UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
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Conn's, Inc.
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CONN'S, INC.
3295 College Street
Beaumont, Texas 77701
(409) 832-1696
NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS
To Be Held June 3, 2008
To the Stockholders of Conn's, Inc.:
NOTICE IS HEREBY GIVEN that the 2008 annual meeting of stockholders of Conn's,
Inc. will be held on Tuesday, June 3, 2008, at 3295 College Street, Beaumont,
Texas 77701, commencing at 10:00 a.m. local time, for the following purposes:
1. to elect nine (9) directors;
2. to ratify the Audit Committee's appointment of Ernst & Young, LLP
as our independent public accountants for the fiscal year ending
January 31, 2009; and
3. to transact such other business as may properly come before the
meeting.
A copy of the proxy statement relating to the 2008 annual meeting of
stockholders, in which the foregoing matters are described in more detail, and
our Annual Report on Form 10-K outlining our operations for the fiscal year
ended January 31, 2008, accompanies this notice of 2008 annual meeting of
stockholders. For your additional convenience, the Company is posting a copy of
this Proxy Statement and the Annual Report on Form 10-K for the fiscal year
ended January 31, 2008 on the Company's website at www.conns.com, under
"investor relations - 2008 proxy statement".
Only stockholders of record at the close of business on April 18, 2008,
are entitled to notice of and to vote at the 2008 annual meeting of stockholders
or any adjournment thereof. A list of such stockholders, arranged in
alphabetical order and showing the address of and the number of shares
registered in the name of each such stockholder, will be available for
examination by any stockholder for any purpose relating to the meeting during
ordinary business hours for a period of at least ten days prior to the meeting
at the principal offices of the Company located at 3295 College Street,
Beaumont, Texas 77701.
Your vote is important. Whether or not you expect to be present at the
meeting, please complete, sign, date and return promptly the enclosed form of
proxy in the enclosed pre-addressed, postage-paid return envelope.
By Order of the Board of Directors,
/s/ Sydney K. Boone, Jr.
------------------------
SYDNEY K. BOONE, JR.
Secretary
April 23, 2008
Beaumont, Texas
This proxy statement is first being mailed to our stockholders on or about April
25, 2008.
PROXY STATEMENT
2008 ANNUAL MEETING OF STOCKHOLDERS
Date: June 3, 2008
Time: 10:00 a.m. local time
Location: Conn's, Inc., 3295 College Street, Beaumont, Texas
77701
Record Date and April 18, 2008. Holders of our common stock are
Number of Votes: entitled to one vote for each share of common
stock they owned as of the close of business on
April 18, 2008. You may not cumulate votes.
Agenda: 1. to elect nine directors;
2. to ratify the Audit Committee's appointment of
Ernst & Young, LLP as our independent public
accountants for the fiscal year ending January
31, 2009; and
3. to transact such other business as may properly
come before the meeting.
Proxies: Unless you tell us on the enclosed form of proxy to
vote differently, we will vote signed returned
proxies "FOR" the board nominees. The proxy holders
will use their discretion on other matters. If a
nominee cannot or will not serve as a director, the
proxy holders will vote for a person whom they
believe will carry on our present policies.
Proxies The Board of Directors
Solicited By:
First Mailing Date: We are first mailing this Proxy Statement and the
form of proxy on or about April 25, 2008.
Revoking Your Proxy: You may revoke your proxy before it is voted at the
the meeting. To revoke your proxy, follow the
procedures listed on page 2 under "General
Information Regarding the 2008 Annual Meeting of
Stockholders; Revocation of Proxies."
PLEASE VOTE BY RETURNING YOUR PROXY. YOUR VOTE IS IMPORTANT.
Prompt return of your proxy will help reduce the costs of re-solicitation.
Table of Contents
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Page
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GENERAL INFORMATION REGARDING THE 2008 ANNUAL MEETING OF STOCKHOLDERS.............................1
Quorum.......................................................................................1
Votes Required to Approve Proposals..........................................................1
Record Date, Shares Outstanding and Number of Votes..........................................1
Method of Counting Votes, Abstentions and Broker Non-Votes...................................1
How the Proxies Will Be Voted................................................................1
Revocation of Proxies........................................................................2
Stockholder Proposals and Other Business.....................................................2
Solicitation of Proxies......................................................................2
Annual Report................................................................................3
PROPOSALS FOR STOCKHOLDER ACTION..................................................................4
PROPOSAL ONE: ELECTION OF DIRECTORS...............................................................4
Number of Directors to be Elected............................................................4
Board Nominees...............................................................................4
PROPOSAL TWO: RATIFICATION OF THE SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS.....................5
BOARD OF DIRECTORS................................................................................6
Board of Director Nominees:..................................................................6
Nomination Policies and Procedures Governance................................................7
Independent Board Composition................................................................8
Board Meetings...............................................................................9
Policy Regarding Director Attendance at the Annual Meeting of Stockholders...................9
Committees of the Board......................................................................9
COMPENSATION DISCUSSION AND ANALYSIS.............................................................10
Overview....................................................................................10
Objectives/Reward...........................................................................10
Elements of and Determining Compensation....................................................11
Employment Agreements.......................................................................13
Other Compensation..........................................................................14
Compensation for the Named Executive Officers in Fiscal 2008................................14
COMPENSATION COMMITTEE REPORT....................................................................15
Compensation Tables.........................................................................16
Termination of Employment and Change of Control Arrangements................................19
Compensation of Non-Employee Directors......................................................20
Indemnification Arrangements................................................................21
CORPORATE GOVERNANCE.............................................................................22
Code of Ethics..............................................................................22
Stockholder Communications with the Board...................................................22
AUDIT COMMITTEE REPORT...........................................................................23
The Committee...............................................................................23
Review and Discussion.......................................................................23
Recommendation..............................................................................23
PERFORMANCE GRAPH................................................................................24
EXECUTIVE OFFICERS...............................................................................25
Biographical Information....................................................................25
Equity Incentive Plans......................................................................27
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS AND PRINCIPAL STOCKHOLDERS......................28
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................31
Review and Approval of Related Person Transactions..........................................31
Lease Arrangement...........................................................................31
Independent Contractor......................................................................31
Indirect Ownership in Service Provider......................................................31
Stock repurchase services...................................................................32
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..........................................33
INDEPENDENT PUBLIC ACCOUNTANTS...................................................................33
i
GENERAL INFORMATION REGARDING THE 2008 ANNUAL MEETING OF STOCKHOLDERS
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Quorum
The holders of a majority of the outstanding shares of common stock
entitled to vote at the 2008 annual meeting of stockholders, represented in
person or by proxy, will constitute a quorum at the meeting. However, if a
quorum is not present or represented at the meeting, the stockholders entitled
to vote at the meeting, present in person or represented by proxy, have the
power to adjourn the meeting, without notice, other than by announcement at the
meeting, until a quorum is present or represented. At any such adjourned meeting
at which a quorum is present or represented, any business may be transacted that
might have been transacted at the original meeting.
Votes Required to Approve Proposals
To be elected, directors must receive a plurality of the shares voting in
person or by proxy, provided a quorum exists. A plurality means receiving the
largest number of votes, regardless of whether that is a majority. A majority of
the votes cast is required to approve the ratification of Ernst & Young, LLP as
our independent public accountants, provided a quorum exists.
Record Date, Shares Outstanding and Number of Votes
Only stockholders of record as of the close of business on April 18,
2008, the record date set for the meeting by our board, are entitled to notice
of and to vote at the meeting or any adjournments of the meeting. On the record
date, there were 22,401,836 shares of our common stock issued and outstanding
and entitled to vote. Each share of common stock entitles the holder to one vote
per share.
Method of Counting Votes, Abstentions and Broker Non-Votes
Votes cast by proxy or in person will be counted by the inspector of
election appointed by the Company.
Those who fail to return a proxy or who do not attend the meeting will
not count towards determining any required quorum, plurality or majority of
votes cast. Stockholders and brokers returning proxies or attending the meeting
who abstain from voting on the election of directors or on the proposal to
ratify Ernst & Young, LLP as our independent public accountants will count
towards determining a quorum. Such abstentions will have no effect on the
election of our directors and will not impact how the shares in the Conn's
Voting Trust are voted, which votes in the same proportion as the votes cast
"for" and "against" a proposal by all other shareholders, not counting
abstentions.
Brokers holding shares of record for customers generally are not entitled
to vote on certain matters unless they receive voting instructions from their
customers. Brokers are permitted to vote on routine, non-controversial proposals
in instances where they have not received voting instructions from the
beneficial owner of the stock, e.g., ratification of independent public
accountants, but are not permitted to vote on non-routine matters. In the event
that a broker does not receive voting instructions for non-routine matters, a
broker may notify us that it lacks voting authority to vote those shares. These
"broker non-votes" refer to votes that could have been cast on the matter in
question by brokers with respect to uninstructed shares if the brokers had
received their customers' instructions. The inspector of election will treat
broker non-votes as shares that are present and entitled to vote for the purpose
of determining the presence of a quorum. However, for the purpose of determining
the outcome of any matter as to which the broker has indicated on the proxy that
it does not have discretionary authority to vote, those shares will be treated
as not present and not entitled to vote with respect to that matter (even though
those shares are considered entitled to vote for quorum purposes and may be
entitled to vote on other matters). These broker non-votes will have no effect
on the outcome of the election of our directors or on the proposal to ratify
Ernst & Young, LLP as our independent public accountants.
How the Proxies Will Be Voted
The enclosed proxies will be voted in accordance with the instructions
you place on the form of proxy. Unless you tell us on the enclosed form of proxy
to vote differently, we will vote signed returned proxies "FOR" the board
nominees and "FOR" ratification of the selection of Ernst & Young as our
independent public accountants for our fiscal year ending January 31, 2009. The
proxy holders will use their discretion on other matters. If a nominee cannot or
will not serve as a director, the proxy holders will vote for a person whom they
believe will carry on our present policies.
Pursuant to the terms of a voting trust agreement entered into by
Stephens Group, Inc., Stephens Inc. and certain affiliates of Stephens Inc.,
which collectively own approximately 22.6% of our common stock, unless the
voting trust is revoked, the trustee of the voting trust must vote the shares of
common stock held by the voting trust "FOR" or "AGAINST" any proposal or other
matter submitted to the stockholders of the company for approval in the same
proportion as the votes cast "FOR" and "AGAINST" such proposal or other matter
by all other stockholders, not counting abstentions. Therefore, each proxy
received voting "FOR" or "AGAINST" any proposal will result in a proportionate
number of shares held in the voting trust to be voted "FOR" or "AGAINST" a
proposal. Abstentions and broker non-votes will not impact how the shares in the
voting trust are counted.
Revocation of Proxies
You may revoke your proxy before it is voted. Any stockholder returning
the enclosed form of proxy may revoke such proxy at any time prior to its
exercise by:
o delivering a signed proxy, dated later than the original proxy, to
our transfer agent, Computershare., at 250 Royall Street, Canton,
Massachusetts 02021, Attention: Patrick E. Thebado (please make
sure our transfer agent receives your proxy at least two business
days prior to the date of the meeting);
o delivering a signed, written revocation letter, dated later than
the proxy, to our transfer agent, Computershare, at 250 Royall
Street, Canton, Massachusetts 02021, Attention: Patrick E. Thebado
(please make sure our transfer agent receives your revocation
letter at least two business days prior to the date of the
meeting); or
o attending the meeting and voting in person (attending the meeting
alone will not revoke your proxy).
Your last vote is the vote that will be counted.
Stockholder Proposals and Other Business
From time to time, stockholders seek to nominate directors or present
proposals for inclusion in our proxy statement and form of proxy for
consideration at an annual meeting of stockholders. To be included in our proxy
statement and form of proxy or considered at our next annual meeting, you must
timely submit nominations of directors or proposals, in addition to meeting
other legal requirements. We must receive your nominations and/or proposals for
the 2009 annual meeting for possible consideration at the meeting no earlier
than December 26, 2008 and no later than January 25, 2009 and by no later than
December 26, 2008 for possible inclusion in the proxy statement. However, if the
date of the 2009 annual meeting changes by more than 30 days from the date of
this year's meeting, then we must receive your nominations and/or proposals
within a reasonable time before we begin to print and mail our proxy materials.
We do not intend to bring any business before the 2008 annual
stockholders meeting other than the matters described in this proxy statement
nor have we been informed of any matters that may be presented at the meeting by
others. If however, any other business should properly arise, the persons
appointed in the enclosed proxy have discretionary authority to vote in
accordance with their best judgment.
Solicitation of Proxies
The cost of soliciting proxies will be borne by the Company. In addition
to the solicitation of proxies by mail, solicitation may be made by our
directors, officers and employees by other means, including telephone, email or
in person. No special compensation will be paid to directors, officers or
employees for the solicitation of proxies. To solicit proxies, we also will
request the assistance of banks, brokerage houses and other custodians, nominees
or fiduciaries, and, upon request, will reimburse such organizations or
individuals for their reasonable expenses in forwarding soliciting materials to
beneficial owners and in obtaining authorization for the execution of proxies.
2
Annual Report
The booklet containing this proxy statement also contains our Annual
Report to Stockholders on Form 10-K, including audited consolidated financial
statements for the year ended January 31, 2008. The booklet has been mailed to
all stockholders of record as of the close of business on April 18, 2008. Any
stockholder that has not received a copy of our annual report may obtain a copy,
without charge, by writing to us at 3295 College Street, Beaumont, Texas 77701,
Attention: Sydney K. Boone, Jr., Corporate General Counsel. You may also obtain
a copy of this proxy statement and Form 10-K together with all of our SEC
filings through the Company's website at www.conns.com and at the SEC's website
at www.sec.gov.
3
PROPOSALS FOR STOCKHOLDER ACTION
--------------------------------
PROPOSAL ONE:
ELECTION OF DIRECTORS
Number of Directors to be Elected
Our board is currently constituted with nine director positions, all of
which positions are to be elected at the 2008 annual meeting of stockholders.
The nine directors elected at the annual meeting will hold office until the 2009
annual meeting of stockholders or until their respective successors have been
elected and qualified or their earlier death resignation or removal. You may not
vote for a greater number of directors than those nominated.
Board Nominees
Our board of directors met in March 2008 and considered the candidates
for election to the board at the 2008 annual meeting. The Nominating and
Corporate Governance Committee of the Board of Directors, consisting of three
(3) of the independent members of the current board of directors, recommended
that the full board nominate:
Thomas J. Frank, Sr.
Marvin D. Brailsford
Jon E.M. Jacoby
Bob L. Martin
Douglas H. Martin
William C. Nylin, Jr.
Scott L. Thompson
William T. Trawick
Theodore M. Wright
for re-election to the Board of Directors at the 2008 annual meeting. Each of
the nominated directors were elected and served on the board of directors from
the 2007 annual meeting. In making these recommendations, the Nominating and
Corporate Governance Committee considered the requirements and qualifications
discussed under "Board of Directors; Nominating Policies" on page 11 of this
Proxy Statement. Based on this recommendation, our board has nominated:
Thomas J. Frank, Sr.
Marvin D. Brailsford
Jon E.M. Jacoby
Bob L. Martin
Douglas H. Martin
William C. Nylin, Jr.
Scott L. Thompson
William T. Trawick
Theodore M. Wright
to be elected by the stockholders at the 2008 annual meeting. All nominees have
consented to serve as directors. The board has no reason to believe that any of
the nominees will be unable or unwilling to act as a director. In the event any
of these nominated directors is unable to stand for election, the board of
directors may either reduce the size of the board or designate a substitute.
For biographical information regarding each of the board's nominees for
director, please refer to "Board of Directors; Board Nominees" on page 6 of this
Proxy Statement.
We Recommend That You Vote For Each Of The Board Nominees.
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4
PROPOSAL TWO:
RATIFICATION OF THE SELECTION OF INDEPENDENT
PUBLIC ACCOUNTANTS
Ernst & Young LLP served as our independent public accountants for the
fiscal year ended January 31, 2008. The Audit Committee of the Board has
selected Ernst & Young, LLP as our independent public accountants for the fiscal
year ending January 31, 2009. Our Board of Directors has further directed that
we submit the selection of our independent public accountants for ratification
by the stockholders at the 2008 Annual Meeting. Stockholder ratification of the
selection of Ernst & Young, LLP as our independent public accountants is not
required by our Bylaws or otherwise. However, the Board is submitting the
selection of Ernst & Young, LLP to the stockholders for ratification as a matter
of good corporate practice. The Audit Committee believes it to be in the best
interests of our stockholders to retain Ernst & Young, LLP as our independent
public accountants for the fiscal year ended January 31, 2009. If the
stockholders fail to ratify the selection, the Audit Committee will reconsider
whether or not to retain Ernst & Young, LLP. Even if the selection is ratified,
the Audit Committee in its discretion may direct the appointment of a different
independent public accounting firm at any time during the year if they determine
that such a change would be in our best interests and those of our stockholders.
The Audit Committee annually reviews the performance of our independent public
accountants and the fees charged for their services. The Audit Committee
anticipates, from time to time, obtaining competitive proposals from other
independent public accounting firms for our annual audit. Based upon the Audit
Committee's analysis of this information, we will determine which independent
public accounting firms to engage to perform our annual audit each year.
Representatives of Ernst & Young, LLP will attend the 2008 annual meeting of
stockholders and will be available to respond to appropriate questions that may
be asked by stockholders. These representatives will also have an opportunity to
make a statement at the meeting if they desire to do so.
We Recommend That You Vote For the Ratification of Ernst & Young, LLP
---------------------------------------------------------------------
As Our Independent Public Accounting Firm.
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5
BOARD OF DIRECTORS
Board of Director Nominees:
Thomas J. Frank, Sr. was appointed as our Chairman of the Board and Chief
Executive Officer in 1994. He has been employed by us for 48 years, has been a
member of our board of directors since 1980 and has held every key management
position within the organization, including responsibilities for distribution,
service, credit, information technology, accounting and general operations. Mr.
Frank holds a B.A. degree in industrial arts from Sam Houston State University
and attended graduate courses at Texas A&M University. Mr. Frank completed the
SCMP course at Harvard University. Mr. Frank is 68 years old.
Marvin D. Brailsford has served as a director since September 2003. From
1996 until 2002, General Brailsford served as Vice President-Material
Stewardship Project Manager for the U.S. government's Rocky Flats Environmental
Technology Site where he was responsible for managing engineered systems and
commodities purchasing. From 1992 to 1996, General Brailsford was president of
the Brailsford Group, Inc., a management consulting company, and served as
president of Metters Industries, Inc., an information technology and systems
engineering company, during this time period. In 1992, he retired from the U.S.
Army as a Lieutenant General, after 33 years of service, most recently where he
served as Deputy Commanding General Materiel Readiness/Executive Director for
Conventional Ammunition at the U.S. Materiel Command in Alexandria, Virginia.
Since 1996, General Brailsford has served on the board of directors of Illinois
Tool Works, Inc. and has been a member of its audit committee and chairman of
its corporate governance and nominating committee. He also serves or has served
on the boards of directors of various private and governmental entities. General
Brailsford earned a B.S. degree in biology from Prairie View A & M University
and a M.S. degree in bacteriology from Iowa State University. He is also a
graduate of the Executive Program at the Graduate School of Business
Administration, University of California at Berkley; Harvard University's John
F. Kennedy School of Government; the U.S. Army Command and General Staff
College; and the Army War College. General Brailsford is 69 years old.
Jon E. M. Jacoby has served as a director since April 2003. In September
2006 Mr. Jacoby was elected Vice Chairman and Senior Principal of The Stephens
Group LLC, a family-owned investment company. In September 2003, he retired as a
Vice Chairman of Stephens Inc., where he had been employed since 1963. His
positions included Investment Analyst, Assistant to the President and Manager of
the Corporate Finance Department and the Special Investments Department for
Stephens Group, Inc. Mr. Jacoby serves on the board of directors of Power-One,
Inc. and Eden Bioscience Corporation. He received his B.S. from the University
of Notre Dame and his M.B.A. from Harvard Business School. Mr. Jacoby is 70
years old.
Bob L. Martin has served as director since September 2003. Mr. Martin has
over 32 years of retailing and merchandising experience. Prior to retiring from
the retail industry in 1999, he headed the international operations of Wal-Mart
International, Inc. for 15 years. From 1968 to 1983 Mr. Martin was responsible
for technology services for Dillard's, Inc. He currently serves on the board of
directors of Gap, Inc., Sabre Holdings Corporation, Furniture Brands
International and Guitar Center, Incorporated. He has experience as chairman of
the corporate governance committee and compensation committee, and has been a
member of the audit committee of publicly held companies. Mr. Martin attended
South Texas University and holds an honorary doctorate degree from Southwest
Baptist University. Mr. Martin is 59 years old.
Douglas H. Martin has served as a director of the predecessor to the
Company since 1998, and was appointed a director of the Company in September
2003, when it became a publicly held entity. Mr. Martin is an Executive Vice
President of Stephens Inc. where he has been employed since 1981. He is
responsible for the investment of the firm's capital in private companies. Mr.
Martin serves as a member of the board of directors of numerous privately held
companies. He received his B.A. in physics and economics from Vanderbilt
University and his M.B.A. from Stanford University. Mr. Martin is 54 years old.
6
William C. Nylin, Jr. was appointed to our board as Executive Vice
Chairman of the Board by the board of directors on March 28, 2006, to fill the
newly created ninth board position. Dr. Nylin served as our Chief Operating
Officer from 1995 until June 1, 2007. From 1995 until April 1, 2006, Dr. Nylin
also served as our President. He was a director of the predecessor to the
Company commencing in 1993, and remained a member until September 2003, when the
Company became a publicly held entity. In addition to responsibilities as
Executive Vice Chairman, Dr. Nylin has direct responsibility for information
technology and risk management, From 1984 to 1995, Dr. Nylin held several
executive management positions, including Deputy Chancellor and Executive Vice
President of Finance and Operation, at Lamar University in Beaumont, Texas. Dr.
Nylin obtained his B.S. degree in mathematics from Lamar University, and holds
both a masters and doctorate degree in computer sciences from Purdue University.
He has also completed a post-graduate program at Harvard University. Dr. Nylin
is 65 years old.
Scott L. Thompson has served as a director since June 2004. Mr. Thompson
is recently retired from Group 1 Automotive, Inc. where he played a major role
in the founding and subsequent growth of that New York Stock Exchange listed and
Fortune 500 Company. He served as Executive Vice President, Chief Financial
Officer and Treasurer of Group 1 from February 2002 until his retirement in
January 2005. From 1996 until February 2002, Mr. Thompson served as Senior Vice
President, Chief Financial Officer and Treasurer of Group 1. From 1991 to 1996,
Mr. Thompson served as Executive Vice President, Operations and Finance for KSA
Industries, Inc., a billion dollar diversified enterprise with interests in
automotive retailing, investments, energy and professional sports. Mr. Thompson
is also a director of UAP Holding Corp. and Houston Wire and Cable. Mr. Thompson
has extensive experience in automotive retailing, investments, energy and
professional sports and is a certified public accountant. Mr. Thompson is 49
years old.
William T. Trawick has served as a director of the Company since
September 2003, when the Company became a publicly held entity. Since August
2000, Mr. Trawick has served as Executive Director of NATM Buying Corporation
where he oversees the administrative activities of the multi-billion dollar
regional group purchasing program of which we are a member. He also functioned
as a consultant to our merchandising department until September, 2006. From
September 1996 to July 1999, Mr. Trawick served as our Vice President of
Merchandising and was responsible for all product purchasing, merchandising and
store operations. Mr. Trawick is 61 years old.
Theodore M. Wright has served as a director since September 2003, when
the Company became a publicly held entity. Mr. Wright served as the President of
Sonic Automotive, Inc., a New York Stock Exchange listed and Fortune 300
automotive retailer, from October 2002 until his retirement in April 2005.
Previously Mr. Wright served as its chief financial officer from April 1997 to
April 2003. From 1995 to 1997, Mr. Wright was a Senior Manager in Deloitte &
Touche LLP's Columbia, South Carolina office. From 1994 to 1995, he was a Senior
Manager in Deloitte & Touche LLP's National Office of Accounting Research and
SEC Services Department. Mr. Wright received a B.A. from Davidson College. Mr.
Wright is 45 years old.
If elected, these directors will serve one year terms which expire at our
2009 annual meeting of stockholders.
Nomination Policies and Procedures Governance
In preparation of our initial public offering, we conducted a thorough
process of selecting qualified directors for our board. All directors whose
terms expire at this annual meeting, except Mr. Jacoby, Dr. Nylin, and Mr.
Thompson, were appointed in September 2003 in preparation for that offering. Mr.
Jacoby was appointed to our board in April 2003, Mr. Thompson was appointed to
our board in June 2004, and Dr. Nylin was appointed to our Board in March 2006.
At our Board of Directors meeting held March 25, 2008, our board created a
Nominating and Corporate Governance Committee consisting of three (3) of our
independent directors. The Nominating and Corporate Governance Committee
recommended and will continue to recommend director nominees for the full
board's selection.
The goal of our board has been, and continues to be, to identify nominees
for service on the board of directors who will bring a variety of perspectives
and skills from their professional and business experience. In furtherance of
this goal, our board has adopted nominating policies and procedures which are
available on our website at www.conns.com under "Investor Relations -
Governance". The Nominating and Corporate Governance Committee will consider
candidates for nomination proposed by stockholders so long as they are made in
accordance with the provisions of Section 2.14 of our Bylaws.
7
For the Nominating and Corporate Governance Committee to consider
candidates recommended by stockholders, Section 2.14 of our Bylaws requires that
the stockholder provide written notice to our Secretary no later than the close
of business on the ninetieth (90th) day nor earlier than the close of business
on the one hundred twentieth (120th) day prior to the anniversary date of the
mailing of the proxy statement for the immediately preceding annual meeting of
the stockholders. The notice to our Secretary must set forth (a) as to each
person whom the stockholder proposes to nominate for election or re-election as
a director, information relating to such person that is required to be disclosed
in solicitations of proxies for election of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the Securities Exchange Act of
1934 (including such person's written consent to being named in the proxy
statement as a nominee and to serve as a director if elected); (b) as to any
other business that the stockholder proposes to bring before the meeting, a
brief description of such business, the reasons for conducting such business at
the meeting and any material interest in the business by the stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address, as they
appear on the company's books, of such stockholder and beneficial owner; and
(ii) the class and number of shares of the company that are owned beneficially
and held of record by such stockholder and such beneficial owner.
Notwithstanding this procedure, the Board may, in its discretion, exclude from
any proxy materials sent to stockholders any matters that may properly be
excluded under the Exchange Act, Securities and Exchange Commission rules or
other applicable laws.
The independent directors believe that the minimum requirements for a
person to be qualified to be a member of the board of directors, are that a
person must (i) be an individual of the highest character and integrity and have
an inquiring mind, vision, a willingness to ask hard questions and the ability
to work well with others; (ii) be free of any conflict of interest that would
violate any applicable law or regulation or interfere with the proper and
reasonable performance of the responsibilities of a director; (iii) be willing
and able to devote sufficient time to the affairs of the company and be diligent
in fulfilling the responsibilities of a director and board committee member
(including developing and maintaining sufficient knowledge of the company and
its industry; reviewing and analyzing reports and other information important to
the board and committee responsibilities; preparing for, attending and
participating in board and committee meetings; and satisfying appropriate
orientation and continuing education guidelines); and (iv) have the capacity and
desire to represent the balanced, best interest of the stockholders as a whole
and not primarily a special interest group or constituency. The independent
directors evaluate whether certain individuals possess the foregoing qualities
and recommends to the board for nomination candidates for election or
re-election as directors at the annual meeting of stockholders, or if
applicable, at a special meeting of stockholders. This process is the same
regardless of whether the nominee is recommended by our board or one of our
stockholders.
Independent Board Composition
Nasdaq requires that a majority of the board of directors of a listed
company be "independent". Nasdaq's rules provide that an independent director is
a person other than an officer or employee of the company or its subsidiaries or
any other individual having a relationship that, in the opinion of the company's
board of directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. Utilizing and applying the
rules of Nasdaq as to whether a director is considered to not be independent,
the board has determined during fiscal 2008 that the following directors are
independent as defined by NASD listing standards: Marvin D. Brailsford, Jon E.M.
Jacoby, Bob L. Martin, William T. Trawick, Scott L. Thompson, and Theodore M.
Wright.
In the course of determination of each director's independence, the board
considered Mr. Jacoby's service as Vice Chairman and Senior Principal of The
Stephens Group LLC, a merchant banking firm, and the transfer of our Common
Stock equal to 24.1% of our outstanding shares out of the Stephens Voting Trust,
including shares held by Mr. Jacoby. Mr. Jacoby is not involved in the
investment banking side of Stephens, Inc, which has provided investment banking
and brokerage services to us in the past. After taking into account such
positions held by Mr. Jacoby with a significant shareholder, given his exercise
of independent judgment as one of our directors over the years, the fact that
Mr. Jacoby is not involved with Stephens, Inc., the investment banking firm, and
his lack of control of the voting of common stock, our board of directors
determined that above-described relationship would not interfere with the
exercise of his independent judgment in carrying out his responsibilities as one
of our directors.
8
The independent directors of the board held executive sessions at each
meeting of the board of directors during fiscal 2008.
Board Meetings
During fiscal 2008, the board held four regularly scheduled meetings and
one telephonic meeting. Each person serving as a director during fiscal 2008
attended at least seventy-five percent (75%) of the board meetings held during
the period he served as director during fiscal 2008.
Policy Regarding Director Attendance at the Annual Meeting of Stockholders
It is our policy that each member of the board of directors is encouraged
to attend our annual meeting of stockholders. Each director serving at the time
of last year's annual meeting attended our annual meeting of stockholders.
Committees of the Board
Audit Committee
The Audit Committee recommends the appointment of our independent
auditors. It also approves audit reports and plans, accounting policies, audit
fees and certain other expenses. In connection with the rules adopted by the SEC
and NASD, we adopted a written charter for the Audit Committee, which is posted
on our website at www.conns.com under "Investor Relations". The Audit Committee
reviews and reassesses the adequacy of the written charter on an annual basis.
Messrs. Wright, Brailsford and Thompson serve on the Audit Committee. The
Audit Committee held four regularly scheduled meetings and two telephonic
meetings in fiscal 2008, each of which was attended by all of the members. The
board has determined that each of Mr. Wright and Mr. Thompson is an "audit
committee financial expert" as defined by SEC rules. In addition, each of the
members of the Audit Committee is "independent" as defined by the NASD listing
standards and the Sarbanes-Oxley Act of 2002.
Compensation Committee
The Compensation Committee establishes, reviews and approves the CEO
compensation package, and reviews and approves other senior executive officer
compensation. It also evaluates the compensation plans, policies and programs to
the executive officers of the company and makes recommendations to the board of
directors concerning such plans, policies and programs, advises the board
regarding compensation plans, policies and programs applicable to non-employee
directors for their services as a director and administers the Company's stock
option, stock purchase and other plans. The Compensation Committee also
evaluates the competitiveness of our compensation and the performance of our
executive officers, including our Chief Executive Officer. In connection with
the rules adopted by the SEC and NASD, the Company adopted a written charter for
the Compensation Committee, which is posted on our website at www.conns.com
under "Investor Relations."
Messrs. Jacoby, Trawick, and Wright serve on the Compensation Committee.
The Compensation Committee held three regular meetings in fiscal 2008 and two
telephonic meetings, each of which was attended by all members of the Committee.
All members of the Compensation Committee were determined to be independent
directors as defined by NASD regulations. Additional information on the
Committee's processes and procedures for consideration of executive compensation
are addressed in the Compensation Discussion and Analysis section of this proxy
statement below.
9
Nominating and Corporate Governance Committee
At the Company's March 25, 2008 Board of Directors meeting, the Board
approved the creation and appointed members of the Nominating and Corporate
Governance Committee. This Committee advises and makes recommendations to the
Board with respect to corporate governance principles and directorship
practices, and recommends qualified candidates to the Board, in accordance with
criteria approved by the Board, for election as directors of the Company,
including the directors that the Board has approved and proposes for election by
stockholders at the Annual Meeting. The Committee will periodically review and
make recommendations regarding the Company's corporate governance policies and
procedures as exist from time to time, and copies of which are discussed below
under "Corporate Governance" and are posted on the Company's website at
www.conns.com under "Investor Relations". The Company adopted a written charter
for the Committee, which is also posted on our website at www.conns.com under
"Investor Relations".
Members of the Committee are appointed by the Board. The members of the
Committee serve until their successors are duly elected and qualified, and they
may be removed by the Board of Directors in its discretion. Members of the
Committee are independent directors who are not employees of the Company or any
of its subsidiaries. The initial members of the Committee are Jon E.M. Jacoby,
Chairman, William T. Trawick and Bob L. Martin. All members of the Committee
were determined to be independent directors as defined by NASD regulations as
explained above.
--------------------------------------------------------------------------------
COMPENSATION DISCUSSION AND ANALYSIS
Overview
We have developed a compensation program for executives and key employees
designed to: (i) reward performance that increases the value of our common
stock; (ii) attract, retain and motivate executives and key employees with
competitive compensation opportunities; and (iii) build and encourage ownership
of our shares of common stock. Toward these goals, our compensation program has
been designed and implemented to reward our executives for strong financial and
operating performance and leadership attributes and examples, and to coordinate
these criteria with those of our shareholders. These goals are intended to
reward our executive officers and encourage their long term commitment to the
Company. We believe that our compensation programs, consisting of base salary,
annual bonus programs tied to the objective success of our Company's financial
performance, and equity incentive compensation program through granting of stock
options tied to the executive officers performance and retention desires,
fulfill our objectives.
Objectives/Reward
Reward Performance: The Company's performance is a key consideration in
determining executive compensation, combined with the continued performance and
service to the Company by each executive officer over an extended period of
time. The Company also considers the accomplishment of strategic direction and
goals, including specific business objectives. While our compensation policy
recognizes that stock price performance is one measure of performance, given
industry business conditions in the industry and our long-term strategic
direction and goals, the Company believes that it may not necessarily be the
best current measure of executive performance. The Company compensation packages
are based upon a company-wide compensation structure that emphasizes bonus
compensation based upon company pre-tax income performance and is consistent for
each position relative to its authority and responsibility.
Attract, Retain and Motivate: Our Company designs our compensation program with
the goal to obtain and retain the benefits of excellent executives in our
Company's significant areas of operations - sales, merchandising, distribution,
product service, consumer credit and training. We understand that we must be
competitive within our industry, including providing competitive salary, annual
bonus opportunities and long-term compensation as part of our overall
compensation program. Our equity compensation generally provides for vesting
periods of five (5) years for our stock option programs for all but two of our
employees - our Chief Executive Officer and our Executive Vice Chairman, each of
whom has an Employment Agreement providing for less than five (5) years before
retirement. This equity compensation aligns our executive officers' goals with
those of our shareholders, in providing for long term growth and related
compensation.
10
Encourage Ownership of our Shares of Common Stock: Equally important in our
compensation objectives is our desire for our executive officers to obtain and
benefit from ownership of our common stock. This is accomplished through the
deferred vesting of our stock option program, as explained above, and the
resulting accumulation of shares of common stock by our executive officers.
Determining Compensation
Our compensation program consists of three basic elements: (i) base salary; (ii)
annual bonus (both predetermined based on Company performance and individual
performance based); and (iii) equity awards. These components work together in
determining the overall compensation of our executive officers.
In applying the above-described objectives for our executive compensation
program, the Compensation Committee, in making its final determination,
primarily relies upon:
o input and recommendations received from the CEO, EVC, COO and
other supervisors of each executive officer except the CEO,
regarding the day-to-day performance of each individual and each
executive officer's areas of responsibilities and expectations for
future performance;
o publicly available information with respect to the executive
compensation practices of certain public companies in our
industry; and
o its own judgment and knowledge of the industry.
Input Received from Supervisors and our Executive Committee. The Compensation
Committee has historically relied in part on the input and recommendations of
the Chief Executive Officer and the Executive Vice Chairman and other
supervisors of our executive officers in making its final determination
regarding annual increases to base salaries of the executive officers,
individual levels for bonus compensation, and whether to grant long-term equity
awards to our executive officers and if so, in what forms and amounts. The
Compensation Committee believes that the Chief Executive Officer and the
Executive Vice Chairman, by virtue of their role in overseeing the day-to-day
performance of such individuals and their positions with us and their vast
experience in the industry, are appropriately suited to make informed
recommendations to the Compensation Committee with respect to the foregoing
elements of our executive compensation program. As discussed below, the
Compensation Committee alone determines the compensation for our Chief Executive
Officer.
Peer Group Data. While the Compensation Committee does not deem it necessary or
appropriate to base our executive compensation program on any comparative
analyses of the amounts and forms of compensation which are paid to executive
officers with comparable titles of at other public companies in the home
appliance and consumer electronics industry, it does review annually such other
public information of public companies of comparable size and nature to ours of
a retail business, as well as similarly situated public company's outside the
retail business industry,. We refer to such companies collectively as our "peer
group." For the year ended January 31, 2008, the companies which comprised our
peer group for this review were hhgregg, Inc., Circuit City Stores, Inc., and
Best Buy Co., Inc. The amount and structure of peer company compensation is a
factor in the Compensation Committee's determination of the compensation of
executive officers, but the Compensation Committee does not target compensation
of its executive officers based upon the levels of compensation of executives of
the companies in our peer group due to the nature and responsibility level of
each of our executive officers, since our business model and resulting levels of
responsibility are not comparable with that . However, based on the results of
the review of peer companies, the Compensation Committee may determine to modify
compensation of our executive officers. of any of the others of our peer group
Unlike the home appliance and electronics retailing companies in our peer group,
Conn's provides financing to its customers to assist in their purchases. This
provision of financing provides Conn's with income opportunities not available
to its peers, and requires additional management responsibilities and activities
by our executive officers that are not commensurate with or comparable to any
executive officers of companies in our peer group.
11
Other Factors. Key factors which also affect our executive compensation program
include our financial performance, to the extent that it may be fairly
attributed or related to the performance of a particular executive officer, as
well as the contribution of each executive officer relative to his individual
responsibilities and capabilities. While the Compensation Committee does
consider our stock price performance, it has not utilized it as a measure of our
financial performance, or the performance of our executive officers, given the
fact that it may not take into account a variety of factors including, but not
limited to, the business conditions within the industry as well as our long-term
strategic direction and goals.
Elements of Compensation
Our compensation program consists of three basic elements: (i) base salary; (ii)
bonus (both pre-determined based on the Company's performance and individual
performance based); and (iii) equity awards. These components work together in
determining the overall compensation of our executive officers.
Base Salary: Each executive officer receives a base salary determined by the
Compensation Committee to be commensurate with the officer's area of
responsibility and that officer's areas and extent of responsibility in relation
to the performance of the Company as a whole. The determination of this
component is made at the first Compensation Committee meeting during each fiscal
year, and is set for the ensuing fiscal year, or at other meetings as deemed
necessary by the Compensation Committee. Such base salaries are intended to
provide the executive officer with a competitive and equitable living salary.
Bonus: The Compensation Committee establishes our bonus program for all
executive officers and other employees of the Company, after receiving
recommendations from the CEO, the COO and the EVC for each individual executive
officer and employee. The bonus program is based on both pre-determined levels
of Company performance and bonus levels set for each executive officer based on
individual performance.
Executive officers receive bonus payments based on the Company's achievement of
pre-determined profit goals approved by the Compensation Committee each fiscal
year. For the fiscal years ended January 31, 2007 and 2008, the profit goals and
the bonus amount associated with each of those goals were as follows:
--------------------------------------------------------------------------------
Fiscal Year 2007 Pre-Tax Profit Goals
----------------------------------------------------
$ 61,700,000 $ 65,700,000 $ 71,000,000
--------------------------------------------------------------------------------
Name (1) (1) (1)
--------------------------------------------------------------------------------
Thomas J. Frank, Sr. 500,000 600,000 750,000
--------------------------------------------------------------------------------
David L. Rogers 112,500 158,693 225,000
--------------------------------------------------------------------------------
William C. Nylin, Jr. 250,000 352,652 500,000
--------------------------------------------------------------------------------
Timothy L. Frank 112,500 158,693 225,000
--------------------------------------------------------------------------------
David W. Trahan 112,500 158,693 225,000
--------------------------------------------------------------------------------
(1) Bonuses are calculated on a pro-rata basis when pre-tax profits fall
between the levels shown above.
12
--------------------------------------------------------------------------------------------------
Fiscal Year 2008 Pre-Tax Profit Goals
----------------------------------------------------------------------
$ 62,400,000 $ 65,400,000 $ 68,400,000 $ 71,400,000
--------------------------------------------------------------------------------------------------
Name (1) (1) (1) (1)
--------------------------------------------------------------------------------------------------
Thomas J. Frank, Sr. 500,000 583,333 666,667 750,000
--------------------------------------------------------------------------------------------------
David L. Rogers 150,000 196,154 246,154 300,000
--------------------------------------------------------------------------------------------------
William C. Nylin, Jr. 250,000 326,923 410,256 500,000
--------------------------------------------------------------------------------------------------
Timothy L. Frank 150,000 196,154 246,154 300,000
--------------------------------------------------------------------------------------------------
David W. Trahan 150,000 196,154 246,154 300,000
--------------------------------------------------------------------------------------------------
(1) Bonuses are calculated on a pro-rata basis when pre-tax profits fall
between the levels shown above. Pre-tax profits for purposes of the bonus
in fiscal year 2008 were calculated excluding any effect of gain or loss
from fair value adjustments recorded related to our interest in
securitized assets.
Individual executive officers and other employees may also receive bonus
payments based on individual performance. These bonus levels, are recommended by
the CEO, the EVC, and the COO, and determined by the Compensation Committee,
based on that officer's or employee's level of responsibility and ability to
affect the performance of his area of responsibility and the Company's
performance. The Company does not have any direct criteria for individual
performance bonus amounts or payments, nor are these based upon any percentage
of the individuals' base salary or goals. At the end of each fiscal year, the
Compensation Committee may additionally establish individual performance bonus
awards for each executive officer and employee upon recommendation of the Chief
Executive Officer and the Executive Vice Chairman.
For each of these elements, the Compensation Committee in making its final
determination, reviews recommendations from our Chief Executive Officer, or CEO,
and our Executive Vice Chairman, or EVC, of the amounts and timing of each,
based upon their respective day to day working knowledge of the performance of
each individual and each such individuals areas of responsibility and
expectations for future performance and rewards. The Compensation Committee
alone determines the compensation of the CEO. The Compensation Committee also
relies on its explicit knowledge of the industry and our peers in determining
the final salary, bonus and equity awards on a comparative basis as deemed
appropriate and necessary to reward and maintain the executives as an integral
part of the Company's executive team and its overall performance and
achievements.
Employment Agreements
Our Chief Executive Officer and Executive Vice Chairman each have been accorded
Employment Agreements expiring on January 31, 2011 and 2010, respectively, and
our Chief Financial Officer had an Employment Agreement that expired on January
31, 2008. Our Chief Financial Officer announced his retirement effective January
31, 2008, and as a result his Employment Agreement expired at that time, with no
further obligation of the Company to him for any further compensation. Each
employment agreement may be renewed for successive one year periods upon the
mutual written consent of the Company and the executive officer. Under the terms
of these employment agreements, each of these officers is entitled to payment of
an annual salary plus a bonus based upon attainment of performance goals
determined by our Compensation Committee, to participate in our employee benefit
plans and receive options to purchase shares of our common stock. In the event
that we terminate the executive officer's employment other than for cause or we
do not renew the employment agreement when it expires, other than our CFO's
employment agreement that expired, we are obligated to pay the executive officer
severance in an amount equal to the executive officer's annual base salary.
Under these employment agreements, the executive agreed to a confidentiality
agreement as well as not to compete with the Company for period of one year
following the termination of the Agreement and not to solicit our employees to
work for anyone else for a period of two years following the termination of the
Agreement.
13
Other Compensation
We provide our named executive officers with other benefits, as reflected in the
All Other Compensation column in the Summary Compensation Table on page 16,
which we believe are reasonable, competitive and consistent with the Company's
executive compensation program.
Compensation for the Named Executive Officers in Fiscal 2008
CEO Compensation
Our CEO's annual compensation package was determined in accordance with our
Company's policies and procedures for all executive officers. With respect to
the Company's fiscal year ended January 31, 2008, the Chief Executive Officer
was eligible to receive an annual cash bonus (the "Incentive Compensation"), the
amount of such bonus determined by the Compensation Committee in accordance with
a pre-established performance goal which satisfies the requirements of Section
1.162-27(e)(2) of the Treasury regulations, taking into account any one or more
of the following criteria with respect to Conn's or any affiliates or divisions
of Conn's: (a) total revenues or any component thereof; (b) operating income,
pre-tax or after-tax income, EBITA, EBITDA or net income; (c) cash flow, free
cash flow or net cash from operations; (d) earnings per share; (e) value of the
Conn's stock or total return to stockholders; and (f) any combination of any or
all of the foregoing criteria, in each case on an absolute or relative basis.
The performance goals established for fiscal years 2007 and 2008 and the bonus
amount associated with each level were as follows:
--------------------------------------------------------------------------------
Fiscal Year 2007 Pre-Tax Profit Goals
----------------------------------------------------
$ 61,700,000 $ 65,700,000 $ 71,000,000
--------------------------------------------------------------------------------
Name (1) (1) (1)
--------------------------------------------------------------------------------
Thomas J. Frank, Sr. 500,000 600,000 750,000
--------------------------------------------------------------------------------
(1) The bonus is calculated on a pro-rata basis when pre-tax profits fall
between the levels shown above.
--------------------------------------------------------------------------------------------------
Fiscal Year 2008 Pre-Tax Profit Goals
----------------------------------------------------------------------
$ 62,400,000 $ 65,400,000 $ 68,400,000 $ 71,400,000
--------------------------------------------------------------------------------------------------
Name (1) (1) (1) (1)
--------------------------------------------------------------------------------------------------
Thomas J. Frank, Sr. 500,000 583,333 666,667 750,000
--------------------------------------------------------------------------------------------------
(1) Bonuses are calculated on a pro-rata basis when pre-tax profits fall
between the levels shown above. Pre-tax profits for purposes of the bonus
in fiscal year 2008 were calculated excluding any effect of gain or loss
from fair value adjustments recorded related to our interest in
securitized assets.
The Incentive Compensation award for any year may not exceed $1,920,000. The
Compensation Committee evaluated and took into account each of the above listed
criteria in determining the performance goals for fiscal 2008 and took into
account the same criteria in determining the performance goals for fiscal 2009.
Due to the financial performance of the Company, our CEO received a cash bonus
based on achievement of financial results between the second and third levels,
as reflected in the Summary Compensation Table. The other components of our
CEO's compensation package are also reflected in the Summary Compensation Table
and the footnotes following.
Other Named Executive Officers' Compensation
Each of the other Named Executive Officer's compensation was determined in
accordance with our Company's policies and procedures for all executive
officers, including bonus, stock option and other benefits. Each of the
components is addressed in the Summary Compensation Table and the footnotes
following for each Named Executive Officer.
--------------------------------------------------------------------------------
14
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed the Compensation Discussion and
Analysis and discussed the Analysis with Management. Based on its review and
discussions with management, the Committee recommended to the Board of Directors
that the Compensation Discussion and Analysis be included in the Company's
Annual Report on Form 10-K for fiscal year ended January 31, 2008 and the
Company's 2008 Proxy Statement on Schedule 14A related to the 2008 Annual
Meeting of Stockholders, for filing with the Securities and Exchange
Commission.. This report is provided by the following independent directors, who
comprise the Compensation Committee.
Jon E.M. Jacoby, Chairman
William T. Trawick
Theodore M. Wright
--------------------------------------------------------------------------------
15
Compensation Tables
Summary Compensation
--------------------
----------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
Change in
Pension Value
Non- and
Equity Nonqualified
Incentive Deferred All
Plan Compen- Other
Fiscal Stock Option Compen- sation Compens
Name and Principal Position Year Salary Bonus Awards Awards sation Earnings -ation Total
($) ($) ($) ($) ($) ($) ($) ($)
----------------------------------------------------------------------------------------------------------------------------
(7) (1)
----------------------------------------------------------------------------------------------------------------------------
Thomas J. Frank, Sr. 2007 441,000 500,000 - 191,945 - - 8,800 1,141,745
Chairman and CEO 2008 400,000 665,681 - 283,101 - - 8,600 1,357,382
(2)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
David L. Rogers 2007 240,000 147,916 - 148,026 - - 11,800 547,742
CFO 2008 240,000 164,399 - 215,137 - - 12,480 632,016
(3)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
William C. Nylin, Jr. 2007 350,000 313,147 - 162,479 - - 13,800 839,426
Executive Vice 2008 285,000 414,220 - 253,634 - - 13,700 966,554
Chairman (4)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
Timothy L. Frank 2007 180,000 168,416 - 59,252 - - 11,000 418,668
President and COO 2008 220,000 268,532 - 109,094 - - 10,037 607,663
(5)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
David W. Trahan 2007 204,000 168,416 - 59,252 - - 10,800 442,468
Executive Vice 2008 228,000 255,032 - 107,425 - - 11,120 601,577
President (6)
----------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------
(1) Amount recognized in the financial statements during the fiscal year in accordance Statement of Financial Accounting
Standards (FAS) No. 123R, "Share-based Payment." Information regarding the assumptions used in calculating the fair
value under FAS 123R can be found in Note 8 to the financial statements contained in the Company's annual report on
Form 10-K filed with the SEC on March 27, 2008.
(2) Company matched 401K contributions $8,800 and $8,600 for fiscal years 2007 and 2008, respectively.
(3) Company matched 401K contributions of $8,800 and $9,480, and use of automobile (including fuel) of $3,000 and
$3,000 for fiscal years 2007 and 2008, respectively.
(4) Company matched 401K contributions of $8,800 and $8,700, and use of automobile (including fuel) of $5,000 and
$5,000 for fiscal years 2007 and 2008, respectively.
(5) Company matched 401K contributions of $8,800 and $7,837, and use of automobile (including fuel) of $2,200 and
$2,200 for fiscal years 2007 and 2008, respectively.
(6) Company matched 401K contributions of $8,800 and $9,120, and use of automobile (including fuel) of $2,000 and
$2,000 for fiscal years 2007 and 2008, respectively.
(7) The executives shown above receive a base bonus amount based on the pre-tax performance goals shown above
under "Elements of Compensation". The executives can also receive discretionary funds that are approved by the
Compensation Committee. The table below shows the composition of bonus payments made for the fiscal years 2007
and 2008.
16
--------------------------------------------------------------------------------
Base bonus Discretionary Total bonus
earned funds paid
($) ($) ($)
--------------------------------------------------------------------------------
Name
--------------------------------------------------------------------------------
Thomas J. Frank, Sr. 2007 500,000 - 500,000
--------------------------------------------------------------------------------
2008 592,681 73,000 665,681
--------------------------------------------------------------------------------
David L. Rogers 2007 118,416 29,500 147,916
--------------------------------------------------------------------------------
2008 150,399 14,000 164,399
--------------------------------------------------------------------------------
William C. Nylin, Jr. 2007 263,147 50,000 313,147
--------------------------------------------------------------------------------
2008 334,220 80,000 414,220
--------------------------------------------------------------------------------
Timothy L. Frank 2007 118,416 50,000 168,416
--------------------------------------------------------------------------------
2008 200,532 68,000 268,532
--------------------------------------------------------------------------------
David W. Trahan 2007 118,416 50,000 168,416
--------------------------------------------------------------------------------
2008 200,532 54,500 255,032
--------------------------------------------------------------------------------
Grants of Plan-Based Awards
---------------------------
-------------------------------------------------------------------------------------------------------------------------------
Estimated future Estimated future
payouts under payouts under
non-equity equity incentive
incentive plan awards plan awards
-------------------------------------------------------------------------------------------------------------------------------
All other All other
stock option
awards; awards; Grant
Number Number Exercise Date Fair
of of or base Value of
shares securities price of Stock and
Thres- Maxi- Thres- Maxi- of stock underlying option Option
Name Grant Date hold Target mum hold Target mum or units options awards Awards
($) ($) ($) (#) (#) (#) (#) (#) ($/Sh) ($)
-------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l)
-------------------------------------------------------------------------------------------------------------------------------
Thomas J. Frank, Sr. 11/27/2007 N/A N/A N/A N/A N/A N/A N/A 10,000 19.99 91,200
-------------------------------------------------------------------------------------------------------------------------------
David L. Rogers 11/27/2007 N/A N/A N/A N/A N/A N/A N/A - N/A -
-------------------------------------------------------------------------------------------------------------------------------
William C. Nylin, Jr. 11/27/2007 N/A N/A N/A N/A N/A N/A N/A 10,000 19.99 91,200
-------------------------------------------------------------------------------------------------------------------------------
Timothy L. Frank 11/27/2007 N/A N/A N/A N/A N/A N/A N/A 25,000 19.99 228,000
-------------------------------------------------------------------------------------------------------------------------------
David W. Trahan 11/27/2007 N/A N/A N/A N/A N/A N/A N/A 20,000 19.99 182,400
-------------------------------------------------------------------------------------------------------------------------------
17
Outstanding Equity Awards at Fiscal Year End
--------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Option Awards Stock Awards
-------------------------------------------------------------------------------------------------------------------------------
Equity
Incentive
Equity Plan
Incentive Awards:
Plan Market or
Equity Awards: Payout
Incentive Number of Value of
Plan Number Market Unearned Unearned
Number Number Awards: of Value of Shares, Shares,
of of Number of Shares Shares Units or Units or
Securities Securities Securities or Units or Units Other Other
Underlying Underlying Underlying of Stock of Stock Rights Rights
Unexercised Unexercised Unexercised Option Option That Have That Have That Have That Have
Options Options Unearned Exercised Expiration Not Been Not Been Not Not
Name Exercisable Unexercisable Options Price Date Vested Vested Vested Vested
(#) (#) (#) ($) (#) ($) (#) ($)
-------------------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i) (j)
-------------------------------------------------------------------------------------------------------------------------------
Thomas J. Frank, Sr. 45,200 11,300 (1) N/A $14.00 11/25/2013 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
Chairman and CEO 35,000 0 N/A $17.73 11/30/2014 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
16,667 8,333 (3) N/A $33.88 11/30/2015 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
8,334 16,666 (5) N/A $22.68 12/4/2016 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
0 10,000 (7) N/A $19.99 11/27/2017 N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
David L. Rogers 4,000 0 N/A $14.00 11/25/2013 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
CFO 15,000 0 N/A $17.73 11/30/2014 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
23,333 0 N/A $33.88 11/30/2015 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
6,667 0 N/A $22.68 12/4/2016 N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
William C. Nylin, Jr. 33,647 11,300 (1) N/A $14.00 11/25/2013 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
Executive Vice 35,000 0 N/A $17.73 11/30/2014 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
Chairman 10,000 5,000 (3) N/A $33.88 11/30/2015 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
8,334 16,666 (5) N/A $22.68 12/4/2016 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
0 10,000 (7) N/A $19.99 11/27/2017 N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
Timothy L. Frank 11,228 0 N/A $8.21 7/26/2011 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
President and COO 6,400 1,600 (1) N/A $14.00 11/25/2013 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
6,000 4,000 (2) N/A $17.73 11/30/2014 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
6,000 9,000 (4) N/A $33.88 11/30/2015 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
4,000 16,000 (6) N/A $22.68 12/4/2016 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
0 25,000 (8) N/A $19.99 11/27/2017 N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
David W. Trahan 6,400 1,600 (1) N/A $14.00 11/25/2013 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
Executive Vice 6,000 4,000 (2) N/A $17.73 11/30/2014 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
President 6,000 9,000 (4) N/A $33.88 11/30/2015 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
4,000 16,000 (6) N/A $22.68 12/4/2016 N/A N/A N/A N/A
---------------------------------------------------------------------------------------------------------
0 20,000 (8) N/A $19.99 11/27/2017 N/A N/A N/A N/A
-------------------------------------------------------------------------------------------------------------------------------
(1) - Options vest ratably at 20% per year for five years with final vesting on 11/30/2008.
(2) - Options vest ratably at 20% per year for five years with final vesting on 11/30/2009.
(3) - Options vest ratably at 33.33% per year for three years with final vesting on 11/30/2008.
(4) - Options vest ratably at 20% per year for five years with final vesting on 11/30/2010.
(5) - Options vest ratably at 33.33% per year for three years with final vesting on 12/4/2009.
(6) - Options vest ratably at 20% per year for five years with final vesting on 12/4/2011.
(7) - Options are fully vested after one year with that vesting occurring on 11/27/2008.
(8) - Options vest ratably at 20% per year for five years with final vesting on 11/27/2012.
18
Option Exercises and Stock Vested
---------------------------------
------------------------------------------------------------------------------------------------
Option Awards Stock Awards
------------------------------------------------------------------------------------------------
Number of Shares
Acquired on Value Realized Number of Shares Value Realized on
Name Exercise on Exercise Acquired on Vesting Vesting
(#) ($) (#) ($)
------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e)
------------------------------------------------------------------------------------------------
Thomas J. Frank, Sr. 0 0 N/A N/A
------------------------------------------------------------------------------------------------
David L. Rogers 0 0 N/A N/A
------------------------------------------------------------------------------------------------
William C. Nylin, Jr. 11,553 142,448 N/A N/A
------------------------------------------------------------------------------------------------
Timothy L. Frank 0 0 N/A N/A
------------------------------------------------------------------------------------------------
David W. Trahan 0 0 N/A N/A
------------------------------------------------------------------------------------------------
Termination of Employment and Change of Control Arrangements
The following table indicated the quantitative disclosure of the
estimated payments that would have been provided to our named executive officers
if they were terminated without cause or if their employment agreement is not
renewed, as of January 31, 2008:
The following table also indicated the quantitative disclosure of the
estimated benefit of the acceleration of each named executive officer's unvested
options had a change of control occurred on January 31, 2008 and is calculated
based on the closing price of the Company's common stock on January 31, 2008:
Termination/Change in Control Benefits
--------------------------------------------------------
(a) (b) (c)
Compensation
Vesting in lieu of
acceleration salary/bonus
of options upon
Named upon change termination
Executive in control not for cause
Officer (# of shares) ($)
--------------------------------------------------------
Thomas J. Frank, Sr. 46,299 360,000
--------------------------------------------------------
William C. Nylin, Jr. 42,966 270,000
--------------------------------------------------------
David L. Rogers - -
--------------------------------------------------------
Timothy L. Frank 55,600 -
--------------------------------------------------------
David W. Trahan 50,600 -
--------------------------------------------------------
(b) Assumes vesting would accelerate on all unvested options per the employee
stock option plan:
"1. Acceleration of Vesting and Exercise Dates. The other
provisions of this Agreement notwithstanding and pursuant to Paragraph 12
of the Plan:
(a) In the event of a proposed dissolution or liquidation of the
Company and at the discretion of the Administrator, this Option may be
immediately exercised for the entire number of Shares covered hereby
until fifteen (15) days prior to such dissolution or liquidation;
(b) In the event of a Merger Transaction in which this Option
shall not be assumed or an equivalent option issued as a substitute by a
successor entity, the Administrator shall notify the Optionee in writing
that this Option shall be exercisable for the entire number of Shares
covered hereunder for a period of fifteen (15) days from the date of such
notice; or
19
In the event of a Merger Transaction that constitutes a Change of
Control in which this Option is assumed or an equivalent option is issued
by a successor entity, an Involuntary Termination of the Optionee within
one (1) year after the effective date of the Change of Control shall
cause this Option or the equivalent substitute option to be immediately
exercisable for the full number of Shares covered hereunder."
(c) These amounts would be paid in equal installment in such intervals as the
base salary would have been paid, i.e., semi-monthly. Assumes termination
occurred on February 1, 2008 and that termination satisfies the following
language from the employment agreements in force:
"1. In the event (i) Conn's exercises its right of termination
other than for Cause or (ii) this Agreement is not renewed by Conn's when
it expires, Conn's shall be obligated to pay Executive's Base Salary and
Incentive Compensation, if any, earned and accrued but unpaid through the
date of termination. In addition, Conn's shall pay as severance pay one
(1) year of Executive's current Base Salary. Such payments shall be made
in equal installments in such intervals as the Base Salary was paid at
the time of such termination or expiration."
Compensation of Non-Employee Directors
Each non-employee director of the board in respect of his or her service
on the board receives:
o an annual retainer of $25,000 through the 2008 annual meeting;
o $2,500 for each board meeting attended;
o $1,000 for each audit committee meeting attended by a member of
the audit committee (excluding the chair of the audit committee)
on the same day as a board meeting;
o $1,500 for each audit committee meeting attended by the chair of
the audit committee on the same day as a board meeting;
o $2,500 for each audit committee meeting attended by a member of
the audit committee (excluding the chair of the audit committee)
on a day other than the day of the board meeting;
o $3,500 for each audit committee meeting attended by the chair of
the audit committee meeting on a day other than the day of the
board meeting;
o $500 per meeting for participation in a telephonic meeting of the
board;
o $750 for each compensation committee meeting attended by a member
of the compensation committee on the same day as a board meeting;
o $1,250 for each compensation committee meeting attended by a
member of the compensation committee on a day other than the day
of a board meeting.
In addition our non-employee directors (i) are allowed to participate in
the Company's medical plan at the same contributories with all the benefits of
full-time active employees, (ii) receive a merchandise discount in the same
amount as the discount our employees receive; and (iii) are reimbursed for their
expenses in attending board and committee meetings.
We adopted the 2003 Non-Employee Director Stock Option Plan in February
2003 in connection with our initial public offering, and amended the Plan by
vote of shareholders at our 2006 annual meeting of shareholders. The plan is
administered by the board of directors. Only non-employee directors are eligible
grantees. Upon the closing of the initial public offering, we granted each of
our then-current non-employee directors the option to purchase 40,000 shares of
our common stock, and we have and will grant an option to purchase 40,000 shares
of our common stock to any new board member. We will also grant our non-employee
directors an option to purchase an additional 10,000 shares following each
annual stockholders meeting on and after the fourth anniversary of each
non-employee director's initial election or appointment to the board of
directors. The initial options to purchase 40,000 shares of our common stock
issued to non-employee directors vest equally over a three year period, and the
additional options to purchase 10,000 shares of our common stock issued to
non-employee directors vests on the first annual anniversary date of the date of
the grant. The exercise price of each option is equal to the price per share of
our common stock at the close of market on the date the option is granted. The
options have a term of up to ten years. Upon a change in control or sale of the
company, optionees have special vesting and exercise rights.
20
Accordingly, if reelected at the 2008 Annual Meeting, all of the
nominated non-employee directors, Messrs. Brailsford, Jacoby, Bob L. Martin,
Douglas H. Martin, Thompson, Trawick and Wright, shall each be granted an option
to purchase an additional 10,000 shares of our common stock, with the option
vesting on the annual anniversary date of the date of grant.
Director Compensation
---------------------
-----------------------------------------------------------------------------------------------------------------------
Change in
pension value
Non-equity and nonqualified
Fees earned incentive deferred
or paid in Stock Option plan compensation All Other
Name cash Awards Awards compensation earnings Compensation Total
$ ($) ($) ($) $ ($) ($)
-----------------------------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h)
-----------------------------------------------------------------------------------------------------------------------
(1)
-----------------------------------------------------------------------------------------------------------------------
Thomas J. Frank, Sr. - - - - - - -
-----------------------------------------------------------------------------------------------------------------------
William C. Nylin, Jr. - - - - - - -
-----------------------------------------------------------------------------------------------------------------------
Marvin D. Brailsford 46,500 - 75,650 - - - 122,150
-----------------------------------------------------------------------------------------------------------------------
Jon E. M. Jacoby 37,750 - 75,650 - - - 113,400
-----------------------------------------------------------------------------------------------------------------------
Bob L. Martin 33,000 - 75,650 - - - 108,650
-----------------------------------------------------------------------------------------------------------------------
Douglas H. Martin 35,500 - 75,650 - - - 111,150
-----------------------------------------------------------------------------------------------------------------------
Scott L. Thompson 47,000 - 20,833 - - - 67,833
-----------------------------------------------------------------------------------------------------------------------
William T. Trawick 38,750 - 75,650 - - - 114,400
-----------------------------------------------------------------------------------------------------------------------
Theodore M. Wright 53,750 - 75,650 - - - 129,400
-----------------------------------------------------------------------------------------------------------------------
(1) Amount recognized in the financial statements during the fiscal year in accordance with FAS 123R.
Information regarding the assumptions used in calculating the fair value under FAS 123R can be found in
Note 8 to the financial statements contained in the Company's annual report on Form 10-K filed with the
SEC on March 27, 2008. Messrs. Brailsford, Jacoby, Bob L. Martin, Douglas H. Martin, Trawick and Wright
were each issued 10,000 options on July 2, 2007. Those awards fully vest after one year.
Indemnification Arrangements
As permitted by the Delaware General Corporation Law, we have adopted
provisions in our certificate of incorporation and bylaws that provide for the
indemnification of our directors and certain executive officers, including the
Named Executive Officers, to the fullest extent permitted by applicable law.
These provisions, among other things, indemnify each of our directors and
certain officers for certain expenses, including judgments, fines and amounts
paid in settling or otherwise disposing of actions or threatened actions,
incurred by reason of the fact that such person was a director or officer of
Conn's or of any other corporation which such person served in any capacity at
the request of Conn's.
In addition, we have entered into indemnification agreements with each of
our directors pursuant to which we will indemnify them against judgments,
claims, damages, losses and expenses incurred as a result of the fact that any
director, in his capacity as a director, is made or threatened to be made a
party to any suit or proceeding. The indemnification agreements also provide for
the advancement of certain expenses (such as attorney's fees, witness fees,
damages, judgments, fines and settlement costs) to our directors in connection
with any such suit or proceeding.
We maintain a directors' and officers' liability insurance policy to
insure our directors and officers against certain losses resulting from acts
committed by them in their capacities as our directors and officers, including
liabilities arising under the Securities Act of 1933.
21
CORPORATE GOVERNANCE
Code of Ethics
Our board has adopted a code of business conduct and ethics for our
employees, a code of ethics for our chief executive officer and senior financial
professionals and a code of business conduct and ethics for our board of
directors. A copy of these codes is published on our website at www.conns.com
under "Investor Relations." We intend to make all required disclosures
concerning any amendments to, or waivers from, these codes on our website.
Stockholder Communications with the Board
We have adopted a policy that allows stockholders to communicate directly
with the board of directors. Stockholders may contact the board or any committee
of the board by any one of the following methods:
By telephone: By mail: By e-mail:
(409) 832-1696 Ext. 3218 Board of Directors Conns1890tf@aol.com
3295 College Street
Beaumont, Texas 77701
All communications submitted under this policy will be compiled by the
Compliance Officer of the company and submitted to the board or the requisite
board committee on a periodic basis. Complaints or concerns relating to
accounting, internal accounting controls or auditing matters will be referred to
the Audit Committee under the policy adopted by the Audit Committee. This policy
and procedure is posted on our website at www.conns.com under "Investor
Relations".
22
AUDIT COMMITTEE REPORT
----------------------
The Committee
Our board of directors established the Audit Committee to recommend the
appointment of our independent auditors and to oversee the company's (i)
financial reporting process; (ii) internal audits, internal control policies and
procedures implementation and compliance with Sarbanes-Oxley Section 404
requirements, and authorities; and (iii) financial, tax, and risk management
policies. The Audit Committee is composed of three members and operates under a
written charter, a copy of which is published on our website at www.conns.com
under "Investor Relations." The Audit Committee has prepared the following
report on its activities with respect to the company's financial statements for
the fiscal year ended January 31, 2008.
Review and Discussion
Management is responsible for the Company's financial reporting process
including its system of internal controls, and for the preparation of Conn's
consolidated financial statements in accordance with generally accepted
accounting principles. Ernst & Young, LLP, the Company's independent auditors,
is responsible for auditing those financial statements and for attesting to the
effectiveness of the Company's internal control over financial reporting. It is
the Audit Committee's responsibility to monitor and review these processes. The
members of the Audit Committee are not employees of the Company and do not
represent themselves to be or to serve as, accountants or auditors by profession
or experts in the field of accounting or auditing.
In connection with the preparation of the Company's audited financial
statements for the fiscal year ended January 31, 2008, the Audit Committee:
o reviewed and discussed the Company's annual report on Form 10-K,
including the audited consolidated financial statements of the
Company and Management's Report on Internal Control over Financial
Reporting for the year ended January 31, 2008 with management;
o discussed with Ernst & Young the matters required to be discussed
by Statement on Auditing Standards No. 61;
o received the written disclosures and the letter from Ernst & Young
required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and discussed
with Ernst & Young its independence from Conn's, including whether
Ernst & Young's provision of non-audit services to the company is
compatible with the auditors' independence.
The Audit Committee meets with the company's independent auditors to
discuss the results of their examinations, their evaluations of the company's
internal controls and the overall quality of the company's financial reporting.
The Audit Committee held four regularly scheduled meetings and five telephonic
meetings during the fiscal year ended January 31, 2008.
Recommendation
Based on the review and discussion referred to above, the Audit Committee
recommended to the board of directors that the audited financial statements be
included in our Annual Report on Form 10-K for the fiscal year ended January 31,
2008, for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE:
Theodore M. Wright, Chairman
Marvin D. Brailsford
Scott L. Thompson
23
PERFORMANCE GRAPH
-----------------
The following graph provides a comparison of the cumulative total
stockholder return on our common stock against the Nasdaq U.S. Stock Market
Index and the average of a peer group index comprised of five publicly traded
consumer electronic and/or appliance retailers((1)) since our initial public
offering on November 24, 2003. Since we have not been publicly traded for five
years, we have selected November 24, 2003, the date our initial public offering,
and the end of each of our fiscal years between November 24, 2003 and January
31, 2008 (the last trading day of our fiscal year) for comparison purposes. The
graph reflects the value of a $100 investment as of November 24, 2003 in either
our stock or the indices presented at the dates of measurement, including
reinvestment of dividends. The corresponding index values and common stock price
values are summarized in the table below by measurement date.
[GRAPHIC OMITTED]
[PLEASE SEE SUPPLEMENTAL PDF FOR IMAGE]
NASDAQ Peer Conn's
US Stock Group Closing
Conn's Market Stock Stock
Trade Date Index Index Index(1) Price
---------------------- ----------- ----------- ----------- -----------
November 24, 2003 $ 100.00 $ 100.00 $ 100.00 $ 14.00
January 31, 2004 114.29 105.40 82.86 16.00
January 31, 2005 118.23 105.76 113.37 16.55
January 31, 2006 310.63 119.23 159.99 43.48
January 31, 2007 167.68 128.30 186.07 23.47
January 31, 2008 137.91 129.06 140.92 19.30
-------------------
(1) The peer group index consists of the simple average of the indices of Sears
Holding Co., Best Buy Co., Inc., Circuit City Stores, Inc., Rex Stores Corp. and
Tweeter Home Entertainment Group, Inc.
24
EXECUTIVE OFFICERS
------------------
Biographical Information
The board appoints our executive officers at the first board meeting
following our annual meeting of stockholders and updates the executive officer
positions as necessary. Our executive officers serve at the discretion of the
board and until their successors are elected and qualified or until the earlier
of their death, resignation or removal.
The following sets forth certain biographical information regarding our
executive officers, including service with Conn Appliances, Inc., our
predecessor company:
Years of Service
Name Age Positions with Conn's
---- --- --------- ----------------
Thomas J. Frank, Sr. 68 Chairman of the Board and Chief Executive Officer 48
William C. Nylin, Jr. 65 Executive Vice Chairman of the Board 15
David L. Rogers 59 Chief Financial Officer - Retired effective
January 31, 2008 11
Michael J. Poppe 40 Chief Financial Officer - effective February 1, 2008 4
Timothy L. Frank 40 Chief Operating Officer and President 12
David W. Trahan 47 Executive Vice President - Retail 20
Reymundo de la Fuente, Jr. 47 Executive Vice President - Credit 9
David R. Atnip 60 Senior Vice President and Treasurer 15
Walter M. Broussard 48 Senior Vice President - Sales/Store Operations 22
Robert B. Lee, Jr. 61 Senior Vice President - Service and Logistics 8
Clinton W. Harwood 51 Senior Vice President - Information Technology 14
Thomas J. Frank, Sr. was appointed as our Chairman of the Board and Chief
Executive Officer in 1994. He has been employed by us for 48 years, has been a
member of our board of directors since 1980 and has held every key management
position within the organization, including responsibilities for distribution,
service, credit, information technology, accounting and general operations. Mr.
Frank holds a B.A. degree in industrial arts from Sam Houston State University
and attended graduate courses at Texas A&M University. Mr. Frank completed the
SCMP course at Harvard University. Mr. Frank is the father of Timothy L. Frank,
our President.
William C. Nylin, Jr.. On March 28, 2006, Dr. Nylin was appointed to our
board of directors as its Executive Vice Chairman. He has served as our Chief
Operating Officer from 1995 until June 1, 2007. From 1995 until April 1, 2006,
he also served as our President. He became a member of our board of directors in
1993 and served in that capacity until September 2003, and was appointed to our
board of directors on March 28, 2006 by our board. In addition to performing
responsibilities as Chief Operating Officer, he has direct responsibility for
credit granting and collections, information technology, risk management,
distribution and service. From 1984 to 1995, Dr. Nylin held several executive
management positions, including Deputy Chancellor and Executive Vice President
of Finance and Operations at Lamar University. Dr. Nylin obtained his B.S.
degree in mathematics from Lamar University and holds both a masters degree and
a doctorate degree in computer sciences from Purdue University. He has also
completed a post-graduate program at Harvard University.
Timothy L. Frank was elected President of our Company by our board of
directors on March 28, 2006, effective April 1, 2006, and Chief Operating
Officer effective June 1, 2007. Mr. Frank has previously served as our Senior
Vice President - Retail from May, 2005. He joined us in September 1995 and has
served in various roles throughout our Company, including Director of
Advertising, Director of Credit, Director of Legal Collections, Director of
Direct Marketing, and as Vice President of Special Projects. Prior to joining
our Company, Mr. Frank served in various marketing positions with a nationally
known marketing consulting company. Mr. Frank holds a B.S. in Liberal Arts from
Texas A&M University and an M.B.A. in Marketing from the University of North
Texas. Mr. Frank has also completed a post-graduate program at Harvard
University. Mr. Frank is the son of Thomas J. Frank, Sr., our Chairman and Chief
Executive Officer.
25
David L. Rogers retired effective January 31, 2008. Mr. Rogers was
appointed as our Chief Financial Officer Designate, effective September 1, 2004
and our Chief Financial Officer effective January 31, 2005. Mr. Rogers joined us
in October 1996 and served as our Legal Manager until August 1997. He has served
as our Controller from September 1997 until September 1, 2004. Prior to his
joining our Company, Mr. Rogers served in various accounting positions during a
twenty-year career with a Fortune 500 public utility. Mr. Rogers obtained his
B.B.A. in accounting from Lamar University in December, 1974.
Michael J. Poppe. In connection with the announcement by David Rogers,
our CFO, of his retirement effective January 31, 2008, our Board appointed
Michael J. Poppe, our Controller and Assistant Chief Financial Officer, as our
Chief Financial Officer effective February 1, 2008. Mr. Poppe, 40, has served as
our Controller and Assistant Chief Financial Officer and Assistant Treasurer
since he joined us in September 2004. In the 14 years prior to his joining us,
Mr. Poppe served in various accounting and finance management positions in
public accounting at Arthur Andersen LLP and in automotive retail companies,
most recently as Vice President and Corporate Controller of Group 1 Automotive,
Inc. Mr. Poppe spent from January 1997 until May 2004 at Group 1, a New York
Stock Exchange listed, Fortune 500 retail company, and was a member of the
founding management team. Mr. Poppe is a certified public accountant and
obtained his B.B.A in accounting and finance from Texas A&M University.
David W. Trahan was elected Executive Vice President - Retail by our
board of directors effective June 1, 2008. He has previously served as our
Senior Vice President - Retail from April 1, 2006 and as our Senior Vice
President - Merchandising from October 2001. He has been employed by us since
1986 in various capacities, including sales, store operations and merchandising.
He has been directly responsible for our merchandising and product purchasing
functions, as well as product display and pricing operations, for the last four
years. Mr. Trahan has completed special study programs at Harvard University,
Rice University and Lamar University.
Reymundo de la Fuente, Jr. was elected as Executive Vice President -
Credit by our board of directors effective June 1, 2008. He has previously
served as our Senior Vice President - Credit since October 2001. Since joining
us in 1998, he has served in positions that involve direct responsibility for
credit underwriting, customer service inbound operations, collections, recovery
of charge-offs and legal activities. Mr. de la Fuente has worked in the credit
receivables industry since 1986 with national credit organizations. His
responsibilities included the strategic direction and development of large
credit portfolios. Mr. de la Fuente obtained his B.B.A. in finance from The
University of Texas at San Antonio and holds an M.B.A. from Our Lady of the Lake
in San Antonio.
David R. Atnip has served as our Senior Vice President since October 2001
and as our Treasurer since 1997. He joined us in 1992 and served as Chief
Financial Officer from 1994 to 1997 and as our Secretary from 1997 to 2005. In
1995, he joined our board of directors and served in that capacity until
September 2003. Mr. Atnip holds a B.B.A. in accounting from The University of
Texas at Arlington and has over 20 years of financial experience in the savings
and loan industry.
Walter M. Broussard has served as our Senior Vice President - Sales since
2005, and previously served as our Senior Vice President - Store Operations from
October 2001. Mr. Broussard has served us in numerous retail capacities since
1985, including working on the sales floor as a sales consultant, store manager
and district manager. He has over 25 years of retail sales experience. He
attended Lamar University and has completed special study programs at Harvard
University, Rice University and the University of Notre Dame.
Robert B. Lee, Jr. has served as our Senior Vice President - Service and
Logistics since April, 2005, after serving as our Vice President - Advertising,
and was our Senior Vice President - Advertising from October 2001 and Vice
President - Advertising from January, 1999 until October 2001. His
responsibilities include managing our Service Division and Distribution
Division. The Service Division is responsible for providing factory authorized
service from the Company's five regional service centers for the majority of the
products that we sell. The Distribution Division consists of warehousing,
transportation and delivery operations from our five regional warehouse and two
cross-dock facilities. He also chairs our site selection committee and manages
our Facility Maintenance department. From 1990 until 1998, he was a partner in
Ann Lee & Associates, a Beaumont-based advertising agency and public relations
firm where he served as Chief Operating Officer. Mr. Lee obtained a B.B.A. in
Finance from The University of Texas at Austin and completed a post-graduate
program at the University of Notre Dame.
26
Clinton W. Harwood has served as our Senior Vice President - Information
Technology since appointed by our board of directors effective June 1, 2007. He
previously served as our Vice President - Information Technology since August
2000. Mr. Harwood joined Conn's in April 1994 as Manager of Computer Operations,
and has served the Company in all aspects of information technology since that
time. Prior to joining the Company, he served in various information technology
positions un utility, academic and petrochemical industries. Mr. Harwood holds
both a Bachelor (1979) and Master (1988) of Science degrees in Computer Science
from Lamar University, and completed a special study program at Harvard
University.
Equity Incentive Plans
Amended and Restated 2003 Incentive Stock Option Plan
In February 2003, we adopted our Amended and Restated 2003 Incentive
Stock Option Plan, and amended the Plan in June 2004 and May 2006. The plan is
administered by the Compensation Committee of our board of directors. Our
employees and employees of our subsidiaries, subject to certain exclusions, are
eligible to participate in the plan. Option grants are made within the
discretion of the Compensation Committee. Options may be granted for such terms
as the Compensation Committee may determine, but not for terms greater than ten
years from the date of grant. The maximum number of shares of our common stock
that may be issued under this plan is 3,859,767 shares, subject to adjustment.
All options issued vest equally over five-year term or less, as per the grant.
At January 31, 2008, there were options to purchase 1,700,165 shares of our
common stock issued and outstanding under the plan.
Employee Stock Purchase Plan
In February 2003, we adopted our Employee Stock Purchase Plan. The plan
is administered by the Compensation Committee of our board of directors. Our
employees and employees of our subsidiaries, subject to certain exclusions, are
eligible to participate in the plan. Eligible employees are able to purchase
shares of our common stock without brokerage commissions and at a discount from
market prices. The maximum number of shares of our common stock that may be
issued under this plan is 1,267,085 shares, subject to adjustment.
2003 Non-Employee Director Stock Option Plan
We also have the 2003 Non-Employee Director Stock Option Plan, which we
adopted in February 2003 and is discussed on page 10. The maximum number of
shares of our common stock that may be issued under this plan is 600,000 shares,
subject to adjustment. All options issued to a director when he or she becomes a
director currently vest equally over a three-year term, while those issued to a
director on his fourth anniversary date of becoming a director vest on the first
anniversary date of the grant. At January 31, 2008, there were options to
purchase 243,000 shares of our common stock issued and outstanding under the
plan.
The following table provides information regarding the number of shares
of our common stock that may be issued on exercise of outstanding stock options
and warrants under our existing equity compensation plans as of January 31,
2008. These plans are as follows:
o the Amended and Restated 2003 Incentive Stock Option Plan;
o the Non-Employee Director Stock Option Plan; and
o the Employee Stock Purchase Program.
27
(A) (B) (C)
Number of Securities
Remaining Available for
Number of Securities to be Weighted-Average Future Issuance Under
Issued upon Exercise of Exercise Price of Equity Compensation Plans
Outstanding Options, Outstanding Options, (Excluding Securities
Plan Category Warrants and Rights Warrants and Rights Reflected in Column (A))
------------------------ --------------------------- --------------------------- ---------------------------
Equity Compensation
Plans Approved by
Stockholders 1,943,165 (1) $19.11 1,508,269 (1)
Equity Compensation
Plans Not Approved
by Stockholders - - -
--------------------------- --------------------------- ---------------------------
Total 1,943,165 $19.11 1,508,269
=========================== =========================== ===========================
-------------------
(1) Includes 243,000 outstanding options and 260,000 options available for future issue applicable
to the Non-Employee Director Stock Option Plan.
STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE OFFICERS
AND PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock for each person who is known by us to be the
beneficial owner of more than 5% of our voting securities, for each director and
named executive officer, and for all directors and executive officers as a
group. Unless otherwise indicated in the footnotes, each person named below has
sole voting and investment power over the shares indicated. For purposes of this
table, a person is deemed to be the "beneficial owner" of the number of shares
of common stock that such person has the right to acquire within 60 days of
April 18, 2008 through the exercise of any option, warrant or right, through the
conversion of any security, through the power to revoke a trust, discretionary
account, or similar arrangement, or through the automatic termination of a
trust, discretionary account or similar arrangement.
Percent of
Common
Stock
Name Common Stock Owned Owned
--------------------------------------- --------------------- ------------
Conn's Voting Trust (1) 5,411,176 23.61%
Warren A. Stephens 2,789,576 (2) 12.17%
Stephens Investments Holdings LLC 2,309,538 (3) 10.08%
Curtis Bradbury, Jr. 1,409,702 (4) 6.15%
Douglas H. Martin 314,204 (5) 1.37%
SG-1890, LLC 5,767,060 25.16%
W.R. Stephens, Jr. 5,767,484 (6) 25.17%
Elizabeth Stephens Campbell 5,767,060 (7) 25.16%
Jon E.M. Jacoby 43,588 (8) 0.19%
Thomas J. Frank, Sr. 794,713 (9) 3.47%
William C. Nylin, Jr. 327,698 (10) 1.43%
David W. Trahan 153,930 (11) 0.67%
Michael J. Poppe 26,000 (12) 0.11%
David L. Rogers 55,000 (13) 0.24%
Timothy L. Frank 125,200 (14) 0.55%
Marvin D. Brailsford 40,000 (15) 0.17%
Bob L. Martin 10,000 (16) 0.04%
William T. Trawick 20,740 (17) 0.09%
Theodore M. Wright 15,000 (18) 0.07%
Scott L. Thompson 28,213 (19) 0.12%
Directors and officers (13 persons) 1,954,286 (20) 8.53%
-------------------
28
(1) These shares have been contributed to a voting trust agreement and are held
and voted by an independent third party as voting trustee. The voting trust will
vote the shares held in the voting trust in the same proportion as votes cast
"for" or "against" any proposals by all other stockholders. The voting trust
agreement imposes substantial limitations on the sale or other disposition of
the shares subject to the voting trust. The voting trust agreement will expire
in November 2013 or such earlier time as Stephens Inc. ceases to be an affiliate
of ours or a market maker of our common stock.
(2) Includes 149,199 shares owned by Stephens Inc. which have been contributed
to the Voting Trust and as to which Mr. Stephens, as President of Stephens Inc.,
has no voting power and sole dispositive power. Also includes 141,600 shares
owned directly by Stephens Inc. as to which Mr. Stephens has sole voting power
and sole dispositive power, and 42,447 shares held in discretionary trading
accounts on behalf of Stephens Inc. clients as to which Stephens Inc. has shared
voting power and shared dispositive power. Also includes 424 shares beneficially
owned directly by Warren A. Stephens Trust. Also includes 4,356 shares owned by
each of Warren Miles Amerine Stephens Trust, John Calhoun Stephens Trust, and
Laura Whitaker Stephens Trust, which have been contributed to the Voting Trust
and as to which Mr. Stephens, as sole trustee of the trusts, has no voting power
and sole dispositive power. Also includes 2,309,509 shares owned by Stephens
Investments Holdings LLC which have been contributed to the Voting Trust and as
to which Mr. Stephens, as Manager of the LLC, has no voting power and sole
dispositive power. Also includes 22,808 shares beneficially owned by Jackson T.
Stephens Trust No. One which have been contributed to the Voting Trust and as to
which Mr. Stephens, as trustee of the Jackson T. Stephens Trust No. One, has no
voting power and sole dispositive power. Also includes 29 shares owned directly
by Stephens Investments Holdings LLC as to which Mr. Stephens has sole voting
power and sole dispositive power. Also includes 119,322 shares owned by Stephens
Investment Partners 2000 LLC and 116 shares owned by Stephens Investment
Partners 2001 LLC as to which Mr. Stephens, as a Co-Manager of the LLCs, has
shared voting power and shared dispositive power.
(3) Includes 2,309,509 shares which have been contributed to the Voting Trust
and as to which Stephens Investments Holdings LLC has no voting power and sole
dispositive power, and 29 shares held directly as to which the LLC has sole
voting power and sole dispositive power.
(4) Includes 217,510 which have been contributed to the Voting Trust and as to
which Mr. Bradbury has no voting power and sole dispositive power, and 785
shares owned individually as to which Mr. Bradbury has sole voting power and
sole dispositive power. Also includes 119,322 shares owned by Stephens
Investment Partners 2000 LLC and 116 shares owned by Stephens Investment
Partners 2001 LLC as to which Mr. Bradbury, as a Co-Manager of the LLCs, has
shared voting power and shared dispositive power. Also includes 51,282 shares
beneficially owned by each of John Calhoun Stephens 95 Trust, Laura Whitaker
Stephens 95 Trust and Warren Miles Amerine Stephens 95 Trust, as to which Mr.
Bradbury, as sole trustee of the trusts, has no voting power and sole
dispositive power.
(5) Includes 9 shares owned by Douglas H. Martin IRA as to which Mr. Martin has
sole voting power and sole dispositive power, 154,414 shares owned individually
which have been contributed to the Voting Trust and as to which Mr. Martin has
no voting power and sole dispositive power, and 343 shares owned individually
which have not been contributed to the Voting Trust as to which Mr. Martin has
sole voting power and sole dispositive power. Also includes 119,322 shares owned
by Stephens Investment Partners 2000 LLC and 116 shares owned by Stephens
Investment Partners 2001 LLC as to which Mr. Martin, as a Co-Manager of the
LLCs, has shared voting power and shared dispositive power. Also includes 40,000
shares which Mr. Martin has the right to receive upon the exercise of options
exercisable on or within 60 days of April 18, 2008.
(6) Includes 424 shares owned directly by W.R. Stephens, Jr. Revocable Trust as
to which Mr. Stephens, as sole trustee, has sole voting power and sole
dispositive power. Also includes 5,767,060 shares owned by SG-1890, LLC as to
which Mr. Stephens, as Co-Manager of the LLC with Elizabeth S. Campbell, has
shared voting power and shared dispositive power.
(7) Includes 424 shares owned directly by W.R. Stephens, Jr. Revocable Trust as
to which Mr. Stephens, as sole trustee, has sole voting power and sole
dispositive power. Also includes 5,767,060 shares owned by SG-1890, LLC as to
which Mr. Stephens, as Co-Manager of the LLC with Elizabeth S. Campbell, has
shared voting power and shared dispositive power.
(8) Includes 3,588 shares owned individually as to which Mr. Jacoby has sole
voting power and sole dispositive power. Also includes 40,000 shares which Mr.
Jacoby has the right to receive upon the exercise of options exercisable on or
within 60 days of April 18, 2008.
(9) Includes 300,279 shares owned by a trust over which Mr. Frank is the trustee
and exercises sole voting power and sole dispositive power but over which Mr.
Frank has no pecuniary interest and for which Mr. Frank disclaims beneficial
ownership and includes options to purchase 105,201 shares of common stock.
(10) Includes options to purchase 86,981 shares of common stock.
(11) Includes options to purchase 22,400 shares of common stock.
(12) Includes options to purchase 26,000 shares of common stock.
(13) Includes options to purchase 49,000 shares of common stock.
29
(14) Includes options to purchase 33,628 shares of common stock.
(15) Includes options to purchase 40,000 shares of common stock.
(16) Includes options to purchase 10,000 shares of common stock.
(17) Includes options to purchase 20,000 shares of common stock.
(18) Includes options to purchase 15,000 shares of common stock.
(19) Includes options to purchase 28,000 shares of common stock.
(20) Includes options to purchase 516,210 shares of common stock.
30
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Review and Approval of Related Person Transactions
We review all relationships and transactions in which the Company and our
directors and executive officers or their immediate family members are
participants to determine whether such persons have a direct or indirect
material interest, and if so, if the transactions are at arms length and are
acceptable to the Board of Directors. As required under SEC rules, transactions
that are determined to be directly or indirectly material to the Company or a
related person are disclosed in the Company's Proxy Statement. In addition, the
Audit Committee reviews any related person transaction that is required to be
disclosed, and submits to the full board of directors such relationship for
approval. In the course of its review of these relationships, the committee
considers:
o the nature of the related person's interest in the transaction;
o the material terms of the transaction, including, without
limitation, the amount and type of transaction, and the timing of
the entering of such transaction;
o the importance of the transaction to the related person;
o the importance of the transaction to the Company;
o whether the transaction would impair the judgment of a director or
executive officer to act in the best interest of the Company; and
o any other matters the committee deems appropriate.
Lease Arrangement
Since 1996, we have leased one of our Houston, Texas store locations
containing approximately 19,150 square feet from Thomas J. Frank, Sr., our
Chairman of the Board and Chief Executive Officer. The lease provides for base
monthly rental payments of $17,235 plus escrow for taxes, insurance and common
area maintenance expenses, which escalate annually, per month through January
31, 2011. We also have an option to renew the lease for two additional five-year
terms. Mr. Frank received total payments under this lease of $281,000 in each of
fiscal years 2006, 2007, and 2008. Based on current market lease rates for
comparable retail space in the area, we believe that the terms of this lease
were at or better than fair market value at the date of the lease commencement.
Independent Contractor
William T. Trawick has served as a member of our board of directors since
September 2003 and served as an advisory director of Conn Appliances, Inc., our
predecessor company, since August 1999. In addition to the fees paid to Mr.
Trawick in his capacity as a director, we paid him consulting fees in the amount
of $48,000 in fiscal 2006 and $32,000 in fiscal 2007. Mr. Trawick is also the
President and Executive Director of NATM Buying Corporation, a national buying
group representing nine regional retailers, including us, in the appliance and
electronics industry. NATM coordinates the buying and merchandising strategies
for its member retailers. We recorded expenses of cash payments to NATM for
membership dues of $83,000, $83,000 and $88,200 in fiscal years 2006, 2007, and
2008, respectively. The Company terminated its consulting contract with Mr.
Trawick in September, 2006.
Indirect Ownership in Service Provider
During fiscal year 2008, we engaged the services of Direct Marketing
Solutions, Inc., or DMS, for a substantial portion of our direct mailing
advertising. Direct Marketing Solutions, Inc. is partially owned (less than 50%)
by the SF Holding Corp., members of the Stephens family, Jon E.M. Jacoby and
Douglas H. Martin. SF Holding Corp. and the members of the Stephens family are
significant shareholders of our company, and Messrs. Jacoby and Martin are
members of our Board of Directors. Thomas J. Frank, the Chief Executive Officer
and Chairman of the Board of Directors indirectly owned a small percentage
(0.7%) at the end of fiscal year 2005, but divested his interest during the
first half of fiscal 2006. The fees we paid to DMS during fiscal 2006, 2007 and
2008 amounted to approximately $2.1 million, $3.6 million and $2.5 million,
respectively. When DMS was initially engaged to perform direct marketing
services for us, a competitive analysis was performed from submissions by
various marketing groups, with DMS presenting the low price point in these
analyses. During fiscal 2007 and 2008, additional competitive analyses have been
performed which continually support that DMS offers us the lowest cost for this
service. We, at least annually, seek competitive bids for the services performed
by DMS.
31
Stock repurchase services
The Company engaged the services of Stephens Inc. to act as its broker
under its stock repurchase program. Stephens Inc. is a shareholder of the
Company, and Doug Martin, an Executive Vice President of Stephens Inc., is a
member of the Company's Board of Directors. During the years ended January 31,
2007 and 2008, the Company incurred fees payable to Stephens Inc. of $5,040 and
$46,644, respectively, related to the purchases of 168,000 and 1,555,205 shares
of its common stock, respectively. Based on a review of competitive bids
received from various broker candidates, the Company believes the terms of this
arrangement are no less favorable than it could have obtained in an arms' length
transaction.
32
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires that our directors, executive
officers and other persons who own more than 10% of our outstanding common stock
file initial reports of ownership and reports of changes in ownership of our
common stock with the SEC. Officers, directors and other stockholders who own
more than 10% of our outstanding common stock are required by the SEC to furnish
us with copies of all Section 16(a) reports they file.
To our knowledge, based on a review of reports and information furnished
to us by those persons who were directors, executive officers and/or the
beneficial holders of 10% or more of our common stock at any time during the
fiscal year ended January 31, 2008 and upon representations from such persons,
we believe that all stock ownership reports required to be filed under section
16(a) by such reporting persons during the fiscal year ended January 31, 2008
were timely made, except that the Form 3 for Clinton W. Harwood's appointment as
our Senior Vice President for Information Technology was not timely filed, and
the resultant Form 4 for his stock option grant on November 27, 2008 was also
not timely filed. Both of these Forms were filed following the Company's March,
2008 board meeting.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP served as our independent public accountants for the
fiscal year ended January 31, 2008. The Audit Committee has appointed Ernst &
Young as our independent public accountants for the fiscal year ending January
31, 2009, subject to shareholder ratification. Representatives of Ernst & Young
will attend the 2008 annual meeting of stockholders and will be available to
respond to appropriate questions that may be asked by stockholders. These
representatives will also have an opportunity to make a statement at the meeting
if they desire to do so.
We paid the following fees to Ernst & Young for professional and other
services rendered by them during fiscal 2007 and 2008:
Years Ended January 31,
---------------------------
2007 2008
------------ ------------
Audit Fees...................... $ 897,578 $ 720,610
Audit-Related Fees.............. 101,251 112,938
Tax Fees........................ - -
All Other Fees.................. 133,656 -
Our Audit Committee Charter requires pre-approval of all services to be
rendered by our independent auditors. It was determined that no services
rendered by our outside auditors in fiscal 2008 were prohibited under the new
requirements of the Sarbanes-Oxley Act of 2002. Fees associated with the audit
for fiscal 2008 were approved in advance of services being rendered. In
addition, the Audit Committee has considered whether Ernst & Young's provision
of services, other than services rendered in connection with the audit of our
annual financial statements and reviews of our financial statements included in
our Forms 10-Q for the most recent fiscal year, is compatible with maintaining
Ernst & Young's independence and has determined that such services rendered met
the requirements of independence.
33
Conn's, Inc.
2008 ANNUAL MEETING OF STOCKHOLDERS
June 3, 2008
FORM OF PROXY
-------------
By my signature below, I revoke all previous proxies and appoint Thomas
J. Frank, Sr. and Sydney K. Boone, Jr. as proxy, with full power of substitution
and resubstitution, to represent and to vote, as designated below, all shares of
common stock of Conn's, Inc. that I held of record as of the close of business
on April 18, 2008 at the 2008 Annual Meeting of Stockholders to be held at 3295
College Street, Beaumont, Texas 77701, on June 3, 2008 at 10:00 a.m. local time,
or any adjournments thereof. The above named proxy is hereby instructed to vote
as shown on the reverse side.
THIS PROXY IS BEING SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PLEASE MARK YOUR VOTE IN THE BOXES BELOW USING DARK INK ONLY
Proposals:
1 To elect the nine directors listed below: FOR WITHHOLD
AUTHORITY
Thomas J. Frank, Sr. [ ] [ ]
Marvin D. Brailsford
Jon E.M. Jacoby WITHHOLD AUTHORITY FOR (To
Bob L. Martin withhold authority to vote for
Douglas H. Martin either individual nominee,
Dr. William C. Nylin, Jr. write the nominee's name in the
Scott L. Thompson space provided below):
William T. Trawick
Theodore M. Wright _______________________________
_______________________________
2 To ratify the Audit Committee's appointment FOR AGAINST
of Ernst & Young, LLP as our independent
public accountants for the fiscal year [ ] [ ]
ending January 31, 2009.
3 In the above named proxy's discretion, to FOR AGAINST ABSTAIN
act upon such other business as may properly
come before the meeting. [ ] [ ] [ ]
IMPORTANT - This proxy must be signed and dated on the reverse side.
If you execute and return this proxy it will be voted in the manner you have
indicated on the reverse side. If you execute and return this proxy without
indicating any voting preference, this proxy will be voted "FOR" Proposal 1,
"FOR" Proposal 2, and in the discretion of the above named person acting as
proxy on such other matters that may properly come before the meeting.
Please sign exactly as your name appears on this proxy. Joint owners should each
sign. When signing as a fiduciary, such as an attorney, executor, administrator,
trustee, guardian, etc., please give your full title as such. Please return this
form of proxy promptly in the enclosed envelope.
The undersigned acknowledge(s) receipt of the Notice of 2008 Annual Meeting of
Stockholders and the Proxy Statement accompanying such Notice, each dated April
23, 2008.
Print Name ___________________________ Print Name ___________________________
Signature(s) _________________________ Signature(s) _________________________
Date _________________________________ Date _________________________________