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The Compensation Committee would typically establish the base salary, bonus and equity incentive awards
for the CEO, Mr. Kartsotis. However, Mr. Kartsotis again refused all forms of compensation for fiscal 2011.
Mr. Kartsotis is one of the initial investors in our company and expressed his belief that his primary
compensation is met by continuing to drive stock price growth.
Certain members of the executive management team and other employees regularly attend portions of
Compensation Committee meetings in order to provide information and recommendations to the Compensation
Committee as requested, although the Compensation Committee meets in executive session with only
Compensation Committee members present when it deems appropriate. The CEO attended a portion of all of the
Compensation Committee's formal meetings during fiscal 2011.
Use of Performance Rating
Each Named Executive Officer's performance is evaluated annually in a performance review. The
performance review leads to a performance rating, determined on the basis of both business metrics, which are
quantitative measures of our performance and positioning, and position competencies, which are qualitative
measures of individual performance and talent. Some of the business metrics include net sales, operating expense
leverage, operating income, and gross margin. Some of the position competencies that are evaluated for each
Named Executive Officer include setting direction and vision for the organization, cultivating corporate culture,
managing resources, driving execution, decision making, leading communications, inspiring creativity and
change, resolving conflict and collaborating, identifying and maximizing talent, coaching and developing,
scorekeeping, and teambuilding. The overall performance review rating is used in determining base salary
increases, short-term incentive payouts and the size of any equity grants.
Performance ratings for each Named Executive Officer range from "outstanding," "exceeds expectations,"
"meets expectations," "improvement needed" to "unsatisfactory." The Compensation Committee and CEO
review the qualitative and quantitative measures and subjectively determine the appropriate performance rating.
The Compensation Committee and CEO do not assign any specific weights to the various qualitative and
quantitative factors nor do they use any formulas to determine the appropriate performance rating. In addition, no
one qualitative or quantitative factor is material to the ultimate determination of each Named Executive Officer's
performance rating.
During the first quarter of fiscal 2011, the Compensation Committee considered each Named Executive
Officer's 2010 performance appraisal in setting his or her base salary and equity incentive awards for fiscal 2011.
In addition, during the first quarter of fiscal 2012, each Named Executive Officer's 2011 cash bonus was paid
based on his or her 2011 performance appraisal.
As described in our 2011 annual meeting proxy statement, each of Mr. Kovar, Ms. Pritchard and Mr. Quick
received an "exceeds expectations" performance rating for fiscal year 2010.
For fiscal 2011, each Named Executive Officer was evaluated using the qualitative measures disclosed
above as well as the following quantitative measures of the Company's performance:
Mr. Kovar: increasing sell side and buy side analyst coverage, expanding sales, operating income
targets and gross margin percentage
Ms. Pritchard: sales, operating income targets and retail store performance goals
Mr. Quick: sales, operating income targets, gross margin, inventory goals and supply chain
improvement initiatives
Based on the quantitative and qualitative measures analyzed for each Named Executive Officer, the
Compensation Committee and CEO awarded an "outstanding" performance rating to Mr. Quick and an "exceeds
expectations" performance rating to Ms. Pritchard and Mr. Kovar for fiscal year 2011.
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