TANDY LEATHER FACTORY, INC.
Dear Tandy Leather Factory, Inc. Stockholder:
On Thursday, July 1, 2021, Tandy Leather Factory, Inc. will hold our 2021 Annual Meeting of Stockholders at the Tandy retail store #4, adjacent to its principal office in
Fort Worth, Texas (address shown above). These meeting will begin at 11:00 a.m. local time.
Only stockholders who owned common stock at the close of business on May 20, 2021 may vote at the Annual Meeting or any adjournments that may take place. At the Annual Meeting, we will consider:
Our company is undertaking a restatement of prior financial statements and is not currently reporting our regular financial results until the restatement has been completed. For this reason, we
are unable to solicit votes for the Annual Meeting by proxy statement. The attached information statement is not a proxy statement or a solicitation of shareholder votes by proxy. We believe that we will have sufficient shares of stock represented in order for the Annual Meeting to be held; in the event there are not sufficient shares in
attendance during the virtual meeting, the Annual Meeting would be postponed to a later date.
Our Board of Directors recommends that you vote in favor of Proposals 1 and 2. Our information statement also outlines certain of our corporate governance practices and discusses our
compensation philosophy and practices. Your vote is important. We encourage you to read these materials carefully and, if possible, to attend the Annual Meeting to vote on these proposals.
Please advise our transfer agent, Broadridge Corporate Issuer Solutions, 1155 Long Island Avenue, Edgewood, NY 11717, of any change in your address, for future mailings.
Because you are a stockholder of Tandy Leather Factory, Inc. as of the record date and entitled to vote at the 2021 Annual Meeting of Stockholders, our Board of Directors is asking for your vote at the Annual
Meeting. You are invited to attend our Annual Meeting on July 1, 2021, beginning at 11:00 am Central time.
These information materials are first being made available to stockholders on or about June 2, 2021.
At the date this information statement went to print, we did not know of any other matters to be raised at the Annual Meeting.
Holders of record of shares of our common stock as of the close of business on May 20, 2021 (the record date) are entitled to vote at the Annual Meeting. As of that
date, a total of 8,663,921 shares of common stock were outstanding and entitled to vote. Each share of common stock is entitled to one vote.
Many stockholders hold their shares through a stockbroker, bank, or other nominee rather than directly in their own name. As summarized below, there are some distinctions between shares held of record and those
owned beneficially.
Your vote is important.
If you vote by Internet or by telephone, your vote must be received by 11:59 PM Eastern Time on June 30, 2021, the business day before the Annual Meeting. Your shares will be voted as you indicate.
If your shares are held in a brokerage account in your broker’s name, you should follow the voting directions provided by your broker or nominee. You may complete and mail a voting instruction card to your broker or
nominee or, in most cases, submit voting instructions via the Internet to your broker or nominee. If you provide specific voting instructions by mail or the Internet, your shares should be voted by your broker or nominee as you have directed.
We will distribute written ballots to anyone who wants to vote at the Annual Meeting. If you hold your shares in street name, you must request a legal proxy from your broker to vote at the Annual Meeting.
Yes. It is our policy that all ballots and vote tabulations that identify the vote of a stockholder will be kept confidential from us and our directors, officers, and employees until after the final vote is
tabulated and announced, except in limited circumstances when required to meet a legal requirement, to defend a claim against us or to assert a claim by us, or when written comments by a stockholder appear on the stockholder’s voting material.
We will appoint an inspector of election for the Annual Meeting who will count the votes cast.
A majority of the outstanding shares of common stock determined on May 20, 2021 represented in attendance at the Annual Meeting constitutes a quorum for voting on items at the Annual Meeting. If you vote, your
shares will be part of the quorum. Abstentions will be counted in determining the quorum but will not be counted as votes cast.
The eight nominees for director receiving the highest number of “FOR” votes at the Annual Meeting will be elected to the Board of Directors.
The affirmative vote of a majority of the votes cast at the Annual Meeting by stockholders entitled to vote on the matter is required to provide advisory approval of the executive compensation of our named executive
officers as described in this information statement. Abstentions are not counted for purposes of the advisory approval of the executive compensation of our named executive officers as described in the information statement.
We plan to announce preliminary voting results at the Annual Meeting and publish final results in a current report on SEC Form 8-K within four business days after the Annual Meeting.
The following table sets forth information regarding the following as of May 20, 2021, the record date for the Annual Meeting:
The percentage of beneficial ownership is calculated on the basis of 8,663,921 shares of our common stock outstanding as of May 20, 2021. The information provided in the table is based on our records, information
filed with the SEC, and information provided to us, except where otherwise noted.
|
Title of Class
|
|
Name and Address of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership (1)
|
|
Percent
of Class
|
|
Common Stock
|
|
Bandera Partners LLC (2)
50 Broad Street, Suite 1820
New York, NY 10004
|
|
2,857,936
|
|
33.0%
|
| |
|
|
|
|
|
|
|
Common Stock
|
|
JCP Investment Partnership, LP (3)
1177 West Loop South, Suite 1650
Houston, TX 77027
|
|
859,197
|
|
9.9%
|
Security Ownership of Management
|
Title of Class
|
|
Name of Beneficial Owner
|
|
Amount and Nature of
Beneficial Ownership (1)(4)
|
|
Percent
of Class
|
|
Common Stock
|
|
Janet Carr
|
|
192,800
|
|
2.2%
|
|
Common Stock
|
|
Michael Galvan
|
|
-
|
|
*
|
|
Common Stock
|
|
Vicki Cantrell
|
|
3,374
|
|
*
|
|
Common Stock
|
|
Elaine D. Crowley
|
|
-
|
|
*
|
|
Common Stock
|
|
Jefferson Gramm(2)
|
|
2,864,055
|
|
33.1%
|
|
Common Stock
|
|
Sharon M. Leite
|
|
3,374
|
|
*
|
|
Common Stock
|
|
James Pappas (3)
|
|
863,922
|
|
10.0%
|
|
Common Stock
|
|
Sejal Patel
|
|
3,374
|
|
*
|
|
Common Stock
|
|
William Warren
|
|
28,516
|
|
*
|
| |
|
All Current Directors and Executive Officers as a Group (9 persons)
|
|
3,959,415
|
|
45.7%
|
|
*
|
Represents beneficial ownership of less than 1% of our outstanding shares of common stock.
|
| (1) |
All shares of common stock are owned beneficially, and such owner has sole voting and investment power, unless otherwise stated. The
inclusion herein of shares listed as beneficially owned does not constitute an admission of beneficial ownership.
|
| (2) |
Holdings shown for Jefferson Gramm and Bandera Partners, LLC are based on a Schedule 13D/A filed on February 5, 2021 by Mr. Gramm and Bandera Partners, LLC. Bandera Partners, LLC is the investment manager
of Bandera Master Fund L.P. in whose name 2,857,936 of our shares are held. Messrs. Gregory Bylinksy and Jefferson Gramm are Managing Partners, Managing Directors and Portfolio Managers of Bandera Partners LLC. Bandera Master Fund L.P.
has delegated to Bandera Partners the sole and exclusive authority to vote and dispose of the securities held by Bandera Master Fund. As a result, each of Bandera Partners and Messrs. Bylinksy and Gramm may be deemed to beneficially own
the shares held by Bandera Master Fund.
|
| (3) |
Holdings shown JCP Investment Management, LLC are based on a Schedule 13D/A filed on December 6, 2018 by JCP Investment Management, LLC. Mr. Pappas, one of our Directors, is a Managing Member and Owner of JCP Investment Management, LLC. As a result, Mr. Pappas may be deemed to beneficially own the shares held by JCP
Investment Management, LLC. Ownership percentages in the table are rounded to the nearest 1/10%; actual ownership percentage for Mr. Pappas is 9.97%.
|
| (4) |
To our knowledge, none of these shares have been pledged.
|
PROPOSAL ONE: ELECTION OF DIRECTORS
The Board of Directors Recommends a Vote “FOR” All Nominees.
All directors are to be elected at the Annual Meeting to hold office until the next Annual Meeting of stockholders and until their successors have been duly elected and qualified. Currently, there are eight
directors as provided by our corporate by-laws. All eight nominees have indicated their willingness to serve for the ensuing term.
GENERAL INFORMATION ABOUT THE BOARD OF DIRECTORS
|
Name
|
|
Age
|
|
Director
Since
|
|
Position
|
|
Janet Carr
|
|
60
|
|
2018
|
|
Director, Chief Executive Officer
|
|
Vicki Cantrell
|
|
63
|
|
2017
|
|
Director
|
|
Elaine D. Crowley
|
|
62
|
|
2021
|
|
Director
|
|
Jefferson Gramm
|
|
45
|
|
2014
|
|
Chairman of the Board of Directors
|
|
Sharon M. Leite
|
|
58
|
|
2017
|
|
Director
|
|
James Pappas
|
|
40
|
|
2016
|
|
Director
|
|
Sejal Patel
|
|
42
|
|
2017
|
|
Director
|
|
William M. Warren
|
|
76
|
|
2013
|
|
Director
|
Janet Carr, 60, has served as our Chief Executive Officer and as a member of our Board of Directors since October 2018. Prior to her current role, Ms.
Carr served as the SVP of Global Business Development for Caleres (formerly Brown Shoe) from January 2016 until July 2017. While there, she was responsible for international wholesale and retail for all of their brands. Prior to Caleres, Ms. Carr
was the President of the Handbag Division of Nine West Group from 2013 to November 2014, where she was responsible for all aspects of design, development and sales in both wholesale and retail. Ms. Carr has deep experience in strategy and
consumer insights in various roles at a number of prominent retailers including Tapestry, Inc. (formerly Coach, Inc.), Gap Inc. and Safeway.
Vicki Cantrell, 63, is a retail veteran with over 20 years of operational experience. Since January 2020 she has served as
Chief Executive Officer for Vendors in Partnership LLC. From September 2017 until June 2018, she served as Retail Transformation Officer for Aptos Inc., where Ms. Cantrell brought transformation strategies to the retailer’s businesses and to the
vendor/retail partnership. Prior to that role, Ms. Cantrell served from October 2011 to October 2016 as a Senior Vice President at National Retail Federation, which is the world’s largest retail association. From May 2008 until June 2011, she
served as Chief Operating Officer of Tory Burch LLC while it experienced 300% growth. From April 2003 until May 2008 she served as Chief Information Officer of Giorgio Armani, as it underwent a multi-phase CRM implementation. Ms. Cantrell has
worked in all facets of the retail industry, as retailer, vendor/partner and industry spokesperson. She has deep expertise in building and executing strategies to meet evolving needs including enhancing customer acquisition, service and loyalty;
determining optimal organizational structure in ever-changing environments; and in building robust cyber security programs.
Elaine D. Crowley, 62, served as Chief Restructuring Officer of Stage Stores, Inc. from May 2020 to October 2020 and served as a
member of its Board of Directors from 2014 to 2020. From 2010 until her retirement in 2012, Ms. Crowley served as Executive Vice President and Chief Financial Officer for Mattress Giant Corporation, a mattress retailer. From 2008 to 2010, Ms.
Crowley served as Executive Vice President and Chief Financial Officer and Senior Vice President, Controller and Chief Accounting Officer/Chief Financial Officer for Michaels Stores, Inc., an arts and crafts retailer. From August 1990 to
September 2007, Ms. Crowley was employed by The Bombay Company, Inc., a furniture and home goods retailer, most recently as Senior Vice President, Chief Financial Officer and Treasurer. She held that title for administrative purposes while also
having served as Liquidation Trustee for the Bombay Liquidation Trust from September 2007 to December 2017. She has 11 years of public accounting experience principally with Price Waterhouse. She holds a B.B.A. in accounting from Texas
Christian University and is licensed as a certified public accountant in Texas. Ms. Crowley’s tenure in senior executive and financial roles with other retailers and experience as a Certified Public Accountant in the practice of public
accounting provides the Board with valuable leadership experience and financial and retail expertise.
Jefferson Gramm, 45, is a portfolio manager at Bandera Partners LLC, which might be deemed to be an affiliate of ours
by virtue of holding approximately 33% of our outstanding common stock. See “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT” for information regarding Bandera Partners LLC’s ownership of our common stock. Mr. Gramm has been in his present position with Bandera since 2006. His prior experience includes serving as Managing Director of Arklow Capital, LLC, a hedge fund manager focused on distressed and value
investments, from October 2004 to July 2006. He has been a Director of Rubicon Technology since November 2017. He also served as a Director of Ambassadors Group from May 2014 until October 2015 and of Morgan’s Foods Inc. from April 2013 to
March 2014. He served as a Director of Peerless Systems Corp from June 2009 to November 2010. He received an M.B.A. from Columbia University in 2003 and a B.A. in Philosophy from University of Chicago in 1996. Mr. Gramm provides a
unique and valuable perspective with respect to corporate governance, our stockholder base and stockholder issues in general.
Sharon M. Leite, 58, has been Chief Executive Officer of Vitamin Shoppe, Inc. since August 2018. She previously served as
Managing Director, President of Godiva Chocolatier in North America from October 2017 until August, 2018. Prior to joining Godiva, from February 2016 until May 2017, Ms. Leite was the President of Sally Beauty, US and Canada (NYSE: SBH), an
international specialty retailer and distributor of professional beauty products, with over 3,000 stores. Prior to joining SBH, from 2007 until January 2016, Ms. Leite was the Executive Vice President of Sales, Customer Experience, & Real
Estate at Pier 1 Imports (NYSE: PIR). In addition, Ms. Leite has held various executive leadership roles at Bath and Body Works (L Brands) as well as various sales and operations positions with other prominent retailers including Gap, Inc. and
The Walt Disney Company. She currently serves as a member of the Board of Directors of the National Retal Federation (NRF).
Ms. Leite brings significant general management experience as well as retail sales,
operations, digital, e-commerce, real estate, merchandising, marketing and human resource strategies.
James Pappas, 40, is the managing member and owner of JCP Investment Management. Mr. Pappas serves on the board of Innovative Food Holdings, Inc. since
2020. Mr. Pappas also served as a director of US Geothermal, Inc. from September 2016 until April 2018. He served as a director of Jamba, Inc., a health and wellness brand and leading retailer of freshly squeezed juice, from January 2015 to
September 2018; he also served on Jamba, Inc.’s Nominating, Corporate Governance and Audit Committees. He served on the board of directors of The Pantry, Inc., the largest independently operated convenience store chains in the U.S. from March
2014 until it was acquired in February 2015. Mr. Pappas also served on the board of directors, including Chairman of the Board, of Morgan’s Foods from February 2012 to May 2014 until it was acquired. Mr. Pappas received a BBA in Information
Technology and a Masters in Finance from Texas A&M University. Mr. Pappas has substantial skills in marketing and branding, as well as experience with growth-oriented businesses. Mr. Pappas also offers a strong tactical and financial
background.
Sejal Patel, 42, is a Portfolio Manager at Skale Investments since January 2019. From July 2015 through September 2018, she was a Partner/Advisor at
Lake Trail Capital, a private investment firm. Her prior work experience includes serving as Vice President of Indus Capital, a hedge fund manager focused on Asian and Japanese equities, from 2012 to 2015 and Director for Kelusa Capital
Management, a hedge fund manager focused on Asian equities, from 2006 to 2012. She served on the Boards of Value Quest Capital, a value fund based in India, since 2014 and the Tiger Foundation, a non-profit organization based in New York, from
2009 to 2018. She received a B.S. in Economics from the University of Pennsylvania. Ms. Patel brings a strong financial and business background to our Board.
William M. Warren, 76, is president and sole Director of William M. Warren, PLLC, an independent law firm. He
also serves as of Counsel to Loe Warren P.C., a law firm located in Fort Worth Texas, where he was President and Director from 1979 until December 2019. He has served as one of our directors from 1993 to 2003 and since 2013 and also served as
our Secretary and General Counsel from 1993 until 2018. Mr. Warren brings to our Board extensive legal and industry experience, as well as a long history with, and deep institutional knowledge of, the Company.
The information relating to the occupations and security holdings of our directors and nominees is based upon information received from them.
ADDITIONAL INFORMATION CONCERNING OUR BOARD OF DIRECTORS
Meeting Attendance
During fiscal 2020, the Board of Directors held four regularly scheduled meetings. All current directors who served during 2020 attended 75% or more of the aggregate of the total number of meetings of the Board of
Directors and of committees of the Board of Directors of which he or she was a member and which were held during the time that he or she was a director or member of such committee, as applicable. We encourage and expect our directors to attend
our Annual Meeting absent extenuating circumstances, but we do not have a formal policy requiring attendance. All of our directors attended our Annual Meeting held in 2020.
Director Independence
The Board of Directors has considered the listing requirements of the Nasdaq for “independence” of directors, and it has determined that our non-employee directors Vicki Cantrell, Elaine Crowley, Jefferson Gramm,
Sharon Leite, James Pappas and Sejal Patel are independent under these requirements. Our non-employee directors hold executive sessions at each regular meeting.
Board of Directors Leadership Structure
The Board of Directors has determined it appropriate to separate the roles of CEO and Chairman, allowing the CEO to run Tandy Leather Factory, Inc. and the Chairman to run the Board of Directors. Janet Carr has
been our Chief Executive Officer since October 2018. Jefferson Gramm, one of our directors, has been Chairman of the Board since 2017. We believe our CEO and our Chairman have an excellent working relationship that has allowed the CEO to focus
on the challenges that we face in the current business environment. The separation of the CEO and Chairman positions provides strong leadership for our Board of Directors, while also positioning our CEO as our leader in the eyes of our
customers, employees, and other stakeholders.
Our Board of Directors currently has six independent members and two non-independent members; in May 2021 we increased the size of our Board from seven members to eight. We have three committees of the Board of
Directors comprised solely of independent directors, with three different independent directors serving as chairs of the committees. We believe that the number of independent, experienced directors that make up our Board of Directors benefits us
and our stockholders.
Risk Oversight
Our Audit Committee is primarily responsible for overseeing our risk management processes on behalf of the full Board of Directors, focusing on the most significant risks facing us and our general risk management
strategy, and also ensuring that risks undertaken by us are consistent with the Board of Directors’ appetite for risk. Management is responsible for the development, implementation, and maintenance of our risk management processes and provides
periodic reports to the Audit Committee on its assessment of strategic, operational, financial, competitive, reputational, and legal risks to us. We believe this division of responsibilities is the most effective approach for addressing the
risks we face and that our Board of Directors leadership structure supports this approach.
Director Compensation
Compensation of non-employee directors is determined by the Board. Our non-employee directors are paid an annual cash retainer of $16,000; in addition, the Chairman of the Audit Committee is paid an additional
annual retainer of $5,000, and other members of the Audit Committee are paid an additional retainer of $2,000. All directors are reimbursed for reasonable expenses incurred in connection with their service on our Board of Directors, including the
committees thereof.
We generally award restricted stock units annually to each non-employee director in accordance with our 2013 Restricted Stock Plan; these grants generally have a value equal to approximately $14,000 (based on the
fair market value of our common stock as of the date of grant) and vest equally over a four-year period from the date of grant. Between February 2017 and the end of 2018, we did not award any equity to our non-employee directors, and the Board
has determined that this was an oversight that should be corrected with increased grants in 2019 and 2020. Accordingly, in February 2020, we awarded each non-employee director other than Mr. Gramm (who voluntarily declined this equity grant) an
increased grant of restricted stock units with a fair market value equal to $23,000 as of the grant date; the shares underlying the 2020 awards will vest equally over a three-year period from the date of grant. In February 2021, we awarded each
non-employee director other than Mr. Gramm (who voluntarily declined this equity grant) a grant of restricted stock units with a fair market value equal to $14,000 as of the grant date; the shares underlying the 2021 awards will vest equally over
a four-year period from the date of grant. Upon joining the Board in May 2021, Elaine Crowley was awarded a grant of restricted stock units with these same terms.
The goal of our restricted stock unit grants to directors is to attract and retain competent non-employee personnel to serve on our Board of Directors by offering them long-term equity incentives. Each of our
non-employee directors is eligible to participate in this plan.
DIRECTOR COMPENSATION TABLE
The table below summarizes the compensation paid by us to our non-employee directors for their service on the Board during the year ended December 31, 2020. Our directors who are also employees receive no
additional compensation for serving as directors.
|
Name
|
Fees Earned or Paid in
Cash ($)
|
Restricted Stock
Awards($)
|
Total
($)
|
|
Vicki Cantrell
|
$16,000
|
$23,000
|
$39,000
|
|
Jefferson Gramm
|
16,000
|
-
|
16,000
|
|
Sharon M. Leite
|
18,000
|
23,000
|
41,000
|
|
James Pappas
|
21,000
|
23,000
|
44,000
|
|
Sejal Patel
|
18,000
|
23,000
|
41,000
|
|
William Warren
|
16,000
|
23,000
|
39,000
|
COMMITTEES OF THE BOARD OF DIRECTORS
As of the date of this information statement, our Board of Directors has three committees: (1) Audit Committee, (2) Compensation Committee, and (3) Nominating Committee. The membership as of the date of this
information statement and the function of each committee are described below.
|
Name of Director
|
|
Audit
|
|
Compensation
|
|
Nominating
|
|
Non-Employee Directors:
|
|
|
|
|
|
|
|
Vicki Cantrell
|
|
|
|
X
|
|
C
|
|
Elaine D. Crowley
|
|
X
|
|
|
|
|
|
Jefferson Gramm
|
|
|
|
X
|
|
X
|
|
Sharon M. Leite
|
|
X
|
|
C
|
|
|
|
James Pappas
|
|
C
|
|
|
|
X
|
|
Sejal Patel
|
|
X
|
|
|
|
X
|
|
William Warren
|
|
|
|
|
|
X
|
|
Employee Director:
|
|
|
|
|
|
|
|
Janet Carr
|
|
|
|
|
|
|
|
Number of Meetings in Fiscal 2020
|
|
7
|
|
1
|
|
0
|
X = Committee member; C = Committee Chairman
Nominating Committee
We have a Nominating Committee consisting of five directors, all of whom except for Mr. Warren are “independent” under the listing requirements of Nasdaq. The Nominating Committee did not meet during 2020.
The Board of Directors has adopted a written charter for the Nominating Committee, which is available on our website at www.tandyleather.com. This charter provides that the Nominating Committee is
responsible for identifying individuals qualified to become directors consistent with criteria as may be established by the Board of Directors. The charter also provides that the Nominating Committee shall take into account such additional
factors as it deems appropriate in evaluating candidates. These factors may include strength of character, mature judgment, career specialization, relevant technical skills, diversity and the extent to which a candidate would fill a present need
on the Board of Directors. In addition, the charter states that the Nominating Committee will consider stockholder recommendations of director nominees, as well as nominations by our senior officers. The Nominating Committee evaluates all
director nominees in a like manner without regard as to who recommended the nomination. Traditionally, we have not engaged third parties to identify or evaluate potential directors or to assist in that process. In addition, the Nominating
Committee makes a review and evaluation periodically of the Board of Directors and the Nominating Committee’s own performance. Further, the Nominating Committee recommends persons to serve on the Nominating Committee as members, as well as the
possible removal of any incumbent Nominating Committee members.
Stockholders may nominate director nominees for consideration by writing to our Secretary at 1900 Southeast Loop 820, Fort Worth, Texas 76140-1003. Any such nomination must include:
|
• |
As to each person whom the stockholder proposes to nominate for election or re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or
as otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, or any successor regulation thereto (including such person’s written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); and
|
|
• |
The nominating stockholder’s name and address, as they appear on our books, and the class and number of our shares beneficially owned by him.
|
The Nominating Committee recommended to the Board of Directors that all eight director nominees listed in this information statement serve as directors for a term ending on the date of the 2022 Annual Meeting of
Stockholders.
The Nominating Committee will consider nominees for directors recommended by our stockholders and will evaluate such nominees using the same criteria used to evaluate director candidates as described above.
Nominations of persons for election to the Board of Directors may be made by any stockholder entitled to vote for the election of directors at the applicable meeting that complies with the notice procedures set forth in our bylaws. Such
nominations shall be made pursuant to timely notice in writing to our Secretary. To be timely, a stockholder’s notice shall be delivered to or mailed and received at our principal executive offices not less than 30 days nor more than 60 days
prior to the applicable meeting; provided, however, that if less than 40 days’ notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholders to be timely must be so received not later
than the close of business on the 10th day following the date on which such notice of the date of the meeting was mailed or such public disclosure was made. Any adjournment(s) or postponement(s) of the original meeting whereby the
meeting will reconvene within 30 days from the original date shall be deemed for purposes of notice to be a continuation of the original meeting and no nominations by a stockholder of persons to be elected directors may be made at any such
reconvened meeting other than pursuant to a notice that was timely for the meeting on the date originally scheduled. The stockholder’s notice shall set forth: (i) as to each person whom the stockholder proposes to nominate for election or
re-election as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or as otherwise required, in each case pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended, or any successor regulation thereto (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (ii) as to the stockholder giving
notice (a) the name and address, as they appear on our books, of such stockholder, and (b) the class and number of our shares that are beneficially owned by such stockholder.
Compensation Committee
The Compensation Committee is responsible for recommending to the Board of Directors the compensation program of the executive officers. The Compensation Committee consists of three directors, all of whom are
“independent” under the listing requirements of Nasdaq. The Compensation Committee submits all issues concerning executive compensation to the full Board of Directors for approval. It may not delegate this authority. The Board of Directors has
adopted a written charter for the Compensation Committee, which is available on our website at www.tandyleather.com. The Compensation Committee met one time during 2020.
Audit Committee
The Audit Committee’s basic role is to assist the Board of Directors in fulfilling its fiduciary responsibility pertaining to our accounting policies and reporting practices. Among other duties, the Audit
Committee is to be the Board of Directors’ principal agent in assuring the independence of our outside auditor, the integrity of management, and the adequacy of disclosures to stockholders. The Audit Committee has been structured to comply with
the requirements of Section 3(a)(58)(A) of the Exchange Act. The Board of Directors has determined that all members of the Audit Committee are “independent” under the applicable rules of the Nasdaq and that James Pappas, Chairman of the Audit
Committee, qualifies as an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K. The Board of Directors has adopted a written charter for the Audit Committee, which is available on our website at www.tandyleather.com.
The Audit Committee met seven times during 2020. The Report of the Audit Committee for the fiscal year ended December 31, 2020 appears below.
Audit Fees
Weaver & Tidwell performed the audit of our 2018 financial statements, as well as the reviews of the financial statements included in our Forms 10-Q during 2018 and the first quarter of 2019. They also have
performed services in connection with the pending restatement of our 2017 – 2018 financial statements and with the pending preparation of financial statements for periods since January 1, 2019. The amounts shown below are the aggregate amounts
paid to Weaver during 2020 and 2019 for services in the categories indicated.
|
Types of Fees
|
|
2020
|
|
|
2019
|
|
|
Audit fees
|
|
$
|
352,691
|
|
|
$
|
125,850
|
|
|
Audit-related fees
|
|
|
-
|
|
|
|
-
|
|
|
Tax fees
|
|
|
-
|
|
|
|
-
|
|
|
All other fees
|
|
|
-
|
|
|
|
-
|
|
|
Total
|
|
$
|
352,691
|
|
|
$
|
125,850
|
|
In accordance with the charter of our Audit Committee as in effect at the relevant times and the rules of the SEC, the Audit Committee approved all of the fees indicated above before the services were provided,
except for the portions of the 2019 and 2020 fees relating to the financial restatement of the prior years, which were not able to be determined before the services were begun. The Audit Committee considered the services listed above to be
compatible with maintaining Weaver’s independence.
Report of the Audit Committee
As members of the Audit Committee, we oversee Tandy Leather Factory, Inc.’s financial reporting process on behalf of the Board of Directors. Management is responsible for the preparation, presentation, and
integrity of our financial statements, accounting and financial reporting principles, internal controls, and procedures designed to ensure compliance with accounting standards, applicable laws, and regulations.
During 2020 we recommended, and the Board of Directors approved, the appointment of Weaver as independent auditors for the year ended December 31, 2020. Our auditors are responsible for performing an independent
audit of the consolidated financial statements and expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States.
The Audit Committee has received from Weaver the written disclosures and the letter required by the applicable requirements of the PCAOB regarding Weaver’s communications with the Audit Committee concerning
independence and the Audit Committee has discussed with Weaver their independence from us and our management.
As previously disclosed, in October 2019 the Company’s management, in consultation with the Audit Committee, determined that the Company’s previously issued Consolidated Financial Statements for the years 2017 and
2018 and quarterly periods between January 1, 2017 and March 31, 2019 should no longer be relied upon due to misstatements related to the Company’s accounting processes for inventory transactions. The Company undertook to make the necessary
accounting corrections and restate such financial statements. Because that financial restatement in still in progress, the Company’s financial statements for 2020 have not yet been completed, and Weaver has not yet completed its audit of our
2020 financial statements. The Company and Weaver are working diligently to complete this restatement, and we intend that Weaver’s audit of our 2020 financial statements will be completed shortly following the filing of our restatement.
The foregoing report was submitted by the Audit Committee and shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A promulgated by the SEC or Section 18 of the
Exchange Act.
| |
AUDIT COMMITTEE:
|
| |
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James Pappas, Chairman
|
| |
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Elaine D. Crowley
|
| |
|
Sharon M. Leite
|
| |
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Sejal Patel
|
COMPENSATION DISCUSSION AND ANALYSIS
The primary focus of our executive compensation programs is to improve our performance year over year and over a longer-term period. The compensation programs were designed to provide the tools necessary to hire
executives with the skills needed to manage Tandy Leather Factory, Inc. to meet these goals and to retain them over the long-term. In developing the programs, a key consideration was to have plans that were easy to understand and administer,
while being competitive with companies of similar size and philosophy. Over the past several years, management and the Compensation Committee have worked to refine the compensation programs used to ensure that they support these goals and our
ongoing business objectives. Our philosophy has been to reward team performance, measured by our overall results. Each executive officer’s compensation is linked to their individual contribution toward increases in the size of our operations,
our income, and increases in stockholder value. At the 2020 Annual Meeting, stockholders were asked to approve Tandy Leather Factory, Inc.’s 2019 executive compensation programs. Approximately 99% of the shares voted approved the program. In
consideration of these results and other factors the the Compensation Committee evaluates on a regular basis, the Compensation Committee concluded that Tandy Leather Factory, Inc.’s existing executive compensation programs continue to be
appropriate to support Tandy Leather Factory, Inc.’s compensation philosophy and objectives described in this discussion.
Compensation for our executive officers consists of the following components:
|
• |
Annual incentive bonus;
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|
• |
Restricted stock unit grants;
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|
• |
Retirement and other benefits, and
|
Each of these elements of pay is described below.
Company Performance. In 2020, Tandy Leather Factory, Inc.’s sales decreased approximately 15% from 2019, as the Company’s entire fleet of stores was temporarily shut down
by the COVID-19 pandemic. Because of the ongoing financial restatement, the Company has not yet announced (as of the date of this information statement) its full-year gross profits or operating expenses for 2020.
Base Salary
Base salaries are intended to reward our executive officers based upon their roles within Tandy Leather Factory, Inc. and for their performance in those roles. Base salaries are established when an executive
officer is hired, based on prior experience and compared to salaries for comparable positions in other companies. Base salaries are generally increased annually, if market factors dictate such increases and assuming our financial performance is
satisfactory. The Company did not increase, and temporarily lowered because of the COVID-19 pandemic, base salaries for its executive officers during 2020.
Bonuses
We award discretionary bonuses to our executive officers, as determined by the Compensation Committee. We determine these bonuses on a subjective basis, considering business prospects for the upcoming year and the
improvement in our net income and financial position for the year in question. These discretionary bonuses are awarded annually and paid in the first quarter of the following year. We did not award any bonuses to our executive officers for
2020.
Restricted Stock Unit Grants
We award restricted stock unit grants to promote long-term retention of executive officers and permit them to accumulate equity ownership in Tandy Leather Factory, Inc., so that the interests of our management team
are directly aligned with the interest of our stockholders. We believe it is important to have an element of compensation that is focused directly on retaining talent so that we can minimize potential loss of company and industry knowledge and
the disruption inherent in unplanned turnovers. Restricted stock unit grants also align our executive officers with our stockholders by making them stockholders themselves. Retaining talent and aligning interests encourages our executive
officers to take actions to enhance the value of our business and increase stockholder value. Time-based restricted stock unit awards generally vest equally over four years. We did not grant any restricted stock units to our Chief Executive
Officer during 2020. In July 2020, the Company awarded Steven Swank, its Chief Financial Officer, a new-hire grant of restricted stock units valued at $30,000, which were scheduled to vest one year after the grant date; these units were
cancelled when Mr. Swank left the Company in March 2021.
Retirement and Other Benefits
Our benefits program includes a retirement plan and a group insurance program. The objective of the program is to provide executive officers with reasonable and competitive levels of protection against the four
contingencies (retirement, death, disability and ill health) that could interrupt the executive officer’s employment and/or income received as an active employee. Our retirement plans are designed to provide a competitive level of retirement
income to our executive officers and to reward them for continued service with Tandy Leather Factory, Inc. The retirement program for executive officers consists of a tax-qualified 401(k) Plan that covers all full-time employees. The group
insurance program consists of life and health insurance benefits plans that cover all full-time employees.
Employment Agreement with Ms. Carr
We have entered into an employment agreement with Janet Carr, CEO, dated as of October 2, 2018. Under this agreement, Ms. Carr is entitled to receive an annual base salary of
$500,000 and is eligible to receive an annual discretionary bonus, as determined by the Board. Also under this agreement, On October 2, 2018, Ms. Carr received: (i) a time-based equity grant of 460,000 restricted stock units (“RSUs”) that vest
over five years from the date of the grant; (ii) a performance-based equity grant of 92,000 RSUs that will vest if/when the Company’s operating income exceeds $12 million dollars two fiscal years in a row; and (iii) a performance-based equity
grant of 92,000 RSUs that will vest if/when the Company’s operating income exceeds $14 million dollars in one fiscal year. Ms. Carr was also reimbursed for reasonable costs and expenses in connection with her commute and relocation from New
York to Texas in 2019. If Ms. Carr’s employment is terminated by the Company without Cause or by Ms. Carr for Good Reason (each as defined in her employment agreement), Ms. Carr would receive twelve months of base salary and an annual
reimbursement of COBRA payments and vest in a pro-rata portion of the time-based RSUs, based on the number of days that Ms. Carr is employed. Any unvested performance-based RSUs would be forfeited. In the event that Ms. Carr’s employment is
terminated by the Company without Cause or by Ms. Carr for Good Reason within six months prior to or one year after a Change in Control (as defined in her employment agreement), Ms. Carr would receive thirty-six months of base salary and an
annual reimbursement of COBRA payments and vest in a pro-rata portion of the time-based RSUs, based on the number of days that Ms. Carr had been employed. Any unvested performance-based RSUs would be forfeited. Under this agreement, a
“Change in Control” is a defined term that includes a merger, a sale of all or substantially all of our assets or a similar transaction involving us, a third party acquiring more than 50% of our shares which includes, in general, a person or
entity becoming a 50% or greater stockholder of us, a covered removal of directors on our board of directors, or our liquidation or dissolution.
Change in Control Effect on other Restricted Stock Units
Our 2013 Restricted Stock Plan (which does not include the grants to Ms. Carr described above) also provides for accelerated vesting in the event of a “change of control”, whose meaning is materially the same as a
Change in Control described above for Ms. Carr’s employment agreement. Except to the extent that the Compensation Committee provides a result more favorable to holders of awards, in the event of a change of control, restricted stock units that
are not vested before a change of control will vest on the date of the change of control.
Separation and Release Agreement with Steven Swank
We entered into a Separation and Release Agreement with Steven Swank, the Company’s Chief Financial Officer from July 2020 until January 2021, dated as of January 6, 2021. Pursuant to this agreement, Mr. Swank
remained with the Company until March 5, 2021 (the “Separation Date”) to assist with transition. During this period, Mr. Swank continued to receive his base salary of $275,000 per year and continued to participate in all company health and
retirement plans and other benefits programs. The Company also agreed not to seek reimbursement from Mr. Swank for relocation or health insurance-related payments totalling $44,544 made to Mr. Swank at the time of his hire.
Compensation Committee Report
The Compensation Committee has reviewed and discussed the foregoing Compensation Discussion and Analysis (“CD&A”) with management.
The foregoing report was submitted by the Compensation Committee and shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A promulgated by the SEC, other than as
provided in Item 407 of Regulation S-K, or to the liabilities of Section 18 of the Exchange Act.
| |
COMPENSATION COMMITTEE:
|
| |
|
Sharon M. Leite, Chair
Vicki Cantrell
Jefferson Gramm
|
COMPENSATION TABLES AND OTHER INFORMATION
The following table includes information required by Item 402 of Regulation S-K promulgated by the SEC. The amounts shown represent the compensation paid to our named executive officers for each fiscal year noted
in the table, for services rendered to us. For a more complete discussion of the elements of compensation included in this table, please refer to the discussion reflected in “Compensation Discussion and Analysis” above.
SUMMARY COMPENSATION TABLE
|
Name and Principal
Position
|
Year
|
Salary
|
Bonus
|
Restricted Stock Awards
|
All Other
Compensation
|
Total
|
|
Janet Carr, Chief Executive Officer (1)
|
2020
2019
2018
|
$361,574
$500,000
$113,010
|
$ -
-
-
|
$ -
-
$4,759,160
|
$10,000 (3)
$20,230 (3)
-
|
$371,574
$520,230
$4,872,170
|
|
Steven Swank, Chief Financial Officer (2)
|
2020
|
$123,077
|
$ -
|
$30,000 |
$44,544 (4)
|
$197,621
|
|
(1) |
In October 2018, Ms. Carr was appointed CEO with an annual salary of $500,000. In addition, Ms. Carr was granted 644,000 restricted stock units; the amount reported as the value of these restricted stock units is based on the grant
date fair value of $7.39 per share, computed in accordance with FASB ASC Topic 718.
|
|
(2) |
In July 2020, Mr. Swank was granted restricted stock units valued on the grant date at $30,000 based on the grant date fair value of $3.31 per share, computed in accordance with FASB ASC Topic 718. Mr. Swank’s position as an executive
officer of the Company terminated in January 2021, although he continued to remain employed by the Company in a non-executive-officer capacity until March 2021, at which time these restricted stock units were cancelled.
|
|
(3) |
For 2019, represents Company-reimbursed moving expenses for Ms. Carr. For 2020, represents matching funds contributed to Ms. Carr’s Company 401(k) plan.
|
|
(4) |
Represents $42,376 paid by the Company to Mr. Swank for his relocation to Texas and $2,168 reimbursed to Mr. Swank for extending his health insurance coverage from his prior employer.
|
GRANTS OF PLAN-BASED AWARDS
The Company did not grant any plan-based or non-plan-based equity awards to its Chief Executive Officer during 2020. In July 2020, the Company awarded Steven Swank, its Chief Financial Officer, a new-hire grant of
restricted stock units valued at $30,000, which were scheduled to vest one year after the grant date; these units were cancelled when Mr. Swank left the Company in March 2021.
OUTSTANDING STOCK AWARDS
as of December 31, 2020
|
Name
|
Number of shares of stock
that have not vested (#)
|
Market value of shares of stock
that have not vested ($)
|
|
Janet Carr (1)
|
460,000
|
$1,472,000
|
| Steven Swank (2) |
9,063
|
$29,002
|
|
(1) |
Vesting is subject to Ms. Carr’s continued employment with the Company and to the achievement of performance criteria set forth in 184,000 performance-based restricted stock award units granted to her in 2018.
|
|
(2) |
All stock awards held by Mr. Swank were cancelled upon his departure from the Company in March 2021.
|
PROPOSAL TWO: ADVISORY VOTE ON EXECUTIVE COMPENSATION (“SAY-ON-PAY” VOTE)
The Board of Directors recommends a vote “FOR” the advisory approval of the executive compensation of our named executive officers as disclosed in this information statement.
Based upon a vote of stockholders at our 2017 Annual Meeting, following the Board of Directors’ recommendation for an annual advisory vote to approve the compensation of our named executive officers, we are
providing stockholders with an annual advisory vote on executive compensation. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), which was signed into law July 21, 2010, added Section 14A to the Securities
Exchange Act of 1934, as amended, and requires that we provide our stockholders with an opportunity to cast an advisory vote on the compensation of our named executive officers as disclosed in this information statement pursuant to the
compensation disclosure rules of the SEC. This proposal, commonly known as a “Say-on-Pay” vote, gives stockholders the opportunity to approve, reject or abstain from voting with respect to our fiscal 2020 executive compensation programs and
policies and the compensation paid to our named executive officers.
As discussed in this information statement under the heading “Compensation Discussion and Analysis,” our executive compensation program is designed to serve us and our stockholders by aligning executive
compensation with stockholder interests and by encouraging and rewarding management initiatives that will benefit us and our stockholders, customers, and employees over the long-term.
At last year’s annual meeting, approximately 99% of the votes cast on the advisory vote on executive compensation were in favor of our named executive officer compensation for 2019. We are asking our stockholders
to again indicate their support for our named executive officer compensation as described in this information statement. This is not intended to address any specific item of compensation, but rather the overall compensation of our named
executive officers and the philosophy, policies and practices described in this information statement. Accordingly, we are asking our stockholders to approve, on an advisory basis, the following resolution:
“RESOLVED, that the stockholders of Tandy Leather Factory, Inc. approve, on an advisory basis, the compensation paid to the named executive officers of Tandy Leather Factory, Inc., as disclosed in the 2021
information statement pursuant to the compensation disclosure rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables, and the related narrative disclosures.”
Approval of this proposal requires the affirmative vote of the holders of a majority of the shares entitled to vote on, and who vote for and against, this proposal. Although your vote on this matter is advisory in
nature and therefore will not be binding upon Tandy Leather Factory, Inc., the Compensation Committee or the Board of Directors, your advisory vote will serve as an additional tool to guide the Board of Directors and the Compensation Committee in
continuing to improve the alignment of our executive compensation programs with the interests of us and our stockholders. The vote on this resolution is not intended to address any specific element of compensation but rather relates to overall
compensation of our named executive officers, as described in this information statement in accordance with the compensation disclosure rules of the SEC.
RELATIONSHIPS AND TRANSACTIONS WITH RELATED PERSONS
On January 28, 2021, the Company entered into an agreement with Central Square Management (the “Seller”), an institutional shareholder of more than 5% of the Company’s common stock, to repurchase 500,000 shares of
the Company’s common stock in a private transaction. The purchase price was $3.35 per share and $1,675,000 in total. The closing of the repurchase of those shares took place on February 1, 2021. Prior to the repurchase, the Shares represented
approximately 5.5% of the Company’s outstanding common stock. The Company believes that the transaction was an arm’s length transaction, at the then-current market price for the Company’s common stock and otherwise on favorable terms to the
Company.
For our last two fiscal years, there have been no other transactions, and there is no currently proposed transaction, in which we were or are to be a participant and the amount involved exceeds the lesser of
$120,000 or one percent (1%) of the average of our total assets at year-end for our last two most recently completed fiscal years, and in which any related person, as defined under Item 404(a) of Regulation S-K, had or will have a direct or
indirect material interest. Such related persons include our directors, executive officers, nominees for director, any beneficial owner of more than five percent (5%) of our common stock, and their immediate family members.
Our Code of Business Conduct, which applies to all employees, including our executive officers and our directors, provides that our employees and officers and members of our Board of Directors are expected to use
sound judgment to help us maintain appropriate compliance procedures and to carry out our business with honesty and in compliance with law and high ethical standards. In addition, our directors and officers are expected to report any potential
related party transactions to the Board of Directors. Our Audit Committee, on behalf of the Board of Directors, reviews the material facts of all reported matters, by taking into account, among other factors it deems appropriate, whether a
transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances and the extent of the related person’s interest in the transaction to determine whether an actual
conflict of interest exists. No director may participate in any discussion or approval of a matter for which he or she is a related party. An annual review and assessment of any ongoing relationship with a related party is performed by the
Audit Committee and reported to the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Sections 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and holders of more than 10% of our common stock to file reports regarding their ownership and changes
in ownership of our securities with the SEC. Based solely on a review of the copies of such reports and amendments thereto furnished to us with respect to fiscal 2020 and written representations from our directors and executive officers, we
believe that, during fiscal 2020, our directors, executive officers and 10% stockholders complied with all Section 16(a) filing requirements, except that a Form 3 and Form 4 were not filed reporting Steven Swank’s initial ownership upon joining
the Company as Chief Financial Officer and an initial grant of restricted stock units made to him (which was reported on a Form 8-K).
EQUITY COMPENSATION PLANS
The following table sets forth information regarding our equity compensation plans (including individual compensation arrangements) that authorize the issuance of shares of our common stock. The information is
aggregated in two categories: plans previously approved by our stockholders and plans not approved by our stockholders. The table includes information for officers, directors, employees and non-employees. All information is as of December 31,
2020.
|
Plan Category
|
Column (A)
Number of Securities
to be issued upon
exercise of
outstanding options,
warrants and rights
|
Column (B)
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
Column (C)
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities reflected
in Column (A)
|
|
Equity compensation plans approved by stockholders
|
61,215
|
$ -
|
630,202
|
|
Equity compensation plans not approved by stockholders
|
460,000 |
-
|
-
|
|
TOTAL
|
521,215
|
$-
|
630,202
|
OTHER MATTERS
Solicitation of Proxies
The Company will not be soliciting proxies in connection with its 2021 Annual Meeting but will pay for all other costs in connection with the meeting.
Stockholder Proposals for 2021 and 2022
If you wish to present a proposal for consideration at an annual meeting, you must send written notice of the proposal to our Secretary not less than ten days before such annual meeting. We have not received
notice of any stockholder proposals to be presented at this year’s Annual Meeting. Pursuant to our bylaws, we must receive written notice of a stockholder proposal on or before June 21, 2020 for such proposal to be considered at this year’s
Annual Meeting.
If you would like your proposal to be included in next year’s proxy statement, you must submit the proposal to our Secretary by no later than February 3, 2022, or, if we hold our next annual meeting on a date that
is more than 30 days from the anniversary of our 2021 Annual Meeting, a reasonable time before we begin to print and send our proxy materials. We will include your proposal in our next annual proxy statement if it is a proposal that we would be
required to include pursuant to the rules of the SEC. You may write to our Secretary at 1900 Southeast Loop 820, Fort Worth, Texas 76140-1003 to present a proposal for consideration.
See “Nominating Committee” under “Committees of the Board of Directors” for the process for stockholders to follow to suggest a director candidate to the Nominating Committee for nomination by the Board of
Directors or to nominate persons for election to our Board of Directors at an applicable meeting of our stockholders.
According to our by-laws, any proposal properly raised at the Annual Meeting by a stockholder will require the affirmative vote of a majority of the shares deemed present at the Annual Meeting, whether in person or
by proxy unless a higher approval threshold is required by applicable law.
Stockholder Communications with Board of Directors
Stockholders who wish to communicate with the Chairman or with the directors as a group may do so by writing to our Secretary at Tandy Leather Factory, Inc., 1900 Southeast Loop 820, Fort Worth, Texas 76140-1003.
Our Secretary will forward your communication to the directors or Chairman of the Board as requested by the stockholder. All appropriate communications addressed to directors will be reviewed by our Secretary. Because other appropriate avenues
of communication exist for matters that are not of stockholder interest, such as general business complaints or employee grievances, communications that do not relate to matters of stockholder interest will not be forwarded to the Board of
Directors. Our Secretary has the option, but not the obligation, to forward these other communications to appropriate channels within Tandy Leather Factory, Inc.
Management knows of no other business to be brought before the 2021 Annual Meeting of Stockholders.
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TANDY LEATHER FACTORY, INC. |
| |
|
|
 |
|
Chairman of the Board |
| |
|
|
Fort Worth, Texas
|
|
|
June 2, 2021
|
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