<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
SHOP AT HOME, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
SHOP AT HOME, INC.
5210 SCHUBERT ROAD
P.O. BOX 12600
KNOXVILLE, TENNESSEE 37912
______________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FRIDAY, DECEMBER 6, 1996
______________________________
Notice is hereby given that the Annual Meeting of Shareholders of Shop
at Home, Inc. (hereinafter called the "Company"), will be held at the LaQuinta
Inn, located at 5634 Merchants Center Boulevard, Knoxville, Tennessee, on
Friday, December 6, 1996 at 11:00 a.m., local time, for the following purposes:
(1) To consider and to vote upon the election of six (6) directors
to serve until the next Annual Meeting and until their
successors are duly elected and qualified;
(2) To consider and to vote upon a proposed amendment to the
Company's Omnibus Stock Incentive Plan (the "Plan"), as
described in the accompanying Proxy Statement;
(3) To consider and to vote upon the approval of the selection of
Coopers & Lybrand L.L.P., Certified Public Accountants,
Knoxville, Tennessee, as the Company's independent auditors
for the 1997 fiscal year; and
(4) To transact such other business as may properly come before
the meeting or any adjournment thereof.
Information regarding the matters to be acted upon at the Annual
Meeting is contained in the Proxy Statement accompanying this Notice. The
Annual Meeting may be adjourned from time to time without notice, other than
the announcement of the adjournment at the Annual Meeting or any adjournment or
adjournments thereof, and any and all business for which notice is hereby given
may be transacted at any such adjourned Annual Meeting.
The Board of Directors has fixed the close of business on November 1,
1996, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting.
By Order of the Board of Directors
A. E. Jolley, Secretary
Knoxville, Tennessee
November 15, 1996
YOUR REPRESENTATION AT THE MEETING IS IMPORTANT. TO ENSURE YOUR
REPRESENTATION, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE,
DATE, SIGN AND RETURN THE ENCLOSED PROXY. SHOULD YOU DESIRE TO REVOKE YOUR
PROXY, YOU MAY DO SO AS PROVIDED IN THE ACCOMPANYING PROXY STATEMENT, AT ANY
TIME BEFORE IT IS VOTED.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
INFORMATION CONCERNING THE SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Security Ownership of Certain Beneficial Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Director Nominees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Security Ownership of Management and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Other Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Remuneration of Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Summary Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Option Grants in Last Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values . . . . . . . . . . . . . . . . . . . . 9
Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Compensation of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Omnibus Stock Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Transactions with Management and Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Compensation Committee Interlocks and Insider Participation . . . . . . . . . . . . . . . . . . . . . . . . 10
Transactions with Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Report on Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Compensation Philosophy and Policies for Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . 11
Base Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Annual Bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Long-Term Incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Chief Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Stockholder Return Comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
PROPOSAL NO. 2 -- AMENDMENT TO THE PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
PROPOSAL NO. 3 -- APPOINTMENT OF AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
PROPOSAL NO. 4 -- OTHER BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Interests of Company Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Proposals of Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Cost of Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Annual Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
APPENDIX A -- Amendment No. 1 Shop at Home, Inc. Omnibus Stock Incentive Plan . . . . . . . . . . . . . . . . . . . 22
</TABLE>
i
<PAGE> 4
SHOP AT HOME, INC.
5210 SCHUBERT ROAD
P.O. BOX 12600
KNOXVILLE, TENNESSEE 37912
_______________________________________________________
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
_______________________________________________________
INFORMATION CONCERNING THE SOLICITATION
The accompanying proxy is solicited by the Board of Directors of Shop
At Home, Inc. (the "Company"), for use at the Annual Meeting of Shareholders to
be held on December 6, 1996, and any adjournments thereof, notice of which is
attached hereto.
This Proxy Statement and the Annual Report of the Company for the
fiscal year ended June 30, 1996, have been mailed on or about November 15,
1996, to all shareholders of record on November 1, 1996.
The purposes of the Annual Meeting are: [1] to consider and to vote
upon the election of six (6) directors; [2] to consider and to vote upon an
amendment to the Plan; [3] to consider and to vote upon the approval of the
selection of Coopers & Lybrand L.L.P., Certified Public Accountants, Knoxville,
Tennessee, as the Company's independent auditors for the fiscal year ended June
30, 1997; and [4] to consider such other business as may properly come before
the meeting or any adjournment thereof.
A shareholder of record who signs and returns a proxy in the
accompanying form may revoke that proxy at any time before the authority
granted thereby is exercised (i) by attending the Annual Meeting and electing
to vote in person, (ii) by filing with the Secretary of the Company a written
revocation, or (iii) by duly executing and filing with the Secretary of the
Company a proxy bearing a later date. Unless so revoked, the shares
represented by the proxy will be voted at the Annual Meeting. Where a choice
is specified on the proxy, the shares represented thereby will be voted in
accordance with that specification. If no specification is made, all shares
will be voted: FOR the election of all director nominees; FOR the proposed
amendment to the Plan; and FOR ratification of the selection of Coopers &
Lybrand L.L.P., Certified Public Accountants, Knoxville, Tennessee, as the
Company's independent auditors for the fiscal year ended June 30, 1997.
The Board of Directors knows of no other matters which are to be
brought to a vote at the Annual Meeting. If, however, any other matter does
come before the meeting, the persons appointed in the proxy, or their
substitutes, will vote in accordance with their best judgment on such matters.
1
<PAGE> 5
The Board of Directors has fixed the close of business on November 1,
1996 (the "Record Date") as the record date for the Annual Meeting. The
Company's only class of securities entitled to vote is its Common Stock, $.0025
par value per share ("Common Stock"). On the Record Date, the Company had
outstanding 10,594,414 shares of Common Stock. Only shareholders of record at
the close of business on the Record Date will be entitled to vote at the Annual
Meeting. Shareholders will be entitled to one vote for each share held, which
may be given in person or by proxy authorized in writing.
Under the Tennessee Business Corporation Act (the "Act") and the
Company's Bylaws, the presence, in person or by proxy, of a majority of the
outstanding shares of Shop at Home Common Stock is necessary to establish a
quorum of the Company's shareholders for the purpose of taking action at the
Annual Meeting. For these purposes, shares which are present or represented by
a proxy at the Annual Meeting will be counted for quorum purposes, regardless
of whether the holder of the shares or proxy fails to vote on any particular
matter or whether a broker with discretionary authority fails to exercise its
discretionary voting authority with respect to any particular matter.
The directors standing for election must be elected by a plurality of
the votes cast at the Annual Meeting. Any other action to be taken at the
Annual Meeting, including the approval of the amendment to the Plan and the
approval of the Company's independent auditors, must be approved by a majority
of the votes cast. For these voting purposes, abstentions and broker non-votes
will not be counted in determining whether the directors standing for election
have been elected or whether any other action has been approved.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following information relates to the Common Stock of the Company
beneficially owned, directly or indirectly, by all persons known to be the
beneficial owners of more than five percent (5%) of the Common Stock as of
November 1, 1996. Unless otherwise noted, the named persons have sole voting
and investment power with respect to the shares indicated.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(6)
<TABLE>
<CAPTION>
Sole Investment Shared Investment
Name and address of Sole Voting Power Shared Voting Power Power Power
beneficial owner
Number of % Number of % Number of % Number of %
Shares Shares Shares Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SAH Holdings, L.P.(1), (2),
(5), (6)
Global Network Television,
Inc.
Mortgage Funding Corporation
Brownsville, TN
J.D. Clinton 1,391,755 11.7 5,448,400 44.5 5,697,659 42.1 594,096 5.6
Naples, Florida
W. Paul Cowell(4), (5), (6) 0 0 5,313,456 43.4 413,456 3.9 134,944 1.3
Knoxville, TN
MediaOne,Inc.(3)(6)
Frank A. Woods 0 0 0 0 825,000 7.2 0 0
Nashville, TN
- --------------------------------------
</TABLE>
2
<PAGE> 6
(1) SAH Holdings, L.P. ("SAH") is a Tennessee limited partnership with
Global Network Television, Inc., a Tennessee corporation ("Global"), as its
sole general partner. J.D. Clinton is chairman, a director and the sole
shareholder of Global.
(2) SAH currently owns 2,655,904 shares of Common Stock (25.1% of shares
issued and outstanding). Mr. Clinton's wife owns, individually, 5,000 shares
of Common Stock that are assumed to be beneficially owned by SAH. Mortgage
Funding Corporation, a corporation wholly owned by Mr. Clinton, owns 100,000
shares of Common Stock that are assumed to be beneficially owned by SAH. SAH
holds warrants to purchase up to 1,650,000 shares of Common Stock from the
Company. Global holds warrants to purchase up to 742,500 shares of Common
Stock from the Company which is assumed to be beneficially owned by SAH. SAH
owns an option to purchase 594,096 shares of Common Stock from W. Paul Cowell.
Global also holds the Company's $2,000,000 Variable Rate Convertible Secured
Note, Due 2000, which it may convert to a total of 544,255 shares of Common
Stock. If these warrants and options were exercised, and the note converted to
stock, SAH would beneficially own 6,291,755 shares (or 46.5%) of the 13,531,169
shares of Common Stock that would then be outstanding.
(3) MediaOne, Inc. is a Tennessee corporation of which Frank A. Woods
serves as an executive officer and director. Members of Mr. Woods' immediate
family own MediaOne, Inc. MediaOne owns warrants to purchase up to 825,000
shares of Common Stock.
(4) Mr. Cowell presently owns 1,007,552 shares of Common Stock (9.5% of
the shares issued and outstanding). Mr. Cowell has granted an option to
purchase 594,096 of those shares to SAH. In addition, Mr. Cowell is the income
beneficiary and has a limited right to name the beneficiary of the trust which
owns 134,944 shares.
(5) Mr. Cowell and SAH have agreed that so long as the options granted to
SAH remain outstanding, Mr. Cowell and SAH will vote all of their shares
together with respect to the composition and election of directors. For the
purposes of calculating Shared Voting Power, SAH is deemed to own the following
shares of Shop at Home Common Stock: SAH -- 4,900,000 shares (including
594,096 now owned by Mr. Cowell), and W. Paul Cowell -- 548,400 shares
(including 134,944 shares owned by a trust). Mr. Cowell is deemed to own the
same shares with the exception of the shares owned by the trust.
(6) The shares subject to warrants, options, or conversion rights
described in Notes (2) and (3) are deemed to be outstanding for the purposes of
computing the percentage of outstanding Common Stock beneficially owned by SAH
and W. Paul Cowell.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The terms of all present directors will expire upon the election of
new directors at the Annual Meeting. The Board of Directors proposes the
election of the nominees listed below to serve until the next Annual Meeting,
and until their successors are duly elected and qualified. Unless contrary
instructions are received, it is intended that the shares represented by the
Proxy solicited by the Board of Directors will be voted in favor of the
election as directors of all the nominees named below. If for any reason any
of the nominees is not available for election, the persons named in the Proxy
have advised that they will vote for such substitute nominees as the Board of
Directors of the Company may propose. The Board of Directors has no reason to
expect that any of these nominees will fail to be candidates at the meeting,
and therefore, does not at this time have any substitute nominee under
consideration. The information relating to the six (6) nominees set forth
below has been furnished to the Company by the individuals named. All of the
nominees are presently directors of the Company, having been elected at the
Company's Annual Meeting held on October 26, 1995. The Company's Bylaws
specify that the Company's President shall be a member of its Board of
Directors.
3
<PAGE> 7
The Directors shall be elected by a plurality of the votes cast by the
shares entitled to vote in the election at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE NOMINEES LISTED BELOW.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE LISTED
NOMINEES.
DIRECTOR NOMINEES
J.D. Clinton. Shop At Home Director and Chairman of the Board since
1993. Chairman, President and Chief Executive Officer, Independent Southern
Bancshares, Inc., Brownsville, Tennessee, a diversified financial institutions
holding company. Chairman and Director, Brownsville Bank, Brownsville,
Tennessee. Chairman and Director, Tennessee Bank & Trust, Millington,
Tennessee. Director, Union Savings Bank, Covington, Tennessee. Director,
Southern Financial, Inc., Nashville, Tennessee. Age 52. Graduate of the
University of Memphis.
W. Paul Cowell. Shop At Home Director since 1988, and Chairman of the
Board from 1990 through 1993. President and Chief Executive Officer, Warren &
William, Inc. (formerly National Book Warehouse, Inc.,) a discount bookstore
chain since 1989. President and Owner, Book Ends Discount Book Stores, Inc.,
since 1987. Director, Global Christian Ministries, Inc. Age 54.
A.E. Jolley. Shop At Home Director and Secretary/Treasurer since 1986.
President, Lakeway Containers, Inc., Morristown, Tennessee, a corrugated
container manufacturer, since 1975. Director, Franklin Federal Savings Bank.
Director, Kingwood School, Morristown, Tennessee. Commissioner, Morristown
City Planning Commission. Member, Board of Trustees, Walters State Community
College. Age 56.
Kent E. Lillie. Shop at Home Director since 1993. Shop At Home
President and Chief Executive Officer since September, 1993. Vice President
and General Manager, WATL-TV, Atlanta, Georgia, 1992-1993. Vice President and
General Manager, WPTY-TV, Memphis, Tennessee, 1987-1992. Age 50. Graduate of
Sacramento City College.
Joseph I. Overholt. Shop At Home Director since 1986. President and
Owner of Planet Systems, Inc., a computer software development company engaged
in the satellite delivery of computer data, since 1992. President and Owner of
Skylink Communications since 1989. Shop At Home Vice President from 1986
through August, 1993. Age 48. Graduate of The University of Tennessee.
Frank A. Woods. Shop At Home Director since 1993. Chairman of the
Board and Director of MediaOne, Inc., Nashville, Tennessee, a communications
consulting and strategic planning firm since 1991. Partner, The Woods Group,
Nashville, Tennessee, a merchant banking firm which specializes in mergers and
acquisitions, corporate finance and strategic planning services. Age 55.
Graduate of Vanderbilt University and Vanderbilt University School of Law.
The principal business activity of each of the above Directors has
been as shown above during the past five years, except that in some cases the
individual has been employed by a predecessor organization or has undertaken
greater responsibilities with the same employer, a parent company, or a
successor organization.
The Board of Directors has no standing audit, nominating or
compensation committees. The Board of Directors has appointed Kent E. Lillie,
J.D. Clinton and Frank A. Woods to serve as an administrative committee to
administer the Company's Omnibus Stock Incentive Plan.
During the fiscal year ended June 30, 1996, the Board of Directors
held five (5) meetings. No incumbent director attended fewer than 75% of the
Board meetings during the year.
4
<PAGE> 8
SECURITY OWNERSHIP OF MANAGEMENT AND DIRECTORS
The following information presents the beneficial ownership of the
Common Stock of the Company as of November 1, 1996, by the Company's directors,
the executive officers named in the Remuneration of Directors and Officers, and
by all directors and executive officers as a group.
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
BY DIRECTORS AND EXECUTIVE OFFICERS(4)
<TABLE>
<CAPTION>
NAME OF Sole Investment Shared Investment
BENEFICIAL OWNER Sole Voting Power Shared Voting Power Power Power
Number of Number of Number of Number of %
Shares % Shares % Shares % Shares
<S> <C> <C> <C> <C> <C> <C> <C> <C>
J.D. Clinton(1),(3),(4) 1,391,755 11.7 5,448,400 44.5 5,697,659 42.1 594,096 5.6
W. Paul Cowell (3),(4) 0 0 5,313,456 43.4 413,456 3.9 134,944 1.3
A.E. Jolley 501,092 4.7 0 0 501,092 4.7 0 0
Kent E. Lillie (5) 414,000 3.8 0 0 414,000 3.8 0 0
Joseph I. Overholt 509,200 4.8 0 0 509,200 4.8 0 0
Frank A. Woods(2) 0 0 0 0 825,000 7.2 0 0
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY OWNED % OF OUTSTANDING STOCK
<S> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (14 9,260,872 62.7%
PERSONS)(6)
</TABLE>
______________________________________
(1) J.D. Clinton is deemed to be the beneficial owner of the shares,
warrants and options to acquire shares, and the right to convert debt to
shares, owned by SAH Holdings, L.P. and Global Network Television, Inc.
(2) Frank A. Woods is an executive officer and director of MediaOne, Inc.,
which owns warrants to purchase up to 825,000 shares of Common Stock.
(3) For the purposes of calculating Shared Voting Power, Mr. Clinton, and
Mr. Cowell are deemed to own beneficially the following shares of Shop at Home
Common Stock: J.D. Clinton -- 4,900,000 shares (including 594,096 now owned by
Mr. Cowell), and W. Paul Cowell -- 548,400 shares.
(4) The shares subject to warrants or options described in Notes (1) and
(3) are deemed to be outstanding for the purposes of computing the number of
shares and percentage of outstanding of Common Stock beneficially owned by J.D.
Clinton and W. Paul Cowell.
(5) Mr. Lillie owns 114,000 shares and has options, exercisable currently
or within the next sixty days, to purchase an additional 300,000 shares. Mr.
Lillie also has options to purchase 700,000 shares which are not currently
exercisable.
(6) For the purposes of computing the number of shares and percentage of
outstanding Common Stock beneficially owned by all Directors and Executive
Officers as a Group, all shares subject to warrants or options held by members
of the Group, which are exercisable currently or within the next sixty days,
were assumed to be outstanding.
5
<PAGE> 9
OTHER EXECUTIVE OFFICERS
The following information relates to the executive officers of the
Company as of the date of this Proxy Statement, other than those executive
officers who also serve as directors of the Company, as noted above. With the
exception of the President and Chief Executive Officer, who has an employment
agreement with a term of five (5) years, and Mr. Nawy and Mr. Gratteau, each of
whom has an employment agreement, the remaining executive officers serve at the
discretion of the Board:
<TABLE>
<CAPTION>
Name AGE POSITION
---- --- --------
<S> <C> <C>
Thomas C. Sutula . . . . . . . . . . . . . . . . 52 Executive Vice President and Chief
Operating Officer
Joseph Nawy . . . . . . . . . . . . . . . . . . . 53 Vice President of Finance
H. Wayne Lambert . . . . . . . . . . . . . . . . 46 Vice President of Operations
Henry I. Shapiro . . . . . . . . . . . . . . . . 50 Vice President of Merchandise
Kent H. Gratteau, Jr. . . . . . . . . . . . . . . 53 Vice President of Broadcasting &
Engineering
Linda O. Ford . . . . . . . . . . . . . . . . . . 32 Vice President of Human Resources
Sandra B. Emery . . . . . . . . . . . . . . . . . 51 Vice President of Customer Relations
Michael S. Kokernak . . . . . . . . . . . . . . . 30 Vice President of Affiliate & Investor
Relations
</TABLE>
OTHER EXECUTIVE OFFICERS
Thomas C. Sutula, Executive Vice President and Chief Operating Officer.
Mr. Sutula joined the Company in July, 1995, and has extensive experience in
marketing, merchandising and operations. Prior to joining the Company, Mr.
Sutula was with Sears, Roebuck and Co. where he held numerous management
positions, including National Logistics Manager, National Marketing Manager and
General Merchandise Manager. Prior to that, he served as Vice President of
Marketing for Hitachi Home Electronics and as Vice President - Sales &
Marketing for Great Bay Tool Corporation, a development company. Mr. Sutula
also served as a sales and marketing consultant. Mr. Sutula is a graduate of
Villanova University.
Joseph Nawy, Vice President of Finance. Mr. Nawy has served as Vice
President of Finance since September 8, 1994. Mr. Nawy possesses extensive
experience in the direct mail industry, computer operations and distribution.
Prior to joining the Company, during 1993 and 1994, Mr. Nawy was a loan officer
with the firm of Morgan Carlton. From 1990 to 1993 Mr. Nawy was the Chief
Operating Officer and Chief Financial officer of LP Music Group, a manufacturer
and importer of percussion musical instruments. From 1987 to 1990, Mr. Nawy
was the Chief Financial Officer of American Direct Industries, Inc., a direct
mail retailer. Prior to that, Mr. Nawy served in a variety of positions,
including as an accountant with Ernst & Young. Mr. Nawy is a certified public
accountant and has an accounting degree from New York University.
H. Wayne Lambert, Vice President of Operations. Mr. Lambert has served
as Vice President of Operations for the Company since March, 1992. Immediately
before joining the Company, he served as Operations Officer for National Book
Warehouses, Inc., Knoxville, Tennessee. Prior to that employment, he served as
Assistant Controller for the Knoxville News-Sentinel, Knoxville, Tennessee.
Mr. Lambert is a retired Captain of the Tennessee Air National Guard and a Base
Budget Officer. He is a graduate of University of Tennessee.
6
<PAGE> 10
Henry I. Shapiro, Vice President of Merchandise. Mr. Shapiro has
served as the Vice President of Merchandise for the Company since January of
1994. Immediately prior to joining the Company, Mr. Shapiro designed and
manufactured jewelry for leading jewelry retailers, Home Shopping Network and
QVC Manufacturing Company. Mr. Shapiro attended the Fashion Institute of
Technology and Maryland University. He served as a consultant for jewelry
manufacturers with special emphasis on the television markets in Thailand,
Czechoslovakia, Hong Kong, Switzerland and Italy.
Kent Gratteau, Vice President of Broadcasting and Engineering.
Mr. Gratteau joined the Company in August, 1995, and before that, he served for
ten years as Engineering Manager for KWGN(TV), Denver, Colorado. He is member
of the Society of Motion Picture and Television Engineers and has served that
organization as Section Chairman and on the Board of Managers for the Rocky
Mountain Section. Mr. Gratteau attended the University of Utah and Florida
State University.
Linda O. Ford, Vice President of Human Relations. Ms. Ford has
served as the Vice President of Human Resources for the Company since May of
1996. Immediately prior to joining the Company, Ms. Ford served as a Human
Resources Consultant for Phillips & Phillips Associates, Inc. From 1993 to
1995, she was the Manager of Human Resources for NATIONAL Auto/Truckstops, Inc.
From 1989 to the time she joined NATIONAL, Ms. Ford was a Human Resources
Manager for Union Oil Company of California.
Sandra B. Emery, Vice President of Customer Relations. Ms. Emery has
served as Vice President of Customer Relations for the Company since June,
1994. From 1992 until 1994, she served as Operations Manager of Order Entry
and Customer Service for the Company. Prior to that time, she served as
Operations Director for National Book Warehouse, Inc. Her other experience
includes positions with Jostens' Printing and Publishing Company, R.V. Emery
Company and Carousel of Curios.
Michael S. Kokernack, Vice President of Affiliate & Investor
Relations. Mr. Kokernack has served as Vice President of Affiliate & Investor
Relations since June of 1996. Immediately prior to joining the Company, Mr.
Kokernack served as Director of Affiliate Relations for the Video Catalog
Channel in Knoxville, Tennessee. Prior to that position, Mr. Kokernak held the
same title for ViaTV Network in New York City. Prior to that, Mr. Kokernak
developed corporate partnerships for corporate funding of short and long form
programming for News Broadcast Network. Mr. Kokernak also served as a
consultant to Future Mart in Brentwood, New York, and for Satellite Market USA
in New York City. Mr. Kokernak is a graduate of the University of
Massachusetts.
REMUNERATION OF DIRECTORS AND OFFICERS
SUMMARY COMPENSATION
The following table sets forth the compensation paid or accrued by the
Company during the three fiscal years ended June 30, 1996, to those person who
served as the Company's CEO during the 1996 fiscal year and were the Company's
most highly compensated executive officers (other than the CEO) serving as of
the end of the 1996 fiscal year whose compensation exceeded $100,000 (not more
than four persons are required to be shown) (collectively, the "Named Executive
Officers").
7
<PAGE> 11
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPEN-
SATION
AWARDS ALL OTHER
ANNUAL COMPENSATION COMPEN-
SATION
($)
SECURITIES
OTHER ANNUAL UNDERLYING
COMPEN- OPTIONS
NAME AND PRINCIPAL SALARY BONUS SATION /SAR
POSITION YEAR ($) ($) ($) (#)
<S> <C> <C> <C> <C> <C> <C>
Kent E. Lillie(1) 1996 120,000 __ 12,000(2) 500,000 --
President/CEO
1995 120,000 50,000 12,000(2) 600,000 18,000(3)
1994 98,128 -- 8,000(2) 600,000 24,000(4)
Thomas C. Sutula,
Executive Vice
President/COO 1996 101,539(5) -- -- 100,000 --
Joseph Nawy, Vice
President of
Finance/CFO 1996 96,000 -- 3,500(2) 60,000 7,423(4)
1995 76,431(6) -- -- 60,000 --
</TABLE>
______________________________________________________________
(1) Mr. Lillie commenced his employment with the Company in September, 1993.
(2) Other Annual Compensation consists of an automobile allowance.
(3) Other Compensation consists of a housing allowance.
(4) Other Compensation consists of a relocation allowance.
(5) Mr. Sutula commenced his employment with the Company in July 1995.
(6) Mr. Nawy commenced his employment with the Company in September 1994.
OPTION GRANTS IN LAST FISCAL YEAR
Shown below is information concerning stock option grants to any Named
Executive Officer who was granted a stock option during the 1996 fiscal year.
8
<PAGE> 12
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
POTENTIAL REALIZABLE VALUE
% OF TOTAL AT ASSUMED ANNUAL RATES OF
OPTIONS/ OPTIONS/ EXERCISE STOCK PRICE APPRECIATION
SARS SARS GRANTED OR BASE FOR OPTIONS TERMS
GRANTED TO EMPLOYEES PRICE EXPIRATION --------------------------
NAME (#)(1) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
------------------- -------- -------------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Thomas C. Sutula 100,000 33.9% $2.81 (1) $77,635 $171,553
- ---------------
</TABLE>
(1) On July 21, 1995, Mr. Sutula was granted options to acquire 100,000
shares of common stock. Of the total options, options to acquire 20,000 shares
vested on July 21, 1996, and options to acquire an additional 20,000 shares
vests on each July 21 thereafter until fully vested. The options terminate on
the earlier to occur of thirty (30) days after the termination of Mr. Sutula's
employment with the Company or five years from the date vested.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
Shown below is information with respect to exercises by any Named
Executive Officer during the 1996 fiscal year of options to purchase shares
pursuant to the Company's stock options and information with respect to
unexercised options to purchase shares held by such officers as of the end of
the 1996 fiscal year.
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXER- IN-THE-MONEY
CISED OPTIONS/SARS OPTIONS/SARS AT
AT JUNE 30, 1996 JUNE 30, 1996
SHARES ACQUIRED ON EXERCISABLE/ EXERCISABLE/
NAME EXERCISE (#) VALUE REALIZED(s)(1) UNEXERCISABLE UNEXERCISABLE(1)
----------------- ------------ -------------------- ---------------- ------------------
<S> <C> <C> <C> <C>
Kent E. Lillie 100,000 $221,875 200,000/200,000 $575,000/$575,000
- -------------------
</TABLE>
(1) Market value of underlying securities at exercise date of May 1, 1996,
minus the exercise price of $1.00 per share. "In-the-Money" options are ones
in which the fair market value of the underlying securities exceeds the
exercise price of the options.
EMPLOYMENT AGREEMENTS
On September 25, 1993, the Company executed an employment agreement
with Kent E. Lillie whereby Mr. Lillie is to serve as the Company's President
and Chief Executive Officer. Under the terms of the agreement, Mr. Lillie will
be employed for an initial term of five (5) years with a base salary of
$120,000 per year and an annual bonus of ten percent (10%) of the increase in
the Company's net operating profit after taxes, over the previous fiscal year.
Mr. Lillie receives car and other fringe benefits and allowances. The
agreement provides that Mr. Lillie will be granted options to purchase up to
600,000 shares of Common Stock at an exercise price of $1.00 per share during
the term of the agreement. Of those options, options to purchase 100,000
shares vested immediately, and additional options to purchase 100,000 shares
will vest on each anniversary date of the agreement. The options expire on the
earlier to occur of (a) five years after the date of vesting or (b) thirty days
after termination of his employment with the Company. In the event of a
"change of control" of the Company, as defined in the agreement, the agreement
grants Mr. Lillie certain rights, including the right to resign at any time
during
9
<PAGE> 13
the twelve months following the occurrence of the event, and to receive his
base salary and monthly allowances for an additional twelve (12) months. In
addition, any options to purchase stock not yet vested shall automatically vest
on the date of termination.
On June 21, 1996, the Board of Directors voted to increase Mr.
Lillie's base compensation to $190,000 annually, and also granted to him
options to purchase an additional 500,000 shares of the Company's Common Stock
at a price of $3.75 per share. These options to purchase 100,000 shares vests
on January 1, 1997, and options to purchase a total of 100,000 shares will vest
on January 1 of each year thereafter for another four (4) years.
COMPENSATION OF DIRECTORS
The Company pays no remuneration to its directors for their service as
directors.
OMNIBUS STOCK INCENTIVE PLAN
The Company's Omnibus Stock Incentive Plan (the "Plan") was adopted by
the Company's Board of Directors on October 15, 1991, and approved by the
Company's shareholders at the 1991 Annual Meeting of Shareholders.
A special administrative committee of the Board of Directors was
appointed to administer the plan. All employees of the Company are eligible to
receive stock options and/or stock appreciation rights ("SARs") under the plan.
Options granted under the plan can be either incentive stock options or
nonqualified stock options. Incentive stock options to purchase Common Stock
may be granted at not less than 100% of fair market value of the Common Stock
on the date of the grant.
SARs generally entitle the participant to receive the excess of the
fair market value of a share of Common Stock on the date of exercise over the
initial value of the SAR. The initial value of the SAR is the fair market
value of a share of Common Stock on the date of the grant.
A maximum of 1,500,000 shares of Common Stock may be issued upon the
exercise of options and SARs.
No option or SAR may be granted after October 15, 2001. No option
that is an incentive stock option and any corresponding SAR that related to
such option shall be exercisable after the expiration of ten (10) years from
the date such option or SAR was granted for five (5) years after the expiration
in the case of any such option or SAR that was granted to a 10% shareholder.
Since its adoption through June 30, 1996, stock options for 630,000
shares of Common Stock have been granted under the Plan.
TRANSACTIONS WITH MANAGEMENT AND DIRECTORS
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors of the Company does not have a Compensation
Committee. All directors of the Company participate in executive compensation
decisions. The members of the Board of Directors during the fiscal year ended
June 30, 1996, were J.D. Clinton, W. Paul Cowell, A.E. Jolley, Joseph I.
Overholt, Frank A. Woods, and Kent E. Lillie.
10
<PAGE> 14
TRANSACTIONS WITH RELATED PARTIES
The Company leases its Knoxville office and studio space from William
and Warren, Inc., an entity owned by Mr. Cowell, and paid total lease payments
of approximately $142,695 during the fiscal year ended June 30, 1996.
Management of the Company determined that these terms and conditions were
competitive with comparable commercial space being leased in the Knoxville
market.
On August 16, 1995, the Company issued its $2,000,000 Variable Rate
Convertible Secured Note Due 2000 to Global Network Television, Inc. J.D.
Clinton, a director of the Company is the sole shareholder and Chairman of
Global Network Television, and that corporation is a principal shareholder of
the Company. See "Security Ownership of Certain Beneficial Owners" herein.
The loan bears interest at the prime rate plus 2%, and is payable in 60 monthly
installments. The loan is secured by a security interest in the inventory,
accounts, and certain equipment, furniture and fixtures of the Company, as well
as the stock of MFP, Inc., a subsidiary of the Company, and an assignment of
the proceeds of any sale of the Federal Communications Commission license of
Television Station WMFP, Lawrence, Massachusetts. Based upon management's
knowledge of the commercial lending market, these terms and rates are
considered competitive.
In the year ended June 30, 1995, the Company contracted with MediaOne,
Inc., to provide certain consulting services to the Company. In addition,
MediaOne, Inc., acted as the commission broker for MFP, Inc., a Delaware
corporation, from whom the Company acquired Television Station WMFP, Lawrence,
Massachusetts. In consideration of its services as the commission broker,
MediaOne was owed a commission at the closing of the acquisition of the
station, which occurred on February 24, 1995. As a part of its acquisition,
the Company agreed to assume responsibility for the payment of this commission.
In August, 1995, the Company paid MediaOne $115,000 as payment in full for
these consulting services and the brokerage commission. Frank A. Woods, a
director of the Company, serves as an executive officer and director of
MediaOne, Inc., and members of Mr. Woods' immediate family own that company.
In the opinion of management, the terms of the above transactions were
as fair to the Company as terms which could have been obtained or made with
unaffiliated persons.
REPORT ON EXECUTIVE COMPENSATION
Decisions on compensation of the Company's executives are made by the
Company's Board of Directors. Each member of the Board, except for Kent E.
Lillie, is a non-employee director. It is the responsibility of the Board to
assure that the executive compensation programs are reasonable and appropriate,
meet their stated purpose and effectively service the interests of the Company
and its stockholders. Pursuant to rules of the Securities and Exchange
Commission designed to enhance disclosure of corporate policies toward
executive compensation, set forth below is the report of the Board of Directors
with respect to executive compensation.
COMPENSATION PHILOSOPHY AND POLICIES FOR EXECUTIVE OFFICERS
The Company believes that the most effective executive compensation
program aligns the interest of the Company's executives with the interests of
its stockholders. The Company's primary corporate mission is to achieve
profitability on a consistent basis and thereby enhance long-term stockholder
value. In pursuit of that mission, the Board seeks to maintain a strong
positive nexus between this mission and its compensation and benefit goals.
The Company's executive compensation program exemplifies the Board's
commitment to that nexus. The Company provides only minimal perquisites to its
executive officers, relying instead upon compensation methods that emphasize
overall Company performance. In addition, the Company maintains no contractual
arrangements with any executive officer, other than its agreement with its
11
<PAGE> 15
President, its Vice President of Finance, and its Vice President of
Broadcasting & Engineering, thereby enhancing the opportunities for
performance-based rewards to individuals.
The Company's executive compensation program supports the Company's
mission by:
- Directly aligning the interests of executive officers with the
long-term interests of the Company's stockholders by making Company
stock appreciation over the long term the cornerstone of executive
compensation through awards that can result in the ownership of
substantial amounts of the Company's Common Stock.
- Providing compensation opportunities that create an environment that
attracts and retains talented executives on a long-term basis.
- Emphasizing pay for performance by having a meaningful portion of
executive compensation "at risk."
At present, the Company's executive compensation program is comprised
of three primary components: base salary, annual cash incentive (bonus) and
long-term incentive opportunity in the form of stock options. Two of the three
components of the Company's executive compensation plan -- bonus and stock
options -- directly relate to overall performance by the Company. With respect
to the third component -- salary -- the Company seeks to be at or below market,
placing primary emphasis on the opportunities for greater reward through the
availability of performance-based reward mechanisms.
BASE SALARY
The base salary of the Company's President as listed in the Summary
Compensation Table is governed by an Employment Agreement with the Company. As
a part of its search, the Board determined that in order to attract an
individual with knowledge and experience necessary to implement the Company's
mission, the Company needed to provide that individual with a certain level of
compensation. The Board also determined to place a greater portion of the
compensation package in performance-based compensation (i.e., performance bonus
and stock options), thereby providing an incentive for outstanding performance
and minimizing the amount of guaranteed compensation. The Board believes that
the Employment Agreement with Mr. Lillie contains an appropriate mix of
guaranteed and performance-based compensation.
The Company has no other employment agreements with any other
employees, with the exception of Mr. Nawy and Mr. Gratteau. All other
executive officer salaries are evaluated on an annual basis. In determining
appropriate salary levels and salary increases, the Board considers achievement
of the Company's mission, level of responsibility, individual performance,
internal equity and external pay practices. In this regard, the Board attempts
to set base salaries of all executive officers at rates at or below the rates
of other individuals in equivalent positions in the market area. The Board
determines those rates from information gathered by its members.
ANNUAL BONUS
The Board believes that annual bonuses to executive officers encourage
management to focus attention on key operational goals of the Company, and
corporate and business earnings are the main performance measure for awards of
bonuses. In that regard, the agreement with the Company's President provides a
bonus of ten (10%) percent of the increase in the Company's net operating
profit after taxes over the previous year. With respect to the other executive
officers of the Company, the Board does not have a formal annual incentive
plan. Instead, the Board has elected to review the corporate and business
performance of the Company on a periodic basis, and make awards to executive
officers if
12
<PAGE> 16
appropriate. In determining appropriate annual bonuses, the Board considers
achievement of the Company's mission, level of responsibility, individual
performance, internal equity, and external pay practices. In the fiscal year
ended June 30, 1996, the Board elected not to award any cash bonuses to any
executive officers.
LONG-TERM INCENTIVES
The Company's only current long-term incentive compensation is stock
options that are directly related to improvement in long-term stockholder
value. The Board believes that stock option grants provide an incentive to
executive officers that focuses each officer's attention on managing the
Company from the perspective of an owner with an equity stake in the business.
In addition, the Board believes that stock option grants provide the Company
with a mechanism for recruiting individuals by providing an opportunity for
those officers to profit from the results of their contributions to the
Company. These grants also help ensure that operating decisions are based on
long-term results that benefit the Company and ultimately the Company's
stockholders.
The options granted to executive officers provide the right to
purchase shares of Common Stock usually at the fair market value on the date of
grant. Usually, each stock option becomes vested and exercisable over a period
of time, generally five years. The number of shares covered by each grant
reflects the Board's assessment of the executive's level of responsibility, and
his or her past and anticipated contributions to the Company. The size of
option grants to individual executives is designed to reflect the impact the
individual has on decisions that affect the overall success of the Company.
The Company granted stock options for no shares of its Common Stock to
its executive officers in the fiscal year ended June 30, 1993, and the Company
granted stock options, for 210,000 shares of its Common Stock to its executive
officers, other than the President, in the fiscal year ended June 30, 1994. In
the fiscal year ended June 30, 1995, the Company awarded executive officers
options to purchase up to 140,000 shares of Common Stock. In the fiscal year
ended June 30, 1996, the Company awarded executive officers options to purchase
up to 225,000 shares of Common Stock. Since June 30, 1996, the Company has
awarded to its executive officers additional options to purchase up to 145,000
shares of Common Stock. These totals are exclusive of stock options granted to
Kent E. Lillie and are net of any options which expired without being
exercised.
CHIEF EXECUTIVE COMPENSATION
The regulations of the Securities Exchange Commission require the
Board to disclose the basis for the compensation of the Company's chief
executive officer relative to the Company's performance. The Company's chief
executive officer is its President, Mr. Kent E. Lillie. Mr. Lillie's
compensation is governed by the terms of an Employment Agreement dated
September 25, 1993.
The Board's general approach in establishing Mr. Lillie's compensation
was to provide a base salary below market, augmented by an annual bonus based
upon specific corporate-wide performance criteria, and stock options reflective
of the value of that performance. The Board approved a base salary of $120,000
as provided by the Employment Agreement, and an annual bonus of ten (10%)
percent of the increase in the Company's net operating profits after taxes over
the previous year. The Board determined, based upon the information available,
that the base salary and annual bonus was below the market rate and within the
Company's overall internal compensation goal. Mr. Lillie did not receive a
bonus for the fiscal year ended June 30, 1996. Consistent with the goals
stated above, that fact reflects the Company's overall performance during that
fiscal year and not Mr. Lillie's performance.
13
<PAGE> 17
As a part of the Employment Agreement, Mr. Lillie was granted options
to purchase up to 600,000 shares of stock of the Company at an exercise price
of $1.00 per share. Those options vest over a period of five (5) years, with
100,000 shares vesting immediately upon employment. There was no grant of any
other stock options during the fiscal year ended June 30, 1996. The Board,
however, elected to grant Mr. Lillie on July 1, 1996, an option to purchase
500,000 shares of its Common Stock as addition long-term incentive. Also,
effective July 1, 1996, the Board of Directors has increased Mr. Lillie's base
salary to $190,000.
THE FOREGOING REPORT IS SUBMITTED BY ALL MEMBERS OF THE COMPANY'S BOARD OF
DIRECTORS WHOSE MEMBERS ARE AS FOLLOWS:
J.D. Clinton Kent E. Lillie
W. Paul Cowell Joseph I. Overholt
A.E. Jolley Frank A. Woods
STOCKHOLDER RETURN COMPARISONS
The following line-graph compares the cumulative stockholder returns
for the Company over the past five (5) years with a broad market equity index
and a published industry or line-of-business index. For these purposes, the
Company has chosen the Nasdaq Market Index and the MG Group Index. The MG
Group Index is composed of companies classified as "Other Importers,
Wholesalers and Retailers" by Media General Financial Services, Inc. The
chart uses as a beginning price $1.50 which was the average of the high and low
bid of the Company's Stock on June 30, 1991 (the last trading day prior to
fiscal year 1992), and assumes $100 invested on that date.
SATH
<TABLE>
<CAPTION>
Cumulative Total Return
-----------------------------------
6/91 6/92 6/93 6/94 6/95 6/96
<S> <C> <C> <C> <C> <C> <C> <C>
SHOP AT HOME INC SATH 100 45 136 164 200 282
PEER GROUP PPEERI 100 118 266 277 204 247
NASDAQ STOCK MARKET-US INAS 100 120 151 153 204 261
</TABLE>
14
<PAGE> 18
PROPOSAL NO. 2
AMENDMENT TO THE PLAN
THIS SECTION OF THE PROXY STATEMENT DESCRIBES THE PROPOSED AMENDMENT
TO THE SHOP AT HOME, INC. OMNIBUS STOCK INCENTIVE PLAN (THE "PLAN") TO BE VOTED
ON BY COMPANY'S SHAREHOLDERS AT THE ANNUAL MEETING. THE FOLLOWING DESCRIPTION
IS QUALIFIED IN ITS ENTIRETY BY THE PLAN, RESTATED TO INCORPORATE THE PROPOSED
AMENDMENT, A COPY OF WHICH IS ATTACHED AS APPENDIX A.
The Plan was originally adopted by the Company's Board of Directors on
October 15, 1991, and was approved by the Company's shareholders at the 1991
annual meeting of shareholders, held on November 25, 1991.
The amendment to the Plan adopted by the Board of Directors, and
recommended for shareholder approval at the Annual Meeting, effective with
respect to options granted on and after April 1, 1996, are as follows:
1. To provide that all options and stock appreciation rights granted
under the Plan shall provide for termination no later than three (3) months
following termination of employment with the Company or an affiliate for any
reason other than death or disability and no later than one (1) year following
termination of employment because of disability.
2. To amend the section of the Plan which provides that the Committee
can decide to what extent a leave of absence from the Company shall be deemed
an interruption of continuous employment to state that if the leave exceeds
ninety (90) days and there is no guarantee of reemployment, the Participants's
employment shall be deemed to have terminated on the 91st day of such leave.
3. To provide that no option or stock appreciation right (other than
options exercisable in the event of a change in control of the Company) may be
exercised to the extent the exercise would cause the Participant to have
compensation for any year in excess of $1 million and which is nondeductible by
the Company or its affiliate.
4. To provide that the rights under the Plan extend to rights granted
by the Company and also the affiliates of the Company.
Following is a description of the Plan incorporating the foregoing
amendments:
The award of Options and other rights pursuant to the Plan is intended
to benefit the Company by (i) assisting it in recruiting and retaining officers
and key employees with ability and initiative, (ii) providing personal
financial incentive for officers and key employees, and (iii) associating the
interests of officers and key employees with those of the Company and its
shareholders through opportunities for increased stock ownership.
The Plan is not subject to any of the provisions of the Employee Retirement
Income Security Act of 1974.
Options. Generally, a stock option entitles the holder to purchase
from the Company a stated number of shares of Common Stock at the price set
forth in the Option agreement. Two types of options (the "Options") may be
granted under the terms of the Plan. One type, referred to as an "incentive
stock option" or "ISO," will constitute an "incentive stock option" as
contemplated by and defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"). The other type, referred to as a
15
<PAGE> 19
"nonqualified stock option," does not qualify as an "incentive stock option"
under Section 422 of the Code. The Plan Committee (as defined below) may in
its discretion designate the status of options as ISOs or nonqualified options.
SARs. In addition to the grant of Options, the Plan Committee may
also grant stock appreciation rights ("SARs") under the terms of the Plan. An
SAR entitles the holder to receive, with respect to each share of Common Stock
encompassed by the exercise of such SAR, the amount specified in an SAR
agreement. In the absence of such a determination, the holder shall be entitled
to receive, with respect to each share of Common Stock encompassed by the
exercise of such SAR, the excess of the fair market value on the date of
exercise over the value on the date of grant. A Corresponding SAR is an SAR
granted in relation to a particular Option and can only be exercised upon the
surrender to the Company, unexercised, of that portion of the Option to which
the SAR relates. A Corresponding SAR that is related to an ISO may be exercised
only to the extent the ISO is exercisable and only when the fair market value
exceeds the option price of the ISO. Each SAR may be granted as a Corresponding
SAR or independently of the grant of an Option. As of this date, the Company has
not issued any SARs under the Plan, and management of the Company has no present
intention to issue SARs.
Administration. The Plan is managed by a special committee ("Plan
Committee") composed of two or more directors of the Company who are appointed
by and serve at the pleasure of the Company's Board of Directors. A director
who is appointed as a member of the Plan Committee must be (i) ineligible to
receive an Option under the Plan, and (ii) may not have been granted existing
securities under the Plan or any other plan of the Company or an affiliate of
the Company during the one year period prior to becoming a member of the Plan
Committee. The manner in which the members of the Board of Directors of the
Company are selected, their terms of office, and the manner in which they may
be removed from office are governed by the Tennessee Business Corporation Act,
the Charter and the Bylaws of the Company. The current members of the Plan
Committee are J.D. Clinton, Kent E. Lillie, and Frank A. Woods.
The Plan Committee may interpret the Plan; prescribe the form of
agreements; adopt, amend, and rescind rules and regulations pertaining to the
administration of the Plan; and make all other determinations necessary or
advisable for the administration of the Plan. Among other things, the Plan
Committee shall determine:
A. to whom Options or SARs will be granted;
B. the number of shares of Common Stock to be granted
under each Option or the amount of SARs to be
granted;
C. whether Options granted shall be ISOs, nonqualified
stock options, or a combination thereof;
D. whether the SAR will be a Corresponding SAR or
granted independently of an Option;
E. the price to be paid for the Common Stock upon the
exercise of each Option (the "Option Price"); and
F. the terms and conditions of each Option and SAR
between the Company and a Participant.
Any interpretation, determination or other action made or taken by the
Plan Committee shall be final and conclusive.
16
<PAGE> 20
Term. The Plan will expire on October 15, 2001. No Option or SAR
can be granted under the Plan after its termination. Termination of the Plan,
however, will not affect the validity of any Option or SAR granted under the
Plan prior to the termination.
Amendments. The Plan may be amended or modified by the Board of
Directors from time to time, except that the approval of the Company's
stockholders will be required if the proposed amendment or modification would
(i) materially increase the benefits accruing to Participants under the Plan,
(ii) materially increase the aggregate number of shares of Common Stock that
may be issued under the Plan, or (iii) materially change the requirements as to
eligibility for participation in the Plan. No amendment shall, without a
Participant's consent, adversely affect any rights of that Participant under
any Option or SAR outstanding at the time the amendment is adopted.
Participants. Options and SARs may be granted from time to time to
employees of the Company or any Affiliate (including officers or directors who
are also employees) who, in the judgment of the Plan Committee, has contributed
or can be expected to contribute to the profits or growth of the Company or an
Affiliate. For these purposes, an "Affiliate" means any subsidiary corporation
or parent corporation as defined in Section 424 of the Code. A member of the
Plan Committee may not participate in the Plan during the time that such
participation would prevent the Committee from being "disinterested" for
purposes of Securities and Exchange Commission ("SEC") Rule 16b-3.
Agreement. Each Option and SAR under the Plan is evidenced by a
written agreement between the Company and the Participant (an "Option Agreement"
and an "SAR Agreement") and is subject to the following terms and conditions and
to such other terms and conditions not inconsistent with the Plan as the Plan
Committee may deem appropriate in each case:
1. An Option or an SAR is exercisable, beginning on the date
granted (the "Date of Grant") or on any other date established by the Plan
Committee, subject to such limitations as are set forth in the Option or SAR
agreement. The Participant must be an employee of the Company or of an
affiliate on the date the Option or SAR is exercised (the "Date of Exercise"),
or in the event of death or disability, exercise within the time periods set
forth in the Option or SAR agreement. Notwithstanding this provision of the
Plan, a number of the Option agreements currently in effect contain provisions
giving the employee the right to exercise the Option to purchase stock of the
Common Stock within some period after the employee terminates his or her
employment with the Company. A typical provision states that an employee who
is terminated without cause, may exercise the Options (including Options which
have not vested) within thirty (30) days following termination.
2. The price at which shares of Common Stock may be purchased
under an Option (the "Option Price") is set by the Plan Committee, except that,
with respect to ISOs only, the Option Price may not be less than (i) the fair
market value at the Date of Grant, or (ii) in the case of an ISO granted to an
employee who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any of its subsidiaries or
parent corporation (a "Ten Percent Shareholder"), 110% of the fair market value
at the Date of Grant. The Option Price may be paid in cash and/or such other
consideration as the Plan Committee deems appropriate, including Common Stock
already owned by the Participant having a fair market value equal to the Option
Price.
3. At the discretion of the Plan Committee, the amount payable as
a result of the exercise of an SAR may be settled in cash, Common Stock, or a
combination of cash and Common Stock.
4. No Participant may be granted ISOs or related SARs (under all
incentive stock option plans of the Company or its Affiliates) which are first
exercisable in any calendar year for stock have an aggregate fair market value
(determined as of the Date of Grant) exceeding $100,000.
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5. The Plan Committee may, in its discretion, treat all or any
portion of any period during which a Participant is on military or an approved
leave of absence from the Company or any Affiliate as a period of employment
for purposes of accrual of his or her rights under the Plan; provided, however,
if the leave exceeds ninety (90) days and there is no guarantee of
reemployment, the Participants's employment shall be deemed to have terminated
on the 91st day of such leave.
6. The Option Agreement shall specify the period for which an
Option is granted (the "Option Period"), and the Option shall lapse at the end
of the Option Period; provided, however, no Option that is an ISO and any
Corresponding SAR that relates to an ISO shall be exercisable after the
expiration of ten (10) years from the date of grant, or five (5) years after
the date of grant in the case of an ISO or a Corresponding SAR that relates to
an ISO granted to a Ten Percent Shareholder. The terms of any Option or SAR
may provide that it is exercisable for a period of less that such maximum
period. All Options and SARs shall terminate on the date that the
Participant's employment with the Company or its affiliates terminates, except
as provided in the Agreement with respect to retirement, death or disability.
See the discussion of the rights of an employee to exercise an Option after the
termination of his or her employment set out in 1. above.
The Company, in accordance with federal regulations, may lend the
Participant all or part of the Option Price, provided that the maximum loan
amount shall not exceed the current market value at the time of purchase by the
Participant of the shares of Common Stock acquired with the loan proceeds. The
principal amount of the loan shall be repayable in not more than five (5)
annual installments. The Participant shall pay interest on the unpaid
principal balance at such rate as the Plan Committee shall determine, which
shall be no less than the minimum rate necessary to avoid imputed interest or
original issue discount under the Code. All shares of Common Stock acquired
with cash borrowed from the Company shall be pledged to the Company as security
for the repayment of the loan. As of this date, the Company has made no loans
to enable any Participant to exercise an Option, and the management of the
Company has no present intention to make any such loans.
No Participant shall have any rights as a stockholder with respect to
any shares subject to his or her Options or SARs until the Date of Exercise of
such Option or SAR. In addition, neither the adoption of the Plan, its
operation, nor any documents describing or referring to the Plan shall confer
upon any Participant any right to continue in the employ of the Company or an
Affiliate or in any manner affect any right and power of the Company to
terminate the employment of any Participant at any time.
Federal Income Tax Treatment. The Plan is not, nor is it intended to
be, qualified under Section 401(a) of the Code. The Plan has been structured
so that Options granted pursuant to the Plan may qualify as "incentive stock
options" under the Code.
A. ISOs. The grant of an ISO has no immediate federal
income tax consequences to the Company or to the Participant. Likewise, the
exercise of an ISO will not have an immediate federal income tax consequence to
the Company or the Participant. The exercise of an ISO, however, may subject
the Participant to federal alternative minimum tax in the year in which the ISO
is exercised.
To qualify for treatment as an "incentive stock option," [i] a
Participant may not dispose of any shares received upon the exercise of an
Option within two years from the date of grant or within one year from the date
of the issuance of such shares (together the "Holding Periods"), and [ii] a
Participant who ceases to be an employee of the Company must exercise his or
her Option within three months after the date of his or her cessation of
employment or, in the event of the Participant's cessation of employment due to
permanent or total disability, within one year of his or her cessation of
employment. In the event of the Participant's death, provided (i) the
Participant was employed by the Company or its Affiliates on
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<PAGE> 22
the date of his or her death, or within three months of his or her death, and
(ii) the Participant's estate or the person or persons to whom the
Participant's rights pass by will or by the laws of descent or distribution,
comply with all other terms of the Option, the Option will continue to qualify
for treatment as an "incentive stock option."
If the Option qualifies for treatment as an "incentive stock option,"
the Participant recognizes no taxable gain or loss either on the grant or the
exercise of the ISO. The Participant will generally recognize long-term
capital gain income upon the sale of any shares received upon the exercise of
an Option provided the holding period applicable to long-term capital assets is
satisfied. The Participant's gain will be equal to the difference between the
net sale proceeds and the Participant's tax basis in the Common Stock received
upon exercise of the ISO. Generally, the Participant's tax basis will be equal
to the Option Price. Since the Participant recognizes no compensation income
with respect to an ISO (except upon the occurrence of a disqualifying event, as
discussed below), the Company is not entitled to any compensation tax deduction
with respect to an ISO.
If the Participant takes action which disqualifies the Option from
treatment as an "incentive stock option" (such as the failure to meet the
Holding Periods), then the Participant will recognize compensation or ordinary
income in the year of the disqualifying event, and the Company will receive a
tax deduction from its income in the tax year in which the Participant
recognizes income, in an amount equal to the lesser of (i) the fair market
value on the Date of Exercise minus the Option Price of the optioned shares,
and (ii) the amount realized on the disposition minus the Option Price. The
balance of the Participant's gain on disposition of the shares acquired
pursuant to the exercise of the Option will be long-term capital gain, provided
the holding period applicable to long-term capital assets is satisfied. For
this purpose, the Participant's tax basis in the stock will include any
ordinary income recognized on the disqual- ifying disposition of the stock.
Any ordinary income recognized by the Participant will constitute
wages for federal income and employment tax purposes. Accordingly, the Company
may make whatever arrangements are necessary to ensure that funds equaling the
amount of income and employment taxes required to be withheld are available for
payment.
B. Nonqualified Options. The Participant will recognize no
taxable gain or loss on the grant of a nonqualified option under the Plan.
Upon exercise of a nonqualified stock option, the Participant will recognize
compensation or ordinary income in an amount equal to the excess of the fair
market value of the shares of the Common Stock received over the Option Price
of such shares. Upon a subsequent sale of the stock, the Participant will
recognize short-term or long-term capital gain or loss depending upon the
Participant's holding period for the stock. The Participant's gain will be
equal to the difference between the net sale proceeds and the Participant's tax
basis in the Common Stock received upon exercise of the nonqualified option.
Generally, the Participant's tax basis will be equal to the Option Price plus
the compensation income recognized at the time the nonqualified option is
exercised. The Company will be allowed a federal income tax deduction for the
amount recognized as ordinary income by the Participant upon the Participant's
exercise of the Option.
C. SARs. The grant of an SAR has no immediate federal income
tax consequences to the Participant. Upon the exercise of an SAR, the
Participant generally must recognize ordinary income equal to any cash that is
paid plus the fair market value of any Common Stock that is received in
settlement of an SAR. The Company will not be entitled to a federal income tax
deduction upon the grant of an SAR, but will be entitled to such a deduction
upon the exercise of an SAR.
D. Change in Control. The Company has the authority to
provide that all or some portion of the Options and SARs granted under the Plan
may become immediately exercisable in the event of a change in control of the
Company or the sale of substantially all of its assets (together a "Change in
Control"). It is likely that the exercise of the Options and SARs by certain
of the Participants in the event
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of a Change of Control will result in certain negative tax consequences to the
Participant. Section 4999 of the Code imposes an excise tax of 20% of the
amount of any "excess parachute payment" to an officer, shareholder or highly
compensated individual that is contingent on a change of control of the
corporation or in the ownership of a substantial portion of the assets of the
corporation. An "excess parachute payment" is generally defined as the amount
by which the payment upon the change in control exceeds three (3) times the
employee's "base compensation." In addition, the Code denies a tax deduction
to the Company for payment of an "excess parachute payment."
State Income Tax Treatment. The grant, exercise and/or subsequent
sale of shares acquired upon exercise of an Option awarded under the Plan may
also have state and local tax effects. While these tax effects will depend on
the jurisdictions involved, such as where the Participant is employed and where
he or she resides, generally, the grant, exercise and/or subsequent sale of
shares acquired upon the exercise of an ISO or a nonqualified stock option has
state income tax consequences similar to the federal income tax consequences
described above. Tennessee has only a limited tax on incomes received by
individuals, limited generally to the receipt of dividends from stocks and
interest from bonds (as those terms are defined in the statute). The capital
gain associated with the receipt of stock under an Option and the subsequent
sale of that stock does not generate income subject to the Tennessee Income
Tax.
The foregoing summary is a general summary of the significant federal
and state income tax consequences of ISOs and nonqualified stock options. This
summary is not intended to be an exhaustive discussion of all of the relevant
tax issues related to such Options. Rather, it represents the Company's best
understanding of the primary federal and state income tax ramifications
involved in connection with such Options under the Code.
Transfer. No Option or SAR shall be transferred other than by will or
the laws of descent and distribution. Options and SARs may be exercised during
the lifetime of the Participant only by the Participant. In the event of a
permitted transfer, the Option and any Corresponding SAR that relates to the
Option must be transferred to the same person or entity. No right or interest
of a Participant in any Option or SAR shall be liable for, or subject to, any
lien, obligation or liability of such Participant.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE PROPOSAL.
PROPOSAL NO. 3
APPOINTMENT OF AUDITORS
On October 25, 1996, the Board of Directors determined to recommend
the appointment of Coopers & Lybrand L.L.P., Certified Public Accountants,
Knoxville, Tennessee, as the independent auditors of the Company for the fiscal
year ended June 30, 1997, subject to approval by the shareholders. Coopers &
Lybrand served as the Company's independent auditors for the fiscal year ended
June 30, 1996. The Company does not anticipate that representatives of Coopers
& Lybrand will be present at the annual meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" THE PROPOSAL.
PROXIES, UNLESS INDICATED TO THE CONTRARY, WILL BE VOTED "FOR" THE PROPOSAL.
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PROPOSAL NO. 4
OTHER BUSINESS
The Board of Directors of the Company currently is unaware of any
proposal to be presented at the Annual Meeting other than the matters specified
in the Notice of Annual Meeting accompanying this Proxy Statement. Should any
other proposal properly come before the Annual Meeting, the persons named in
the enclosed proxy will vote on each such proposal in accordance with their
discretion.
OTHER INFORMATION
INTERESTS OF COMPANY AFFILIATES
None of the Company's directors, executive officers or principal
shareholders, including any of their affiliates has any interest in the matters
to be acted upon at the Annual Meeting, other than the election of directors
and the proposed amendment to the Plan.
PROPOSALS OF SHAREHOLDERS
Shareholders intending to submit proposals for presentation at the
1997 Annual Meeting of Shareholders of the Company for inclusion in the proxy
statement and form of proxy relating to that meeting should forward those
proposals to A.E. Jolley, Secretary, Shop At Home, Inc., 5210 Schubert Road,
P.O. Box 12600, Knoxville, Tennessee 37912. Proposals must be in writing and
must be received by the Company prior to August 8, 1997. Proposals should be
sent to the Company by certified mail, return receipt requested.
COST OF SOLICITATION OF PROXIES
The cost of solicitation of proxies, including expenses in connection
with preparing, assembling and mailing this Proxy Statement, will be borne by
the Company. That solicitation will be made by mail, and may also be made by
the Company's regular officers or employees, personally or by telephone or
telegram. The Company may reimburse brokers, custodians and nominees for their
expenses in sending proxies and proxy material to beneficial owners.
ANNUAL REPORT
The Company's 1996 Annual Report on Form 10-K accompanies this Proxy
Statement. The Annual Report does not form any part of the material for the
solicitation of proxies.
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APPENDIX A
AMENDMENT NO. 1
SHOP AT HOME, INC.
OMNIBUS STOCK INCENTIVE PLAN
WHEREAS, Shop At Home, Inc. (the "Company") adopted the Shop
At Home, Inc. Omnibus Stock Incentive Plan (the "Plan") effective November 25,
1991; and
WHEREAS, the Board reserved the right to amend the Plan
pursuant to Article XII of the Plan; and
WHEREAS, the Board desires to amend the Plan to allow for the
exercise of options after termination of employment;
NOW, THEREFORE, the Plan is hereby amended, subject to
shareholder approval, effective with respect to options and SARs granted on and
after April 1, 1996, as follows. Failure to obtain approval of the Company's
shareholders shall render the following amendments void.
7. Section 1.5 is amended by inserting the phrase "or its
affiliates" after the word "Company."
8. Section 7.1 is amended to read as follows:
An Option or SAR shall be exercisable at such time and in such
manner as provided by the Committee in the Option or SAR
Agreement.
9. The third sentence of Section 7.2 is amended to read as
follows:
All Options and SARs shall terminate as provided by the
Committee in the Option or SAR Agreement, subject to the
maximum period limitations set forth in this Section 7.2 with
respect to incentive stock options and Corresponding SARs;
provided, however, that the Committee shall provide for the
termination of an incentive stock option and Corresponding SAR
no later than: [i] three (3) months following termination of
employment with the Company or an Affiliate for any reason
other than death or disability; and [ii] one (1) year
following termination of employment with the Company or an
Affiliate because of disability (within the meaning of Code
Section 22(e)(3).
10. Section 7.4 is amended by changing the period at the end
thereof to a semicolon and adding the following phrase thereafter:
provided, however, that in the case of an incentive stock
option, if the leave de- scribed in the preceding sentence
exceeds 90 days and reemployment is not guaranteed by contract
or statute, the
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Participant's employment shall be deemed to have terminated
on the 91st day of such leave.
11. Article VII is amended by the addition of the following new
Section 7.5:
Exercises Causing Loss of Tax Deduction. No part of an option
or SAR may be exercised to the extent the exercise would cause
the Participant to have compensation from the Company and its
affiliated companies for any year in excess of $1 million and
which is nondeductible by the Company and its affiliated
companies pursuant to Code Section 162(m). Any option or SAR
not exercisable because of this limitation shall continue to
be exercisable in any subsequent year in which the exercise
would not cause the loss of the Company's or its affiliated
companies' tax deduction, provided that an incentive stock
option and Corresponding SAR may not be exercised later than
ten (10) years from date of grant or five (5) years in the
case of a Ten Percent Shareholder. This section shall not
limit the exercisability of an option in the event of change
in control to the extent provided by the Committee in the
option or SAR Agreement.
12. In all other respects, the Plan is hereby ratified and
confirmed in its entirety.
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APPENDIX B
PROXY SHOP AT HOME, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF SHOP AT HOME, INC.
FOR THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, DECEMBER 6, 1996.
The undersigned hereby appoints A. E. JOLLEY AND JOSEPH I. OVERHOLT, and each
of them, as proxies, with full power of substitution, to vote all shares of the
undersigned as shown below on this proxy at the Annual Meeting of Shareholders
of Shop at Home, Inc. to be held at the LaQuinta Inn, located at 5634 Merchants
Center Boulevard, Knoxville, Tennessee, on Friday, December 6, 1996, at 11:00
o'clock, a.m., local time, and any adjournments thereof.
(1) ELECTION OF DIRECTORS:
[ ] FOR all the following nominees (except as indicated to the contrary
below):
W. Paul Cowell, A. E. Jolley, Joseph I. Overholt, J.D. Clinton, Frank A.
Woods, Kent E. Lillie.
[ ] AGAINST THE FOLLOWING NOMINEE(S) (PLEASE PRINT NAMES(S)):
[ ] WITHHOLD AUTHORITY (ABSTAIN) TO VOTE FOR THE FOLLOWING NOMINEES (PLEASE
PRINT NAME):
[ ] AGAINST ALL NOMINEES.
[ ] WITHHOLD AUTHORITY (ABSTAIN) to vote for all nominees.
(2) To approve the proposed amendment to the Shop at Home, Inc. Omnibus Stock
Incentive Plan.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)
(3) To approve the selection of Coopers & Lybrand L.L.P., Knoxville, Tennessee,
as the Company's independent auditors for the fiscal year 1997.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)
(4) In their discretion, to transact such other business as may properly be
brought before the meeting or any adjournment thereof.
[ ] FOR [ ] AGAINST [ ] WITHHOLD AUTHORITY (ABSTAIN)
(PLEASE DATE AND SIGN THIS PROXY ON THE REVERSE SIDE.)
Your shares will be voted in accordance with your instructions. If no choice
is specified, shares will be voted FOR the nominees in the election of
directors, FOR the proposed amendment to the Omnibus Stock Incentive Plan, and
FOR the selection of Coopers & Lybrand.
Date: ________________, 1996
PLEASE SIGN HERE AND RETURN
PROMPTLY
____________________________
____________________________
Please sign exactly as your
name appears at left. If
registered in the names of two
or more persons, each should
sign. Executors,
administrators, trustees,
guardians, attorneys, and
corporate officers should show
their full titles.
- --------------------------------------------------------------------------------
If you have changed your address, please PRINT your new address on this line.
