What the hell is going on over at ValueVision Media Inc., better known as ShopNBC?
ShopNBC made several eye-popping filings with the Securities and Exchange Commission (SEC) Monday.
But here’s bottom line: ShopNBC CEO Keith Stewart’s base salary is $650,000. That would buy a lot of Chuck Clemency jewelry.
The first SEC filing was a copy of a rather ominous letter dated Jan. 26 from the SEC to ShopNBC CEO Keith Stewart, referring to information in a proxy statement.
“Please revise your disclosure to describe the factors that led to the material increase in Mr. Stewart’s compensation in 2010 versus 2009. We note your disclosure on page 22 under ‘Base Salary’ that Mr. Stewart elected to receive restricted stock in lieu of cash for a large portion of his base compensation in fiscal 2009, but this does not appear to
explain the material increase in Mr. Stewart’s compensation,” the SEC said in its letter.
In a Feb. 9 letter, ShopNBC responded to the SEC’s questions regarding Stewart’s salary.
Mr. Stewart was hired by the Company as President and Chief Operating Officer on August 27, 2008. In lieu of his $500,000 annual base salary for his first year of employment, Mr. Stewart elected to receive $500,000 worth of restricted stock, which was awarded in 2008. On January 29, 2009, Mr. Stewart was promoted to Chief Executive Officer. In connection with this promotion, his annual base salary was increased to $650,000 and he was to be awarded 500,000 options to purchase common stock.
Since Mr. Stewart had previously agreed to have $500,000 of compensation payable from August 27, 2008 through August 27, 2009 paid in restricted stock that was granted in 2008, Mr. Stewart effectively received $215,068 of base salary as restricted stock in 2008 and $284,932 of his 2009 base salary as restricted stock, all of which was received in 2008 and reported in the table as received in 2008.
In 2009, Mr. Stewart received an additional $361,539 of cash as base salary bringing his effective 2009 annualized base salary to $650,000, the same as his 2010 base salary.
In the Company’s definitive proxy statement for its 2012 annual meeting of shareholders, the Company will include the $284,932 of restricted stock received in 2008 that constituted Mr. Stewart’s 2009 base salary under the salary column for 2009 compensation bringing his total salary for 2009 to $646,471. The Company will footnote this disclosure to reflect that $284,942 of the 2009 salary was received at the election of Mr. Stewart as restricted stock that was issued in 2008.
As mentioned above, pursuant to his 2009 employment agreement with the Company entered into in connection with his promotion to Chief Executive Officer, Mr. Stewart was entitled to receive a grant of options to purchase 500,000 shares of common stock at the same time as stock options were granted to executive officers of the Company generally.
These options were not granted in 2009. In 2010, Mr. Stewart’s employment agreement was amended so that he was entitled to receive this grant of options to purchase 500,000 shares of common stock if he remained employed by the Company through the date of the earliest of the following events that occurred during the 2010 fiscal year: (1) stock options are granted generally to other executive officers of the Company; (2) the public announcement of the results for a fiscal quarter in which the Company reported a positive adjusted EBITDA for such fiscal quarter or (3) an “Event” as defined under the Company’s 2001 Omnibus Stock Plan.
On November 18, 2010, the Company publicly announced $0.6 million of adjusted EBITDA for its fiscal third quarter ended October 30, 2010 triggering the Company’s obligation to grant Mr. Stewart these 500,000 options, which options had a grant date fair value of $1,083,363 under FASB ASC Topic 718. This was a significant milestone for the Company and reflected the Company’s first quarter of positive adjusted EBITDA since the fourth quarter of fiscal 2007. These options, which were to be granted in 2009, were the sole difference between Mr. Stewart’s 2010 compensation and 2009 compensation.
In the Company’s definitive proxy statement for its 2012 annual meeting of shareholders, the Company will add the disclosure in the prior paragraph to its Compensation Discussion and Analysis.