THE CORPORATE LIBRARY
4/20/2006 Proxy Information
Lease Arrangement
Since 1996, we have leased one of our Houston, Texas store locations containing approximately 19,150 square feet from Thomas J. Frank, Sr., our Chairman of the Board and Chief Executive Officer. The lease provides for base monthly rental payments of $17,235 plus escrow for taxes, insurance and common area maintenance expenses, which escalate annually, per month through January 31, 2011. We also have an option to renew the lease for two additional five-year terms. Mr. Frank received total payments under this lease of $281,000 in each of fiscal years 2004, 2005, and 2006. Based on current market lease rates for comparable retail space in the area, we believe that the terms of this lease were at or better than fair market value at the date of the lease commencement.
Independent Contractor
William T. Trawick has served as a member of our board of directors since September 2003 and served as an advisory director of Conn Appliances, Inc., our predecessor company, since August 1999. In addition to the fees paid to Mr. Trawick in his capacity as a director, we paid him consulting fees in the amount of $58,000 in fiscal 2004, $48,000 in fiscal 2005, and $48,000 in fiscal 2006 Mr. Trawick is also the President and Executive Director of NATM Buying Corporation, a national buying group representing nine regional retailers, including us, in the appliance and electronics industry. NATM coordinates the buying and merchandising strategies for its member retailers. We recorded expenses of cash payments to NATM for membership dues of $83,000 in fiscal years 2004, 2005, and 2006.
Indirect Ownership in Service Provider
During fiscal year 2006, we engaged the services of Direct Marketing Solutions, Inc., or DMS, for a substantial portion of our direct mailing advertising. Direct Marketing Solutions, Inc. is partially owned the Stephens Group Inc., members of the Stephens family, Jon E.M. Jacoby and Doug Martin. Thomas J. Frank, our Chief Executive Officer and the Chairman of our board of directors owned approximately 0.7% of DMS until July, 2005, at which time he divested his ownership. The Stephens Group Inc. and the members of the Stephens family are significant shareholders of our company, and Messrs. Jacoby and Martin are members of our Board of Directors. The fees we paid to DMS during fiscal 2005 and 2006 amounted to approximately $1.8 million and $4.1 million, respectively. When DMS was initially engaged to perform direct marketing services for us, a competitive analysis was performed from submissions by various marketing groups, with DMS presenting the low price point in these analyses. During fiscal 2006, additional competitive analyses have been performed which continually support that DMS offers us the lowest cost for this service. We will, at least annually, seek competitive bids for the services performed by DMS.