Item 5.02.
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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(c)
On August 18, 2016, the
Board of Directors of the Company (the “Board”) appointed Robert Rosenblatt, Chairman of the Board and interim Chief
Executive Officer, to serve as the Chief Executive Officer of the Company, commencing on August 18, 2016. Landel Hobbs, the current
Vice Chairman of the Board, will replace Mr. Rosenblatt as the Chairman of the Board, although Mr. Rosenblatt will remain a director
on the Board.
Mr. Rosenblatt, age 59,
has served as the Company’s interim Chief Executive Officer since February 8, 2016 and as the Chairman of the Board since
June 2014. Mr. Rosenblatt has more than 25 years of leadership experience at a number of leading retail organizations, including
Tommy Hilfiger, HSN (formerly the Home Shopping Network) and Bloomingdale’s. During the end of 2012 through mid-May of 2013,
Mr. Rosenblatt was Interim President of Ideeli.com, a flash sales company based in New York that was sold to Groupon. As Group
President and Chief Operating Officer of Tommy Hilfiger Corporation, he grew revenues and profitability and built the company’s
first transactional web site. Mr. Rosenblatt co-managed the process which culminated in the Tommy Hilfiger Company successfully
being sold to Apax Partners in 2006. Mr. Rosenblatt also previously served as Chief Financial Officer, Chief Operating Officer
and President of HSN. Mr. Rosenblatt introduced and built HSN’s online operation, which achieved profitability within three
months of inception. As Chief Financial Officer at Bloomingdale’s, Mr. Rosenblatt was responsible for financial reporting,
financial planning and administrative management. For the past nine years, Mr. Rosenblatt has been the Chief Executive Officer
of Rosenblatt Consulting, LLC, which specializes in helping investment firms determine value in both public and private companies
in the consumer products sector, as well as helping retail firms maximize profitability. Mr. Rosenblatt currently serves or has
served on several public and private boards in the retail and technology industry including PepBoys (NYSE: PBY), RetailNext, Newgistics,
ERA (Electronic Retailing Association) and I.Predictus. In addition, Mr. Rosenblatt previously taught at FIT (Fashion Institute
of Technology) as an Adjunct Professor.
There are no arrangements
or understandings between Mr. Rosenblatt and any other person or persons pursuant to which Mr. Rosenblatt was appointed as Chief
Executive Officer. Mr. Rosenblatt does not have a family relationship with any member of the Board or other executive officer of the Company nor is he a party to any transactions with related persons that would be required to
be disclosed under applicable SEC regulations.
In connection with his
appointment as Chief Executive Officer, Mr. Rosenblatt has entered into an Executive Employment Agreement as described below and
incorporated into this Item 5.02(c).
(e)
On August 18, 2016, the
Company entered into an Executive Employment Agreement with Mr. Rosenblatt (the “Employment Agreement”). The Employment
Agreement provides for a two year initial term, followed by automatic one-year renewals. Pursuant to the Employment Agreement Mr.
Rosenblatt will receive an initial base salary of $750,000 per year, and, provided that certain annual performance goals are met,
a cash bonus of $750,000 payable upon completion of the fiscal year ending January 28, 2017. Thereafter, Mr. Rosenblatt will be
entitled to cash bonuses of at least 100% of his base salary if the target performance goals established by the Board are achieved. Mr. Rosenblatt is eligible to participate in the Company’s fiscal year 2016 annual cash incentive plans and
programs as are generally provided to the senior executives of the Company and as are in effect from time to time. Mr. Rosenblatt
also received a long term incentive equity grant equal to 150% of Mr. Rosenblatt’s base salary, comprised of 50% stock options
and 50% performance units. Specifically, Mr. Rosenblatt was granted options to purchase 375,855 shares of Company common stock,
which shall vest in annual one third increments starting on March 28, 2017 at an exercise price of $1.60, and 231,799 performance
units which shall be issuable in shares of Company common stock, the number of which is tied to the achievement of certain relative
total shareholder return performance goals. The award agreements evidencing the long term incentive equity grant provide for accelerated
vesting upon Mr. Rosenblatt’s termination with good reason or termination without cause within 12 months of a change of control.
The Employment Agreement
also provides Mr. Rosenblatt with an initial equity award of 625,000 shares of restricted stock under the Company’s 2011
Omnibus Incentive Plan with a fair value of approximately $1,000,000. The award will vest as follows: one third on the effective
date of the Employment Agreement and the other two thirds to vest in two equal parts upon the achievement of certain specified
performance goals relating to a) an increase in stock price and b) length-of-service requirements.
To assist with Mr. Rosenblatt’s
commute to the Company’s headquarters in Eden Prairie, Minnesota, the Employment Agreement provides that the Company will
reimburse Mr. Rosenblatt for his commuting, temporary housing and transportation costs, and will pay an additional amount to make
Mr. Rosenblatt whole for taxes on such reimbursement amounts. The Employment Agreement also provides that the Company will reimburse
Mr. Rosenblatt for up to $20,000 in reasonable and documented legal expenses and other costs associated with the negotiation of
his employment arrangements.
In the event of a termination
by the Company of Mr. Rosenblatt’s employment during the term of the Employment Agreement without cause (other than as a
result of death or disability) or by Mr. Rosenblatt with good reason, he will receive severance benefits consisting of a cash severance
payment equal to one and one-half times the sum of Mr. Rosenblatt’s base salary during the 12-month period immediately
preceding the termination plus one times his target annual incentive bonus, to be determined based on such base salary. In the
event of a termination due to a change in control, the multiple will be increased to two times Mr. Rosenblatt’s base salary
during the 12-month period immediately preceding the termination plus two times the greater of the target annual incentive
bonus he received for the immediately preceding fiscal year or the target annual incentive bonus determined based on his base salary.
The severance will be paid in equal installments or, following a change in control, in a lump sum, subject in each case to a six
month delay to the extent required for compliance with Section 409A of the Internal Revenue Code of 1986, as amended. He will also
receive a pro-rated annual cash incentive award to the extent the performance goals are achieved, if the Company does not renew
the Employment Agreement or if Mr. Rosenblatt’s employment with the Company terminates as a result of a change of control,
continued group health, dental and life insurance benefits for 18 months (24 months following a change in control) at no cost to
Mr. Rosenblatt and pro-rata vesting of any long-term incentive awards, subject to the achievement of any performance goals.
The foregoing description
of the Executive Employment Agreement with Mr. Rosenblatt summarized above is a summary only, and is qualified in its entirety
by the document filed as Exhibit 10.1 to this Current Report on Form 8-K and incorporated herein by reference.