Radioshack DEF 14A 2005
Documents found in this filing:
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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:
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
April 7, 2005
We would like to cordially invite you to attend our 2005 Annual Meeting on Thursday, May 19, 2005, at 10:00 a.m., at RadioShack Corporation, Trinity Building, RadioShack Riverfront Campus, 300 RadioShack Circle, in Fort Worth, Texas. The formal notice of the meeting, the proxy statement, our 2004 Annual Report and your proxy card are enclosed in this mailing.
The meeting also marks several important milestones for your company. In addition to being the first annual meeting held at RadioShacks new Riverfront Campus, the meeting marks the beginning of Dave Edmondsons role as Chief Executive Officer of RadioShack.
In addition to each item of business described in the enclosed notice of the meeting, we will also give a current report on our business operations. There will also be time for questions.
Your vote is important. We encourage you to sign and return your proxy card or vote by telephone or the Internet prior to the meeting, so that your shares will be represented and voted at the meeting even if you cannot attend. Submitting your vote promptly will save your company the cost of additional proxy solicitation.
LEONARD H. ROBERTS
DAVID J. EDMONDSON
300 RadioShack Circle
Fort Worth, Texas 76102
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
By Order of the Board of Directors,
MARK C. HILL
Senior Vice President Chief
Administrative Officer, Secretary
and General Counsel
April 7, 2005
We urge each stockholder to promptly sign and return the enclosed proxy card or to use telephone or Internet voting. Please see our question and answer section for information about voting by telephone or Internet, how to revoke a proxy, and how to vote shares in person.
TABLE OF CONTENTS
300 RadioShack Circle
Fort Worth, Texas 76102
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, MAY 19, 2005
Your board of directors is furnishing you this proxy statement to solicit proxies on its behalf to be voted at the RadioShack Corporation 2005 annual meeting of stockholders. The meeting will be held on Thursday, May 19, 2005, at 10:00 a.m., local time, at RadioShack Corporation, Trinity Building, RadioShack Riverfront Campus, 300 RadioShack Circle, Fort Worth, Texas 76102. For directions to the meeting, please refer to your proxy card. The proxies also may be voted at any resumption of the meeting after adjournment or postponement of the meeting.
We are first sending out these proxy materials to stockholders on or about April 7, 2005.
ABOUT THE MEETING AND VOTING
Who is entitled to vote?
Owners of record of common stock at the close of business on the record date, March 22, 2005, are the only persons entitled to receive notice of the annual meeting and to vote the shares of common stock that they held on that date. Each stockholder is entitled to one vote for each share of common stock he or she held on March 22, 2005. We had 156,806,021 shares of common stock outstanding on March 22, 2005, which includes 8,092,369 shares of common stock held under the RadioShack Investment Plan, Supplemental Stock Plan and 401(k) Plan.
What are the boards recommendations?
The boards recommendations, if any, are included with the description of each item in this proxy statement. In summary, the board recommends a vote:
Will any other items be presented at the meeting?
We do not know of any other matters to be presented at the meeting. If any other matter is properly presented for a vote at the meeting, your shares will be voted by the holders of the proxies using their best judgment.
How do I vote?
You can use one of the following methods:
The telephone and Internet voting procedures are designed to authenticate your identity and allow you to vote your shares. They will also confirm that your instructions have been properly recorded. Street name holders may vote by telephone or the Internet if their bank or broker makes those methods available. If this is the case, the bank or broker will enclose instructions with the proxy statement.
What are my voting choices on the matters to be voted on?
In the vote on the election of the 14 director nominees, you may:
For any other items, you may vote (or abstain) by choosing FOR, AGAINST or ABSTAIN.
What if I do not specify a choice for a matter when I return my proxy card?
You should specify your choice for each matter on the enclosed proxy card. If you do not specify a choice, proxies that are signed and returned will be voted FOR the election of all director nominees.
How are votes counted?
Directors are elected by a plurality of votes cast at the meeting. All other matters submitted to a vote of stockholders will be determined by a majority of the votes cast.
We have a policy of confidential voting that applies to all stockholders, including RadioShack employee-stockholders. Equiserve Trust Company, N.A., our stock transfer agent, tabulates the votes received and acts as an inspector of election.
What is the quorum requirement for the annual meeting?
To achieve a quorum at the annual meeting, the holders of a majority of outstanding common stock as of the record date must be present, either in person or by proxy.
How are abstentions and broker non-votes counted?
Abstentions and broker non-votes count for quorum purposes. With respect to the election of directors, abstentions will be counted as withheld votes. For purposes of determining whether a proposal has received a majority vote, abstentions will be included in the vote total, with the result that an abstention will have the same effect as a negative vote.
For purposes of determining whether a proposal has received a majority vote, broker non-votes will not be included in the vote totals and, therefore, will have no effect on the outcome of the vote.
How will shares of common stock held in RadioShack 401(k) Plan, the RadioShack Employees Supplemental Stock Program, and the RadioShack Investment Plan be voted?
Each participant in the RadioShack 401(k) Plan and the Employees Supplemental Stock Plan is entitled to direct the plan trustee on how to vote shares of common stock allocated to his or her account. If a participant does not direct the trustee how to vote his or her allocated shares, the trustee will vote those shares in the same proportion as other participants who have directed the trustee to vote their allocated shares. The trustee will also vote all unallocated shares of common stock held by the 401(k) Plan in this proportion.
Participants in the RadioShack Investment Plan are entitled to direct the plan administrator on how to vote shares of common stock allocated to his or her account. If a participant does not direct the trustee how to vote his or her allocated shares, those shares will not be voted.
How can I revoke my proxy?
You can revoke your proxy at any time before the annual meeting by:
You should send any written notice of a revocation of a proxy to RadioShack Corporation, Attention: Shareholder Services, Mail Stop CF3-227, 300 RadioShack Circle, Fort Worth, Texas 76102.
Who can attend the meeting?
Stockholders as of the record date, March 22, 2005, or their duly appointed proxies, may attend the meeting.
You will need your admission ticket as well as a form of personal identification to enter the annual meeting. If you are a stockholder of record, you will find an admission ticket attached to the proxy card sent to you. If you plan to attend the annual meeting, please retain the admission ticket. If you own shares in street name, please contact your bank or broker to obtain an admission ticket; however, please note that even if you obtain an admission ticket from your bank or broker to attend the meeting, you will not be able to vote your shares at the meeting without also obtaining a legal proxy from your bank or broker.
If you arrive at the annual meeting without an admission ticket, we will admit you if we are able to verify that you are a RadioShack stockholder.
Where do I find the voting results of the meeting?
We will publish the voting results in our Form 10-Q for the second quarter of 2005, which we will file with the SEC in August 2005.
How can I receive the proxy statement and annual report electronically?
Registered stockholders may elect to receive RadioShacks annual report and proxy statement electronically. Choosing electronic delivery gives stockholders faster and more convenient access to the proxy materials and reduces our printing and postage costs.
Registered stockholders can read additional information about electronic delivery and enroll in the service by going to www.econsent.com/rsh on the Internet. Stockholders will be asked to enter their account numbers, which
can be found on their Forms 1099-DIV. Registered stockholders needing assistance in obtaining their account numbers should call our stock transfer agent, toll free, at (888) 218-4374. Registered stockholders can also request the service while voting via the Internet by simply clicking the box consenting to electronic delivery.
Stockholders who own their shares in street name should contact their broker to determine their account numbers and to choose electronic delivery.
What is householding?
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements with respect to two or more stockholders sharing the same address by delivering a single proxy statement addressed to those stockholders. This process, which is commonly referred to as householding, potentially provides convenience for stockholders and cost savings for companies. RadioShack and some brokers may household proxy materials, delivering a single proxy statement to multiple stockholders sharing an address unless contrary instructions have been received from the affected stockholders. Each stockholder will receive his or her own proxy card. Once you have received notice from your broker or us that they or we will be sending householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in householding and would prefer to receive a separate proxy statement, or if you are receiving multiple copies of the proxy statement and wish to receive only one, please notify your broker if your shares are held in a brokerage account or us if your shares are registered in your name. You can notify us by sending a written request to RadioShack Corporation, Attention: Shareholder Services, Mail Stop CF3-227, 300 RadioShack Circle, Fort Worth, Texas 76102, or by calling Shareholder Services at (817) 415-3021.
ITEM 1ELECTION OF DIRECTORS
Fourteen directors are recommended for election to the board of directors at the 2005 annual meeting. Directors are elected for a one-year term and serve until the next annual meeting where their successors are elected, or if earlier, until their retirement, resignation or removal.
We have no reason to believe that any of the nominees will be unable or unwilling for good cause to serve if elected. If any nominee, however, should become unable or unwilling for good cause to serve for any reason, proxies may be voted for another person nominated as a substitute by the board of directors, or the board of directors may reduce the number of directors.
The board of directors recommends you vote FOR the election of each of the nominees listed above.
Securities Owned by Directors and Officers
The following table sets forth information regarding beneficial ownership of common stock by each director and nominee, the named executive officers in the summary compensation table on page 25, and our directors, nominees and executive officers as a group, all as of February 28, 2005.
Securities Owned by Principal Stockholders
The following table sets forth information as of the dates set forth below about persons we know as of February 28, 2004 to be the beneficial owners of more than 5% of RadioShacks issued and outstanding common stock, based on a review of documents publicly filed with the SEC.
Section 16(a) Beneficial Ownership Reporting Compliance
Executive officers, directors and certain persons who own more than 10% of RadioShack common stock are required by Section 16(a) of the Securities Exchange Act of 1934 and related regulations:
We received written representations from each such person who did not file an annual report with the SEC on Form 5 that no Form 5 was due. Based on our review of the reports and representations, and except as previously disclosed in the proxy statement for the 2004 annual meeting, we believe that all required Section 16(a) reports were timely filed in 2004.
THE BOARD OF DIRECTORS AND COMMITTEES
Information about Meetings, Attendance and Committees
In 2004, the board of directors held 7 meetings (all in person), and committees of the board of directors held a total of 27 meetings (both in person and by telephone). Each director attended at least 75% of the aggregate of all meetings of the board of directors and the committees on which he or she served during 2004.
The board has four standing committees: the Audit and Compliance Committee, the Corporate Governance Committee, the Executive Committee, and the Management Development and Compensation Committee. Other than the Executive Committee, all of the standing committees are composed entirely of independent, non-employee directors.
Executive sessions without management directors present are scheduled at each board meeting. Thomas G. Plaskett has been designated as the presiding director for each executive session of the board. Additional information about this role is described under Presiding Director on page 19.
The board of directors and each committee of the board (other than the Executive Committee) conducted an evaluation of their performance in 2004.
Board Committees and Functions
The board of directors has adopted criteria for determining whether a director is independent from management. The board believes that at least 75% of its members should be independent, non-employee directors. The board annually reviews the commercial and charitable relationships that directors may have with RadioShack to determine whether RadioShacks non-employee directors are, in fact, independent.
To assist it in determining director independence, the board has established the following guidelines consistent with the listing standards of the New York Stock Exchange:
The board of directors has reviewed the transactions or relationships between each director, or any member of his or her immediate family, and RadioShack, its senior management and its independent auditors. Based on this review and in accordance with RadioShacks independence criteria, the board of directors has affirmatively determined that each of the following thirteen current non-employee directors has no material relationship with RadioShack and is independent from management: Frank J. Belatti, Ronald E. Elmquist, Robert S. Falcone, Daniel R. Feehan, Richard J. Hernandez, Lawrence V. Jackson, Robert J. Kamerschen, Gary M. Kusin, H. Eugene Lockhart, Jack L. Messman, William G. Morton, Jr., Thomas G. Plaskett and Edwina D. Woodbury. The board of directors has also determined that each of the committees of the board of directors, other than the Executive Committee, is composed entirely of independent, non-employee directors.
In determining that each of the thirteen directors is independent, the board considered that RadioShack and its subsidiaries in the ordinary course of business sell products and services to, and/or purchase products and services from, companies at which certain directors, including Messrs. Falcone, Jackson, Kusin and Messman, serve or have served as an executive officer. In each case, the amount paid to or received from these companies in each of the last three years did not approach the 2% of total revenue threshold in the guidelines stated above. The board also determined that these transactions were not otherwise material to the other company or to RadioShack and that none of our directors had a material interest in the transactions with these companies. The board therefore determined that none of these relationships impaired the independence of the directors. The board also considered that some of RadioShacks directors were directors (but not officers) of companies or institutions that RadioShack sells products and services to or purchases products or services from, but determined that these relationships did not impair the independence of those directors.
RadioShacks Corporate Governance Framework
The board of directors has for many years followed specific policies regarding corporate governance and has incorporated these policies and procedures into its Corporate Governance Framework. You can review a copy of RadioShacks Corporate Governance Framework on our corporate Web site located at www.radioshackcorporation.com, under the heading Investor Relations and the sub-heading Corporate Governance. In addition, you can obtain a copy of the Corporate Governance Framework by mailing a request to RadioShack Corporation, Assistant Corporate Secretary, Mail Stop CF4-101, 300 RadioShack Circle, Fort Worth, Texas 76102.
Responsibilities of the Board of Directors. The Corporate Governance Framework provides that the responsibilities of the board are to:
Code of Conduct and Financial Code of Ethics. In connection with the boards responsibility to oversee RadioShacks legal compliance and ethical conduct, the board of directors has approved RadioShacks Code of Ethics and Financial Code of Ethics.
Structure of the Board of Directors. The Corporate Governance Framework sets forth the following concerning the structure of the board of directors:
Directors. The Corporate Governance Framework sets forth the following concerning directors:
Desired Characteristics of Individual Directors and the Board.
Presiding Director. The non-employee directors appoint a presiding director to strengthen the independence and the role of the non-employee directors. The duties of the presiding director are to:
The non-employee directors have appointed the chair of the Corporate Governance Committee, Thomas G. Plaskett, to serve as the presiding director for three years or until a new chair of the Corporate Governance Committee is appointed (whichever is earlier). Mr. Plaskett is an active member of the board of directors, having attended 32 of the 34 board and committee meetings held in 2004, representing 94% of all meetings held (including committees of which Mr. Plaskett was not a member).
Compensation of Directors
Non-employee directors are currently compensated as follows:
In addition, directors may use RadioShack aircraft from time to time in connection with our business operations. Directors and their spouses are also eligible to travel on RadioShack aircraft on non-company business on a space-available basis, if approved in advance by the Chief Executive Officer or, in his absence, the Senior Vice President Chief Administrative Officer, General Counsel and Corporate Secretary. In 2004, a director accompanied some of our officers on RadioShack aircraft on a RadioShack business trip. RadioShack incurred no incremental cost as a result of this directors travel.
Unfunded Deferred Compensation Plan for Directors. Under RadioShacks Unfunded Deferred Compensation Plan for Directors, non-employee directors may elect to defer payment of all or a specified part of their annual retainer fees and meeting fees. Interest is credited for fees deferred in cash at 1% below the prime rate. If a director elects to defer payment of fees payable in common stock for more than three years, RadioShack will make an additional contribution of 25% of the amount deferred in common stock. Upon a change in control of RadioShack, a director will receive any deferred fees and the additional RadioShack contribution in a lump sum cash payment.
RadioShack 2004 Deferred Stock Unit Plan for Non-Employee Directors. The RadioShack 2004 Deferred Stock Unit Plan for Non-Employee Directors provides for a one-time grant of 5,000 deferred stock units for each new non-employee director, and for annual grants of 3,500 deferred stock units to non-employee directors, vesting in equal amounts over three years. These directors receive shares of common stock equal to the number of vested deferred stock units in their account only when their service as a director terminates. The plan replaces one-time and annual grants of stock options to the directors.
Communications with the Board of Directors
Communications with the Presiding Director. Stockholders who wish to communicate with the board of directors or who have concerns regarding RadioShack that pertain to matters other than accounting, internal accounting controls or auditing matters can communicate confidentially with RadioShacks presiding director, Mr. Thomas G. Plaskett, by using the following methods:
c/o Corporate Secretary
Mail Stop CF3-203
300 RadioShack Circle
Fort Worth, Texas 76102
Attn: Presiding Director
Communications with the Chair of the Audit and Compliance Committee. Stockholders with concerns regarding RadioShack that pertain to matters concerning accounting, internal accounting controls or auditing matters or that relate to RadioShacks Financial Code of Ethics can communicate confidentially with RadioShacks chair of the Audit and Compliance Committee, Edwina D. Woodbury, by using the following methods:
c/o Corporate Secretary
Mail Stop CF3-203
300 RadioShack Circle
Fort Worth, Texas 76102
Attn: Chair of the Audit and Compliance Committee
Please note that the telephone number listed above for the presiding director and the chair of the Audit and Compliance Committee is administered by an independent third party and therefore does not provide direct communications with either the presiding director or the chair of the Audit and Compliance Committee.
Mail sent to the address listed above for the presiding director or the chair of the Audit and Compliance Committee will be forwarded, unopened, by the Corporate Secretary to the presiding director or the chair of the Audit and Compliance Committee, as applicable. Calling the toll-free number allows stockholders to make reports anonymously and confidentially.
Directors Attendance at the Annual Meeting
RadioShack encourages each of its directors and nominees for director to attend the annual meeting of stockholders, although attendance is not mandatory. Each of the current directors (other than Mr. Kusin, who was
not a director at the time) attended the annual stockholders meeting for 2004, and it is anticipated that each of the directors will also attend the annual meeting for 2005.
REPORT OF THE AUDIT AND COMPLIANCE COMMITTEE
Respective Responsibilities of the Committee, Management and the Independent Auditors. As discussed in its charter, the primary responsibility of the Audit and Compliance Committee is to oversee RadioShacks financial controls (including appropriate disclosure controls and procedures and internal control over financial reporting) and reporting processes on behalf of the board and report the results of its activities to the board. Management is responsible for preparing RadioShacks financial statements. PricewaterhouseCoopers LLP, RadioShacks independent accounting firm, is responsible for performing an integrated audit of RadioShacks consolidated financial statements and internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States).
The function of the committee is to provide business, financial and accounting oversight at the board level, along with advice, counsel, and direction to management and the auditors on the basis of information it receives, discussions with management and the auditors, and the experience of the committees members. The committees role is not intended to duplicate or to certify the activities of management and the independent auditors.
Independence of Committee Members. Each of the members of the committee meets the independence and experience requirements of the New York Stock Exchange and the SEC.
Committee Charter. The committee has adopted, and annually reviews, a charter outlining the practices that it follows. In February 2005, the board of directors amended the committees charter. A copy of the amended charter is attached as Appendix A to this proxy statement. The charter complies with all current regulatory requirements and the requirements of the New York Stock Exchange and the SEC.
Discussions of the Committee. Throughout 2004, the committee met and held many discussions with management and the independent auditors. The committee also held a number of meetings, without members of RadioShacks management present, with RadioShacks internal auditor and with the independent auditors.
Among other things, during these meetings, the committee reviewed and discussed RadioShacks audited consolidated financial statements with RadioShacks management and the independent auditors. The committee also discussed with the independent auditors other matters required to be discussed by the auditors with the committee under Statement on Auditing Standards No. 61, as amended by Statement on Auditing Standards No. 90 (Communications with Audit Committees), which include, among other items, matters related to the conduct of the audit of RadioShacks consolidated financial statements. The committee also received and discussed with the independent auditors their annual written report on their independence from RadioShack and its management, which is issued under Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees), and discussed with the independent auditors the independent auditors independence. These discussions with the independent auditors included an examination of whether the provision of non-audit services provided by them to RadioShack during 2004 was compatible with the auditors independence. In addition, the committee obtained and reviewed a report by the independent auditors describing the firms internal quality-control procedures and related matters, as required by the listing standards of the New York Stock Exchange.
The committee also reviewed key initiatives and programs aimed at strengthening the effectiveness of RadioShacks internal and disclosure control structure. As part of this process, the committee continued to monitor the scope and adequacy of RadioShacks internal auditing program, as well as reviewed staffing levels and steps taken to implement recommended improvements in internal procedures and controls.
In reliance on these reviews and discussions, and the report of the independent auditors, the committee has recommended to the board of directors, and the board of directors has approved, that the audited financial
statements be included in RadioShacks Annual Report on Form 10-K for the year ended December 31, 2004, for filing with the SEC.
Fees and Services of the Independent Auditors
PricewaterhouseCoopers LLP performed the integrated audit of RadioShacks consolidated financial statements and internal control over financial reporting for the year ended December 31, 2004, and the audit of RadioShacks consolidated financial statements for the year ended December 31, 2003. The following is a summary of the fees billed to RadioShack by PricewaterhouseCoopers LLP for professional services rendered for the years ended December 31, 2004 and December 31, 2003, respectively:
Audit Fees. Consist of fees billed for professional services rendered for the integrated audit of RadioShacks consolidated financial statements and internal control over financial reporting and review of the interim consolidated financial statements included in quarterly reports, along with services that only the independent auditors can provide. These services include statutory and regulatory filings or comfort letters, statutory audits, attestation services, consultations with respect to accounting treatment and disclosure of transactions and the impact of proposed accounting rules and standards, and consents with respect to, assistance with, and review of documents filed with the SEC.
Audit-Related Fees. Consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of RadioShacks consolidated financial statements and are not reported under Audit Fees. These services include employee benefit plan audits, accounting consultations in connection with acquisitions, attestation services that are not required by statute or regulation, and consultations concerning financial accounting and reporting.
Tax Fees. Consist of fees billed for tax services that are unrelated to the audit of RadioShacks consolidated financial statements. These services include assistance regarding federal, state, employee benefit plan and international tax compliance, approved tax planning, review of returns and other tax advice.
All Other Fees. Consist of fees for products and services other than the services reported above. In fiscal 2004 and 2003, these services included an accounting research software license fee.
Policy for Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
The committees policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. Pre-approval is generally provided for up to one calendar year, and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to, and do, periodically report to the committee regarding the
extent of services provided by the independent auditors in accordance with this pre-approval, along with the fees for the services performed to date. The committee may also pre-approve particular services on a case-by-case basis. The committee separately pre-approved all audit and permissible non-audit services provided by PricewaterhouseCoopers LLP for the year ended December 31, 2004.
In connection with its pre-approval, the committee considers whether the provision of any permissible non-audit services is compatible with maintaining the independence of the independent auditors. The committee has determined the provision of the permissible non-audit services described above is compatible with maintaining PricewaterhouseCoopers LLPs independence.
Appointment of Independent Auditors
The Audit and Compliance Committee has selected PricewaterhouseCoopers LLP as independent auditors for 2005. Representatives of PricewaterhouseCoopers LLP will be present at the Annual Meeting and will have an opportunity to make a statement and to respond to appropriate questions.
The following tables and narrative text discuss the compensation paid in 2004, 2003 and 2002 to our chief executive officer and our four other most highly compensated executive officers (including executive officers who would otherwise be disclosed but for the fact they were not serving at the end of the year).
Summary Compensation Table
RadioShack Investment Plan. On April 30, 2004, RadioShack amended its employee stock purchase plan and renamed it the RadioShack Investment Plan. Only employees participating in the former employee stock purchase plan as of April 29, 2004, may participate in the plan, and new employees are not eligible to participate in the plan. Participants contribute from 1% to 7% of their annual compensation, based on the amount of their election in the employee stock purchase plan as of April 29, 2004. Participants may decrease, but not increase, the amount of their election. Participants may annually elect to receive their contributions either in the form of cash or RadioShack stock. RadioShack matches 40%, 60% or 80% of each participants contribution, depending on the participants length of continuous participation in the employee stock purchase plan as of April 29, 2004. This matching contribution is in the form of either cash or RadioShack stock, based on the participants election to receive his or her contribution in cash or common stock, as described above.
RadioShack 401(k) Plan. The RadioShack 401(k) Plan is a tax-qualified defined contribution plan. Eligible employees may direct their contributions into various investment alternatives, including investing in RadioShack common stock. Participants may defer, via payroll deductions, 1% to 15% of their annual compensation; however, RadioShack officers may only defer from 1% to 8% of their annual compensation. Contributions per participant are limited to certain annual maximums permitted by the Internal Revenue Code. RadioShack presently contributes an amount to each participants account maintained under the plan equal to 30% of the participants contributions on up to 8% of their annual compensation. This percentage contribution by RadioShack is discretionary and may change in future years. Any contributions by RadioShack are made directly to the 401(k) Plan and are made in cash and invested in an age appropriate retirement fund for each participant; however, participants may immediately reinvest RadioShacks contribution into other investment alternatives provided by the 401(k) Plan.
Employees Supplemental Stock Plan. The Employees Supplemental Stock Plan enables employee-participants of our 401(k) Plan who are no longer eligible to make pre-tax contributions to the 401(k) Plan to make after-tax contributions to the Supplemental Stock Plan to purchase RadioShack stock. RadioShack matches 80% of each participants contribution. When these employee participants are again eligible to make pre-tax contributions to the 401(k) Plan, they are not eligible to contribute under the Supplemental Stock Plan.
Executive Deferred Compensation/Stock Plans. RadioShacks Executive Deferred Compensation Plan and Executive Deferred Stock Plan permit officers of RadioShack to defer, on a pre-tax basis, up to 80% of their base salary and/or bonus, unless otherwise permitted by the plan administrator. These plans are distinct from the Salary Continuation Plan and Deferred Compensation Plan described on page 29. The major features of these plans are:
Option Grants in the Last Fiscal Year
Option Exercises in the Last Year and Year-End Option Values
Long-Term Incentive Plan Awards in Last Fiscal Year
Retirement and Deferred Compensation
The Management Development and Compensation Committee may select full-time executive employees to participate in RadioShacks Salary Continuation Plan for Executive Employees and its Officers Deferred Compensation Plan. The plans generally provide for the payment of:
Benefits are payable in 120 equal monthly installments.
Under the plans, the committee determines the retirement compensation amount for each participant. This amount does not necessarily bear any relationship to the participants present compensation, final compensation or years of service. The annual retirement compensation amount when retiring at age 65 for the following officers at December 31, 2004 would have been as follows:
Other Matters Involving Executive Officers
Transition Agreement with Mr. Roberts. In connection with the announced retirement of Mr. Roberts as RadioShacks Chief Executive Officer, RadioShack and Mr. Roberts entered into a Transition Agreement on January 12, 2005. Under the Transition Agreement, until May 19, 2005 (the Transition Date), Mr. Roberts will continue to serve as RadioShacks Chief Executive Officer and will be entitled to receive his current salary,
bonus, stock option grants and other compensation. On the Transition Date, Mr. Roberts will retire as CEO but will remain an employee and will assist in the transition of his duties as CEO, including helping to guide RadioShack on long-term strategic opportunities, representing RadioShack with key industry, civic, and philanthropic constituents, and providing leadership to the Board of Directors, until the date Mr. Roberts employment under the Transition Agreement is terminated (the Retirement Date). As compensation for Mr. Roberts serving as Chairman of RadioShack, RadioShack will provide Mr. Roberts (i) an annual salary of $750,000, from the Transition Date until the Retirement Date; (ii) a target annual bonus of $500,000, payable pursuant to RadioShacks Bonus Program for Executive Officers; (iii) 120 monthly cash payments in an amount equal to (x) the difference between the plan benefit amount under RadioShacks Officers Deferred Compensation Plan that Mr. Roberts would have received if he retired at age 61 and the plan benefit amount he will receive based upon his age on the retirement date (y) divided by 120; and (iv) a one-time grant of restricted stock on the Transition Date valued at $750,000, that will vest ratably over three years beginning on June 1, 2006.
In addition to the foregoing compensation, during the term of the Transition Agreement, Mr. Roberts will continue to participate in the following plans in accordance with their terms: RadioShack Corporation Officers Deferred Compensation Plan, 2004 and 2005 RadioShack Corporation Long-Term Incentive Plan, 2004 RadioShack Corporation Bonus Program for Executive Officers, RadioShack Corporation Executive Deferred Compensation Plan and Executive Deferred Stock Plan, the 1993, 1997, 1999 and 2001 Incentive Stock Plans, RadioShack Investment Plan, RadioShack Corporation Supplemental Stock Plan, RadioShack Corporation 401(k) Plan, RadioShack Corporation Termination Protection Plan and RadioShacks health and welfare benefit plans.
Furthermore, from the Transition Date until the Retirement Date, Mr. Roberts will be entitled to such medical, disability, life insurance coverage, vacation, sick leave, holiday benefits and any other benefits, in each case as are customarily made available to RadioShacks executive officers, all in accordance with RadioShacks benefits program in effect from time to time. In addition, from the Transition Date until the Retirement Date, RadioShack agreed to (i) provide Mr. Roberts with the same executive benefits as provided to him immediately prior to his retirement as CEO, including the use of RadioShacks aircraft to be used only for RadioShack business purposes pursuant to RadioShacks policy as in effect from time to time, excess liability insurance coverage, AYCO financial planning and administrative support, (ii) pay the costs of the employee benefits for his administrative assistant, (iii) pay the reasonable costs for the purchase and operation of a computer and a wireless handheld communications device for each of him and his administrative assistant, and (iv) pay his monthly fees at the City Club and the Fort Worth Club. In addition, during such period, RadioShack agreed to provide Mr. Roberts with office space for him and his administrative assistant, selected by Mr. Roberts but at a location other than RadioShacks corporate headquarters. RadioShack will not pay more than a total of $100,000 a year towards the cost of the rent and parking for the office space and the cost of Mr. Roberts administrative assistants base annual salary.
Consulting Agreement with Mr. Roberts. The Transition Agreement with Mr. Roberts contemplates that RadioShack and Mr. Roberts will enter into a Consulting Agreement upon Mr. Roberts termination of his employment under the Transition Agreement. The term of the Consulting Agreement will be 31 months after Mr. Roberts employment as Chairman ceases. Pursuant to the Consulting Agreement, Mr. Roberts will provide certain consulting services to RadioShack. In return, RadioShack will pay Mr. Roberts a monthly fee of $41,667.
In addition, during the term of the Consulting Agreement, RadioShack agreed to provide Mr. Roberts with an administrative assistant and office space for him and his administrative assistant, selected by him but at a location other than RadioShacks corporate headquarters. RadioShack will not pay more than a total of $100,000 a year towards the cost of the rent and parking for the office space and the cost of Mr. Roberts administrative assistants base annual salary. If Mr. Roberts elects to continue his group health benefits in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, RadioShack agreed to pay the portion of any premiums relating to such continuation coverage that RadioShack would otherwise have paid if Mr. Roberts
was an active senior executive officer through the end of the term of the Consulting Agreement. RadioShack also agreed to reimburse Mr. Roberts for all reasonable expenses incurred by him in connection with the performance of his services under the Consulting Agreement within 30 days following his delivery of an accounting of those expenses to RadioShack in accordance with RadioShacks then-current travel and business expense policy.
Agreements with Mr. Roberts and Mr. Edmondson. The board of directors has determined that it is in the best interests of RadioShack and its stockholders to provide for an orderly transition should either Mr. Roberts or Mr. Edmondson leave the employ of RadioShack. If either Mr. Roberts or Mr. Edmondson involuntarily leaves RadioShack under defined circumstances, their respective agreements provide for salary and bonus payments and acceleration of certain stock awards. In the event either Mr. Roberts or Mr. Edmondson voluntarily leaves RadioShack or leaves under other defined circumstances, he will receive no payments or accelerations under his respective agreement. In no event under these agreements would Mr. Roberts or Mr. Edmondson receive benefits under both arrangements described below under Change in Control Provisions. Mr. Roberts agreement will terminate on May 19, 2005, under the terms of the Transition Agreement described above.
Death Benefit Agreement with Mr. Roberts and His Spouse. In connection with the December 21, 2001 loan by RadioShack to the Leonard and Laurie Roberts Heritage Trust described above in note 4 to the Summary Compensation Table under Executive Compensation, RadioShack has agreed to pay beneficiaries, as designated by Mr. Roberts and his spouse, a death benefit amount. This death benefit amount will only be paid by RadioShack in the event, after the second to die of Mr. Roberts and his spouse, the Leonard and Laurie Roberts Heritage Trust fully repays to RadioShack the $2,180,000 loan made to the Trust plus accrued interest. The death benefit amount is a calculated amount to make the arrangement cost neutral to RadioShack on a present value basis.
Retirement Agreement with Ms. Follit. In connection with the retirement of Evelyn V. Follit, RadioShacks Senior Vice President Chief Organizational Enabling Services Officer and Chief Information Officer, on February 8, 2005, RadioShack and Ms. Follit entered into a Retirement Agreement, effective February 28, 2005. Pursuant to the Retirement Agreement, Ms. Follit resigned from RadioShack effective February 28, 2005, and RadioShack agreed to pay Ms. Follit her accrued but unused vacation days in a lump sum on that date. In addition, approximately seven months after that date, RadioShack will commence making 120 successive monthly payments of $3,789.38 each to Ms. Follit. If Ms. Follit dies before RadioShack makes all of these payments to her, RadioShack will make the remaining payments in the same manner and on the same terms and conditions as if the remaining payments were made under RadioShacks Officers Deferred Compensation Plan.
The Retirement Agreement further provides that RadioShack shall pay Ms. Follit specified compensation in connection with certain consultation services that Ms. Follit may provide as requested by RadioShack from time to time, as well as reimbursement for approved expenses in accordance with RadioShacks travel policy. Through April 15, 2007, or such earlier date in the event RadioShack determines to discontinue such program, Ms. Follit will be entitled to continue receiving financial consulting benefits, if so desired, under RadioShacks current program. Ms. Follit is also permitted under the Retirement Agreement to retain certain RadioShack hardware and software, as well as access for two years to her current RadioShack e-mail address. RadioShack has also agreed to provide Ms. Follit with a wireless handheld communication device and to pay for the account as long as her RadioShack e-mail account is active. Ms. Follit will also have full access to executive support for six months, and RadioShack will provide her with any hardware necessary to transition Ms. Follit from RadioShacks corporate network during this period.
Under the Retirement Agreement, Ms. Follit will also continue to participate in the following plans in accordance with their terms: RadioShack Corporation Officers Deferred Compensation Plan, 2004 RadioShack Corporation Long Term Incentive Plan, 2004 and 2005 RadioShack Corporation Bonus Programs for Executive Officers, RadioShack Corporation Executive Deferred Compensation Plan and Executive Deferred Stock Plan, the 1993, 1997, 1999 and 2001 Incentive Stock Plans, RadioShack Investment Plan, RadioShack Corporation Supplemental Stock Plan and RadioShack Corporation 401(k) Plan.
Change in Control Provisions
Deferred Compensation Plan. The Deferred Compensation Plan provides that, for one year following the occurrence of a change in control (as defined in the plan), the plan will not be terminated or amended in any way, nor will the manner in which the plan is administered be changed in any way that adversely affects the rights of its participants or beneficiaries. In the event of a change in control, each participant in this plan becomes immediately vested at the age 65 benefit level. Additionally, if the participants employment is terminated for any reason following a change in control, RadioShack must make a lump-sum payment equal to the present value of the age 65 benefit level. Upon a change in control, the provisions of the Deferred Compensation Plan provide that any benefit due under it shall be (1) offset by any outstanding loan to the participant and (2) forfeited if the participant engages in any activity that is in competition with RadioShack. This Deferred Compensation Plan is distinct from the Executive Deferred Compensation/Stock Plans described below.
Executive Deferred Compensation/Stock Plans. The Executive Deferred Compensation Plan and Executive Deferred Stock Plan provide that, in the event RadioShack experiences a change in control (as defined in these plans), within two weeks of this event, each executive employee participant will be paid the full value of his or her accounts in the plans in the form of cash or RadioShack common stock, as the case may be.
Benefit Provisions. The board of directors has also included change in control provisions in the RadioShack 401(k) Plan, the Employees Supplemental Stock Plan, the RadioShack Investment Plan, the Post Retirement Death Benefit Plan, the 1993 Incentive Stock Plan, the 1997 Incentive Stock Plan, the 1999 Incentive Stock Plan, the 2001 Incentive Stock Plan and several other plans. The RadioShack 401(k) Plan provides that for a period of one year following a change in control, the plan may not be terminated or amended in any way that would adversely affect the amount or entitlement of benefits. The Employees Supplemental Stock Plan and the RadioShack Investment Plan contain similar provisions and provide that RadioShack may not reduce the level of its contributions to these plans. The RadioShack Investment Plan additionally provides that in the event of a change in control or a tender offer, RadioShack will distribute to participants all cash credited to each participants account. The change in control provisions of the 1993 Incentive Stock Plan, 1997 Incentive Stock Plan, 1999 Incentive Stock Plan and 2001 Incentive Stock Plan provide that all outstanding options become immediately vested and exercisable in the event of a change in control.
Termination Protection Agreements. As of December 31, 2004, RadioShack has entered into Termination Protection Agreements with certain of its executive officers. The agreements remain in effect unless terminated by either party. If the employment of any executive covered by these agreements is terminated (with certain exceptions) within 24 months following a change in control, the executive will be entitled to receive cash payments (equal to two times current annual salary and the amount of the bonus guarantee under a bonus guarantee letter agreement (the highest bonus paid in the last three years) and an amount equal to the contributions that RadioShack would have made to the RadioShack Investment Plan, the RadioShack 401(k) Plan and the Employees Supplemental Stock Plan over a 24-month period, assuming the foregoing salary and bonus guarantee were used to calculate RadioShacks contributions), as well as the continuation of fringe benefits (including life insurance, disability, medical, dental and hospitalization benefits) for a period of up to 24 months. Additionally, all outstanding incentive awards and stock options will become fully vested, and RadioShack will be required to purchase for cash, on demand, any shares of unrestricted stock and shares purchased upon the exercise of options at the then per-share fair market value.
The Termination Protection Agreements also provide that RadioShack will make additional gross-up payments to the executives covered by these agreements to offset fully the effect of any excise tax imposed under the Internal Revenue Code. In addition, RadioShack will pay all legal fees and related expenses incurred by any of these executives arising out of the employment of any of them or termination of employment under certain circumstances.
Payments upon a Change in Control. Assuming a change in control occurred on the date of this proxy statement and the employment of the following executive officers terminated on that date, the approximate cash payment
made by virtue of all change in control protections implemented by RadioShack (not including the gross-up payments) to Messrs. Roberts, Edmondson, Hill and Johnson would be approximately $6,775,997; $3,525,587; $1,826,493; and $1,327,330, respectively. The amount of the gross-up payment, if any, to be paid may be substantial and will depend upon numerous factors.
Rabbi Trust. In connection with the benefits described above, and several other plans and agreements, RadioShack is authorized to enter into a Rabbi Trust, which is intended to be a grantor trust under the Internal Revenue Code. The Rabbi Trust may be funded by RadioShack at any time, but is required to be funded upon a threatened change in control or upon a change in control in an amount sufficient to provide for the payment of all benefits described above and several other plans and agreements. The trust assets of the Rabbi Trust will be subject to the claims of RadioShacks creditors in the event of RadioShacks bankruptcy or insolvency. To date, no Rabbi Trust has been established.
The following graph compares the cumulative total stockholder return on common stock against the cumulative total return on the S&P Corporate 500 Stock Index and the S&P Specialty Retail Index (assuming $100 was invested on December 31, 1999 in common stock and in the stocks comprising the S&P Corporate 500 Stock Index and the S&P Specialty Retail Index and also assuming the reinvestment of all dividends). The S&P Specialty Retail Index and the S&P Corporate 500 Stock Index include RadioShack.
The historical stock price performance of common stock shown on the graph below is not necessarily indicative of future price performance.
Certain Transactions with Management and Others
In connection with his retirement as Chief Executive Officer of RadioShack, Mr. Roberts signed a Transition Agreement with RadioShack on January 12, 2005 in which Mr. Roberts will, after his retirement on May 19, 2005, continue to serve as Executive Chairman and, in return, Mr. Roberts will receive certain compensation and other benefits. The Transition Agreement with Mr. Roberts contemplates that RadioShack and Mr. Roberts will enter into a Consulting Agreement upon Mr. Roberts termination of his employment under the Transition Agreement, in which Mr. Roberts will also receive certain payments and other benefits. Please refer to Other Matters Involving Executive Officers Executive Agreements Transition Agreement with Mr. Roberts and Consulting Agreement with Mr. Roberts beginning on page 29 for additional information.
In addition, Ms. Follit signed a Retirement Agreement with RadioShack on February 8, 2005, in connection with her retirement as RadioShacks Senior Vice President Chief Organizational Enabling Services Officer and Chief Information Officer. Under the Retirement Agreement, Ms. Follit will receive certain compensation and other benefits. Please refer to Other Matters Involving Executive Officers Executive Agreements Retirement Agreement with Ms. Follit on page 31 for additional information.
Mr. Timothy Abbott, Mr. Roberts son-in-law, is an at-will employee of RadioShack with the title of Director, Workplace Transition. Mr. Abbott was paid an aggregate salary that did not exceed $75,000 for his services throughout 2004. Mr. Abbott is not an officer of RadioShack and does not report directly or indirectly to Mr. Roberts.
COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The members of the Management Development and Compensation Committee are appointed by the board of directors, and the committee is composed entirely of independent directors.
Management Development Philosophy
The committee believes that oversight of management development is a critical component of its obligations. The committees charter and RadioShacks Corporate Governance Framework describe the committees philosophy concerning management development. To this end, the committee reviews RadioShacks executive succession planning and associated specific executive development plans at least annually.
Compensation Philosophy for Executive Officers and Overall Objectives
RadioShacks executive compensation program is designed to encourage and reward enhancement of stockholder value by linking the financial interest of RadioShacks key executives closely to the financial interests of RadioShacks stockholders, specifically, stockholder value appreciation.
The program focuses on the following key objectives:
RadioShacks executive compensation program contains the following key components to assist in achieving these objectives:
In determining the specific components of RadioShacks executive compensation program, the committee obtains input from an independent compensation consulting firm retained by the committee, as well as input from senior management. This firm furnishes the committee with independent executive compensation advice, along with data drawn from multiple nationally recognized surveys and a peer group primarily consisting of the S&P Specialty Retail Index.
Throughout the year, the committee continuously monitors the effectiveness of the components of the compensation program, including performance measures for the annual bonus and long-term incentive plan, and may change them should the committee determine that the enhancement of stockholder value warrants it. This monitoring includes periodic reviews of compensation packages at the peer group described above.
Base Salary for Executive Officers
RadioShacks executive compensation program includes a competitive base salary that is based on various factors, including:
Annual Incentive Bonus for Executive Officers
The executive compensation program also includes an annual incentive bonus, based on the attainment of certain performance measures. Early each year, the committee establishes these performance measures that will be utilized in determining executive officers annual bonus.
Once the performance measures are established, the committee also sets a target bonus amount for each executive. The committee initially determines the amount of the target bonus based on a specified percentage of the executives base salary. The committee also sets superior and maximum bonus amounts for performance levels beyond the target amount, which amounts are multiples of the target bonus amount. The sum of the executives base salary and superior bonus amount is compared to the 75th percentile of the peer group described above, and the sum of the executives base salary and maximum bonus is compared to the 90th percentile of the peer group. Based on this comparison, the executives bonus amounts may then be adjusted, positively or negatively.
After the end of the year, the committee reviews the companys actual performance against each of the performance measures established at the beginning of the year. In determining the extent to which the pre-set performance goals are met for a given period, the committee will exercise its judgment as to whether to reflect or exclude the impact of changes in accounting principles and extraordinary, unusual or infrequently occurring events.
2004 Annual Incentive Bonus. In February 2004, the committee established the following performance measures for the top five executive officers, other than for Mr. Johnson:
All of Mr. Johnsons performance measure was based on the increase in RadioShacks operating income over the previous year.
These performance measures were established pursuant to the RadioShack 2004 Annual and Long-Term Incentive Compensation Plan, which was approved by stockholders at RadioShacks 2004 annual meeting (the 2004 Plan), and the RadioShack Bonus Plan for Executive Officers, which was implemented pursuant to the stockholder-approved 2004 Plan.
After the end of 2004, the committee determined that the measures for the top five executive officers had been achieved and that bonuses could be paid under the plan in accordance with Section 162(m). Accordingly, bonuses were paid as follows: Mr. Roberts: $1,882,795; Mr. Edmondson: $820,219; Ms. Follit: $400,115; Mr. Hill: $393,094; and Mr. Johnson: $259,974. Mr. Newman did not receive a bonus with respect to 2004 as a result of his resignation from RadioShack in July 2004. In connection with his services as Acting Chief Financial Officer, Mr. Johnson also received a Presidents Special Bonus Payment in the amount of $51,809.
2005 Annual Incentive Bonus. To achieve RadioShacks strategy to dominate cost-effective solutions to meet everyones routine electronics needs and families distinct electronics wants, the 2005 annual incentive bonuses for the top five executive officers will be based on the following performance measures:
These performance measures have been established in accordance with the 2004 Plan and the RadioShack Bonus Plan for Executive Officers.
Long-Term Incentive Plan for Executive Officers
In 2004, the committee established a cash long-term incentive plan for its executive officers, which directly aligns the executives with RadioShacks key strategic long-term business objectives, with the objective of ultimately supporting the long-term growth of stockholder value. Each award under the long-term incentive plan has a three-year term. For example, the first performance cycle under the plan began on January 1, 2004 and will end on December 31, 2006.
Awards under the plan are based on RadioShacks performance over the three-year period, measured under performance goals that are established annually by the committee early in the first year of each performance cycle. Using these performance goals, the committee establishes a target long-term award for each executive participating in the plan that period. The committee initially determines the amount of the target long-term award
based on a specified percentage of the executives target annual bonus amount. The committee also sets superior and maximum long-term award amounts for performance levels beyond the target long-term amount, which amounts are multiples of the target long-term award amount. The superior long-term award amount is then compared to the 75th percentile of the peer group described above, and the maximum long-term award amount is then compared to the 90th percentile of the peer group. Based on this comparison, the executives long-term award amounts may then be adjusted, positively or negatively.
After the end of each three-year performance cycle, the committee reviews the companys actual performance against each of the performance measures established at the beginning of the cycle. In determining the extent to which the pre-set performance goals are met for a given period, the committee will exercise its judgment as to whether to reflect or exclude the impact of changes in accounting principles and extraordinary, unusual or infrequently occurring events reported in RadioShacks public filings. Any awards are paid in cash as soon as practicable following the end of the each three-year period.
2004 Long-Term Incentive Plan Performance Cycle
In February 2004, the committee established the three-year performance goals for executives for the 2004 through 2006 plan cycle, in accordance with the stockholder-approved 2004 Plan and the RadioShack Corporation Long-Term Incentive Plan, which was adopted pursuant to the 2004 Plan. The cash payment for executives under the 2004 through 2006 plan cycle will be based on achievement of the following performance measures:
Payments to an executive officer under this plan cycle are based on a percentage of that executive officers 2004 target bonus.
2005 Long-Term Incentive Plan Performance Cycle
In February 2005, the Management Development and Compensation Committee established the three-year performance goals for executives for the 2005 through 2007 plan cycle. The cash payment for executives under the 2005 through 2007 plan cycle will be based on achievement of the following performance measures:
Payments to an executive officer under this plan cycle are based on a percentage of that executive officers 2005 target bonus.
Other Long-Term Incentives for Executive Officers
RadioShacks executive compensation program also includes other long-term incentives, such as stock options and other types of equity-based awards, including a deferred compensation plan, an investment plan and a salary continuation plan. The deferred compensation plan and investment plan are described beginning on page 26, and the salary continuation plan is discussed on page 29.
During 2004, the committee granted a total of 1,255,605 stock options to 2,091 employees under the 1997 Incentive Stock Plan, the 1999 Incentive Stock Plan and the 2001 Incentive Stock Plan. Each of the named executive officers in the summary compensation table were granted stock options in 2004. The quantity of options granted to officers was determined by the committee based on its evaluation of the individuals performance following consultation with the chief executive officer. The grant of options to the chief executive officer was determined solely by the committee.
Under the 1997 Incentive Stock Plan, RadioShack may also grant restricted stock to eligible participants in amounts to be determined by the committee, subject to the restrictions set forth in the plan. The 1999 Incentive Stock Plan provides only for grants of non-qualified stock options and stock appreciation rights. The 2001 Incentive Stock Plan provides only for grants of incentive stock options and non-qualified stock options to eligible participants. Under the present incentive stock plans of RadioShack, all options and awards are awarded at their fair market value (the average of the high and low sales prices) on the date of grant and may not be repriced under the terms of the incentive stock plans.
The committee believes that stock options continue to play a key role in motivating and rewarding the creation of long-term stockholder value. The committee has awarded in the past, and plans to award in the future, stock options to a wide spectrum of employees to more closely align employee interests with stockholders. In making awards of stock options, the committee does not typically consider any impact that expensing these stock options may have, because of the committees belief in the potential enhancement of long-term stockholder value created by option grants, as well as its belief that reductions in the number of options granted in recent years helps to mitigate any expense that could occur.
Compensation of the Chief Executive Officer
Effective March 2004, the committee determined to increase Mr. Roberts base salary from $1,100,000 to $1,138,500, based on the factors described above under Base Salary. Mr. Roberts was also awarded an annual incentive bonus of $1,882,795 with respect to 2004 in connection with the bonus performance measures of increased operating income, increased earnings per share, and growth in sales over the previous year described above under 2004 Annual Incentive Bonus. Mr. Roberts also received a grant of options to purchase 200,000 shares of RadioShack common stock in 2004.
For fiscal year 2003, Mr. Roberts received a base salary of $1,100,000, a grant of options to purchase 425,000 shares of RadioShack common stock, and a bonus of $1,629,271.
Policy Regarding Internal Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code generally limits corporate deductions to $1 million for compensation, except for qualified performance-based compensation paid to a person who on the last day of a fiscal year is either the chief executive officer or among the four most highly compensated officers other than the chief executive officer. However, the statute exempts qualifying performance-based compensation from the deduction limit if certain requirements are met.
To ensure that annual incentive bonus and long-term incentive plan payments to executives subject to Section 162(m) will be deductible by RadioShack, the specified performance measure(s) and goal(s) for annual incentive bonuses and for long-term incentive plan payments set for each fiscal year under the RadioShack 2004 Annual and Long-Term Incentive Compensation Plan must also be met. As discussed below, however, the committee retains the right to award bonuses outside of this plan in appropriate circumstances, including bonuses and long-term incentive plan payments that may not be deductible in part or in full.
Although the committee does design certain components of its executive compensation program to seek full deductibility, the committee believes that the interests of stockholders are best served by not restricting the
committees discretion and flexibility in crafting compensation programs, even though such programs may result in certain non-deductible compensation expenses. The committee has from time to time approved elements of compensation for certain officers that are not fully deductible, and reserves the right to do so in the future in appropriate circumstances. Accordingly, the committee has not and will not make compensation decisions based solely on the deductibility of compensation for federal income tax purposes.
Compensation Committee Interlocks and Insider Participation
The Management Development and Compensation Committee of the board of directors is composed entirely of the independent directors listed above. Each committee member has no professional, familial or financial relationship with the chief executive officer or other executive officers of RadioShack, other than his directorship with RadioShack or relationships that would be considered trivial in nature.
COSTS OF SOLICITATION
We bear all expenses incurred in connection with the solicitation of proxies. In addition, we have engaged Morrow Company, Inc. to assist with the solicitation of proxies for a fee of $4,000 plus expenses. We will reimburse brokers, fiduciaries and custodians for their costs in forwarding proxy materials to beneficial owners of common stock held in their names. Our directors, officers and employees may also solicit proxies by mail, electronically, facsimile, telephone and personal contact. They will not receive any additional compensation for these activities.
FOR DIRECTORS FOR THE 2006 ANNUAL MEETING
We must receive proposals of stockholders intended to be presented at the 2006 annual meeting of stockholders, which is currently scheduled to be held on May 18, 2006, on or before December 9, 2005, for the proposals to be eligible for inclusion in our proxy statement and proxy relating to that meeting. These written proposals should be sent to the Corporate Secretary at Mail Stop CF3-203, 300 RadioShack Circle, Fort Worth, Texas 76102.
With respect to stockholder proposals for the 2006 annual meeting that are not to be included in the proxy statement, these proposals must also be received by the Corporate Secretary by December 9, 2005, at the above address.
Nominations for Election as Director
In accordance with RadioShacks bylaws and Corporate Governance Framework, as well as applicable law, nominations for the election of directors may be made by the board of directors, by the Corporate Governance Committee of the board, or by any stockholder generally eligible to vote in the election of directors.
Stockholders who wish to nominate persons for election as directors at the 2006 annual meeting must give notice of their intention to make a nomination in writing to the Corporate Secretary of RadioShack on or before December 9, 2005. The notice must set forth:
Each board nominee will be subject to an independent background investigation as part of the nomination process.
The board has delegated the responsibility for evaluating potential board nominees to its Corporate Governance Committee. The committee will consider director candidates recommended by stockholders in accordance with the procedures described above and in RadioShacks Corporate Governance Framework. Candidates must be highly qualified and exhibit both an interest in serving and a willingness to serve on the board. In addition, candidates should take into consideration the characteristics described beginning on page 18. Candidates must represent the interests of all stockholders and not those of a special interest group. The committee, after reviewing nominees under the procedures and standards established in its charter and RadioShacks Corporate Governance Framework, will propose a slate of nominees for election to the board at RadioShacks annual meeting of stockholders. The board will review and approve the final slate of nominees to submit to the stockholders for election.
April 7, 2005
AUDIT AND COMPLIANCE COMMITTEE CHARTER
February 24, 2005
The Audit and Compliance Committee (the Committee) will represent and assist the Board in fulfilling its oversight responsibility to the shareholders and others relating to the integrity of the Companys financial statements and the overall financial reporting and disclosure control process, the systems of internal accounting and financial controls, the internal audit function (including responsibilities, budget and staffing), the annual independent audit of the Companys financial statements and the Companys compliance with legal and regulatory requirements. The Committee will also oversee and evaluate the performance of the Companys independent auditors, including a review and evaluation of the independent auditors qualifications and independence, the engagement partner and the coordinating partner. In so doing, it is the responsibility of the Committee to maintain free and open communication among the Committee, independent auditors, the internal auditors and management of the Company. The Committee is also responsible for producing an annual report for inclusion in the Companys proxy statement.
The Committee will also review with management and the independent auditors (a) major issues regarding accounting principles and financial statement presentations, including significant changes in the selection or application of accounting principles; (b) major issues regarding the adequacy of disclosure controls and of internal controls and remedial steps taken in light of detected material deficiencies; and (c) the effects of regulatory and accounting initiatives on the financial statements.
The Committee will discuss the results of the annual audit and any difficulties the independent auditors encountered in the course of their audit work, including any restrictions on the scope of the auditors activities or on access to requested information, and any significant disagreements with management. The Committee will also discuss any other matters required to be communicated to the Committee by the independent auditors under generally accepted auditing standards, and the annual report on internal controls by the Chief Executive Officer and Chief Financial Officer, as reviewed by the independent auditors.
Based on these reviews, the Committee will make a recommendation to the Board as to whether the audited financial statements should be included in the Companys Annual Report on Form 10-K.
The Committee will have the sole authority to retain, at the Companys expense, outside counsel, accountants, experts or other advisors, as the Committee deems necessary to fulfill its responsibilities, without obtaining the approval of the Board or any officer of the Company in advance. The Committee will have sole authority to approve any such counsels, accountants or other advisors fees and other terms of retention.
In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company.
Please present this admission ticket to gain admittance to the meeting. This ticket admits only the stockholder listed on the reverse side and is not transferable.
2005 Annual Meeting of Stockholders
10 a.m. (CDT), Thursday, May 19, 2005
Trinity Building, Fourth Floor
RadioShack Riverfront Campus
The Riverfront Campus (located in the northwest corner of Belknap and Taylor streets) comprises three office buildings, a common building and a parking garage. The Riverfront Campus address is 300 RadioShack Circle, which is a private driveway off Belknap Street. The Annual Meeting will be held on the fourth floor of the Trinity Building (the common building). Signs and personnel will be present to guide shareholders.
The visitor entrance to the Riverfront Campus parking garage is located at Belknap and Cherry streets. Visitor parking is on Level 3. In addition, visitors may be dropped off at the Main Entrance to the Riverfront Campus (off Belknap Street at 300 RadioShack Circle), but parking is not allowed in the front circular driveway.
THIS IS YOUR PROXY YOUR VOTE IS IMPORTANT
Your vote is important to us. Whether you attend the meeting or not, please use one of these methods to vote:
Internet (see reverse).
Telephone (see reverse).
Mark the attached proxy card, sign, detach and return the card in the accompanying postage-paid envelope.
DETACH PROXY CARD HERE
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING ON MAY 19, 2005
The undersigned holder of common stock of RadioShack Corporation hereby appoints Leonard H. Roberts, Robert J. Kamerschen, Thomas G. Plaskett and Edwina D. Woodbury, and each or any of them, as attorneys and proxies of the undersigned, with full power of substitution, to vote all the shares of common stock of the Company held by the undersigned at the Annual Meeting of Stockholders of RadioShack Corporation at Fort Worth, Texas on May 19, 2005, or any resumption of the Annual Meeting after any adjournment thereof, as indicated on this proxy, and in their discretion on any other matters which may properly come before the meeting. The undersigned acknowledges receipt of the Notice of the Annual Meeting of Stockholders and of the accompanying proxy statement and revokes any proxy heretofore given with respect to such meeting. The votes entitled to be cast by the undersigned will be cast as instructed. If this proxy is executed but no instruction given, the votes entitled to be cast by the undersigned will be cast FOR each of the nominees for director.
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS RECOMMENDATIONS,
SIGN ON THE REVERSE SIDENO BOXES NEED TO BE CHECKED.
IMPORTANT This Proxy must be signed and dated on the reverse side.
RadioShack Riverfront Campus
300 RadioShack Circle
Fort Worth, Texas 76102-1964
Your vote is important. Please vote immediately.
Log on to the Internet and go to
If you vote via the Internet or by telephone, please do not mail your card.
RECEIVE FUTURE RADIOSHACK CORPORATION ANNUAL MEETING MATERIALS VIA THE INTERNET!
Consider receiving all future RadioShack Corporation Annual Reports and Proxy Statements in electronic form. While voting via the Internet, just click the box to give your consent and save RadioShack the future costs of producing, distributing and mailing these materials. Choosing electronic delivery will give you faster and more convenient access to annual meeting materials.
Voting by telephone, Internet and mail will still be available to shareholders who choose to receive printed annual meeting materials by mail.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
your vote as
in this example
The Board of Directors recommends a vote FOR.
1. Election of fourteen directors
(01) Frank J. Belatti (02) David J. Edmondson (03) Ronald E. Elmquist (04) Robert S. Falcone (05) Daniel R. Feehan (06) Richard J. Hernandez
(07) Robert J. Kamerschen (08) Gary M. Kusin (09) H. Eugene Lockhart (10) Jack L. Messman (11) William G. Morton, Jr. (12) Thomas G. Plaskett
(13) Leonard H. Roberts (14) Edwina D. Woodbury
to vote for all
For all nominees except those written on line above
MARK HERE IF YOU PLAN TO ATTEND THE MEETING
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LOWER LEFT
Please sign exactly as your name(s) appear(s) on this proxy,
date and promptly return this proxy in the enclosed
Signature: Date: Signature: Date: