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EVINE LIVE INC.

6740 Shady Oak Road

Eden Prairie, MN 55344-3433

May 4, 2018

Dear Shareholders:

You are cordially invited to attend the Annual Meeting of Shareholders (the “Annual Meeting”) of EVINE Live Inc., a Minnesota corporation (the “Company”), to be held at our offices located at 6690 Shady Oak Road (Human Resources Entrance), Eden Prairie, Minnesota, on June 13, 2018 at 9:00 a.m. CT.

This year we are again taking advantage of a Securities and Exchange Commission rule allowing us to furnish our proxy materials over the Internet. You will receive a Notice Regarding Availability of Proxy Materials that will tell you how you can access our proxy materials which describe the matters to come before the meeting. It also will tell you how to request a paper or e-mail copy of our proxy materials.

We hope that you will be able to attend the meeting in person and we look forward to seeing you. Whether or not you plan to attend the Annual Meeting, please take the time to vote. Please vote your shares as instructed in the Notice Regarding Availability of Proxy Materials or on your proxy card and send your proxy through the Internet, telephone or mail as soon as possible so that your proxy is received prior to the Annual Meeting. This will assure that your shares will be represented at the meeting and voted in accordance with your wishes. Please vote as quickly as possible, even if you plan to attend the Annual Meeting. You may revoke the proxy and vote in person at the meeting if you so desire.

Your vote is extremely important regardless of the number of shares you own. Please promptly follow the directions on the enclosed proxy card to vote by telephone, by Internet, or by signing, dating and returning the proxy card in the postage-paid envelope provided. It is important that your shares be represented.

 

 

EVINE LIVE INC.

6740 Shady Oak Road

Eden Prairie, MN 55344-3433

 

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JUNE 13, 2018

To the Shareholders of EVINE Live Inc.:

The Annual Meeting of Shareholders (the “Annual Meeting”) of EVINE Live Inc., a Minnesota corporation (the “Company”), will be held at our offices located at 6690 Shady Oak Road (Human Resources Entrance), Eden Prairie, Minnesota on June 13, 2018 at 9:00 a.m. CT, or at any adjournments or postponements thereof. The Annual Meeting is being held for the purpose of considering and taking action with respect to the following:

1.

to elect eight persons to serve as directors on our Board of Directors until the next Annual Meeting of Shareholders or until their successors have been duly elected and qualified;

2.

to approve, on an advisory basis, the 2017 compensation of the Company’s named executive officers as disclosed in the accompanying proxy statement;

3.

to approve the amendment to the Company’s 2011 Omnibus Incentive Plan to increase the number of shares of our common stock authorized for awards from 9,500,000 to 13,000,000;

4.

to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 2, 2019; and

5.

to transact such other business as may properly come before the Annual Meeting, or any adjournments or postponements thereof.

Only Company shareholders of record as of the close of business on April 18, 2018 will be entitled to receive notice of and to vote at the Annual Meeting or any adjournments or postponements thereof. The mailing of the accompanying proxy statement and the Board’s form of proxy to shareholders who request a printed copy will commence on or about May 4, 2018. The mailing of the Notice Regarding Availability of Proxy Materials to our shareholders will commence on or about May 4, 2018.

Your vote is extremely important. You may attend the Annual Meeting and vote in person, or you may vote by following the directions on the proxy card for the Annual Meeting. Even if you own only a few shares, and whether or not you plan to attend the meeting in person, you are requested to vote your proxy either (1) through the Internet at the address listed on the Notice Regarding Availability of Proxy Materials or the proxy card, (2) by calling a toll-free telephone number listed on the proxy card or (3) by marking, signing and dating the proxy card and mailing it in the envelope provided. The proxy may be revoked by you at any time prior to being exercised and voting your proxy by telephone or through the Internet or by returning your proxy will not affect your right to vote in person if you attend the meeting and revoke the proxy.

If you attend the Annual Meeting and wish to change your proxy, you may do so automatically by voting in person at the Annual Meeting. You may also revoke any previously returned proxy by sending another later-dated proxy for the Annual Meeting. Only your latest-dated proxy counts.

THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF EACH OF PROPOSALS 1-4, INCLUDING VOTING IN FAVOR OF THE NOMINEES TO THE BOARD OF DIRECTORS.

By Order of the Board of Directors

 

 

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

 

TABLE OF CONTENTS

 

 

EVINE Live Inc.

 

PROXY STATEMENT FOR THE

ANNUAL MEETING OF SHAREHOLDERS

TO BE HELD ON JUNE 13, 2018

The enclosed proxy is being furnished to holders of shares of common stock of EVINE Live Inc., a Minnesota corporation (the “Company” or “EVINE”), in connection with the solicitation of proxies by our Board of Directors (the “Board”) for use in connection with our Annual Meeting of Shareholders (the “Annual Meeting”) to be held on June 13, 2018 at 9:00 a.m. CT, or at any adjournments or postponements thereof, for the purposes set forth herein. The Annual Meeting will be held at our offices located at 6690 Shady Oak Road (Human Resources entrance), Eden Prairie, Minnesota. The mailing of this proxy statement to shareholders who request a printed copy will commence on or about May 4, 2018. The mailing of the Notice Regarding Availability of Proxy Materials will commence on or about May 4, 2018.

This proxy statement contains important information to consider when deciding how to vote on the matters set forth in the Notice of Annual Meeting of Shareholders. In this proxy statement, the terms “EVINE,” the “Company,” “we,” “our,” “ours,” and “us” refer to EVINE Live Inc. Our principal executive offices are located at 6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433 and our main telephone number is (952) 943-6000.

Voting Matters and Voting Recommendations

The following proposals are included in this proxy statement and are scheduled to be voted on at the meeting. The Board recommends that you vote your shares as indicated below.

 

 

PROPOSAL NO. 1:

ELECTION OF DIRECTORS

Proposal No. 1 is a proposal to elect eight persons to serve as directors on our Board of Directors. Each director will hold office until the next Annual Meeting of Shareholders and until his or her successor is elected and qualified, or his or her earlier resignation or removal. All of the Board’s director nominees have consented to be named in this proxy statement and to serve as a director, if elected.

The number of directors currently serving on our Board is ten. Messrs. Arnold and Robinson will not be standing for re-election at our Annual Meeting, and the size of the Board will be decreased to eight on the date of the meeting. Our Corporate Governance and Nominating Committee reviewed the makeup of the Board and recommended, by unanimous vote, that each person named below, be nominated for election as directors. All of the nominees named below were elected to serve as directors at our 2017 Annual Meeting of Shareholders, except for Mr. Spiro, who was appointed to the Board in March 2018. Prior to Mr. Spiro’s appointment, the size of the Board was increased by one to ten directors.

On March 19, 2018, we entered into a Cooperation Agreement (the “Cooperation Agreement”) with our shareholder the Clinton Group, Inc. (the “Investor”) pursuant to which we agreed, among other things, to cause the Board to appoint Mr. Spiro as a new director to serve on the Board until the Annual Meeting and to nominate, recommend to shareholders and support such director for election to the Board at the Annual Meeting. The Cooperation Agreement, including certain standstill commitments made by the Investor, is described in a Form 8-K filed with the SEC on March 20, 2018.

Based upon the recommendation of our Corporate Governance and Nominating Committee (the “Governance Committee”), the Board unanimously nominated the individuals recommended by the Governance Committee for election as directors. We did not retain any third party to assist in identifying or evaluating the nominees. Assuming shareholders elect all the director nominees named in this proxy statement at the Annual Meeting, we will have eight directors. The Board has authority under our By-Laws to fill vacancies and to increase or, upon the occurrence of a vacancy, decrease the Board’s size between annual meetings. Your proxy holder will vote your shares for the Board’s nominees unless you instruct otherwise.

If prior to the Annual Meeting the Board should learn that any of its nominees will be unable to serve for any reason, the proxies that otherwise would have been voted for such nominee will be voted for a substitute nominee as selected by the Board. Alternatively, the proxies, at the Board’s discretion, may be voted for that fewer number of nominees as results from the inability of any nominee to serve. However, in the event Mr. Spiro is unable or unwilling to serve prior to the end of his term, the Investor has a right to propose a replacement director. The Board has no reason to believe that any of its nominees will be unable to serve. There are no family relationships between any director, executive officer, or person nominated to become a director.

Directors are elected by a plurality of the shares of common stock present in person or by proxy at the Annual Meeting and entitled to vote. Shareholders do not have the right to cumulate their votes in the election of directors or with respect to any other proposal or matter. Assuming a quorum is present, the eight validly nominated individuals receiving the highest number of votes cast at the Annual Meeting will be elected directors.

Summarized below is certain information concerning the persons who are nominated by the Board for election to the Board.

Thomas D. Beers has been Chief Executive Officer of Fremantle Media N.A., Inc., since 2012 where he is responsible for Fremantle’s management and business performance as well as the development, production and operations of more than 600 hours of programming per year including “American Idol,” “America’s Got Talent,” “The X Factor,” “Let’s Make a Deal,” “Family Feud,” and “The Price is Right.” Prior to joining Fremantle, Mr. Beers was the founder and Chief Executive Officer of Original Productions, where he was the creator and driving force behind the Primetime Emmy® winning “Deadliest Catch,” and Emmy nominee “Ice Road Truckers,” and top-rated shows “Storage Wars,” “Monster Garage” and “Black Gold.” His catalogue of more than 30 series is firmly entrenched across the cable powerhouses Discovery, HISTORY, A&E, Spike TV, The National Geographic Channel, and truTV. Mr. Beers’ extensive programming development and production, brand enhancement and relationships in the entertainment and media industry is invaluable in providing strategic advice on new ventures, product development and marketing initiatives.

Neal S. Grabell is currently a Visiting Professor of Economics and Independent College Programs at Haverford College where he has taught since 2006. Mr. Grabell served as Of Counsel to the Saul Ewing, LLP law firm from 2008 to 2015 where he practiced corporate and commercial law for domestic and foreign retailing, licensing, and manufacturing clients. From 1987 to 2008, Mr. Grabell served as the General Counsel of QVC, Inc. where he was responsible for the company’s securities offerings and filings, commercial transactions, acquisitions, litigation, regulatory and ethical compliance, corporate structure, and government relations. Mr. Grabell also oversaw the affiliate sales and marketing department, and operations of other departments of the company, forming and managing the internal audit department and leading the facilities department operations in the company’s numerous sites. Mr. Grabell was a director of QVC (UK), a Managing Director of QVC Deutschland GmbH, and a Director of QVC Japan, Inc. from their respective formations until 2009. He was also a director of most of QVC’s domestic subsidiaries. Mr. Grabell received a B.A. degree from Haverford College in 1977 and a J.D. degree from Georgetown University in 1980. Mr. Grabell is the President of the foundations of Golden Slipper Club & Charities, a Governor of the Golden Slipper Club & Charities, and trustee of the Abramson Center. Mr. Grabell was recommended to serve on our Board by members of the Board of Directors. Mr. Grabell’s experience with QVC, and his legal and business background, provides him with a unique perspective with respect to television retailing and the legal/regulatory issues it faces.

 

Landel C. Hobbs has served as the Company’s Chairman of the Board since August 2016 and prior to that time served as Vice Chair since 2015. He is the founder and has been Chief Executive Officer of LCH Enterprises LLC, a consulting and investment firm that operates in the broader telecommunications and media space, since 2010. Mr. Hobbs previously served as Chief Operating Officer of Time Warner Cable (“TWC”) from 2005 until the end of 2010 and was Chief Financial Officer of TWC from 2001 until 2005. He served as Vice President of Financial Analysis and Operations Support for all divisions of AOL Time Warner from September 2000 until October 2001. Mr. Hobbs also served in various positions, including Senior Vice President, Controller and Chief Accounting Officer, of Turner Broadcasting System, Inc. from 1993 until 2000. Before joining Turner in 1993, he served as Senior Vice President and Audit Director of Banc One Illinois Corporation and as a Senior Manager with KPMG Peat Marwick. He is currently Chairman of the National 4H Council. He was previously the Chairman of The Dyslexia Resource Trust, Lead Director of Allconnect, Chair and a Director of CSPAN, a Trustee of Women in Cable Television (WICT), and a Broadcasting and Cable Hall of Fame Member. Mr. Hobbs earned a Bachelor of Business Administration from Angelo State University. Mr. Hobbs brings to the Board significant cable and broadcast television expertise which is invaluable to the Company and management when assessing and structuring both cable and satellite distribution and other carriage deals. Mr. Hobbs also has an extensive finance and operations background which benefits the Board with analyzing financial transactions, financial reporting as well as accounting oversight.

Mark K. Holdsworth is currently the co-founder and operating partner of Tennenbaum Capital Partners, LLC, a Los Angeles-based private multi-strategy investment firm with approximately $9 billion of capital under management, a position he has held since 1996. He also serves as the founder of Holdsworth & Co., LLC, a family office focused on investments in real estate, venture capital, common equities and privately-owned businesses. He has extensive experience investing in multiple industries, including technology and media. Mr. Holdsworth also has 20 years of experience serving on boards of directors for companies in a variety of industries, currently serving on the boards of Parsons Corporation, AGY Holding Corp. and Intelinair Corp. He specializes in active management oversight, strategy, mergers and acquisition activity and financing and, as a financial expert, is able to provide knowledgeable insight to implement structures that can be used to accelerate growth and improve financial flexibility. Mr. Holdsworth received a B.A. from Pomona College in Physics, a B.S. (Honors) from California Institute of Technology in Engineering and Applied Science and an M.B.A. from Harvard Business School. Mr. Holdsworth was recommended to serve on our Board by members of the Board of Directors. Mr. Holdsworth provides the Company with finance and capital markets expertise.

Lisa A. Letizio has served as a strategic advisor to LivingHR, Inc., a culture first consulting and search group, since 2014 and as an independent consultant to Allison James Estate & Homes, Inc., a real estate brokerage firm, since 2015. She served as the Chief Human Resources Officer at HSN, Inc. from 1998 to 2014. In that role, Ms. Letizio oversaw the Human Resources teams for all of HSNi, a retail portfolio that encompassed HSN, a leading interactive multichannel retailer, and Cornerstone, a multichannel retailer of lifestyle brands including Frontgate, Garnet Hill and Ballard Designs. Ms. Letizio’s responsibilities at HSNi included talent acquisition and assessment, leadership development, compensation, employee engagement, benefits/wellness, work life programs and community affairs. Prior to joining HSNi, Ms. Letizio was Vice President of Human Resources of The Timberland Company from 1992 to 1998. During her tenure at The Timberland Company, Ms. Letizio built the company’s global human resources function, establishing world-wide pay and benefits systems as well as recruiting top leadership talent across Europe, the Dominican Republic and Puerto Rico. Ms. Letizio is a board member and board secretary of the St. Petersburg Arts Alliance. Ms. Letizio provides the Board with valuable talent acquisition and assessment, leadership development, and compensation experience obtained over her more than 20-year career in the consumer goods and home shopping industries. Her deep experience in these areas provides the Board with strategic and operational leadership and critical insights into human resources and executive compensation issues.

Robert J. Rosenblatt joined the Company in June 2014 as Chairman of the Board. In February 2016, he was appointed Interim Chief Executive Officer and permanent Chief Executive Officer on August 18, 2016. Previously, Mr. Rosenblatt served as Chief Executive Officer of Rosenblatt Consulting, LLC, a private company he formed in 2006, which specializes in helping investment firms determine value in both public and private consumer companies as well as helping retail firms bring their products to market. From 2012 to 2013, Mr. Rosenblatt served as the interim President of ideeli Inc., a members-only e-retailer that sells women's fashion and décor items during limited-time sales. From 2004 to 2006, he was Group President and Chief Operating Officer of Tommy Hilfiger Corp. (then a public company), a worldwide apparel and retail company. He co-managed the process that culminated in the successful sale of Tommy Hilfiger Corp. to Apax Partners in 2006. From 1997 to 2004, Mr. Rosenblatt was an executive at HSN, Inc., a multi-channel retailer and television network specializing in home shopping. He served as Chief Financial Officer from 1997 to 1999, Chief Operating Officer from 2000 to 2001 and President from 2001 to 2004. Previously, from 1983 to 1996, he was an executive at Bloomingdale's, an upscale chain of department stores owned by Macy's Inc., and served as Chief Financial Officer and Vice President of Stores. He currently serves on the board of RetailNext, a provider of technology and analytics solutions to the retail industry. Mr. Rosenblatt also served on the Board of Directors of Newgistics, Inc., I.Predictus, debShops, PepBoys and the Electronic Retailing Association, and was an adjunct professor at Fashion Institute of Technology where he taught entrepreneurial studies. Mr. Rosenblatt holds a BS in Accounting from Brooklyn College. Mr. Rosenblatt provides the Board with substantial home shopping and retail perspectives from his time at HSN and Bloomingdales. In addition, his prior executive management and board experience in publicly-held companies provides the Board with public company accounting and financial reporting expertise, operational expertise and a top-level perspective in organizational management.

 

Fred R. Siegel is owner of Fred Siegel Partners, a consultancy group focused on social change initiatives for corporations and leading non-profits, a position he has held since 2000. Mr. Siegel was Senior Vice President and marketing head for QVC from 1993 to 1998, overseeing all off-air consumer touch-points including all marketing and communications, leading special on-air events, and attracting and securing marquee brand-name vendors, helping QVC become the category-defining brand. After QVC, Mr. Siegel was marketing lead for Excite and Excite @ Home where he oversaw all marketing and communications activities. He is responsible for many Internet firsts including strategic partnerships with television networks, the first large-scale voting event on the web (with the Prime Time Emmys) and the first Online Town Hall meeting with President Clinton. He currently works with multiple organizations such as AARP, Stand Up To Cancer and digital content powerhouse, ATTN, advises early-stage companies including Andreessen Horowitz-backed Honor Home Care, the Emmy award-winning National Geographic series, Years Of Living Dangerously, and is a national Board member for United Healthcare Children’s Foundation. Mr. Siegel has won multiple awards including a Daytime Emmy Award (2011) and numerous advertising awards including Clio and One Show. Mr. Siegel’s experience with QVC, his prior experience at Excite and his current work with multiple high-profile enterprises, provides him with global perspectives and real-time knowledge on marketing, brand development and customer acquisition particularly relevant in the digital retail arena.

Alexander B. Spiro is currently a partner at Quinn Emanuel Urquhart and Sullivan, LLP having served in that capacity since October 2017. His practice area includes nearly every type of litigation, dispute, and investigation across the globe. Prior to that, Mr. Spiro was an attorney at Brafman and Associates in New York City since July 2013. In that position, Mr. Spiro has handled an array of complex litigation and investigations. Prior to his joining Brafman and Associates, from September 2008 to July 2013, Mr. Spiro worked as a Manhattan prosecutor. Mr. Spiro formerly was the director of an autism children’s program at McLean Hospital, Harvard’s psychiatric hospital. Mr. Spiro is a graduate of the Harvard Law School where he remains on the adjunct teaching faculty. He has lectured and written on a variety of subjects related to psychology and the law. Mr. Spiro is also a board member of GlassBridge Enterprises, Inc., having served in that capacity since August 2015. Mr. Spiro’s experience and deep connections in the sports, entertainment, media and celebrity industries provides the Board with insights on consumer trends and opportunities that are relevant in digital retailing.

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Shareholder Communications with the Board of Directors

Persons interested in communicating with the Board are encouraged to contact the Chair of the Board, all outside directors as a group, or an individual director by submitting a letter or letters to the desired recipients in an envelope labeled with “Chair of the Board” or the names of specified directors. This letter should be placed in an envelope and mailed to EVINE Live Inc., 6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433, Attention: Corporate Secretary. The Corporate Secretary will forward the communication to the designated recipient(s) or the Chair of the Board.

Attendance at Shareholder Meetings

The directors are encouraged, but not required, to attend all meetings of our shareholders. All our then-serving directors attended our 2017 Annual Meeting of Shareholders.

 

Composition of the Board

Certain information about our current directors is set forth below (ages are as of April 30, 2018).

 

 

Board Leadership Structure and Risk Oversight

Robert J. Rosenblatt served as the Chair of the Board until he was appointed Chief Executive Officer (“CEO”) on August 18, 2016, at which time Landel C. Hobbs was appointed Chair of the Board. The Chair of the Board and the CEO are currently separate offices. Our Board believes that having separate positions and having an independent director serve as Chair of the Board is the appropriate leadership structure for us and demonstrates our commitment to good corporate governance. The Board retains the right to exercise its discretion in combining or separating the offices of Chair of the Board and Chief Executive Officer if it believes it is in the best interest of the Company and its shareholders, in light of all circumstances at any particular time.

The Company’s management is responsible for risk management on a day-to-day basis and engages annually in a formal Enterprise Risk Management (“ERM”) process. ERM is a process applied in a strategy setting across the Company and is designed to identify and manage potential events or risks that may affect the Company and to provide reasonable assurance regarding the achievement of Company objectives. The Company develops an assessment of major risks facing the Company and mitigation plans as part of its annual strategic planning process, incorporating any new risk treatment strategies into normal business activities. Input gathered from the Board is analyzed and incorporated into the process.

The Board oversees the risk management activities of management directly and through the committees of the Board by discussing with management the policies and practices utilized by management in assessing and managing risks and by providing input on those policies and practices. In general, the Board oversees risk management activities relating to business strategy, strategic transactions, capital allocation, legal and regulatory risk, and operational risks; the Audit and Finance Committees oversee risk management activities related to certain financial risks and the Audit Committee oversees the ERM process; the Human Resources and Compensation Committee (the “HR and Compensation Committee”) oversees risk management activities relating to the Company’s compensation policies and practices and organizational risk; and the Governance Committee oversees risk management activities relating to Board composition and function. Each committee reports to the full Board on a regular basis, including reports with respect to the respective committee’s risk oversight activities as appropriate. Certain key risks and related mitigation plans are also reviewed more in depth throughout the year either by the Board or its committees. Management and the Board regularly review and discuss appropriate strategies to monitor and assess the effectiveness of risk treatment for long-term success.

Director Independence

Ms. Letizio and Messrs. Hobbs, Robinson, Grabell, Holdsworth, Arnold, Siegel and Spiro, constituting a majority of the Board, have been determined to be independent as that term is used in Section 10A of the Exchange Act of 1934 and as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules. Our Board has determined that neither Mr. Rosenblatt, as our Chief Executive Officer, nor Mr. Beers are independent as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules.

Committees of the Board of Directors

On-going committees established and maintained by the Board include the Audit Committee, the HR and Compensation Committee, the Governance Committee, and the Finance Committee.

 

The following table summarizes the current membership of each of our on-going committees:

 

 

(1)

Ms. Letizio served as Chair of the Governance Committee through March 22, 2018.

Audit Committee

The Audit Committee consists of Messrs. Robinson (Chair), Grabell and Hobbs. All members of the Audit Committee are independent as that term is used in Section 10A of the Securities Exchange Act of 1934, as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules and as that term is defined by Section 301 of the Sarbanes-Oxley Act of 2002. The Board has determined that each of Messrs. Robinson, Grabell and Hobbs is an Audit Committee financial expert as defined by the Securities and Exchange Commission’s (“SEC”) regulations.

The Audit Committee is established by the Board for the primary purpose of assisting the Board in overseeing:

•

management’s process for ensuring the integrity of the Company’s financial statements and the Company’s accounting and financial reporting processes and financial statement audits;

•

the Company’s compliance with legal and regulatory requirements;

•

the registered public accounting firm’s (independent auditor’s) qualifications and independence;

•

the performance of the Company’s independent auditor and internal audit function, if applicable; and

•

the Company’s systems of disclosure controls and procedures and internal controls over financial reporting.

The Audit Committee assists the Board in carrying out its oversight responsibilities for our financial reporting process, audit process and internal controls. The role of the Audit Committee is described above and in the Audit Committee charter, which is reviewed annually and can be found on our website at http://investors.evine.com/governance/governance-documents/default.aspx. The Audit Committee charter complies with the standards set forth in SEC and applicable stock exchange regulations.

HR and Compensation Committee

The HR and Compensation Committee consists of Ms. Letizio (Chair) and Messrs. Grabell and Siegel. All members of the HR and Compensation Committee are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules and are outside directors for purposes of Internal Revenue Code Section 162(m). The HR and Compensation Committee charter complies with the standards set forth in Securities and Exchange Commission and applicable stock exchange regulations.

The responsibilities of the HR and Compensation Committee are set forth in the HR and Compensation Committee charter, which is reviewed annually and can be found on our website at http://investors.evine.com/governance/governance-documents/default.aspx.

Among other duties, the HR and Compensation Committee has the responsibility to:

•

establish executive compensation strategy, including base salary, incentive compensation and any other compensation elements and evaluate the strategy in light of the Company’s non-binding advisory say on pay vote;

 

•

assure that all executive officers are compensated in a manner consistent with such strategy, internal considerations, competitive practices and the requirements of regulatory agencies, and that they are not incentivized to take an undue amount of risk;

•

oversee our stock-based incentive plans and approve all grants to executive officers made in connection with those plans;

•

review and approve (i) the components of and total cash compensation for our Chief Executive Officer, and (ii) stock-based grants to our Chief Executive Officer;

•

review and approve any employment agreements or severance arrangements for the Chief Executive Officer or other members of senior management, including change-in-control provisions, plans or agreements;

•

monitor our employee benefit plans and discharge the duties imposed on the committee by the terms of those plans;

•

oversee succession planning for the Chief Executive Officer and other members of the senior executive team;

•

annually review and recommend to the Board cash and equity compensation for members of the Board and its Committees;

•

review and discuss with Company management the Compensation Discussion & Analysis;

•

annually evaluate the performance of the committee and the adequacy of the committee’s charter, and report the evaluation to the Board; and

•

perform other duties or functions deemed appropriate by the Board.

Compensation decisions for the named executive officers (other than the Chief Executive Officer) and the other corporate officers directly reporting to the Chief Executive Officer are made by the HR and Compensation Committee, upon the recommendation of our Chief Executive Officer. For the Chief Executive Officer, the compensation decisions are made by the HR and Compensation Committee. Under its charter, the HR and Compensation Committee has the authority to engage, review and approve the payment of fees to or terminate advisors and consultants as it deems necessary to assist in the fulfillment of its responsibilities.

The HR and Compensation Committee’s meeting agendas are determined by its Chair, with the assistance of the SVP of Human Resources and the Corporate Secretary. The HR and Compensation Committee reports on its actions regarding executive compensation to the Board.

The HR and Compensation Committee is supported by our human resources and legal departments upon request. In addition, the HR and Compensation Committee engaged Frederic W. Cook & Co., Inc. (“Consultant”) in 2017. Consultant is a global human resources consulting firm, hired to assist the HR and Compensation Committee in discharging its responsibilities, which include conducting periodic reviews of the Company’s total compensation program for executive officers. Under a policy established by the HR and Compensation Committee, Consultant only performs work for the HR and Compensation Committee, the Board and other committees of the Board, and has not been retained by or performed work on behalf of our management for other benefits, compensation or recruiting services, or any other purposes. In assessing Consultant’s independence, the HR and Compensation Committee has considered a number of important factors including: the relationships that the Consultant has with the Company, the members of the HR and Compensation Committee and our executive officers, as well as the policies that the Consultant has in place to maintain its independence and objectivity, and has determined that the work performed by Consultant has raised no conflicts of interest.

Governance Committee

The Governance Committee consists of Mr. Spiro (Chair), Ms. Letizio and Messrs. Holdsworth and Siegel. All members of the Governance Committee are independent directors as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The Governance Committee advises and makes recommendations to the Board on all matters concerning the selection of candidates as nominees for election as directors, corporate governance and other matters as specified in the Governance Committee’s charter or as directed by the Board. The responsibilities of the Governance Committee are set forth in the Governance Committee charter, which is reviewed regularly in light of SEC and applicable stock exchange regulations and is available on our website at http://investors.evine.com/governance/governance-documents/default.aspx.

Finance Committee

The Finance Committee consists of Messrs. Hobbs (Chair), Arnold, Beers, Holdsworth and Robinson. The Finance Committee assists the Board with its responsibilities and monitors and provides advice to senior management of the Company with regard to capital raising strategies and activities and exercises such other authority that may be granted to the Finance Committee by the Board on a transaction by transaction basis. The responsibilities of the Finance Committee are set forth in the Finance Committee charter, which is available on our website at http://investors.evine.com/governance/governance-documents/default.aspx.

 

Director Qualifications, Board Diversity and Shareholder Nominations for Directors

The Governance Committee charter describes the attributes we seek in considering director candidates. The Governance Committee will consider persons recommended by shareholders in selecting nominees for election to the Board. The Governance Committee recommends qualified individuals who, if added to the Board, will provide the mix of director characteristics and diverse experiences, perspectives and skills appropriate for our Company. We have determined that a majority of our directors should be independent directors. While the Governance Committee does not have a formal diversity policy, diversity is one of the factors set forth in the Governance Committee’s charter in analyzing the qualifications for directors.

In evaluating potential nominees, the Board considers the person’s integrity, judgment, skill, experience with entities in related industries (i.e., consumer retailing, TV home shopping, TV programming, media, fulfillment, direct response marketing, e-commerce, technology, finance, mergers and acquisitions, and corporate law), public company experience, and commitment to devote the time and attention necessary to fulfill his or her responsibilities to the Company. It also considers the diversity of experience, race, ethnicity, gender and age of the nominees to complement and enhance the other members’ experiences and backgrounds.

Shareholders who wish to suggest qualified candidates should write to: EVINE Live Inc., 6740 Shady Oak Road, Eden Prairie, Minnesota 55344-3433, Attention: Corporate Governance and Nominating Committee, c/o Corporate Secretary. All recommendations should state in detail the qualifications of the person for consideration by the Governance Committee and should be accompanied by an indication of the person’s willingness to serve.

Business Ethics Policies

We have adopted a business ethics policy applicable to all of our directors and employees, including our principal executive officer, principal financial officer, principal accounting officer, controller and other employees performing similar functions. A copy of this business ethics policy is available on our website at http://investors.evine.com/governance/governance-documents/default.aspx. In addition, we have adopted a code of ethics for our Chief Executive Officer and senior financial management; this policy also is available on our website at http://investors.evine.com/governance/governance-documents/default.aspx.

Attendance and Meetings of the Board of Directors and Its Committees

Our business and affairs are managed by the Board, which held nine meetings during fiscal 2017. During fiscal 2017, the Audit Committee held eight meetings; the HR and Compensation Committee held eight meetings; the Governance Committee held six meetings; and, the Finance Committee held nine meetings. During fiscal 2017, none of our directors attended fewer than 75% of the aggregate number of meetings of the Board and the various committees on which he or she served during fiscal 2017.

Compensation Committee Interlocks and Insider Participation

No member of the HR and Compensation Committee is now, or was during the last fiscal year, an officer or employee of our Company or of any of our subsidiaries. None of our executive officers has served on the Board or on the HR and Compensation Committee of any other entity, any of whose executive officers served either on our Board or on our HR and Compensation Committee.

 

EXECUTIVE COMPENSATION

Executive Summary

Business Overview

EVINE Live Inc. is a multiplatform interactive digital commerce company that offers a mix of proprietary, exclusive and name brand merchandise directly to customers in an engaging and informative shopping experience through TV, online and on mobile devices. The Company operates a 24-hour television shopping network, Evine, which is distributed primarily on cable and satellite systems, through which it offers proprietary, exclusive and name brand merchandise in the categories of jewelry & watches; home & consumer electronics; beauty; and fashion & accessories.

2017 Performance

Our compensation structure is based on pay for performance. The following metrics outline our performance in fiscal 2017:

•

Net sales of $648.2 million, a decrease of 2.7% from 2016 fiscal year

•

Gross profit of $235.1 million, a decrease of 2.7% from 2016 fiscal year

•

Gross profit as a percentage of sales was flat to 2016 fiscal year at 36.3%

•

Net income was $0.1 million, an $8.9 million improvement over 2016 fiscal year

•

Adjusted EBITDA† increased 11% over 2016 fiscal year to $18.0 million

•

EPS was $0.00, a $0.15 improvement over 2016 fiscal year

Based on the foregoing results, no cash awards were earned under our annual incentive program for fiscal 2017, and no annual merit increases were made to the base salaries of our named executive officers.

Prior Year Say-on-Pay Results

The Board values the opinions of our shareholders and carefully reviews and considers the outcome of our Say-on-Pay vote, along with other relevant factors, in evaluating the compensation program for the NEOs. In 2017, more than 95% of the votes cast were in favor of our executive compensation. The HR and Compensation Committee devotes time and resources to understanding shareholder feedback and analyzing the executive compensation programs with the assistance of its independent compensation consultant. In evaluating potential changes, the HR and Compensation Committee also takes into consideration market practices and the Company’s overarching compensation philosophy of attracting and retaining exceptional leaders and enabling them to behave like owners. Our current programs are materially the same as the programs approved at our 2017 Annual Meeting. We believe our programs effectively align with the interests of our shareholders.

Compensation Discussion and Analysis

This compensation discussion and analysis is intended to provide an overview of the compensation awarded to, earned by, or paid to our named executive officers for 2017, including the material elements of the compensation paid to our named executive officers as outlined in the compensation tables included in this proxy statement. Our “named executive officers” or “NEOs” for 2017 are:

 

 

(1)

Mr. Peterman ceased serving as an executive officer of the Company on April 16, 2018.

(2)

Mr. Sabatier’s employment with the Company terminated on April 1, 2017.

(3)

Mr. Schramm’s employment with the Company terminated on July 1, 2017.

 

---

^† Adjusted EBITDA is a non-GAAP financial measure. Adjusted EBITDA is defined and reconciled to net income on page 27 and 28 of our Annual Report on Form 10-K for fiscal 2017 filed with the SEC on April 10, 2018.

 

Compensation Objectives and Philosophy

The primary objective of our executive compensation program is to attract and retain exceptional leaders and enable them to behave like owners. When setting executive compensation, we apply a consistent approach for all executive officers and intend that the combination of compensation elements closely aligns the executives’ financial interests with those of our shareholders. The program is primarily designed to:

•

Attract, motivate and retain a highly capable and performance-focused executive team;

•

Promote a culture of employee owners whose financial interests are aligned with those of our shareholders;

•

Pay for performance such that total compensation reflects the individual performance of executives and our Company’s absolute and relative performance;

•

Promote a focus on equity value by tying executive compensation to the long-term enhancement of shareholder value;

•

Permit the HR and Compensation Committee to exercise independent judgment and approval authority with respect to establishing executive compensation programs, performance measures, and awards; and

•

Consider the potential stock dilution, cash flow, tax and reported earnings implications of executive compensation, consistent with the other objectives of the program.

Target total compensation is comprised of an appropriate balance of cash and equity and divided into three core elements: base salary, annual cash incentive compensation, and long-term incentive compensation. In support of our emphasis on significant ownership by executives, the HR and Compensation Committee offers long-term incentive opportunities that encourage stock ownership. Generally, the amount of compensation realizable from prior compensation does not directly impact the level at which future pay opportunities are set. However, when granting equity awards, the HR and Compensation Committee reviews and considers the number of outstanding and previously granted equity awards. In addition to promoting share ownership, our executive compensation objectives and philosophy focus on rewarding performance. This means that shareholder returns along with corporate, operating unit, and individual performance, both short-term and long-term, determine the largest portion of the executive pay opportunity.

Role of the HR and Compensation Committee and Executive Compensation Consultant

The HR and Compensation Committee oversees the administration of the executive compensation program and determines the compensation of our executive officers. The HR and Compensation Committee is solely composed of non-management directors, all of whom meet the independence requirements of applicable Nasdaq rules. To assist the HR and Compensation Committee in discharging its responsibilities, the HR and Compensation Committee engages a Consultant. The Consultant’s role is to develop analyses and competitive information and to provide independent advice to the HR and Compensation Committee related to executive compensation programs.

Process for Determining Executive Compensation

The HR and Compensation Committee reviews executive total compensation levels, including equity grants, during the first quarter of each fiscal year. Our CEO’s target total compensation package is set by the HR and Compensation Committee during an executive session, where the CEO is not present, based on the HR and Compensation Committee’s review of the competitive information prepared by the Consultant and assessment of the CEO’s individual performance in conjunction with the Company’s financial and operating performance. Target total compensation recommendations for other executive officers are made by the CEO and the head of human resources who work closely with the HR and Compensation Committee, after reviewing the executive’s and the Company’s performance in conjunction with the executive’s responsibility and experience when compared to the competitive information prepared by the Consultant. The HR and Compensation Committee then determines the compensation of these executive officers.

Market Data Review

To gain an understanding of current compensation practices and competitive pay levels, we perform a “market check” which reviews each executive officer’s target total compensation in relation to comparably-sized companies based on general industry data derived from several published survey sources. For our most senior executives, we also take into account competitive compensation data for comparable positions from the proxy statements of a selected group of retail, e-commerce, media, and mail order catalog companies. In 2017, the HR and Compensation Committee engaged its Consultant to assist in reviewing our peer group. The companies included in our peer group for 2017 are set forth below.

 

2017 Peer Group

 

 

We use this information as a reference point and to gain a better and more current understanding of prevailing compensation practices. Although the practices of other companies represent useful guidelines, the HR and Compensation Committee does not rely solely on the peer group data in making its individual compensation determinations, nor is this data a material factor in any such determination made by the HR and Compensation Committee. Rather, the HR and Compensation Committee takes into account various other factors such as individual performance, an individual’s primary duties and responsibilities, internal equity and affordability in setting individual executive compensation packages.

Risk Assessment

The HR and Compensation Committee has reviewed the concept of risk as it relates to our compensation programs and does not believe our compensation programs encourage excessive or inappropriate risk. Overall, our internal risk assessment confirmed that our compensation arrangements are low in risk and do not foster undue risk taking because they focus on performance of Company-wide annual goals, including Adjusted EBITDA, that are aligned with the long-term interests of our shareholders and have strong governance and control mechanisms.

Our Executive Compensation Program and Fiscal 2017 Performance

The primary elements of our executive compensation program are designed to be consistent with the compensation objectives described above. These key compensation elements are divided into three main categories which are outlined in the following table. The purpose of each element is provided to demonstrate how each component fits with the overall compensation objectives established by the HR and Compensation Committee, specifically, stock ownership and pay for performance. The fiscal 2017 performance outcomes column describes the result of each element.

 

 

The Summary Compensation Table sets forth the actual base salary earned by each of our NEOs during fiscal 2017. The level of base salary takes into account job responsibilities, Company and individual performance, experience level and market competitiveness. Base salaries are generally reviewed annually in March, with any changes becoming effective in May. Annual adjustments are based on individual performance, performance of the area of responsibility, the Company’s performance, competitiveness versus the external market and budget availability for internal merit increases. No annual merit increases were made to the base salaries of our NEOs for fiscal 2017 due to the failure to meet our internal Company targets for 2016. Mr. Peterman received a salary increase in fiscal 2017 due to his increased responsibilities as Chief Operations Officer of the Company.

 

An annual incentive opportunity is provided to encourage and reward the NEOs for making decisions that improve performance as measured by annual performance measures selected by the Committee. The annual incentive plan is designed to produce sustained shareholder value by establishing a direct link between these performance measures and the incentive compensation. The annual incentive opportunity is established each year as a percentage of an executive’s annual base salary and is targeted at the estimated median of our competitive market with the opportunity to earn more for above-target performance or less for below target performance. The HR and Compensation Committee administers the annual incentive plan in which the NEOs participate.

An annual incentive award is designed to reward achievement of annual financial and individual performance goals in the form of cash bonuses. The Company’s and the NEO’s performance determines the amount, if any, of awards earned. Such awards are based on performance relative to the established target. Targets are established annually for the Company as a whole and are based on our prior and anticipated future performance. For a given year, a payout at 100% of target annual incentive compensation is achieved when Company performance achieves the stated goals. The plan is designed to motivate continuous improvement in order to achieve payouts at or above target over time. Actual incentive payments could range from 50 to 200 percent of the targeted incentive opportunity based on corporate performance and individual performance goals. Performance below a threshold goal level results in no payout under the plan.

For 2017, the HR and Compensation Committee determined that the annual performance bonus for our NEOs would be based on the Company achieving a goal with respect to the Company’s Adjusted EBITDA (the “Pre-Bonus Adjusted EBITDA”). The performance bonus of the NEOs (other than the CEO) were weighted 80%-90% on the Company achieving the Pre-Bonus Adjusted EBITDA goal and 10%-20% on individual performance. If threshold performance of the Pre-Bonus Adjusted EBITDA goal was not achieved, no bonuses would be payable. For our CEO, the annual performance bonus was based entirely on the Company achieving the Pre-Bonus Adjusted EBITDA goal. The HR and Compensation Committee selected the Pre-Bonus Adjusted EBITDA as the financial metric since most executives possess the ability to impact the Pre-Bonus Adjusted EBITDA, and the metric provides a balanced focus on sales and profitability. The target incentive opportunities (expressed as a percentage of base salary) for the NEOs for fiscal 2017 were as follows:

 

 

Included below are the goals at Threshold, Target and Maximum and our actual result for fiscal 2017, reflected in millions of dollars. Because the Company did not meet the threshold goal for fiscal 2017, our NEOs did not receive any payout under the annual incentive plan.

 

 

A key component of an executive officer’s compensation is long-term equity incentive awards, which are critical to focusing our executives on the Company’s long-term growth and creating shareholder value. The long-term equity incentive plan is designed to attract and retain exceptional leaders and enable them to behave like owners. The following is a general description of the vehicles we used in 2017.

Stock Option. A stock option allows the recipient to buy a certain number of shares of our common stock at a pre-determined “exercise price.”  The exercise price is equal to the fair market value on the grant date. Stock options have a ten-year term and vest in three equal annual installments beginning on the first anniversary of the grant date, subject to certain post termination and change of control provisions. Unvested options are generally forfeited upon termination of employment. As a result, options are intended to retain key employees, including the NEOs, and align their interests with shareholders.

 

Restricted Stock Unit (“RSU”). An RSU is a promise to issue shares of our common stock in the future, provided the recipient remains employed with us through the award’s vesting period. The RSUs vest in three equal annual installments beginning on the first anniversary of the grant date, and unvested RSUs are generally forfeited upon termination of employment. As a result, RSUs are intended to retain key employees, including the NEOs, and align their interests with shareholders.

Performance Share Unit (“PSU”). A PSU is a promise to issue shares of our common stock in the future provided the recipient remains employed with us through the award’s vesting period and certain performance conditions are achieved. The PSUs granted in fiscal 2017 vest at the end of a three-year period, if at all, based on the Company’s Relative Total Shareholder Return (“TSR”) versus companies listed in the GICS 255020 - Internet & Catalog Retail Index. The number of shares that may be earned upon vesting of the PSUs ranges from 0% to 150% of the target number of PSUs, based upon the following table:

 

 

(1)   Vesting percentages for performance between Performance Goal data points are based on a linear interpolation.

 

Grant levels of each component of the long-term incentive program may vary from year to year and by participant, based on a variety of factors. The HR and Compensation Committee determines the award opportunity level for each executive officer based upon the individual’s responsibility level and potential within our Company, competitive practices, the number of shares available for grant, the individual’s and Company’s performance and the market price for our common stock.

The Company uses a combination of options, RSUs and PSUs for the long-term incentive (“LTI”) grant. In 2017, the award opportunity levels for each NEO and the mix of options, RSUs and PSUs granted to each NEO are as set forth below.

 

 

Employment Agreement with Robert J. Rosenblatt

On August 18, 2016, the Company entered into an employment agreement with Robert J. Rosenblatt (“Employment Agreement”) that provides for a two-year initial term, followed by automatic one-year renewals. Pursuant to the Employment Agreement, Mr. Rosenblatt’s base salary was set at $750,000 per year, and, provided that certain annual performance goals are met, a cash bonus of $750,000 was payable upon completion of the fiscal year ending January 28, 2017. Thereafter, Mr. Rosenblatt would be entitled to cash bonuses of at least 100% of his base salary if the target performance goals established by the Board are achieved. Mr. Rosenblatt is eligible to participate in the Company’s annual cash incentive plans and programs as are generally provided to the senior executives of the Company and as are in effect from time to time. Pursuant to the Employment Agreement, Mr. Rosenblatt received a long-term incentive equity grant valued at 150% of his base salary, comprised of 50% stock options and 50% PSUs. Specifically, Mr. Rosenblatt was granted options to purchase 375,855 shares of Company common stock, which vest in annual one-third increments starting on March 28, 2017 at an exercise price of $1.60, and 231,799 PSUs which shall be issuable in shares of Company common stock depending on the achievement of certain relative TSR performance goals. Mr. Rosenblatt was also granted 625,000 shares of restricted stock with a fair value of approximately $1,000,000 which vests as follows: one third on the effective date of the Employment Agreement and the other two thirds to vest in two equal parts upon the achievement of certain specified performance goals relating to (i) an increase in stock price and (ii) length-of-service requirements. The vesting of the equity grants to Mr. Rosenblatt pursuant to the Employment Agreement will be accelerated upon Mr. Rosenblatt’s termination of employment with good reason or the Company’s termination of Mr. Rosenblatt without cause within 12 months of a change of control. To assist with Mr. Rosenblatt’s commute to the Company’s headquarters in Eden Prairie, Minnesota, the Employment Agreement also provides that the Company will reimburse Mr. Rosenblatt for his commuting, temporary housing and transportation costs, and will pay an additional amount to make Mr. Rosenblatt whole for taxes on such reimbursement amounts.

 

In the event of a termination of Mr. Rosenblatt’s employment by the Company without cause or by Mr. Rosenblatt with good reason during the term of the Employment Agreement, Mr. Rosenblatt will receive severance benefits consisting of a cash severance payment equal to one and one-half times the sum of Mr. Rosenblatt’s base salary during the 12-month period immediately preceding the termination plus one times his target annual incentive bonus, to be determined based on such base salary. In the event of a termination due to a change in control, the multiple will be increased to two times Mr. Rosenblatt’s base salary during the 12-month period immediately preceding the termination plus two times the greater of the target annual incentive bonus he received for the immediately preceding fiscal year or the target annual incentive bonus determined based on his base salary. The severance will be paid in equal installments or, following a change in control, in a lump sum, subject in each case to a six-month delay to the extent required for compliance with Section 409A of the Internal Revenue Code of 1986, as amended. In addition to severance, Mr. Rosenblatt will also receive: (i) a pro-rated annual cash incentive award for the year of termination to the extent the performance goals are achieved, if the Company does not renew the Employment Agreement or if Mr. Rosenblatt’s employment with the Company terminates as a result of a change of control, (ii) continued group health, dental and life insurance benefits for 18 months (24 months following a change in control) at no cost to Mr. Rosenblatt and (iii) pro-rata vesting of any long-term incentive awards, subject to the achievement of any performance goals.

Clawback Policy

The Company has implemented an executive compensation recovery, or clawback, policy, which covers all officers, providing for recoupment of certain compensation in the event the Company is required to restate its financial statements due to material non-compliance, as a result of misconduct of an executive officer or officers, with any financial reporting requirement under the securities laws. The policy complies with the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Anti-Hedging Policy

The Company has implemented an anti-hedging and pledging policy, which covers all officers and directors, restricting such officers and directors from:

•

Purchasing any financial instrument, or entering into any transaction, that is designed to hedge or offset a decrease in the market value of Company stock (including, but not limited to, prepaid variable forward contracts, equity swaps, collars or exchange funds); or

•

Pledging, hypothecating, or otherwise encumbering shares of Company stock as collateral for indebtedness. This prohibition includes, but is not limited to, holding such shares in a margin account.

Stock Ownership Guidelines for Directors and Executive Officers

Consistent with our ownership philosophy, the Board has established stock ownership guidelines for non-management members of the Board and executive officers. Under the guidelines, non-management directors are required to own equity at a level equal to four times the amount of their annual cash retainer within five years of becoming subject to the guidelines. The guidelines also require that within five years of becoming subject to the guidelines, each executive officer must own equity at a level equal to a specified multiple of his or her annual base salary. The minimum equity ownership levels are four times the annual base salary for our CEO and two times the annual base salary for the other executive officers. Progress toward the stock ownership guidelines is measured once each year at the time of the March Board meeting. Ownership levels are calculated using the market value of our stock each March multiplied by the number of restricted shares and unrestricted shares, plus the value of vested in-the-money options. All directors and officers who have been subject to the ownership guidelines for at least five years comply with the guidelines, and the directors and officers who have been subject to the ownership guidelines for less than five years are continuing to make progress to achieve their stock ownership requirements.

Accounting and Tax Considerations

When establishing pay elements or associated programs, the HR and Compensation Committee reviews projections of the estimated pro forma expense and tax impact of all material elements of the Company’s executive compensation program. Generally, an accounting expense is accrued over the requisite service period of the particular pay element, which in many cases is equal to the performance period, and the Company realizes a tax deduction upon payment to and/or realization by the executive.

 

Compensation Committee Report

The HR and Compensation Committee has discussed and reviewed the Compensation Discussion and Analysis with management. Based upon this review and discussion, the HR and Compensation Committee recommended to the Board that this Compensation Discussion and Analysis be included in this proxy statement.

 

 

Summary Compensation Table

The table below shows all elements of compensation for our NEOs for each of our last three completed fiscal years.

 

 

(1)

Represents base salary paid during fiscal 2015, fiscal 2016, and fiscal 2017, as described above in the section entitled “Compensation Discussion & Analysis Specifics Related to the 2017 Compensation Elements”.

(2)

Each amount represents the grant date fair value of the stock option award made to each individual during the fiscal year as determined pursuant to FASB ASC Topic 718. The assumptions used to calculate the value of the option awards granted in fiscal 2017 are set forth in Note 9, Shareholders’ Equity — Stock-Based Compensation, of the Notes to the Consolidated Financial Statements included in our Annual Report on Form 10-K for fiscal 2017 filed with the SEC on April 10, 2018. Amounts do not reflect compensation actually realized by the NEO.

(3)

Amounts shown represent the grant date fair value of market-based PSUs granted in fiscal 2017 as part of the Company’s long-term incentive program. The number of PSUs earned is based on the Company’s TSR relative to a group of industry peers over a three-year performance measurement period as described in footnote 6 to the Outstanding Equity Awards at Fiscal 2017 Year-End table below. Grant date fair values were determined using a Monte Carlo simulation methodology and are based on the probable outcome of the performance measure and are consistent with the estimate of aggregate compensation cost to be recognized over the performance period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures. The assumptions used to calculate the value of the PSUs are set forth in Note 9, Shareholders Equity —  Stock-Based Compensation, of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for fiscal 2017 filed with the SEC on April 10, 2018. At grant date, the value of the 2017 awards, assuming maximum performance, would be $843,585, $223,081 and $223,081 for Mr. Rosenblatt, Mr. Peterman and Ms. Ostoya, respectively.

(4)

Represents $238,506 of commuting expense and $13,298 of 401(k) company match paid during fiscal 2017.

(5)

Represents $103,737 of commuting expense and $8,283 of 401(k) company match paid during fiscal 2017.

(6)

Represents $117,014 of commuting expense and $4,962 of 401(k) company match paid during fiscal 2017.

(7)

Amounts shown represents the grant date fair value of RSUs awarded on March 27, 2017 as part of the Company’s long-term compensation program. The per share grant date fair value was determined in accordance with FASB ASC Topic 718 and equaled the closing price of the share of our common stock on the date of grant. The dollar amounts shown do not reflect the value of the restricted shares on the day they vest.

(8)

Represents $13,697 of relocation expense and $10,904 of 401(k) company match paid during fiscal 2017.

 

(9)

Represents 401(k) company match paid during fiscal 2017.

(10)

Mr. Sabatier’s employment with the Company terminated on April 1, 2017.

(11)

Represents severance of $338,746 and consulting fees of $120,000 paid in fiscal 2017 in connection with Mr. Sabatier’s employment termination and separation agreement and $1,628 of 401(k) Company match paid during fiscal 2017.

(12)

Mr. Schramm’s employment with the Company terminated on July 1, 2017.

(13)

Represents severance of $275,000 paid in fiscal 2017 in connection with Mr. Schramm’s termination of employment on July 1, 2017 and $4,125 of 401(k) company match paid during fiscal 2017.

 

Grants of Plan-Based Awards in Fiscal 2017

The following table sets forth certain information concerning plan-based awards granted to our NEOs during fiscal 2017.

 

 

(1)

SEC rules require that we disclose the applicable range of estimated payouts denominated in dollars (with the threshold referring to the minimum amount payable for a certain level of performance, the target referring to the amount payable if the specific performance targets are reached and the maximum referring to the maximum payout possible) upon satisfaction of the conditions in question under our non-equity annual incentive plan granted in the fiscal year. Accordingly, the amounts in the columns above reflect possible payouts under awards made to our NEOs under our annual incentive plan described in this proxy statement under “Compensation, Discussion & Analysis.”  The actual payouts for fiscal 2017 were based on our Company achieving an Adjusted EBITDA target, and there were no payouts made to our NEOs for the fiscal 2017 non-equity annual incentive plan.

(2)

SEC rules require that we disclose the applicable range of estimated payouts denominated in shares (with the threshold referring to the minimum amount of payable for a certain level of performance, the target referring to the amount payable if the specific performance targets are reached and the maximum referring to the maximum payout possible) upon satisfaction of the conditions in question under the Company's long-term equity incentive plan granted in the fiscal year. Accordingly, the amounts in the columns above reflect possible share payouts under awards made to our NEOs under our long-term equity incentive plan described in this proxy statement under “Compensation, Discussion & Analysis.”

(3)

Amounts shown equal the grant date fair value of each equity award computed in accordance with FASB ASC Topic 718. For PSUs, the grant date fair values are based on the probable outcome of the performance measure and are consistent with the estimate of aggregate compensation cost to be recognized over the performance period determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures.

(4)

Stock option award granted on March 27, 2017 under the Company’s 2011 Omnibus Incentive Plan (the “2011 Plan”) with an exercise price of $1.33 per share in connection with the Company's annual long-term executive compensation program. This stock option award vests in equal annual installments over a three-year period beginning on the first anniversary date of grant.

(5)

PSUs granted on March 27, 2017 under the 2011 Plan in connection with the Company’s annual long-term executive compensation program. The number of PSUs earned is based on the Company’s total shareholder return relative to a group of industry peers over a three-year performance measurement period as described in footnote 6 to the Outstanding Equity Awards at Fiscal 2017 Year-End table below.

(6)	RSUs granted on March 27, 2017 under the 2011 Plan in connection with the Company’s annual long-term executive compensation program. This award vests in equal annual installments over a three-year period beginning on the first anniversary date of grant.

(7)	Employment with the Company was terminated on April 1, 2017. All unvested stock options and restricted stock units were forfeited upon termination.

(8)	Employment with the Company was terminated on July 1, 2017. All unvested stock options and restricted stock units were forfeited upon termination.

 

Outstanding Equity Awards at Fiscal 2017 Year-End

The following table presents information regarding the outstanding equity awards held at the end of fiscal 2017 by our NEOs, except for Jean-Guillaume Sabatier and Damon E. Schramm who had no outstanding equity awards at fiscal year-end.

 

 

(1)	Market value of unvested or unearned shares is based on the $1.20 closing price of our stock on February 2, 2018, the last trading day prior to the completion of our 2017 fiscal year.

(2)	Amount represents the options granted to Mr. Rosenblatt on June 23, 2014 while holding the position of chairman of the Board. The options vested in full on the date of grant.

(3)	Options and RSUs vest in three equal annual installments beginning on the first anniversary of the date of grant.

(4)

On August 18, 2016, the Company granted market-based PSUs to Mr. Rosenblatt in connection with his appointment as chief executive officer of the Company. The PSUs vest in three tranches. Tranche 1 (one-third of the shares subject to the award) vested on the date of grant. Tranche 2 (one-third) will vest on the date the Company’s average closing stock price for 20 consecutive trading days equals or exceeds $4.00 per share. Tranche 3 (one-third) will vest on the date the Company’s average closing stock price for 20 consecutive trading days equals or exceeds $6.00 per share and the executive has been continuously employed at least two years. The vesting of the second and third tranches can occur any time on or before the tenth anniversary of the date of grant if the executive has been continuously employed through the vesting date.

(5)

The Company granted market-based PSUs to certain executive officers as part of the Company's long-term executive compensation program. The number of PSUs earned will be based on the Company's TSR relative to a group of industry peers over a three-year performance measurement period. The percent of the target number of PSUs that will be earned based on the Company’s TSR percentile rank relative to the peer group is as follows: percentile rank below 33%, 0% vests; percentile rank of 33%, 50% vests; percentile rank of 50%, 100% vests and percentile rank of 100%, 150% vests. Vesting percentages for performance between performance goal data points will be based on a linear interpolation. The number of PSUs reported in the table reflects the threshold number of PSUs granted.

(6)	Options granted on April 18, 2016 in connection with the hiring of Ms. Ostoya. These options vested on the date of grant.

(7)

On October 3, 2012, the Company granted non-qualified market-based stock options to its executive officers as part of the Company's long-term executive compensation program. The options were granted with an exercise price of $4.00 and each option would become exercisable in three tranches, as follows, on the dates when the Company's average closing stock price for 20 consecutive trading days equals or exceeds the following prices: Tranche 1 (50% of the shares) at $6.00 per share; Tranche 2 (25%) at $8.00 per share; and Tranche 3 (25%) at $10.00 per share. On August 14, 2013, 50% of this stock option grant (Tranche 1) vested. The second and third tranches expired unvested on October 3, 2017 and were forfeited.

 

Option Exercises and Stock Vested

The table below shows information regarding stock options exercised and restricted stock vested during fiscal 2017.

 

 

(1)

Represents the aggregate dollar amount realized upon exercise equal to the difference between the market price of the underlying securities at exercise and the exercise price of the options.

(2)

Represents the market value of the common stock on the date of vesting.

All Other Compensation

Retirement Benefits

The Company’s NEOs may voluntarily elect to participate in the Company’s 401(k) plan. The Company currently provides a contribution match of $0.50 for every $1.00 contributed by eligible participants up to a maximum of 6% of eligible compensation. Matching contributions are contributed to the plan on a per pay period basis.

We do not provide a defined benefit plan to our NEOs or any of our other executive officers.

Nonqualified Deferred Compensation

We currently do not provide any nonqualified deferred compensation plans to our NEOs or other executive officers.

Health and Other Benefits

We provide several benefit plan options, such as medical insurance, dental insurance, life insurance, short term disability insurance and long-term disability insurance. All full-time team members, including NEOs, are eligible for these benefits plans. These benefits are provided to enable us to attract and retain talent and are comparable to those provided by the companies in our peer group. All benefits plans are reviewed periodically with the HR and Compensation Committee.

In fiscal 2017, commuting benefits and relocation benefits were offered to certain NEOs. The benefits offered were consistent with our policy for eligible relocating and commuting expenses, which are benefits that were also offered to other eligible team members.

Severance Agreements and Severance Plan

Employment Agreement with Robert J. Rosenblatt

Under the terms of Mr. Rosenblatt’s Executive Employment Agreement (“Employment Agreement”), if Mr. Rosenblatt’s employment terminates during the term of the Employment Agreement by the Company without cause or by Mr. Rosenblatt with good reason, Mr. Rosenblatt will receive severance benefits consisting of a cash severance payment equal to one and one-half times the sum of his base salary during the 12-month period immediately preceding the termination plus one times his target annual incentive bonus, to be determined based on such base salary. In the event of a termination due to a change in control, the multiple will be increased to two times Mr. Rosenblatt’s base salary during the 12-month period immediately preceding the termination plus two times the greater of the target annual incentive bonus he received for the immediately preceding fiscal year or the target annual incentive bonus determined based on his base salary. In addition to severance, Mr. Rosenblatt will also receive: (i) a pro-rated annual cash incentive award to the extent the performance goals are achieved, if the Company does not renew the Employment Agreement or if Mr. Rosenblatt’s employment with the Company terminates as a result of a change of control, (ii) continued group health, dental and life insurance benefits for 18 months (24 months following a change in control) at no cost to Mr. Rosenblatt and (iii) pro-rata vesting of any long-term incentive awards, subject to the achievement of any performance goals.

 

Executives’ Severance Benefit Plan

The Company has also adopted the EVINE Live Inc. Executives’ Severance Benefit Plan (“Plan”) to provide certain severance benefits to executive officers and designated employees (“Executives”). Because Mr. Rosenblatt has a separate agreement providing for severance benefits as described under “Employment Agreement with Robert J. Rosenblatt” above, Mr. Rosenblatt is not entitled to benefits under the Plan. Under the terms of the Plan, if an Executive’s employment is terminated by the Company without “Cause” or by the Executive for “Good Reason” and no Change in Control has occurred, the Executive will receive the following:

 

 

If within a one-year period (the “Benefit Period”) commencing on the date of a Change in Control (as defined in the Plan), Executive’s employment is terminated by the Company without “Cause” or by the Executive for “Good Reason,” the Executive will be entitled to benefits under the Plan as set forth in the table below. In addition, an Executive who was a participant in the Plan on the date of the Change in Control will be entitled to benefits under the Plan if the Executive’s employment is terminated by the Company during the Benefit Period or the immediately preceding six months.

 

 

The Executive will also be entitled to reimbursement for a portion of the premium amount for COBRA coverage equal to the amount paid by other similarly situated Executives who have not been terminated and who receive similar group, health, dental and life insurance benefits. The Company shall provide such reimbursement for a period of eighteen months for Tier 1 Executives and fifteen months for Tier II Executives after the Executive’s employment terminates, subject to the Executive’s timely payment of his or her share of the applicable premiums. All severance pay or benefits are conditioned upon the applicable Executive’s execution of an effective release and his or her compliance with applicable covenants under the Plan (including non-solicitation, non-disparagement, confidentiality and non-use covenants).

The Plan defines “Cause” as what the term is expressly defined to mean in a then-effective written agreement between an Executive and the Company or, in the absence of any such then-effective agreement or definition, as (i) a material act of fraud which results in or is intended to result in an Executive’s personal enrichment at the expense of Company, including theft or embezzlement from the Company; (ii) public conduct by an Executive that is materially detrimental to the reputation of the Company; (iii) a material violation by an Executive of any written Company policy, regulation or practice; (iv) the willful or grossly negligent failure to adequately perform the duties of an Executive’s position to the material detriment of the Company; (v) the commission of conduct constituting a felony; (vi) a material breach by an Executive of any of the terms and conditions of an agreement with the Company; or (vii) the Executive continues to materially fail to perform the duties associated with Executive’s employment after being notified of such failure and given a reasonable opportunity to cure such failure.

 

“Good Reason” is defined in the Plan as, without an Executive’s written consent, (i) an adverse and material change in the Executive’s status, position or responsibilities as compared to the Executive’s status, position or responsibilities as in effect prior to such change; (ii) a material reduction in the amount of either the Executive’s annual base salary or target annual incentive program opportunity as in effect on the date she or he became a participant in the Plan, or as the same may be increased from time to time during the term of the Executive’s participation in this Plan; (iii) the failure to provide or continue in effect materially similar compensation and benefits, in accordance with the plans, practices, policies and programs of the Company in effect for the Executive at any time during the 120-day period immediately preceding the Change in Control or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company; (iv) the failure of any successor or assign of the Company to assume and expressly agree to perform the obligations under the Plan; (v) any purported termination of the Executive’s employment which is not effected in accordance with the applicable provisions of the Plan; and (vi) any request by the Company that the Executive participate in an unlawful act.

Potential Payments upon Termination, Non-Change in Control and After Change of Control

In the event an NEO’s employment terminated on February 3, 2018 (the last day of our last completed fiscal year) and the NEO was entitled to a severance payment, the named executive would have realized the payments set forth below.

 

 

(1)

Reflects the actual severance received upon termination of employment during fiscal 2017.

Additional Potential Payments for Accelerated Equity Awards Upon Change in Control

Under the terms of our 2011 Plan, equity awards will accelerate in full upon a change in control involving a corporate transaction (as defined in the 2011 Plan) if: (1) such awards are not continued, assumed or replaced or (2) such awards are continued, assumed or replaced and the individual’s employment with the Company is terminated without cause within one year of the corporate transaction.  For a change in control not involving a corporate transaction, the 2011 Plan provides the HR and Compensation Committee with discretion to accelerate vesting of outstanding equity awards. Pursuant to the terms of the PSU award agreements, in the event of either type of change of control, the number of units that will accelerate will be based on actual performance through the date of the change in control or termination of employment, as applicable. Under our 2004 Omnibus Stock Plan, accelerated vesting of equity awards is mandatory upon a change in control of the Board that is not approved by the then-current Board.

 

If any such accelerated vesting occurred on February 3, 2018 (the last day of our fiscal year), then each of our NEOs serving on such date would have received the following payments with respect to their outstanding equity awards:

 

 

(1)

Market value of unvested shares is based on the $1.20 closing price of our stock on February 2, 2018, the last day markets were open during our 2017 fiscal year.

CEO Pay Ratio

We are providing the following information about the relationship of the annual total compensation of our employees and the annual total compensation of Robert J. Rosenblatt, our Chief Executive Officer (our “CEO”). For 2017, our last completed fiscal year:

•

the median of the annual total compensation of all employees of our company (other than our CEO) was $27,522; and

•

the annual total compensation of our CEO, as reported in the Summary Compensation Table included on page 16 of this proxy statement, was $2,154,354.

Based on this information for fiscal year 2017, we reasonably estimate that the ratio of our CEO’s annual total compensation to the annual total compensation of our median employee was 78:1. Our pay ratio estimate has been calculated in a manner consistent with Item 402(u) of Regulation S-K.

We identified our median employee based on the total compensation actually paid during fiscal year 2017 to all 1,248 members of our workforce (including full-time, part-time and temporary employees as well as certain independent contractors) other than our CEO who were employed on January 3, 2018. For purposes of determining the total compensation actually paid, we included: the amount of base salary the employee received during the year, and the amount of any cash incentives paid to the employee in the year (which include annual cash incentives that are generally paid in April for performance during the prior fiscal year) and the value of any equity grants that vested during the year based on the value of the shares on the date of vesting. We did not include any adjustments for the annualization of pay for any employees who were employed by us for only part of the year. Once we identified our median employee, we then determined that employee’s total compensation, including any perquisites and other benefits, in the same manner that we determine the total compensation of our NEOs for purposes of the Summary Compensation Table disclosed above.

PROPOSAL NO. 2

ADVISORY VOTE ON EXECUTIVE COMPENSATION

Proposal No. 2 is a proposal to approve, on an advisory basis, the 2017 compensation of the Company’s named executive officers as disclosed in this proxy statement.

Proposal No. 2 will be considered approved by the Company’s shareholders if the number of votes cast “For” Proposal No. 2 exceeds the number of votes cast “Against” Proposal No. 2. Shareholders may vote “FOR” or “AGAINST,” or may “ABSTAIN” with respect to, Proposal No. 2.

In accordance with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Section 14A of the Securities and Exchange Act of 1934, as amended, we are providing our shareholders the opportunity to vote on a non-binding, advisory resolution to approve the 2017 compensation of our named executive officers.

 

Our compensation philosophy is described in the Compensation Discussion and Analysis contained in this proxy statement. Shareholders are urged to read the Compensation Discussion and Analysis which also discusses how our compensation policies and procedures implement our compensation philosophy, as well as the Summary Compensation Table and other related tables and narrative disclosures which describe the compensation of our named executive officers set forth under the caption “Executive Compensation” above. The HR and Compensation Committee and the Board believe the policies and procedures articulated in the Compensation Discussion and Analysis are effective in implementing our compensation philosophy and in achieving its goals and that the compensation of our executive officers in 2017 reflects and supports these compensation policies and procedures.

Shareholders are being asked to vote on the following resolution:

RESOLVED, that the shareholders of EVINE Live Inc. (the “Company”) approve, on an advisory basis, the compensation of the Company’s named executive officers as described in the Compensation Discussion and Analysis, compensation tables, and related disclosures contained in the section of the proxy statement for the 2018 Annual Meeting of Shareholders captioned “Executive Compensation.”

Although this advisory vote is not binding on our Board, the Board and the HR and Compensation Committee will take into account the results of the vote when structuring our executive compensation programs. We currently intend to hold an annual non-binding advisory vote to approve our named executive officer compensation. Our next advisory vote will occur at our 2019 Annual Meeting of Shareholders.

THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR PROPOSAL NO. 2 TO APPROVE THE 2017 COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

DIRECTOR COMPENSATION FOR FISCAL 2017

We use a combination of cash and stock-based compensation to attract and retain qualified Board members. In setting director compensation, we consider the significant amount of time that directors spend in fulfilling their duties as directors, committee members and chairs. The HR and Compensation Committee has in the past received proxy and survey data and analysis completed by its Consultant relative to director compensation and will continue to review and update this information as appropriate in the future. The HR and Compensation Committee generally makes recommendations to the Board as to director compensation issues at its Board meeting held following the Annual Meeting of Shareholders.

In determining the director compensation structure to be utilized in 2017, the HR and Compensation Committee was advised on director compensation design matters by its Consultant. In particular, the HR and Compensation Committee sought recommendations regarding mechanisms to achieve certain design goals, including administrative simplicity, equity across board membership, recognition of leadership on the Board and Board Committees and similar objectives. Additionally, the HR and Compensation Committee sought input on how to achieve these objectives without incremental cost to the Company. After analysis of design alternatives, the HR and Compensation Committee recommended and the Board approved amendments to the director compensation structure that lowered the overall compensation provided to directors and streamlined the compensation approach.

The following table highlights the material elements of our non-employee director compensation program.

 

 

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(1)

Cash retainers are payable on a quarterly basis in arrears promptly following the end of each fiscal quarter, and subject to pro rata adjustment if the director did not serve the entire quarter.

(2)

Effective on June 14, 2017, the supplemental annual retainer fees for the Chair and Vice Chair were deemed to be in lieu of any additional committee retainer fees.

(3)

Annual equity award vests in full one-year after the grant date (typically the annual meeting date).

 

All directors are reimbursed for their reasonable out-of-pocket expenses incurred in connection with their service, including those incurred in attending meetings of the Board and committees. Directors who serve on special committees of the Board which are established from time to time may receive additional compensation as determined by the Board.

The following table shows information concerning compensation provided to each of our non-employee directors for services provided as a director during fiscal 2017. Mr. Spiro is not shown in the below table because his service began after the close of fiscal 2017.

 

 

(1)

Amounts reported represent 100% of the grant date fair value of the grant of 59,090 RSUs to each of the directors. The valuation of these awards, in accordance with FASB Topic 718, is based on the closing price of our common stock on June 14, 2017, the date of grant. These shares are restricted and vest in full on the day before our 2018 Annual Meeting, currently expected to be June 13, 2018.  For Mr. Arnold, the amount also includes 100% of the grant date fair value of 7,096 RSUs granted to him upon his appointment as director on April 17, 2017, which vested in full on June 13, 2017.

PROPOSAL NO. 3

APPROVE THE AMENDMENT TO THE COMPANY’S 2011 OMNIBUS INCENTIVE PLAN

TO INCREASE THE NUMBER OF SHARES OF OUR COMMON STOCK AUTHORIZED

FOR AWARDS FROM 9,500,000 TO 13,000,000

Proposal No. 3 is to approve the amendment to the Company’s 2011 Omnibus Incentive Plan to increase the number of shares of our common stock authorized for awards from 9,500,000 to 13,000,000.

General

The Company’s 2011 Omnibus Incentive Plan (the “2011 Plan”) became effective on June 15, 2011 upon its approval by our shareholders. As originally adopted, the Plan authorized the issuance of up to 3,000,000 shares of our common stock. On June 19, 2013, the shareholders approved an amendment to the 2011 Plan to increase the number of shares issuable under the 2011 Plan to 6,000,000, and on June 22, 2016, the shareholders approved an amendment to the 2011 Plan to increase the number of shares issuable under the 2011 Plan to 9,500,000. As of April 20, 2018, there were estimated to be approximately 272,000 shares of our common stock remaining available for future awards under the 2011 Plan.

Because of the importance we attach to providing competitive levels of equity-based compensation to our employees, and in light of our pattern of share usage during recent years, we believe that the shares remaining under the 2011 Plan will be insufficient to continue making awards. As a result, on April 23, 2018, our human resources and compensation committee (the “Compensation Committee”) recommended and the Board approved an amendment to our 2011 Plan, subject to the approval of the Company’s shareholders, to increase the number of shares of our common stock authorized for issuance under the 2011 Plan from 9,500,000 to 13,000,000. The Company believes that an increase in the number of shares available for grant under the 2011 Plan ensures that the Company can continue to grant stock options or other equity-based awards to attract and retain talented directors and key employees. The Company further believes that the granting of stock options or other equity-based awards to directors and key employees links the personal interests of such directors and key employees with the Company’s shareholders.

The shareholders are being asked to approve the increase in the number of shares of common stock reserved for issuance under the 2011 Plan from 9,500,000 to 13,000,000 to provide the Company the shares needed to attract, retain, and incentivize key contributors.