
150,000
|
(1)
|
$
|
375,000
|
(2)
|
$
|
|
|
$
|
72,838
|
|
$
|
972,839
|
|
Chief Executive Officer and President
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hamish Sandhu
|
|
2007
|
|
51,250
|
(3)
|
|
|
|
|
123,000
|
(4)
|
131
|
|
174,381
|
|
Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Dahan
|
|
2007
|
|
104,011
|
(5)
|
|
|
|
|
|
|
34,993
|
|
139,004
|
|
Creative Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
(1) Reflects portion of Mr. Crossmans
bonus approved and paid in fiscal 2007.
The remaining amount of $150,000 previously approved bonus by the
Compensation Committee is expected to be paid in connection with the execution
of an employment letter agreement during the second quarter of fiscal 2008.
(2) Represents the total fair value of
the restricted common stock grant to Mr. Crossman on October 15, 2007
to be recognized by us as an expense in accordance with
Statement of Financial
Accounting Standards No. 123 (revised 2004), or SFAS 123R, in connection
with the grant. The restricted common
stock vests as follows: one-third of the
shares vest on October 15, 2008, one-third of the shares vest on October 15,
2009, and one-third of the shares vest on October 15, 2010.
(3) Mr. Sandhu commenced employment
with us on August 27, 2007 as our Chief Financial Officer.
(4) Represents the total fair value of
the stock option award to be recognized by us as an expense in accordance with
SFAS 123R in connection with the award.
On December 18, 2007, Mr. Sandhu elected to forfeit and cancel
his stock option award in exchange for a grant of 100,000 restricted common
stock units on the same terms and conditions granted to other non-officer
employees. The restricted common stock
units are scheduled to vest every six months over a four year period.
(5) Mr. Dahan was appointed Creative
Director on October 25, 2007 and previously served as an employee and
president of our Joes Subsidiary. This
amount represents the full compensation paid to him in connection with his
employment for fiscal 2007.
(6) The following table details the
components of this column.
Name and Principal Position
|
|
Year
|
|
Company Paid Health Insurance(a)
|
|
Unused Vacation Payout (b)
|
|
401(k) Match
|
|
Total
|
|
Marc Crossman
|
|
2007
|
|
$
|
21,147
|
|
$
|
45,371
|
|
$
|
6,321
|
|
$
|
72,838
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hamish Sandhu
|
|
2007
|
|
$
|
131
|
|
|
|
|
|
$
|
131
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Dahan
|
|
2007
|
|
$
|
30,378
|
|
$
|
4,615
|
|
|
|
$
|
34,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) This amount represents health insurance premiums paid on behalf of the Named
Executive Officer in excess of health insurance premiums paid for other
employees.
(b) This
amo
unt represents a pay out for earned but unused vacation at the Named
Executive Officers daily rate. In
accordance with our employee handbook, all regular full-time employees are
eligible to be paid out for earned but unused vacation at the end of each
fiscal year.
10
Grants
of Plan-Based Awards
The
following table sets forth information regarding grants of our awards pursuant
to our 2004 Stock Incentive Plan to our Named Executive Officers during our fiscal year ended November 30,
2007:
|
|
|
|
Estimated Future Payouts Under Equity Incentive Plan
Awards
|
|
Exercise or Base Price of Option Awards
|
|
Grant Date Fair Value of Stock and Option
|
|
Name
|
|
Grant Date
|
|
Threshold (#)
|
|
Target (#)
|
|
Maximum (#)
|
|
($ / Sh)
|
|
Awards
|
|
Marc Crossman
|
(1)
|
15-Oct-07
|
|
|
|
235,849
|
|
|
|
|
|
$
|
375,000
|
|
Hamish Sandhu
|
(2)
|
27-Aug-07
|
|
|
|
100,000
|
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) On October 15, 2007, Mr. Crossman
was granted 235,849 shares of restricted common stock that vest as
follows: one-third of the shares vest on
October 15, 2008, one-third of the shares vest on October 15, 2009,
and one-third of the shares vest on October 15, 2010. These shares of restricted common stock are
subject to a time-based vesting requirements that automatically vests provided Mr. Crossman
is employed by us on such date. There
are no other requirements or performance targets that must be met in order for
such shares to vest.
(2) On August 27, 2007, Mr. Sandhu
was granted options to purchase up to 100,000 shares of our common stock at an
exercise price of $1.92, the closing price of our common stock on the date of
grant. This stock option was subject to
a time-based vesting requirement and vested automatically on a monthly basis
over a two year period provided that Mr. Sandhu was employed by us on the
vesting date. On December 18, 2007,
Mr. Sandhu elected to forfeit and cancel his stock option award in
exchange for a grant of 100,000 restricted common stock units on the same terms
and conditions granted to other non-officer employees. The restricted common stock units are subject
to a time-based vesting requirement and are scheduled to vest every six months
over a four year period provided that Mr. Sandhu continues to be employed
on such vesting date. There are no other
requirements or performance targets that must be met in order for such grant to
vest.
11
Outstanding
Equity Award at Fiscal Year-End
The
following table sets forth information regarding outstanding equity awards held
by our Named Executive Officers during our fiscal year ended November 30,
2007:
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Number of Securities Underlying Unexercised Options
|
|
Number of Securities Underlying Unexercised Options
|
|
Equity Incentive Plan Awards:
|
|
Option Exercise Price
|
|
Option Expiration Date
|
|
Number of Shares or Units of Stock That Have Not Vested
|
|
Market Value of Shares or Units of Stock that Have Not Vested
|
|
Equity Incentive Plan Awards:
|
|
Equity Incentive Plan Awards:
|
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Number of Securities Underlying Unexercised Unearned Options
|
|
|
|
|
|
|
|
|
|
Number of Unearned Shares, Units or Other Rights That Have Not Vested
|
|
Market or Payout Value of Unearned Shares, Units or Other Rights That
Have Not Vested
|
|
Marc Crossman
|
|
|
|
|
|
|
|
|
|
|
|
235,849
|
|
$
|
375,000
|
|
235,849
|
|
$
|
271,226
|
|
|
|
25,641
|
|
|
|
|
|
$
|
0.39
|
|
13-Dec-10
|
|
|
|
|
|
|
|
|
|
|
|
10,000
|
|
|
|
|
|
$
|
1.00
|
|
17-Apr-12
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
|
|
$
|
1.63
|
|
3-Sep-14
|
|
|
|
|
|
|
|
|
|
|
|
250,000
|
|
|
|
|
|
$
|
1.02
|
|
13-Jun-15
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
|
|
$
|
1.02
|
|
23-May-13
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hamish Sandhu
|
|
12,500
|
|
87,500
|
|
87,500
|
|
$
|
1.92
|
|
26-Aug-17
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph Dahan
|
|
200,000
|
|
|
|
|
|
$
|
1.02
|
|
4-Aug-15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
(1) On December 18, 2007, Mr. Sandhu
elected to forfeit and cancel his stock option award in exchange for a grant of
100,000 restricted common stock units on the same terms and conditions granted
to other non-officer employees. The
restricted common stock units are scheduled to vest every six months over a
four year period.
Option
Exercises and Stock Vested
There
were no option exercises or restricted stock that vested by our Named Executive
Officers in our fiscal year ended November 30, 2007.
Pension
Benefits
We
do not provide any pension benefits to any of our Named Executive Officers or
employees.
Nonqualified
Deferred Compensation
We
do not provide any non-qualified deferred compensation to any of our Named
Executive Officers or employees.
Employment
Contracts and Termination of Employment and Change in Control Arrangements
Joseph M. Dahan
In
connection with the completion of a merger between us, our Joes Subsidiary and
JD Holdings, Mr. Dahans employment agreement automatically became
effective for service as our Creative Director.
Under
the employment agreement, the initial term of employment is five years with
automatic renewals for successive one year periods thereafter, unless
terminated earlier. Mr. Dahan is entitled
to an annual salary of $300,000 and other discretionary benefits that the
Compensation Committee of the Board of Directors may deem appropriate in its
sole and absolute discretion.
12
Under
the terms of the employment agreement, we may terminate Mr. Dahan for
Cause or if he becomes Disabled. Cause
is defined as (i) a conviction, plea of guilty or nolo contendere to a
felony or a crime of moral turpitude; (ii) a material breach of any
provision of the employment agreement that is not cured within 45 days of
receipt of written notice of such breach; (iii) the solicitation,
persuasion or attempt at persuasion for any employee, consultant, contractor,
customer or potential customer to engage in an act prohibited by the employment
agreement; or (iv) a violation of any of our policies in our handbook or
code of ethics and such violation constitutes a breach of the Code of Ethics or
warrants termination. Disability is
defined as inability to perform duties for 180 consecutive days or shorter
periods aggregating 270 days during any 12 month period. Should we terminate Mr. Dahans
employment for Cause or Disability, we would only be required to pay him
through the date of termination. We may
terminate Mr. Dahans employment without Cause at any time upon two weeks
notice, provided that it pays to him the present value of the annual salary
amounts otherwise due to him for the remainder of the initial term of
employment or any renewal term. Mr. Dahan
may terminate his employment for Good Reason at any time within 30 days written
notice. Good Reason is defined as (i) a material breach of the
employment agreement by us that is not cured within 30 days of written notice;
or (ii) Mr. Dahans decision to terminate employment at any time
after 18 months following a Change in Control.
A Change in Control is defined as (i) the sale or disposal of all
or substantially all of the assets; (ii) the merger or consolidation with
another company provided that our stockholders as a group no longer own at
least 50 percent of the voting power of the surviving corporation; (iii) any
person or entity becoming the beneficial owner of 50 percent or more of our
combined voting power; or (iv) the approval by our stockholders to
liquidate or dissolve. In the event that Mr. Dahan terminates his
employment for Good Reason, then he will be entitled to the present value of
the annual salary amounts otherwise due to him for the remainder of the initial
term of employment or any renewal term.
Further, Mr. Dahan may terminate his employment for any reason upon
ten business days notice and only be entitled to his salary as of the date of
termination on a pro rata basis.
The
employment agreement contains customary terms and conditions related to
confidentiality of information, ownership by us of all intellectual property,
including future designs and trademarks, alternative dispute resolution and Mr. Dahans
duties and responsibilities to us as Creative Director.
Hamish Sandhu
In
connection with Mr. Sandhus appointment as CFO, we entered into a written
offer letter whereby Mr. Sandhu agreed to serve as our CFO. Under the terms of the offer letter, Mr. Sandhus
annual base salary is $205,000. In
addition, Mr. Sandhu received a grant on August 27, 2007, pursuant to
our 2004 Stock Incentive Plan, to purchase up to 100,000 shares of our common
stock at an exercise price equal to the closing price of our common stock on
that date. The option has a term of 10
years, vests in equal monthly installments over the next 24 months and first
became exercisable on September 27, 2007.
We also agreed to pay the full cost of participation in our health
insurance plan for Mr. Sandhu and his family. Mr. Sandhu will also be entitled to six
months of his monthly base salary as a severance payment in the event that a
Change in Control occurs during the four years following August 27, 2007
and his employment is subsequently terminated.
For purposes of the offer letter, a Change in Control shall be deemed
to have occurred upon the closing of a transaction which: (i) we sell or otherwise dispose of all
or substantially all of our assets; or (ii) there is a merger or
consolidation of us with any other corporation or corporations, provided that
our shareholders, as a group, do not hold, immediately after such event, at
least 50 percent of the voting power of the surviving or successor
corporation. Notwithstanding anything to
the contrary, Mr. Sandhu is an employee at-will and has not entered into
an employment agreement with us.
13
On
December 18, 2007, we entered into a Restricted Stock Unit Agreement, or
RSU Award whereby we granted Mr. Sandhu an award of restricted stock units
representing the right to receive 100,000 shares of our common stock, or the
Restricted Stock Units, pursuant to the 2004 Stock Incentive Plan. The Restricted Stock Units are scheduled to
vest every six months over a four year
period. In conjunction with this award, Mr. Sandhu
agreed to terminate his employee stock option to purchase 100,000 shares of our
common stock granted pursuant to the 2004 Stock Incentive Plan on August 27,
2007. Mr. Sandhu agreed to forfeit
the 100,000 shares he was entitled to acquire under the terms of the stock
option, which was scheduled to vest on a monthly basis over a two year period.
2004 Stock Incentive Plan, Restricted Stock Agreement and Restricted
Stock Unit Awards
Under
the terms of the 2004 Stock Incentive Plan, all unvested awards accelerate and
immediately vest upon the occurrence of a Change in Control for all
grantees. Further, Mr. Crossmans
Restricted Stock Agreement and each RSU Award contains certain provisions
regarding the terms and conditions of the grant. Each vests upon the earliest to occur of the
participants death, Disability, or separation from service by us without Just
Cause (as defined below). Death and
Disability are defined in the Plan. Upon a separation from service for any
other reason (including, without limitation, termination by us for Just Cause
or by participant for any reason) prior to the date that participant becomes
100 percent vested in the award, the unvested units or shares are forfeited
immediately. Under the award agreements,
Just Cause means (a) a conviction for, or a plea of guilty or nolo
contendere to, a felony or any other crime which involves fraud, dishonesty or
moral turpitude, or (b) a material breach of any written employment
policies or rules, including the our Code of Business Conduct and Ethics.
14
Potential
Payments Upon Termination or Change in Control
The
following table reflects the amounts that would be paid if a change in control
or other termination event occurred on November 30, 2007 and our stock
price per share was the closing market price as of that date. The closing market price of our common stock
on November 30, 2007 was $1.15
Termination Scenario (11/30/07)
|
|
Marc Crossman
|
|
Hamish Sandhu
|
|
Joseph Dahan
|
|
Without Cause or for Good Reason (1) (within 18 months of Change in
Control)
|
|
|
|
|
|
|
|
Severance pay (a)
|
|
$
|
|
|
$
|
|
|
$
|
1,470,443
|
|
Health benefits continuation (b)
|
|
|
|
|
|
30,378
|
|
Unexercised options
|
|
|
|
|
|
|
|
Unvested restricted stock
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
1,500,821
|
|
|
|
|
|
|
|
|
|
Without Cause or for Good Reason (1) (no Change in Control)
|
|
|
|
|
|
|
|
Severance pay (a)
|
|
$
|
|
|
$
|
|
|
$
|
1,470,443
|
|
Health benefits continuation (b)
|
|
|
|
|
|
30,378
|
|
Unvested options
|
|
|
|
|
|
|
|
Unvested restricted stock
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
$
|
|
|
$
|
1,500,821
|
|
|
|
|
|
|
|
|
|
Change in Control - assuming no termination
|
|
|
|
|
|
|
|
Severance pay (2)
|
|
$
|
|
|
$
|
102,500
|
|
$
|
|
|
Unvested options (3)
|
|
|
|
100,625
|
|
|
|
Unvested restricted stock (3)
|
|
271,226
|
|
|
|
|
|
Total
|
|
$
|
271,226
|
|
$
|
203,125
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Without Just Cause, Death or Disability
|
|
|
|
|
|
|
|
Unvested restricted stock (3)
|
|
$
|
271,226
|
|
$
|
|
|
$
|
|
|
Total
|
|
$
|
271,226
|
|
$
|
|
|
$
|
|
|
(1) See Employment Contracts and
Termination of Employment and Change in Control Arrangements Joseph M. Dahan
for a further discussion of the terms under which such benefits would be
payable for Mr. Dahan.
(a) Represents the amount of salary at Mr. Dahans
current rate of $300,000 that would have been paid pursuant to his employment
agreement from November 30, 2007 until October 25, 2012.
(b) Represents the anticipated cost of health insurance
benefits for a period of one year following termination based upon amounts paid
in fiscal 2007 for Mr. Dahan.
(2) See Employment Contracts and
Termination of Employment and Change in Control Arrangements Hamish Sandhu
for a further discussion of the terms under which such benefits would be
payable for Mr. Sandhu. Represents
the amount of salary at Mr. Sandhus current rate of $205,000 that would
have been paid pursuant to his employment offer letter from November 30,
2007 until May 31, 2008.
(3) See Employment Contracts and
Termination of Employment and Change in Control Arrangements 2004 Stock
Incentive Plan, Restricted Stock Agreement and Restricted Stock Unit Awards. Represents the fair market value of the
acceleration of vesting of all outstanding awards pursuant to the 2004 Stock
Incentive Plan and applicable agreements based upon the closing market price of
our common stock on November 30, 2007 at $1.15.
15
Director
Compensation
Historically,
our non-employee Directors have been compensated for service through an equity
grant. Our Directors are not compensated
in any other manner, however, they are reimbursed for travel and business
expenses associated with attending our annual meeting if the Directors
schedule permits such attendance.
Attendance in person is not required, but we try to accommodate
schedules in planning the date. In
fiscal 2007, all directors, except Mr. Hoffman, attended our annual
meeting in person. Consistent with its
past practices, on October 15, 2007 and October 17, 2007, the
Compensation Committee of the Board approved grants of restricted stock in the
amount of 80,000 shares to each non-employee Director: Sam Furrow, Kent Savage, Tom ORiordan, and
Suhail Rizvi. The restricted stock vests
on a monthly basis over the course of 12 months beginning November 15,
2007. In lieu of a restricted stock
grant, Kelly Hoffman elected to be compensated through a cash retainer in the
amount of $127,200 paid monthly over the next twelve months. This amount was determined based upon the
peer group analysis and because the non-employee Directors had served from May 2006
to October 2007 (a period of 17 months) without any form of cash or other
equity compensation.
Name
|
|
Fees Earned or Paid in Cash
|
|
Stock Awards (1)
|
|
Total
|
|
Sam Furrow
|
|
$
|
|
|
$
|
127,200
|
|
$
|
127,200
|
|
Kent Savage
|
|
|
|
127,200
|
|
127,200
|
|
Tom ORiordan
|
|
|
|
127,200
|
|
127,200
|
|
Suhail Rizvi
|
|
|
|
127,200
|
|
127,200
|
|
Kelly Hoffman
|
|
127,200
|
|
|
|
127,200
|
|
|
|
$
|
127,200
|
|
$
|
508,800
|
|
$
|
636,000
|
|
(1) Represents the total fair value of
80,000 shares of restricted common stock granted to our non-employee directors
on October 15, 2007 to be recognized by us as an expense in accordance
with SFAS 123R. The restricted common
stock vests on a monthly basis over a 12 month period with the first tranche
vesting on November 15, 2007.
Compensation
Committee Interlocks and Insider Participation
During
fiscal 2007, the Compensation and Stock Option Committee of our Board of
Directors, or Compensation Committee, was comprised of Messrs. Savage,
Hoffman, ORiordan and Rizvi. The
Compensation Committee is responsible for determining the salaries and incentive
compensation of our executive officers and for providing recommendations for
the salaries and incentive compensation of all other employees and
consultants. The Compensation Committee
also administers our benefit plans, including the 2004 Stock Incentive
Plan. Mr. Savage serves as Chairman
of the Compensation Committee. None of
our past or current members of the Compensation Committee has served as an
executive officer or employee of us or any of our subsidiaries. One member of our Compensation Committee, Mr. Rizvi,
entered into a transaction with us to sublease, at our current market rate,
certain previously leased office space for an entity that he owns. See Related Parties 9000 Sunset Office
Space Sublease for a further discussion of this transaction.
16
COMPENSATION COMMITTEE REPORT
The
Compensation Committee has reviewed and discussed the Compensation Discussion
and Analysis with management.
Based
upon this review and discussion, the Compensation Committee recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in
this Amendment No. 1 to the Annual Report on Form 10-K for the year
ended November 30, 2007 and incorporated by reference into in our proxy statement
for our 2008 Annual Meeting of Stockholders.
|
Respectfully
Submitted by the Compensation Committee of the Board of Directors,
|
|
|
|
Kent
Savage (Chairman)
|
|
Kelly
Hoffman
|
|
Tom
ORiordan
|
|
Suhail
Rizvi
|
17
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND
DIRECTOR INDEPENDENCE.
Our Audit Committee charter
provides that that all transactions between us and persons or entities
affiliated with our officers, directors or principal common stockholders must
be approved by our Audit Committee. We
believe that this policy requiring that any material transaction between us and
such related parties be approved by our Audit Committee ensures that such
transactions are on terms no less favorable to us than reasonably could have
been obtained in arms length transactions with independent third parties.
Former
Related Parties
Commerce
Investment Group and affiliates
Historically,
we have had a strategic relationship with certain of our stockholders, Hubert
Guez, Paul Guez and their affiliated companies, including Azteca, AZT
International de CV, or AZT, and Commerce Investment Group LLC, or
Commerce. By virtue of this
relationship, we have entered into the following agreements, at various times,
with Hubert Guez, Paul Guez and their affiliated companies, Azteca, AZT and
Commerce, entities in which Hubert Guez and Paul Guez have controlling
interests. These entities are no longer
related parties as they are not officers, directors or greater than five
percent stockholders nor do they have the ability to control us, directly or indirectly.
The
following table represents charges from the affiliated companies pursuant to
Joes relationship with them, including its discontinued operations, as
follows:
|
|
(in thousands)
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
Continuing operations
|
|
|
|
|
|
|
|
Purchase order arrangements
|
|
$
|
10,727
|
|
$
|
12,845
|
|
$
|
2,560
|
|
Verbal facilities arrangement
|
|
|
|
256
|
|
315
|
|
Discontinued operations
|
|
|
|
|
|
|
|
Supply agreement / Purchase order arrangements
|
|
|
|
16,851
|
|
60,898
|
|
Earn-out due to Sweet Sportswear
|
|
|
|
248
|
|
1,323
|
|
Verbal facilities agreement
|
|
|
|
301
|
|
724
|
|
Principal and interest on note payable
|
|
|
|
1,088
|
|
1,057
|
|
Supply and Distribution agreement
|
|
|
|
|
|
639
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing Operations - Purchase Order Arrangement
Until
August 2007, we used AZT as a supplier on a purchase order basis for
certain of our Joes® denim products produced in Mexico. Under this arrangement, we advanced the funds
to purchase raw materials, which primarily includes fabric, anticipated for
production of our products and paid for the production cost less credit for the
advances on raw materials. We purchased
these products in various stages of production from partial to completed
finished goods. In August 2007, we
began using a different third party vendor for the production of our products
in Mexico.
21
Continuing Operations - Verbal Facilities Arrangement
Until
mid-July 2006, we used space for our headquarters and principal executive
offices under a verbal month-to-month arrangement with Azteca. Under this arrangement, we paid to Azteca a
monthly fee for allocated expenses associated with our use of office and
warehouse space, including a fee charged on a per unit basis for inventory, and
expenses in connection with maintaining such office and warehouse space. These allocated expenses included, but were
not limited to, rent, security, office supplies, machine leases and
utilities. In mid-July 2006, we
moved our headquarters and principal executive offices to nearby office and
warehouse space and accordingly, no longer have any obligation to pay Azteca
under the verbal facilities arrangement.
Discontinued Operations - Supply Agreement/Purchase Order Arrangements
In
July 2003, under an asset purchase agreement, or Blue Concept APA, with
Azteca, Hubert Guez and Paul Guez, our IAA subsidiary acquired the Blue Concept
Division of Azteca, a division which sold denim apparel primarily to American
Eagle Outfitters, Inc., or AEO.
Simultaneous with the Blue Concept APA, IAA entered into a non-exclusive
Supply Agreement with AZT for the purchase of denim products to be sold to AEO,
which expired on July 17, 2005.
Under the terms of the Supply Agreement, AZT agreed that the purchase
price on the products supplied would provide for a margin per unit of 15
percent. After the expiration of the
supply agreement, we continued to use AZT as a supplier on a purchase order
basis for our AEO products under similar terms.
Upon completion of the sale of IAAs private label division to Cygne
Designs, Inc., or Cygne, as discussed in Note 15 Discontinued
Operations of our Initial Report, Cygne assumed $2,500,000 of the amount owed
to AZT under this purchase order supply arrangement.
Discontinued Operations - Earn-out Due to Sweet Sportswear LLC
The
Blue Concept APA also provided for the calculation and payment, on a quarterly
basis, to Sweet Sportswear LLC, an entity owned by Hubert and Paul Guez, of an
amount equal to 2.5 percent of the gross sales solely attributable to AEO. In May 2006, Cygne assumed the future
liability associated with this payment.
Discontinued Operations - Principal and Interest on Note Payable
We
originally incurred long-term debt in connection with the purchase of the Blue
Concept Division from Azteca. In July 2003,
IAA issued a seven-year unsecured, convertible promissory note in the principal
amount of $21.8 million, or the Blue Concept Note. The Blue Concept Note bore interest at a rate
of six percent and required payment of interest only during the first 24 months
and then was fully amortized over the remaining five year period. On March 5, 2004, after stockholder
approval, a portion of the Blue Concept Note was converted into 3,125,000
shares of common stock at a value per share of $4.00. In May 2006, Cygne assumed the remaining
principal balance of the Blue Concept Note and Azteca released us from any and
all remaining obligations. The Blue
Concept Note has been reclassified as a discontinued operation liability. Under the terms of the original asset purchase
agreement, in addition to the shares previously issued, we issued on May 17,
2006 an additional 1,041,667 shares of our common stock as a result of its
average stock price trading at less than $3.00 per share for the period between
February 10, 2006 and March 12, 2006.
This share issuance has been recognized in the Statement of Stockholders
Equity.
Discontinued Operations - Craft and accessories Supply and
Distribution Agreement
In
August 2000, we entered into a supply agreement and a distribution
agreement for our craft products with Commerce.
In connection with the sale of the craft inventory and certain other
assets of our Innovo subsidiary in May 2005, both the supply agreement and
the distribution agreement were terminated.
22
Aggregate balances by entities
As
of November 30, 2007 and November 25, 2006, respectively, the
balances due (to) or due from these related parties and certain of their
affiliates are as follows:
|
|
2007
|
|
2006
|
|
|
|
|
|
|
|
AZT
International SA de CV
|
|
$
|
1,800
|
|
$
|
4,994
|
|
Commerce Investment Group
|
|
(2,822
|
)
|
(2,822
|
)
|
Sweet Sportswear, LLC
|
|
(4
|
)
|
(4
|
)
|
Cygne Design Inc.
|
|
(5
|
)
|
(5
|
)
|
|
|
$
|
(1,031
|
)
|
$
|
2,163
|
|
The
AZT balance represented the balances due as a result of production efforts in
Mexico as of November 30, 2007.
Upon completion of the sale of our private label division to Cygne, as
discussed in Note 15 Discontinued Operations of our Initial Report, Cygne
assumed the aggregate liability in the amount of $2,500,000 owed to Commerce
and its affiliates. The balance due to
Commerce represents the adjusted balance remaining that we continue to be
obligated for after the completion of the transaction with Cygne. The balance of $5,000 due to Cygne
represented the amount we owed to Cygne as a result of certain chargebacks to
former customers.
Current
Related Party
JD
Holdings Inc.
On
February 7, 2001, we acquired a license for the rights to the Joes® brand
from JD Design LLC, which was subsequently merged with and into JD
Holdings. Under the license agreement,
JD Holdings was entitled to a royalty of 3 percent on net sales of licensed
products. In October 2005, we
granted JD Holdings the right to develop the childrens branded apparel line
under an amendment to our master license agreement in exchange for a 5 percent
royalty on net sales of those products.
On October 25, 2007, in connection with the merger, the license
agreement terminated.
As
part of the consideration paid in connection with the completion of the merger,
Mr. Dahan will be entitled to a certain percentage of the gross profit
earned by Joes in any applicable fiscal year until October 2017. See Note 4 Merger Transaction of our
Initial Report for a further discussion on the merger agreement and the
earn-out.
For
fiscal 2007 and 2006, the following table sets forth earn-out, royalties, fees
and income paid in connection with the Joes® brand.
|
|
(in thousands)
|
|
|
|
2007
|
|
2006
|
|
2005
|
|
Expense (income):
|
|
|
|
|
|
|
|
Joes Jeans royalty expense
|
|
$
|
1,647
|
|
$
|
1,363
|
|
$
|
999
|
|
Joes Kids license, royalty income
|
|
(88
|
)
|
(40
|
)
|
|
|
indie Design fee
|
|
|
|
39
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
23
As
a result of Mr. Dahans appointment as a director and executive officer
and his ownership of approximately 24 percent of our total shares outstanding,
an additional related party transaction occurred in the past fiscal year. Mr. Dahans brother is the managing
member of a company Shipson LLC, or Shipson, to whom we outsourced our E-shop
operated on our Joes Jeans website. We
sold our Joes® products to Shipson at wholesale price on normal and customary
terms and conditions similar to those that we offer other customers to fulfill
purchases by customers on the E-shop. As
of November 30, 2007, Shipson owed $163,000 to us for purchase
orders. Shipson no longer operates our
E-shop.
In
October 2006, we entered into a collateral protection agreement with JD
Holdings in connection with the pledge of certain collateral to CIT Commercial
Services, a unit of the CIT Group Inc., or CIT, for increased
availability. Under the collateral
protection agreement, we agreed to issue JD Holdings shares of its common stock
in the event of a default under our agreements with CIT. In October 2007 in connection with the
merger and the release of the pledge by CIT, the collateral protection
agreement was terminated.
9000 Sunset Office Space Sublease
On
March 3, 2006, our Audit Committee approved a related party transaction
whereby we subleased, at our current rate, our executive office space to an
entity owned by Suhail Rizvi, one of our directors, on a month-to-month
basis. We believe that this transaction
is in our best interest to reduce our expenses associated with lease
commitments. The transaction amount of
such sublease was less than $120,000 in any fiscal year.
Director Independence
Currently,
the following members of our Board of Directors are considered independent
under NASDAQ listing standards and as such term is defined in the rules and
regulations of the SEC:
·
Kelly Hoffman
·
Thomas ORiordan
·
Suhail Rizvi
·
Kent Savage
In
making its determination that the foregoing Directors are independent, the
Board considered all relevant facts and circumstances. The Board considered the sublease of our
office space to an entity owned by Mr. Rizvi. The Board concluded that the sublease does
not impact Mr. Rizvis independence.
We do not have any past or present members serving on our Audit
Committee, Compensation and Stock Option Committee and Nominating and
Governance Committee that are not considered to be independent.
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