SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
PetMed Express, Inc.
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(Name of Registrant as Specified In Its Charter)
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[LOGO] 1-800-PETMEDS [R]
PETMED EXPRESS, INC. PROXY STATEMENT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 5, 2005
TO THE OWNERS OF COMMON STOCK
OF PETMED EXPRESS, INC.
The Annual Meeting of Stockholders of PetMed Express, Inc.
(the "Company") will be held on Friday, August 5, 2005, at 1:00
p.m., Eastern Time at the Company's principal place of business,
1441 S.W. 29th Avenue, Pompano Beach, FL 33069. The purposes of
the meeting are:
1. To vote upon a proposal to amend the Company's Articles of
Incorporation to provide for staggered terms for our Board of
Directors,
2. To elect six Directors to our Board of Directors, for terms
in accordance with the Amendment to the Articles of Incorporation
if Proposal 1 is adopted and, if the proposal is not adopted, for
a one year term until their successors are elected and qualified,
3. To ratify the appointment of Goldstein Golub Kessler LLP as
the independent registered public accounting firm for the Company
to serve for the 2006 fiscal year, and
4. To transact any other business as may properly come before
the meeting.
These items are described in this proxy statement.
Only stockholders of record at the close of business on
Tuesday, June 21, 2005, the record date, are entitled to notice
of and to vote at the annual meeting. Each stockholder of record
on the record date is entitled to one vote for each share of
Common Stock held. On June 21, 2005, there were 23,496,191
shares of Common Stock issued and outstanding.
A list of stockholders entitled to vote will be available for
examination for ten days prior to the annual meeting, during
normal business hours, at the Company's principal place of
business at 1441 S.W. 29th Avenue, Pompano Beach, FL 33069. This
list will also be available to stockholders at the annual
meeting.
I would like to extend a personal invitation for you to
join us at our annual meeting. Your vote is important to us and
to our business. I encourage you to sign and return your proxy
card prior to the meeting, so that your shares will be
represented and voted at the meeting even if you cannot attend.
If you attend, you may withdraw your proxy and vote in person.
This proxy statement and our 2005 Annual Report to
Stockholders are being distributed on or about June 30, 2005.
By Order of the Board of Directors,
MENDERES AKDAG
Chief Executive Officer and Director
Pompano Beach, Florida
June 30, 2005
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING 1
ITEM 1 - AMENDMENT OF ARTICLES OF INCORPORATION TO PROVIDE
FOR STAGGERED TERMS FOR DIRECTORS 3
ITEM 2 - ELECTION OF DIRECTORS 4
ITEM 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM 4
DIRECTORS AND EXECUTIVE OFFICERS 4
BOARD GOVERNANCE AND OPERATIONS 6
Corporate Code of Business Conduct and Ethics 6
Policy with Regard to the Consideration of Director
Candidate Recommendations by our Stockholders 6
Stockholder Communications with the Board 6
Meetings of the Board of Directors 6
Committees of the Board of Directors 7
REPORT OF THE AUDIT COMMITTEE 8
PRINCIPAL ACCOUNTANT FEES AND SERVICES 9
Pre-Approval Policy for Services of Independent Auditor 9
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT 11
Section 16(a) Beneficial Ownership Reporting Compliance 11
REPORT OF THE COMPENSATION COMMITTEE 12
EXECUTIVE COMPENSATION 13
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 15
PERFORMANCE GRAPH 15
OTHER MATTERS 15
EXHIBIT A 16
QUESTIONS AND ANSWERS
ABOUT THE MEETING AND VOTING
What am I voting on?
- To amend the Company's Articles of Incorporation to provide
for staggered terms for our Board of Directors.
- To elect six directors to our Board of Directors (Menderes
Akdag, Frank J. Formica, Gian M. Fulgoni, Ronald J. Korn,
Marc A. Puleo, M.D., Robert C. Schweitzer).
- To ratify the appointment of Goldstein Golub Kessler LLP as
our independent registered public accounting firm.
What is a proxy?
It is your legal designation of another person to vote the
stock you own. That other person is called a proxy. If you
designate someone as your proxy in a written document, that
document also is called a proxy or a proxy card. We have
designated Bruce S. Rosenbloom, our Chief Financial Officer and
Alison Berges, our Corporate Secretary and General Counsel, as
proxies for the 2005 Annual Meeting of Stockholders.
How will my proxy vote my shares?
Your proxy will vote according to your instructions. If you
complete your proxy instructions but do not indicate your vote on
one or all of the business matters, your proxy will vote "FOR"
these items. Also, your proxy is authorized to vote on any other
business that properly comes before the annual meeting in
accordance with the recommendation of our Board of Directors.
Why did I receive this proxy statement?
Our Board of Directors is soliciting your proxy to vote at the
annual meeting because you were a stockholder of record at the
close of business on June 21, 2005, the record date, and are
entitled to vote at the meeting. This proxy statement and the
2005 Annual Report to Stockholders, along with either a proxy
card or a voting instruction card, are being mailed to
stockholders beginning on or about June 30, 2005. This proxy
statement summarizes the information you need to know to vote at
the annual meeting. You do not need to attend the annual meeting
to vote your shares.
What is the difference between holding shares as a stockholder of
record and as a beneficial owner?
If your shares are registered directly in your name with our
transfer agent, Florida Atlantic Stock Transfer, Inc., you are
considered, with respect to those shares, the "stockholder of
record." The proxy statement, annual report and proxy card have
been sent directly to you by us.
If your shares are held in a stock brokerage account by a bank
or other nominee, you are considered the "beneficial owner" of
shares held in the "street name." The proxy statement and annual
report have been forwarded to you by your broker, bank or other
nominee who is considered, with respect to those shares, the
stockholder of record. As the beneficial owner, you have the
right to direct your broker, bank or other nominee on how to vote
your shares by using the voting instruction card included in the
mailing or by following their instructions for voting.
How do I vote?
If your shares are held in the street name, through a broker,
bank or other nominee, that institution will send you separate
instructions describing the procedure for voting your shares.
Stockholders of record can vote as follows:
- By Mail: Stockholders should sign, date and return their
proxy cards in the pre-addressed, postage-paid envelope that is
provided.
- At the Meeting: If you attend the annual meeting, you may
vote in person by ballot, even if you have previously returned a
proxy card.
Who is entitled to vote and how many votes do they have?
Holders of our common stock as of the close of business on
June 21, 2005, the record date, are entitled to vote at the
annual meeting. Each share of our Common Stock is entitled to
one vote. As of the record date, 23,496,191 shares of our Common
Stock were outstanding and entitled to vote at the annual
meeting.
1
May I change my vote after I return my proxy card?
Yes, you may change your vote at any time before your shares
are voted at the annual meeting by:
- Notifying our Corporate Secretary, in writing at PetMed
Express, Inc., 1441 S.W. 29th Avenue, Pompano Beach, FL 33069
that you are revoking your proxy;
- Executing and delivering a later dated proxy card; or
- Voting in person at the annual meeting.
However, if you have shares held through a brokerage firm,
bank or other custodian, you may revoke your instructions only by
informing the custodian in accordance with any procedures it has
established.
What is a quorum of stockholders and what vote is required to
approve each item?
Shares representing the majority of the total outstanding
votes present or represented by proxy constitute a quorum. If
you vote or return a proxy card, your shares will be considered
part of the quorum. The affirmative vote of a majority of votes
cast is required to approve each item.
How are abstentions and broker non-votes counted?
Abstentions and broker non-votes will not be included in vote
totals and will not affect the outcome of the vote. With respect
to the election of directors, votes withheld will be treated as
shares present for purposes of determining a quorum but are not
counted as votes cast on any matter to which they relate.
Who will count the votes?
A representative of The Altman Group, a company contracted by
us to assist the Company in the tabulation of proxies, and our
Corporate Secretary and General Counsel, Alison Berges, will
tabulate the votes and act as inspector of election.
What happens if a nominee for director is unable to serve as a
director?
If any of the nominees becomes unavailable for election, which
we do not expect, votes will be cast for such substitute nominee
or nominees as may be designated by our Board of Directors,
unless our Board of Directors reduces the number of directors.
Under the policies of our Board of Directors, directors are
expected to attend regular board meetings, board committee
meetings and our annual stockholders meeting.
How do I get an admission card to attend the annual meeting?
If you are a stockholder of record, your admission card is
attached to your proxy card. You will need to bring it with you
to the meeting. If you own shares in the street name, you will
need to ask your broker or bank for an admission card in the form
of a legal proxy. You will need to bring the legal proxy with
you to the meeting. If you do not receive the legal proxy in
time or you want to attend the meeting but not vote in person,
bring your most recent brokerage statement with you to the
meeting. We can use that to verify your ownership of Common
Stock and admit you to the meeting; however you will not be able
to vote your shares at the meeting without a legal proxy. Please
note that if you own shares in the street name and you request a
legal proxy, any previously executed proxy will be revoked, and
your vote will not be counted unless you appear at the meeting
and vote in person.
You will also need to bring a photo ID to gain admission.
Who is soliciting my proxy and who pays the cost?
PetMed Express, Inc. and the Board of Directors are
soliciting your proxy. The cost of soliciting proxies will be
borne by the Company. PetMed Express, Inc. will also reimburse
brokerage firms, banks and other custodians for their reasonable
out-of-pocket expenses for forwarding these proxy materials to
you. Our directors, officers and employees may also solicit
proxies by mail, telephone and personal contact. They will not
receive any additional compensation for these activities.
2
When are the stockholder proposals due for next year's annual
meeting?
Pursuant to Rule 14a-8 under the Exchange Act, stockholders
may present proper proposals for inclusion in the Company's proxy
statement and for consideration at the 2006 annual meeting of
stockholders by submitting their proposals to the Company in a
timely manner. Proposals that stockholders wish to be included in
next year's Proxy Statement for the annual meeting to be held in
2006 must be received at the Company's principal place of
business at 1441 S.W. 29th Avenue, Pompano Beach, FL 33069,
addressed to the Corporate Secretary's attention, no later than
March 15, 2006 and must otherwise comply with the requirements of
Rule 14a-8.
Can different stockholders sharing the same address receive only
one Annual Report and Proxy Statement?
Yes. The Securities and Exchange Commission permits companies
and intermediaries, such as a brokerage firm or a bank, to
satisfy the delivery requirements for proxy statements and annual
reports with respect to two or more security holders sharing the
same address by delivering only one proxy statement and annual
report to that address. This process which is commonly referred
to as "householding" can effectively reduce our printing and
postage costs. Under householding, each stockholder would
continue to receive a separate proxy card or voting instruction
card.
Certain of our stockholders whose shares are held in the
street name and who have consented to householding will receive
only one set of our annual meeting materials per household this
year. If your household received a single set of our annual
meeting materials this year, you can request to receive
additional copies of these materials by calling or writing your
broker, bank or other nominee. If you own your shares in the
street name, you can request householding by calling or writing
your broker, bank or other nominee.
ITEM 1- AMENDMENT OF ARTICLES OF INCORPORATION TO PROVIDE
FOR STAGGERED TERMS FOR DIRECTORS
The Board of Directors unanimously recommends a vote "FOR" the
amendment of the Articles of Incorporation to provide for the
classification of the Board of Directors into three classes of
directors with staggered terms of office.
The Company's By-Laws now provide that all directors are to be
elected annually for a term of one year. Florida law permits
provisions in the by-laws or the articles of incorporation
approved by stockholders that provide for a classified board of
directors. The proposed classified board amendment to the
Articles of Incorporation described in Exhibit A to this Proxy
Statement would provide that directors will be classified into
three classes as nearly equal in number as possible. One class
would hold office initially for a term expiring at the 2006
annual meeting; another class would hold office initially for a
term expiring at the 2007 annual meeting; and another class would
hold office initially for a term expiring at the 2008 annual
meeting. At each annual meeting following this initial
classification and election, the successors to the class of
directors whose terms expire at that meeting would be elected for
a term of office to expire at the third succeeding annual meeting
after their election and until their successors have been duly
elected and qualified. Information concerning the current
nominees for election as directors at the annual meeting is set
forth below under "Election of Directors."
Our Board believes that staggered terms for directors provide
stability and continuity in the Board of Directors' leadership
and policies, ensuring that a majority of directors will always
be familiar with the Company's long-term strategy and goals.
This knowledge will assist the directors in fulfilling their
duties to our stockholders, providing for greater effectiveness,
which ultimately creates value for our stockholders. While
management has not experienced any problems with such continuity
in the past, it wishes to ensure that this experience will
continue. Electing directors to two- or three-year terms will
not reduce their accountability to our stockholders. Regardless
of their term, all directors will have the same duties and
responsibilities to our stockholders.
The Board of Directors also believes that the classified board
will assist the Board of Directors in protecting the interests of
the Company's stockholders against potentially coercive takeover
tactics where a party might attempt to acquire control of the
Company on terms that do not offer the greatest value to all
stockholders. The proposed classified board amendment will
significantly extend the time required to effect a change in
control of the Board of Directors and may discourage hostile
takeover bids for the Company. Currently, a change in control of
the Board of Directors can be made by stockholders holding a
plurality of the votes cast at a single annual meeting. If the
Company implements a classified board of directors, it will take
at least two Annual Meetings for even a majority of stockholders
to make a change in control of the Board of Directors, because
only a minority of the directors will be elected at each meeting.
3
Seen as a disadvantage on the other hand, because of the
additional time required to change control of the Board of
Directors, the classified board proposal will tend to perpetuate
present management. Without the ability to obtain immediate
control of the Board of Directors, a takeover bidder will not be
able to take action to remove other impediments to its
acquisition of the Company. While the proposal is not intended
as a takeover-resistive measure in response to a specific threat,
it may discourage the acquisition of large blocks of the
Company's shares by causing it to take longer for a person or
group of persons who acquire such a block of shares to effect a
change in management. The classified board proposal will also
make it more difficult for the stockholders to change the
composition of the Board of Directors even if the stockholders
believe such a change would be desirable.
In addition, Florida law provides that the stockholders may
remove one or more directors with or without cause unless the
Articles of Incorporation provide that directors may be removed
only for "cause." Cause is not defined in the statute, but it is
generally considered a difficult standard to meet in any attempt
to remove a director. The amendment of the Company's Articles of
Incorporation will specifically provide that directors may be
removed only for cause. This will have the effect of preventing a
majority stockholder from voting to remove directors whose three-
year terms have not yet expired.
ITEM 2 - ELECTION OF DIRECTORS
The Board of Directors unanimously recommends a vote "FOR" the
election of the following directors:
Menderes Akdag, Frank J. Formica, Gian M. Fulgoni, Ronald J.
Korn, Marc Puleo, M.D. and Robert C. Schweitzer.
Our Board of Directors currently has six members, all of whom
are standing for re-election at this year's annual meeting. If
our stockholders approve Item 1, above, if elected the directors
will serve initial staggered terms of one, two or three years as
follows: term of Class I directors for one year: Gian M. Fulgoni
and Robert C. Schweitzer; term of Class II directors for two
years: Ronald J. Korn and Marc Puleo, M.D.; term of Class III
directors for three years: Menderes Akdag and Frank J. Formica.
At each annual meeting following this initial classification and
election, the successors to the class of directors whose terms
expire at that meeting would be elected for a term of office to
expire at the third succeeding Annual Meeting after their
election and until their successors have been duly elected and
qualified. If our stockholders do not approve Item 1, above, if
elected the directors will serve until the next annual meeting of
stockholders or until the director is succeeded by another
director who has been elected.
Each of the nominated directors has agreed to serve if
elected. However, if for some reason one or more of them is
unable to accept nomination, or election, proxies will be voted
for the election of a nominee(s) designated by our Board of
Directors. Biographical information for each of the nominees is
presented below.
ITEM 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
The Board of Directors recommends a vote "FOR" the
ratification of the appointment of Goldstein Golub Kessler LLP as
the Company's independent registered public accounting firm.
The Audit Committee has appointed and approved Goldstein Golub
Kessler LLP to audit our fiscal year 2006 consolidated financial
statements. Representatives of the firm will be available at the
annual meeting to make a statement, if they choose, and to answer
any questions you may have.
DIRECTORS AND EXECUTIVE OFFICERS
MENDERES AKDAG, age 44, was appointed Chief Executive Officer on
March 16, 2001. Prior to joining PetMed Express, from November
2000 until March 2001, Mr. Akdag served as Chief Executive
Officer of International Cosmetics Marketing Co. d/b/a Beverly
Sassoon & Co., a publicly held (PS:SASN) direct sales company
distributing skin care and nutritional products. From May 1991
until August 2000, Mr. Akdag was employed by Lens Express, Inc.,
a direct sales company distributing replacement contact lenses,
serving as its President from May 1996 until August 2000, Chief
Executive Officer and a member of the Board of Directors from
August 1992 until May 1996, and Chief Financial Officer and a
member of the Board of Directors from May 1991 until August 1992.
On December 14, 1998, Netel Inc., a corporation in which Mr.
Akdag served as a member of the Board of Directors, filed a
Petition for Chapter 11 bankruptcy in the United States
Bankruptcy Court Southern District of Florida. The proceeding
was styled IN RE: NETEL, INC., CASE NO.98-28929-BKC-PGH. On July
19, 1999, the Bankruptcy Court entered an Order Confirming an
Amended Chapter 11 Plan. On December 21, 1999, the Bankruptcy
Court entered a Final Decree, Discharge of Trustee, and closed
the case. Mr. Akdag holds a Bachelor of Science degree in
Business Administration with a major in finance from the
University of Florida.
4
FRANK J. FORMICA, age 61, has served as a member of our Board of
Directors since August 11, 2003. Mr. Formica has served as a
legal consultant and expert in corporate securities and
securities industry litigation and arbitration cases since 1999.
From 1969 until 1999, Mr. Formica held various positions with the
National Association of Securities Dealers ("NASD"), including
Director of the NASD's Congressional and State Liaison
Department, Director of the Corporate Finance Department, and
Vice President and Deputy General Counsel. Mr. Formica received
his Juris Doctor degree from the Washington College of Law at
American University and an undergraduate degree from Ohio
University. He is a member of the New York State Bar.
GIAN M. FULGONI, age 57, has served as a member of our Board of
Directors since November 14, 2002. Mr. Fulgoni has been the
Executive Chairman of ComScore Networks, Inc. since 1999. From
1981 until 1998, Mr. Fulgoni served as President and Chief
Executive Officer of Information Resources, Inc. (NASDAQ: IRIC).
He was a member of our Board of Directors from August 1999
through November 2000. Mr. Fulgoni served on the Board of
Directors of Platinum Technology, Inc. from 1990 to 1999, U.S.
Robotics, Inc. from 1991 to 1994, and Yesmail.com, Inc. in 1999.
Educated in the United Kingdom, Mr. Fulgoni holds a Masters
degree in Marketing from the University of Lancaster and a
Bachelor of Science degree in Physics from the University of
Manchester.
RONALD J. KORN, age 65, has served as a member of our Board of
Directors since November 14, 2002. Mr. Korn has been the
President of Ronald Korn Consulting, a business consulting firm,
since 1991. He served as the Managing Partner of KPMG, LLP's
Miami office from 1985 to 1991. Mr. Korn held various positions
including Partner with KPMG, an international accounting firm,
from 1961 until 1991. He has served as a Director, Chairman of
the Audit Committee, and member of the Loan Committee of Equinox
Bank, FSB, formerly Horizon Bank, FSB, since 1999. He has served
as a Director and Chairman of the Audit Committee of Ocwen
Financial Corporation (NYSE:OCN) and Ocwen Federal Bank since
July 2003. Mr. Korn previously served as a Director and Chairman
of the Audit Committee of Vacation Break U.S.A., Inc. and
Magicworks Entertainment Corporation, a Director of TOUSA Homes,
Inc. (formerly Engle Homes, Inc.), and Non-Executive Chairman of
Carole Korn Interiors, Inc. Mr. Korn holds a Juris Doctor degree
from the New York University Law School and a Bachelor of Science
degree in Economics from the University of Pennsylvania, Wharton
School.
MARC PULEO, M.D., age 42, has served as President and Chairman of
our Board of Directors since our inception in January 1996. From
January 1996 until March 2001, Dr. Puleo served as our Chief
Executive Officer, and from January 1996 until May 2001, Dr.
Puleo served as our Treasurer. Dr. Puleo has also been the
President of South Florida Anesthesia Professionals, an entity
located in Fort Lauderdale, Florida, since founding that company
in January 1996. Dr. Puleo was Vice President of Dynamic Press,
Inc., an offset printing and direct marketing company, from June
1997 until June 1998. Dr. Puleo, an anesthesiologist, was
employed with Anesthesia Professional Association, North Ridge
Medical Center and North Ridge Outpatient Surgery Center from
December 1994 through December 1995. Dr. Puleo was an anesthesia
resident with the University of Illinois Hospitals and Clinics,
the Michael Reese Hospital, the Westside Veteran's Administration
Hospital, the University of Illinois Eye and Ear Infirmary, the
Nathan Cummings Surgicenter, and the University of Illinois Pain
Clinic, all located in the Chicago, Illinois area, from July 1991
through June 1994. Dr. Puleo received his medical degree from
the University of Illinois College of Medicine, Chicago,
Illinois.
ROBERT C. SCHWEITZER, age 59, has served as a member of our Board
of Directors since November 14, 2002. Mr. Schweitzer has been
the President and Chief Executive Officer of Equinox Bank, FSB,
since March 2005. Mr. Schweitzer was the Regional President of
Union Planters Bank for Broward and Palm Beach County Florida
markets from April 1999 to December 2002. Prior to joining Union
Planters, Mr. Schweitzer served as the Executive Vice President
and Head of Commercial Banking for Barnett Bank/NationsBank in
Jacksonville, Florida from 1993 to 1999. Other positions held
include Director and Head of Real Estate Consulting for Coopers &
Lybrand in Washington, D.C.; Senior Vice President and Manager of
Central North America Real Estate for the First National Bank of
Chicago, and Manager of Domestic Credit Process Review; and
Senior Vice President and Manager of Central North American
Banking for Wachovia Bank. Mr. Schweitzer holds a Masters degree
in Business Administration from the University of North Carolina,
and a Bachelor of Science degree from the United States Naval
Academy.
BRUCE S. ROSENBLOOM, age 36, was appointed Chief Financial
Officer on May 30, 2001. Mr. Rosenbloom served as the Manager of
Finance and Financial Reporting of Cooker Restaurant Corporation,
a publicly held (PS: CGRTQ) restaurant, in West Palm Beach,
Florida, from December 2000 until May 2001. Mr. Rosenbloom's
duties included all internal and external reporting including all
SEC filings and Annual Reports to Shareholders. Mr. Rosenbloom
was a senior audit accountant for Deloitte & Touche LLP, an
international accounting firm, West Palm Beach, Florida, from
January 1996 until December 2000. Mr. Rosenbloom was responsible
for planning and conducting all aspects of audit engagements for
clients in various industries, including direct marketing,
healthcare, manufacturing, financial institutions, and
professional service firms. From August of 1992 to May of 1995,
Mr. Rosenbloom was an Account Executive for MCI
Telecommunications. Mr. Rosenbloom, a certified public
accountant, received a Bachelor of Science degree in Accounting
from Florida Atlantic University, Boca Raton, Florida in 1996 and
a Bachelor of Arts degree in Economics from the University of
Texas, Austin, Texas in 1992.
5
BOARD GOVERNANCE AND OPERATIONS
The business and affairs of PetMed Express, Inc. are
managed by or under the direction of our Board of Directors. Our
Board includes a majority of independent directors. Our Board
reaffirms its accountability to stockholders through the
stockholder election process. Our Board reviews and ratifies
executive officer selection and compensation, and monitors
overall corporate performance and the integrity of our financial
controls. Our Board of Directors also oversees our strategic and
business planning processes.
Corporate Code of Business Conduct and Ethics
Our Board of Directors has adopted a Corporate Code of
Business Conduct and Ethics, which is applicable to all
directors, officers and employees, including our principal
executive officer, and principal financial and accounting
officer. A Code of Business Conduct and Ethics is a written
standard designed to deter wrongdoing and to promote:
- honest and ethical conduct,
- full, fair, accurate, timely and understandable disclosure
in regulatory filings and public statements,
- compliance with applicable laws, rules and regulations,
- the prompt reporting of violation of the code, and
- accountability for adherence to the Code of Business
Conduct and Ethics.
Any person, who wishes to receive a copy of our Corporate
Code of Business Conduct and Ethics, without charge, can send a
letter addressed to our General Counsel at PetMed Express, Inc.,
1441 S.W. 29th Avenue, Pompano Beach, FL 33069.
Policy with Regard to the Consideration of Director Candidate
Recommendations by our Stockholders
The Corporate Governance and Nominating Committee has a policy
pursuant to which it considers director candidates recommended by
our stockholders. All director candidates recommended by our
stockholders are considered for selection to the Board on the
same basis as if such candidates were recommended by one or more
of our directors or other sources. To recommend a director
candidate for consideration by our Corporate Governance and
Nominating Committee, a stockholder must submit the
recommendation in writing to our Corporate Secretary not later
than one hundred twenty (120) calendar days prior to the
anniversary date of our proxy statement distributed to our
stockholders in connection with our most recent annual meeting of
stockholders, and the recommendation must provide the following
information: (i) the name of the stockholder making the
recommendation, (ii) the name of the candidate, (iii) the
candidate's resume or a listing of his or her qualifications to
be a director, (iv) the proposed candidate's written consent to
being named as a nominee and to serving as one of our directors
if elected, and (v) a description of all relationships,
arrangements or understandings, if any, between the proposed
candidate and the recommending stockholder and between the
proposed candidate and us so that the candidate's independence
may be assessed. The stockholder or the director candidate also
must provide any additional information requested by our
Corporate Governance and Nominating Committee to assist the
Committee in appropriately evaluating the candidate.
Stockholder Communications with the Board
Stockholders who wish to communicate directly with our
Board of Directors, or specified individual directors, may do so
in writing to the Board of Directors or individual director in
c/o Corporate Secretary and General Counsel, PetMed Express,
Inc., 1441 S.W. 29th Avenue, Pompano Beach, FL 33069.
Meetings of the Board of Directors
During the fiscal year ended March 31, 2005, there were
six meetings of our Board of Directors, and the Board took action
three times by written consent in lieu of a meeting. Except for
one meeting where one director was unable to attend, each
director attended all of the meetings of the Board and meetings
held by committees on which he served. Members of the Board are
required to attend the annual meeting of stockholders. A
director who is unable to attend our annual meeting of
stockholders is expected to notify the Chairman of the Board in
advance of the meeting.
6
Committees of the Board of Directors
Our Board of Directors maintains three standing
committees, an Audit Committee, a Compensation Committee and a
Corporate Governance and Nominating Committee. All members of
the committees are independent directors. The following table
shows the present members of each committee, the number of
committee meetings held during FY 2005 and the functions
performed by each committee:
Committee Functions
--------- ---------
Audit - Oversees the Company's systems of
Number of Meetings during FY 2005: 8 internal controls regarding finance,
Members accounting and legal compliance
- Oversees the Company's auditing,
accounting and financial reporting
processes generally
Ronald J. Korn*, Financial Expert (1) - Oversees the Company's financial
Robert C. Schweitzer statements and other financial
Gian M. Fulgoni information provided by the Company to
its stockholders, the public and others
- Oversees the Company's compliance with
legal and regulatory requirements
- Oversees the performance of the
Company's independent auditors
Conducts an annual performance
evaluation on the Audit Committee's
effectiveness
Compensation - Establishes, in consultation with
Number of Meetings during FY 2005: 1 senior management, the Company's
Members: general compensation philosophy, and
oversees development and implementation
of the compensation programs
Robert C. Schweitzer* - Reviews and approves corporate goals
Ronald J. Korn and objectives relating to the
Gian M. Fulgoni compensation of the Company's CEO
- Recommends, subject to Board
approval, salaries and other
compensation matters for executive
and other senior officers
- Approves annual incentive plans for
the Company's officers and employees,
grants stock options to directors,
officers and employees and supervises
administration of employee benefit
plans
- Oversees, in consultation with
management, regulatory compliance
with respect to compensation matters
- Reviews and approves any severance or
similar termination payment proposed
to be made to any Company executive
or senior officer
- Recommends, subject to the approval of
the Board of Directors, compensation
for directors
- Conducts an annual performance
evaluation of the Committee and
prepares and issues all required
evaluations and reports
Corporate Governance and Nominating - Recommends the slate of director
Number of Meetings during FY 2005: 1 nominees for election to Board of
Members: Directors
- Identifies and recommends candidates
Frank J. Formica* to fill vacancies occurring between
Gian M. Fulgoni annual shareholders meetings
Robert C. Schweitzer - Develops and recommends to the Board
Ronald J. Korn of Directors corporate governance
principles Leads annual review of
performance of Board of Directors
* Chairperson
(1) The Board considers Mr. Korn to be an audit committee
financial expert as defined by regulations promulgated by the
Securities and Exchange Commission.
7
REPORT OF THE AUDIT COMMITTEE
The following Report of the Audit Committee does not
constitute soliciting material and should not be deemed filed or
incorporated by reference into any other filing by us under the
Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, except to the extent we specifically
incorporate this Report by reference therein.
The Securities and Exchange Commission rules require us to
include in this proxy statement a report from the Audit Committee
of our Board of Directors. The following report concerns the
Audit Committee's activities regarding oversight of our financial
reporting and auditing process.
The Audit Committee is comprised solely of independent
directors, as defined in the Marketplace Rules of the Nasdaq
National Market and under Securities Exchange Act Rule 10A-
3(b)(1), and it operates under a written charter adopted by the
Company's Board of Directors. The composition of the Audit
Committee, the attributes of its members and the responsibilities
of the Audit Committee, as reflected in its charter, are intended
to be in accordance with applicable requirements for corporate
audit committees. The Audit Committee reviews and assesses the
adequacy of its charter on an annual basis.
As described more fully in its charter, the purpose of the
Audit Committee is to assist the Board of Directors in the
oversight of its financial reporting, internal control and audit
functions. Management is responsible for the preparation,
presentation and integrity of its consolidated financial
statements, accounting and financial reporting principles, and
internal controls and procedures designed to ensure compliance
with accounting standards and applicable laws and regulations.
Goldstein Golub Kessler LLP, the Company's independent auditor,
is responsible for performing an independent audit of the
Company's consolidated financial statements in accordance with
auditing standards generally accepted in the United States.
The Audit Committee members are not professional
accountants or auditors, and their functions are not intended to
duplicate or to certify the activities of management and the
independent auditor, nor can the Audit Committee certify that the
independent auditor is "independent" under applicable rules. The
Audit Committee serves a board-level oversight role, in which it
provides advice, counsel and direction to management and the
independent auditor on the basis of the information it receives,
discussions with management and the independent auditor and the
experience of the Audit Committee's members in business,
financial and accounting matters.
Among other matters, the Audit Committee monitors the
activities and performance of the Company's independent auditor,
including the audit scope, external audit fees, auditor
independence matters and the extent to which the independent
auditor may be retained to perform non-audit services. The Audit
Committee and the Board of Directors have ultimate authority and
responsibility to select, evaluate and, when appropriate, replace
the independent auditor. The Audit Committee also reviews the
results of the audit work with regard to the adequacy and
appropriateness of financial, accounting and internal controls.
Management and independent auditor presentations to and
discussions with the Audit Committee also cover various topics
and events that may have significant financial impact or are the
subject of discussions between management and the independent
auditor. In addition, the Audit Committee generally oversees
internal compliance programs.
The Audit Committee has reviewed and discussed the
Company's consolidated financial statements with management and
the independent auditor, management represented to the Audit
Committee that its consolidated financial statements were
prepared in accordance with generally accepted accounting
principles, and the independent auditor represented that its
presentations included the matters required to be discussed with
the independent auditor by Statement on Auditing Standards No.
61, as amended, "Communication with Audit Committees."
Goldstein Golub Kessler LLP, the independent auditor, also
provided the Audit Committee with the written disclosures
required by Independence Standards Board Standard No. 1,
"Independence Discussions with Audit Committees," and the Audit
Committee discussed with Goldstein Golub Kessler LLP the firm's
independence.
Following the Audit Committee's discussions with
management and Goldstein Golub Kessler LLP, the Audit Committee
recommended that the Board of Directors include the audited
consolidated financial statements in the Company's Annual Report
for the fiscal year ended March 31, 2005.
Audit Committee
RONALD J. KORN, Chairperson
ROBERT C. SCHWEITZER
GIAN M. FULGONI
8
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the fees billed to us by
Goldstein Golub Kessler LLP, our independent registered public
accounting firm, as of and for the fiscal years ended March 31,
2005 and 2004:
For the Year Ended
March 31,
2005 2004
---------- ----------
Audit fees $ 65,294 $ 70,500
Audit-related fees - -
Tax fees - -
All other fees - -
---------- ----------
$ 65,294 $ 70,500
========== ==========
Audit fees billed by Goldstein Golub Kessler LLP related
to the audit of our annual consolidated financial statements for
the fiscal years ended March 31, 2005 and 2004; the review of our
Annual Report; the review of our interim consolidated financial
statements included in our Quarterly Reports on Form 10-Q for the
periods ended June 30, September 30, and December 31, 2004 and
2003; attest services; provisions of comfort letters; and the
provision of consents.
Goldstein Golub Kessler LLP has a continuing relationship with
American Express Tax and Business Services Inc. from which it
leases auditing staff who are full-time, permanent employees of
American Express Tax and Business Services Inc. and through which
its partners provide non-audit services. As a result of this
arrangement, Goldstein Golub Kessler LLP has no full time
employees and therefore, none of the audit services performed was
provided by permanent full-time employees of Goldstein Golub
Kessler LLP. Goldstein Golub Kessler LLP manages and supervises
the audit and audit staff, and is exclusively responsible for the
opinion rendered in connection with its examination. Other
services, which do not include financial information system
design and implementation fees, have been provided by American
Express Tax and Business Services Inc.
Pre-Approval Policy for Services of Independent Auditor
The Audit Committee shall:
- Have the responsibility to review and consider and
ultimately pre-approve all audit and permitted non-audit services
to be performed by our independent auditors.
- Select, evaluate, and, where appropriate, replace the
independent registered public accounting firm or nominate the
independent registered public accounting firm for shareholder
approval. The Committee also has the responsibility to approve
all audit engagement fees and terms and all non-audit engagements
with the independent registered public accounting firm. The
following sets forth what the Committee shall do in order to
fulfill its responsibilities and duties with respect to the
independent registered public accounting firm: be directly
responsible for the appointment, compensation approval and
oversight of the work of the independent registered public
accounting firm (including resolution of disagreements between
management and the independent registered public accounting firm
regarding financial reporting) for the purpose of preparing its
audit report or related work.
- Have the sole authority to review in advance, and grant any
appropriate pre-approvals of: (i) all auditing services to be
provided by the independent auditors, (ii) all non-audit services
to be provided by the independent registered public accounting
firm as permitted by Section 10A of the Securities Exchange Act
of 1934, and (iii) in connection therewith to approve all fees
and other terms of engagement. The Committee shall also review
and approve disclosures required to be included in Securities and
Exchange Commission periodic reports filed under Section 13(a) of
the Securities Exchange Act of 1934 with respect to non-audit
services.
- Review the performance of the Company's independent
registered public accounting firm on at least an annual basis.
9
- On an annual basis, review and discuss with the independent
registered public accounting firm all relationships the
independent registered public accounting firm have with the
Company in order to evaluate the independent registered public
accounting firm' continued independence. The Committee: (i) shall
ensure that the independent registered public accounting firm
submit to the Committee on an annual basis a written statement
(consistent with Independence Standards Board Standards No. 1)
delineating all relationships and services that may impact the
objectivity and independence of the independent registered public
accounting firm; (ii) shall discuss with the independent
registered public accounting firm any disclosed relationship or
services that may impact the objectivity and independence of the
independent registered public accounting firm; and (iii) shall
satisfy itself as to the independent registered public accounting
firm' independence.
- At least annually, obtain and review an annual report from
the independent registered public accounting firm describing: (i)
the independent registered public accounting firm' internal
quality control procedures and (ii) any material issues raised by
the most recent internal quality control review, or peer review,
of the independent registered public accounting firm, or by any
inquiry or investigation by governmental or professional
authorities, within the preceding five years, respecting one or
more independent audits carried out by the independent registered
public accounting firm, and any steps taken to deal with any such
issues.
- Confirm that the lead audit partner, or the lead audit
partner responsible for reviewing the audit for the Company's
independent registered public accounting firm, has not performed
audit services for the Company for each of the five previous
fiscal years.
- Review all reports required to be submitted by the
independent registered public accounting firm to the Committee
under Section 10A of the Securities Exchange Act of 1934.
- Review, based upon the recommendation of the independent
registered public accounting firm and management, the scope and
plan of the work to be done by the independent registered public
accounting firm for each fiscal year.
Our Audit Committee has considered whether the provision
of non-audit services is compatible with maintaining the
independence of Goldstein Golub Kessler LLP, and has concluded
that the provision of such services is compatible with
maintaining the independence of our auditors.
10
BENEFICIAL OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth information regarding
beneficial ownership of our Common Stock as of June 21, 2005, by
each person known by us to own beneficially or exercise voting or
dispositive control over 5% or more of our outstanding Common
Stock, by each of our executive officers and directors, and by
all executive officers and directors as a group. In general,
"beneficial ownership" includes those shares a person has the
power to vote or transfer, and options to acquire our Common
Stock that are exercisable currently or become exercisable within
60 days. Except as otherwise indicated, we believe that the
beneficial owners of the Common Stock listed below, based on
information furnished by these owners, have sole investment and
voting power with respect to these shares, except as otherwise
provided by community property laws where applicable. Unless
otherwise indicated below, the address for each person is 1441
S.W. 29th Avenue, Pompano Beach, FL 33069.
Aggregate Number of Percent of
Shares Shares
Name and Address of Beneficial Owner Beneficially Owned Outstanding
------------------------------------ ------------------ -----------
Tricon Holdings, LLC 5,102,500 (1) 21.7%
Marc Puleo, M.D. 1,403,286 (2) 5.9%
Bricoleur Capital Management, LLC 1,280,364 (3) 5.4%
Menderes Akdag 754,534 (4) 3.2%
Bruce S. Rosenbloom 75,434 (5) *
Robert C. Schweitzer 28,667 (6) *
Gian M. Fulgoni 26,667 (7) *
Ronald J. Korn 21,567 (8) *
Frank Formica 13,333 (9) *
All executive officers and directors
as a group (seven persons) 2,323,488 (10) 9.7%
__________
* Less than 1% of the issued and outstanding shares.
(1) Emel Yesil and Ragip Devres are the managers of Tricon
Holdings, LLC ("Tricon"). Creslin Limited ("Creslin") is the
sole member (shareholder) of Tricon. Mr. Robert G. Guest is the
officer, and Mr. Guest and Christopher J. Pitaluga are the
directors of Creslin. Creslin Limited Trust, established by
Mustafa Yesil, owns 99% of Creslin. Abacus Trustees (Gibraltar)
Limited is the trustee and Emel Yesil and Engin Yesil are the
beneficiaries of the Creslin Limited Trust. Emel Yesil and Engin
Yesil are Mustafa Yesil's daughter and son. The address for
Tricon is 1020 N.W. 163rd Drive, Miami, FL 33169.
(2) Dr. Puleo's holdings include 1,113,286 shares of our Common
Stock held by Marpul Trust, a trust established by Dr. Puleo
under an agreement dated September 3, 1999 and of which he is the
beneficiary. Southpac Trust International, Inc. is the trustee
of Marpul Trust. Dr. Puleo's holdings also include vested
options held by him to purchase 50,000 shares of our Common Stock
at $.35 per share until March 2006, 80,000 shares of our Common
Stock at $1.05 per share until May 2006, 80,000 shares of our
Common Stock at $1.05 per share until May 2007, and 80,000 shares
of our Common Stock at $1.05 per share until May 2008.
(3) As reflected on the Form 13F, which was filed with the
Securities and Exchange Commission on April 28, 2005. The
address for Bricoleur Capital Management, LLC is 12230 El Camino
Real, Suite 100, San Diego, CA 92130.
(4) Mr. Akdag's holdings include vested options to purchase
83,333 shares of our Common Stock at $10.64 per share until March
2008, but exclude options to purchase an additional 166,667
shares of our Common Stock at $10.64 per share, which have not
yet vested.
(5) Mr. Rosenbloom's holdings include vested options to purchase
16,667 shares of our Common Stock at $1.65 per share until May
2006, 16,667 shares of our Common Stock at $1.65 per share until
May 2007, 5,000 shares of our Common Stock at $3.45 per share
until June 2007, 8,334 shares of our Common Stock at $.86 per
share until March 2008, 5,000 shares of our Common Stock at $3.45
per share until June 2008, and 6,000 shares of our Common Stock
at $8.90 per share until June 2008, but exclude options to
purchase an additional 5,000 shares of our Common Stock at $3.45
per share, 12,000 shares of our Common Stock at $8.90 per share,
and 20,000 shares of our Common Stock at $6.60 per share, which
have not yet vested.
(6) Mr. Schweitzer's holdings include vested options to purchase
6,667 shares of our Common Stock at $8.90 per share until June
2008, but exclude options to purchase an additional 10,000 shares
of our Common Stock at $1.90 per share, 13,333 shares of our
Common Stock at $8.90 per share, and 20,000 shares of our Common
Stock at $6.60 per share, which have not yet vested.
(7) Mr. Fulgoni's holdings include vested options to purchase
6,667 shares of our Common Stock at $8.90 per share until June
2008, but exclude options to purchase an additional 10,000 shares
of our Common Stock at $1.90 per share, and 13,333 shares of our
Common Stock at $8.90 per share, and 20,000 shares of our Common
Stock at $6.60 per share, which have not yet vested.
(8) Mr. Korn's holdings include vested options to purchase 6,667
shares of our Common Stock at $8.90 per share until June 2008,
but exclude options to purchase an additional 10,000 shares of
our Common Stock at $1.90 per share, 13,333 shares of our Common
Stock at $8.90 per share, and 20,000 shares of our Common Stock
at $6.60 per share, which have not yet vested.
(9) Mr. Formica's holdings include vested options to purchase
10,000 shares of our Common Stock at $7.90 per share until August
2007 and 3,333 shares of our Common Stock at $8.90 per share
until June 2008, but exclude options to purchase an additional
20,000 shares of our Common Stock at $7.90 per share, 6,667
shares of our Common Stock at $8.90 per share, and 20,000 shares
of our Common Stock at $6.60 per share, which have not yet
vested.
(10) Incorporates (2) and (4) through (9) above.
Section 16(a) Beneficial Ownership Reporting Compliance
We became a reporting company under the Securities Exchange
Act of 1934 (the "Exchange Act") in March 2000. Based solely
upon a review of Forms 3 and 4 and amendments thereto furnished
to us under Rule 16a-3(d) of the Exchange Act through the fiscal
year ended March 31, 2005, the Company is not aware of any person
that failed to file on a timely basis, as disclosed in the
aforementioned forms, reports required by Section 16(a) of the
Exchange Act during the fiscal year ended March 31, 2005.
11
REPORT OF THE COMPENSATION COMMITTEE
The following Report of the Compensation Committee of our
Board of Directors and the performance graphs included elsewhere
in this proxy statement do not constitute soliciting material and
should not be deemed filed or incorporated by reference into any
other filings by us under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, except to the
extent we specifically incorporate this Report or the performance
graphs by reference therein.
The primary purposes of our Compensation Committee of our
Board of Directors, a committee which is comprised solely of
independent directors, are to oversee the administration of the
Company's compensation programs, review the compensation of
executive officers and directors, prepare any report on executive
compensation required by the rules and regulations of the
Securities and Exchange Commission and generally to provide
assistance to the Board of Directors on compensation matters.
During FY 2005, we approved the granting of stock options to
the Company's management and other employees.
Components of Executive Compensation
The basic components of executive compensation are:
- Annual Cash Compensation, specifically, base salary; and
- Long-Term Incentive Compensation, specifically, stock options.
Annual Cash Compensation - Base Salary
The purpose of base salary is to create a secure base of cash
compensation for executives that is competitive with the market.
Executives' salary increases do not follow a preset schedule or
formula; however, the following will be considered when
determining appropriate salary levels and increases: the
individual's current and sustained performance results and the
methods utilized to achieve such results; and non-financial
performance indicators to include strategic developments for
which an executive has responsibility and managerial performance.
We exercise discretion in making salary decisions taking into
account, among other things, each individual's performance and
the Company's overall performance. With regard to individual
performance of executive officers other than the Chief Executive
Officer, we rely to a large extent on the Chief Executive
Officer's evaluations of each individual executive officer's
performance.
Long-Term Incentive Compensation - Stock Options
Long-term incentives comprise the largest portion of the total
compensation package for executives. The form of long-term
incentives used for executives is stock options. Grant levels
will be determined for each executive based on individual
performance and potential, history of past grants, time in
current job and level of, or significant changes in,
responsibility. The purpose of stock options is to provide
equity compensation whose value is directly related to the
creation of share-owner value. Stock options provide executives
a vehicle to increase equity ownership and share in the
appreciation of the value of Company stock.
Compensation Committee
ROBERT C. SCHWEITZER,
Chairperson
RONALD J. KORN
GIAN M. FULGONI
12
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term
compensation paid by the Company for services performed on our
behalf for the last three completed fiscal years ended March 31,
2005, 2004, and 2003, with respect to our Chief Executive Officer
and other officers serving as such who earned compensation
greater than $100,000 in these fiscal years:
Summary Compensation Table
Annual Compensation Long-Term Compensation
------------------- ----------------------
Awards Payouts
Other Securities
Name and Principal Annual Underlying LTIP All Other
Position Year Salary Bonus Compensation($) Options/SARs Payouts ($) Compensation ($)
-------- ---- ------ ----- --------------- ------------ ----------- ----------------
(#)
---
Menderes Akdag 2005 $ 250,000 $ - - - - -
Chief Executive 2004 201,731 - - 250,000 - -
Officer 2003 200,000 - - - - -
Marc Puleo, M.D. 2005 150,000 - - - - -
Chairman of Board 2004 146,154 - - - -
and President 2003 100,000 50,000 240,000
Bruce Rosenbloom 2005 125,577 700 - 18,000 - -
Chief Financial 2004 106,461 1,600 - 15,000 - -
Officer 2003 100,000 500 - - - -
The following table sets forth certain information for the
fiscal year ended March 31, 2005, with respect to options granted
to individuals named in the Summary Compensation Table above.
Option Grants for Fiscal Year Ended March 31, 2005
Individual Grants
Potential Realizable Value at Assumed
Annual Rates of Stock Price Appreciation
Number of % of Total
Securities Options Exercise
Underlying Granted to Price Expiration
Name Options (#) Employees ($/Share) Date 0% ($) 5% ($) 10% ($)
---- ----------- --------- --------- ---- ------ ------ -------
Bruce Rosenbloom 18,000 (1) 8% $8.90 6/11/2008 - - -
Menderes Akdag - (2) - - - - - -
Marc Puleo, M.D. - (2) - - - - - -
(1) The Company granted Mr. Rosenbloom options to purchase
18,000 shares of its Common Stock on June 11, 2004, under the
Company's 1998 Stock Option Plan at an exercise price of $8.90
per share which will vest at the rate of 6,000 options on each of
June 11, 2005, 2006, and 2007.
(2) No options were issued to the individual during fiscal 2005.
The following table sets forth certain information with
respect to the number of shares covered by both exercisable and
unexercisable stock options held by the individuals named in the
Summary Compensation Table as of March 31, 2005. Also reported
are the values for "in-the-money" stock options that represent
the positive spread between the respective exercise prices of
outstanding stock options and the fair market value of our Common
Stock as of March 31, 2005 ($ per share).
Aggregate Option Exercises and Fiscal Year-End Option Values
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End (#) at Fiscal Year End ($) (1)
------------------------------ ---------------------------
Shares
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
---- ------------ ------------ ----------- ------------- ----------- -------------
Menderes Akdag 187,500 $ 708,750 83,333 166,667 $ - $ -
Marc Puleo, M.D. 750,000 2,272,500 210,000 80,000 1,370,600 508,800
Bruce Rosenbloom 10,000 63,900 36,667 44,667 208,786 135,602
(1) Represents the difference between the closing price
($7.41) of the Company's Common Stock on March 31, 2005, the
last trading day of the Company's 2005 fiscal year, and the
exercise price of the options.
13
Employment Agreement with Marc Puleo, M.D., President
On May 1, 2000, the Company entered into a two-year employment
agreement with Marc Puleo, M.D., current President, which
provided for annual cash compensation to him of $150,000. On
November 8, 2000, Dr. Puleo's employment agreement dated May 1,
2000 was amended to reflect a salary of $75,000 annually. Under
the terms of the employment agreement Dr. Puleo received an
annual salary of $75,000, subject to increase no less frequent
than an annual review by our Board of Directors. Dr. Puleo's
salary was increased to $100,000 in fiscal year 2002, and then
increased to $150,000 in May 2003. The agreement can be
terminated upon the mutual consent of the parties, or upon 90
days notice by the Company, in which case the Company would
continue to compensate him under the terms of his employment
agreement, or his contract will renew annually.
Employment Agreement with Menderes Akdag, Chief Executive Officer
On March 16, 2001, the Company had entered into an
employment agreement with its current Chief Executive Officer,
Menderes Akdag. Under the terms of this three-year agreement the
Company paid Mr. Akdag an annual salary of $150,000 for the first
six months of the agreement, and thereafter his annual salary was
to be increased to $200,000. The Company also granted Mr. Akdag
options to purchase 750,000 shares of its common stock under the
Company's 1998 Stock Option Plan at an exercise price of $.32 per
share, which vested at the rate of 187,500 options on each of
March 16, 2001, 2002, 2003 and 2004.
The agreement provided the following: the Company can
terminate the employment of Mr. Akdag either upon mutual consent
or for cause. If the Company should terminate Mr. Akdag for
cause, or if Mr. Akdag should terminate the agreement without
"good reason" as described in the employment agreement, no
severance benefits would be paid. If the Company should
terminate Mr. Akdag without cause, the Company would be required
to give Mr. Akdag three months notice and continue to compensate
him under the terms of this employment agreement during those
three months. At the end of the three-month period, the Company
would have to pay Mr. Akdag severance benefits equal to his
annual base salary, and any previously granted but unvested
options would immediately vest. If the Company should terminate
Mr. Akdag for cause, as defined in the employment agreement, no
severance benefits would be paid. The agreement can be
terminated upon the mutual consent of the parties, or upon 90
days notice by the Company during which time the Company would
continue to compensate him under the terms of his employment
agreement.
On March 16, 2004, the Company amended Mr. Akdag's existing
employment agreement. The amendments are as follows: the term of
the agreement will be for three years, commencing on March 16,
2004; Mr. Akdag's salary will be increased to $250,000 per year
throughout the term of the agreement, and Mr. Akdag shall be
granted 250,000 incentive stock options under the Company's 1998
Stock Option Plan at an exercise price of $10.64 per share, which
vest at the rate of 83,333 options on each of March 16, 2005 and
2006, and 83,334 options on March 16, 2007. All other terms of
Mr. Akdag's original employment agreement remain in effect.
Directors' Compensation
Each member of our Board of Directors who is not employed
by us receives an annual retainer of $10,000 per year, paid
quarterly. Additionally, upon election to the Board of
Directors, each director not employed by us was granted 30,000
stock options, under our 1998 Stock Option Plan, to purchase our
Common Stock, at an exercise price equal to the fair market value
of the stock at the time of granting, with the options vesting
equally over a three-year period. From time to time at the
discretion of the Board, additional options may be issued in the
future. We also pay the reasonable travel and accommodation
expenses of directors in connection with their participation in
meetings of the Board of Directors.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended March 31, 2005, Robert C.
Schweitzer, Ronald J. Korn and Gian M. Fulgoni served on the
Compensation Committee. All members of the Compensation Committee
are independent. Accordingly, insiders do not participate in
compensation decisions.
14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Board's policy requires that transactions with related
parties must be entered into in good faith on fair and reasonable
terms that are no less favorable to us than those that would be
available in a comparable transaction in arm's-length dealings
with an unrelated third party. Our Board, by a vote of the
disinterested directors, must approve all related party
transactions, recommended by the Audit Committee. Since the
beginning of the Company's last fiscal year, the Company has not
had, or been a party to, nor is there currently proposed, a
transaction with a related party.
PERFORMANCE GRAPH
Set forth below is a graph comparing the cumulative
performance of our Common Stock with the Standard & Poor's
Composite-500 Stock Index (the "S&P 500") and the Nasdaq
Composite (the "NASDAQ") from March 31, 2000 to March 31, 2005.
The graph assumes that $100 was invested on March 31, 2000 in
each of our Common Stock, the S&P 500 and the NASDAQ and that all
dividends were reinvested.
[LINE GRAPH]
Value of $100 Investment made March 31, 2000
3/31/2000 3/31/2001 3/31/2002 3/31/2003 3/31/2004 3/31/2005
--------- --------- --------- --------- --------- ---------
Nasdaq Composite 100.00 40.24 40.35 29.33 43.61 43.72
S&P 500 100.00 77.43 76.57 56.60 75.15 78.78
PetMed Express, Inc. 100.00 32.63 27.83 82.09 382.61 257.74
OTHER MATTERS
Our Board of Directors does not intend to present, or have
any reason to believe others will present, any items of business
other than those stated above. If other matters are properly
brought before the Board of Directors at the annual meeting, the
persons named in the accompanying proxy will vote the shares
represented by it in accordance with the recommendation of our
Board of Directors.
By Order of the Board of Directors,
MENDERES AKDAG
Chief Executive Officer and Director
Pompano Beach, Florida
June 30, 2005
15
EXHIBIT A
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
PETMED EXPRESS, INC.
Pursuant to Section 607.1006 of the Business Corporation Act
of the State of Florida, the undersigned, being the Chief
Executive Officer of PETMED EXPRESS, INC., a corporation
organized and existing under and by virtue of the Business
Corporation Act of the State of Florida (the "Corporation"),
bearing document number P96000010098, does hereby certify that
the following resolution was adopted pursuant to the authority of
the Board of Directors and the holders of a majority of the
Corporation's issued and outstanding voting securities as
required by Section 602.1003 of the Florida Business Corporation
Act:
RESOLVED, that the name of this Corporation is PetMed
Express, Inc.
RESOLVED, that Article VI - BOARD OF DIRECTORS of the
Corporation's Articles of Incorporation, as amended, be and
hereby is amended by adding the following paragraph:
ARTICLE VI - BOARD OF DIRECTORS
The Directors shall be divided into three (3) classes. Each
such class shall consist, as nearly as may be possible, of one-
third of the total number of Directors, and any remaining
Directors shall be included within such groups as the Board of
Directors shall designate. The first class of Directors will be
elected for a term which expires in 2006. The second class will
be elected for a term which expires in 2007. The third class will
be elected to a term which expires in 2008. At each annual
meeting of stockholders, beginning in 2005, successors to the
class of Directors whose term expires at the annual meeting shall
be elected for a three-year term. If the number of Directors is
changed, any increase or decrease shall be apportioned among the
classes so as to maintain the number of Directors in each class
as nearly equal as possible, but in no case shall a decrease in
the number of Directors shorten the term of any incumbent
Director. A Director may be removed from office for cause only
and, subject to such removal, death, resignation, retirement or
disqualification, shall hold office until the annual meeting for
the year in which his term expires and until his successor shall
be elected and qualify. No alteration, amendment or repeal of
this Article VI or the Bylaws of the Corporation shall be
effective to shorten the term of any Director holding office at
the time of such alteration, amendment or repeal, to permit any
such Director to be removed without cause, or to increase the
number of Directors in any class or in the aggregate from that
existing at the time of such alteration, amendment or repeal
until the expiration of the terms of office of all Directors then
holding office, unless such alteration, amendment or repeal of
this Article VI has been approved by the holders of the shares of
stock entitled to vote thereon.
The foregoing resolutions and articles of amendment were
adopted by the Board of Directors of the Corporation and by the
holders of a majority of the Corporation's issued and outstanding
voting securities at a meeting of shareholders held on August 5,
2005, which number of votes cast for the amendment by the
shareholders was sufficient for approval pursuant to the Florida
Business Corporation Act.
IN WITNESS WHEREOF, the undersigned, being the Chief Executive
Officer of this Corporation, has executed these Articles of
Amendment as of August 5, 2005.
PETMED EXPRESS, INC.
By:________________________________________
Menderes Akdag, Chief Executive Officer
16
[LOGO] 1-800-PetMeds[R]
PETMED EXPRESS, INC. ADMISSION TICKET
2005 ANNUAL MEETING OF STOCKHOLDERS FRIDAY, AUGUST 5, 2005 AT 1:00 P.M. EST
TO BE HELD AT PETMED EXPRESS, INC. AT 1441 S.W. 29th AVE.,
POMPANO BEACH, FL 33069
THIS TICKET MUST BE PRESENTED TO ENTER THE MEETING
[ ] DETACH PROXY CARD HERE
Please Vote, Sign, Date and
Return Promptly in the
Enclosed Envelope. [X]
Votes must be indicated
(x) in Black or Blue Ink.
The Board of Directors recommends a vote "FOR" each item.
FOR AGAINST ABSTAIN
1. To amend the Company's 3. To ratify the appointment [ ] [ ] [ ]
Articles of Incorporation of Goldstein Golub Kessler
to provide for staggered LLP as the independent
terms for Directors: registered accounting firm:
FOR AGAINST ABSTAIN
amendment [ ] amendment [ ] [ ]
of Company's of the Company's
Articles of Articles of
Incorporation Incorporation
2. To elect six (6) members to the Board of Directors:
FOR all nominees WITHHOLD *EXCEPTIONS
listed below [ ] AUTHORITY to vote for all [ ] [ ]
nominees listed below
Nominees: Menderes Akdag, Frank J. Formica, Gian M. Fulgoni, Ronald Korn,
Marc A. Puleo, M.D., and Robert C. Schweitzer
To change your address,
Instructions: To withhold authority to vote please mark this box. [ ]
for any individual nominee, mark the "*Exceptions"
box and write that nominee's name in the space
provided below.
*Exceptions
To include any
comments, please mark
this box. [ ]
S C A N L I N E
The signature on this Proxy should correspond
exactly with stockholders name as printed to the left.
In case of joint tenancies, co-executors, or co-trustees,
both should sign. Persons signing as Attorney, Executor,
Administrator, Trustee or Guardian should give their
full title.
Dated 2005 Stock Owner sign here Co-Owner sign here
PETMED EXPRESS, INC.
Proxy Solicited on behalf of the Board of Directors of
PetMed Express, Inc.
The undersigned hereby appoints Bruce S. Rosenbloom and
Alison Berges, and each of them, proxies, with full power of
substitution in each of them, for and on behalf of the
undersigned to vote as proxies, as directed and permitted herein
to vote the undersigned's shares of PetMed Express, Inc. Common
Stock at the Annual Meeting of Stockholders of PetMed Express,
Inc. to be held on Friday, August 5, 2005, at 1:00 p.m., Eastern
Time at the Company's principal place of business and at any
adjournments thereof upon matters set forth in the proxy
statement and, in their judgment and discretion, upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner
directed on the reverse hereof by the Stockholder.
If no direction is made, this proxy will be voted FOR all
nominees listed and items 1 and 3.
(Continued and to be dated and signed on the reverse side)
PetMed Express, Inc.
1441 S.W. 29th Avenue
Pompano Beach, FL 33069