o | Preliminary Proxy Statement |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ | Definitive Proxy Statement |
o | Definitive Additional Materials |
o | Soliciting Material Pursuant to §240.14a-12 |
þ | No fee required. |
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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): |
o | Fee paid previously with preliminary materials. |
o | 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. To elect three directors to hold office until the 2008 Annual Meeting of Stockholders. | |
2. To ratify the selection by the Audit Committee of the Board of Directors of PricewaterhouseCoopers LLP as independent auditors of the Company for its fiscal year ending January 1, 2006. | |
3. To conduct any other business properly brought before the Annual Meeting. |
By Order of the Board of Directors | |
Mark Vadon | |
Chairman of the Board, Chief Executive Officer and President |
Stockholder of Record: Shares Registered in Your Name |
Beneficial Owner: Shares Registered in the Name of a Broker or Bank |
1) Election of three directors; and | |
2) Ratification of PricewaterhouseCoopers, LLP as independent auditors of the Company for its fiscal year ending January 1, 2006. |
Stockholder of Record: Shares Registered in Your Name |
• | To vote in person, come to the Annual Meeting and the Company will give you a ballot when you arrive. | |
• | To vote using the proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to the Company before the Annual Meeting, the Company will vote your shares as you direct. | |
• | To vote over the telephone, dial toll-free 1-866-540-5760 using a touch-tone phone and follow the recorded instructions. Please have your proxy card in hand when you call. You will be asked to provide the Company number and control number from the enclosed proxy card. Your vote must be received by 8:59 PM Pacific Time (11:59 PM Eastern Time) on Sunday, May 22, 2005 to be counted. | |
• | To vote on the Internet, go to http://www.proxyvoting.com/nile to complete an electronic proxy card. You will be asked to provide the Company number and control number from the enclosed proxy card. Your vote must be received by 8:59 PM Pacific Time (11:59 PM Eastern Time) on Sunday, May 22, 2005 to be counted. |
Beneficial Owner: Shares Registered in the Name of Broker or Bank |
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• | You may submit another properly completed proxy card with a later date. | |
• | You may send a written notice that you are revoking your proxy to Blue Nile’s Corporate Secretary at 705 Fifth Avenue South, Suite 900, Seattle, Washington 98104. | |
• | You may attend the Annual Meeting and vote in person. Simply attending the Annual Meeting will not, by itself, revoke your proxy. |
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• | Proposal 1 — Election of Directors. For the election of directors, the three nominees receiving the most “For” votes (among votes properly cast in person or by proxy) will be elected. Only votes “For” or “Withheld” will affect the outcome. | |
• | Proposal 2 — Ratification of PricewaterhouseCoopers LLP as Independent Auditors. To be approved, Proposal No. 2, the ratification of PricewaterhouseCoopers LLP as Blue Nile’s independent auditors for the fiscal year ending January 1, 2006, must receive a “For” vote from the majority of shares present and entitled to vote either in person or by proxy. If you “Abstain” from voting, it will have the same effect as an “Against” vote. Broker non-votes will be counted towards a quorum, but will have no effect in determining whether this matter has been approved. |
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Name | Audit | Compensation | Nominating and Corporate Governance | |||||||||
Mr. W. Eric Carlborg | X | |||||||||||
Ms. Diane Irvine | ||||||||||||
Mr. Joseph Jimenez | X | X | ||||||||||
Mr. Brian McAndrews | X | X | ||||||||||
Ms. Joanna Strober | X | X | * | |||||||||
Mr. Augustus Tai | X | * | ||||||||||
Ms. Mary Alice Taylor** | X | * | X | |||||||||
Mr. Mark Vadon | ||||||||||||
Total meetings in fiscal year 2004 | 4 | 2 | 0 |
* | Committee Chairperson |
** | Lead Outside Director |
• | evaluates the performance of and assesses the qualifications of the independent auditors; | |
• | determines and approves the engagement of the independent auditors; | |
• | reviews and approves the retention of the independent auditors to perform any proposed permissible non-audit services; | |
• | monitors the rotation of partners of the independent auditors on the Company’s audit engagement team as required by law; | |
• | confers with management and the independent auditors regarding the effectiveness of internal controls over financial reporting; | |
• | establishes procedures, as required under applicable law, for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters; and | |
• | meets to review the Company’s annual audited financial statements and quarterly financial statements with management and the independent auditor, including reviewing the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” |
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• | reviews and approves corporate performance goals and objectives relevant to the compensation of the Company’s executive officers and other senior management; | |
• | reviews and approves the compensation and other terms of employment of the Company’s Chief Executive Officer; | |
• | reviews and approves the compensation and other terms of employment of the other executive officers; and | |
• | administers the Company’s stock option and purchase plans, pension and profit sharing plans, stock bonus plans, deferred compensation plans and other similar programs. |
• | identifying, reviewing and evaluating candidates to serve as directors of the Company (consistent with criteria approved by the Board); | |
• | reviewing and evaluating incumbent directors; | |
• | recommending to the Board for selection candidates for election to the Board of Directors; | |
• | making recommendations to the Board regarding the membership of the committees of the Board; | |
• | assessing the performance of management and the Board; and | |
• | developing a set of corporate governance principles for the Company. |
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• | Blue Nile’s corporate accounting, financial reporting practices and audits of financial statements; | |
• | the quality and integrity of Blue Nile’s financial statements and reports; | |
• | the qualifications, independence and performance of any firm or firms of certified public accountants engaged as Blue Nile’s independent outside auditors; and | |
• | the performance of Blue Nile’s internal audit function. |
(1) Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this proxy statement, in whole or in part, the following report shall not be incorporated by reference into any such filings.
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Respectfully submitted, | |
Mary Alice Taylor, Chairwoman | |
Joseph Jimenez | |
W. Eric Carlborg | |
Joanna Strober |
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Fiscal Year | |||||||||
2004 | 2003 | ||||||||
Audit Fees(1) | $ | 557,172 | $ | 13,500 | |||||
Audit-related Fees(2) | $ | 9,400 | — | ||||||
Tax Fees(3) | $ | 44,914 | $ | 6,062 | |||||
All Other Fees(4) | $ | 327,648 | $ | 2,220 | |||||
Total Fees | $ | 939,134 | $ | 21,782 |
(1) | Audit fees include services for verifying the consolidated financial statements of the Company, along with reviews of the interim financial information of the Company and its Forms 10-K and 10-Q. The 2004 audit fees include the audits of the 2001, 2002, 2003 and 2004 financial statements, and the review of interim information for 2002, 2003 and 2004. |
(2) | Audit related fees in the current year include fees for Sarbanes-Oxley Section 404 related work. |
(3) | Tax fees in both 2003 and 2004 relate to federal and state tax return preparation and federal, state and foreign tax planning and consulting. |
(4) | Other fees consist primarily of fees related to the filing of the Company’s registration statement on Form S-1 in May 2004 and fees related to a subscription service. |
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Beneficial Ownership(1) | |||||||||
Beneficial Owner | Number of Shares | Percent of Total | |||||||
FMR Corp.(2) | 1,788,300 | 10.06 | % | ||||||
82 Devonshire Street | |||||||||
Boston, MA 02109 | |||||||||
Baron Capital Group, Inc.(3) | 1,407,600 | 7.92 | % | ||||||
767 Fifth Avenue | |||||||||
New York, NY 10153 | �� | ||||||||
Transamerica Investment Management, LLC(4) | 1,403,470 | 7.89 | % | ||||||
1150 South Olive Street, Suite 2700 | |||||||||
Los Angeles, CA 90015 | |||||||||
Mark Vadon(5) | 1,788,718 | 9.98 | % | ||||||
Diane Irvine(6) | 353,887 | 1.98 | % | ||||||
Susan Bell(7) | 115,039 | * | |||||||
Robert Paquin(8) | 500,749 | 2.78 | % | ||||||
Darrell Cavens(9) | 95,532 | * | |||||||
Joanna Strober(10) | 25,048 | * | |||||||
Augustus Tai(11) | 12,634 | * | |||||||
Joseph Jimenez(12) | 33,083 | * | |||||||
Mary Alice Taylor(13) | 31,290 | * | |||||||
Brian McAndrews(14) | 9,252 | * | |||||||
W. Eric Carlborg(15) | 1,000 | * | |||||||
All executive officers and directors as a group (12 persons)(16) | 2,975,398 | 16.11 | % |
* | Less than one percent. |
(1) | This table is based upon information supplied by officers, directors and principal stockholders and Schedules 13D and 13G filed with the Securities and Exchange Commission (the “SEC”). Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, the Company believes that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 17,778,942 shares outstanding on March 17, 2005, provided that any additional shares of common stock that a stockholder has the right to acquire within 60 days after March 17, 2005 are deemed to be outstanding for the purpose of calculating that stockholder’s percentage beneficial ownership. |
(2) | FMR Corp. reported to the SEC on its form Schedule 13G that it beneficially owned 1,788,300 shares of the Company’s common stock as of January 31, 2005. The 1,788,300 shares, represents 1,516,500 shares held by Fidelity Management & Research Company (“Fidelity”), a wholly-owned subsidiary of FMR Corp. and 271,800 shares held by Fidelity Management Trust Company (“Fidelity Trust”), a wholly-owned subsidiary of FMR Corp. Edward C. Johnson 3d and FMR Corp., through its control of Fidelity, and the funds each has sole power to dispose of the |
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1,516,500 shares owned by Fidelity. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of FMR Corp., has the sole power to vote or direct the voting of the shares owned directly by Fidelity, which power resides with Fidelity’s Board of Trustees. Edward C. Johnson 3d and FMR Corp., through its control of Fidelity Trust, each has sole dispositive power over 271,800 shares and sole power to vote or to direct the voting of 271,800 shares. Members of the Edward C. Johnson family, through their ownership of approximately 49% of the voting power of FMR Corp. and the execution of a shareholders’ voting agreement, may be deemed under the Investment Company Act of 1940, to form a controlling group with respect to FMR Corp. |
(3) | Baron Capital Group, Inc. reported to the SEC on its form Schedule 13G that it beneficially owned 1,407,600 shares of the Company’s common stock as of February 11, 2005. The 1,407,600 shares represents 1,355,000 shares held by BAMCO, Inc., a subsidiary of Baron Capital Group, Inc., and 52,600 shares held by Baron Capital Management, Inc., a subsidiary of Baron Capital Group, Inc. Ronald Baron owns a controlling interest in Baron Capital Group, Inc. and may be deemed to share power to vote and dispose of the shares held by the Baron Capital Group, Inc. | |
(4) | Transamerica Investment Management, LLC reported to the SEC on its form Schedule 13G that it beneficially owned 1,403,470 shares of the Company’s common stock as of March 17, 2005. Transamerica Investment Management, LLC, an investment advisor in accordance with Rule 13d-1(b)(1)(ii)(E) of the Exchange Act of 1934, has shared power to vote and shared dispositive power over all 1,403,470 shares. | |
(5) | Includes 151,665 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. | |
(6) | Includes 1,160 shares held by Douglas Royan Irvine as Custodian for the benefit of Laura Anne Irvine under the Washington Uniform Gift to Minors Act, 1,160 shares held by Douglas Royan Irvine as Custodian for the benefit of David Douglas Irvine under the Washington Uniform Gift to Minors Act, 1,160 shares held by Douglas Royan Irvine as Custodian for the benefit of Jessica Leigh Irvine under the Washington Uniform Gift to Minors Act and 101,384 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. | |
(7) | Includes 59,181 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. | |
(8) | Includes 214,830 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. Does not include 1,160 shares held by Rachelle L. Paquin, the daughter of Mr. Paquin, as to which shares Mr. Paquin disclaims beneficial ownership. | |
(9) | Includes 75,332 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. |
(10) | Includes 8,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. |
(11) | Includes 8,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. |
(12) | Includes 28,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. |
(13) | Includes 28,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. |
(14) | Includes 8,000 shares of common stock issuable upon the exercise of options that are exercisable within 60 days after March 17, 2005. |
(15) | Mr. Carlborg does not have any shares of common stock exercisable within 60 days after March 17, 2005. |
(16) | Includes shares held by Mr. Vadon, Ms. Irvine, Ms. Bell, Mr. Paquin and Mr. Cavens, the shares described in notes (5) through (14) above, 4,800 shares held by Blue Nile’s executive officers who |
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are not named executive officers, and 4,366 shares issuable pursuant to options held by executive officers who are not named executive officers that are exercisable within 60 days of March 17, 2005. |
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Name | Age | Position | ||||
Mark Vadon | 35 | Chairman, Chief Executive Officer and President | ||||
Robert Paquin | 58 | Chief Operating Officer and Chief Information Officer | ||||
Diane Irvine | 46 | Chief Financial Officer and Director | ||||
Susan Bell | 47 | Vice President, Marketing and Merchandising | ||||
Darrell Cavens | 32 | Vice President, Development and Chief Technology Officer | ||||
Terri Maupin | 43 | Vice President, Finance and Controller |
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Long-Term | |||||||||||||||||||||
Compensation | |||||||||||||||||||||
Awards | |||||||||||||||||||||
Annual Compensation | Securities | ||||||||||||||||||||
Underlying | All Other | ||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($) | Options | Compensation ($) | ||||||||||||||||
Mark Vadon | 2004 | 299,914 | 76,000 | 180,000 | 6,677(1) | ||||||||||||||||
Chairman, Chief Executive Officer and | 2003 | 249,499 | 100,000 | 100,000 | 5,107(2) | ||||||||||||||||
President | |||||||||||||||||||||
Robert Paquin | 2004 | 283,000 | 76,000 | 50,000 | 8,271(3) | ||||||||||||||||
Chief Operating Officer and | 2003 | 282,880 | 100,000 | 20,000 | 7,445(4) | ||||||||||||||||
Chief Information Officer | |||||||||||||||||||||
Diane Irvine | 2004 | 265,478 | 76,000 | 65,000 | 6,017(5) | ||||||||||||||||
Chief Financial Officer and Director | 2003 | 249,499 | 100,000 | 40,000 | 5,924(6) | ||||||||||||||||
Susan Bell | 2004 | 205,220 | 5,000 | 11,338(7) | |||||||||||||||||
Vice President of Marketing and | 2003 | 193,000 | 6,000 | 7,950(8) | |||||||||||||||||
Merchandising | |||||||||||||||||||||
Darrell Cavens | 2004 | 148,220 | 25,000 | 3,684(9) | |||||||||||||||||
Vice President of Development and | 2003 | 142,125 | 16,000 | 3,148(10) | |||||||||||||||||
Chief Technology Officer |
(1) | Of this amount, $5,957 is for matching contributions under Blue Nile’s 401(k) plan and $720 is for a transportation allowance. |
(2) | Of this amount, $4,387 is for matching contributions under Blue Nile’s 401(k) plan and $720 is for a transportation allowance. |
(3) | Of this amount, $5,660 is for matching contributions under Blue Nile’s 401(k) plan and $2,611 is for a transportation allowance. |
(4) | Of this amount, $4,957 is for matching contributions under Blue Nile’s 401(k) plan and $2,488 is for a transportation allowance. |
(5) | Of this amount, $5,297 is for matching contributions under Blue Nile’s 401(k) plan and $720 is for a transportation allowance. |
(6) | Of this amount, $5,204 is for matching contributions under Blue Nile’s 401(k) plan and $720 is for a transportation allowance. |
(7) | Of this amount, $4,105 is for matching contributions under Blue Nile’s 401(k) plan, $720 is for a transportation allowance and $6,513 is for medical insurance premiums for dependents. |
(8) | Of this amount, $3,872 is for matching contributions under Blue Nile’s 401(k) plan, $720 is for a transportation allowance and $3,358 is for medical insurance premiums for dependents. |
(9) | Of this amount, $2,964 is for matching contributions under Blue Nile’s 401(k) plan and $720 is for a transportation allowance. |
(10) | Of this amount, $2,848 is for matching contributions under Blue Nile’s 401(k) plan and $300 is for a transportation allowance. |
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Potential Realizable Value | ||||||||||||||||||||||||
at Assumed Annual Rates of | ||||||||||||||||||||||||
Stock Price Appreciation for | ||||||||||||||||||||||||
Individual Grants | Option Term | |||||||||||||||||||||||
% of Total | ||||||||||||||||||||||||
Number of | Options to | |||||||||||||||||||||||
Securities | Employees | Exercise or | ||||||||||||||||||||||
Underlying | in Fiscal | Base Price | Expiration | |||||||||||||||||||||
Name | Options (#) | Year | ($/Sh) | Date | 5% ($) | 10% ($) | ||||||||||||||||||
Mark Vadon | 180,000 | 25.3 | % | $ | 30.00 | July 2014 | 8,796,031 | 14,006,209 | ||||||||||||||||
Robert Paquin | 50,000 | 7.0 | % | $ | 30.00 | July 2014 | 2,443,342 | 3,890,614 | ||||||||||||||||
Diane Irvine | 65,000 | 9.1 | % | $ | 30.00 | July 2014 | 3,176,345 | 5,057,798 | ||||||||||||||||
Susan Bell | 5,000 | 0.7 | % | $ | 30.00 | July 2014 | 244,334 | 389,061 | ||||||||||||||||
Darrell Cavens | 25,000 | 3.5 | % | $ | 30.00 | July 2014 | 1,221,671 | 1,945,307 |
Number of Securities | Value of Unexercised | |||||||||||||||||||||||
Underlying Unexercised | In-the-Money | |||||||||||||||||||||||
Options at | Options at | |||||||||||||||||||||||
January 2, 2005 | January 2, 2005 | |||||||||||||||||||||||
Shares Acquired | ||||||||||||||||||||||||
Name | on Exercise (#) | Value Realized | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
Mark Vadon | — | — | 123,332 | 286,668 | $ | 3,081,392 | $ | 2,344,358 | ||||||||||||||||
Robert Paquin | — | — | 205,664 | 78,335 | $ | 5,557,975 | $ | 660,198 | ||||||||||||||||
Diane Irvine | — | — | 89,718 | 108,337 | $ | 2,335,996 | $ | 956,405 | ||||||||||||||||
Susan Bell | 4,734 | $ | 133,262 | (1) | 50,348 | 36,792 | $ | 1,357,500 | $ | 833,922 | ||||||||||||||
Darrell Cavens | — | — | 72,266 | 40,334 | $ | 1,927,531 | $ | 327,949 |
(1) | There was no public market at the time of Ms. Bell’s exercise. Accordingly, as permitted by the Securities and Exchange Commission, the Value Realized has been calculated based on $28.40 per |
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share, the closing price on the date of Blue Nile’s initial public offering, minus the exercise price, multiplied by the number of shares issued upon the exercise of the option. |
• | is terminated without cause; | |
• | voluntarily terminates continuous service following a material reduction in such employee’s responsibilities and duties without cause; or | |
• | voluntarily terminates continuous service following a relocation of the principal place where such employee’s responsibilities and duties are performed outside of a specified radius. |
1999 Equity Incentive Plan |
• | any portion of each stock option that is not subject to monthly vesting, but is subject to vesting based on the expiration of a one year period will be treated as if the award had vested ratably on a monthly basis from the vesting commencement date; and | |
• | the lesser of (i) twelve and one-half percent of all shares subject to such stock grant, or (ii) an amount equal to the remaining unvested shares, will vest upon the closing of such corporate transaction. |
2004 Equity Incentive Plan |
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Number of Shares | |||||||||||||
Number of Shares to | Remaining Available for | ||||||||||||
be Issued Upon | Weighted-Average | Future Issuance Under | |||||||||||
Exercise of | Exercise Price of | Equity Compensation | |||||||||||
Outstanding Options, | Outstanding Options, | Plans (Excluding Shares | |||||||||||
Warrants and Rights | Warrants and Rights | Reflected in Column (a)) | |||||||||||
Plan Category | (a) | (b) | (c) | ||||||||||
Equity compensation plans approved by stockholders | 1,916,582 | $11.26 | 4,298,994(1) | ||||||||||
Equity compensation plans not approved by stockholders | — | — | — | ||||||||||
Total | 1,916,582 | $11.26 | 4,298,994(1) |
(1) | Includes 1,369,882 shares outstanding under the 1999 Equity Incentive Plan, 546,700 shares outstanding under the 2004 Equity Incentive Plan, 0 shares outstanding under the 2004 Non-Employee Directors’ Stock Option Plan and 0 shares outstanding the 2004 Employee Stock Purchase Plan. There are 0 shares available for grant under the 1999 Equity Incentive Plan, 2,898,994 shares available for grant under the 2004 Equity Incentive Plan, 400,000 shares available for grant under the 2004 Non-Employee Directors’ Stock Option Plan and 1,000,000 shares available for grant under the 2004 Employee Stock Purchase Plan. The aggregate number of shares of common stock that are reserved for issuance under the 2004 Equity Incentive Plan automatically increases on January 1 of each year up to and including 2014, by five percent of the number of shares of common stock outstanding on such date unless the Board of Directors designates a smaller number. The aggregate number of shares of common stock that are reserved for issuance under the 2004 Non-Employee Directors’ Plan automatically increases on January 1 of each year up to and including 2014, by the number of shares of common stock subject to options granted during the prior calendar year unless the Board of Directors designates a smaller number. After the effective date of the first offering under the 2004 Employee Stock Purchase Plan, the aggregate number of shares of common stock that are reserved for issuance under the 2004 Employee Stock Purchase Plan automatically increases on January 1 of each year for 20 years, by the lesser of 320,000 shares or one and one half percent of the number of shares of common stock outstanding on each such date, unless the Board of Directors designates a smaller number. |
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• | attract, retain and motivate management and other employees by providing appropriate levels of risk and reward, assessed on a relative basis at all levels within Blue Nile and in proportion to the individuals contribution and performance; and | |
• | establish incentives for management and employees that further the long-term strategic plan and the long-term value of Blue Nile as a going concern and to avoid undue emphasis on short-term market value. |
1 Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate future filings, including this proxy statement, in whole or in part, the following report shall not be incorporated by reference into any such filings.
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Respectfully submitted, | |
Augustus Tai (Chairman) | |
Joseph Jimenez | |
Brian McAndrews |
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(1) | This Section is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing of the Company under the 1933 Act or the 1934 Act whether made before or after the date hereof and irrespective of any general incorporation language in any such filing. |
(2) | Assumes $100 was invested on May 20, 2004, at the closing price on the date of Blue Nile’s initial public offering, in Blue Nile’s common stock and each index, and all dividends have been reinvested. No cash dividends have been declared on Blue Nile’s common stock. Stockholder returns over the indicated period should not be considered indicative of future stockholder returns. |
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By Order of the Board of Directors | |
Mark Vadon | |
Chairman of the Board, Chief Executive Officer and President |
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• | Communication — Regular and meaningful contact with the Board, members of senior management and independent professional advisors to the Board and its various committees, as applicable, shall be encouraged as a means of strengthening the Committee’s knowledge of relevant current and prospective corporate accounting and financial reporting issues. | |
• | Committee Education/ Orientation — Developing with management and participating in a process for systematic review of important accounting and financials reporting issues and trends in accounting and financial reporting practices that could potentially impact the Company shall be encouraged to enhance the effectiveness of the Committee. | |
• | Information Needs — The Committee members shall communicate to the Chief Executive Officer or his or her designees the Committee’s expectations, and the nature, timing, and extent of any specific information or other supporting materials requested by the Committee for its meetings and deliberations. |
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• | Meeting Agendas —Committee meeting agendas shall be the responsibility of the Committee chairperson with input from the Committee members and other members of the Board as well as, to the extent deemed appropriate by the chairperson, from members of senior management and outside advisors. |
1. To evaluate the performance of the Auditors, to assess their qualifications including their internal quality-control procedures and any material issues raised by that firm’s most recent internal quality-control or peer review or any investigations by regulatory authorities and to determine whether to retain or to terminate the existing Auditors or to appoint and engage new Auditors for the ensuing year. | |
2. To determine and approve engagements of the Auditors, prior to commencement of such engagement, to perform all proposed audit, review and attest services, including the scope of and plans for the audit, the adequacy of staffing, the compensation to be paid to the Auditors and the negotiation and execution, on behalf of the Company, of the Auditors’ engagement letters, which |
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approval may be pursuant to preapproval policies and procedures, including the delegation of preapproval authority to one or more Committee members so long as any such preapproval decisions are presented to the full Committee at the next scheduled meeting. | |
3. To determine and approve engagements of the Auditors, prior to commencement of such engagement (unless in compliance with exceptions available under applicable laws and rules related to immaterial aggregate amounts of services), to perform any proposed permissible non-audit services, including the scope of the service and the compensation to be paid therefor, which approval may be pursuant to preapproval policies and procedures established by the Committee consistent with applicable laws and rules, including the delegation of preapproval authority to one or more Committee members so long as any such preapproval decisions are presented to the full Committee at the next scheduled meeting. | |
4. To monitor the rotation of the partners of the Auditors on the Company’s audit engagement team as required by applicable laws and rules and to consider periodically and, if deemed appropriate, adopt a policy regarding rotation of auditing firms. | |
5. At least annually, to receive and review written statements from the Auditors delineating all relationships between the Auditors and the Company, to consider and discuss with the Auditors any disclosed relationships and any compensation or services that could affect the Auditors’ objectivity and independence, and to assess and otherwise take appropriate action to oversee the independence of the Auditors. | |
6. To consider and, if deemed appropriate, adopt a policy regarding Committee preapproval of employment by the Company of individuals formerly employed by the Company’s Auditors and engaged on the Company’s account. | |
7. On and after the Reporting Date, to review, upon completion of the audit, the financial statements proposed to be included in the Company’s Annual Report on Form 10-K to be filed with the Securities and Exchange Commission and to recommend whether or not such financial statements should be so included. | |
8. To discuss with management and the Auditors the results of the annual audit, including the Auditors’ assessment of the quality, not just acceptability, of accounting principles, the reasonableness of significant judgments and estimates (including material changes in estimates), any material audit adjustments proposed by the Auditors and immaterial adjustments not recorded, the adequacy of the disclosures in the financial statements and any other matters required to be communicated to the Committee by the Auditors under generally accepted auditing standards. | |
9. On and after the Reporting Date, to discuss with management and the Auditors the results of the Auditors’ review of the Company’s quarterly financial statements, prior to public disclosure of quarterly financial information, if practicable, or filing with the Securities and Exchange Commission of the Company’s Quarterly Report on Form 10-Q, and any other matters required to be communicated to the Audit Committee by the Auditors under generally accepted auditing standards. | |
10. On and after the Reporting Date, to review and discuss with management and the Auditors, as appropriate, the Company’s disclosures contained under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in its periodic reports to be filed with the Securities and Exchange Commission. | |
11. To review and discuss with management and the Auditors, as appropriate, earnings press releases, as well as the substance of financial information and earnings guidance provided to analysts and ratings agencies, which discussions may be general discussions of the type of information to be disclosed or the type of presentation to be made. | |
12. To review with management and the Auditors significant issues that arise regarding accounting principles and financial statement presentation, including critical accounting policies and |
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practices, alternative accounting policies available under GAAP related to material items discussed with management and any other significant reporting issues and judgments. | |
13. To review and discuss with management and the Auditors, as appropriate, the Company’s guidelines and policies with respect to risk assessment and risk management, including the Company’s major financial risk exposures and the steps taken by management to monitor and control these exposures. | |
14. To evaluate the cooperation received by the Auditors during their audit examination, including any significant difficulties with the audit or any restrictions on the scope of their activities or access to required records, data and information. | |
15. To review with the Auditors and, if appropriate, management, any management or internal control letter issued or, to the extent practicable, proposed to be issued by the Auditors and management’s response, if any, to such letter, as well as any additional material written communications between the Auditors and management. | |
16. To review with the Auditors communications between the audit team and the firm’s national office with respect to accounting or auditing issues presented by the engagement. | |
17. To review with the Auditors and management any conflicts or disagreements between management and the Auditors regarding financial reporting, accounting practices or policies and to resolve any such conflicts regarding financial reporting. | |
18. To confer with the Auditors and with the management of the Company regarding the scope, adequacy and effectiveness of internal auditing and financial reporting controls in effect including any special audit steps taken in the event of material control deficiencies, responsibilities, budget and staff of the internal audit function and review of the appointment or replacement of the senior internal audit executive or manager. | |
19. Periodically, to meet in separate sessions with the Auditors, the internal auditors and management to discuss any matters that the Committee, the Auditors, the internal auditors or management believe should be discussed privately with the Committee. | |
20. To consider and review with management, the Auditors, outside counsel, as appropriate, and, in the judgment of the Committee, such special counsel, separate accounting firm and other consultants and advisors as the Committee deems appropriate, any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding the Company’s financial statements or accounting policies. | |
21. To establish procedures, when and as required by applicable laws and rules, for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters and the confidential and anonymous submission by employees of concerns regarding questionable accounting or auditing matters. | |
22. To review with counsel, the Auditors and management, as appropriate, any significant regulatory or other legal or accounting initiatives or matters that may have a material impact on the Company’s financial statements, compliance programs and policies if, in the judgment of the Committee, such review is necessary or appropriate. | |
23. To review the results of management’s efforts to monitor compliance with the Company’s programs and policies designed to ensure adherence to applicable laws and rules, as well as to its Code of Conduct, including (i) review and approval of related-party transactions as required by Nasdaq rules and (ii) to the extent permitted by the rules of Nasdaq and the SEC, the consideration and determination of whether to approve proposed waivers of the Code of Conduct applicable to the Company’s directors and executive officers. | |
24. To investigate any matter brought to the attention of the Committee within the scope of its duties if, in the judgment of the Committee, such investigation is necessary or appropriate. |
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25. On and after the Reporting Date, to prepare the report required by the rules of the Securities and Exchange Commission to be included in the Company’s annual proxy statement. | |
26. To review and assess the adequacy of this charter annually and recommend any proposed changes to the Board for approval. | |
27. To report to the Board of Directors with respect to material issues that arise regarding the quality or integrity of the Company’s financial statements, the Company’s compliance with legal or regulatory requirements, the performance or independence of the Company’s Auditors the performance of the Company’s internal audit function or such other matters as the Committee deems appropriate from time to time or whenever it shall be called upon to do so. | |
28. To perform such other functions and to have such powers as may be necessary or appropriate in the efficient and lawful discharge of the foregoing. |
A-5
• | Compensation Structure. The Committee shall seek to maintain an overall compensation structure designed to attract, retain and motivate management and other employees by providing appropriate levels of risk and reward, assessed on a relative basis at all levels within the Company and in proportion to individual contribution and performance; and | |
• | Long-Term Focus. The Committee shall seek to establish appropriate incentives for management and employees at all levels to further the Company’s long-term strategic plan and long-term value as a going concern and to avoid undue emphasis on short-term market value. |
• | Communication — Regular and meaningful contact with the Chairman of the Board, other committee chairpersons, members of senior management and independent professional advisors to the Board and its various committees, as applicable, shall be encouraged as a means of strengthening the Committee’s knowledge of relevant current and prospective issues with compensation policies, plans and programs. | |
• | Committee Education/ Orientation — Developing with management and participating in a process for systematic review of important compensation issues and trends that could potentially impact the Company shall be encouraged to enhance the effectiveness of the Committee. | |
• | Information Needs — The Committee members shall communicate to the Chief Executive Officer or his or her designees the Committee’s expectations, and the nature, timing, and extent of any specific information or other supporting materials requested by the Committee for its meetings and deliberations. |
B-1
• | Meeting Agendas — Committee meeting agendas shall be the responsibility of the Committee chairperson with input from the Committee members and other members of the Board as well as, to the extent deemed appropriate by the chairperson, from members of senior management and outside advisors. |
B-2
1. Overall Compensation Strategy. The Committee shall review, modify (as needed) and approve the overall compensation strategy and policies for the Company, including: |
• | reviewing and approving corporate performance goals and objectives relevant to the compensation of the Company’s executive officers and other senior management; | |
• | evaluating and recommending to the Board the compensation plans and programs advisable for the Company, as well as modification or termination of existing plans and programs; | |
• | establishing policies with respect to equity compensation arrangements with the objective of appropriately balancing the perceived value of equity compensation and the dilutive and other costs of that compensation to the Company; | |
• | reviewing regional and industry-wide compensation practices and trends to assess the propriety, adequacy and competitiveness of the Company’s executive compensation programs among comparable companies in the Company’s industry; | |
• | reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements for the Company’s executive officers and other senior management; | |
• | reviewing and approving any compensation arrangement for any executive officer involving any subsidiary, special purpose or similar entity, taking into account the potential for conflicts of interest in such arrangements and whether the arrangement has the potential to benefit the Company; and | |
• | evaluating the efficacy of the Company’s compensation policy and strategy in achieving expected benefits to the Company and otherwise furthering the Committee’s policies. |
2. Compensation of Chief Executive Officer. The Committee, meeting in executive session, shall determine, in its sole discretion, the compensation and other terms of employment of the Company’s Chief Executive Officer and shall evaluate the Chief Executive Officer’s performance in light of relevant corporate performance goals and objectives, taking into account, among other things, the policies of the Committee and the Chief Executive Officer’s performance in: |
• | fostering a corporate culture that promotes the highest levels of integrity and the highest ethical standards; | |
• | developing and executing the Company’s long-term strategic plan and conducting the business of the Company in a manner appropriate to enhance long-term stockholder value; and | |
• | achieving the Chief Executive Officer’s individual performance goals and objectives. |
In determining the long-term incentive component of the Chief Executive Officer’s compensation, the Committee shall seek to achieve an appropriate level of risk and reward, taking into consideration the Company’s performance and relative stockholder return, the potential benefits and costs to the Company, the value of similar incentives given to chief executive officers of comparable companies, incentives provided to the Chief Executive Officer in past years, and such other criteria as the Committee deems advisable. Notwithstanding anything to the contrary set forth herein, the Chief Executive Officer may not be present for any portion of any meeting of the Committee at which the compensation of the Chief Executive Officer is deliberated or voted upon. | |
3. Compensation of Other Officers. The Committee shall review and approve the individual and corporate performance goals and objectives of the Company’s other executive officers (as that term is defined in Section 16 of the Exchange Act and Rule 16a-1 thereunder) that are periodically established. The Committee shall determine the compensation and other terms of employment of these officers, taking into consideration the officer’s success in achieving his or her individual |
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performance goals and objectives and the corporate performance goals and objectives deemed relevant to the officer as established by the Committee. The Chief Executive Officer may be present during these deliberations, but may not vote. | |
4. Compensation of Directors. The Committee shall recommend to the Board the type and amount of compensation to be paid or awarded to Board members, including consulting, retainer, Board meeting, committee and committee chair fees and stock option grants or awards. | |
5. Administration of Benefit Plans. The Committee shall recommend to the Board the adoption, amendment and termination of the Company’s stock option plans, stock appreciation rights plans, pension and profit sharing plans, incentive plans, stock bonus plans, stock purchase plans, bonus plans, deferred compensation plans and similar programs. The Committee shall have full power and authority to administer and delegate the administration of these plans to the extent permissible pursuant to applicable laws and regulations, establish guidelines, interpret plan documents, select participants, approve grants and awards, and exercise such other power and authority as may be permitted or required under such plans. | |
6. Insurance Coverage. The Committee shall review and establish appropriate insurance coverage for the Company’s directors and executive officers. | |
7. Proxy Statement Report. At such time as the Company becomes subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act (the “Reporting Date”), the Committee shall prepare any report required by the applicable SEC rules and regulations to be included in the Company’s annual proxy statement. |
B-4
• | Communication — Regular and meaningful contact with the Chairman of the Board, other committee chairpersons, members of senior management and independent professional advisors to the Board and its various committees, as applicable, is important shall be encouraged as a means of strengthening the Committee’s knowledge of relevant current and prospective corporate governance issues. | |
• | Committee Education/Orientation — Developing with management and participating in a process for systematic review of important corporate governance issues and trends in corporate governance practices that could potentially impact the Company shall be encouraged to enhance the effectiveness of the Committee. | |
• | Information Needs — The Committee members shall communicate to the Chief Executive Officer or his or her designees the Committee’s expectations, and the nature, timing, and extent of any specific information or other supporting materials requested by the Committee for its meetings and deliberations. |
C-1
• | Meeting Agendas —Committee meeting agendas shall be the responsibility of the Committee chairperson with input from the Committee members and other members of the Board as well as, to the extent deemed appropriate by the chairperson, from members of senior management and outside advisors. |
1. Establish criteria for membership on the Board and on committees of the Board, including standards for the independence of directors to serve on the Board and committees of the Board. | |
2. Identify, evaluate, review and recommend qualified candidates to serve on the Board and on committees of the Board. | |
3. Evaluate, review and determine whether to recommend, upon conclusion of their terms, existing directors for re-election to the Board. |
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4. Consider recommendations for Board nominees and proposals submitted by the Company’s stockholders. Recommend to the Board appropriate action on any such proposal or recommendation and make any disclosures required by applicable law in the course of exercising its authority. | |
5. Establish any policies, requirements, criteria and procedures, including policies and procedures to facilitate stockholder communications with the Board. | |
6. Evaluate at least annually the performance, authority, operations, charter and composition of each standing Board committee and the performance of each committee member and recommend any changes considered appropriate in the authority, operations, charter, number or membership of each committee. | |
7. Develop and periodically review and revise as appropriate, a management succession plan and related procedures and consider and recommend to the Board candidates for successor to the Chief Executive Officer of the Company and, with appropriate consideration of the Chief Executive Officer’s recommendations, candidates for successors to other executive officers, in each case when vacancies shall occur in those offices. | |
8. Establish a process for the periodic review and assessment of the performance of the Board and Board committees and management, seeking input from senior management, the full Board and others, including whether, individually and collectively, the directors and management provide the skills and expertise appropriate for the Company. | |
9. Consider and assess periodically the independence of directors, including whether a majority of the Board are independent of management within the meaning prescribed by Nasdaq and whether the members of the standing committees of the Board meet the independence requirements of Nasdaq applicable to such committees. | |
10. Evaluate the need and, if necessary, develop and institute a plan or program for the continuing education of directors. | |
11. Develop a set of corporate governance principles applicable to the Company to be adopted by the Board, and periodically review and assess these principles and their application and recommend any changes deemed appropriate to the Board for its consideration. | |
12. Review and make recommendations to the Board regarding proposals submitted by shareholders that relate to corporate governance matters. | |
13. Recommend to the Board the establishment of such special committees as may be desirable or necessary from time to time in order to address ethical, legal, business or other matters that may arise. | |
14. Oversee and review the processes and procedures used by the Company to provide accurate, relevant and appropriately detailed information to the Board and its committees on a timely basis. | |
15. Periodically review, discuss and assess the performance of the Committee as well as the Committee’s role and responsibilities, seeking input from senior management, the full Board and others and recommend any changes to the Board. | |
16. Oversee the Company’s policies and practices regarding philanthropic and political activities and undertake such additional activities within the scope of its primary functions as the Committee may from time to time determine. |
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PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
BLUE NILE, INC.
The undersigned hereby appoints Mark Vadon and Diane Irvine, and each of them, with power to act without the other and with power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Blue Nile Common Stock which the undersigned is entitled to vote, and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the company to be held Monday, May, 23, 2005 or at any adjournment or postponement thereof, with all powers which the undersigned would possess if present at the Meeting.
(Continued and to be marked, dated and signed, on the other side
Address Change/Comments (Mark the corresponding box on the reverse side) | ||||
| ||||
You can now access your BLUE NILE account online.
Access your Blue Nile shareholder/stockholder account online via Investor ServiceDirect® (ISD).
Mellon Investor Services LLC, Transfer Agent for Blue Nile, now makes it easy and convenient to get current information on your shareholder account.
• View account status
• View certificate history
• View book-entry information
• View payment history for dividends
• Make address changes
• Obtain a duplicate 1099 tax form
• Establish/change your PIN
Visit us on the web athttp://www.melloninvestor.com
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time
Investor ServiceDirect® is a registered trademark of Mellon Investor Services LLC
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE VOTED “FOR” THE PROPOSALS. | Mark Here for Address Change or Comments | o | ||||
SEE REVERSE SIDE |
WITHHELD | |||||||||||||
FOR | FOR ALL | FOR | AGAINST | ABSTAIN | |||||||||
ITEM 1. ELECTION OF DIRECTORS Nominees: | o | o | ITEM 2. | RATIFICATION OF INDEPENDENT ACCOUNTANTS | o | o | o | ||||||
01 Mark Vadon 02 Joanna Strober 03 W. Eric Carlborg | |||||||||||||
WITHHOLD for the nominees you list below: (Write that nominee’s name in the space provided below.) | |||||||||||||
ChooseMLinkSM for fast, easy and secure 24/7 online access to your future proxy materials, investment plan statements, tax documents and more. Simply log on toInvestor ServiceDirect® at www.melloninvestor.com/isd where step-by-step instructions will prompt you through enrollment.
Signature | Signature | Date | ||||||||
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
Internet |
http://www.proxyvoting.com/nile |
Use the Internet to vote your proxy. Have your proxy card in hand when you access the web site. |
OR
Telephone |
1-866-540-5760 |
Use any touch-tone telephone to vote your proxy. Have your proxy card in hand when you call and follow the instructions. |
OR
Mark, sign and date your proxy card and return it in the enclosed postage-paid envelope. |
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
You can view the Annual Report on a Form 10-K and the Proxy Statement
on the Internet at www.bluenile.com