DEF 14A 1 sqbg-20200605xdef14a.htm DEF 14A sqbg_Current_Folio_Proxy

 

 

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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Preliminary Proxy Statement

Confidential, for Use of the Commission Only (as permitted by Rule 14a 6(e)(2))

Definitive Proxy Statement

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Soliciting Material Under Rule 14a‑12

 

SEQUENTIAL BRANDS GROUP, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

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SEQUENTIAL BRANDS GROUP, INC.

601 West 26th Street, 9th Floor

New York, New York 10001

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

To Be Held Friday, June 5, 2020

To the Stockholders of Sequential Brands Group, Inc.:

Notice is hereby given that the 2020 annual meeting of stockholders of Sequential Brands Group, Inc. (the “Company”) will be held at 601 West 26th Street, 9th Floor, New York, New York 10001 on Friday, June 5,  2020 at 10:00 a.m. Eastern Time, for the following purposes:

1.

To elect two Class III members of the Company’s board of directors named in this Proxy Statement for a three-year term;

2.

To ratify the selection of CohnReznick LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020;

3.

To approve, on an advisory basis, the compensation of the Company’s named executive officers as described in this Proxy Statement (“say-on-pay”); 

4.

To approve an amendment to the Sequential Brands Group, Inc., 2013 Stock Incentive Compensation Plan (the “2013 Stock Incentive Plan”) to increase the number of shares of common stock authorized for issuance thereunder by 2,500,000 shares; and

5.

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

The board of directors has fixed the close of business on April 9,  2020 as the record date for determination of stockholders entitled to notice of, and to vote at, the meeting and any of its adjournments or postponements.

You are cordially invited to attend the 2020 annual meeting of stockholders in person. However, you must be a stockholder of record at the close of business on April 9,  2020 to vote at the meeting.

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the 2020 annual meeting of stockholders, we strongly encourage you to vote. Please vote as soon as possible, even if you plan to attend the 2020 annual meeting of stockholders in person.

Date These Proxy Materials Are First Being Made Available On the Internet: On or about April 24,  2020.

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April 24,  2020

By Order of the Board of Directors

 

 

 

/s/ William Sweedler

 

William Sweedler

 

Chairman of the Board of Directors

 

 

i

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 5,  2020

The notice of Annual Meeting, the proxy statement and our Annual Report on Form 10‑K for the fiscal year ended December 31, 2019 are available on our website at http://www.sequentialbrandsgroup.com. Additionally, in accordance with Securities and Exchange Commission rules, you may access our proxy materials at www.investorvote.com/SQBG.

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS, WE URGE YOU TO VOTE. THE ANNUAL MEETING OF STOCKHOLDERS WILL BE HELD ON JUNE 5, 2020.

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TABLE OF CONTENTS

 

Page

Notice of Annual Meeting of Stockholders 

i

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders To Be Held on June 5, 2020 

ii

General Information and Voting Rights 

1

Annual Meeting Admission 

3

Solicitation of Proxies 

3

Householding 

3

Voting Results of the Annual Meeting 

4

Proposal No. 1 — Election of Directors 

5

Directors and Executive Officers 

6

Board of Directors and Nominees 

6

Other Executive Officers 

9

Corporate Governance 

10

Meetings and Committees 

10

Director Nominations 

11

Board Leadership Structure 

12

Diversity 

12

Communications with the Board of Directors 

12

Board Oversight of Risk Management 

13

Code of Ethics and Business Conduct 

13

Compensation Discussion and Analysis 

14

Determination of Executive Compensation 

14

Compensation Philosophy and Objectives 

14

2019 Highlights 

15

Named Executive Officer Transitions 

15

Results of the Company’s 2019 Say-on-Pay Vote 

16

Elements of 2019 Compensation 

16

Long-Term Incentive Compensation 

17

Executive Employment Agreements 

19

Benefits and Other Compensation 

19

Compensation Committee Report 

20

Executive Compensation 

21

Summary Compensation Table 

21

Grants of Plan-Based Awards 

22

Summary of Employment Agreements 

22

Outstanding Equity Awards at Fiscal Year-End 2019 

24

Stock Vested 

24

Potential Payments Upon Termination or Change in Control 

25

iii

 

Pay Ratio 

25

Compensation and Risk 

26

Director Compensation 

27

Certain Relationships and Related Transactions 

28

Review and Approval of Related Party Transactions 

28

Reportable Related Party Transactions 

28

Report of the Audit Committee 

31

Security Ownership of Certain Beneficial Owners and Management 

32

Proposal No. 2 — Ratification of Selection of Independent Registered Public Accounting Firm 

36

Audit and Non-Audit Fees 

36

Audit Committee Pre-Approval Policies and Procedures 

37

Proposal No. 3 — To Approve, On An Advisory Basis, Named Executive Officer Compensation 

38

Proposal No. 4 — To Approve an Amendment to the Sequential Brands Group, Inc. 2013 Stock Incentive Plan 

39

Other Proposals 

45

Stockholder Proposals for the 2021 Annual Meeting 

45

Annual Report 

46

 

 

Appendix A — Sequential Brands Group, Inc. 2013 Stock Incentive Compensation Plan (as proposed to be amended) 

A-1

 

 

 

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SEQUENTIAL BRANDS GROUP, INC.

601 West 26th Street, 9th Floor

New York, New York 10001

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

To Be Held Friday, June 5, 2020

GENERAL INFORMATION AND VOTING RIGHTS

This proxy statement (the “Proxy Statement”) is furnished in connection with the solicitation of proxies by the board of directors of Sequential Brands Group, Inc. (the “Board of Directors”), a Delaware corporation (the “Company”), for use at the 2020 annual meeting of stockholders (the “Annual Meeting”) to be held at 601 West 26th Street, 9th Floor, New York, New York 10001 on Friday, June 5, 2020 at 10:00 a.m. Eastern Time, and any adjournments or postponements thereof. We anticipate that the Notice of Internet Availability of Proxy Materials will first be mailed or given to our stockholders and the proxy materials will first be made available on the internet on or about April 24,  2020.

The Company has chosen to follow the “notice only” option for stockholders, which requires that only a Notice of Internet Availability of Proxy Materials be mailed to stockholders. Stockholders who receive the Notice of Internet Availability of Proxy Materials and wish to receive hard copies of the proxy materials may receive such copies by making a request on-line at www.investorvote.com/SQBG.

The Company was formed in June 2015 in connection with a strategic combination resulting in our predecessors, Sequential Brands Group, Inc. (“Old Sequential”) and Martha Stewart Living Omnimedia, Inc. (“MSLO”), becoming our wholly-owned subsidiaries (the “Mergers”).  Old Sequential was incorporated under the laws of the State of Delaware in 1982 as People’s Liberation, Inc. and changed its name to Sequential Brands Group, Inc. in 2012.  Old Sequential's common stock began trading on the Nasdaq Capital Market (“Nasdaq”) under the ticker “SQBG” on September 24, 2013, and the Company succeeded to Old Sequential’s listing on December 7, 2015.  On June 10, 2019, the Company completed the sale of MSLO, a Delaware corporation and a wholly-owned subsidiary of the Company. 

Your vote is important. If your shares are registered in your name, you are a stockholder of record. We encourage you to vote as soon as possible so that your shares will be represented and voted at the Annual Meeting even if you cannot attend.

You have three options for submitting your vote prior to the date of the Annual Meeting: internet, telephone or mail:

·

If you have received a Notice of Internet Availability of Proxy Materials, you may follow the instructions for voting provided in that notice.

·

If you are voting via telephone, call toll free 1‑800‑652‑VOTE (8683) within the United States, United States territories and Canada and follow the instructions provided by the recorded message.

·

If you received a hard copy of the Proxy Statement, you may fill in, date and sign the enclosed proxy card and mail it promptly in the envelope provided.

If your shares are held in an account at a brokerage firm, bank, dealer or other similar organization or other nominees, then you are the beneficial owner of the shares and your shares are held in “street name.” If you are a beneficial owner whose shares are held of record by a broker (i.e., your shares are held in street name), and do not provide voting instructions to your broker, bank or other custodian, your broker, bank or other custodian may only vote your shares on “routine” matters. The only routine matter to be voted on at the Annual Meeting is the ratification of our independent registered public accounting firm for the fiscal year ending December 31, 2020 (Proposal No. 2). Your broker does not have authority to vote on non-routine matters without instructions from you, in which case a “broker non-vote” will occur and your shares will not be voted on these matters. Non-routine matters include the election of directors (Proposal No. 1),  the say-on-pay vote (Proposal No. 3) and the approval of an amendment to the 2013 Stock Incentive Plan to increase the number of authorized shares for issuance thereunder by 2,500,000 shares (Proposal No. 4). Because brokers require their customers’

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direction to vote on non-routine matters, it is critical that the stockholders provide their brokers with voting instructions with respect to the proposals involving non-routine matters (Proposal No. 1,  Proposal No. 3 and Proposal No. 4). If your shares are held in street name, the organization holding your account is considered the stockholder of record for purposes of voting at the Annual Meeting and you must obtain a proxy, executed in your favor, from such organization in order to be able to vote at the Annual Meeting. If you are a beneficial owner, you should follow the voting instructions provided to you by your brokerage firm, bank, dealer or other similar organization or other custodian.

If you are a stockholder of record, you may revoke your proxy at any time before the Annual Meeting either by filing with the Secretary of the Company at our principal offices a written notice of revocation or a duly executed proxy bearing a later date or by attending the Annual Meeting and voting your shares in person. If you hold your shares in street name, you may change your vote by submitting new voting instructions to your broker, bank or other custodian. You must contact your broker, bank or other custodian to find out how to do so. All shares entitled to vote and represented by properly executed proxies received prior to the Annual Meeting, and not revoked, will be voted at the Annual Meeting in accordance with the instructions indicated on those proxies. If no instructions are indicated on a properly executed proxy, the shares represented by that proxy will be voted as recommended by the Board of Directors.

Only holders of record of our common stock at the close of business on April 9,  2020 will be entitled to vote at the Annual Meeting on the proposals described in this Proxy Statement. On the record date, there were 65,880,607 shares of common stock outstanding. On all matters to come before the Annual Meeting, each holder of record of common stock is entitled to one vote for each share of common stock. The shares of common stock held in our treasury, which are not considered outstanding, will not be voted.

If any other matters are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn the Annual Meeting to another time or place in order to solicit additional proxies in favor of the nominees to the Board of Directors, the persons named as proxies and acting thereunder will have discretion to vote on these matters according to their best judgment to the same extent as the person delivering the proxy would be entitled to vote. As of the date of this notice, we have not received notice of any other matters that may be properly presented at the Annual Meeting.

In order for us to conduct the Annual Meeting, the holders of a majority of the shares of our common stock outstanding as of April 9,  2020, must be present at the Annual Meeting in person or by proxy. This is referred to as a quorum.

Election of Directors:   The affirmative vote of the majority of the shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting is required for the election to the Board of Directors of each of the nominees for director. If you are a beneficial owner, note that your broker, bank and other custodian cannot vote your stock on your behalf for the election of directors if you have not provided instructions on your voting instruction form. For your vote to be counted, you must submit your voting instructions to your broker, bank or custodian. Abstentions will be counted as present for the purposes of this vote and, therefore, will have the same effect as a vote against the nominees for director. Broker non-votes will not be counted as present and are not entitled to vote on the nominees for director.

Ratification of CohnReznick LLP as the Independent Registered Public Accounting Firm for the Year Ending December 31, 2020:   Ratification of the appointment of our independent registered public accounting firm requires the affirmative vote of the majority of the shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. If you are a beneficial owner, note that your broker, bank or other custodian is entitled to vote on your behalf on the ratification of the appointment of our independent registered public accounting firm. As such, there should be no broker non-votes with respect to this proposal. Abstentions will be counted as present for the purposes of this vote and, therefore, will have the same effect as a vote against this proposal.

Advisory Vote to Approve Named Executive Officer Compensation: Adoption of the non-binding advisory resolution to approve compensation of our named executive officers as disclosed in this Proxy Statement requires the affirmative vote of the majority of the shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. If you are a beneficial owner, note that your broker, bank or other custodian cannot vote your stock on your behalf on the non-binding advisory vote on compensation of our named executive officers if you have not provided

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instructions on your voting instruction form. For your vote to be counted, you must submit your voting instructions to your broker, bank or custodian. Abstentions will be counted as present for the purposes of this vote and, therefore, will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on this proposal.

Approval of an Amendment to the 2013 Stock Incentive Plan:  Approval of the amendment to the 2013 Stock Incentive Plan requires the affirmative vote of the majority of the shares of common stock present in person or represented by proxy and entitled to vote at the Annual Meeting. If you are a beneficial owner, note that your broker, bank or other custodian cannot vote your stock on your behalf on the approval of the amendment to the 2013 Stock Incentive Plan if you have not provided instructions on your voting instruction form.  Abstentions will be counted as present for the purposes of this vote and, therefore, will have the same effect as a vote against this proposal. Broker non-votes will not be counted as present and are not entitled to vote on this proposal.

If you hold your shares directly in your own name, your shares will not be voted if you do not vote them or provide a proxy. If you hold your shares directly in your own name and you sign and return your proxy card (including over the internet or by telephone) but do not include voting instructions, your proxy will be voted as the Board of Directors recommends with respect to each of the director nominees and on each other proposal.

ANNUAL MEETING ADMISSION

Only stockholders and certain other permitted attendees may attend the Annual Meeting. If you plan to attend the Annual Meeting in person, we ask that you also complete and return the reservation form attached to the end of the Proxy Statement. Please note that the Company limits attendance to stockholders and one guest. Each stockholder may appoint only one proxy holder or representative to attend the meeting on his or her behalf. Proof of your ownership of the Company’s stock as of the record date, along with photo identification, will be required for admission. The street name holders will need to bring a copy of a brokerage statement reflecting their stock ownership as of the record date. No cameras, recording equipment, electronic devices, use of cell phones or other mobile devices, large bags or packages will be permitted at the Annual Meeting.

Special Precautions Due to Coronavirus Concerns: In order to protect the health and safety of our employees and stockholders, we are taking special precautions in connection with the Annual Meeting due to the health impact of the coronavirus outbreak (COVID-19). These include limiting the Annual Meeting to the items of business on the Notice of Annual Meeting of Stockholders of Sequential Brands Group, Inc., which means that there will not be a separate business update provided. In addition, refreshments will not be provided. We also encourage stockholders who intend to attend the Annual Meeting to review the relevant guidance from public health authorities. In the event that we determine that it is necessary or appropriate to take additional steps related to how the Annual Meeting is conducted, including imposing additional attendance restrictions in light of public health concerns, details will be posted in advance on our website and, if possible, filed with the SEC.

SOLICITATION OF PROXIES

We will bear the expense of soliciting proxies. Our directors, officers and other employees may solicit proxies in person, by telephone, by mail or by other means of communication, but such persons will not be specially compensated for such services. While we presently intend that solicitations will be made only by directors, officers and employees of the Company, we may also retain outside brokers, banks, custodians, nominees and other fiduciaries to assist in the solicitation of proxies. Any reasonable charges and expenses incurred in connection with the use of such outside solicitors will be paid by the Company.

HOUSEHOLDING

To reduce the expense of delivering duplicate proxy materials to our stockholders, we are relying on the rules of the Securities and Exchange Commission (the “SEC”) that permit us to deliver only one set of proxy materials, including our Proxy Statement, proxy card and our Annual Report on Form 10‑K for the fiscal year ended December 31, 2019 (the “2019 Annual Report”) to stockholders who share an address, unless we receive contrary instructions from any stockholder at

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that address. This practice, known as “householding,” reduces duplicate mailings, thus saving printing and postage costs as well as natural resources. Each stockholder retains a separate right to vote on all matters presented at the Annual Meeting. Once you have received notice from your broker or us that they or we will be householding materials to your address, householding will continue until you are notified otherwise or until you revoke your consent. If, at any time, you wish to receive promptly a separate copy of the 2019 Annual Report or other proxy materials, free of charge, or if you wish to receive separate copies of future annual reports or proxy materials, please mail your request to Sequential Brands Group, Inc., 601 West 26th Street, 9th Floor, New York, New York 10001, attention: Investor Relations, or call us at (646) 564‑2577.

VOTING RESULTS OF THE ANNUAL MEETING

Voting results will be published in a Current Report on Form 8‑K issued by us within four business days following the Annual Meeting and will be reported on our website at www.sequentialbrandsgroup.com.

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PROPOSAL NO. 1

ELECTION OF DIRECTORS

Our Board of Directors is divided into three classes designated Class I, Class II and Class III. Directors hold office for staggered terms of three years. One of the three classes is elected each year to succeed the directors whose terms are expiring.

David Conn, William Sweedler and Martha Stewart serve as the Class I directors, Rodney S. Cohen, Stewart Leonard, Jr. and Gary Johnson serve as the Class II directors, and Al Gossett and Aaron Hollander serve as the Class III directors. The Class I, Class II and Class III directors serve terms that expire in 2021, 2022 and 2020, respectively.

The Board of Directors has nominated Al Gossett and Aaron Hollander for re-election at the Annual Meeting to serve as the Class III directors. If re-elected at the Annual Meeting, Mr. Gossett and Mr. Hollander will serve until the annual meeting of stockholders to be held in 2023 or until their respective successors have been duly elected and qualified or until they otherwise cease to serve as directors.

Unless otherwise instructed, the proxy holders will vote the proxies received by them for the nominees named above. If any nominee is unable or unwilling to serve as a director at the time of the Annual Meeting, the proxies will be voted for such other nominee(s) as shall be designated by the then current Board of Directors to fill any vacancy or the Board of Directors may decrease the size of the Board. We have no reason to believe that the nominees will be unable or unwilling to serve if elected as directors.

The principal occupation and certain other information about the nominees and our directors and executive officers are set forth on the following pages.

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Directors and Executive Officers

The following table sets forth certain information with respect to the nominees and the directors and executive officers of the Company as of April 9, 2020. The nominees are currently directors of the Company.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Independent

 

Director

Name

    

Age

    

Position with the Company

    

(Y/N)

    

Since

Class I Directors:

 

  

 

  

 

  

 

  

(Current Terms Expiring in 2021)

 

 

 

 

 

 

 

 

David Conn

 

52

 

Class I Director, Chief Executive Officer and Secretary

 

N

 

2020

William Sweedler

 

53

 

Class I Director and Chairman of the Board of Directors

 

N

 

2012

Martha Stewart

 

78

 

Class I Director

 

N

 

2015

 

 

 

 

 

 

 

 

 

Class II Directors:

 

  

 

  

 

  

 

  

(Current Terms Expiring in 2022)

 

 

 

 

 

 

 

 

Rodney S. Cohen

 

54

 

Class II Director

 

Y

 

2014

Stewart Leonard, Jr.

 

65

 

Class II Director

 

Y

 

2013

Gary Johnson

 

65

 

Class II Director

 

Y

 

2013

 

 

 

 

 

 

 

 

 

Class III Director Nominees:

 

  

 

  

 

  

 

  

(Current Terms Expiring in 2020)

 

 

 

 

 

 

 

 

Al Gossett

 

66

 

Class III Director

 

Y

 

2011

Aaron Hollander

 

63

 

Class III Director

 

Y

 

2013

 

 

 

 

 

 

 

 

 

Other Executive Officers:

 

  

 

  

 

  

 

  

Chad Wagenheim

 

43

 

President

 

  

 

  

Daniel Hanbridge

 

42

 

Senior Vice President and Interim Chief Financial Officer

 

  

 

  

 

Committee Membership

 

 

 

 

 

 

 

Name

    

Audit

    

Compensation

    

Governance

Stewart Leonard, Jr.

 

X

 

  

 

X

Gary Johnson

 

  

 

X

 

X

Al Gossett

 

X

 

X

 

X

Aaron Hollander

 

X

 

X

 

  

 

 

Board of Directors and Nominees

David Conn was appointed Director and Chief Executive Officer on January 6, 2020. Mr. Conn brings with him over 25 years of experience and vast knowledge in brand management and marketing. From 2017 to 2019, he served as CEO of ThreeSixty Brands, a leading provider of branded consumer products to the nation’s largest retailers, where he played a significant role in acquiring and relaunching the iconic FAO Schwarz and Sharper Image brands. Mr. Conn leveraged his broad expertise to develop a go-to-market strategy for the FAO Schwarz brand that featured scaled distribution with major retailers and a direct-to-consumer rollout including an experiential, award winning, FAO Schwarz NYC flagship store, and an e-commerce platform. From 2013 to 2015, he served as CEO and board member of True Religion, a global lifestyle brand with over 2000 employees and 180 retail stores. While there, he led the development and rollout of an innovative new retail concept and omni-channel platform. Before joining True Religion, Conn served as President of

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VF Corporation’s newly formed retail licensed brands division from 2009 to 2013 and led VF’s acquisition of premium denim brand Rock & Republic. From 2004 to 2008, he served as Executive Vice President of Iconix Brand Group, where he joined at the Company’s inception and oversaw it during a period of significant growth. A graduate of Boston University, Mr. Conn served in various roles early in his career at BMG Columbia House and Candie’s Inc.

 

William Sweedler joined the Board of Directors as Chairman on February 22, 2012 in connection with our financing transaction with TCP WR Acquisition, LLC. Mr. Sweedler is presently Co-Founder and Managing Partner of Tengram Capital Partners, a private equity firm focused on investments in the consumer and retail sectors, which Mr. Sweedler co-founded in 2011. In addition, Mr. Sweedler is the founder, Chairman and Chief Executive Officer of Windsong Brands, a diversified brand development and investment company that specialized in the acquisition, growth, licensing, and comprehensive management of consumer branded intellectual property and businesses. Mr.  Sweedler is currently a director at the following privately held companies: High Ridge Brands, Tone it Up, Zanella and Tommie Copper, as well as a director of Centric Brands Inc., a publicly traded company. Prior to founding Windsong Brands, he was President and Chief Executive Officer of Joe Boxer, a wholly-owned division of the Iconix Brand Group (Nasdaq: ICON) of which he was also an Executive Vice President and Director. Mr. Sweedler has a B.S. in Finance and Investments from Babson College. With over 25 years of experience in the consumer sector as an operator and strategic investor, Mr. Sweedler brings strategic vision and guidance to our company as Chairman of our Board of Directors.

Martha Stewart joined the Board of Directors on December 4, 2015 in connection with the MSLO merger and was selected to become a director because of her extensive entrepreneurial and media experience and her unique insight into operations and creative vision. Since June 2019, Ms. Stewart has been the Chief Creative Officer of Marquee Brands, a privately held entity of Neuberger Berman, a global asset manager. Ms. Stewart also serves on the Board of Directors of Hudson River Park Friends and is an advisor to Canopy Growth Corporation. Previously, Ms. Stewart was Chief Creative Officer of Sequential through the sale of MSLO to Marquee Brands in June 2019.  Prior to joining Sequential, Ms. Stewart was Founder, Chief Creative Officer and Non-Executive Chairman of the board of directors of Martha Stewart Living Omnimedia, Inc., which she founded in 1996 and sold to Sequential on December 4, 2015. Ms. Stewart was the Chairman of the board of directors of MSLO from 1996 through June 2003, when she resigned as a director. She also served as Chief Executive Officer from 1996 until 2003. Ms. Stewart is an Emmy Award winning television show host, entrepreneur and bestselling author and is a trusted lifestyle expert and teacher. Ms. Stewart earned a bachelor’s degree in European history and architectural history from Barnard College.

 

Rodney S. Cohen joined the Board of Directors on August 15, 2014 in connection with the Company’s acquisition of Galaxy Brand Holdings, Inc. and was selected to become a director because of his knowledge and experience in managing and developing brands and his two decades of private equity investing, operational restructuring and legal advisory work in a variety of sectors including commodities, natural resources, media, consumer, financial services, security and industrials. Mr. Cohen is currently the Head of Private Equity at Black Diamond Capital Management,  a privately held alternative asset management firm.  Prior to that from 2010 through 2020, Mr. Cohen was the Managing Director of The Carlyle Group and Co-Head of Carlyle Growth Partners and Carlyle Equity Opportunity Funds,  which represent the U.S. smaller and middle market buyout activities of The Carlyle Group in North America. From 1996 through 2010, Mr. Cohen was Co-Managing Partner at Pegasus Capital Advisors, a middle-market investment firm. From 1993 to 1996, he consulted and managed several diverse business ventures. Prior to that, Mr. Cohen practiced law with Anderson Kill Olick and Oshinsky P.C. He serves as a trustee and executive committee member of the Randall’s Island Sports Foundation, on the Franklin and Marshall Leadership Council and as a board member of the After School All Stars. Mr. Cohen earned his J.D. from Columbia Law School where he was a Harlan Fiske Stone Scholar and his B.A. from Franklin and Marshall College.

Stewart Leonard, Jr. joined the Board of Directors on May 1, 2013 and was selected to become a director because of his experience in the retail industry and his unique financial, operational and strategic expertise in matters facing corporations, including brand management, business development and governance. Mr. Leonard, Jr. is currently President and Chief Executive Officer of Stew Leonard’s, a unique family-owned and operated, farm-fresh food store. Mr. Leonard, Jr. became President and Chief Executive Officer of Stew Leonard’s in 1991 and during his tenure Stew Leonard’s has grown to include seven supersized food stores and individual members of the Leonard family additionally operate ten stores in the tri-state area. The food stores are among the nation’s best performing per square foot, generating approximately $475 million in annual sales. The company also employs more than 3,000 team members and has been one

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of Fortune Magazine’s “100 Best Companies to Work For” ten years in a row. Mr. Leonard serves on non-profit boards for the Stew Leonard III Children’s Charities and the Global Foundation for Eating Disorders. Mr. Leonard, Jr. earned a B.S. degree from Ithaca College and received an MBA from UCLA.

Gary Johnson joined the Board of Directors on May 1, 2013 and was selected to become a director because of his experience in both public and private equity owned companies in the financial services and direct marketing industries. From 1999 through 2019, Mr. Johnson served as Chairman of the board of directors of CAN Capital, a 20‑year old financial services company that has funded over 100,000 small retail businesses with approximately $8 billion of capital. Prior to joining CAN Capital, from 1989 through 2012, Mr. Johnson served as Chairman and Chief Executive Officer of Vertrue Inc., one the nation’s leading consumer marketing companies which was listed on Nasdaq from 1997 to 2007. Mr. Johnson earned a B.S. degree in civil engineering from Tufts University and received an MBA from Harvard Business School.

Al Gossett is a nominee for election at the Annual Meeting. He joined the Board of Directors on December 14, 2011 in connection with the restructuring of the ownership of our William Rast branded apparel business and was selected to become a director of the Company because of his experience in managing brands. Mr. Gossett is President and Chief Executive Officer of Gossett Automotive Group, which he founded in 1988. Gossett Automotive Group consists of 15 automotive dealerships located in Memphis, TN and is one of the largest privately owned automotive groups in the Mid-South Region. The various brands under his umbrella include two Volkswagen, two Kia, two Hyundai, Porsche, Audi, Chrysler, Jeep, Dodge, Ram, Mazda, Mitsubishi and FIAT. Mr. Gossett began his career in the automotive industry in 1975 and acquired his first franchise in 1988. During the course of his career, Mr. Gossett has chaired or served on a number of district, regional and national dealer boards within the industry, including Chrysler Financial, Volkswagen Financial, Capital One Bank, Chrysler, Jeep, Dodge, Volkswagen, Suzuki and the American International Automobile Dealers Association. He has received numerous awards for his accomplishments within the automotive industry. Mr. Gossett serves as the managing partner of JALP Clothing, LLC, a wholesale business engaged in the global distribution of apparel. Beginning in June 2009, Mr. Gossett has served on the board of directors of Landmark Community Bank which is located in Memphis and Nashville, Tennessee. An avid sports enthusiast, Mr. Gossett is in the ownership group of the Memphis Grizzlies, a NBA team located in Memphis, TN. He is active in charities supporting children in various capacities, and has been a strong supporter and advocate of St. Jude’s Children’s Research Hospital, Le Bonheur Children’s Hospital and Make-A-Wish, all located in Memphis, as well as many other causes and charities nationwide. Mr. Gossett attended Northwestern University. Mr. Gossett brings his brand management expertise to our company as a member of our Board of Directors.

Aaron Hollander is a nominee for election at the Annual Meeting. He joined the Board of Directors on September 11, 2013 and was selected to become a director of the Company because of his governance, financial reporting, accounting and risk management expertise gained through his service as the Chief Executive Officer of several corporations throughout his tenure, as well as his finance and accounting background. Mr. Hollander currently serves as, Chairman, Chief Executive Officer and President of First Aviation Services Inc., a leading worldwide provider of maintenance, repair and overhaul services to the aerospace industry, a position he has held since 2007. Mr. Hollander is also a Principal at First Equity Group, which he co-founded in 1985, advising the aerospace and defense industries on significant transactions impacting those sectors. From December 2001 to July 2009, Mr. Hollander served as the Chief Executive Officer of Skip Barber Racing School LLC and, from 1993 until February 2012, served as Chairman and the Chief Executive Officer of Imtek, LLC, an agency that provides direct marketing, printing, fulfillment, and location intelligence services to clients across a variety of industries. Prior to co-founding First Equity Group, Mr. Hollander worked for the Boston Consulting Group, and as a CPA and CMA with Arthur Young & Company (now Ernst & Young). Mr. Hollander received his B.S. in Economics from the Wharton School, University of Pennsylvania and earned an MBA with distinction from Harvard Business School.  Mr. Hollander brings his governance, financial reporting, accounting and risk management expertise to our company as a member of our Board of Directors.

 

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Other Executive Officers

Chad Wagenheim has served as our President since October 7, 2019 and also acted as the principal executive officer of the Company from October 7, 2019 through Mr. Conn’s appointment in January 2020.  Mr. Wagenheim has been employed by the Company since November 2014 previously serving as Executive Vice President Strategic Development and Operations.  Mr. Wagenheim has over 15 years of executive level business, finance and operations experience with well-known consumer brands, ranging from launching high-profile early stage start-ups to growing larger scale public companies across the licensing, retail, wholesale, home, beauty, fashion, media, and Internet industries.  Prior to Sequential, Mr. Wagenheim was SVP Finance & Operations for Aerin Lauder's luxury lifestyle brand - AERIN where he established and implemented its strategic & financial business plans, successfully executed the brand's launch (Fall 2012), and drove key initiatives across the company's licensing, wholesale, ecommerce, and retail brick & mortar platforms - with categories focused in the Beauty, Fashion Accessories, and Home Furnishings market segments.  Previously Mr. Wagenheim held a similar role in leading all financial and licensing efforts for MSLO’s Retail Merchandising Division.  During his nearly 10 years with MSLO, the company successfully diversified the brand's licensing portfolio through a combination of organic growth and new acquisitions, which ultimately lead to the company growing its distribution to over 20,000 doors worldwide and achieving annual retail sales of over $1 billion.  Earlier in his career, Mr. Wagenheim held various finance and business management related positions with LivePerson Inc., Prudential Financial, and the United States Department of Defense. Mr. Wagenheim holds a B.S. in Accounting from Monmouth University.

Daniel Hanbridge has served as our Senior Vice President and Interim Chief Financial Officer since January 6, 2020 and has been employed with the Company since February 2017 previously serving as VP, Finance.  Mr. Hanbridge is a CPA with over 20 years of experience in finance. Prior to joining the Company,  Mr. Hanbridge served as VP, Controller of AdvantageCare Physicians, one of the largest primary and specialty care practices in the New York metropolitan area, from 2013 to 2016. There he was responsible for the monthly financial close, entity-wide budgeting and forecasting for 50+ departments, supporting the annual external audit, and overall entity-wide financial reporting and analysis. Prior to AdvantageCare Physicians, Mr. Hanbridge was VP, Head of Technical Accounting and SEC Reporting for Cowen Group, Inc. where he prepared and reviewed the Company’s filings and various other financial reporting activities.  Earlier in his career, Mr. Hanbridge was a Senior Accountant, Financial Reporting for L-3 Communications and a Supervisory Senior Associate in the Consumer Products Division at KPMG LLP. Mr. Hanbridge holds a B.S. in Accounting from Lehigh University.

 

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES NAMED IN THIS PROXY STATEMENT

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CORPORATE GOVERNANCE

Meetings and Committees

The Board of Directors held fourteen meetings during 2019. Each current director, while serving as a director, attended at least 75% of all the meetings of the Board of Directors and the committees on which such director served. While we have not established a policy with respect to members of the Board of Directors attending annual meetings, directors are generally expected to be in attendance at the annual meeting of stockholders. Our 2019 annual meeting of stockholders was attended in person or telephonically by six directors.

Our shares of common stock are listed on the Nasdaq Capital Market (“Nasdaq”) and are subject to the Nasdaq listing standards that require us to have a majority of our Board of Directors comprised of independent directors and separate committees comprised of independent directors. The Nasdaq definition of independent director includes a series of objective tests, and also requires a subjective review by the Board of Directors.

Pursuant to Nasdaq’s objective tests and the Board of Directors’ subjective review, the Board of Directors has affirmatively determined that five of our eight current directors, Messrs. Cohen, Gossett, Hollander, Johnson and Leonard, Jr., are “independent” as that term is defined in Rule 5605(a)(2) of the Nasdaq Stock Market’s Listing Rules. In assessing independence, the Board of Directors considered, among other things, the relationships and transactions described under “Certain Relationships and Related Transactions”. Mr. Sweedler does not meet the independence requirements of Rule 5605(a)(2) of the Nasdaq Stock Market’s Listing Rules because he is a managing member of Tengram Capital Associates (“TCA”), an entity affiliated with Tengram Capital Partners, L.P. (“TCP”), to which the Company made payments of  $2.7 million in 2019 (see “Certain Relationships and Related Transactions — Reportable Related Party Transactions” for further information). Mr. Conn is our Chief Executive Officer and Ms. Stewart was employed by the Company as the Company’s former Chief Creative Officer within the last three years.  

The Board of Directors has established a separately designated audit committee (the “Audit Committee”), compensation committee (the “Compensation Committee”) and nominating and governance committee (the “Governance Committee”) of the Board of Directors. Our Board of Directors may also establish special committees from time to time to perform specifically delegated functions. The Board of Directors has adopted written charters that govern the conduct and responsibilities of each of the Audit Committee, Compensation Committee and Governance Committee, copies of which may be found on our website at www.sequentialbrandsgroup.com in the section titled “Corporate Governance”. You may also request printed copies of the charters by sending written request to the Secretary at the address set forth on the cover of this Proxy Statement.

Audit Committee.   Our Audit Committee held six meetings during 2019, and separately acted by unanimous written consent on one occasion. The Audit Committee is chaired by Mr. Hollander, and includes Mr. Gossett and Mr. Leonard, Jr., all of whom qualify as “independent” directors within the meaning of Rule 5605(a)(2) of the Nasdaq Stock Market’s Listing Rules and Rule 10A‑3(b)(1) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). The Board of Directors has determined that Mr. Hollander qualifies as an audit committee “financial expert” within the meaning of the rules and regulations of the SEC and that each of our other Audit Committee members is able to read and understand fundamental financial statements and has substantial business experience that results in that member’s financial sophistication. Among other responsibilities, the Audit Committee reviews the scope and results of quarterly reviews and the year-end audit with management and the independent auditors, reviews and discusses the adequacy of our internal controls, and recommends to the Board of Directors selection of independent auditors for the coming year. The Audit Committee operates under a written charter, which was adopted by the Board of Directors and is available on our website www.sequentialbrandsgroup.com in the section titled “Corporate Governance”.

Compensation Committee.   Our Compensation Committee held nine meetings during 2019, and separately acted by unanimous written consent on one occasion. The Compensation Committee is chaired by Mr. Johnson, and includes Mr. Hollander and Mr. Gossett, each of whom qualify as “independent” directors within the meaning of Rule 5605(a)(2) of the Nasdaq Stock Market’s Listing Rules, including the enhanced independence requirements applicable to members of compensation committees. The Compensation Committee is primarily responsible for determining the compensation of directors and executive officers and administering our equity compensation plans. In connection with its deliberations, the

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Compensation Committee considers the views of the management with respect to appropriate compensation levels of officers and directors and may engage compensation experts to provide independent advice regarding market trends and other competitive considerations. The Compensation Committee did not engage any third party consultants during the year ended December 31, 2019. The Compensation Committee operates under a written charter, which was adopted by the Board of Directors and is available on our website www.sequentialbrandsgroup.com in the section titled “Corporate Governance”. The Compensation Committee has the authority to delegate its responsibilities listed in the Compensation Committee charter to subcommittees comprised of one or more members of the Compensation Committee, or to the Company’s Chief Executive Officer with respect to the grants of equity awards to any of our officers other than officers subject to Section 16 of the Securities Exchange Act of 1934, if the Compensation Committee determines such delegation would be in the best interest of the Company.

Governance Committee.   Our Governance Committee acted by unanimous written consent on one occasion. Our Governance Committee includes Mr. Gossett, Mr. Johnson and Mr. Leonard, Jr., all of whom qualify as “independent” directors within the meaning of Rule 5605(a)(2) of the Nasdaq Stock Market’s Listing Rules. The Governance Committee reviews and makes recommendations regarding the functioning of the Board of Directors as an entity, assists the Board of Directors in defining and assessing qualifications for membership on the Board of Directors, identifies and recommends qualified individuals to serve as members of the Board of Directors and recommends corporate governance principles applicable to the Company. The Governance Committee operates under a written charter, which was adopted by the Board of Directors and is available on our website www.sequentialbrandsgroup.com in the section titled “Corporate Governance.”

Director Nominations

The Governance Committee reviews persons who are candidates for election to our Board of Directors and makes a recommendation with respect to such candidates to our Board of Directors. Our full Board of Directors, then reviews those members of the Board of Directors who are candidates for election to our Board of Directors and makes the final determination regarding whether to nominate a candidate to the Board of Directors for election for the next term. The Governance Committee’s methods for identifying candidates for election to the Board of Directors (other than those proposed by our stockholders, as discussed below, and other than candidates that we are contractually obligated to nominate pursuant to written agreements) include the solicitation of ideas for possible candidates from a number of sources, including existing members of the Board of Directors, our executive officers, individuals personally known to the members of the Board of Directors and other research. We may also from time to time retain one or more third-party search firms to identify suitable candidates.

In carrying out its function to nominate candidates for election to our Board of Directors, upon recommendation from our Governance Committee, our Board of Directors considers the mix of skills, experience, character, commitment and diversity of background, all in the context of the requirements of our Board of Directors at that point in time. Our Board of Directors believes that each candidate should be an individual who has demonstrated integrity and ethics in such candidate’s personal and professional life, has an understanding of elements relevant to the success of a publicly-traded company and has established a record of professional accomplishment in such candidate’s chosen field. Each candidate should be prepared to participate fully in our Board of Directors’ activities, including attendance at and active participation in meetings of our Board of Directors, and not have other personal or professional commitments that would, in our Board of Directors’ judgment, interfere with or limit such candidate’s ability to do so. Our Board of Directors has no stated specific minimum qualifications that must be met by a candidate for a position on our Board of Directors.

Our Governance Committee and Board of Directors will consider nominees recommended by stockholders. For a stockholder recommendation to be considered by our Governance Committee and Board of Directors as a potential candidate at an annual meeting, the recommendation must be received on or before the deadline for receipt of stockholder proposals to be included in our proxy statement for such meeting. The recommendation should be addressed to our Secretary at c/o Sequential Brands Group, Inc., 601 West 26th Street, 9th Floor, New York, New York 10001. If a stockholder decides to nominate a candidate for director and solicits proxies for such candidate, the stockholder will need to follow the rules set forth by the SEC and in our amended and restated bylaws (the “Bylaws”) as they pertain to director nominations. A stockholder of the Company may nominate one or more persons for election as a director at an annual meeting of stockholders if the stockholder complies with the notice, information and consent provisions contained in the

11

Bylaws, including the notice deadlines, which are discussed under “2021 Stockholder Proposals”. In addition, the notice must be made in writing and set forth as to each proposed nominee who is not an incumbent director (i) their name, age, business address and, if known, residence address, (ii) their principal occupation or employment, (iii) the class and number of shares of the Company’s stock owned beneficially and of record by such person and (iv) any other information concerning the nominee that must be disclosed respecting nominees in proxy solicitations pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a‑11 thereunder, including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected.

Based on the foregoing and the Company’s obligations pursuant to the Amended and Restated Stockholders Agreement, dated as of March 27, 2013, by and between the Company and TCP WR Acquisition, LLC (“TCP WR”), which provides TCP WR with the right to nominate a number of nominees for director such that the number of directors that will be serving on the Board of Directors (determined immediately following the election of directors and assuming that the director nominees designated by TCP WR are elected to the Board of Directors) that have been appointed or nominated by TCP WR equals three, the Board of Directors, upon the recommendation of the Governance Committee, nominated Al Gossett and Aaron Hollander for re-election as Class III members of the Board of Directors, subject to stockholder approval, for a three-year term ending on or around the date of the 2023 annual meeting of stockholders.

Board Leadership Structure

In connection with the closing of our financing transaction with TCP WR in February 2012, Mr. Sweedler was appointed Chairman of our Board of Directors. In January 2020, Mr. Conn became our Chief Executive Officer, Secretary and a director. Additional information about Mr. Conn’s appointment can be found in our Compensation Discussion and Analysis below. The Board of Directors believes that its current leadership structure best serves the objectives of the Board of Directors’ oversight of management, the ability of the Board of Directors to carry out its roles and responsibilities on behalf of the stockholders and our overall corporate governance. The Board of Directors also believes that the current separation of the Chairman and Chief Executive Officer roles allows the Chief Executive Officer to focus his time and energy on operating and managing our business and leverages the experience and perspectives of our Chairman, who has a deep knowledge of the consumer industry and significant experience in managing and developing brands. The Board of Directors, however, periodically reviews the leadership structure and may make changes in the future.

Diversity

The Board of Directors does not have a formal policy with respect to director nominee diversity. In selecting nominees to the Board of Directors, the Board of Directors is committed to building and maintaining an ideal mix of talent and experience to achieve our business objectives in the current environment, and the Board of Directors assess the effectiveness of this process when reviewing the composition of the Board of Directors each year. In particular, the Board of Directors considers expertise, depth of knowledge in key areas that are important to us and diversity of thought, background, perspective and experience so as to facilitate robust debate and broad thinking on strategies and tactics pursued by us. The Board of Directors believes this diversity is demonstrated in the range of experiences, qualifications and skills of the current members of the Board of Directors.

Communications with the Board of Directors

You may communicate with our Board of Directors, or with any individual director, by sending communications via email to boardofdirectors@sbg-ny.com or by telephoning the Secretary at the Company’s principal executive offices, who will then relay the communications to the Board of Directors.

Communications are relayed to the Board of Directors, or to any individual director, depending on the facts and circumstances described in the communication. In that regard, the Board of Directors has requested that certain items that are unrelated to the duties and responsibilities of the Board of Directors be excluded, including junk mail and mass mailings, product complaints, product inquiries, new product suggestions, resumes and other forms of job inquiries, surveys and business solicitations or advertisements. In addition, material that is unduly hostile, threatening, illegal or

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similarly unsuitable will not be relayed, with the provision that any communication that is not relayed will be made available to any director upon such director’s request.

Any interested party, including any employee, may make confidential, anonymous submissions regarding questionable accounting or auditing matters or internal accounting controls and may communicate directly with the Chairman by letter to 601 West 26th Street, 9th Floor, New York, New York 10001, marked for the attention of the Chairman, as applicable.

Board Oversight of Risk Management

Our Board of Directors, as a whole and also at the committee level, is responsible for overseeing risk management. A fundamental part of risk management is not only understanding the risks we face and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company. The involvement of our Board of Directors in setting our business strategy is a key part of our assessment of risk management, including with respect to cybersecurity risks, and the determination of what constitutes an appropriate level of risk for the Company. Members of our Board of Directors discuss with management our major risk exposures, including with respect to the Company’s credit, liquidity, proposed acquisitions and operations as well as other risks associated with the Company’s business, their potential impact on the Company and the steps taken by management to manage these risks. The Compensation Committee is responsible for overseeing the management of risks relating to the Company’s executive compensation plans and arrangements as well as the Company’s benefit plans. The Audit Committee oversees management of financial risks and potential conflicts of interest with related parties. The Governance Committee oversees risks associated with the independence of the Board of Directors. In addition, our Board of Directors and its committees may retain, on such terms as they determine in their sole discretion, independent legal, financial and other consultants and advisors to advise and assist them in fulfilling their oversight responsibilities.

Code of Ethics and Business Conduct

We have adopted a written code of ethical conduct (the “Code of Ethics”) applicable to all members of the Board of Directors and to all of our employees and executive officers, including our Chief Executive Officer and Chief Financial Officer. The Code of Ethics constitutes a “code of ethics” as defined by applicable SEC rules and a “code of conduct” as defined by applicable Nasdaq Stock Market’s Listing Rules. Our Code of Ethics is also made available on our website located at www.sequentialbrandsgroup.com in the section titled “Corporate Governance.” You may also request a copy of the Code of Ethics by writing or calling us at:

Sequential Brands Group, Inc.
Attn: Investor Relations
601 West 26
th Street, 9th Floor
New York, New York 10001
(646) 564‑2577

Any amendment or waiver of the Code of Ethics pertaining to a member of the Board of Directors or one of our executive officers will be disclosed on our website (www.sequentialbrandsgroup.com) within four business days. We granted no waivers under our Code of Ethics in 2019.

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COMPENSATION DISCUSSION AND ANALYSIS

Determination of Executive Compensation

The Compensation Committee of the Board of Directors is responsible for overseeing the Company’s executive compensation policies and practices, including levels and structure of compensation for the Company’s executive officers, which are currently submitted to the Board of Directors for ratification. Specifically, among other things, the Compensation Committee is responsible for:

·

Formulating, evaluating and approving compensation for the Company’s executive officers, including the Chief Executive Officer, interim Chief Financial Officer and President. The Company’s compensation policies are intended to reward executive officers for their contributions to the Company’s growth and profitability, and recognize individual initiative, leadership, achievement, and other valuable contributions to the Company. An additional goal is to provide competitive compensation that attracts and retains qualified and talented executive officers. The Compensation Committee may consult with the Chief Executive Officer and the interim Chief Financial Officer on the performance of the Company’s other executive officers. However, neither the Chief Executive Officer nor the interim Chief Financial Officer may be present during any Compensation Committee or Board deliberations or voting with respect to each of their own compensation packages;

·

Overseeing and approving all compensation programs involving the issuance of the Company’s stock and other equity securities under the Company’s long-term incentive plans;

·

Annually assessing the risks associated with the Company’s compensation practices, policies and programs to determine whether the risks arising from such practices, policies and programs are appropriate or reasonably likely to have a material adverse effect on the Company;

·

Periodically reviewing compensation practices and trends of other companies to assess the reasonableness and adequacy of the Company’s executive compensation programs and policies; and

·

Securing the services of external compensation consultants or other experts, as necessary and appropriate.

Each year, the Compensation Committee reviews the Company’s executive officer compensation, including the compensation structure and levels of compensation paid to the executive officers in the prior year (as disclosed in the Summary Compensation Table on page 21 for our named executive officers), and determines any needed adjustments to our compensation policies and practices so that such policies and practices continue to reflect the Company’s commitment to aligning executive compensation practices with the interests of the Company’s stockholders.

Compensation Philosophy and Objectives

The Company’s overall compensation philosophy is to “pay for performance.” The Company’s compensation plans, policies and practices are designed to provide compensation that motivates executive officers to achieve corporate strategic and financial goals and to reward them for short- and long-term financial performance in order to maximize stockholder value. In addition, these plans, policies and practices and the compensation paid thereunder are structured to be competitive with other companies in order to attract and retain high performing executive talent. The Company’s executive compensation program is designed specifically to:

·

Support the achievement of the Company’s short- and long-term strategic and financial objectives;

·

Reward executive officers for continuous improvement of financial metrics and achievement of strategic objectives;

·

Align executive interests with the interests of our stockholders; and

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·

Attract and retain highly talented, results-driven executive officers.

2019 Highlights

The following individuals comprise our “named executive officers”:

·

Ms. Karen Murray — Former Chief Executive Officer (employment ended on October 1, 2019)

·

Mr. Peter Lops — Former Chief Financial Officer (employment ended on January 6, 2020)

·

Ms. Martha Stewart — Former Chief Creative Officer  (employment ended on June 10, 2019)

·

Mr. Chad Wagenheim — President (Effective October 7, 2019) (Acted as interim principal executive officer through January 6, 2020.  On and following such date, Mr. Wagenheim continued his role as President.)

·

Mr. Andrew Cooper — Former President (employment ended on June 5, 2019)

The Compensation Committee made the following key decisions for 2019 with respect to its compensation policies to continue management’s focus on driving stockholder value:

·

The named executive officers’ annual base salaries were set as follows for 2019:

o

Ms. Murray — $600,000. No change from 2018;

o

Mr. Lops —Increased $25,000 from $425,000 to $450,000 pursuant to the terms of his employment agreement negotiated in 2018;

o

Ms. Stewart — $500,000. No change from 2018;  

o

Mr. Wagenheim —  $450,000 (effective July 1, 2019)

o

Mr. Cooper — Increased $25,000 from $550,000 to $575,000 pursuant to the terms of his employment agreement negotiated in 2016;

·

The Company established its 2019 annual bonus program for all named executive officers, other than Ms. Stewart and Mr. Wagenheim, based on the attainment of an adjusted EBITDA target established by the Compensation Committee.  The annual performance bonus targets for the named executive officers as a percentage of each such named executive officer’s base salary remained unchanged from 2018.

In setting compensation for the named executive officers for 2019 the Compensation Committee considered a variety of factors, including the scope and impact of the named executive officer’s role, the expectations for the executive officer, market compensation levels and contributions made by the named executive officer beyond such named executive officer’s formal position and the Company’s performance against budget.

 

Named Executive Officer Transitions

Chief Executive Officer Transition

On October 1, 2019, Ms. Karen Murray resigned from her positions as Chief Executive Officer, Secretary and Director of Sequential.  In connection with her resignation, Sequential and Ms. Murray entered into a transition agreement dated as of October 1, 2019. Under the transition agreement, Ms. Murray agreed to act as a consultant to the Company for a period from October 1, 2019 through September 30, 2020.  The terms of the transition agreement are described in more detail in “Executive Compensation — Summary of Employment Agreements and Transition Agreements”.

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Chief Financial Officer Transition

On January 6, 2020, Mr. Peter Lops resigned from his positions as Chief Financial Officer and Principal Financial and Accounting Officer of Sequential. Per the transition agreement between Sequential and Mr. Lops dated January 6, 2020, Mr. Lops has agreed to act as a consultant to the Company through March 31, 2020. The terms of the transition agreement are described in more detail in “Executive Compensation — Summary of Employment Agreements and Transition Agreements”.

Chief Creative Officer Transition

On June 10, 2019, Ms. Stewart resigned from the Company as of the date of sale of MSLO.

President Transition

Effective June 5, 2019, Mr. Andrew Cooper mutually agreed to terminate his position as President of Sequential. In connection with his termination, Sequential and the Company entered into a separation agreement on June 9, 2019.  The terms of the separation agreement are described in more detail in “Executive Compensation — Summary of Employment Agreements and Transition Agreements”.

 

Results of the Company’s 2019 Say-on-Pay Vote

At the Company’s annual meeting of stockholders held in June 2019, the Company’s stockholders were asked to approve the compensation paid to the Company’s named executive officers for fiscal 2018.  65.9% of the votes cast on the say-on-pay proposal at that annual meeting were voted in favor of the proposal. In response to this lower level of shareholder support and other considerations, the Compensation Committee and the Board increased the level of Company performance required to receive any payout under our annual cash incentive plan and the compensation arrangements approved for our new Chief Executive Officer and Interim Chief Financial Officer also reflect lower levels of overall target compensation than their respective predecessors.  Further no RSUs or PSUs were granted to Karen Murray, Andrew Cooper and Peter Lops in 2019.

The Company regularly engages with our stockholders to discuss a variety of aspects of our business and welcomes stockholder input and feedback, including on compensation matters.  The Compensation Committee believes that the say-on-pay vote serves as an additional tool to guide the Board of Directors and the Compensation Committee in ensuring alignment of the Company’s executive compensation programs with stockholder interests.

The Compensation Committee continues to work so that the design of the Company’s executive compensation program is focused on long-term stockholder value creation, emphasizes pay for performance and does not encourage imprudent short-term risks. The Compensation Committee also uses the say-on-pay vote as a guidepost for stockholder sentiment and believes it is critical to maintain and continually develop this program to promote ongoing stockholder engagement, communication and transparency.

Elements of 2019 Compensation

Annual Cash Compensation

·

Base Salary provides a portion of compensation that is fixed to provide executive officers with a certain level of financial security and to attract and retain critical talent. Each executive officer’s base salary level is designed to compensate the executive officer in a way that is competitive and indicative of his or her knowledge, skills, abilities and future potential. When making base salary adjustments, the Compensation Committee considers the performance of the Company, the overall performance and future potential of the individual executive officer, the economic environment and competitive pay positioning.

·

Annual Performance Bonus for all of our named executive officers for 2019, other than Ms. Stewart and Mr. Wagenheim,  was based on the attainment of an adjusted EBITDA target established by the Compensation

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Committee. The annual performance bonus is consistent with the Company’s pay for performance philosophy in that it requires the Company to meet financial objectives in order for bonus compensation to become payable. In addition, the design fosters teamwork and creates the incentive for each executive officer to work towards the Company, as a whole, being successful. The Compensation Committee believes this metric is a strong indicator of financial performance and that linking bonus compensation to the achievement of adjusted EBITDA targets closely aligns the financial interests of the executive officers with the interests of stockholders.

o

As provided in Ms. Murray’s and Messrs. Cooper’s and Lops’ respective employment agreements, the annual performance bonus target for these named executive officers was set as a percentage of such named executive officer’s base salary equal to 100% of base salary for Ms. Murray, 125% of base salary for Mr. Cooper and 75% of base salary for Mr. Lops. The adjusted EBITDA target was set to be achievable, but encourage growth over the prior year’s performance. The adjustments made to EBITDA include deal advisory costs, non-cash stock-based compensation, write-off of deferred financing costs, debt refinancing costs, non-cash mark-to-market adjustments on equity securities, loss on sale of assets, net of non-controlling interests, non-cash impairment of trademarks, net of non-controlling interests and other immaterial amounts that are not representative of the Company’s day-to-day licensing business. Each executive officer’s annual performance bonus is determined based on the level of achievement of the performance bonus target. Pursuant to Ms. Murray’s and Messrs. Cooper’s and Lops’ respective employment agreement, if performance is 90% or more but less than 100% of the target, 75% of the target annual bonus will be paid; if performance is 80% or more but less than 90% of target, 50% of the target bonus will be paid; and if performance is less than 80%, no bonus will be paid. For 2019, the Compensation Committee confirmed that the Company did not achieve its adjusted EBITDA target for the year. Accordingly, no bonus was paid for 2019.

o

Ms. Stewart does not participate in our annual performance bonus program, but rather was entitled to bonuses only as determined in the discretion of our Board of Directors and the Company’s Chief Executive Officer and did not receive any bonus for 2019.  

o

Ms. Murray and Mr. Wagenheim were awarded discretionary cash bonus payments of $112,500 and $300,000, respectively, in recognition of their contributions for the sale of MSLO.

o

Mr. Wagenheim was awarded a discretionary bonus of $325,000 in recognition of his promotion to President and his extraordinary individual performance during 2019. 

·

A guaranteed annual payment of $1,300,000 is provided for Ms. Stewart under her employment agreement for each calendar year of her employment period. This amount is pro-rated for partial years of service and is payable in installments in accordance with the Company’s customary payroll practices. For 2019, Ms. Stewart received approximately  $574,000 under this provision of her employment agreement in light of her June 10, 2019 termination.

Long-Term Incentive Compensation

The Compensation Committee believes long-term incentives are beneficial to stockholders and a key component of overall executive compensation. The primary focus in granting long-term incentives is to:

·

Align executive officers’ financial interest with the long-term interests of our stockholders;

·

Support the achievement of strategic objectives and goals, which tend to be longer-term;

·

Focus executive officers’ behavior on long-term value creation;

·

Promote executive officers’ retention by providing financial rewards that are achieved over a period of years; and

·

Provide executive officers with an opportunity to acquire an ownership interest in the Company.

17

Over the years, we have used a combination of two forms of long-term equity compensation: time-based restricted stock and restricted stock units and PSUs. The Compensation Committee considers the value of the award as a component of total direct compensation. In deciding which type of equity award to grant to executive officers, the Compensation Committee may consider the number of shares necessary to deliver the intended value appropriate for each named executive officer and his or her position and level of responsibility within the Company. The Company’s intent is to focus executive officers on driving stockholder value by placing more emphasis on pure performance-based compensation, as PSUs have no value unless the Company achieves certain performance metrics.

All equity awards are granted pursuant to, and are subject to the terms and conditions of, the Sequential Brands Group, Inc. 2013 Stock Incentive Compensation Plan (the “2013 Stock Incentive Plan”), which we assumed in 2015.    For more information on the 2013 Stock Incentive Plan, see Proposal 4.

Time-Based Restricted Stock and Restricted Stock Units

Time-based restricted stock and restricted stock units typically vest over a three-year period after the grant date. While restricted stock and restricted stock units have inherent intrinsic value when granted, they deliver greater value as the price of the Company’s common stock appreciates over time. The intrinsic value at grant date tends to provide continued incentive even if the stock price decreases following the grant date and, as such, they continue to motivate executive officers to sustain their efforts towards achieving corporate goals. If the executive officer terminates employment before vesting occurs, all unvested shares or units are cancelled immediately, unless otherwise stipulated in the respective employment agreement.

No time-based restricted stock units or restricted stock were granted to our named executive officers in 2019.

Performance Stock Units

On August 22, 2016, the Company approved 375,000 PSUs to Mr. Cooper under the 2013 Stock Incentive Plan. For 250,000 of such PSUs vesting was to occur in equal installments on December 31, 2017, 2018 and 2019 subject to achievement of specified performance metrics. For these PSUs, the Company’s performance metrics included two targets, weighted as follows: (i) 66.7% for the achievement of 110% or greater of the Company’s Board approved annual budget for adjusted EBITDA and (ii) 33.3% for the achievement of other performance criteria established in the discretion of the Compensation Committee. The specific performance metrics were set at a level that was designed to be achievable, but require growth over the relevant performance period.  These PSUs contain both carryback and carryforward rights whereby any overage from a given performance period could be applied to earn awards during a period in which the Company does not achieve the pre-established targets. Based on 2017 performance, 27,722 shares were issued under this award, and based on 2018 performance, 27,750 shares were issued under this award. Mr. Cooper separated prior to December 31, 2019 and thus forfeited the 2019 portion of these PSUs. The remaining 125,000 PSUs approved in 2016 were to vest in equal annual increments based on the attainment of certain performance targets as determined the Compensation Committee and the Chief Executive Officer in consultation with Mr. Cooper.  Based on attainment of the performance targets set for the awards granted in 2018, which were set at a level intended to require significant effort, but be attainable, 83,250 shares were issued in settlement of this award in 2018.  Mr. Cooper separated from the Company on June 5, 2019 and thus forfeited the 2019 portion of these PSUs.

On April 3, 2017, the Company granted 175,000 PSUs to Ms. Murray under the 2013 Stock Incentive Plan. The PSUs were subject to achievement of the below specified performance metrics, and were to vest in equal installments on December 31, 2017, 2018 and 2019. For these PSUs, the Company’s performance metrics were set at (i) achievement of 90% or greater of the adjusted EBITDA target for 2017, (ii) achievement of 95% or greater of the adjusted EBITDA target for 2018 and (iii) achievement of 100% or greater of the adjusted EBITDA target for 2019. Based on 2017 and 2018 performance, 58,275 were issued each year under this award. Per Ms. Murray’s transition agreement, she was entitled to the unvested portion of her PSUs should the Company achieve its performance metrics.  The Company did not achieve the performance metric for 2019, and thus, this portion of Ms. Murray’s PSU grant was forfeited.

On August 15, 2017, the Company granted 300,000 PSUs to Ms. Murray under the 2013 Stock Incentive Plan. The PSUs were subject to achievement of the same performance metrics discussed above for the August 22, 2016 grant for

18

Mr. Cooper, and were scheduled to vest in equal installments on December 31, 2017, 2018 and 2019, subject to achievement of such metrics. Based on 2017 performance, 33,267 shares were issued in settlement of this award, and based on 2018 performance, 33,300 shares were issued in settlement of this award. These PSUs contain both carryback and carryforward rights whereby any overage from a given performance period could be applied to earn awards during a period in which the Company does not achieve the pre-established targets.  Per Ms. Murray’s transition agreement, she was entitled to the unvested portion of her PSUs should the Company achieve its performance metrics.  The Company did not achieve its performance metrics for 2019 and none of these 2019 PSUs were issued.

On March 5, 2018, the Company granted 200,000 PSUs to Mr. Lops under the 2013 Stock Incentive Plan. The PSUs were subject to achievement of the same performance metrics discussed above for the August 22, 2016 grant for Mr. Cooper and the August 15, 2017 grant for Ms. Murray, and were scheduled to vest in equal installments on December 31, 2018 and 2019, subject to achievement of such metrics. Based on 2018 performance, 33,333 shares were issued in settlement of this award. These PSUs contain both carryback and carryforward rights whereby any overage from a given performance period could be applied to earn awards during a period in which the Company does not achieve the pre-established targets.  Mr. Lops separated from the Company on January 6, 2020 and forfeited his unvested PSUs.

No PSUs were granted to our named executive officers in 2019.

Executive Employment Agreements

The Company believes employment agreements are an effective recruiting and retention tool for its executive officers. The Company also believes employment agreements help protect certain interests of the Company by prohibiting post-termination competition, disclosure of confidential information and solicitation of employees and customers. All of the Company’s employment agreements have severance provisions and noncompetition and nondisclosure clauses, which encourage executive officers to remain committed to the business and discourage them from collaborating with competitors in order to prevent critical confidential information from leaking to competitors. In addition, all employment agreements require executives to release all claims against the Company in order to receive severance payments. To that end, the Company has entered into employment agreements or employment letters with each of our named executive officers, the terms of which are described in more detail in “Executive Compensation — Summary of Employment Agreements and Transition Agreements”.

Benefits and Other Compensation

Retirement Plans

The Company believes that providing retirement benefits allows the Company to be competitive in attracting and retaining talented executives and to reward executive officers for long-time service to the Company. The Company’s 401(k) plan is a tax qualified retirement savings plans pursuant to which the Company’s employees, including the executive officers, are able to make pre-tax contributions from their eligible compensation. The Company made a matching contribution for all participants during 2019. This matching contribution is reflected in the “Summary Compensation Table” in the column titled “All Other Compensation”.

Perquisites and Other Personal Benefits

The Company also provides the executive officers with limited perquisites and other personal benefits that the Compensation Committee believes are reasonable and consistent with the Company’s overall compensation program to better enable the Company to attract and retain superior executive talent. The Compensation Committee periodically reviews the levels of perquisites and other personal benefits provided to the executive officers, which for 2019 included a travel or car allowance for Ms. Murray, Mr. Lops and Mr. Cooper. The costs associated with providing these benefits for the executive officers are reflected in the “Summary Compensation Table” in the column titled “All Other Compensation”. By reason of her unique position as a performer and her unparalleled role in supporting and developing the Martha Stewart brand, which required her to undertake extensive travel, make a substantial number of on-camera and personal appearances and required her to be constantly in the public eye, we paid for a number of expenses to assist Ms. Stewart in fulfilling

19

these Company responsibilities that, under SEC regulations, are required to be reported as perquisites. For more information on these benefits, see the “All Other Compensation” column of the Summary Compensation Table on page 21.

Compensation Committee Report

The Compensation Committee has reviewed and discussed with management the “Compensation Discussion and Analysis” section of this Proxy Statement as required by Item 402(b) of Regulation S-K. Based on such review and discussions, the Compensation Committee recommended to our Board of Directors that the “Compensation Discussion and Analysis” section be included in this Proxy Statement on Schedule 14A and the 2019 Annual Report on Form 10‑K.

COMPENSATION COMMITTEE

Gary Johnson, Chairman
Al Gossett
Aaron Hollander

20

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table provides certain information concerning the compensation for services rendered to us during the years ended December 31, 2019, 2018 and 2017 by our named executive officers.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock

 

Incentive Plan

 

All Other

 

 

 

 

 

 

 

Salary

 

Bonus(2)

 

Awards(3)

 

Compensation(4)

 

Compensation(5)

 

Total

Name and Principal Position(1)

    

Year

    

($)

    

($)

    

($)

    

($)

    

($)

    

($)

Karen Murray
Former Chief Executive Officer

 

2019

 

$

452,273

 

$

112,500

 

$

 —

 

$

 —

 

$

220,200

 

$

784,973

 

 

2018

 

 

600,000

 

 

 —

 

 

 —

 

 

450,000

 

 

27,500

 

 

1,077,500

 

 

2017

 

 

450,000

 

 

62,500

 

 

1,849,750

 

 

337,500

 

 

7,146

 

 

2,706,896

Peter Lops
Former Chief Financial Officer

 

2019

 

 

445,929

 

 

 —

 

 

 —

 

 

 —

 

 

29,200

 

 

475,129

 

 

2018

 

 

351,170

 

 

 —

 

 

657,250

 

 

199,219

 

 

25,337

 

 

1,232,976

Martha Stewart
Former Chief Creative Officer

 

2019

 

 

221,379

 

 

574,166

 

 

 —

 

 

 —

 

 

1,866,786

 

 

2,662,331

 

 

2018

 

 

500,000

 

 

1,300,000

 

 

636,000

 

 

 —

 

 

3,493,147

 

 

5,929,147

 

 

2017

 

 

500,000

 

 

1,300,000

 

 

 —

 

 

 —

 

 

4,760,174

 

 

6,560,174

Chad Wagenheim
President

 

2019

 

 

409,000

 

 

625,000

 

 

 —

 

 

 —

 

 

11,200

 

 

1,045,200

Andrew Cooper
Former President

 

2019

 

 

246,218

 

 

 —

 

 

 —

 

 

 —

 

 

450,700

 

 

696,918

 

 

2018

 

 

550,000

 

 

 —

 

 

241,250

 

 

515,625

 

 

29,000

 

 

1,335,875

 

 

2017

 

 

525,000

 

 

 —

 

 

 —

 

 

492,188

 

 

18,000

 

 

1,035,188


(1)

Ms. Murray resigned as our Chief Executive Officer, Secretary and Director effective as of October 1, 2019.  Mr. Lops resigned as our Chief Financial Officer effective as of January 6, 2020.  Ms. Stewart resigned as our Chief Creative Officer on June 10, 2019. Mr. Cooper agreed to terminate his position as our President effective June 5, 2019.  Mr. Wagenheim was named our President effective October 7, 2019 and served as our Executive Vice President Strategic Development and Operations prior to this date.

(2)

For 2019, the amounts reported in this column represent for Ms. Murray $112,500 discretionary bonus in recognition of her contributions toward the sale of MSLO.  For Ms. Stewart, the pro-rated annual guaranteed payment payable during 2019 as provided for under her employment agreement, as discussed in further detail in “Executive Compensation — Summary of Employment Agreements” below.  Mr. Wagenheim was awarded (i) a discretionary bonus of $325,000 in recognition of his promotion and his extraordinary individual performance during 2019 and (ii) $300,000 discretionary bonus in recognition of his contributions toward the sale of MSLO.  

(3)

The amounts in this column represent the grant date fair value calculated in accordance with Financial Accounting Standards Board, Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“ASC Topic 718”). No stock awards were granted in 2019. For additional information on the valuation assumptions with respect to the stock awards granted, please see Note 14 to our consolidated financial statements included in the 2019 Annual Report.

(4)

The amounts reported in this column represent annual performance bonus payouts under our annual cash bonus program. No annual performance bonus payments were made to our named executive officers for 2019. For more information on this program for 2019, see “Elements of Compensation — Annual Cash Compensation — Annual Performance Bonus” above.

(5)

The amounts set forth in this column for 2019 represent: (i) for Ms. Murray, the consulting fee paid in 2019 under her transition agreement ($200,000), various travel allowances ($9,000), and Company-paid 401(k) match ($11,200); (ii) for Mr. Lops, a car allowance ($18,000) and Company-paid 401(k) match ($11,200);  (iii) for Mr. Cooper, severance ($431,250), a car allowance ($8,250) and Company-paid 401(k) match ($11,200); (iv) for Mr. Wagenheim, Company-paid 401(k) match ($11,200); and (v) for Ms. Stewart, (a) $1,000,000 in transaction fees in connection with

21

the sale of MSLO and $297,424 in connection with the Intangible Asset Agreement entered into with the acquisition of MSLO, which is described in more detail in “Certain Relationships and Related Transactions — Agreements with Ms. Stewart”, (b) Company-paid 401(k) match ($11,200) and (c) $558,162 of expenses incurred by reason of her unique position as a performer and her unparalleled role in supporting and developing the Martha Stewart brand, which required her to undertake extensive travel, make a substantial number of on-camera and personal appearances and require her to be constantly in the public eye. In 2019, we paid for a number of expenses to assist Ms. Stewart in fulfilling these Company responsibilities that, under SEC regulations, are required to be reported as perquisites. The $558,162 includes the following: (i) $222,994 for security services, (ii) $119,082 for expenses related to personal fitness, wellness, beauty and wardrobe provided in her capacity as on-air and in-person talent, (iii) $86,379 for non-business travel expenses, (iv) $75,182 for utilities and telecommunication services and (v) $54,525 of personnel costs for individuals performing work for Ms. Stewart and other similar expenses.

Grants of Plan-Based Awards

The following table sets forth the information concerning the grants of plan-based compensation to each named executive officer during the year ended December 31, 2019. As discussed above, Ms. Stewart and Mr. Wagenheim did not participate in our annual cash bonus program in 2019.    No equity awards were granted to our named executive officers in 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Estimated future

 

Estimated future

    

All other

    

 

 

 

 

 

 

payments under

 

payments under

 

stock awards:

 

Grant date

 

 

 

 

non-equity incentive

 

equity incentive

 

Number of

 

fair value

 

 

 

 

plan awards (1)

 

plan awards

 

Shares of

 

of stock

 

 

Grant

 

Threshold

    

Target

    

Maximum

 

Threshold

    

Target

    

Maximum

 

Stock or

 

and option

Name

    

Date

    

($)

    

($)

    

($)

    

(#)

    

(#)

    

(#)

    

Units

    

awards

Karen Murray

 

 

 

300,000

 

600,000

 

600,000

 

 —

 

 —

 

 —

 

 —

 

 

 —

Peter Lops

 

 

 

168,750

 

337,500

 

337,500

 

 —

 

 —

 

 —

 

 —

 

 

 —

Andrew Cooper

 

 

 

359,375

 

718,750

 

718,750

 

 —

 

 —

 

 —

 

 —

 

 

 —


(1)

The Target column reflects the award granted if we were to achieve our full 2019 performance targets under our annual cash performance bonus plan. Represents annual performance bonus target of 100% for Ms. Murray, 75% for Mr. Lops and 125% for Mr. Cooper, in each case of the named executive officer’s 2019 annual salary. For each executive, if performance were 90% or more but less than 100%, 75% of annual bonus will be paid and if performance were 80% or more but less than 90% of target, 50% of annual bonus will be paid. If performance were less than 80% no bonus is paid. See “Compensation Discussion and Analysis — Elements of Compensation — Annual Cash Compensation.” As noted above, our named executive officers did not earn any payouts under our annual bonus program for 2019.

Summary of Employment Agreements and Transition Agreements

Certain of the amounts set forth in the “Summary Compensation Table” are provided for in employment agreements and employment letters with our named executive officers. We also entered into transition agreements with Ms. Murray and Mr. Lops and a separation agreement with Mr. Cooper in connection with their respective departures. The material terms of such agreements with our named executive officers are summarized below:

Karen Murray.   Ms. Murray is party to an employment agreement dated as of March 22, 2017 which provided for an annual base salary of $600,000 and eligibility to participate in the Company’s annual bonus program with a target annual bonus opportunity equal to 100% of her base salary, based upon the Company achieving certain adjusted EBITDA performance targets determined by the Board.

Ms. Murray resigned from her position as Chief Executive Officer, Secretary and Director of the Company on October 1, 2019.  In connection with her separation from the Company, Ms. Murray and the Company entered into a Transition Agreement on October 1, 2019 (the “Murray Transition Agreement”).  The Murray Transition Agreement provided that Ms. Murray’s 33,334 shares of unvested restricted stock units fully vested on October 8, 2019. Pursuant to the Murray Transition Agreement, Ms. Murray agreed to serve as a Senior Advisor to the Company during the period from

22

October 1, 2019 through September 30, 2020 and will be entitled to payment for such services as follows: (i) $200,000 on October 9, 2019, (ii) $150,000 on January 2, 2020; (iii) $150,000 on April 1, 2020; and (iv) $150,000 on July 1, 2020.  The Murray Transition Agreement includes other customary terms and conditions, including a release of claims. 

Peter Lops.   Mr. Lops is party to an employment agreement dated as of February 27, 2018 (the “CFO Employment Agreement”) which provided for an annual base salary of $450,000 and eligibility to participate in the Company’s annual bonus program with a target annual bonus opportunity equal to 75% of his base salary.

As in effect on December 31, 2019, the CFO Employment Agreement also provided that Mr. Lops would have been entitled to certain severance benefits if his employment had ceased under specified circumstances. If Mr. Lops were terminated without cause or had resigned for good reason, he would have received (i) an amount equal to the base salary he would have received if he had remained employed through the term of the CFO Employment Agreement, or, if less, at least six month’s base salary, (ii) any annual bonus earned, but unpaid for a prior year; (iii) if such resignation or termination occurred following the first fiscal quarter of a year, a pro-rata portion of his annual bonus for the year of termination, based on actual results for such year, (iv) subsidized COBRA coverage for up to 18 months and (v) full vesting of any unvested portion of the restricted stock units and PSUs granted upon his commencement of employment. Payment of these severance benefits is subject to the requirement that Mr. Lops execute a release of claims against the Company and its affiliates. Finally, the CFO Employment Agreement also contains customary confidentiality, non-competition, non-solicitation, intellectual property and indemnification provisions.  

Mr. Lops resigned from his position as Chief Financial Officer of the Company effective as of January 6, 2020. In connection with his separation from the Company, Mr. Lops entered into a Transition Agreement on January 6, 2020 (the “Lops Transition Agreement”).  The Lops Transition Agreement provided that all of Mr. Lops’ unvested restricted stock units and performance stock units were forfeited. Pursuant to the Lops Transition Agreement, Mr. Lops agreed to serve as an independent contractor to the Company and was entitled to payment for such services as follows: (i) $56,000 on January 15, 2020 and (ii) $56,500 on March 10, 2020.  The Lops Transition Agreement includes customary terms and conditions, including a release of claims. 

Martha Stewart.   In connection with the closing of the Company’s acquisition of MSLO, the Company entered into an agreement with Ms. Stewart for an initial term continuing through December 31, 2020. The employment agreement provided for (i) an annual base salary of  $500,000 per year, (ii) a guaranteed annual payment of  $1.3 million (the “Guaranteed Payment”), (iii) annual payments of 10% of the gross licensing revenues, in excess of a specified threshold (the “Incentive Payment”), (iv) the opportunity to earn an annual bonus as determined by the Board of Directors and Chief Executive Officer, and (v) payment of certain of Ms. Stewart’s expenses, up to an annual maximum amount of  $1.5 million. In addition, and regardless of whether Ms. Stewart remains employed with the Company, beginning in 2026 and ending on the later of December 31, 2030 or the date of her death, the Company will pay to Ms. Stewart 3.5% of the annual gross licensing revenues for each such year.

Ms. Stewart terminated from the Company as of the date of sale of MSLO, June 10, 2019.  The Company paid $1.0 million in transaction fees to Ms. Stewart related to the sale of MSLO in 2019.

 Chad Wagenheim.  On January 24, 2020, Mr. Wagenheim and the Company entered into an employment letter that amended Mr. Wagenheim’s previous employment arrangements with the Company (the “Employment Letter”). Under the terms of the Employment Letter, Mr. Wagenheim is entitled to an annual base salary of $450,000 and eligibility to participate in the Company’s annual bonus program with a target annual bonus opportunity equal to 100% of his base salary.  In recognition of his promotion and his extraordinary individual performance during 2019, Mr. Wagenheim received a discretionary bonus of $325,000.  Additionally, Mr. Wagenheim received a long-term cash incentive bonus of $250,000 (the “LTI Bonus”) in lieu of a stock grant, to be paid in two installments as follows: (a) $62,500 upon January 24, 2020; and (b) $187,500 on October 1, 2020 subject to his continued employment through that date. The Employment Letter also provides that if Mr. Wagenheim is terminated without cause, he will receive an amount equal to his annual base salary plus the unpaid portion of the LTI Bonus.

23

Andrew Cooper.   Mr. Cooper is party to an employment agreement dated as of August 22, 2016 which provided for a base salary of $575,000 and eligibility to receive an annual cash performance bonus of up to 125% his then current base salary.

Mr. Cooper agreed to terminate from his position as President of the Company as of June 5, 2019. In connection with his separation from the Company, Mr. Cooper and the Company entered into a Separation Agreement on June 7, 2019 (the “Separation Agreement”). The Separation Agreement provided for the following separation payments and benefits:  (i) $431,250.00, representing nine months of his base salary and (ii) full acceleration of the unvested portion of Mr. Cooper’s 58,334 restricted stock units.

Outstanding Equity Awards at Fiscal Year-End 2019

The following table sets forth the information with respect to restricted stock unit awards and PSUs held by each of the named executive officers as of December 31, 2019.

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Awards

 

 

 

 

 

 

 

 

    

Equity incentive

 

 

 

 

 

 

 

Equity incentive

 

plan awards:

 

 

 

 

 

 

 

plan awards:

 

market or payout

 

 

 

 

Market value of

 

number of

 

value of unearned

 

 

Number of Shares or

 

shares or units of

 

unearned shares,

 

shares, units or

 

 

units of stock that

 

stock that have not

 

units or other rights

 

other rights that

 

 

have not vested(2)

 

vested(3)

 

that have not vested

 

have not vested

Name(1)

    

(#)

    

($)

    

(#)

    

($)

Peter Lops

 

50,000

 

 

17,000

 

 —

 

 

 —

Chad Wagenheim

 

183,334

 

 

62,334

 

 —

 

 

 —


(1)

Ms. Murray, Ms. Stewart and Mr. Cooper did not hold any unvested Company equity awards as of December 31, 2019.

(2)

These time-based restricted stock units vest as follows: (i) for Mr. Lops,  all 50,000 shares were forfeited as of Mr. Lops’ termination date of January 6, 2020 and (ii) for Mr. Wagenheim,  50,000 shares on April 30, 2020, 66,667 shares on November 1, 2020 and 66,667 shares on November 1, 2021.

(3)

The market value is based on the closing market price of our common stock as of December 31, 2019 (the last trading day of the year), which was $0.34 per share, multiplied by the number of shares of common stock subject to the award.

Stock Vested

The following table sets forth certain information regarding vesting of time-based restricted stock units and PSUs held by our named executive officers during the year ended December 31, 2019:

 

 

 

 

 

 

 

 

Stock Awards

 

 

Number of Shares

 

Value Realized

 

 

Acquired on Vesting(1)

 

Upon Vesting(2)

Name

    

(#)

    

($)

Karen Murray

 

66,667

 

$

51,666

Peter Lops

 

25,000

 

$

41,000

Chad Wagenheim

 

104,166

 

$

59,541

Andrew Cooper

 

58,334

 

$

34,417


(1)

Ms. Murray’s stock awards vested as follows: (i) 33,333 shares of time-based restricted stock units on April 3, 2019 and (ii) 33,334 shares of time-based restricted stock units on October 9, 2019. Mr. Lops’ stock award vested as follows: (i) 25,000 shares of time-based restricted stock units on March 5, 2019.  Mr. Wagenheim’s stock awards vested as follows: (i) 37,500 shares of time-based restricted stock units on April 30, 2019 and (ii) 66,666 shares of

24

time-based restricted stock units on November 1, 2019. Mr. Cooper’s stock awards vested as follows: (i) 58,334 shares of time-based restricted stock units on June 18, 2019.

(2)

“Value realized upon vesting” was computed by multiplying the number of shares of stock by the market value of the underlying shares on the vesting date.

Potential Payments Upon Termination or Change in Control

The table below sets forth potential benefits that each listed named executive officer would have been entitled to receive upon termination of employment under the various circumstances outlined below and assumes the relevant termination event occurred as of December 31, 2019. The actual amounts that would be payable in these circumstances can only be determined at the time of the named executive officer’s termination or a change in control and, accordingly, may differ significantly from the estimated amounts set forth in the table below.  Payments and benefits actually provided to Ms. Murray, Ms. Stewart and Mr. Cooper are described under “Summary of Employment Agreements and Transition Agreements” above.  Amounts actually payable to Mr. Lops are also described in such section; however, in accordance with SEC requirements, we have also quantified the potential payments that Mr. Lops could have received had he terminated on December 31, 2019 below.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Potential Payments

 

 

By the

    

By the

 

 

 

 

 

 

 

 

 

 

 

Company

 

Company

 

 

 

 

 

 

 

 

 

 

 

Without

 

for Cause

 

 

 

 

 

 

 

 

 

 

 

Cause or by

 

or by

 

Termination

 

 

 

 

 

 

 

 

Executive

 

Executive

 

Following a

 

 

 

 

 

 

 

 

for Good

 

Without

 

Change in

 

 

 

 

 

 

Form of Compensation

    

Reason

    

Good Reason

    

Control

    

Death

    

Disability

Peter Lops

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Cash compensation

 

$

530,137

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Health and welfare benefits

 

 

55,505

 

 

 —

 

 

 —

 

 

 —

 

 

55,505

Accelerated vesting of restricted stock

 

 

17,000

 

 

 —

 

 

17,000

 

 

 —

 

 

 —

Accelerated vesting of PSUs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total

 

$

602,642

 

$

 —

 

$

17,000

 

$

 —

 

$

55,505

Chad Wagenheim

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

Cash compensation

 

$

450,000

 

$

 —

 

$

 —

 

$

 —

 

$

 —

Health and welfare benefits

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Accelerated vesting of restricted stock

 

 

62,334

 

 

 —

 

 

62,334

 

 

62,334

 

 

62,334

Accelerated vesting of PSUs

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Total

 

$

512,334

 

$

 —

 

$

62,334

 

$

62,334

 

$

62,334

 

 

Pay Ratio

The Company has prepared a reasonable estimate, under the applicable SEC rules, of the ratio of the annual total compensation of Mr. Wagenheim, our President and former interim principal executive officer (“PEO”), to the annual total compensation of our median-compensated employee (other than our PEO) for 2019.  We determined our median employee for 2019 based on our payroll records using total annual wages and cash-based fringe benefits for our 45 full and part-time employees (excluding the PEO), who were employed as of December 31, 2019. The annual total compensation of our median employee (other than the PEO) for 2019 was $134,160. Our PEO’s total compensation for 2019 was $1,045,200. The ratio of the PEO’s total compensation for 2019 to the annual total compensation of our median-compensated employee was approximately 8-to-1.

The pay ratio reported above is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described below. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and

25

compensation practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios.

Compensation and Risk

Our Compensation Committee regularly conducts risk assessments to determine the extent, if any, to which our compensation practices and programs may create incentives for excessive risk taking. Based on these reviews, we believe that the incentive for risk taking is low for the named executive officers and the substantial majority of our employees, because their compensation consists largely of fixed cash salary and a cash bonus that has a capped payout. Furthermore, the majority of these employees do not have the authority to take action on our behalf that could expose us to significant business risks.

In 2019, as part of its assessment, the Compensation Committee reviewed the cash and equity incentive programs for senior executive officers and concluded that certain aspects of our compensation programs actually reduce the likelihood of excessive risk taking. These aspects include the use of long-term equity awards to create incentives for senior executive officers to strive for long-term growth of the Company, policies limiting the incentive to take excessive risk for short-term gains by imposing caps on annual bonuses and requiring compliance with the Code of Ethics.

For these reasons, we do not believe that our compensation policies and practices for our employees create risks that are reasonably likely to have a material adverse effect on us.

26

DIRECTOR COMPENSATION

The following table details the total compensation for services rendered in all capacities by the Company’s non-employee directors serving on our Board of Directors for the year ended December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

    

Fees Earned or

    

 

 

    

 

 

 

 

Paid in Cash

 

Stock Awards(1)

 

Total

Name

 

($)

 

($)

 

($)

Aaron Hollander

 

$

125,000

 

$

100,000

 

$

225,000

Al Gossett

 

 

100,000

 

 

100,000

 

 

200,000

Gary Johnson

 

 

100,000

 

 

100,000

 

 

200,000

Stewart Leonard, Jr.

 

 

100,000

 

 

100,000

 

 

200,000

William Sweedler

 

 

 —

 

 

 —

 

 

 —

Rodney S. Cohen

 

 

 —

 

 

 —

 

 

 —


(1)

The amounts in this column represent the grant date fair value with respect to shares of restricted stock calculated in accordance with ASC Topic 718. For additional information on the valuation assumptions with respect to these stock awards, please see Note 14 to our consolidated financial statements included in the 2019 Annual Report. Represents 116,144 shares of restricted common stock granted to each of Mr. Hollander, Mr. Gossett, Mr. Johnson and Mr. Leonard, Jr. on May 2, 2019, pursuant to the 2013 Stock Incentive Plan, which awards will fully vest on the first anniversary date of the day of grant. The amount does not reflect the actual value that may be realized which depends on the value of our shares in the future. As of December 31, 2019,  116,144 shares of restricted stock remained outstanding for each of Mr. Hollander, Mr. Gossett, Mr. Johnson and Mr. Leonard, Jr.

Compensation for non-employee directors was comprised of a mix of cash and equity-based compensation as follows: (i) an annual cash retainer of $100,000, (ii) an annual cash retainer of $25,000 for the Audit Committee chairman and (iii) $100,000 payable in shares of restricted common stock, vesting on the first anniversary date of the date of grant. Our directors are also reimbursed for reasonable out-of-pocket and travel expenses associated with attendance at the meetings of the Board of Directors and the committees thereof. The Compensation Committee reviews director compensation annually and makes a recommendation to the Board of Directors with respect to compensation and benefits provided to the members of the Board of Directors. Mr. Sweedler and Mr. Cohen are principals of two of our largest stockholders and do not receive any compensation for their service on the Board of Directors. An executive officer currently employed or employed in the last three years who serves on our Board of Directors does not receive additional compensation for serving on the Board of Directors. See the “Summary Compensation Table” and “Grants of Plan-Based Awards” for disclosures related to our former director and former Chief Executive Officer, Ms. Murray, and our director and former Chief Creative Officer, Ms. Stewart.

 

For 2020, the Board of Directors approved a one-time waiver of non-employee director compensation that waives the $100,000 payable in shares of restricted stock as compensation for fiscal year 2020.   Additionally, the Board of Directors is currently reviewing the cash compensation for non-employee directors and is contemplating a one-time reduction in the annual cash compensation paid for fiscal year 2020.

27

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Review and Approval of Related Party Transactions

The Company’s Code of Ethics provides that all directors and employees, including executive officers, have a duty to avoid financial, business or other relationships that might cause a conflict of interest with the performance of their duties and that employees should conduct themselves in a manner that avoids even the appearance of conflict between personal interests and those of the Company.

Pursuant to the philosophy of the Code of Ethics, members of the Board of Directors, director nominees, and executive officers are expected to disclose to the Board of Directors any direct or indirect personal interest they may have in a material transaction. Directors also are expected to recuse themselves from participation in any decision in which there is a conflict between their personal interests and the interest of the Company. Approval of any such transaction with respect to any director, director nominee or executive officer may be made only by the Board of Directors or a committee of the Board of Directors. While, the Company does not have a related party transaction policy for persons other than employees and directors and their affiliates, the Company also monitors the material transactions of stockholders who beneficially own greater than 5% of the Company’s outstanding shares.

Except as discussed above, the Company has not prescribed any specific standards to be applied when assessing material transactions. There were no instances since January 1, 2019 in which an executive officer, director or director nominee engaged in such a transaction with the Company, either directly or indirectly, without first obtaining approval.

Reportable Related Party Transactions

Consulting Services Agreement with Tengram Capital Partners, L.P. (f/k/a Tengram Capital Management L.P.)

Pursuant to an agreement with Tengram Capital Partners, L.P., formerly known as Tengram Capital Management, L.P. (“TCP”), an affiliate of Tengram Capital Partners Gen2 Fund, L.P., which is one of the Company’s largest stockholders, the Company had engaged TCP, effective as of January 1, 2013, to provide services to the Company pertaining to (i) mergers and acquisitions, (ii) debt and equity financing and (iii) such other related areas as the Company may reasonably request from time to time (the “TCP Agreement”). TCP was entitled to receive annual compensation of $1.0 million, including fees and reimbursement of out-of-pocket expenses in connection with performing its services under the TCP Agreement. The TCP Agreement remained in effect for a period continuing through the earlier of five years or the date on which TCP and its affiliates cease to own in excess of 5% of the outstanding shares of common stock in the Company. On August 15, 2014, the Company consummated transactions pursuant to an agreement and plan of merger, dated as of June 24, 2014 (the “Galaxy Merger Agreement”) with SBG Universe Brands LLC, a Delaware limited liability company and the Company’s direct wholly-owned subsidiary (“LLC Sub”), Universe Galaxy Merger Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of LLC Sub, Galaxy Brand Holdings, Inc. and Carlyle Galaxy Holdings, L.P. (such transactions, collectively, the “Galaxy Acquisition”). In connection with the Galaxy Merger Agreement, the Company and TCP entered into an amendment to the TCP Agreement (the “Amended TCP Agreement”), pursuant to which, among other things, TCP was entitled to receive annual fees of $0.9 million beginning with fiscal year 2014.  The Amended TCP Agreement terminated as of December 31, 2019.

The Company paid TCP $0.9 million, $0.7 million, and $0.9 million for services under the Amended TCP Agreement during the years ended December 31, 2019, 2018 and 2017, respectively. The Company reimbursed TCP $0.1 million for the year ended December 31, 2019 and less than $0.1 million for each of the years ended December 31, 2018 and 2017 for out-of-pocket expenses in connection with their services.  These amounts are included in operating expenses from continuing operations in the Company’s consolidated financial statements. At December 31, 2019, there was $0.2 million due to TCP for services and less than $0.1 million due for reimbursement of expenses.  At December 31, 2018, there was $0.2 million due to TCP for services and less than $0.1 million due for reimbursement of expenses. The Company paid $1.8 million in transaction fees to TCP related to the sale of MSLO during the year ended December 31, 2019 recorded in discontinued operations in the Company’s consolidated financial statements.

28

Additionally, in July 2013, the Company entered into a consulting arrangement with an employee of TCP (the “TCP Employee”), pursuant to which the TCP Employee provides legal and other consulting services at the request of the Company from time to time. The TCP Employee was also issued 125,000 shares of restricted stock, vesting over a four - year period and 180,000 PSUs, vesting over three years in increments of 20% for 2014, 20% for 2015 and 60% for 2016. During the year ended December 31, 2016, the TCP employee was granted 200,000 PSUs, vesting over three years in increments of 33.3% for 2017, 33.3% for 2018 and 33.4% for 2019. During the year ended December 31, 2018, the TCP employee was granted 150,000 shares of time-based restricted stock units, vesting over a three year period and 300,000 shares of time-based restricted stock units, vesting over a three year period with 25% vesting immediately.  The Company paid the TCP Employee $0.3 million, $0.3 million and $0.4 million for services under the consulting arrangement during the years ended December 31, 2018, 2017 and 2016, respectively. These amounts are included in operating expenses from continuing operations in the Company’s consolidated financial statements. The Company and the TCP Employee terminated the consulting arrangement during the third quarter of 2019. The Company accelerated the vesting of the unvested shares of the TCP Employee’s time-based restricted stock units.  At December 31, 2019, no amounts were due to the TCP Employee.  At December 31, 2018, less than $0.1 million was due to the TCP Employee.

Transactions with Tommie Copper, Inc.

 

The Company entered into an agreement with Tommie Copper, Inc. (“TCI”), an affiliate of TCP, under which the Company received a vendor placement fee for facilitating certain distribution arrangements.  The Company recorded $3.1 million of revenue from continuing operations for the year ended December 31, 2018.  At December 31, 2018, the Company had a current receivable of $1.1 million from TCI in accounts receivable and a long-term receivable of $1.9 million from TCI in other assets in the consolidated balance sheet.  During the year ended December 31, 2019, the Company reserved $2.9 million related to the outstanding receivable balance recorded in operating expenses from continuing operations in the consolidated statement of operations as TCI could not adhere to its original payment terms and new extended payment terms have been negotiated.  At December 31, 2019, the Company had a net current receivable of $0.1 million due from TCI.

 

Transactions with E.S. Originals, Inc.

A division president of the Company maintains a passive ownership interest in one of the Company’s licensees, E.S. Originals, Inc. (“ESO”). The Company receives royalties from ESO under license agreements for certain of the Company’s brands in the footwear category. The Company recorded $4.9 million, $8.4 million and $18.1 million of revenue for the years ended December 31, 2019, 2018 and 2017, respectively, for royalties, commissions and advertising revenue earned from ESO license agreements. At December 31, 2019 and 2018, the Company had $2.8 million and $6.2 million, respectively, recorded as accounts receivable and $0.2 million and $1.9 million, respectively, as a long-term receivable in other assets from ESO in the consolidated balance sheets.

In addition, the Company entered into a license-back agreement with ESO under which the Company reacquired the rights to certain international territories in order to re-license these rights to an unrelated party. The Company recorded approximately $1.3 million and $0.3 million in license-back expense for the years ended December 31, 2019 and 2018, respectively.

Transactions with Centric Brands Inc. (f/k/a Differential Brands Group, Inc.)

 

During the fourth quarter of 2018, Centric Brands, Inc. (“Centric”) acquired a significant portion of Global Brands Group Holding Limited’s (“GBG”) North American licensing business.  The Company entered into an agreement with Centric, an affiliate of TCP, under which the Company received a rights transfer fee of $4.0 million related to the Joe’s license.  During the fourth quarter of 2019, the Company and Centric entered into a license agreement under the Jessica Simpson brand.  The Company recorded $6.6 million and approximately $1.2 million for royalty revenue earned from continuing operations from Centric for the years ended December 31, 2019 and 2018, respectively.  At December 31, 2019 and 2018, the Company had $1.0 million and $0.8 million, respectively, recorded as accounts receivable from Centric in the consolidated balance sheets.

 

29

Acquisition of FUL

On November 17, 2014, the Company made a strategic investment in FUL IP. FUL IP is a collaborative investment between the Company and JALP. FUL IP was formed for the purpose of licensing the FUL trademark to third parties in connection with the manufacturing, distribution, marketing and sale of FUL branded bags, backpacks, duffels, luggage and apparel accessories. JALP contributed the FUL trademark with a fair value of $8.9 million. In exchange for a 50.5% economic interest in FUL IP the Company paid JALP $4.5 million. JALP’s minority member interest in FUL IP has been reflected as noncontrolling interest on the Company’s consolidated balance sheets. One of the Company’s directors, Mr. Al Gossett, has a partial ownership interest in JALP. There was $0.5 million of noncontrolling interest loss recorded during the year ended December 31, 2019.  The Company sold the FUL trademark during the year ended December 31, 2018.  The noncontrolling interest loss for the year ended December 31, 2019 was due to the write off of a $0.9 million receivable related to the previous sale of the FUL trademark.

Agreements with Ms. Stewart

On June 10, 2019, the Company completed the sale of MSLO. The Company paid $1.0 million in transaction fees to Ms. Stewart related to the sale of MSLO in 2019.

In connection with the transactions contemplated by the Company’s acquisition of MSLO in 2015 before the 2019 sale, MSLO entered into an Amended and Restated Asset License Agreement (“Intangible Asset Agreement”) and Amended and Restated Intellectual Property License and Preservation Agreement (“IP License Agreement” and, together with the Intangible Asset Agreement, the “IP Agreements”) pursuant to which Ms. Stewart, a director and the former Chief Creative Officer of the Company, licensed certain intellectual property to MSLO. The IP Agreements grant the Company the right to the use of certain properties owned by Ms. Stewart.

The Intangible Asset Agreement had an initial term commencing on December 4, 2015 and ending on December 31, 2020. During the term of the Intangible Asset Agreement with the Company, Lifestyle Research Center LLC was entitled to receive a guaranteed annual payment of $1.7 million, which amounts were paid in connection with the acquisition of MSLO regardless of Ms. Stewart’s continued employment with the Company, plus reimbursable expenses. The Company paid Lifestyle Research Center LLC $0.8 million in 2019.  The Intangible Asset Agreement with the Company ended as of June 10, 2019 in connection with the completed sale of MSLO. During the term of the IP License Agreement with the Company, Ms. Stewart was entitled to receive a guaranteed annual payment of $1.3 million which amounts were paid in connection with the acquisition of MSLO regardless of Ms. Stewart’s continued employment with the Company. The Company paid $0.6 million to Ms. Stewart in 2019 in connection with the terms of the IP License Agreement. The IP License Agreement with the Company ended as of June 10, 2019 in connection with the completed sale of MSLO.

30

REPORT OF THE AUDIT COMMITTEE

The Audit Committee has furnished the following report:

The Audit Committee is composed of three independent directors, each of whom, in the Board of Directors’ business judgment, is “independent” within the meaning of Rule 5605(a)(2) of the Nasdaq Stock Market’s Listing Rules and the applicable rules and regulations of the SEC. On behalf of the Board of Directors, the Audit Committee oversees the Company’s accounting, auditing and financial reporting processes. The Audit Committee’s function is one of oversight, recognizing that the management of the Company has the primary responsibility for the Company’s financial statements as well as the Company’s financial reporting processes, principles and internal controls. The Company’s independent registered public accounting firm, CohnReznick LLP (the “Auditors”) is responsible for performing an audit of the Company’s consolidated financial statements in accordance with generally accepted accounting principles, issuing a report relating to their audit and expressing an opinion as to the conformity of such financial statements with generally accepted accounting principles.

In fulfilling its responsibilities with respect to the financial statements for the fiscal year 2019, the Audit Committee:

·

reviewed and discussed the audited consolidated financial statements for the year ended December 31, 2019 with management and the Auditors and reviewed and assessed the effectiveness of the Company’s internal control over financial reporting and the Auditors’ audit of the Company’s internal control over financial reporting;

·

reviewed and discussed with the Auditors the matters that independent registered public accounting firms are required to discuss with audit committees by the applicable Public Company Accounting Oversight Board standards and the SEC;

·

received written disclosures and the letter from the Auditors regarding the Auditors’ independence as required by applicable requirements of the Public Company Accounting Oversight Board and the SEC, and has discussed with the Auditors their independence; and

·

considered whether the Auditors’ provision of non-audit services is compatible with maintaining their independence, and concluded that the non-audit services provided by the Auditors do not impair their independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to the Board of Directors that the Company’s audited consolidated financial statements for the year ended December 31, 2019 be included in its 2019 Annual Report on Form 10‑K. The Audit Committee has selected CohnReznick LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2020 and has asked the stockholders to ratify the selection.

The Audit Committee reviews and assesses the adequacy of its charter on an annual basis. While the Audit Committee believes that the charter in its present form is adequate, it may in the future recommend to the Board of Directors amendments to the charter to the extent it deems necessary to react to changing conditions and circumstances.

Aaron Hollander, Chair
Al Gossett
Stewart Leonard, Jr.

31

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table presents information regarding the beneficial ownership of our common stock as of April 9, 2020 (except where otherwise noted below) by:

·

each of the named executive officers listed in the summary compensation table;

·

each of our directors and our director nominees;

·

all of our directors and executive officers as a group; and

·

each stockholder known to us to be the beneficial owner of more than 5% of our common stock.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Shares of our common stock subject to options, warrants and other derivative securities that are currently exercisable or convertible, or exercisable or convertible within 60 days of April 9, 2020 are deemed to be outstanding and to be beneficially owned by the person holding the options, warrants or other convertible security for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

The information presented in this table is based on 65,880,607 shares of our common stock outstanding on April 9, 2020. Unless otherwise indicated, the address of each of the executive officers and directors and beneficial owners of greater than 5% of our common stock named below is c/o Sequential Brands Group, Inc., 601 West 26th Street, 9th Floor, New York, New York 10001.

32

Executive Officers and Directors:

 

 

 

 

 

 

 

    

Number of Shares

    

Percentage of

 

Name of Beneficial Owner

 

Beneficially Owned

 

Shares Outstanding

 

David Conn(1)
Director, Chief Executive Officer and Secretary

 

102,099

 

*

 

William Sweedler(2)
Chairman of the Board of Directors

 

8,794,571

 

13.3

%

Martha Stewart(3)
Director

 

8,305,187

 

12.6

%

Al Gossett(4)
Director

 

912,415

 

1.4

%

Gary Johnson(5)
Director

 

357,527

 

*

 

Stewart Leonard, Jr.(6)
Director

 

423,609

 

*

 

Aaron Hollander(7)
Director

 

260,963

 

*

 

Rodney S. Cohen
Director

 

 —

 

*

 

Chad Wagenheim(8)
President

 

150,546

 

*

 

Daniel Hanbridge(9)
SVP and Interim Chief Financial Officer

 

7,643

 

*

 

Karen Murray(10)
Former Chief Executive Officer

 

285,432

 

*

 

Peter Lops(11)
Former Chief Financial Officer

 

35,204

 

*

 

Andrew Cooper(12)
Former President

 

182,448

 

*

 

Directors and executive officers as a group (ten persons)(13)

 

19,314,560

 

29.1

%

 

Greater Than 5% Beneficial Owners:

 

 

 

 

 

 

 

    

Number of Shares

    

Percentage of

 

Name of Beneficial Owner

 

Beneficially Owned

 

Shares Outstanding

 

Prescott Group Capital Management(15)

 

8,463,319

 

12.8

%

Martha Stewart Family Limited Partnership(3)

 

8,032,910

 

12.2

%

Tengram Capital Partners Gen2 Fund, L.P.(2)

 

7,619,178

 

11.6

%

Carlyle Galaxy Holdings, L.P.(14)

 

6,369,812

 

9.7

%


*Less than 1%

(1)

Consists of 102,099 shares of common stock that are directly beneficially owned by Mr.  Conn.

(2)

Consists of 6,628,572 shares of common stock held by TCP WR, 733,333 shares of common stock held by TCP Acquisition and 257,273 shares of common stock held by TCP SQBG II LLC (“TCP II”), as reported in the Schedule 13D filed on December 8, 2015. Each of these entities reported having shared voting and investment power over their respective shares. Our chairman, Mr. William Sweedler, as a managing member of TCA, which is the general partner of Tengram Capital Partners Gen2 Fund, L.P., which is the managing member of each of TCP WR, TCP Acquisition and TCP II, may exercise voting and investment authority over (i) the shares held by TCP WR, (ii) the shares held by TCP Acquisition and (iii) the shares held by TCP II. Each of TCA, Tengram and Mr. Sweedler disclaim beneficial ownership of such shares of common stock except to the extent of his pecuniary interest therein. Mr. Sweedler is also the beneficial owner of 59,165 shares of common stock held by Madcat II, LLC, of which

33

Mr. Sweedler is the managing member. Mr. Sweedler disclaims beneficial ownership of the shares of common stock held by Madcat II, LLC, except to the extent of his pecuniary interest therein. Mr. Sweedler is also the beneficial owner of 1,020,290 shares of common stock. The address of Mr. Sweedler, TCA, Tengram, TCP WR, TCP Acquisition and TCP II is 15 Riverside Avenue, Floor 1, Westport, CT 06880.

(3)

Shares reported as beneficially owned by Ms. Stewart represent 198,798 shares of common stock held by Ms. Stewart, 9,585 shares of common stock held by the Martha Stewart 1999 Family Trust (the “1999 Family Trust”), 11,981 shares of common stock held by the Martha Stewart 2000 Family Trust (the “2000 Family Trust”), 51,913 shares of common stock held by the Martha and Alexis Stewart Charitable Foundation (the “Foundation”) and 8,032,910 shares of common stock held by the Martha Stewart Family Limited Partnership (“MSFLP”), as reported in the Schedule 13D filed on December 14, 2015. MSFLP reported having shared voting and investment power over its shares. Our director, Ms. Martha Stewart, is a co-trustee of the 1999 Family Trust and holds sole decision-making authority with respect to investment of the assets of such trust, a co-trustee of the 2000 Family Trust, a co-trustee of the Foundation and the sole trustee of the Martha Stewart 2012 Revocable Trust, the sole general partner of MSFLP. The address of MSFLP is 48 Girdle Ridge Road, Katonah, NY 10536.

(4)

Consists of 912,415 shares of common stock, of which (i) 109,091 were purchased in the private placement transaction consummated on July 26, 2013 and are directly beneficially owned by Mr. Gossett, (ii) 687,180 shares of common stock which are directly beneficially owned by Mr. Gossett and (iii) 116,144 shares are restricted common stock that vest within 60 days.

(5)

Consists of 357,527 shares of common stock, of which (i) 241,383 shares of common stock are directly beneficially owned by Mr. Johnson and (ii) 116,144 shares are restricted common stock that vest within 60 days.

(6)

Consists of 423,609 shares of common stock, of which (i) 307,465 shares of common stock are directly beneficially owned by Mr. Leonard, Jr. and (ii) 116,144 shares are restricted common stock that vest within 60 days.

(7)

Consists of 260,963 shares of common stock, of which (i) 144,819 shares of common stock are directly beneficially owned by Mr. Hollander and (ii) 116,144 shares are restricted common stock that vest within 60 days.

(8)

Consists of 150,546 shares of common stock that are directly beneficially owned by Mr. Wagenheim.

(9)

Consists of 7,643 shares of common stock that are directly beneficially owned by Mr. Hanbridge.

(10)

Consists of 285,432 shares of common stock, of which (i) 243,062 shares of common stock are directly beneficially owned by Ms. Murray, and (ii) 42,730 shares of common stock owned by Ms. Murray’s spouse.

(11)

Consists of 182,448 shares of common stock that are directly beneficially owned by Mr. Cooper.

(12)

Consists of 35,204 shares of common stock that are directly beneficially owned by Mr. Lops.

(13)

Comprised of current directors and officers. Includes 464,576 shares of restricted common stock that vest within 60 days.

(14)

Based on the Schedule 13D filed on December 8, 2015. Carlyle Galaxy Holdings L.P. has the right to nominate one director for election by our stockholders, pursuant to a letter agreement with the Company dated June 24, 2014, for so long as it and its affiliates hold at least 33% of the shares acquired by it in connection with our acquisition of Galaxy Brands Holdings, Inc. Carlyle Group Management L.L.C. is the general partner of The Carlyle Group L.P., which is a publicly traded entity listed on the Nasdaq. The Carlyle Group L.P. is the managing member of Carlyle Holdings II GP L.L.C., which is the general partner of Carlyle Holdings II L.P., which is the general partner of TC Group Cayman Investment Holdings, L.P., which is the general partner of TC Group Cayman Investment Holdings Sub L.P., which is the managing member of Carlyle Equity Opportunity GP, L.L.C., which is the general partner of Carlyle Equity Opportunity GP, L.P., which is the general partner of Carlyle Galaxy Holdings, L.P. Accordingly, each of the foregoing entities may be deemed to share beneficial ownership of the shares of common stock owned of record by

34

Carlyle Galaxy Holdings, L.P. and reported having shared voting and investment power over these shares. The address of TC Group Cayman Investment Holdings, L.P., and TC Group Cayman Investment Holdings Sub L.P. is c/o Intertrust Corporate Services (Cayman) Limited, 190 Elgin Avenue George Town, Grand Cayman, E9 KY1‑9005. The address of each of the other entities mentioned in this footnote is c/o The Carlyle Group, 1001 Pennsylvania Ave. NW, Suite 220 South, Washington, DC 20004.

(15)

Based on the Schedule 13D/A filed jointly by Prescott Group Capital Management, L.L.C., et al., on October 18, 2019. The entities of Prescott Group Capital Management, L.L.C., et al., that hold our common shares reported their beneficial ownership as follows: (i) Prescott Group Capital Management, L.L.C. has sole voting and dispositive power over all of the shares included in the table above; (ii) Prescott Group Aggressive Small Cap, L.P. has shared voting and dispositive power over all of the shares included in the table above; (iii) Prescott Group Aggressive Small Cap II, L.P. has shared voting and dispositive power over all of the shares included in the table above; and (iv) Phil Frohlich has sole voting and dispositive power over all of the shares included in the table above. The address of Prescott Group Capital Management, L.L.C., et al, is 1924 South Utica, Suite 1120, Tulsa OK 74104.

Hedging Policy

 

Executive officers, directors and employees may only engage in hedging transactions (such as puts, calls, options, and similar financial instruments) of Company with prior approval of the Board of Directors. The Company’s policies state that such transactions are generally inappropriate for executive officers, directors and employees.

35

PROPOSAL NO. 2

RATIFICATION OF SELECTION OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has approved the appointment of CohnReznick LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2020. We have been advised by CohnReznick LLP that it is an independent registered public accounting firm with the Public Company Accounting Oversight Board, and complies with the auditing, quality control and independence standards and rules of the Public Company Accounting Oversight Board.

While the Audit Committee retains CohnReznick LLP as our independent registered public accounting firm, the Board of Directors is submitting the selection of CohnReznick LLP to our stockholders for ratification upon recommendation to do so by the Audit Committee and as a matter of good corporate governance.

Unless contrary instructions are given, shares represented by proxies solicited by the Board of Directors will be voted for the ratification of the selection of CohnReznick LLP as our independent registered public accounting firm for the year ending December 31, 2020. If the selection of CohnReznick LLP is not ratified by affirmative vote of the majority of the shares present or represented by proxy at the Annual Meeting and entitled to vote on this proposal, the Audit Committee will review its future selection of an independent registered public accounting firm in the light of that vote result. Even if the selection of CohnReznick LLP is ratified, the Audit Committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if it determines that such a change is in our best interests.

CohnReznick LLP has no financial interest of any kind in the Company, except the professional relationship between auditor and client. Representatives of CohnReznick LLP will be invited to attend the Annual Meeting. If a representative of CohnReznick LLP does attend the Annual Meeting, the representative will have an opportunity to make a statement if he or she so chooses, and will be available to respond to questions from stockholders.

Audit and Non-Audit Fees

Aggregate fees for professional services rendered by our independent auditors, CohnReznick LLP, for 2019 and 2018 are set forth in the table below.

 

 

 

 

 

 

 

 

    

2019

    

2018

Audit fees

 

$

351,235

 

$

423,870

Audit-related fees

 

 

48,450

 

 

 —

Tax fees

 

 

 —

 

 

 —

All other fees

 

 

 —

 

 

 —

Total

 

$

399,685

 

$

423,870

 

Audit Fees

Audit fees include fees for the audit of our consolidated financial statements, the audit of our internal control over financial reporting and reviews of our unaudited consolidated interim financial statements.

Audit-Related Fees

Fees for audit-related services, including for assurance and related services reasonably related to the performance of the audit or review of our financial statements. These fees relate to assurance services performed in connection with the Company’s acquisitions.

Tax Fees

Tax fees include professional services in connection with tax compliance and advice.

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All Other Fees

This category consists of services provided by CohnReznick LLP that are not included in the categories above under “Audit Fees,” “Audited-Related Fees” and “Tax Fees.”

Audit Committee Pre-Approval Policies and Procedures

The Audit Committee approves in advance audit and non-audit services to be provided by our independent registered public accounting firm. Any service proposals submitted by our independent registered public accounting firm must be discussed and approved by the Audit Committee during its meetings. Once a proposed service is approved, we or our subsidiaries formalize the engagement of the service. No tax services were approved by the Board of Directors in accordance with Item 2‑01(c)(7)(i)(C) of Regulation S-X during the fiscal years ended December 31, 2019 and 2018.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR”
RATIFICATION OF SELECTION OF COHNREZNICK LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2020

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PROPOSAL NO. 3

TO APPROVE, ON AN ADVISORY BASIS, NAMED EXECUTIVE OFFICER COMPENSATION

We currently hold an advisory vote to approve executive compensation on an annual basis, which aligns with our stockholders’ recommendation at our 2019 annual meeting. Accordingly, pursuant to Securities Exchange Act Section 14A we are seeking an advisory stockholder vote to approve the compensation of our named executive officers as disclosed in this Proxy Statement. This proposal, also referred to as “say-on-pay,” gives stockholders the opportunity to approve, reject or abstain from voting with respect to our fiscal 2019 executive compensation programs and policies for the named executive officers. This vote is not intended to address any specific item of compensation, but rathe