SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.__)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PetMed Express, Inc.
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
[LOGO] 1-800-PetMeds
PETMED EXPRESS, INC. PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 6, 2004
TO THE OWNERS OF COMMON STOCK
OF PETMED EXPRESS, INC.
The Annual Meeting of Stockholders of PetMed Express, Inc.
(the "Company") will be held on Friday, August 6, 2004, at 1:00
p.m. at the Company's principal place of business, 1441 S.W. 29th
Avenue, Pompano Beach, FL 33069. The purposes of the meeting
are:
1. To elect six Directors,
2. To ratify the appointment of Goldstein Golub Kessler LLP
as independent auditors of the Company to serve for the
2005 fiscal year, and
3. To transact any other business as may properly come
before the meeting.
These items are described in this proxy statement.
Only stockholders of record at the close of business on
Tuesday, June 22, 2004, the record date, are entitled to notice
of and to vote at the annual meeting. Each stockholder of record
on the record date is entitled to one vote for each share of
Common Stock held, except in regard to the election of directors,
for which there will be cumulative voting as described under the
heading "Election of Directors." On June 22, 2004, there were
22,054,890 shares of Common Stock issued and outstanding.
A list of stockholders entitled to vote will be available for
examination for ten days prior to the annual meeting, during
normal business hours, at the Company's principal place of
business at 1441 S.W. 29th Avenue, Pompano Beach, FL 33069. This
list will also be available to stockholders at the annual
meeting.
I would like to extend a personal invitation for you to
join us at our annual meeting. Your vote is important to us and
to our business. I encourage you to sign and return your proxy
card prior to the meeting, so that your shares will be
represented and voted at the meeting even if you cannot attend.
If you attend, you may withdraw your proxy and vote in person.
This proxy statement and our 2004 Annual Report to
Stockholders on Form 10-K are being distributed on or about June
30, 2004.
By Order of the Board of Directors,
MENDERES AKDAG
Chief Executive Officer and Director
Pompano Beach, Florida
June 30, 2004
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING 1
ITEM 1 - ELECTION OF DIRECTORS 3
ITEM 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT 3
AUDITORS
DIRECTORS AND EXECUTIVE OFFICERS 3
BOARD GOVERNANCE AND OPERATIONS 5
Corporate Code of Business Conduct and Ethics 5
Policy with Regard to the Consideration of Director
Candidate Recommendations by our Stockholders 5
Stockholder Communications with the Board 5
Meetings of the Board of Directors 5
Committees of the Board of Directors 6
REPORT OF AUDIT COMMITTEE 7
PRINCIPAL ACCOUNTANT FEES AND SERVICES 8
Pre-Approval Policy for Services of Independent 8
Auditor
10
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND
MANAGEMENT
Section 16(a) Beneficial Ownership Reporting 10
Compliance
11
REPORT OF THE COMPENSATION COMMITTEE
EXECUTIVE COMPENSATION 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 14
PERFORMANCE GRAPH 14
OTHER MATTERS 15
APPENDIX A - CORPORATE CODE OF BUSINESS CONDUCT AND ETHICS 16
APPENDIX B - AUDIT COMMITTEE CHARTER 18
APPENDIX C - COMPENSATION COMMITTEE CHARTER 21
APPENDIX D - CORPORATE GOVERNANCE AND NOMINATING COMMITTEE 23
CHARTER
QUESTIONS AND ANSWERS
ABOUT THE MEETING AND VOTING
What am I voting on?
* To elect six directors to our Board of Directors (Menderes
Akdag, Frank J. Formica, Gian Fulgoni, Ronald J. Korn, Marc
A. Puleo, M.D., Robert C. Schweitzer).
* To ratify the appointment of Goldstein Golub Kessler LLP as
auditors.
What is a proxy?
It is your legal designation of another person to vote the
stock you own. That other person is called a proxy. If you
designate someone as your proxy in a written document, that
document also is called a proxy or a proxy card. We have
designated Bruce S. Rosenbloom, our Chief Financial Officer and
Alison Berges, our General Counsel and Corporate Secretary, as
proxies for the 2004 Annual Meeting of Stockholders.
How will my proxy vote my shares?
Your proxy will vote according to your instructions. If you
complete your proxy instructions but do not indicate your vote on
one or all of the business matters, your proxy will vote "FOR"
these items. Also, your proxy is authorized to vote on any other
business that properly comes before the annual meeting in
accordance with the recommendation of our Board of Directors.
Why did I receive this proxy statement?
Our Board of Directors is soliciting your proxy to vote at the
annual meeting because you were a stockholder of record at the
close of business on June 22, 2004, the record date, and are
entitled to vote at the meeting. This proxy statement and the
2004 Annual Report to Stockholders on Form 10-K, along with
either a proxy card or a voting instruction card, are being
mailed to stockholders beginning on or about June 30, 2004. This
proxy statement summarizes the information you need to know to
vote at the annual meeting. You do not need to attend the annual
meeting to vote your shares.
What is the difference between holding shares as a stockholder of
record and as a beneficial owner?
If your shares are registered directly in your name with our
transfer agent, Florida Atlantic Stock Transfer, Inc., you are
considered, with respect to those shares, the "stockholder of
record." The proxy statement, annual report and proxy card have
been sent directly to you by us.
If your shares are held in a stock brokerage account by a bank
or other nominee, you are considered the "beneficial owner" of
shares held in the "street name." The proxy statement and annual
report have been forwarded to you by your broker, bank or other
nominee who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the
right to direct your broker, bank or other nominee on how to vote
your shares by using the voting instruction card included in the
mailing or by following their instructions for voting.
How do I vote?
If your shares are held in the street name, through a broker,
bank or other nominee, that institution will send you separate
instructions describing the procedure for voting your shares.
Stockholders of record can vote as follows:
* By Mail: Stockholders should sign, date and return their
proxy cards in the pre-addressed, postage-paid envelope that
is provided.
* At the Meeting: If you attend the annual meeting, you may
vote in person by ballot, even if you have previously
returned a proxy card.
Who is entitled to vote and how many votes do they have?
Holders of our common stock as of the close of business on
June 22, 2004, the record date, are entitled to vote at the
annual meeting. Each share of our Common Stock is entitled to
one vote. As of the record date, 22,054,890 shares of our Common
Stock were outstanding and entitled to vote at the annual
meeting.
1
May I change my vote after I return my proxy card?
Yes, you may change your vote at any time before your shares
are voted at the annual meeting by:
* Notifying our Corporate Secretary, in writing at PetMed
Express, Inc., 1441 S.W. 29th Avenue, Pompano Beach, FL
33069 that you are revoking your proxy;
* Executing and delivering a later dated proxy card; or
* Voting in person at the annual meeting.
However, if you have shares held through a brokerage firm,
bank or other custodian, you may revoke your instructions only by
informing the custodian in accordance with any procedures it has
established.
What is a quorum of stockholders and what vote is required to
approve each item?
Shares representing the majority of the total outstanding
votes present or represented by proxy constitute a quorum. If
you vote or return a proxy card, your shares will be considered
part of the quorum. The affirmative vote of a majority of votes
cast is required to approve each item.
How are abstentions and broker non-votes counted?
Abstentions and broker non-votes will not be included in vote
totals and will not affect the outcome of the vote. With respect
to the election of directors, votes withheld will be treated as
shares present for purposes of determining a quorum but are not
counted as votes cast on any matter to which they relate.
Who will count the votes?
A representative of The Altman Group, a company contracted by
us to assist the Company in the tabulation of proxies, and our
Corporate Secretary and General Counsel, Alison Berges, will
tabulate the votes and act as inspector of election.
What happens if a nominee for director is unable to serve as a
director?
If any of the nominees becomes unavailable for election, which
we do not expect, votes will be cast for such substitute nominee
or nominees as may be designated by our Board of Directors,
unless our Board of Directors reduces the number of directors.
Under the policies of our Board of Directors, directors are
expected to attend regular board meetings, board committee
meetings and our annual stockholders meeting.
How do I get an admission card to attend the annual meeting?
If you are a stockholder of record, your admission card is
attached to your proxy card. You will need to bring it with you
to the meeting. If you own shares in the street name, you will
need to ask your broker or bank for an admission card in the form
of a legal proxy. You will need to bring the legal proxy with
you to the meeting. If you do not receive the legal proxy in
time or you want to attend the meeting but not vote in person,
bring your most recent brokerage statement with you to the
meeting. We can use that to verify your ownership of Common
Stock and admit you to the meeting; however you will not be able
to vote your shares at the meeting without a legal proxy. Please
note that if you own shares in the street name and you request a
legal proxy, any previously executed proxy will be revoked, and
your vote will not be counted unless you appear at the meeting
and vote in person.
You will also need to bring a photo ID to gain admission.
Who is soliciting my proxy and who pays the cost?
PetMed Express, Inc. and the Board of Directors are soliciting
your proxy. The cost of soliciting proxies will be borne by the
Company. PetMed Express, Inc. will also reimburse brokerage
firms, banks and other custodians for their reasonable out-of-
pocket expenses for forwarding these proxy materials to you. Our
directors, officers and employees may also solicit proxies by
mail, telephone and personal contact. They will not receive any
additional compensation for these activities.
When are the stockholder proposals due for next year's annual
meeting?
Proposals that stockholders wish to be included in next year's
Proxy Statement for the annual meeting to be held in 2005 must be
received at the Company's principal place of business at 1441
S.W. 29th Avenue, Pompano Beach, FL 33069, addressed to the
Corporate Secretary's attention, no later than March 15, 2005.
2
Can different stockholders sharing the same address receive only
one Annual Report and Proxy Statement?
Yes. The Securities and Exchange Commission permits companies
and intermediaries, such as a brokerage firm or a bank, to
satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more security holders sharing the
same address by delivering only one proxy statement and annual
report to that address. This process which is commonly referred
to as "householding" can effectively reduce our printing and
postage costs. Under householding, each stockholder would
continue to receive a separate proxy card or voting instruction
card.
Certain of our stockholders whose shares are held in the
street name and who have consented to householding will receive
only one set of our annual meeting materials per household this
year. If your household received a single set of our annual
meeting materials this year, you can request to receive
additional copies of these materials by calling or writing your
broker, bank or other nominee. If you own your shares in the
street name, you can request householding by calling or writing
your broker, bank or other nominee.
ITEM 1 - ELECTION OF DIRECTORS
The Board of Directors unanimously recommends a vote "FOR" the
election of the following directors:
Menderes Akdag, Frank J. Formica, Gian Fulgoni, Ronald J.
Korn, Marc Puleo, M.D. and Robert C. Schweitzer.
Our Board of Directors currently has six members, all of whom
are standing for re-election at this year's annual meeting. If
elected the directors will serve until the next annual meeting of
stockholders or until the director is succeeded by another
director who has been elected.
Each of the nominated directors has agreed to serve if
elected. However, if for some reason one or more of them is
unable to accept nomination, or election, proxies will be voted
for the election of a nominee(s) designated by our Board of
Directors. Biographical information for each of the nominees is
presented below.
Stockholders have cumulative voting rights with respect to
election of directors. Under cumulative voting, each stockholder
is entitled to the same number of votes per share as the number
of directors to be elected (or, for purposes of this election,
six votes per share). A stockholder may cast all such votes for a
single nominee or distribute them among the nominees, as he or
she wishes, either by so marking the ballot at the meeting or by
specific voting instructions sent to the Company with a signed
proxy. In connection with the solicitation of proxies,
discretionary authority to cumulate votes is being solicited.
ITEM 2 - RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors recommends a vote "FOR" the
ratification of the appointment of Goldstein Golub Kessler LLP as
independent auditors.
The Audit Committee has appointed and approved Goldstein Golub
Kessler LLP to audit our fiscal year 2005 consolidated financial
statements. Representatives of the firm will be available at the
annual meeting to make a statement, if they choose, and to answer
any questions you may have.
DIRECTORS AND EXECUTIVE OFFICERS
MENDERES AKDAG, age 43, was appointed Chief Executive Officer on
March 16, 2001. Prior to joining PetMed Express, from November
2000 until March 2001, Mr. Akdag served as Chief Executive
Officer of International Cosmetics Marketing Co. d/b/a Beverly
Sassoon & Co., a publicly held (PS:SASN) direct sales company
distributing skin care and nutritional products. From May 1991
until August 2000, Mr. Akdag was employed by Lens Express, Inc.,
a direct sales company distributing replacement contact lenses,
serving as its President from May 1996 until August 2000, Chief
Executive Officer and a member of the Board of Directors from
August 1992 until May 1996, and Chief Financial Officer and a
member of the Board of Directors from May 1991 until August 1992.
On December 14, 1998, Netel Inc., a corporation in which Mr.
Akdag served as a member of the Board of Directors, filed a
Petition for Chapter 11 bankruptcy in the United States
Bankruptcy Court Southern District of Florida. The proceeding
was styled IN RE: NETEL, INC., CASE NO.98-28929-BKC-PGH. On July
19, 1999, the Bankruptcy Court entered an Order Confirming an
Amended Chapter 11 Plan. On December 21, 1999, the Bankruptcy
Court entered a Final Decree, Discharge of Trustee, and closed
the case. Mr. Akdag holds a Bachelor of Science degree in
Business Administration with a major in finance from the
University of Florida.
3
FRANK J. FORMICA, age 60, has served as a member of our Board of
Directors since August 11, 2003. Mr. Formica has served as a
legal consultant and expert in corporate securities and
securities industry litigation and arbitration cases since 1999.
From 1969 until 1999, Mr. Formica held various positions with the
National Association of Securities Dealers ("NASD"), including
Director of the NASD's Congressional and State Liaison
Department, Director of the Corporate Finance Department, and
Vice President and Deputy General Counsel. Mr. Formica received
his Juris Doctor degree from the Washington College of Law at
American University and an undergraduate degree from Ohio
University. He is a member of the New York State Bar.
GIAN FULGONI, age 56, has served as a member of our Board of
Directors since November 14, 2002. Mr. Fulgoni has been the
Executive Chairman of ComScore Networks, Inc. since 1999. From
1981 until 1998, Mr. Fulgoni served as President and Chief
Executive Officer of Information Resources, Inc. (NASDAQ: IRIC).
He was a member of our Board of Directors from August 1999
through November 2000. Mr. Fulgoni served on the Board of
Directors of Platinum Technology, Inc. from 1990 to 1999, U.S.
Robotics, Inc. from 1991 to 1994, and Yesmail.com, Inc. in 1999.
Educated in the United Kingdom, Mr. Fulgoni holds a Masters
degree in Marketing from the University of Lancaster and a
Bachelor of Science degree in Physics from the University of
Manchester.
RONALD J. KORN, age 64, has served as a member of our Board of
Directors since November 14, 2002. Mr. Korn has been the
President of Ronald Korn Consulting, a business consulting firm,
since 1991. He served as the Managing Partner of KPMG, LLP's
Miami office from 1985 to 1991. Mr. Korn held various positions
including Partner with KPMG, an international accounting firm,
from 1961 until 1991. He has served as a Director, Chairman of
the Audit Committee, and member of the Loan Committee of Horizon
Bank, FSB since 1999. He has served as a Director and Chairman of
the Audit Committee of Ocwen Financial Corporation (NYSE:OCN) and
Ocwen Federal Bank since July 2003. Mr. Korn previously served
as a Director and Chairman of the Audit Committee of Vacation
Break U.S.A., Inc. and Magicworks Entertainment Corporation, a
Director of TOUSA Homes, Inc. (formerly Engle Homes, Inc.), and
Non-Executive Chairman of Carole Korn Interiors, Inc. Mr. Korn
holds a Juris Doctor degree from the New York University Law
School and a Bachelor of Science degree in Economics from the
University of Pennsylvania, Wharton School.
MARC PULEO, M.D., age 41, has served as President and Chairman of
our Board of Directors since our inception in January 1996. From
January 1996 until March 2001, Dr. Puleo served as our Chief
Executive Officer, and from January 1996 until May 2001, Dr.
Puleo served as our Treasurer. Dr. Puleo has also been the
President of South Florida Anesthesia Professionals, an entity
located in Fort Lauderdale, Florida, since founding that company
in January 1996. Dr. Puleo was Vice President of Dynamic Press,
Inc., an offset printing and direct marketing company, from June
1997 until June 1998. Dr. Puleo, an anesthesiologist, was
employed with Anesthesia Professional Association, North Ridge
Medical Center and North Ridge Outpatient Surgery Center from
December 1994 through December 1995. Dr. Puleo was an anesthesia
resident with the University of Illinois Hospitals and Clinics,
the Michael Reese Hospital, the Westside Veteran's Administration
Hospital, the University of Illinois Eye and Ear Infirmary, the
Nathan Cummings Surgicenter, and the University of Illinois Pain
Clinic, all located in the Chicago, Illinois area, from July 1991
through June 1994. Dr. Puleo received his medical degree from
the University of Illinois College of Medicine, Chicago,
Illinois.
ROBERT C. SCHWEITZER, age 56, has served as a member of our Board
of Directors since November 14, 2002. Mr. Schweitzer was the
Regional President of Union Planters Bank for Broward and Palm
Beach County Florida markets from April 1999 to December 2002.
Prior to joining Union Planters, Mr. Schweitzer served as the
Executive Vice President and Head of Commercial Banking for
Barnett Bank/NationsBank in Jacksonville, Florida from 1993 to
1999. Other positions held include Director and Head of Real
Estate Consulting for Coopers & Lybrand in Washington, D.C.;
Senior Vice President and Manager of Central North America Real
Estate for the First National Bank of Chicago, and Manager of
Domestic Credit Process Review; and Senior Vice President and
Manager of Central North American Banking for Wachovia Bank. Mr.
Schweitzer holds a Masters degree in Business Administration from
the University of North Carolina, and a Bachelor of Science
degree from the United States Naval Academy.
BRUCE S. ROSENBLOOM, age 35, was appointed Chief Financial
Officer on May 30, 2001. Mr. Rosenbloom served as the Manager of
Finance and Financial Reporting of Cooker Restaurant Corporation,
a publicly held (PS: CGRTQ) restaurant, in West Palm Beach,
Florida, from December 2000 until May 2001. Mr. Rosenbloom's
duties included all internal and external reporting including all
SEC filings and Annual Reports to Shareholders. Mr. Rosenbloom
was a senior audit accountant for Deloitte & Touche LLP, an
international accounting firm, West Palm Beach, Florida, from
January 1996 until December 2000. Mr. Rosenbloom was responsible
for planning and conducting all aspects of audit engagements for
clients in various industries, including direct marketing,
healthcare, manufacturing, financial institutions, and
professional service firms. From August of 1992 to May of 1995,
Mr. Rosenbloom was an Account Executive for MCI
Telecommunications. Mr. Rosenbloom, a certified public
accountant, received a Bachelor of Science degree in Accounting
from Florida Atlantic University, Boca Raton, Florida in 1996 and
a Bachelor of Arts degree in Economics from the University of
Texas, Austin, Texas in 1992.
4
BOARD GOVERNANCE AND OPERATIONS
The business and affairs of PetMed Express, Inc. are
managed by or under the direction of our Board of Directors. Our
Board includes a majority of independent directors. Our Board
reaffirms its accountability to stockholders through the
stockholder election process. Our Board reviews and ratifies
executive officer selection and compensation, and monitors
overall corporate performance and the integrity of our financial
controls. Our Board of Directors also oversees our strategic and
business planning processes.
Corporate Code of Business Conduct and Ethics
Our Board of Directors has adopted a Corporate Code of
Business Conduct and Ethics, which is applicable to all
directors, officers and employees, including our principal
executive officer, and principal financial and accounting
officer. A copy of this Code is attached hereto as Appendix A.
Any person who wishes to receive a copy of our Corporate
Code of Business Conduct and Ethics, without charge, can send a
letter addressed to our General Counsel at PetMed Express, Inc.,
1441 S.W. 29th Avenue, Pompano Beach, FL 33069.
Policy with Regard to the Consideration of Director Candidate
Recommendations by our Stockholders
The Corporate Governance and Nominating Committee has a
policy pursuant to which it considers director candidates
recommended by our stockholders. All director candidates
recommended by our stockholders are considered for selection to
the Board on the same basis as if such candidates were
recommended by one or more of our directors or other sources.
To recommend a director candidate for consideration by our
Corporate Governance and Nominating Committee, a stockholder
must submit the recommendation in writing to our Corporate
Secretary not later than one hundred twenty (120) calendar
days prior to the anniversary date of our proxy statement
distributed to our stockholders in connection with our most
recent annual meeting of stockholders, and the recommendation
must provide the following information: (i) the name of the
stockholder making the recommendation, (ii) the name of the
candidate, (iii) the candidate's resume or a listing of his or
her qualifications to be a director, (iv) the proposed
candidate's written consent to being named as a nominee and to
serving as one of our directors if elected, and (v) a
description of all relationships, arrangements or understandings,
if any, between the proposed candidate and the recommending
stockholder and between the proposed candidate and us so that
the candidate's independence may be assessed. The stockholder
or the director candidate also must provide any additional
information requested by our Corporate Governance and
Nominating Committee to assist the Committee in appropriately
evaluating the candidate.
Stockholder Communications with the Board
Stockholders who wish to communicate directly with our
Board of Directors, or specified individual directors, may do so
in writing to the Board of Directors or individual director in
c/o Corporate Secretary and General Counsel, PetMed Express,
Inc., 1441 S.W. 29th Avenue, Pompano Beach, FL 33069.
Meetings of the Board of Directors
During the fiscal year ended March 31, 2004, there were
four meetings of our Board of Directors, and the Board took
action four times by written consent in lieu of a meeting. Each
director attended all of the meetings of the Board and meetings
held by committees on which he served. Members of the Board are
required to attend the annual meeting of stockholders. A
director who is unable to attend our annual meeting of
stockholders is expected to notify the Chairman of the Board in
advance of the meeting.
5
Committees of the Board of Directors
Our Board of Directors maintains three standing committees,
an Audit Committee, a Compensation Committee and a Corporate
Governance and Nominating Committee. All members of the
committees are independent directors. The following table shows
the present members of each committee, the number of committee
meetings held during FY 2004 and the functions performed by
each committee:
Committee Functions
--------- ---------
Audit * Oversees the Company's systems of
Number of Meetings internal controls regarding
during FY 2004: 8 finance, accounting and legal
Members: compliance
* Oversees the Company's auditing,
Ronald J. Korn*, accounting and financial
Financial Expert reporting processes generally
Robert C. Schweitzer * Oversees the Company's financial
Gian Fulgoni statements and other financial
information provided by the Company to
its stockholders, the public and
others
* Oversees the Company's compliance
with legal and regulatory requirements
* Oversees the performance of the
Company's independent auditors
* The Audit Committee Charter is
attached hereto as Appendix B.
Compensation * Establishes, in consultation with
Number of Meetings senior management, the Company's
during FY 2004: 2 general compensation philosophy, and
Members: oversees development and
implementation of the compensation
Robert C. Schweitzer* programs
Ronald J. Korn * Reviews and approves corporate goals
Gian Fulgoni and objectives relating to the
compensation of the Company's CEO
* Recommends, subject to Board
approval, salaries and other
compensation matters for executive and
other senior officers
* Approves annual incentive plans for
the Company's officers and employees,
grants stock options to directors,
officers and employees and supervises
administration of employee benefit
plans
* Oversees, in consultation with
management, regulatory compliance with
respect to compensation matters
* Reviews and approves any severance
or similar termination payment
proposed to be made to any Company
executive or senior officer
* Recommends, subject to the approval
of the Board of Directors,
compensation for directors
* Conducts an annual performance
evaluation of the Committee and
prepares and issues all required
evaluations and reports
* The Compensation Committee Charter
is attached hereto as Appendix C.
Corporate Governance and * Recommends the slate of director
Nominating nominees for election to Board of
Number of Meetings Directors
during FY 2004: 1 * Identifies and recommends candidates
Members: to fill vacancies occurring between
annual shareholders meetings
Frank J. Formica* * Develops and recommends to the Board
Gian Fulgoni of Directors corporate
Robert C. Schweitzer governance principles
Ronald J. Korn * Leads annual review of performance
of Board of Directors
* The Corporate Governance and
Nominating Committee Charter is
attached hereto as Appendix D.
* Chairperson
6
REPORT OF AUDIT COMMITTEE
The following Report of the Audit Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any other filing by us under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent we specifically
incorporate this Report by reference therein.
The Securities and Exchange Commission rules require us to
include in this proxy statement a report from the Audit Committee
of our Board of Directors. The following report concerns the
Audit Committee's activities regarding oversight of our financial
reporting and auditing process.
The Audit Committee is comprised solely of independent
directors, as defined in the Marketplace Rules of the Nasdaq
National Market and under Securities Exchange Act Rule 10A-
3(b)(1), and it operates under a written charter adopted by the
Company's Board of Directors. The composition of the Audit
Committee, the attributes of its members and the responsibilities
of the Audit Committee, as reflected in its charter, are intended
to be in accordance with applicable requirements for corporate
audit committees. The Audit Committee reviews and assesses the
adequacy of its charter on an annual basis.
As described more fully in its charter, the purpose of the
Audit Committee is to assist the Board of Directors in the
oversight of its financial reporting, internal control and audit
functions. Management is responsible for the preparation,
presentation and integrity of its consolidated financial
statements, accounting and financial reporting principles, and
internal controls and procedures designed to ensure compliance
with accounting standards and applicable laws and regulations.
Goldstein Golub Kessler LLP, the Company's independent auditor,
is responsible for performing an independent audit of the
Company's consolidated financial statements in accordance with
auditing standards generally accepted in the United States.
The Audit Committee members are not professional
accountants or auditors, and their functions are not intended to
duplicate or to certify the activities of management and the
independent auditor, nor can the Audit Committee certify that the
independent auditor is "independent" under applicable rules. The
Audit Committee serves a board-level oversight role, in which it
provides advice, counsel and direction to management and the
independent auditor on the basis of the information it receives,
discussions with management and the independent auditor and the
experience of the Audit Committee's members in business,
financial and accounting matters.
Among other matters, the Audit Committee monitors the
activities and performance of the Company's independent auditor,
including the audit scope, external audit fees, auditor
independence matters and the extent to which the independent
auditor may be retained to perform non-audit services. The Audit
Committee and the Board of Directors have ultimate authority and
responsibility to select, evaluate and, when appropriate, replace
the independent auditor. The Audit Committee also reviews the
results of the audit work with regard to the adequacy and
appropriateness of financial, accounting and internal controls.
Management and independent auditor presentations to and
discussions with the Audit Committee also cover various topics
and events that may have significant financial impact or are the
subject of discussions between management and the independent
auditor. In addition, the Audit Committee generally oversees
internal compliance programs.
The Audit Committee has reviewed and discussed the
Company's consolidated financial statements with management and
the independent auditor, management represented to the Audit
Committee that its consolidated financial statements were
prepared in accordance with generally accepted accounting
principles, and the independent auditor represented that its
presentations included the matters required to be discussed with
the independent auditor by Statement on Auditing Standards No.
61, as amended, "Communication with Audit Committees."
Goldstein Golub Kessler LLP, the independent auditor, also
provided the Audit Committee with the written disclosures
required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Audit
Committee discussed with Goldstein Golub Kessler LLP the firm's
independence.
Following the Audit Committee's discussions with
management and Goldstein Golub Kessler LLP, the Audit Committee
recommended that the Board of Directors include the audited
consolidated financial statements in the Company's annual report
on Form 10-K for the fiscal year ended March 31, 2004.
Audit Committee
RONALD J. KORN, Chairman
ROBERT C. SCHWEITZER
GIAN FULGONI
7
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed to us by
Goldstein Golub Kessler LLP, our independent auditor, as of and
for the fiscal years ended March 31, 2004 and 2003:
For the Year Ended
March 31,
2004 2003
-------- ---------
Audit fees $ 70,500 $ 64,442
Audit-related fees - -
Tax fees - -
All other fees - -
-------- ---------
$ 70,500 $ 64,442
======== =========
Audit fees billed by Goldstein Golub Kessler LLP related
to the audit of our annual consolidated financial statements for
the fiscal years ended March 31, 2004 and 2003; the review of our
Annual Report on Form 10-K; the review of our interim
consolidated financial statements included in our Quarterly
Reports on Form 10-Q for the periods ended June 30, September 30,
and December 31, 2003 and 2002; attest services; provisions of
comfort letters; and the provision of consents.
Goldstein Golub Kessler LLP has a continuing relationship
with American Express Tax and Business Services Inc. from which
it leases auditing staff who are full-time, permanent employees
of American Express Tax and Business Services Inc. and through
which its partners provide non-audit services. As a result of
this arrangement, Goldstein Golub Kessler LLP has no full time
employees and therefore, none of the audit services performed was
provided by permanent full-time employees of Goldstein Golub
Kessler LLP. Goldstein Golub Kessler LLP manages and supervises
the audit and audit staff, and is exclusively responsible for the
opinion rendered in connection with its examination. Other
services, which do not include financial information system
design and implementation fees, have been provided by American
Express Tax and Business Services Inc.
Pre-Approval Policy for Services of Independent Auditor
The Audit Committee shall:
* Have the responsibility to review and consider and
ultimately pre-approve all audit and permitted non-audit
services to be performed by our independent auditors.
* Select, evaluate, and, where appropriate, replace the
independent auditors or nominate the independent auditors
for shareholder approval. The Committee also has the
responsibility to approve all audit engagement fees and
terms and all non-audit engagements with the independent
auditors. The following sets forth what the Committee
shall do in order to fulfill its responsibilities and
duties with respect to the independent auditors: be
directly responsible for the appointment, compensation
approval and oversight of the work of the independent
auditors (including resolution of disagreements between
management and the independent auditors regarding
financial reporting) for the purpose of preparing its
audit report or related work.
* Have the sole authority to review in advance, and grant
any appropriate pre-approvals of: (i) all auditing
services to be provided by the independent auditors, (ii)
all non-audit services to be provided by the independent
auditors as permitted by Section 10A of the Securities
Exchange Act of 1934, and (iii) in connection therewith
to approve all fees and other terms of engagement. The
Committee shall also review and approve disclosures
required to be included in Securities and Exchange
Commission periodic reports filed under Section 13(a) of
the Securities Exchange Act of 1934 with respect to
non-audit services.
8
* Review the performance of the Company's independent
auditors on at least an annual basis.
* On an annual basis, review and discuss with the
independent auditors all relationships the independent
auditors have with the Company in order to evaluate the
independent auditors' continued independence. The
Committee: (i) shall ensure that the independent
auditors submit to the Committee on an annual basis a
written statement (consistent with Independence Standards
Board Standards No. 1) delineating all relationships and
services that may impact the objectivity and independence
of the independent auditors; (ii) shall discuss with the
independent auditors any disclosed relationship or
services that may impact the objectivity and independence
of the independent auditors; and (iii) shall satisfy
itself as to the independent auditors' independence.
* At least annually, obtain and review an annual report
from the independent auditors describing: (i) the
independent auditors' internal quality control procedures
and (ii) any material issues raised by the most recent
internal quality control review, or peer review, of the
independent auditors, or by any inquiry or investigation
by governmental or professional authorities, within the
preceding five years, respecting one or more independent
audits carried out by the independent auditors, and any
steps taken to deal with any such issues.
* Confirm that the lead audit partner, or the lead audit
partner responsible for reviewing the audit for the
Company's independent auditors, has not performed audit
services for the Company for each of the five previous
fiscal years.
* Review all reports required to be submitted by the
independent auditors to the Committee under Section 10A
of the Securities Exchange Act of 1934.
* Review, based upon the recommendation of the independent
auditors and management, the scope and plan of the work
to be done by the independent auditors for each fiscal
year.
Our Audit Committee has considered whether the provision
of non-audit services is compatible with maintaining the
independence of Goldstein Golub Kessler LLP, and has concluded
that the provision of such services is compatible with
maintaining the independence of our auditors.
9
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information regarding
beneficial ownership of our Common Stock as of June 22, 2004, by
each person known by us to own beneficially or exercise voting or
dispositive control over 5% or more of our outstanding Common
Stock, by each of our executive officers and directors, and by
all executive officers and directors as a group. In general,
"beneficial ownership" includes those shares a person has the
power to vote or transfer, and options to acquire our Common
Stock that are exercisable currently or become exercisable within
60 days. Except as otherwise indicated, we believe that the
beneficial owners of the Common Stock listed below, based on
information furnished by these owners, have sole investment and
voting power with respect to these shares, except as otherwise
provided by community property laws where applicable. Unless
otherwise indicated below, the address for each person is 1441
S.W. 29th Avenue, Pompano Beach, FL 33069.
Aggregate
Number of
Shares Percent of
Beneficially Shares
Name and Address of Beneficial Owner Owned Outstanding
------------------------------------ ------------ -----------
Tricon Holdings, LLC 6,927,500 (1) 31.4%
Guven Kivilcim 1,715,900 (2) 7.6%
Marc Puleo, M.D. 1,323,286 (3) 5.7%
Wellington Management Company, LLP 1,032,500 (4) 4.7%
Menderes Akdag 691,201 (5) 3.1%
Bruce Rosenbloom 56,100 (6) *
Robert C. Schweitzer 12,000 (7) *
Gian Fulgoni 10,000 (8) *
Ronald J. Korn 7,900 (9) *
Frank Formica - (10) -
All executive officers and directors as
a group (seven persons) 2,100,487 (11) 9.0%
-----------
* Less than 1% of the issued and outstanding shares.
(1) Emel Yesil is the sole manager of Tricon Holdings, LLC
("Tricon"). Creslin Limited ("Creslin") is the sole member
(shareholder) of Tricon. Mr. Robert G. Guest is the officer,
and Mr. Guest and Christopher J. Pitaluga are the directors of
Creslin. Creslin Limited Trust owns 99% of Creslin. Abacus
Trustees (Gibraltar) Limited is the trustee and Mustafa Yesil
is the beneficiary of the Creslin Limited Trust. Emel Yesil
is the daughter of Mustafa Yesil. The address for Tricon is
1020 N.W. 163rd Drive, Miami, FL 33169.
(2) As reflected on the Schedule 13G, which was filed with the
Securities and Exchange Commission on June 4, 2004. Mr.
Kivilcim's holdings include 400,000 shares of our Common Stock
issuable upon the exercise of warrants at $.33 per share, until
November 2005. The address for Mr. Kivilcim is 1020 N.W. 163rd
Drive, Miami, FL 33169.
(3) Dr. Puleo's holdings include 363,286 shares of our Common
Stock held by Marpul Trust, a trust established by Dr. Puleo
under an agreement dated September 3, 1999 and of which he is
the beneficiary. Southpac Trust International, Inc. is a
trustee of Marpul Trust. Dr. Puleo's holdings also include
vested options held by him to purchase 600,000 shares of Common
Stock at $1.25 per share until May 2008, 200,000 shares of
Common Stock at $.35 per share until March 2006, 80,000 shares
of Common Stock at $1.05 per share until May 2006, and 80,000
shares of Common Stock at $1.05 per share until May 2007, but
exclude options to purchase an additional 80,000 shares of
Common Stock at $1.05, which have not yet vested.
(4) As reflected on the Schedule 13G, which was filed with the
Securities and Exchange Commission on February 13, 2004.
The address for Wellington Management Company, LLP is 75 State
Street, Boston, MA 02109.
(5) Mr. Akdag's holdings include vested options to purchase 187,500
shares of our Common Stock at $.32 per share until March
2007, but exclude options to purchase an additional 250,000
shares of our Common Stock at $10.64 per share, which have not
yet vested.
(6) Mr. Rosenbloom's holdings include options to purchase 6,667
shares of our Common Stock at $1.65 per share until May 2005,
16,667 shares of our Common Stock at $1.65 per share until May
2006, 16,667 shares of our Common Stock at $1.65 per share until
May 2007 and 5,000 shares of our Common Stock at $3.45 until June
2007, but exclude options to purchase an additional 8,334 shares
of our Common Stock at $.86 per share, 10,000 shares of our
Common Stock at $3.45 per share and 18,000 of our Common Stock at
$8.90, which have not yet vested.
(7) Mr. Schweitzer's holdings exclude options to purchase an
additional 20,000 shares of our Common Stock at $1.90 per share
and 20,000 shares of our Common Stock at $8.90, which have not
yet vested.
(8) Mr. Fulgoni's holdings include options to purchase 10,000
shares of our Common Stock at $1.90 per share until November
2006, but exclude options to purchase an additional 20,000 shares
of our Common Stock at $1.90 per share and 20,000 shares of our
Common Stock at $8.90, which have not yet vested.
(9) Mr. Korn's holdings exclude options to purchase an additional
20,000 shares of our Common Stock at $1.90 per share and 20,000
shares of our Common Stock at $8.90, which have not yet vested.
(10) Mr. Formica's holdings exclude options to purchase 30,000
shares of our common stock at $7.90 per share and 10,000 shares
of our Common Stock at $8.90, which have not yet vested.
(11) Incorporates (1) through (10) above.
Section 16(a) Beneficial Ownership Reporting Compliance
We became a reporting company under the Securities Exchange
Act of 1934 (the "Exchange Act") in March 2000. Based solely
upon a review of Forms 3 and 4 and amendments thereto furnished
to us under Rule 16a-3(d) of the Exchange Act through the fiscal
year ended March 31, 2004, the Company is not aware of any person
that failed to file on a timely basis, as disclosed in the
aforementioned forms, reports required by Section 16(a) of the
Exchange Act during the fiscal year ended March 31, 2004, except
for Menderes Akdag, the Company's Chief Executive Officer, who
failed to file a Form 4 upon the grant of 250,000 stock options
to purchase the Company's Common Stock in March 2004. The
delinquent report was subsequently filed.
10
REPORT OF COMPENSATION COMMITTEE
The following Report of the Compensation Committee of our
Board of Directors and the performance graphs included elsewhere
in this proxy statement do not constitute soliciting material and
should not be deemed filed or incorporated by reference into any
other filings by us under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, except to the
extent we specifically incorporate this Report or the performance
graphs by reference therein.
The primary purposes of our Compensation Committee of our
Board of Directors, a committee which is comprised solely of
independent directors, are to oversee the administration of the
Company's compensation programs, review the compensation of
executive officers and directors, prepare any report on executive
compensation required by the rules and regulations of the
Securities and Exchange Commission and generally to provide
assistance to the Board of Directors on compensation matters.
During FY 2004, we amended the employment agreement of our
Chief Executive Officer, Menderes Akdag, which is described
further below.
Components of Executive Compensation
The basic components of executive compensation are:
* Annual Cash Compensation, specifically, base salary;
and
* Long-Term Incentive Compensation, specifically, stock
options.
Annual Cash Compensation - Base Salary
The purpose of base salary is to create a secure base of cash
compensation for executives that is competitive with the market.
Executives' salary increases do not follow a preset schedule or
formula; however, the following will be considered when
determining appropriate salary levels and increases: the
individual's current and sustained performance results and the
methods utilized to achieve such results; and non-financial
performance indicators to include strategic developments for
which an executive has responsibility and managerial performance.
We exercise discretion in making salary decisions taking into
account, among other things, each individual's performance and
the Company's overall performance. With regard to individual
performance of executive officers other than the Chief Executive
Officer, we rely to a large extent on the Chief Executive
Officer's evaluations of each individual executive officer's
performance.
Long-Term Incentive Compensation - Stock Options
Long-term incentives comprise the largest portion of the total
compensation package for executives. The form of long-term
incentives used for executives is stock options. Grant levels
will be determined for each executive based on individual
performance and potential, history of past grants, time in
current job and level of, or significant changes in,
responsibility. The purpose of stock options is to provide
equity compensation whose value is directly related to the
creation of share-owner value. Stock options provide executives
a vehicle to increase equity ownership and share in the
appreciation of the value of Company stock.
Compensation Committee
ROBERT C. SCHWEITZER, Chairman
RONALD J. KORN
GIAN FULGONI
11
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term
compensation paid by the Company for services performed on our
behalf for the last three completed fiscal years ended March 31,
2004, 2003, and 2002, with respect to our Chief Executive Officer
and other officers serving as such who earned compensation
greater than $100,000 in these fiscal years:
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
Other Securities
Name and Annual Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Options/SARs Payouts($) Compensation
(#)
------------------ ----- ---------- ----- ------------ ------------ ---------- ------------
Menderes Akdag 2004 $ 201,731 $ - - 250,000 - -
Chief Executive 2003 200,000 - - - - -
Officer 2002 176,923 - - - - -
Marc Puleo, M.D. 2004 146,154 - - - - -
Chairman of Board 2003 100,000 50,000 - 240,000 - -
and President 2002 88,462 - - - - -
Bruce Rosenbloom 2004 106,461 1,600 - 15,000 - -
Chief Financial 2003 100,000 500 - - - -
Officer 2002 77,962 - - 75,000 - -
The following table sets forth certain information for the
fiscal year ended March 31, 2004, with respect to options granted
to individuals named in the Summary Compensation Table above.
Option Grants for Fiscal Year Ended March 31, 2004
Individual Grants
Potential Realizable Value at Assumed
Annual Rates of Stock Price Appreciation
Number of % of Total
Securities Options Exercise
Underlying Granted to Price Expiration
Name Options (#) Employees ($/Share) Date 0% ($) 5% ($) 10% ($)
---- ----------- ---------- --------- ---------- ------ ----------- -----------
Menderes Akdag 250,000 (1) 55% $10.64 3/16/2008 - $ 3,233,247 $ 3,894,506
Bruce Rosenbloom 15,000 (2) 3% 3.45 6/13/2007 - 62,902 75,767
Marc Puleo, M.D. - (3) - - - - - -
(1) The Company granted Mr. Akdag options to purchase 250,000
shares of its Common Stock on March 16, 2004, under the Company's
1998 Stock Option Plan at an exercise price of $10.64 per share
which vest at the rate of 83,333 options on each of March 16,
2005 and 2006, and 83,334 options on March 16, 2007.
(2) The Company granted Mr. Rosenbloom options to purchase
15,000 shares of its Common Stock on June 13, 2003, under the
Company's 1998 Stock Option Plan at an exercise price of $3.45
per share which vest at the rate of 5,000 options on each of June
13, 2004, 2005, and 2006.
(3) No options were issued during fiscal 2004.
The following table sets forth certain information with
respect to the number of shares covered by both exercisable and
unexercisable stock options held by the individuals named in the
Summary Compensation Table as of March 31, 2004. Also reported
are the values for "in-the-money" stock options that represent
the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of our Common
Stock as of March 31, 2004 ($ per share).
Aggregate Option Exercises And Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End (#) at Fiscal Year End ($)(1)
Shares ------------------------------- -----------------------------
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Menderes Akdag 187,500 $ 1,336,875 187,500 250,000 $ 2,002,500 $ 90,000
Marc Puleo, M.D. 600,000 1,020,000 960,000 80,000 9,572,000 796,000
Bruce Rosenbloom 16,666 128,159 33,334 40,000 311,673 353,584
(1) Represents the difference between the closing price
($11.00) of the Company's Common Stock on March 31, 2004, the
last trading day of the Company's 2004 fiscal year, and the
exercise price of the options.
12
Employment Agreement with Marc Puleo, M.D., President
On May 1, 2000, the Company entered into a two-year
employment agreement with Marc Puleo, M.D., as Chief Executive
Officer, which provided for annual cash compensation to him of
$150,000. On November 8, 2000, Dr. Puleo's employment agreement
dated May 1, 2000 was amended to reflect a salary of $75,000
annually. Under the terms of the employment agreement Dr. Puleo
received an annual salary of $75,000, subject to increase no
less frequent than an annual review by our Board of Directors.
Dr. Puleo's salary was increased to $100,000 in fiscal year 2002,
and then increased to $150,000 in May 2003. The agreement
can be terminated upon the mutual consent of the parties, or upon
90 days notice by the Company, in which case the Company would
continue to compensate him under the terms of his employment
agreement, or his contract will renew annually.
Employment Agreement with Menderes Akdag, Chief Executive Officer
On March 16, 2001, the Company had entered into an
employment agreement with its current Chief Executive Officer,
Menderes Akdag. Under the terms of this three-year agreement the
Company paid Mr. Akdag an annual salary of $150,000 for the first
six months of the agreement, and thereafter his annual salary was
to be increased to $200,000. The Company also granted Mr. Akdag
options to purchase 750,000 shares of its common stock under the
Company's 1998 Stock Option Plan at an exercise price of $.32 per
share, which vested at the rate of 187,500 options on each of
March 16, 2001, 2002, 2003 and 2004.
The agreement provided the following: the Company can
terminate the employment of Mr. Akdag either upon mutual consent
or for cause. If the Company should terminate Mr. Akdag for
cause, or if Mr. Akdag should terminate the agreement without
"good reason" as described in the employment agreement, no
severance benefits would be paid. If the Company should
terminate Mr. Akdag without cause, the Company would be required
to give Mr. Akdag three months notice and continue to compensate
him under the terms of this employment agreement during those
three months. At the end of the three-month period, the Company
would have to pay Mr. Akdag severance benefits equal to his
annual base salary, and any previously granted but unvested
options would immediately vest. If the Company should terminate
Mr. Akdag for cause, as defined in the employment agreement, no
severance benefits would be paid. The agreement can be
terminated upon the mutual consent of the parties, or upon 90
days notice by the Company during which time the Company would
continue to compensate him under the terms of his employment
agreement.
On March 16, 2004, the Company amended Mr. Akdag's existing
employment agreement. The amendments are as follows: the term of
the agreement will be for three years, commencing on March 16,
2004; Mr. Akdag's salary will be increased to $250,000 per year
throughout the term of the agreement, and Mr. Akdag shall be
granted 250,000 incentive stock options under the Company's 1998
Stock Option Plan at an exercise price of $10.64 per share, which
vest at the rate of 83,333 options on each of March 16, 2005 and
2006, and 83,334 options on March 16, 2007. All other terms of
Mr. Akdag's original employment agreement remain in effect.
Directors' Compensation
Each member of our Board of Directors who is not employed
by us receives an annual retainer of $10,000 per year, paid
quarterly. Additionally, upon election to the Board of
Directors, each director not employed by us was granted 30,000
stock options, under our 1998 Stock Option Plan, to purchase our
Common Stock, at an exercise price equal to the fair market value
of the stock at the time of granting, with the options vesting
equally over a three-year period. From time to time at the
discretion of the Board, additional options may be issued in the
future. We also pay the reasonable travel and accommodation
expenses of directors in connection with their participation in
meetings of the Board of Directors.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended March 31, 2004, Robert C.
Schweitzer, Ronald J. Korn and Gian Fulgoni served on the
Compensation Committee. All members of the Compensation Committee
are independent. Accordingly, insiders do not participate in
compensation decisions.
13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Board's policy requires that transactions with related
parties must be entered into in good faith on fair and reasonable
terms that are no less favorable to us than those that would be
available in a comparable transaction in arm's-length dealings
with an unrelated third party. Our Board, by a vote of the
disinterested directors, must approve all related party
transactions, recommended by the Audit Committee. The following
is a summary of agreements and transactions with parties related
to our directors, former directors, or us. Based on our
experience, we believe that each of the transactions described
below complied with our Board's policy at the time the
transaction was effected.
Guven Kivilcim, a former member of Tricon Holdings, LLC and a
former member of the Company's Board of Directors, has an
interest in Intelligent Switching & Software LLC and Numind
Software Systems, Inc., which the Company conducted business with
during the fiscal year ended March 31, 2003. Intelligent
Switching & Software LLC provided the Company with long distance
telecommunication services and Numind Software Systems, Inc.
provided the Company with Internet and website design and hosting
services. The Company paid $0 and $154,000 to Intelligent
Switching & Software LLC and $0 and $45,000 to Numind Software
Systems, Inc., for services during the fiscal years ended March
31, 2004 and 2003, respectively. The Company owed $0 and $5,000
to Intelligent Switching & Software LLC, and $0 and $14,000 to
Numind Software Systems, Inc., which were included in the
Company's accounts payable balance as of March 31, 2004 and 2003.
As of May 28, 2003 the Company no longer conducted business with
these companies.
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative
performance of our Common Stock with the Standard & Poor's
Composite-500 Stock Index (the "S&P 500") and the Nasdaq
Composite (the "NASDAQ") from March 31, 1999 to March 31, 2004.
The graph assumes that $100 was invested on March 31, 1999 in
each of our Common Stock, the S&P 500 and the NASDAQ and that all
dividends were reinvested.
[LINE GRAPH]
Value of $100 Investment Made March 31, 1999
3/31/1999 3/31/2000 3/31/2001 3/31/2002 3/31/2003 3/31/2004
--------- --------- --------- --------- --------- ---------
Nasdaq Composite 100.00 185.78 74.76 74.97 54.49 81.02
S&P 500 100.00 116.50 90.20 89.20 65.94 87.55
PetMed Express, Inc. 100.00 46.90 15.30 13.05 38.50 179.45
14
OTHER MATTERS
Our Board of Directors does not intend to present, or have
any reason to believe others will present, any items of business
other than those stated above. If other matters are properly
brought before the Board of Directors at the annual meeting, the
persons named in the accompanying proxy will vote the shares
represented by it in accordance with the recommendation of our
Board of Directors.
By Order of the Board of Directors,
MENDERES AKDAG
Chief Executive Officer and Director
Pompano Beach, Florida
June 30, 2004
15
APPENDIX A
PETMED EXPRESS INC.
CORPORATE CODE OF BUSINESS CONDUCT AND ETHICS
This Code of Ethics (the "Code") has been adopted by the Board of
Directors (the "Board") of PetMed Express, Inc. (the "Company"),
and the Code applies to all Company directors, officers and
employees.
PURPOSE:
The purpose of the Code is to deter wrongdoing and to promote:
(1) Honest and ethical conduct, including the ethical handling
of actual or apparent conflicts of interest between personal and
professional relationships;
(2) Full, fair, accurate, timely and understandable disclosure
in the periodic reports required to be filed by the Company and
in the Company's public communications;
(3) Compliance with applicable governmental laws and
regulations;
(4) The prompt internal reporting of violations of the Code to
an appropriate person or persons identified in the Code; and
(5) Accountability for adherence to the Code.
In general, the principles that govern honest and ethical
conduct, including the avoidance of conflicts of interest between
personal and professional relationships, reflect, at the minimum:
(1) the duty in performing any responsibilities to place the
interests of the Company ahead of personal interests; (2) the
fundamental standard that no director, officer or employee take
inappropriate advantage of their positions; (3) the duty to
assure that the reports required to be filed by the Company and
in the Company's public communications are prepared honestly and
accurately in accordance with applicable rules and regulations;
(4) the obligation to respect the confidentiality of information
acquired in the course one's work except when authorized or
otherwise legally obligated to disclose and to ensure that such
confidential information not be used for personal advantage; and
(5) the duties performed by all directors, officers and employees
are conducted in an honest and ethical manner.
ADMINISTRATION OF THE CODE
The Code shall be administered as follows:
(1) Responsibility for Administration
The Code shall be interpreted and administered by the Company's
Audit Committee (the "Committee.") In discharging its
responsibilities, the Committee may engage such agents and
advisors as it shall deem necessary or desirable, including but
not limited to, attorneys and accountants.
(2) Scope of Code
The Committee shall periodically, in light of the experience of
the Company, review the Code. As it deems necessary, the
Committee shall make recommendation to the Board to ensure that
(a) the Code conforms to applicable law; (b) the Code meets or
exceeds industry standards, and (c) any weaknesses in the Code or
any other policy of the Company revealed through monitoring,
auditing and reporting systems are eliminated or corrected.
(3) Waiver or Amendment of the Code
The Committee may grant a specific, limited waiver of any
provision of the Code if the Committee determines, based on
information that the Committee deems credible and persuasive,
that such a limited waiver is appropriate in the specific
circumstances (and each fact situation will be a separate case).
In determining whether to waive any of the provisions of the
Code, the Committee will consider whether the proposed waiver (a)
is prohibited by the Code; (b) is consistent with honest and
ethical conduct; and (c) will result in a conflict of interest
between the requestor's personal and professional obligations to
the Company. If the Committee waives any provision of the Code,
then the Company shall make an immediate disclosure of such
waiver in accordance with applicable law. The Code may be
amended only by the Board.
16
(4) Reporting of Violations
Any suspected violation of the Code shall be promptly reported to
the Committee, and failure to report knowledge of a violation may
result in disciplinary action against those who fail to report.
Persons reporting suspected violations of the Code shall be as
specific as possible and if possible, shall identify themselves
in order to facilitate investigation of potential violations.
Reporting of such violations may be done anonymously, but
anonymous reports will be investigated only if enough facts are
available to justify proceeding and to allow a thorough
investigation. To the extent practicable and subject to
applicable laws, rules, regulations or legal proceedings, the
identity of the person reporting a suspected violation will be
kept confidential. The identity of persons against whom
allegations of violations are brought will be kept confidential
unless or until it has been determined that a violation has
occurred.
It shall be a violation of the Code to intimidate or impose any
form of retribution on any person who in good faith reports
suspected violations of the Code (except that appropriate action
may be taken against such person if such person is one of the
wrongdoers).
(5) Investigation of Violations
If the Committee receives information regarding an alleged
violation of the Code, the Committee shall: (a) evaluate such
information as to gravity and credibility; (b) initiate an
informal inquiry or a formal investigation with respect thereto;
(c) if appropriate, prepare a report of the results of such
inquiry or investigation, including recommendations as to the
disposition of such matter; (d) if appropriate, make the results
of such inquiry or investigation available to the public
(including disciplinary action); and (e) if appropriate,
recommend changes to the Code that the Committee deems necessary
or desirable to prevent similar violations of the Code.
(6) Disciplinary Measures
The Committee shall enforce the Code through appropriate
disciplinary actions. The Committee shall determine whether
violations of the Code have occurred and, if so, shall determine
the disciplinary measures to be taken against any person who has
violated the Code. The disciplinary measures, which may be
invoked at the discretion of the Committee, and with approval of
the Board of Directors, include, but are not limited to,
counseling, oral or written reprimands, warnings, probation or
suspension (with or without pay), demotions, deductions in
salary, termination of employment, and restitution.
In determining the appropriate sanction in a particular case, the
Committee shall consider all relevant information, including, but
not limited to: (a) the nature and severity of the violation; (b)
whether the violation was a single occurrence or repeated
occurrences; (c) whether the violation appears to have been
intentional or inadvertent; (d) whether the person(s) involved
had been advised prior to the violation as to the proper course
of action; and (e) whether or not the person in question had
committed other violations in the past.
The jurisdiction of the Committee shall include, in addition to
the person(s) who violated the Code, any other person involved in
the wrongdoing including but not limited to: (a) persons who fail
to use reasonable care to detect a violation; (b) persons who
were requested to divulge information about a suspected violation
of the Code, but who withheld material information regarding a
suspected violation; and (c) supervisors who approved or condoned
the violations or attempt to retaliate against any persons for
reporting violations or violators.
(7) Record Retention and Confidentiality
All reports and records prepared or maintained pursuant to the
Code will be considered confidential and shall be maintained and
protected accordingly to the extent permitted by applicable laws,
rules and regulations or legal proceedings. Except as otherwise
required by law or the Code, such matters shall not be disclosed
to anyone other than the Board of Directors and its counsel.
(8) Other Policies and Procedures
The Code shall be the sole code of ethics adopted by the Company
for purposes of Section 406 of the Sarbanes-Oxley Act and the
rules and forms applicable to public companies thereunder. While
other policies or procedures of the Company may govern the
behavior or activities of the persons who are subject to the
Code, they are superseded by the Code to the extent that they
overlap or conflict.
17
APPENDIX B
PETMED EXPRESS, INC.
AUDIT COMMITTEE CHARTER
I. Purpose
The primary functions of the Audit Committee are to assist the
Board of Directors in fulfilling its oversight responsibilities
with respect to: (i) the Company's systems of internal controls
regarding finance, accounting, legal compliance and ethical
behavior; (ii) the Company's auditing, accounting and financial
reporting processes generally; (iii) the Company's financial
statements and other financial information provided by the
Company to its stockholders, the public and others; (iv) the
Company's compliance with legal and regulatory requirements; and
(v) the performance of the Company's independent auditors.
Consistent with these functions, the Committee will encourage
continuous improvement of, and foster adherence to, the Company's
policies, procedures and practices at all levels.
Although the Committee has the powers and responsibilities set
forth in this Charter, the role of the Committee is oversight. It
is not the duty of the Committee to conduct audits or to
determine that the Company's financial statements and disclosures
are complete and accurate and are in accordance with generally
accepted accounting principles and applicable rules and
regulations. These are the responsibilities of Management and the
independent auditors.
II. Organization
The Audit Committee shall be comprised of two or more directors
as determined by the Board of Directors, each of whom shall
satisfy the independence, financial literacy and experience
requirements of Section 10A of the Securities Exchange Act of
1934 and the National Nasdaq Market.
Committee members shall be elected by the Board at the annual
organizational meeting of the Board of Directors on the
recommendation of the Board of Directors; members shall serve
until their successors shall be duly elected and qualified. The
Committee's chairperson shall be designated by the full Board or,
if it does not do so, the Committee members shall elect a
chairperson by vote of a majority of the full Committee.
The Committee may form and delegate authority to subcommittees
when appropriate.
III. Meetings
The Audit Committee shall meet four times per year on a quarterly
basis, or more frequently as circumstances require. The Committee
shall require members of Management, the independent auditors and
others to attend meetings and to provide pertinent information,
as necessary. As part of its job to foster open communications,
the Committee shall meet in separate executive sessions during
each of its four regularly scheduled meetings with Management and
the Company's independent auditors to discuss any matters that
the Committee (or any of these groups) believes should be
discussed privately.
IV. Responsibilities and Duties
In recognition of the fact that the Company's independent
auditors are ultimately accountable to the Audit Committee, the
Committee shall have the sole authority and responsibility to
select, evaluate, and, where appropriate, replace the independent
auditors or nominate the independent auditors for shareholder
approval. The Committee shall approve all audit engagement fees
and terms and all non-audit engagements with the independent
auditors. The Committee shall consult with Management but shall
not delegate these responsibilities.
To fulfill its responsibilities and duties, the Audit Committee
shall:
With respect to the independent auditors:
-----------------------------------------
1. Be directly responsible for the appointment, compensation
approval and oversight of the work of the independent auditors
(including resolution of disagreements between Management and
the independent auditors regarding financial reporting) for
the purpose of preparing its audit report or related work.
2. Have the sole authority to review in advance, and grant any
appropriate pre-approvals of, (i) all auditing services to be
provided by the independent auditors and (ii) all non-audit
services to be provided by the independent auditors as permitted
by Section 10A of the Securities Exchange Act of 1934, and
(iii) in connection therewith to approve all fees and other
terms of engagement. The Committee shall also review and
approve disclosures required to be included in Securities and
Exchange Commission periodic reports filed under Section 13(a)
of the Securities Exchange Act of 1934 with respect to non-audit
services.
18
3. Review the performance of the Company's independent auditors
on at least an annual basis.
4. On an annual basis, review and discuss with the independent
auditors all relationships the independent auditors have with
the Company in order to evaluate the independent auditors'
continued independence. The Committee: (i) shall ensure that
the independent auditors submit to the Committee on an annual
basis a written statement (consistent with Independent
Standards Board Standards No. 1) delineating all relationships
and services that may impact the objectivity and independence
of the independent auditors; (ii) shall discuss with the
independent auditors any disclosed relationship or services
that may impact the objectivity and independence of the
independent auditors; and (iii) shall satisfy itself as to the
independent auditors' independence.
5. At least annually, obtain and review an annual report from
the independent auditors describing (i) the independent
auditors' internal quality control procedures and (ii) any
material issues raised by the most recent internal quality
control review, or peer review, of the independent auditors,
or by any inquiry or investigation by governmental or
professional authorities, within the preceding five years,
respecting one or more independent audits carried out by the
independent auditors, and any steps taken to deal with any
such issues.
6. Confirm that the lead audit partner, or the lead audit
partner responsible for reviewing the audit, for the Company's
independent auditors has not performed audit services for
the Company for each of the five previous fiscal years.
7. Review all reports required to be submitted by the independent
auditors to the Committee under Section 10A of the Securities
Exchange Act of 1934.
8. Review, based upon the recommendation of the independent
auditors and management, the scope and plan of the work to be
done by the independent auditors for each fiscal year.
With respect to financial statements:
------------------------------------
9. Review and discuss with Management and the independent
auditors the Company's quarterly financial statements (including
disclosures made in "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the
independent auditors' review of the quarterly financial
statements) prior to submission to stockholders, any governmental
body, any stock exchange or the public.
10. Review and discuss: (i) with Management and the independent
auditors the Company's annual audited financial statements
(including disclosures made in "Management's Discussion and
Analysis of Financial Condition and Results of Operations").
11. Discuss with the independent auditors the matters required
to be discussed by Statement on Auditing Standards No. 61, as
amended, relating to the conduct of the audit.
12. Recommend to the Board of Directors, if appropriate, that
the Company's annual audited financial statements be included in
the Company's annual report on Form 10-K for filing with the
Securities and Exchange Commission.
13. Prepare the report required by the Securities and Exchange
Commission to be included in the Company's annual proxy statement
and any other Committee reports required by applicable securities
laws or stock exchange listing requirements or rules.
Periodic and Annual Reviews:
---------------------------
14. Periodically review separately with each of Management and
independent auditors (i) any significant disagreement between
Management and the independent auditors in connection with the
preparation of the financial statements, (ii) any difficulties
encountered during the course of the audit (including any
restrictions on the scope of work or access to required
information), and (iii) Management's response to each.
15. Periodically discuss with the independent auditors, without
Management being present, (i) their judgments about the quality,
appropriateness, and acceptability of the Company's accounting
principles and financial disclosure practices, as applied in its
financial reporting, and (ii) the completeness and accuracy of
the Company's financial statements.
16. Consider and approve, if appropriate, significant changes to
the Company's accounting principles and financial disclosure
practices as suggested by the independent auditors or Management.
Review with the independent auditors and Management, at
appropriate intervals, the extent to which any changes or
improvements in accounting or financial practices, as approved by
the Committee, have been implemented.
17. Review with Management, the independent auditors, and the
Company's counsel, as appropriate, any legal, regulatory or
compliance matters that could have a significant impact on the
Company's financial statements, including significant changes in
accounting standards or rules as promulgated by the Financial
Accounting Standards Board, the Securities and Exchange
Commission or other regulatory authorities with relevant
jurisdiction.
18. Obtain and review an annual report from Management relating
to the accounting principles used in preparation of the Company's
financial statements (including those policies for which
Management is required to exercise discretion or judgments
regarding the implementation thereof).
19
Discussions with Management:
---------------------------
19. Review and discuss with Management the Company's earnings
press releases (including the use of "pro forma" or "adjusted"
non-GAAP information) as well as financial information and
earnings guidance provided to analysts and rating agencies.
20. Review and discuss with Management all material off-balance
sheet transactions, arrangements, obligations (including
contingent obligations) and other relationships of the Company
with unconsolidated entities or other persons, that may have a
material current or future effect on financial condition, changes
in financial condition, results of operations, liquidity, capital
resources, capital reserves or significant components of revenues
or expenses.
21. Inquire about the application of the Company's accounting
policies and its consistency from period to period, and the
compatibility of these accounting policies with generally
accepted accounting principles, and (where appropriate) the
Company's provisions for future occurrences which may have a
material impact on the financial statements of the Company.
22. Review and discuss with Management (i) the Company's major
financial risk exposures and the steps Management has taken to
monitor and control such exposures (including Management's risk
assessment and risk management policies), and (ii) the program
that Management has established to monitor compliance with its
code of business ethics and conduct for directors, officers and
employees.
23. Review and discuss with Management all disclosures made by
the Company concerning any material changes in the financial
condition or operations of the Company.
24. Obtain explanations from Management for unusual variances in
the Company's annual financial statements from year to year, and
review annually the independent auditors' letter of the
recommendations to Management and Management's response.
With respect to the internal audit function and internal controls:
-----------------------------------------------------------------
25. In consultation with the independent auditors and
management, (a) review the adequacy of the Company's internal
control structure and systems, and (b) the procedures designed to
insure compliance with laws and regulations.
26. Establish procedures for (i) the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls or auditing matters, and
(ii) the confidential, anonymous submission by employees of the
Company of concerns regarding questionable accounting or auditing
matters.
Other:
-----
27. Review and approve all related-party transactions.
28. Review and approve (i) any change or waiver in the Company's
code of business conduct and ethics for directors or executive
officers, and (ii) any disclosure made on Form 8-K regarding such
change or waiver.
29. Establish the policy for the Company's hiring of employees
or former employees of the independent auditors who were engaged
on the Company's account.
30. Review any Management decision to seek a second opinion from
independent auditors other than the Company's regular independent
auditors with respect to any significant accounting issue.
31. Review with Management and the independent auditors the
sufficiency and quality of other financial and accounting
personnel of the Company.
32. Review and reassess the adequacy of this Charter annually
and recommend to the Board any changes the Committee deems
appropriate.
33. The Committee shall conduct an annual performance evaluation
on the Committee's effectiveness.
34. Perform any other activities consistent with this Charter,
the Company's By-laws and governing law as the Committee or the
Board deems necessary or appropriate.
V. Resources
The Audit Committee shall have the authority to retain
independent legal, accounting and other consultants to advise the
Committee. The Committee may request any officer or employee of
the Company or the Company's outside counsel or independent
auditors to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Committee shall approve the extent of funding necessary for
payment of compensation to the independent auditors for purpose
of rendering or issuing the annual audit report and to any
independent legal, accounting and other consultants retained to
advise the Committee.
20
APPENDIX C
PETMED EXPRESS, INC.
COMPENSATION COMMITTEE CHARTER
I. PURPOSE
The primary purposes of the Committee are to oversee the
administration of the Company's compensation programs, review the
compensation of executive officers and directors, prepare any
report on executive compensation required by the rules and
regulations of the Securities and Exchange Commission and
generally to provide assistance to the Board of Directors on
compensation matters.
II. ORGANIZATION
A. The Compensation Committee will be comprised of at least three
members, consisting solely of independent directors. A director
is "independent" if he or she meets the requirements for
independence set forth in the rules of the Nasdaq National
Market.
B. The members of the Committee will be appointed by the Board of
Directors. A member will serve until either: (i) his or her
successor is appointed; (ii) until his or her resignation from
the Compensation Committee; (iii) until his or her position on
the Compensation Committee is eliminated due to a reduction in
the size of the Compensation Committee; (iv) until he or she is
removed from the Compensation Committee; (v) until his or her
death; or (vi) until his or her service on the Board of Directors
terminates. The chairperson of the Compensation Committee will be
the member of the Compensation Committee appointed to serve in
such capacity by the Board of Directors from time to time.
III. MEETINGS AND REPORTS
The Compensation Committee will meet as frequently as the
Compensation Committee deems necessary, but the Compensation
Committee will meet at least one time each year. The Committee
shall report its activities to the Board of Directors on a
regular basis, generally at the next succeeding meeting of the
Board of Directors following a meeting of the Committee.
IV. SPECIFIC RESPONSIBILITIES AND AUTHORITY
To carry out its purposes, the Committee shall have the following
duties and responsibilities, in addition to any similar matters
which may be referred to the Committee from time to time by the
Board of Directors or which the Committee raises on its own
initiative that will further its purposes:
* In consultation with senior management, establish the
Company's general compensation philosophy, and oversee the
development and implementation of compensation programs.
* Review and approve corporate goals and objectives relating
to the compensation of the Chief Executive Officer ("CEO"),
evaluate the performance of the CEO in light of those goals
and objectives, and have the sole authority to determine the
CEO's compensation level based on this evaluation. In
determining the long term incentive component of the CEO's
compensation, the Committee will consider, among other
factors, the Company's performance and relative shareholder
return, the value of similar incentive awards to CEO's at
comparable companies, and the awards granted to the CEO in
other years.
* Recommend, subject to the approval of the Board of Directors,
compensation and benefits for the executive officers and
other senior officers of the Company, as designated by the
Board of Directors.
* Approve annual incentive plans and merit plans for the
officers and employees of the Company.
* Supervise the administration of all current employee benefit
plans and any other benefit plans which may from time-to-time
be created.
* Grant stock options and other awards of the Company's stock
to directors, officers and employees of the Company pursuant
to the Company's stock incentive plans as approved by the
Company's shareholders and as may from time-to-time be amended.
21
* In consultation with management, oversee regulatory compliance
with respect to compensation matters, including overseeing the
Company's policies on structuring compensation programs to
preserve the tax deductibility, and, as and when required,
establishing performance goals and certifying that performance
goals have been attained for purposes of 162 (m) of the
Internal Revenue Code.
* Review and approve any severance or similar termination
payment proposed to be made to any executive officer or other
senior officer of the Company.
* Recommend, subject to the approval of the Board of Directors,
compensation for the directors.
* Conduct an annual performance evaluation of the Committee.
* Prepare and issue required evaluations and reports.
* Any other duties or responsibilities expressly delegated to
the Committee by the Board of Directors from time-to-time.
V. DELEGATION; USE OF ADVISORS
The Compensation Committee may delegate authority with respect to
such of its functions to such officers of the Company or to a
subcommittee as it may deem appropriate from time to time, to the
extent permitted by law and the applicable rules of the
Securities and Exchange Commission, NASDAQ Stock Market and
Internal Revenue Code. In the course of fulfilling its duties,
the Compensation Committee has the authority to retain its own
independent advisors in its sole discretion, including sole
authority to approve the fees and other retention terms of any
advisor and to terminate such advisor. The Committee shall keep
the Board of Directors advised as to the general range of
anticipated expenses for outside consultants and experts.
22
APPENDIX D
PETMED EXPRESS, INC.
CORPORATE GOVERNANCE AND
NOMINATING COMMITTEE CHARTER
I. PURPOSE
The Corporate Governance and Nominating Committee ("Committee")
is established by the Company's Board of Directors ("Board"): (1)
to recommend to the Board the slate of director nominees for
election to the Board; (2) to identify and recommend candidates
to fill vacancies on the Board occurring between annual
shareholder meetings; (3) to recommend to the Board, Director
nominees for each committee; (4) to develop and recommend to the
Board a set of corporate governance principles and a Corporate
Code of Business Conduct and Ethics; and (5) to lead the Board in
its annual review of the Board's performance.
II. ORGANIZATION
The Committee shall consist of no fewer than three members. Each
member of the Committee shall meet the independence requirements
of the Nasdaq National Market and the Company's corporate
governance principles.
The members of the Committee shall be appointed and removed by
the Board. A majority of the members shall constitute a quorum.
The Board shall designate one member of the Committee to serve as
the Committee's Chairman.
III. MEETINGS AND REPORTS
The Committee shall meet at least once annually, or more
frequently as circumstances dictate. Special meetings may be
convened as the Committee deems necessary or appropriate.
Members of the Committee may participate in a meeting of the
Committee by means of telephone conference call or similar
communications equipment by means of which all persons
participating in the meeting can hear each other. Except in
extraordinary circumstances as determined by the Chairperson of
the Committee, notice shall be delivered to all Committee members
at least 48 hours in advance of the scheduled meeting. Minutes of
each meeting will be kept and distributed to the entire Board.
The affirmative vote of a majority of the members of the
Committee present at the time of such vote will be required to
approve any action of the Committee. Subject to the requirements
of any applicable law, regulation or Nasdaq listing rule, any
action required or permitted to be taken at a meeting of the
Committee may be taken without a meeting if a consent in writing,
setting forth the action so taken, is signed by all of the
members of the Committee. Such written consent shall have the
same force as a unanimous vote of the Committee.
The Committee shall make regular reports to the Board.
IV. COMMITTEE AUTHORITY AND RESPONSIBILITIES
1. The Committee shall seek individuals qualified to become Board
members for recommendation to the Board, including evaluating
persons suggested by shareholders or others, and conduct the
appropriate inquiries into the backgrounds and qualifications of
possible nominees. The Committee shall determine each proposed
nominee's qualifications for service on the Board. The
assessment will include a review of the nominee's judgment,
experience, independence, possible conflicts of interest,
understanding of the Company's or other related industries, and
such other factors as the Committee concludes are pertinent in
light of the current needs of the Board. Each nominee should be a
person of integrity and be committed to devoting the time and
attention necessary to fulfill his or her duties to the Company.
Diversity of race, ethnicity, gender and age are important
factors in evaluating candidates for Board membership.
2. The Committee shall have the sole authority to retain and
terminate any search firm to be used to identify director
candidates and shall have sole authority to approve the search
firm's fees and other retention terms. The Committee shall also
have authority to obtain advice and assistance from internal or
external legal, accounting or other advisors. The Committee
shall keep the Board advised as to the general range of
anticipated expenses for outside consultants and experts.
23
3. The Committee shall evaluate the performance of each director
before recommending to the Board his or her re-nomination for an
additional term as director.
4. The Committee shall consider issues involving related party
transactions with directors and similar issues. The Committee
shall have the authority to consider for approval any related
party transactions and recommend for approval of such
transactions to the Board.
5. The Committee shall periodically review and reassess the
adequacy of the Corporate Code of Business Conduct and Ethics and
recommend any proposed changes to the Board for approval.
6. During the year, the Committee shall receive input on the
Board's performance from directors and, through its Chairman,
will discuss the input with the full Board and oversee the full
Board's review of its performance.
7. The Committee may form and delegate authority to subcommittees
when appropriate.
8. The Committee shall periodically review and reassess the
adequacy of this Charter and recommend any proposed changes to
the Board for approval.
9. The Committee shall annually review its own performance.
24
FOLD AND DETACH HERE
------------------------------------------------------------------------
PETMED EXPRESS, INC.
Proxy Solicited on Behalf of the Board of Directors of
PetMed Express, Inc.
The undersigned hereby appoints Bruce S. Rosenbloom and Alison Berges,
and each of them, proxies, with full power of substitution in each of
them, for and on behalf of the undersigned to vote as proxies, as
directed and permitted herein to vote the undersigned's shares of
PetMed Express, Inc. Common Stock at the Annual Meeting of
Stockholders of PetMed Express, Inc. to be held on Friday, August 6,
2004, at 1:00 p.m., at the Company's principal place of business and at
any adjournments thereof upon matters set forth in the proxy statement
and, in their judgment and discretion, upon such other business as may
properly come before the meeting.
This proxy when properly executed will be voted in the manner directed
as below and on the reverse hereof by the Stockholder.
If no direction is made, this proxy will be voted FOR all nominees
listed and FOR item 2.
Please Vote, Sign, Date and Return
Promptly in the
Enclosed Envelope.
Votes must be indicated
(x) in Black or Blue Ink. [X] The Board of Directors recommends
a vote "FOR" each item.
1. To elect six (6) members to the Board of Directors:
FOR all nominees WITHHOLD AUTHORITY to *EXCEPTIONS
Listed below [ ] vote for all nominees [ ] [ ]
listed below
Nominees: Menderes Akdag, Frank J. Formica, Gian Fulgoni, Ronald Korn,
Marc A. Puleo, M.D., and Robert C. Schweitzer
Instructions: To withhold authority To cumulate votes as to a particular
to vote for any individual nominee, nominee(s) as explained in the Proxy
mark the "*Exceptions" box and write Statement, indicate the name(s) and
that nominee's name in the space the number of votes to be give to
provided below. such nominee(s) in the "**Cumulate"
box provided below.
------------------------------------ ------------------------------------
[*Exceptions ] [**Cumulate ]
[ ] [ ]
[ ] [ ]
------------------------------------ ------------------------------------
(Continued and to be dated and signed on the reverse side)
PetMed Express, Inc.
1441 SW 29th Avenue
Pompano Beach, FL 33069
FOLD AND DETACH HERE
------------------------------------------------------------------------
2. To ratify the appointment of [ ] FOR [ ] AGAINST [ ] ABSTAIN
Goldstein Golub Kessler LLP
as independent auditors.
To include any comments,
please mark this box. [ ]
To change your address,
please mark this box. [ ]
Dated:_____________________________, 2004
_________________________________________
Stockholder sign here
_________________________________________
Co-Owner sign here (if applicable)
The signature on this Proxy should
correspond exactly with stockholder's name
as it appears herein. In case of joint
tenancies, co-executors, or co-trustees,
both should sign. Persons signing as
Attorney, Executor, Administrator, Trustee
or Guardian should give their full title.