Definitive Proxy Statement

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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Dover Saddlery, Inc.

(Name of Registrant as Specified In Its Charter)

 

Not Applicable

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

to be held on May 2, 2007

and

PROXY STATEMENT

 

IMPORTANT

 

Please mark, sign and date your proxy

and promptly return it in the enclosed envelope.

 

Dover Saddlery, Inc.

P.O. Box 1100, 525 Great Road

Littleton, MA 01460

 

Notice of Annual Meeting of Shareholders

To Be Held May 2, 2007

 

DEAR SHAREHOLDERS:

 

The annual meeting of shareholders of Dover Saddlery, Inc., a Delaware corporation (“Dover” or the “Company”), will be held on Wednesday, May 2, 2007, beginning at 10:00 a.m. local time, at the Westford Regency Inn and Conference Center, 219 Littleton Road, Westford, Massachusetts 01886, for the following purposes:

 

1. To elect three Class II Directors to hold office for three-year terms, or until their successors are duly elected and qualified;

 

2. To ratify the selection of the independent registered public accounting firm for the fiscal year ending December 31, 2007; and

 

3. To transact such other business as may properly come before the annual meeting or any adjournments or postponements thereof.

 

Only holders of record of shares of Dover common stock at the close of business on March 6, 2007, the record date for the annual meeting, are entitled to notice of and to vote at the annual meeting and adjournments or postponements thereof. Shareholders are cordially invited to attend the annual meeting in person.

 

By Order of the Board of Directors

 

Jonathan A.R. Grylls

Secretary

 

Littleton, Massachusetts

April 10, 2007

 

Please complete, date, sign and mail promptly the enclosed proxy in the return envelope, whether or not you plan to attend the annual meeting.

 

 

 

 

 

Dover Saddlery, Inc.
P.O. Box 1100
525 Great Road
Littleton, MA 01460
978-952-8062

 

 

Quorum; Abstentions; Broker Non-Votes

 

In Proposal 1 for the election of directors, directors are elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. Proposal 2 requires the approval of the affirmative vote of a majority of the shares “represented and voting”.

 

The required quorum for the transaction of business at the Annual Meeting is a majority of the shares of Common Stock issued and outstanding on the Record Date. Shares that are voted “FOR”, “AGAINST” or “ABSTAIN” in a matter are treated as being present at the meeting for purposes of establishing the quorum, but only shares voted “FOR” or “AGAINST” are treated as shares “represented and voting” at the Annual Meeting with respect to such matter. Accordingly, abstentions and broker non-votes will be counted for purposes of determining the presence or absence of the quorum for the transaction of business, but will not be counted for purposes of determining the number “represented and voting” with respect to a proposal.

 

 

 

 

 

 

Stephen L. Day has been our President, Chief Executive Officer, Treasurer and Chairman of our Board of Directors since 1998. Mr. Day previously was the controlling member of EquiSearch.com LLC, a leading Internet equine content site. Prior to his acquisition of EquiSearch, he was the Chief Executive Officer of State Line Tack, Inc. from 1991 until the acquisition of State Line by PetSmart, Inc. He holds an MBA from Harvard University and a BS in Industrial Management from Purdue University. As an avid equestrian, he has founded two riding schools and trained many young horses to become successful show horses.

 

Jonathan A.R. Grylls has been our Chief Operating Officer and a member of our Board of Directors since 1998. Mr. Grylls currently serves as Vice President and Secretary. Prior to joining Dover, Mr. Grylls was Chief Operating Officer of Equestrian Products Corporation, a distributor of equestrian products, and held various other positions in MIS, sales, credit and operations at Eisers, the predecessor to Equestrian Products Corp. He previously was Vice President of Merchandising at State Line Tack, Inc. from 1992 until 1996. Mr. Grylls graduated from the University of Manchester’s Institute of Science and Technology with a BS with Joint Honors in Mathematics and Management Sciences.

 

Michael W. Bruns has been our Chief Financial Officer since August 2005 and joined our company as Corporate Controller in 1999. Prior to joining Dover, Mr. Bruns served as Vice President of Finance for CPS Direct, a communications marketing company from 1997 to 1999. He was Controller for Northeast Mobile Communications, a specialty retailer, from 1995 to 1997. Prior to that, he served as Director of Financial Reporting for St. Johnsbury Trucking Company and as Corporate Controller for R&S Corporation. He also was an Auditor for McGladrey Pullen & Co. Mr. Bruns holds a BA in Accounting and English from Simpson College, and is a Certified Public Accountant (CPA).

 

William G. Schmidt has been our Vice President of Operations since 2001. Prior to joining Dover, Mr. Schmidt held senior positions with catalog companies Duncraft, Bay Country Wood Crafts and

Garden Way, and established the direct marketing division of Eastern Mountain Sports. Mr. Schmidt previously worked at State Line Tack, Inc. from 1991 to 1997 in various positions including Chief Financial Officer, Chief Operations Officer, Vice President and General Manager. He has served as President of the New England Mail Order Association and on the Board of Advisors for the National Catalog Conference and the National Catalog Operations Forum. He holds a BS in Accounting from Bentley College.

 

David J. Powers has served as a member of our Board of Directors since 1998. Mr. Powers co-founded Dover Saddlery in 1975 and held various positions there until 1998, including Vice President of Operations. He assumed responsibility for the development of Dover’s catalog business in 1982. Mr. Powers is a former member of the United States Equestrian Team. He holds a BA from the University of Pennsylvania. David Powers is the brother of James Powers.

 

James F. Powers was a founder, and President of Dover Saddlery from 1975 until 1998. Mr. Powers has served as a member of our Board of Directors since 1998. He is a former member of both the United States Equestrian Team and the 1972 U.S. Olympic Team. Mr. Powers is a current member of the USET Foundation Gold Medal Club and an active rider. He attended Babson College. James Powers is the brother of David Powers.

 

Gregory F. Mulligan has served as a member of our Board of Directors since 2004. Since 2002, Mr. Mulligan has been the President of Bay Investment Advisors, an investment banking firm. From 1996 to 2002, Mr. Mulligan worked as Managing Director at Citizens Capital, Inc., a mezzanine and equity investing company.

 

William F. Meagher, Jr. has served as a member of our Board of Directors since November 2005. Mr. Meagher was the Managing Partner of the Boston Office of Arthur Andersen LLP from 1982 until 1995 and spent a total of 38 years with Arthur Andersen. Mr. Meagher was a member of the American Institute of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. Mr. Meagher is a trustee of Living Care Villages of Massachusetts, Inc. d/b/a North Hill and the Dana Farber Cancer Institute and the Greater Boston YMCA. Mr. Meagher also serves as a director of SkillSoft Public Limited Co.

 

John W. Mitchell has served as member of our Board of Directors since November 2006. Mr. Mitchell currently serves as Vice President and General Counsel of Aavid Thermal Products, Inc. (Aavid), a leading thermal engineering company headquartered in Concord, New Hampshire. For the past 11 years, Mr. Mitchell has co-led the corporate development function at Aavid and a group of public and private Aavid affiliates, with a particular focus in corporate governance, corporate finance, investor relations, mergers and acquisitions, commercial, compliance and legal. Previously, Mr. Mitchell practiced business law as a senior partner with Sulloway & Hollis, of Concord, New Hampshire.

 

The Company’s executive officers are elected by the Company’s directors and hold office until the first Directors’ meeting after the next annual meeting of stockholders or special meeting in lieu thereof, and thereafter until their successors are chosen and qualified, unless a shorter term is specified in the vote appointing them, or until they sooner die, resign, are removed or become disqualified.

 

CORPORATE GOVERNANCE

 

Code of Ethics

 

The Company has adopted a Code of Business Conduct and Ethics, as required by The NASDAQ Stock Market (“NASDAQ”), that applies to each of the Company’s employees, executive officers and Directors, including its principal executive officer, principal financial officer and principal accounting officer/controller. The Code of Business Conduct and Ethics is available on the Company’s website at: http://investor.shareholder.com/dovr/documents.cfm. The Company intends to satisfy any Securities and Exchange Commission (“SEC”) disclosure requirements relating to amendments to and/or waivers of the Code of Business Conduct and Ethics by posting such information on the Company’s website

identified above and/or by filing or furnishing copies thereof as exhibits to its periodic filings with the SEC.

 

Board, Committee and Stockholder Meetings

 

During the Company’s fiscal year ended December 31, 2006 (“fiscal 2006”), the Board met or acted by unanimous consent a total of ten times. The Board currently has three standing committees, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, whose members are appointed by the Board for annual terms ending March 31 each year, coinciding with the filing with the Securities and Exchange Commission (SEC) of the Company’s Annual Report on Form 10-K for the preceding fiscal year. The Audit Committee met or acted by unanimous consent seven times during fiscal 2006. The Compensation Committee met or acted by unanimous consent five times during fiscal 2006, and the Independent Directors of the Company’s Board, acting on behalf of the Compensation Committee, met two times during fiscal 2006. The Nominating and Corporate Governance Committee (NCGC) met or acted by unanimous consent six times during fiscal 2006; the Search Committee acting on behalf of the NCGC in connection with the recruitment of an additional director, met or acted by unanimous consent once during fiscal 2006; and the Independent Directors of the Company’s Board, acting on behalf of the NCGC in nominating and appointing new directors, met or acted by unanimous consent two times during fiscal 2006. No incumbent director attended fewer than 75% of the aggregate of the total number of meetings held by the Board and Committees of the Board on which he or she served.

 

It is the Company’s policy that all members of the Board attend the annual meeting of stockholders in person, although we recognize that directors occasionally may be unable to attend for personal or professional reasons. We generally hold a meeting of the Board near the same date as the annual meeting of stockholders, depending on the timing of the annual meeting of stockholders in relation to the release of the Company’s first quarter earnings and financial statements for the current fiscal year. The date of the annual meeting in fiscal 2006 was May 3, 2006. At that meeting, all directors other than Mr. Grylls attended the annual meeting of stockholders in person.

 

Board and Committee Independence and Member Qualifications

 

Board of Directors.   Periodically the Nominating and Corporate Governance Committee of the Board reviews the relationships that each director has with the Company and with other parties, and reports on that review to the full Board. Only those directors who do not have any of the categorical relationships that preclude them from being independent within the meaning of applicable NASDAQ rules and who the Board, upon the recommendation of the Nominating and Corporate Governance Committee, affirmatively determines have no relationships that would interfere with the exercise of independence in carrying out the responsibilities of a director, are considered to be independent directors. The Board has reviewed a number of factors to evaluate the independence of each of its members. These factors include its members’ current and historic relationships with the Company and its competitors, suppliers and customers; their relationships with management and other directors; the relationships their current and former employers have with the Company; and the relationships between the Company and other companies of which the Company’s board members are directors or executive officers (a Board member determined to be independent under such rules and based on such factors is referred to as being “Independent”) . After evaluating these factors, the Board has determined that five members of the Board who are not employees of the Company or any parent or subsidiary of the Company (each a “Non-Employee Director”, and as a group, the “Independent Directors”), comprising seventy-one percent (71%) of the whole Board, are Independent.

 

Audit Committee.   Under applicable NASDAQ rules, the Board is required to make certain findings about the independence and qualifications of the members of the Audit Committee of the Board. In addition to assessing the independence of the members under the NASDAQ rules, the Board also considers the requirements of Section 10A(m)(3), and Rule 10A-3 and Item 7(d)(3)(iv) of

Schedule 14A under the Securities Exchange Act of 1934 (such review process conducted by the Board herein the “Qualifications and Independence Review” or simply, “Independence Review”).

 

As a result of its Independence Review in 2006, the Board determined that, with respect to the composition of the Audit Committee for the twelve months ending March 31, 2007, Mr. Meagher (Chairman) and Messrs. David Powers and James Powers, in their capacity as members of the Audit Committee of the Board, were Independent. In addition, the Board determined that Mr. Meagher was an “Audit Committee Financial Expert” within the meaning of under Item 401 (h) of Regulation S-K and other applicable SEC rules, and that Messrs. Meagher, David Powers and James Powers each had the financial sophistication and other attributes required under the applicable NASDAQ rules.

 

In early 2007, the Board conducted its annual Qualifications and Independence Review, in connection with its Audit Committee appointments for the twelve months ending March 31, 2008. Consistent with the recommendation of its Nominating and Corporate Governance Committee (sometimes herein, the “Nominating Committee”), the Board reviewed the qualifications and independence of that committee’s nominees to serve on the Audit Committee: Messrs. William Meagher (Chair), Gregory Mulligan, and James Powers. The Board has determined that each of these Directors, in his capacity as a member of the Audit Committee of the Board, is Independent. In addition, the Board has determined that Mr. Meagher is an “Audit Committee Financial Expert” within the meaning of under Item 401 (h) of Regulation S-K and other applicable SEC rules, and that each of Messrs. Meagher, Mulligan and James Powers has the financial sophistication and other attributes required under the applicable NASDAQ rules.

 

For more information about this committee and its functions, see “Information Concerning the Audit Committee and Auditors” later in this Proxy Statement.

 

Compensation Committee.   Prior Mr. John Mitchell’s appointment to the Board and to the Compensation Committee on November 14, 2006, Mr. Day, the Company’s CEO, served on the Company’s Compensation Committee with Mr. James Powers during the transition period since the Company’s IPO as permitted by NASDAQ rules. In November 2006, the Board determined that Mr. James Powers (Chairman) and Mr. John Mitchell, in their capacity as members of the Compensation Committee of the Board, were Independent. In early 2007, the Board conducted its annual Qualifications and Independence Review, and determined that the following Directors are Independent, as proposed by the Nominating Committee to serve on the Compensation Committee for the twelve months ending March 31, 2008: James Powers (Chair), John Mitchell, and Gregory Mulligan.

 

Nominating and Corporate Governance Committee.   Prior Mr. John Mitchell’s appointment to the Board and to the Nominating and Corporate Governance Committee (“NCGC” or “Nominating Committee”) on November 14, 2006, Mr. Day, the Company’s CEO, served on the NCGC with Mr. David Powers during the transition period since the Company’s IPO as permitted by NASDAQ rules. In November 2006, the Board determined that Mr. David Powers (Chairman) and Mr. John Mitchell, in their capacity as members of the Nominating and Corporate Governance Committee of the Board, were Independent. In early 2007, the Board conducted its annual Qualifications and Independence Review, and determined that the following Directors are Independent and appointed them to serve on the Nominating Committee for the twelve months ending March 31, 2008: David Powers (Chair), William Meagher, and John Mitchell. For more information about this committee and its functions, see “Information About Nominating and Corporate Governance Committee” later in this Proxy Statement.

 

Stockholder Communications

 

Stockholders may communicate directly with the members of the Board or the individual chairman of standing Board committees by writing directly to those individuals care of Secretary, Dover Saddlery, Inc., P.O. Box 1100, Littleton, Massachusetts 01460. The Company’s general policy is to forward, and not to intentionally screen, any mail received at the Company’s corporate office that is sent directly to an

individual. Updates or additions to the Company’s policy on Stockholder Communications will be available on the Company’s website at: http://investor.shareholder.com/dovr/committees.cfm .

 

INFORMATION CONCERNING THE AUDIT COMMITTEE AND AUDITORS

 

For the twelve months ending March 31, 2007, the Audit Committee was composed of Mr. Meagher (Chairman), Mr. David Powers and Mr. James Powers.

 

The Committee reviews the internal accounting procedures of the Company and is directly responsible for the appointment, compensation and oversight of the work of the Company’s independent auditors. The Audit Committee meets privately with the independent registered public accounting firm, has the sole authority to retain and dismiss the independent registered public accounting firm, and reviews their performance and independence from management. The independent registered public accounting firm has unrestricted access and reports directly to the Audit Committee. Additionally, the Audit Committee has responsibilities and authority necessary to comply with Rule 10A-3(b) (2), (3), (4), and (5) under the Securities Exchange Act of 1934. These and other aspects of the Audit Committee’s responsibilities and authority are more fully described in the written charter for the Committee adopted by the Board. A copy of the Audit Committee Charter is available at the Company’s website at: http://investor.shareholder.com/dovr/documents.cfm .

 

such representative desires to do so and will be available to respond to appropriate questions presented at the Annual Meeting.

 

 

 

 

The Audit Committee has determined that EY’s provision of services to the Company not related to its audit of the Company’s financial statements (herein, “Unrelated Services”) was at all relevant times compatible with that firm’s independence.

 

Pre-Approval Policies

 

The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditor. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one 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 auditor and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditor in accordance with this pre-approval, and the fees for the services performed to date. Specific services that were not contemplated by the annual budget may also be pre-approved, on a case-by-case basis, by the Audit Committee acting as a whole, or by a designated single member of the Audit Committee provided such services are then approved, on at least a quarterly basis, by the Audit Committee acting as a whole.

 

The Audit Committee pre-approved EY’s engagement to provide audit services in respect of fiscal 2006 pursuant to such pre-approval policies. With respect to EY Unrelated Services (as referenced by the figures accompanying notes (2)-(3) above), the Audit Committee did not engage EY to provide any such services in fiscal 2006; in prior years (specifically fiscal 2005), the Audit Committee pre-approved 100% of such services pursuant to paragraph (c)(7)(i)(A-B) of Rule 2-01 of Regulation S-X.

 

 

Vote Required

 

The affirmative vote of a majority of the shares “represented and voting” will be required to approve this Proposal.

 

Recommendation

 

The Audit Committee, on behalf of the Board, recommends that you vote FOR the ratification of the selection of EY as the Company’s Independent Registered Public Accounting Firm.

 

INFORMATION ABOUT NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

 

General

 

For the twelve months ending March 31, 2007, the Nominating and Corporate Governance Committee (sometimes herein, the “Nominating Committee”) was chaired by Mr. David Powers (Chairman). For the first several months, Mr. Day, a Director and the Company’s CEO, served on the Nominating Committee, pursuant to the transition provisions of NASDAQ’s rules for recently public companies. Effective as of November 14, 2006, Mr. Day resigned from the Nominating Committee, and the Board appointed Mr. John Mitchell in his stead, following a unanimous vote of the disinterested Independent Directors who had determined that both Messrs. Mitchell and David Powers were Independent. Thus, a Nominating Committee comprised of Chairman David Powers and Mr. Mitchell carried out the Committee’s charter functions with respect to the Board’s nominees for election as Class II Directors and recommendations to the full Board for committee appointments for the twelve months ending March 31, 2008.

 

Where it retains the requisite independence under NASDAQ rules, the Committee identifies individuals qualified to become members of the Board, selects director nominees for each annual meeting of stockholders, recommends individuals to fill vacancies in the Board, develops and recommends corporate governance principles to the Board and is responsible for leading an annual review of the performance of both the Board as a whole and its individual members, as described below. These and other aspects of the Nominating and Corporate Governance Committee’s responsibilities and authority are more fully described in the written charter for the Committee adopted by the Board. A copy of the Nominating and Corporate Governance Committee Charter is available to security holders at the Company’s website at http://investor.shareholder.com/dovr/documents.cfm .

 

Nomination and Election of Seventh Director

 

As previously reported in the Company’s 2006 Proxy Statement, the Board committed to recruit a new qualified individual in 2006 to serve on the Board whose independence, determined under relevant NASDAQ rules, would assure that the Company meet NASDAQ’s listing requirement that the Board be comprised of a majority of independent directors by the first anniversary of the Company’s IPO.

 

Last year, the Nominating and Corporate Governance Committee consisted of Mr. David Powers (Chairman) and Mr. Day. Because the committee at that time was not comprised solely of Independent Directors, the Committee recommended that the Independent Directors perform several of these functions in connection with the nomination and selection of a seventh Director.

 

The Independent Directors accepted this referral of authority and responsibility, and designated non-management directors David Powers and William Meagher to act as an ad hoc search committee to identify, screen, evaluate and recruit potential nominees.

 

The search committee’s first order of business was to establish nomination criteria to aid in the search process. In establishing search criteria, the committee sought guidance from other members of

the Board and from the Company’s accounting and legal advisors. In addition to the general nomination criteria (see “INFORMATION ABOUT NOMINATING AND CORPORATE GOVERNANCE COMMITTEE, Nomination Criteria ”, below), the special search criteria included consideration of such factors as: independence; business acumen; integrity; database marketing growth — strategy and execution; multi-channel retail and rapid retail rollout and management; financial knowledge; and capital structure and capital formation experience.

 

The search committee encouraged each Director to submit names of potential candidates for consideration by the committee. The committee also identified the Company’s pending search to local and regional corporate governance and public director groups for the referral of potential candidates.

 

Representatives of the search committee screened numerous candidates, and either spoke with or met several of them, including Mr. Mitchell, who had first been suggested to Mr. Day for consideration by the Company’s legal counsel. Mr. Day in turn referred the suggestion to the search committee.

 

The search committee met in person with Mr. Mitchell in the fall of 2006, and then met as a committee to consider his candidacy. Based upon its review of Mr. Mitchell’s qualifications and its assessment of the relevant search criteria, the search committee voted unanimously to recommend his candidacy to the Independent Directors, acting as a group.

 

The Independent Directors met to consider the recommendation of its search committee and Mr. Mitchells’ qualifications. Their initial review was favorable, but they decided (i) to afford each Independent Director an opportunity to meet with Mr. Mitchell, and (ii) to seek more information from Mr. Mitchell pertaining to the annual disclosure categories prescribed by SEC Regulation S-K, Item 401. Once the full Board had voted to increase the size of the Board to seven, then the Independent Directors, equipped with that additional information, found that Mr. Mitchell is Independent and unanimously voted to elect John W. Mitchell to the Board, effective November 14, 2006; and to appoint Mr. Mitchell to the Board’s Compensation Committee and Nominating and Corporate Governance Committee.

 

Nomination Criteria

 

Pursuant to its charter, the Nominating and Corporate Governance Committee is charged with reviewing the qualifications and backgrounds of the directors, as well as the overall composition of the Board, and nominate candidates for election at the annual meeting of stockholders. In the case of incumbent directors whose terms of office are set to expire, this function includes review of each such director’s overall past service to the Company, including the number of meetings attended, level of participation, quality of performance, and whether the director continues to meet applicable Independence standards. Additionally, this function evaluates Board members whose terms of office are set to expire the following year, and includes seeking input from the Company’s Chief Executive Officer and Chief Financial Officer.

 

In selecting both incumbent and new director nominees, this function seeks candidates who have the highest personal and professional integrity, who have demonstrated exceptional ability and judgment and who will be effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the stockholders. Although this function has not established minimum requirements for director candidates, it will assess candidates’ strengths and weaknesses in at least the following categories: Marketing/Branding, Finance and Capital Markets, Specialty Retail, Technology, Entrepreneurship, Corporate Leadership, Diversity and Governance/Legal. The Committee will also consider such matters as a candidate’s ability to read and understand fundamental financial statements, whether a conflict or potential conflict of interest exists and the candidate’s independence from management. The Nominating and Corporate Governance Committee, or the Independent Directors of the Board acting in the Committee’s stead, may change the criteria it considers in potential director candidates from time to time. Exceptional candidates who do not meet all of these criteria may still be considered.

 

Nominations of Class II Directors for Election at 2007 Annual Meeting of Stockholders

 

Since January 1, 2007, the Nominating and Corporate Governance Committee met two times, to carry out its responsibilities under the committee charter and in connection with its consideration and selection of nominees for Class II Directors.

 

The Committee recommended to the Board, and the Board approved and nominated Messrs. Mitchell, Grylls and David Powers for election as Class II Directors, to serve until the Company’s 2010 annual meeting of stockholders or special meeting in lieu thereof, and until their successors are duly elected and qualified.

 

Stockholder Recommendations and Stockholder Nominations

 

The Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders, and does not alter the manner in which it evaluates candidates based on whether or not the candidate was recommended by a stockholder. Stockholders may recommend director candidates for consideration by the Nominating and Corporate Governance Committee by writing to The Nominating and Corporate Governance Committee, care of Secretary, Dover Saddlery, Inc., P.O. Box 1100, Littleton, Massachusetts 01460.

 

Stockholders may nominate director candidates by following the procedures described under the heading “Stockholder Proposals” later in this Proxy Statement.

 

of the EBITDA target is achieved, then fifty percent of the EBITDA bonus is paid. Between seventy-five and one-hundred percent achievement, the bonus is calculated on a pro rata basis up to one-hundred percent.

 

Example:

 

 

Fiscal Year 2006

 

The CEO and the COO operate under employment agreements, which establish their respective base salaries, based on the criteria set forth above, at $350,000 and $250,000. Each employment agreement also establishes a range of performance bonuses opportunities for the CEO and COO ranging from 0-40% of their base salaries, depending on the percentage achievement of the Company’s EBITDA goals for the fiscal year. Copies of their employment agreements may be found as Exhibits 10.29 and 10.30 to the Company’s Registration Statement on Form S-1, as filed on August 26, 2005 with the Securities and Exchange Commission (“SEC”), as amended by Exhibits 10.34 and 10.35 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed on March 30, 2006 with the SEC. In fiscal 2006, based on the Company’s achievement of 77.1% of its EBITDA goal, the CEO’s performance bonus was $41,200; and the COO’s was $29,400.

 

The CFO receives a bonus opportunity of 30% of base, based on the EBITDA performance of the Company. In fiscal 2006, his base salary was adjusted upward from the prior year, pursuant to the market metrics referenced above, to $158,846, and his bonus was $26,000.

 

The Vice President of Operations receives a bonus opportunity based on EBITDA, whereby he can earn an annual award equivalent to 17.5% of his salary and a second operating bonus based on achieving specific quantitative operating goals whereby he can earn up to an additional 17.5% of his annual salary. In fiscal 2006, his base salary was set at $186,346, and his bonus totaled $55,400. He earned $17,800 of his bonus based on the Company’s percentage achievement of its EBITDA goal, and he earned the additional $37,600 of his bonus as the result of exceeding the operational goals set for his departments.

 

Stock Option Program

 

Dover Saddlery believes that in addition to the short term focus encouraged by the incentive bonus program, senior management should also have a longer term focus. This is achieved by having all of the members of the senior management be part of the Stock Option Program.

 

The Compensation Committee regularly meets on a pre-scheduled date in September or October each year to evaluate the performance of the Company as a whole year-to-date and of its Directors, Officers and other key employees, and to consider the grant of stock options under this program. The Committee sets the exercise price based on the NASDAQ closing price of the Company’s common stock on the date of its meeting, which is also the date of the option award, unless the Company is in the possession of material non-public information (MNPI), in which case the Committee either postpones the grant of all stock options, or postpones the award date until a later date when the

Company is not in the possession of MNPI. The Compensation Committee considers the accounting and tax treatment of establishing the entire stock option pool at various levels, and considers the recommendations of the CEO for the specific award of stock options to all NEOs other than the CEO. During the course of 2006, the Compensation Committee met once in June and thereafter had a continuing dialogue with management in order to establish the range of total potential option grants to all Directors, Officers and key employees. In October 2006, the Compensation Committee awarded 15,725 stock options to each of the Company’s Named Executive Officers, out of a total of 134,529 stock options awarded to all Company employees.

 

The Committee based its option awards to NEOs, relative to the awards to other employees, based on their continued year-to-year assessment of the relative contributions of respective senior management to the Company’s success. In addition, the Compensation Committee awarded 31,500 stock options to its Directors (including Directors who are employees) in fiscal 2006, as part of the Directors’ compensation program (see “Executive Compensation Discussion and Analysis — Director Compensation” below). In each case, the Compensation Committee confirmed with management that the Company was not in the possession of MNPI on the dates of the option awards. All the stock options awarded in 2006 vest at the rate of 20% per year, in arrears, over five years. For all option awards other than Director options awarded to Mr. Mitchell, the date of the award was October 26, 2006, the date of the Compensation Committee’s regularly scheduled October meeting. In connection with his appointment to the Company’s Board of Directors in November 2006, Mr. Mitchell’s award of 10,500 options was approved by the Compensation Committee on November 17, 2006, with an exercise price, $8.78, equal to the NASDAQ closing price on that date.

 

All the NEO stock options granted in 2006 were incentive stock options (ISOs), with an exercise price equal to at least 100% of the closing price of the Company’s common stock on The NASDAQ National Market on the date of the award. The exercise price for all NEO option awards (other than to the CEO) was thus set at $7.50, the NASDAQ closing price on October 26, 2006, the date of the awards, and those options have a term of ten years. For the CEO, who is the holder of more than five percent (5%) of Dover’s common stock, the exercise price of his ISOs was set at $8.25, or 110% of the closing price on the date of the award, October 26, 2006, and the options have a term of five years.

 

As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on April 2, 2007, the Company has estimated the fair market value of each option, using the Black-Scholes valuation method, to be $3.05, to be amortized over the estimated life of the option. Accordingly, the Company booked a total non-cash share-based compensation expense of $17,000 in fiscal 2006, of which $6,396 is attributable to stock options granted to NEOs in their capacity as employees.

 

 

In addition, all Directors have been authorized to purchase merchandise at the employee discount rate of cost-plus-10%.

 

Certain Employment and Severance Arrangements

 

Stephen L. Day and Jonathan A.R. Grylls each have employment agreements with the Company which, among other things, provide that if their employment is terminated by the Company other than for just cause (as defined in the agreements), the Company will make severance payments to them in an aggregate amount equal to twice the amount of their annual base salary at the time of termination, payable at the same time and in the same amounts as such base salary otherwise would have been paid, plus, in the event such termination occurs on or after July 1 of any year and the Company is meeting or exceeding the goals previously established under the annual incentive plan for that year, a pro rata portion of his annual incentive compensation.

 

Each of those employment agreements separately provides for the following payments to the executive if the executive’s employment is terminated within two years following a change in control (as defined in the agreements) by the Company without cause (as defined in the agreements) or by the executive with good reason (as defined in the agreements): a lump sum equal to two times the executive’s annual base salary at the time of termination, such lump sum to supersede any other post-termination compensation and benefits payable to the executive under any other agreements with the executive. Also, if the executive’s employment is terminated within two years following a change in control by the Company without cause or by the executive for good reason, then all outstanding stock options held by the executive for the purchase of shares of the Company’s Common Stock shall immediately become exercisable in full.

 

Summary

 

Although the Company does not engage in specific benchmarking for total compensation (including the value of option awards) to NEOs, in the opinion of management, the Company’s compensation policies have stood the test of time, and been very effective over the last nine years at both fairly compensating and motivating its employees to achieve well beyond average.

 

SUMMARY COMPENSATION TABLE

 

The following table sets forth information concerning the compensation of our Chief Executive Officer and our other three Named Executive Officers. The Company did not, in respect of any of our NEOs in fiscal 2006, grant any restricted stock awards or stock appreciation rights, accrue deferred compensation charges, or make any long-term incentive plan payouts.

 

 

 

 

GRANTS OF PLAN-BASED AWARDS

 

The following table sets forth certain information regarding stock options granted during fiscal 2006 by the Company to Named Executive Officers, being the individuals named in the Summary Compensation Table. The Company does not maintain any Equity or Non-equity Incentive Plan Awards or other Stock Awards for any NEO.

 

 

 

 

OUTSTANDING EQUITY AWARDS TABLE

 

The following table sets forth certain information regarding options to purchase shares of Company common stock held by our Named Executive Officers that were outstanding as of the end of our fiscal year, December 31, 2006. None of our NEOs has received an award of common stock from the Company, and thus there were no such stock awards outstanding as of December 31, 2006.

 

 

 

 

OPTION EXERCISES AND STOCK VESTED

 

None of the Company’s NEOs exercised any options to purchase Company common stock in fiscal 2006.

 

PENSION BENEFITS

 

The Company does not maintain a pension plan for its employees, and none of the NEOs have or are entitled to receive any pension benefits from the Company.

 

NON-QUALIFED DEFERRED COMPENSATION

 

The Company does not provide or offer any non-qualified deferred compensation plans or benefits for its employees, and none of the NEOs have or are entitled to receive any non-qualified deferred compensation from the Company.

 

DIRECTOR COMPENSATION

 

The following table sets forth annual and meeting fees, awards of options to purchase Company common stock, and all other compensation paid or awarded to Company Directors in 2006. No Director received Stock Awards, Non-equity Incentive Plan Compensation, Pension Plan Rights, Non-Qualified Deferred Compensation or other reportable compensation during 2006 or any prior year.

 

 

 

 

SEVERANCE AND CHANGE OF CONTROL PAYMENTS AND OTHER BENEFITS

 

The following table shows the potential payments upon termination or a change of control of the Company for the specified Named Executive Officers, on December 31, 2006.

 

 

 

 

 

succeeded on that date by Mr. John Mitchell, after the Board had found Mr. Mitchell to be Independent. During the period prior to November 14, 2006, the Company’s Independent Directors, acting as a group, conducted all deliberations and made all decisions regarding or affecting NEO compensation in executive session, without the participation of Mr. Day or any other Company officer.

 

No interlocking relationship exists between our Board of Directors or compensation committee and the Board of Directors or compensation committee of any other entity, nor has any interlocking relationship existed in the past.

 

 

 

 

 

 

 

 

 

Based solely upon review of Forms 3 and 4 and amendments thereto furnished to the Company during fiscal 2006 and Forms 5 and amendments thereto furnished to the Company with respect to fiscal 2005, or written representations that Form 5 was not required, the Company believes that all Section 16(a) filing requirements applicable to its officers, directors and greater-than-10% stockholders were fulfilled in a timely manner.

 

SOLICITATION

 

This proxy is solicited on behalf of the Board of the Company. You are requested to sign and return your proxy card promptly.

 

The expenses connected with soliciting proxies will be borne by the Company. The Company expects to pay brokers, nominees, fiduciaries, and other custodians their reasonable expenses for forwarding proxy materials and annual reports to principals and obtaining their voting instructions. In addition to the use of the mails, certain directors, officers, and employees may solicit proxies in person or by use of other communications media.

 

DOVER SADDLERY, INC.
P.O. BOX 1100, 525 GREAT ROAD
LITTLETON, MA 01460

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED .

NOTE: Please sign exactly as name appears hereon. Joint owners should each sign. Trustees and others acting in a representative capacity should indicate the capacity in which they sign and give their full title. If a corporation, please indicate the full corporate name and have an authorized officer sign, stating title. If a partnership, please sign in partnership name by an authorized person.

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		PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN ENCLOSED POSTAGE-PAID ENVELOPE WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT. IF YOU DO ATTEND, YOU MAY VOTE IN PERSON IF YOU DESIRE.