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. )
Filed by the Registrant
x
Filed by a Party Other than the Registrant
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Check the appropriate box:
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x
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Under § 240.14a-12
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SEQUENTIAL BRANDS GROUP, INC.
(Name of Registrant as Specified in its
Charter)
_______________________________________________
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate
box):
x
No
fee required.
¨
Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction
applies:_______________________________________
2. Aggregate number of securities to which transaction
applies: ______________________________________
3. Per unit price or other
underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated
and state how it was determined): ______________________________________________________________________________________
4. Proposed maximum aggregate value of transaction:______________________________________________
5. Total
fee paid: ___________________________________________________________________________
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¨
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Fee
paid previously with preliminary materials.
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¨
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Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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1. Amount Previously Paid:____________________________________________________________________
2. Form, Schedule or Registration Statement No.:___________________________________________________
3. Filing Party: ______________________________________________________________________________
4. Date Filed: _______________________________________________________________________________
SEQUENTIAL
BRANDS GROUP, INC.
17383 Sunset Boulevard, Suite A310
Pacific Palisades, CA 90272
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held Tuesday, June 12, 2012
To the Stockholders of Sequential Brands
Group, Inc. (formerly known as People’s Liberation, Inc.):
The
2012 Annual Meeting of Stockholders of Sequential Brands Group, Inc. will be held at
17383 Sunset Boulevard, Suite A310,
Pacific Palisades, CA
on
Tuesday
, June
12,
2012 at
3
:00
p
.m. Pacific Daylight Time, for the
following purposes:
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1.
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To elect two (2) Class I members of the Board of Directors for a three-year term;
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2.
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To approve an amendment to our Certificate of Incorporation to effect a reverse stock split of
our outstanding common stock;
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3.
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To ratify the selection of Weinberg and Company as our independent registered public accounting
firm for the fiscal year ending December 31, 2012; and
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4.
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To transact such other business as may properly come before the meeting or any adjournments or
postponements thereof.
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The Board of Directors
has fixed the close of business on May 11, 2012 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 Annual Meeting in person. However, you must be a stockholder of record at the close of business on May 11, 2012 to
vote at the meeting.
If your shares are held in street name, you
must
obtain a Proxy, executed in your favor, from the
holder of record in order to be able to vote at the Annual Meeting
. Regardless of whether or not you will attend, please mark,
date, sign and return the enclosed proxy.
May [__], 2012
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By Order of the Board of Directors
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/s/ William Sweedler
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William Sweedler
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Chairman of the Board
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THE ATTACHED
PROXY STATEMENT AND
OUR ANNUAL REPORT ON FORM 10-K ARE AVAILABLE AT
http://www.sequentialbrands.com/sequential-brands-group-sec-filings.html
YOUR VOTE IS IMPORTANT. WHETHER OR NOT
YOU EXPECT TO ATTEND THE ANNUAL MEETING OF STOCKHOLDERS, PLEASE MARK, DATE, SIGN AND RETURN PROMPTLY THE ENCLOSED PROXY IN THE
STAMPED RETURN ENVELOPE PROVIDED. YOUR PROMPT RETURN OF THE PROXY WILL HELP AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION
TO ASSURE A QUORUM AT THE MEETING.
THE ANNUAL MEETING IS ON JUNE 12, 2012
PLEASE RETURN YOUR PROXY IN TIME
SEQUENTIAL
BRANDS GROUP, INC.
17383 Sunset Boulevard, Suite A310
Pacific Palisades, CA 90272
PROXY STATEMENT FOR ANNUAL MEETING OF
STOCKHOLDERS
To Be Held Tuesday, June 12, 2012
GENERAL INFORMATION AND VOTING RIGHTS
This
proxy statement (the Proxy Statement) and the enclosed proxy are furnished in connection with the solicitation of proxies by the
Board of Directors of Sequential Brands Group, Inc., a Delaware corporation formerly known as People’s Liberation, Inc.,
for use at the 2012 Annual Meeting of Stockholders (the Annual Meeting) to be held at
17383 Sunset Boulevard, Suite A310,
Pacific Palisades, CA
on
Tuesday
, June
12,
2012 at
3
:00
p
.m. Pacific Daylight Time, and any
adjournments or postponements thereof. Enclosed with this Proxy Statement is a copy of our Annual Report, which includes our Form
10-K (without exhibits), for the year ended December 31, 2011. However, the Annual Report is not intended be a part of this Proxy
Statement or a solicitation of proxies. We anticipate that the Proxy Statement and enclosed proxy will first be mailed or given
to our stockholders on or about May 23, 2012.
Your vote is important.
If your shares are registered in your name, you are a stockholder of record. If your shares are in the name of your broker or bank,
your shares are held in street name. We encourage you to vote by proxy so that your shares will be represented and voted at the
meeting even if you cannot attend. All stockholders can vote by written proxy card. Your submitting the enclosed proxy will not
limit your right to vote at the Annual Meeting if you later decide to attend in person. If your shares are held in street name,
you must obtain a proxy, executed in your favor, from the holder of record in order to be able to vote at the meeting. If you are
a stockholder of record, you may revoke your proxy at any time before the meeting either by filing with the Corporate Secretary
of Sequential Brands Group, at our principal executive offices, a written notice of revocation or a duly executed proxy bearing
a later date, or by attending the Annual Meeting and expressing a desire to vote 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 nominee. You must
contact your broker, bank or other nominee 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 and our Series A Preferred Stock at the close of business on May 11, 2012 will be entitled to vote at the Annual
Meeting on the proposals described in this Proxy Statement. On the record date, there were 36,002,563 shares of common stock outstanding
and 14,500 shares of Series A Preferred Stock outstanding. On all matters to come before the meeting, each holder of record of
common stock is entitled to one vote for each share of common stock and each holder of record of Series A Preferred Stock is entitled
to 5,714 votes for each share of Series A Preferred Stock. Therefore, the holders of our outstanding 14,500 shares of Series A
Preferred Stock have 82,853,000 votes on all matters to come before the meeting, which represents 69.7% of our outstanding voting
securities. Holders of record of Series A Preferred Stock vote together as a single class with the holders of common stock on all
matters requiring the approval of the holders of common stock. Stockholders may not cumulate votes in the election of directors.
If any other matters
are properly presented for consideration at the Annual Meeting, including, among other things, consideration of a motion to adjourn
the meeting to another time or place in order to solicit additional proxies in favor of the nominees of 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. At the date this proxy statement went to press,
we did not know of any other matter to be raised at the Annual Meeting.
The two nominees for
election as a Class I directors who receive the most votes “for” election from holders of our outstanding common stock
and Series A Preferred Stock, voting together as a single class, will be elected.
The affirmative vote,
in person or by proxy, of the holders of a majority of our outstanding common stock and Series A Preferred Stock, voting together
as a single class, will be required to approve the proposed amendment to our Certificate of Incorporation to effect the reverse
stock split.
Ratification of the
appointment of our independent registered public accounting firm will require an affirmative vote of the majority of the shares
of common stock and Series A Preferred Stock present or represented at the Annual Meeting, voting together as a single class, with
respect to such proposal.
The presence, in person
or by proxy, of a majority of the votes entitled to be cast by the stockholders entitled to vote at the Annual Meeting is necessary
to constitute a quorum. Abstentions and broker non-votes will be included in the number of shares present at the Annual Meeting
for determining the presence of a quorum. Abstentions will be counted toward the tabulation of votes cast on proposals submitted
to stockholders and will have the same effect as negative votes. Broker non-votes on a proposal are not counted or deemed present
or represented for determining whether stockholders have approved that proposal. Broker non-votes occur when a broker holding customer
securities in street name has not received voting instructions from the customer on certain “non-routine” matters,
such as director elections, and, therefore, is barred by the rules of the applicable securities exchange from exercising discretionary
authority to vote those securities. Brokers may vote their clients’ shares on routine matters, such as the ratification of
our independent registered public accounting firm.
PROPOSAL NO. 1
ELECTION OF DIRECTORS
Our Certificate of
Incorporation provides that the number of directors of the Company shall be fixed from time to time exclusively by the Board of
Directors, but shall not be less than two (2) nor more than fifteen (15). The Board of Directors has fixed the number of directors
at six (6).
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.
Colin Dyne and William
Sweedler serve as the Class I directors, Susan White and Matthew Eby serve as the Class II directors, and Al Gossett and Richard
Gersten serve as the Class III directors. The Class I, Class II and Class III directors serve terms that expire in 2012,
2013 and 2014, respectively.
The Board of Directors
has nominated Colin Dyne and William Sweedler for election at the Annual Meeting to serve as the Class I directors. If elected,
Mr. Dyne and Mr. Sweedler will serve until the Annual Meeting of Stockholders to be held in 2015 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 either 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 as shall be designated
by the then current Board of Directors to fill any vacancy. 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.
The Board of Directors
Unanimously Recommends a Vote “FOR”
the Election of the Nominees Listed Above.
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information
with respect to the nominees and the directors and executive officers of Sequential Brands Group, Inc. as of May 1, 2012. The nominees
are currently directors of Sequential Brands Group.
Name
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Age
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Position with Sequential Brands Group
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Class I Director Nominees:
(
Current Term Expiring in 2012
)
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Colin Dyne
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49
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Class I Director, Chief Executive Officer, Chief Financial Officer and Secretary
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William Sweedler
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45
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Class I Director, Chairman of the Board of Directors
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Class II Directors:
(
Term Expiring in 2013
)
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Susan White
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60
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Class II Director
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Matthew Eby
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40
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Class II Director
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Class III Directors:
(
Term Expiring in 2014
)
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Al Gossett
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59
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Class III Director
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Richard Gersten
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46
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Class III Director
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Other Executive Officers:
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Andrea Sobel
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44
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President of Licensing
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Board of Directors and Nominees
Colin Dyne
is
a nominee for election at the 2012 Annual Meeting and became our Chief Executive Officer and a director of the Company on May 21,
2007 and our Chief Financial Officer effective December 30, 2010. Mr. Dyne also became our Secretary on January 31, 2012. Mr. Dyne
is a significant stockholder of the Company, and served as a consultant to the Company from December 2005 until May 2007, advising
on strategic sales initiatives. Mr. Dyne also served as Vice Chairman of the Board of Directors of Talon International, Inc. (OTCBB:
TALN), owner of Talon zippers, until July 2010. Mr. Dyne founded Tag-It, Inc., a subsidiary of Talon, in 1991. Mr. Dyne served
as Talon’s President from inception and as its Chief Executive Officer from 1997 to 2005. Mr. Dyne was selected to become
a director of the Company due to his knowledge of the apparel industry.
William
Sweedler
is a nominee for election at the 2012 Annual Meeting. Mr. Sweedler
has
served as Chairman of the Board since February 22, 2012 and was selected to become the chairman of the Company due to his knowledge
of the apparel industry and because of his experience in managing and developing brands. Mr. Sweedler was appointed to our Board
in connection with our financing
transaction with TCP WR Acquisition, LLC
(“TCP”)
in February 2012 (see the heading “Certain Relationships and Related Transactions” below
for further information). Mr. Sweedler is presently Co-Founder and Partner of Tengram Capital Partners, a consumer private equity
firm formed
to invest in the consumer and retail sectors. He was formerly Chairman & CEO 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 has over 20 years of experience in the consumer
sector as an operator and strategic investor. Current portfolio companies and investments include Ellen Tracy, Joe's Jeans, Field
& Stream, Caribbean Joe, Atlantis Weathergear, Carlos Falchi, Sharper Image, and Design Within Reach. Prior to founding Windsong
Brands, he was President & CEO of Joe Boxer, a wholly owned division of the Iconix Brand Group (NASDAQ: ICON) of which he
was Executive Vice President and Director. Prior to Mr. Sweedler joining Iconix Brand Group, he was a founder of Windsong Allegiance
Group (“
WAG
”), a diverse apparel marketer and brand manager. While CEO of WAG, he led the acquisition
and restructuring of Joe Boxer, Hathaway Shirt Company, Como Sport, and New Frontier. He was responsible for licensing the Joe
Boxer brand to Kmart, now Sears Holding Corporation, and Hathaway to Costco. Mr. Sweedler also led the merger, re-structure, and
sale of the Joe Boxer, Hathaway, and New Frontier divisions of WAG. Mr. Sweedler has served as a director to Iconix Brand Group
and Bank of Westport (NASDAQ: BWST). He is currently Co-Chairman of Ellen Tracy, Caribbean Joe and Carlos Falchi. He is also a
director at Field & Stream, Skip Barber Racing, and Design Within Reach (OTC: DWRI). Mr. Sweedler graduated from Babson College
with a BS in Finance and Investments and joined Polo Ralph Lauren for four years prior to co-founding WAG.
Mr. Sweedler is being
nominated as TCP’s nominee for election at the 2012 Annual Meeting pursuant to the terms of a Stockholders Agreement entered
into by Company, TCP and Colin Dyne on February 22, 2012 in connection with our financing transaction with TCP. Pursuant to the
agreement, in connection with any director nominees to be submitted to holders of Common Stock for election at a stockholders’
meeting, TCP has the right to nominate a number of nominees for director such that the number of directors that will be serving
on the Board (determined immediately following the election of directors and assuming that the director nominees designated by
TCP are elected to the Board) that have been appointed or nominated by TCP equals three. The three TCP directors are William Sweedler,
Matthew Eby and Richard Gersten.
Susan White
joined
our Board of Directors on May 21, 2007 and was selected to become a director of the Company due to her experience in apparel branding
and marketing. Ms. White has served as Chief Executive Officer and President of Brand Identity Solutions, LLC, a branding, marketing
and licensing consulting company, since 1987. Ms. White also is the CEO and president of Whitespeed, LLC, an internet design, branding
and marketing company. Ms. White previously served as Director of Marketing and Advertising Worldwide for Warnaco from November
1997 through August 1999.
Matthew Eby
joined
our Board of Directors on February 22, 2012 and was selected to become a director of the Company due to his knowledge of the apparel
industry and because of his experience in managing and developing brands. Mr. Eby was appointed to our Board in connection with
our financing transaction with TCP WR Acquisition, LLC in February (see the heading “Certain Relationships and Related Transactions”
below for further information). Mr. Eby is presently Co-Founder and Partner of Tengram Capital Partners. From 2003 to 2010, prior
to founding Tengram, Mr. Eby was the founder and Chief Investment Officer of JAWS Estates Capital, the private investment office
of Barry Sternlicht and the Sternlicht family. In his capacity as CIO, he was responsible for investment and asset allocation decisions
and recommendations across a broad spectrum of asset classes and investment strategies. His responsibilities included leading investments
in hedge funds, private equity funds, direct transactions in a broad array of public markets and direct transactions in private
companies. During his tenure at JAWS, Mr. Eby invested in and led numerous private equity transactions. Mr. Eby developed an investment
strategy that focused on branded consumer goods and intellectual property. In this space, Mr. Eby led investments in Field &
Stream, Ellen Tracy, Joe’s Jeans, Caribbean Joe, and Carlos Falchi. Mr. Eby currently serves on the Boards of Directors of
Brand Matter, Field & Stream, and Carlos Falchi. Prior to founding JAWS, Mr. Eby was an associate at Morgan Stanley from 2002-2003
and prior to entering the investment industry, he served five years as an officer in the U.S. Navy. Mr. Eby is a graduate of the
United States Naval Academy and Harvard Business School.
Al Gossett
joined
our Board of Directors on December 14, 2011. M
r. Gossett was appointed to our Board of Directors in
connection with the restructuring of the ownership of our William Rast branded apparel business. Mr. Gossett is President, CEO
and owner of Gossett Automotive Group, which he founded in 1988. Gossett Automotive Group consists of 17 automotive dealerships
located in Memphis, TN and Atlanta, GA. The various brands under this umbrella of dealerships include Volkswagen, Porsche, Audi,
Bentley, Kia, Hyundai, Chrysler, Jeep, Dodge, Ram, Mazda, Mitsubishi and FIAT. Mr. Gossett has been involved in the auto dealership
industry since 1975. In 1988, he acquired his first dealership. 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, Jeep, Dodge, Chrysler Financial,
Volkswagen and Volkswagen Credit. Since June 2009, Mr. Gossett has served on the board of directors of Landmark Community Bank
in Collierville, TN, a suburb of Memphis, TN. Since 2005, Mr. Gossett has also served as the managing partner of JALP, LLC (d/b/a
ful), a wholesale business engaged in the global distribution of backpacks, luggage and apparel. Mr. Gossett attended Northwestern
University.
Richard Gersten
joined our Board of Directors on February 22, 2012 and was selected to become a director of the Company due to his experience in
managing and developing brands. Mr. Gersten was appointed to our Board in connection with our financing transaction with TCP WR
Acquisition, LLC in February 2012 (see the heading “Certain Relationships and Related Transactions” below for further
information). Mr. Gersten is presently a Partner of Tengram Capital Partners. Mr. Gersten has over 18 years of experience in the
private equity industry and has spent the last 13 years focused exclusively on the consumer sector. Prior to joining Tengram, he
was a Partner at Catterton Partners, a leading private equity firm with an exclusive focus on providing equity capital to small
to middle market consumer companies. During his time at Catterton, he was responsible for sourcing, evaluating and executing transactions
in the consumer industry and post investment monitoring for companies. Mr. Gersten served on the board of directors of Strivectin,
Sun Water Systems (d/b/a Aquasana), Van's Natural Foods, Monosol, and Dr. Miracle’s. Prior to joining Catterton, Mr. Gersten
was a Partner at North Castle Partners, a private equity firm focused on consumer investments that benefit from healthy living
and aging trends. During his time at North Castle, he originated, executed and monitored investments primarily in the personal
care, fitness and recreation and nutrition industries. He successfully completed investments in and served on the board of directors
of Enzymatic Therapy, Avalon Natural Products, HDS Cosmetics (d/b/a DDF Skincare) and GloMinerals. Prior to joining North Castle,
Mr. Gersten was a Principal at NMS Capital, the merchant banking arm of NationsBanc Montgomery Securities. Prior to joining NMS
Capital, he spent five years at BT Capital Partners, the private equity arm of Bankers Trust, where he helped originate, evaluate
and monitor both control and minority investments in middle market companies. Prior to joining BT Capital, Mr. Gersten was an Associate
at Chemical Bank. Mr. Gersten received a B.S. in Economics from Union College (N.Y.) and an M.B.A. from the Wharton School at the
University of Pennsylvania.
Other Executive Officers
Andrea Sobel
has served as our President of Licensing since January 31, 2012 and as our Executive Vice President of Branding and Licensing from
May 2008 to January 2012. Ms. Sobel has over 15 years of experience in licensing, marketing and brand development. Since 2007,
she was Vice President of Marketing with SANRIO, where she was responsible for market development and brand positioning of that
company's Hello Kitty and other character brands. Between 2004 and 2007 and between 1999 and 2002, she was also a principal and
licensing, merchandising and marketing consultant with ALS Consulting, a firm specializing in marketing and brand development.
Between 2002 and 2004, Ms. Sobel was Director of Licensing and Business Development for Murad, Inc. From 1990 to 1999, she was
with Guess?, Inc. in a series of progressively responsible positions culminating with Vice President of Licensing and Product Development
from 1995 to 1999. She holds a Bachelor of Arts in History and Spanish from the University of California at Berkeley and an MBA
from UCLA's Anderson School of Business.
Additional Information Concerning
our Board of Directors
Meetings and Committees
.
The Board of Directors held 11 general meetings during 2011. The Board of Directors also acted on two occasions by unanimous written
consent during 2011. Each current director, while serving as a director, attended at least 75% of all the meetings of the Board
of Directors. While we have not established a policy with respect to members of the Board of Directors attending annual meetings,
directors are generally in attendance at the annual meeting of stockholders. Our 2011 annual meeting of stockholders was attended
by two out of the three directors then serving: Colin Dyne and Susan White.
During our fiscal year
ended December 31, 2011, we did not have a separately designated audit, compensation or nominating committee of our Board of Directors
and the functions customarily delegated to these committees were performed by our full Board of Directors. We are not a “listed
company” under SEC rules and are therefore not required to have separate committees comprised of independent directors. We
have, however, determined that of our four directors who served during our last completed fiscal year, Susan White, Dean Oakey
and Al Gossett were “independent” as that term is defined in Section 5605 of the NASDAQ Listing Rules as required by
the NASDAQ Stock Market. As we did not maintain an audit committee during our fiscal year ended December 31, 2011, we did not have
an audit committee “financial expert” within the meaning of Item 407(d) of Regulation S-K.
Subsequent to our
year end, we formed separately designated audit, compensation and governance committees of our Board of Directors. Our Board may
also establish special committees from time to time, including a nominating committee, to perform specifically delegated functions.
The Board of Directors has adopted a written charter that governs the conduct and responsibilities of each of the Audit Committee,
Compensation Committee and Governance Committee, copies of which may be found on our website located at
http://www.sequentialbrands.com
.
Audit Committee
.
Although we are not a “listed company” under SEC rules and are therefore not required to have an audit committee comprised
of independent directors, on April 12, 2012, we formed an audit committee of our Board of Directors. Our audit committee is chaired
by Mr. Eby, and seated by Mr. Gosset and Mr. Gersten, all of whom qualify as “independent” directors within the meaning
of rule 5605(a)(2) of the Nasdaq Stock Market’s Listing Rules. Notwithstanding the foregoing, Mr. Eby and Mr. Gersten do
not meet the additional requirement for independence within the meaning of Nasdaq Rule 5602(c)(2)(A)(ii), since Mr. Eby and Mr.
Gersten indirectly received compensation from the Company other than in their capacities as members of the board or its committees
and are affiliates of the Company (see the transaction with TCP WR Acquisition, LLC described below under the heading “Certain
Relationships and Related Transactions” for further information). We have determined that Mr. Eby 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 are able to read and understand fundamental financial statements and have substantial business experience that results
in that member's financial sophistication. Among other responsibilities, the 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.
Compensation Committee
.
On April 12, 2012, we formed a Compensation Committee of our Board of Directors. The Compensation Committee of the Board of
Directors is primarily responsible for determining the annual salaries and other compensation of directors and executive officers
and administering our equity compensation plans. Our Compensation Committee is seated by Mr. Gossett, Mr. Sweedler and Mr. Gersten,
each of whom qualify as “independent” directors within the meaning of rule 5605(a)(2) of the Nasdaq Stock Market’s
Listing Rules. In connection with its deliberations, the Committee seeks the views of the Chief Executive Officer with respect
to appropriate compensation levels of the other officers and directors and may recruit compensation experts to provide independent
advice regarding market trends and other competitive considerations. During the fiscal year ended December 31, 2011, the Board
did not retain the services of compensation consultants to determine or recommend the amount or form of executive and director
compensation. The Compensation Committee has the authority to delegate its responsibilities listed in the Compensation Committee
Charter to subcommittees of the Compensation Committee if the committee determines such delegation would be in the best interest
of the Company.
Governance Committee
.
On April 12, 2012, we formed a Governance Committee of our Board of Directors. Our Governance Committee is seated by Mr. Gossett,
Mr. Eby and Mr. Gersten, 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, recommends corporate governance principles applicable to Sequential Brands Group and assists
the Board of Directors in its reviews of the performance of the Board and each of its committees.
Board Nominations
.
The functions customarily
delegated to a nominating committee are performed by our full Board of Directors. Our full Board of Directors reviews those Board
members who are candidates for re-election to our Board of Directors, and makes the determination to nominate a candidate who is
a current member of the Board of Directors for re-election for the next term. The Board’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 executives; 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, 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 Director 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’s 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 Board of Directors
will consider nominees recommended by stockholders. A Sequential Brands Group stockholder 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 our Bylaws. 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 number of shares of stock of the Company beneficially owned and (iv) any other information concerning
the nominee that must be disclosed respecting nominees in proxy solicitations pursuant to Rule 14(a) of the Exchange Act of 1934.
The recommendation should be addressed to our Secretary. For a stockholder recommendation to be considered by our Board of Directors
as a potential candidate at an annual meeting, nominations must be received on or before the deadline for receipt of stockholder
proposals for such meeting. 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 bylaws as they pertain to director nominations.
Based on the foregoing
and the Company’s obligations pursuant to that certain Stockholders Agreement dated February 22, 2012, by and among the Company,
Colin Dyne, TCP WR Acquisition, LLC and the other stockholders party to the agreement (which agreement is described below under
the heading “Certain Relationships and Related Transactions”), the Board of Directors nominated Colin Dyne and William
Sweedler for re-election as a Class I members of the Board of Directors, subject to stockholder approval, for a three-year term
ending on or around the date of the 2015 Annual Meeting of Stockholders.
Board Leadership
Structure.
In connection with
the closing of our financing transaction with TCP WR Acquisition, LLC in February 2012, Mr. Sweedler was appointed as the Chairman
of our Board of Directors, replacing Mr. Dyne in such capacity, with Mr. Dyne remaining our Chief Executive Officer, Chief Financial
Officer and Secretary. The Board believes that its current leadership structure best serves the objectives of the Board’s
oversight of management; the ability of the Board to carry out its roles and responsibilities on behalf of the stockholders; and
our overall corporate governance. The Board also believes that the current separation of the Chairman and CEO roles allows the
CEO to focus his time and energy on operating and managing our business and leverage the experience and perspectives of our Chairman,
who has a deep knowledge of the apparel industry and significant experience in managing and developing brands. The Board, however,
periodically reviews the leadership structure and may make changes in the future.
Board Oversight
of Risk Management.
Our Board of Directors
and our newly formed committees have the responsibility for the oversight of 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 our company. The involvement of our Board of Directors and committees in setting our business
strategy is a key part of our assessment of risk management and the determination of what constitutes an appropriate level of risk
for our company. Members of our Board discusses with management our major risk exposures, their potential impact on our company
and the steps taken to manage these risks. In addition, our Board 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.
Compensation of
Directors and Officers
. During our fiscal year ended December 31, 2011, our full Board of Directors determined the compensation
to be paid to our officers and directors, with recommendations from management as to the amount and/or form of such compensation.
Following the formation of the Compensation Committee, our Compensation Committee will complete the functions previously performed
by our full Board. While our Compensation Committee may utilize the services of consultants in determining or recommending the
amount or form of executive and director compensation, we do not at this time employ consultants for this purpose.
Code of Ethics
.
We have adopted a Code of Ethics applicable to all of our Board members and to all of our employees, 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 rules. The Code of Ethics has been publicly filed with
the SEC as an exhibit to our Annual Report on Form 10-K. Our code of ethics is posted on our Internet website located at
www.sequentialbrands.com
in the section titled “Investor Relations—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
17383 Sunset Boulevard, Suite A310
Pacific Palisades,
CA 90272
(213) 745-2123
Any waiver of the Code
of Ethics pertaining to a member of our Board or one of our executive officers will be disclosed in a report on Form 8-K filed
with the SEC.
Section 16(a) Beneficial
Ownership Reporting Compliance.
Section 16(a) of the Securities Exchange Act of 1934 requires that our executive officers and
directors, and persons who own more than ten percent of a registered class of our equity securities, file reports of ownership
and changes in ownership with the SEC. Executive officers, directors and greater-than-ten percent stockholders are required by
SEC regulations to furnish us with all Section 16(a) forms they file. Based solely on our review of the copies of the forms received
by us and written representations from certain reporting persons that they have complied with the relevant filing requirements,
we believe that, during the year ended December 31, 2011, all of our executive officers, directors and greater-than-ten percent
stockholders complied with all Section 16(a) filing requirements, except for the filing of one late report on Form 4 reporting
late one transaction by Andrea Sobel and one late report on Form 3 reporting one late transaction by Monto Holdings (Pty) Ltd.
Litigation: Shareholder
Derivative Complaint.
On January 17, 2012, plaintiff RP Capital, LLC filed a shareholders’ derivative complaint in the
Superior Court of the State of California, County of Los Angeles, Case Number BC477118 against the Company and current and former
directors, Colin Dyne, Kenneth Wengrod, Susan White and Dean Oakey. The case alleges that the defendants (i) breached their fiduciary
duties to the Company for failing to properly oversee and manage the Company, (ii) were unjustly enriched, (iii) abused their control,
(iv) grossly mismanaged the Company, (v) wasted corporate assets, (vi) engaged in self-dealing, and (vii) breached their fiduciary
duties by disseminating false and misleading information. The plaintiffs seek (i) judgment against the defendants in favor of the
Company for the amount of damages sustained by the Company as a result of the defendants’ alleged breaches of their fiduciary
duties; (ii) judgment directing the Company to take all necessary actions to reform and improve its corporate governance and internal
procedures to comply with applicable laws; (iii) an award to the Company of restitution from the defendants and an order from the
court to disgorge all profits, benefits and other compensation obtained by the defendants from their alleged wrongful conduct and
alleged fiduciary breaches and (iv) an award of costs and disbursements of the action, including reasonable fees for profession
services. We believe these claims are without merit or substance, and intend to vigorously defend against these claims. The derivative
complaint is in the early stages of discovery.
Certain Relationships and Related Transactions
Review and Approval
of Related Party Transactions
. We have adopted a Code of Ethics that applies to all employees and directors of the Company.
This Code of Ethics requires that all of our employees and directors avoid engaging in activities that give rise to conflicts of
interest, including engaging in any transactions with the Company, without first obtaining a waiver. Executive officers and directors
are required to obtain such a waiver from our Board of Directors or an appropriate committee of our Board. There were no instances
during 2011 in which an executive officer or director engaged in a related party transaction with the Company without first obtaining
a waiver as required under our Code of Ethics.
Reportable Related
Party Transactions
. Other than the employment arrangements described elsewhere in this proxy statement and the transactions
described below, since January 1, 2010, there has not been, nor is there currently proposed, any transaction or series of similar
transactions to which we were or will be a party:
|
·
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in which the amount involved exceeds $120,000; and
|
|
·
|
in which any director, director nominee, executive officer, stockholder who beneficially owns 5%
or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.
|
Change
of Control Transaction with TCP WR Acquisition, LLC
|
(i)
|
Entry into Securities Purchase Agreement
|
William Sweedler, Matthew
Eby and Richard Gersten are each directors of the Company, and are the controlling members of Tengram Capital Associates, LLC which
has the sole voting control over TCP WR Acquisition, LLC (“TCP”). On February 2, 2012, we entered into a Securities
Purchase Agreement (the “Purchase Agreement”) with TCP pursuant to which we sold debentures, warrants and Series A
Preferred Stock to TCP. At the second closing and as contemplated by the Purchase Agreement and the Stockholders Agreement (as
described below), we increased the size of our Board of Directors from three members to six members and appointed William Sweedler,
Matthew D. Eby and Richard Gersten to serve as directors.
The first of two closings
of the financing occurred on February 3, 2012. At the first closing, we sold to TCP $3,000,000 in principal amount of Debentures,
issued to TCP a Warrant to purchase 3,428,571 shares of Common Stock and issued to TCP 3,000 shares of Series A Preferred Stock.
The second and final
closing of the financing occurred on February 22, 2012. At the second closing, we sold to TCP $11,500,000 in principal amount of
Debentures, issued to TCP a Warrant to purchase 13,142,857 shares of common stock and issued to TCP 11,500 shares of Series A Preferred
Stock.
The Purchase Agreement
provides TCP with piggyback registration rights with respect to TCP’s shares of common stock, required the Company to pay
TCP at the second closing a fee of 2.5% of the aggregate subscription amounts plus all legal and other fees and expenses incurred
by TCP in connection with the Purchase Agreement, and requires the Company to pay TCP an annual monitoring fee of $250,000 at the
second closing and on each one year anniversary of such date so long as TCP has the right under the Stockholders Agreement to nominate
one or more directors to our Board.
In addition, the Purchase
Agreement contains negative covenants that prohibit the Company and its subsidiaries from taking certain actions without TCP’s
prior consent until the later of February 3, 2014 and the date that TCP’s beneficial ownership of Common Stock is less than
40% of our fully diluted Common Stock. The negative covenants apply to, with certain exceptions, issuing debt or equity securities;
acquiring assets or equity interests of third parties, disposing of assets or equity interests of subsidiaries, entering into joint
ventures, or engaging in other types of mergers and acquisitions transactions; paying or declaring dividends; settling litigation;
entering into transactions with affiliates; dissolving or commencing bankruptcy proceedings; or changing our principal lines of
business.
As a condition to TCP’s
obligations under the Purchase Agreement, Colin Dyne entered into a lock-up agreement precluding Mr. Dyne from disposing of any
of his shares of our Common Stock or other equity securities until July 31, 2012.
|
(ii)
|
Description of Debentures
|
Pursuant to the terms
of the Purchase Agreement, we sold $14,500,000 in principal amount of Variable Rate Senior Secured Convertible Debentures (the
“Debentures”), convertible into shares of our common stock, $0.001 par value per share (“Common Stock”),
at an initial conversion price of $0.175 per share (the “Conversion Price”). The Debentures have an interest rate of
LIBOR, and in the event payment on the Debentures is accelerated as a result of an event of default, the rate of interest will
increase to the lesser of 18% per annum or the maximum amount permitted under applicable law. Interest on the Debentures is payable,
at our option, in cash or in Common Stock upon conversion of a Debenture (with respect to the principal amount then being converted)
and on their maturity date. The Debentures are payable on or before January 31, 2015 and a Debenture may not be prepaid without
the consent of the holder of the Debenture.
At any time after their
issuance, the Debentures are convertible at the Conversion Price into shares of Common Stock at the option of a Debenture holder.
On the maturity date, we may, in whole or in part, convert the then outstanding principal amount of each Debenture into shares
of Common Stock at the Conversion Price. The Conversion Price is subject to adjustment in the case of stock splits, stock dividends,
combinations of shares and similar recapitalization transactions. The Conversion Price is also subject to adjustment in the event
(i) we incur costs in excess of a specified amount in connection with the wind-down of our wholesale and retail businesses and,
(ii) in certain circumstances, in the event a non-appealable monetary judgment is entered by a court against us, our subsidiaries
or their assets for more than $1,250,000 (except to the extent covered by insurance) relating to events or circumstances arising
prior to February 3, 2012.
|
(iii)
|
Description of Subsidiary Guarantee and Security Agreement
|
At the first closing
of the financing, our subsidiaries, Versatile Entertainment, Inc. (“Versatile”), Bella Rose, LLC (“Bella Rose”),
William Rast Sourcing, LLC (“William Rast Sourcing”), William Rast Licensing, LLC (“William Rast Licensing”)
and William Rast Retail, LLC (“William Rast Retail”), executed a Subsidiary Guarantee in favor of TCP pursuant to which
such subsidiaries guarantee our obligations under the Debentures (the “Subsidiary Guarantee”). In addition, the Company
and the above mentioned subsidiaries entered into a security agreement (the “Security Agreement”) with TCP pursuant
to which such parties granted to TCP a first priority security interest in all of their assets to secure our obligations under
the Debentures and such subsidiaries’ obligations under the Subsidiary Guarantee.
|
(iv)
|
Description of Warrants
|
In connection with
the sale of the Debentures, we issued to TCP warrants to purchase a number of shares of Common Stock equal to 20% of the aggregate
number of shares of Common Stock issuable upon conversion of the Debentures (the “Warrants”). The Warrants are exercisable
immediately after issuance and have a term of five years. The Warrants may be exercised at an initial exercise price per share
of $0.175, which is subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization
transactions.
|
(v)
|
Description of Series A Preferred Stock
|
Also in connection
with the sale of the Debentures, we issued one share of Series A Preferred Stock, par value $0.001 per share (“Series A Preferred
Stock”), for every $1,000.00 of principal amount of Debentures purchased by TCP, for a total of 14,500 shares of Series A
Preferred Stock. The Series A Preferred Stock is designed to give holders of the Debentures certain voting rights while the Debentures
remain outstanding. The rights, preferences, privileges and restrictions of the Series A Preferred Stock are set forth in the Certificate
of Designation of Preferences, Rights and Limitations of Series A Preferred Stock (“Certificate of Designation”), which
we filed on February 3, 2012 with the Delaware Secretary of State. The Certificate of Designation includes the following terms:
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·
|
The authorized number of shares of Series
A Preferred Stock is 19,400, having a par value $0.001 per share and a stated value of $1,000.00 per share (“Stated Value”).
|
|
·
|
Holders of Series A Preferred Stock are
not entitled to dividends or any liquidation preference.
|
|
·
|
Series A Preferred Stock may only be transferred
by a holder of such stock to a transferee if such transfer also includes a transfer to the transferee of $1,000.00 in principal
amount of Debentures for each one share of transferred Series A Preferred Stock.
|
|
·
|
The holders of Series A Preferred Stock
vote together as a single class with the holders of Common Stock on all matters requiring approval of the holders of Common Stock,
except that each share of Preferred Stock is entitled to 5,714 votes per share (which is the number of shares of Common Stock a
Debenture holder would receive if it converted $1,000.00 in principal amount of Debentures into Common Stock at a conversion price
of $0.175), which number of votes per share is subject to adjustment in the case of stock splits, stock dividends, combinations
of shares and similar recapitalization transactions relating to the Company’s Common Stock.
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|
·
|
As long as any shares of Series A Preferred
Stock are outstanding, we will not, without the affirmative vote of the holders of a majority of the then outstanding shares of
the Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock
or alter or amend the Certificate of Designation, (b) amend our certificate of incorporation or other charter documents in any
manner that adversely affects any rights of such holders, (c) increase the number of authorized shares of Series A Preferred Stock,
or (d) enter into any agreement with respect to any of the foregoing.
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|
·
|
Upon conversion of the principal amount
of a Debenture, in whole or in part, into shares of Common Stock or upon the repayment of the principal amount of a Debenture,
in whole or in part, by us, we have the right to and will redeem from the Debenture holder at a price of $0.001 per share, a number
of shares of Series A Preferred Stock determined by dividing (i) the outstanding principal amount of the Debenture that has been
repaid or converted into Common Stock, as applicable, by (ii) the Stated Value.
|
|
(vi)
|
Description of Stockholders Agreement
|
At the second closing
of the financing, the Company, TCP and Colin Dyne, the Company’s Chief Executive Officer and a director, entered into a Stockholders
Agreement (the “Stockholders Agreement”), pursuant to which:
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·
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Following the second closing, our Board
shall initially be comprised of six (6) directors and the initial persons serving on the Board shall be William Sweedler and Colin
Dyne, who shall serve as Class I Directors, Matthew D. Eby and Susan White, who shall serve as Class II Directors, and Richard
Gersten and Al Gossett, who shall serve as Class III Directors. William Sweedler also will serve as Chairman of the Board. The
maximum size of the Board shall not be increased to greater than seven (7) directors except with the consent of Mr. Dyne and TCP.
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|
·
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In connection with any director nominees
to be submitted to holders of Common Stock for election at a stockholders’ meeting, TCP shall have the right to nominate
a number of nominees for director such that the number of directors that will be serving on the Board (determined immediately following
the election of directors and assuming that the director nominees designated by TCP are elected to the Board) that have been appointed
or nominated by TCP equals three.
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|
·
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In connection with any director nominees
to be submitted to holders of Common stock for election at a stockholders’ meeting, a committee of our Board comprised solely
of directors then serving on the Board who were not nominated or appointed by TCP (the “Special Committee”), acting
by majority vote, shall have the right to nominate a number of nominees for director such that the number of directors that will
be serving on the Board (determined immediately following the election of directors and assuming that the director nominees designated
by the Special Committee are elected to the Board) that have been nominated by the Special Committee or who were serving on the
Board prior to the closing of the financing equals three.
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|
·
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All board nominees other than those described
above, if any, to be presented to our stockholders for election will be designated by the full Board, acting by majority vote.
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·
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TCP and Dyne agree to vote all of their
Common Stock and voting Preferred Stock, and to take all other necessary or desirable actions within such stockholder’s control,
and the Company agrees to take all necessary and desirable actions within its control, to cause the election, removal and replacement
of directors and members of committees as described in the Stockholders Agreement, including by voting all of such stockholder’s
shares of Common Stock and voting Preferred Stock for the election of the Board’s nominees for director.
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|
·
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Mr. Dyne will provide TCP with a right
of first refusal with respect to any shares of our voting securities that Mr. Dyne proposes to sell in a negotiated transaction.
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|
·
|
TCP will provide Mr. Dyne with a tag-along
right, providing Mr. Dyne with the right to sell his shares of our voting securities in a transaction where TCP is selling its
shares of our voting securities.
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·
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We agree to provide TCP with a preemptive
right, pursuant to which TCP will have the right, subject to certain exceptions set forth in the Stockholders Agreement, to acquire
in a subsequent issuance of securities by us a number of offered securities that will allow TCP to maintain its percentage ownership
of our voting securities.
|
The holders of Series
A Preferred Stock vote together as a single class with the holders of Common Stock on all matters requiring approval of the holders
of Common Stock, except that each share of Preferred Stock is entitled to 5,714 votes. Therefore, after the second closing, TCP
has the right to vote 82,853,000 shares of the Company’s Common Stock (which excludes any shares obtained upon exercise of
the warrants). This represents 69.7% of our outstanding voting securities immediately after the second closing. The issuance of
the securities to TCP in the financing will allow TCP to control all matters submitted for approval to the holders of Common Stock.
Notwithstanding TCP’s
ownership of 69.7% of our outstanding voting securities immediately after the second closing, TCP agrees in the Stockholders Agreement
to limit to three, out of an initial total of six directors, the number of directors TCP has the right to nominate for election
to the Board. A Special Committee of the Board comprised solely of directors then serving on the Board who were not nominated or
appointed by TCP shall have the right to nominate the other three directors. If the size of the Board is increased to seven directors,
the additional director will be appointed to the Board by a majority vote of the entire Board of Directors. Consequently, pursuant
to the Stockholders Agreement, and notwithstanding TCP’s ownership of a majority of our voting securities, TCP will not have
the right to elect a majority of the directors serving on the Board.
Transactions
with Colin Dyne
Colin Dyne became our
Chief Executive Officer and a director on May 21, 2007 and our Chief Financial Officer effective as of December 31, 2010. Mr. Dyne
served as Vice Chairman of the Board of Directors of Talon International, Inc. (OTCBB: TALN), owner of Talon zippers, until July
2010. Mr. Dyne founded Tag-It, Inc., a subsidiary of Talon, in 1991. Mr. Dyne served as Talon’s President from inception
and as its Chief Executive Officer from 1997 to 2005. During the years ended December 31, 2011 and 2010, we purchased trim products
from Talon amounting to approximately $226,000 and $123,000, respectively.
During the year ended
December 31, 2011, Mr. Dyne loaned us $230,000 in the form of unsecured, non-interest bearing advances. There were no formal terms
of repayment, however, the entire balance was repaid to Mr. Dyne in 2011.
Transaction with
Mobility Special Situations I, LLC
On August 13, 2010,
our subsidiary, William Rast Licensing, entered into a promissory note in the amount of $750,000 with Mobility Special Situations
I, LLC (“Mobility”), an entity owned in part by Mark Dyne, the brother of our Chief Executive Officer, Colin Dyne,
and New Media Retail Concepts, LLC, an entity owned by Gerard Guez, a significant beneficial owner of our common stock. The promissory
note had an interest rate of 8%, payable monthly in arrears, and was due February 13, 2012. The promissory note was secured by
the assets of William Rast Licensing and was guaranteed by our other entities under common control, including Sequential Brands
Group, William Rast Sourcing, William Rast Retail, Bella Rose and Versatile Entertainment. The outstanding principal and interest
balances of this promissory note were paid in full in February 2012 with the proceeds received from the Purchase Agreement as further
described above.
In connection with
the promissory note discussed above, we also entered into an asset purchase agreement with New Media Retail Concepts, LLC and ECA
Holdings II, LLC, an entity affiliated with Mark Dyne, on August 13, 2010. In exchange for $750,000 cash, we sold 50% of any future
net proceeds, after legal fees and expenses, that we may receive as a result of our litigation with Charlotte Russe. We were not
required to repay the $750,000 cash proceeds received from the asset purchase agreement regardless of a favorable or unfavorable
outcome of the Charlotte Russe litigation. New Media Retail Concepts, LLC and ECA Holdings II, LLC received from Charlotte Russe,
in respect to the interest they acquired in the litigation, a combined amount of $2.9 million of the settlement amount paid by
Charlotte Russe pursuant to the settlement agreement entered into by all parties to the litigation on February 3, 2011.
We entered into the
above mentioned promissory note and asset purchase agreement in order to fund a shortfall in cash flow from operations resulting
from our litigation with Charlotte Russe. We experienced a significant decreased in net sales and cash flows from operations of
our People’s Liberation business, and also incurred significant legal and other expenses related to the litigation. The $750,000
purchase price of the asset purchase agreement was determined to be the fair value of the transactions, which included the $750,000
promissory note, based on management’s evaluation of alternative financing arrangements and current market conditions. At
the time we entered into these transactions, management in consultation with legal counsel, was unable to determine if we would
prevail or, if in the event we did prevail, what the range of potential settlement could be.
Transaction with
Justin Timberlake
In May 2010, our subsidiary,
William Rast Sourcing, LLC, entered into a design and licensing agreement with the Target Corporation. During the year ended December
31, 2011, Target made a direct payment of $250,000 to Justin Timberlake, a minority interest holder of William Rast Sourcing, on
our behalf for his services related to the Target agreement.
Transaction with
FTC Commercial Corp.
Kenneth Wengrod, a
former member of our Board of Directors, currently serves as President of FTC Commercial Corp., a company which he founded in 2002
and in which he continues to hold a minority equity position. We were party to a factoring agreement with FTC. As of December 31,
2010, total factored accounts receivable with FTC amounted to approximately $92,000 and net outstanding advances amounted to approximately
$43,000. Mr. Wengrod resigned from our Board of Directors on July 12, 2010. Our factoring agreement with FTC was terminated in
2010.
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table
sets forth information concerning all compensation paid for services provided to us in all capacities for each of the two fiscal
years ended December 31, 2011 and 2010 as to Colin Dyne, the only person serving as our Chief Executive Officer during 2011 and
Andrea Sobel, the only other executive officer who was serving as an executive officer at the end of the 2011 fiscal year whose
compensation exceeded $100,000 (referred to as named executive officers).
Name and Principal
Position
|
|
Year
|
|
|
Salary
($)
|
|
|
Bonus
($)
|
|
|
Option
Awards
(1)
($)
|
|
|
All Other
Compensation
(2)
($)
|
|
|
Total
($)
|
|
Colin Dyne
Chief Executive
|
|
|
2011
|
|
|
|
395,004
|
|
|
|
275,000
|
|
|
|
71,000
|
|
|
|
61,407
|
|
|
|
802,411
|
|
Officer and Chief
|
|
|
2010
|
|
|
|
395,004
|
|
|
|
-
|
|
|
|
-
|
|
|
|
63,688
|
|
|
|
458,692
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrea Sobel
President of
|
|
|
2011
|
|
|
|
200,016
|
|
|
|
25,000
|
|
|
|
6,128
|
|
|
|
16,446
|
|
|
|
247,590
|
|
Licensing
|
|
|
2010
|
|
|
|
200,016
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,688
|
|
|
|
217,704
|
|
|
(1)
|
The amounts in this column represent the grant date fair value with respect to stock options granted
in the applicable fiscal year. The amount does not reflect the actual value that may be realized by the named executive officer
which depends on the value of our shares in the future.
|
|
(2)
|
Other compensation indicated in the above table consists of medical and disability insurance and
car allowances and expenses. Included in other compensation for Mr. Dyne for the year ended December 31, 2011 and 2010 are approximately
$29,000 and $27,000 of medical insurance expenses, respectively and a car allowance of $2,000 per month.
|
Narrative Disclosure to Summary Compensation
Table
During our fiscal year
ended December 31, 2011, we did not have a separate compensation committee and therefore, our executive compensation program was
administered by our Board of Directors. The Board was responsible for, among other functions, administering our stock incentive
plan, and negotiating, reviewing and awarding the annual salary, bonus, stock options and other benefits of our executive officers.
Compensation Philosophy
The objectives of our
executive compensation program include the following:
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·
|
Alignment
– to align the
interests of executives and stockholders through equity-based compensation awards;
|
|
·
|
Retention
– to attract, retain
and motivate highly qualified, high performing executives to lead our growth; and
|
|
·
|
Performance
– to provide
rewards that are dependent upon the executive’s achievements and company performance.
|
Compensation Elements
We compensate senior
executives through a variety of components, including base salary, annual incentives, equity incentives, and benefits and perquisites,
in order to provide our executives with an overall compensation package which we believe is competitive. The mix and value of these
components are impacted by a variety of factors, such as negotiations of an executive with us, the executive’s position within
the Company, and the overall performance of the Company and the individual. The purpose and key characteristics for each component
are described below.
Base Salary
Base salary provides
executives with a steady income stream and is based upon the executive’s level of responsibility, experience, individual
performance and contributions to our overall success.
Annual Incentive
Bonuses
Annual incentive bonuses
are a variable performance-based component of compensation. The primary objective of an annual incentive bonus is to align a portion
of total pay opportunities for executives to the attainment of our company’s performance goals, as well as performance goals
of the individual.
Equity Incentives
Equity incentives
are intended to align senior executive and stockholder interests by linking a portion of executive pay to long-term stockholder
value creation and financial success over a multi-year period. Equity incentives are also provided to our executives to attract
and enhance the retention of executives and other key employees and to facilitate stock ownership by our senior executives. The
Board considers individual and company performance when determining long-term incentive opportunities.
Health & Welfare
Benefits
The named executive
officers participate in a variety of retirement, health and welfare, and paid time-off benefits designed to enable us to attract
and retain our workforce in a competitive marketplace. Health and welfare and paid time-off benefits help ensure that we have a
productive and focused workforce.
Severance and Change
of Control Arrangements
We do not have a formal
plan for severance or separation pay for our employees and officers, with the exception of Colin Dyne and Andrea Sobel (as further
described below). In the future, we may include severance provisions in employment agreements of our executive officers that could
be triggered in the event of involuntary termination without cause or in the event of a change in control.
Other Benefits
In order to attract and retain highly qualified
executives, we may provide our named executive officers with automobile allowances that we believe are consistent with current
market practices. Our executives also may participate in our 401(k) plan.
Process for
Setting Executive Compensation
When making pay determinations
for named executive officers, the Board (or, on a going forward basis, our Compensation Committee) may consider factors including:
(1) actual company performance as compared to pre-established goals, (2) individual executive performance and expected contribution
to our future success, (3) changes in economic conditions and the external marketplace and (4) the recommendation of our Chief
Executive Officer. The Board (or our Compensation Committee going forward) may also consider compensation information from data
gathered from annual reports and proxy statements from companies that the Board (or the Compensation Committee) generally considers
comparable to our company. Ultimately, our Board (or the Compensation Committee) uses its judgment when determining how much to
pay our executive officers and attempts to set the pay for our executive officers at levels that it believes are competitive and
necessary to attract and retain talented executives capable of achieving our long-term objectives.
Compensation
for Fiscal Year Ended December 31, 2011
In the fiscal year
ended December 31, 2011, we compensated our executive officers through base salary, bonuses and perquisites, which consisted of
medical and disability insurance and car allowances and expenses. The following is a description of the material terms of each
of our named executive officer’s employment arrangements with us:
Colin Dyne
On May 21, 2007, our
Board of Directors appointed Colin Dyne as our Chief Executive Officer and Co-Chairman of the Board of Directors, and Mr. Dyne
became our Chief Financial Officer effective December 30, 2010. Mr. Dyne received a base salary of $395,000 during 2010 and 2011
and also received medical insurance reimbursements and an auto allowance of $2,000 per month. As determined by our Board of Directors
based on the our performance, Mr. Dyne did not receive annual bonuses for the years ended December 31, 2011 and 2010. However,
on February 3, 2011, a cash bonus of $275,000 was paid to Mr. Dyne in connection with the successful resolution of our litigation
with Charlotte Russe. On February 3, 2011, Mr. Dyne was also awarded an option to purchase 3,000,000 shares of our common stock
at an exercise price of $0.15 per share. The option has a term of ten years, vested immediately, and was granted outside our 2005
Stock Incentive Plan. The option was granted to Mr. Dyne as compensation for personal guaranties Mr. Dyne provided in connection
with our factoring arrangements.
On December 14, 2011,
we entered into an employment agreement with Colin Dyne pursuant to which Mr. Dyne will continue to serve as our Chief Executive
Officer for a term of five years, which term will automatically renew for successive one year periods unless we or Mr. Dyne elect
not to extend the term of the agreement. During the term of the Agreement, Mr. Dyne will receive a base salary of $650,000
per annum which is subject to increase and will be eligible to receive an annual cash performance bonus.
In the event Mr. Dyne’s
employment is terminated without cause or by Mr. Dyne for good reason, Mr. Dyne will receive all earned but unpaid base salary
and accrued but unpaid vacation through the date of termination as well as earned bonuses that have not been paid for prior fiscal
years (collectively, the “accrued obligations”). Mr. Dyne will also receive a severance amount equal to
the greater of (i) 1.5 times his base salary then in effect and (ii) an amount equal to the base salary that Mr. Dyne would have
received for the remainder of the term of the agreement had Mr. Dyne’s employment continued until the end of the employment
period. In addition, Mr. Dyne will receive a pro-rated annual bonus for the year in which he was terminated (the “pro-rated
bonus”) and all outstanding equity awards previously granted to Mr. Dyne will accelerate and become fully vested on the date
of his termination.
If Mr. Dyne’s
employment is terminated as a result of his death or disability, we will pay to Mr. Dyne or his estate all accrued obligations,
a lump sum equal to 100% of his then effective base salary and the pro-rated bonus. In addition, all outstanding equity
awards previously granted to Mr. Dyne will accelerate and become fully vested on the date of his termination. In the
event Mr. Dyne is terminated for cause or Mr. Dyne terminates his employment without good reason, we will have no further obligations
to Mr. Dyne except to pay Mr. Dyne all accrued obligations.
Andrea Sobel
On May 22, 2008, Andrea
Sobel was appointed our Executive Vice President of Branding and Licensing. On January 31, 2012, Ms. Sobel was appointed our President
of Licensing. Ms. Sobel entered into an employment agreement with us on May 16, 2008. Pursuant to the agreement, Ms. Sobel is employed
on an "at-will" basis, and received an initial base salary of $200,000 per annum. Ms. Sobel also received medical insurance
reimbursements and an automobile allowance of $500 per month. Ms. Sobel did not receive annual bonuses for the years ended December
31, 2011 and 2010. However, on February 3, 2011, a cash bonus of $25,000 was paid to Ms. Sobel in connection with the successful
resolution of the Company’s litigation with Charlotte Russe. On February 3, 2011, our Board of Directors approved an award
to Ms. Sobel of options to purchase 500,000 shares of common stock at an exercise price of $0.15 per share. The options have a
term of ten years and vest in thirty equal monthly installments beginning February 1, 2011 through August 1, 2013.
On December 14, 2011,
we entered into an employment agreement with Ms. Sobel pursuant to which Ms. Sobel will serve as our President of Licensing for
a term of three years, which term will automatically renew for successive one year periods unless we or Ms. Sobel elects not to
extend the term of the agreement. During the term of the agreement, Ms. Sobel will receive a base salary of $250,000
per year, which is subject to increase and will be eligible to receive an annual cash performance bonus. Pursuant to
the agreement, Ms. Sobel was also granted a ten year option to purchase 750,000 shares of common stock at an exercise price of
$0.20 per share. The options vest in equal quarterly installments over a period of three years beginning on March 14,
2012.
In the event Ms. Sobel’s
employment is terminated without cause, Ms. Sobel will receive all earned but unpaid base salary and accrued but unpaid vacation
through the date of termination as well as earned bonuses that have not been paid for prior fiscal years. Ms. Sobel
will also receive a severance amount equal to 2.0 times her base salary then in effect if she is terminated without cause in the
first year of her agreement and if she is terminated without cause after the first year of her agreement, Ms. Sobel will receive
a severance amount equal to the base salary that Ms. Sobel would have received for the remainder of the term of the agreement had
Ms. Sobel’s employment continued until the end of the employment period. In addition, if Ms. Sobel is terminated
without cause, all outstanding equity awards previously granted to Ms. Sobel will accelerate and become fully vested on the date
of her termination.
Outstanding Equity Awards at Fiscal
Year-End 2011
The following table
presents information regarding outstanding options held by our named executive officers as of the end of our fiscal year ended
December 31, 2011. None of the named executive officers exercised options during the fiscal year ended December 31, 2011.
|
|
|
|
Number of Securities Underlying
Unexercised Options (#)
|
|
|
Option Exercise
|
|
|
Option Expiration
|
Name
|
|
Grant Date
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
Price ($)
|
|
|
Date
|
Colin Dyne
|
|
February 3, 2011
(1)
|
|
|
3,000,000
|
|
|
|
—
|
|
|
|
0.15
|
|
|
February 3, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Andrea Sobel
|
|
May 16, 2008
(2)
|
|
|
200,000
|
|
|
|
—
|
|
|
|
0.40
|
|
|
May 16, 2018
|
|
|
June 12, 2009
(3)
|
|
|
28,125
|
|
|
|
16,875
|
|
|
|
0.20
|
|
|
June 12, 2019
|
|
|
February 3, 2011
(4)
|
|
|
183,333
|
|
|
|
316,667
|
|
|
|
0.15
|
|
|
February 3, 2021
|
|
|
December 14, 2011
(5)
|
|
|
—
|
|
|
|
750,000
|
|
|
|
0.20
|
|
|
December 14, 2021
|
|
(1)
|
These options vested immediately on the date of grant.
|
|
(2)
|
These stock options vested 50% on May 1, 2009, and the remaining 50% vested in equal monthly installments
thereafter through October 1, 2010.
|
|
(3)
|
These stock options vest 25% on June 12, 2010 and the remaining 75% vest in equal monthly installments
thereafter through July 12, 2013.
|
|
(4)
|
These stock options vest in thirty equal monthly installments beginning February 1, 2011 through
August 1, 2013.
|
|
(5)
|
These stock options vest in equal quarterly installments over three years beginning March 14, 2012
through December 14, 2014.
|
Director
Compensation
The following table
details the total compensation earned by our non-employee directors in 2011:
Name
|
|
Fees Earned or
Paid in Cash
($)
|
|
|
Option Awards
($)
|
|
|
All Other
Compensation
($)
|
|
|
Total
($)
|
|
Dean Oakey
(1)
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Susan White
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Al Gossett
(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
20,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,000
|
|
(1) Mr.
Oakey resigned from our Board of Directors on November 21, 2011.
(2) Mr.
Gossett was appointed to our Board of Directors on December 14, 2011.
The general policy
of our Board is that compensation for non-employee directors should be a mix of cash and equity based compensation. We do not pay
management directors for Board service in addition to their regular employee compensation. Currently, we pay our non-employee directors
an annual fee of $10,000. Our directors are also reimbursed for travel expenses associated with attendance at Board meetings. There
were no reimbursements for travel expenses for the year ended December 31, 2011.
We do not have a formal
policy with regard to option grants to our Board of Directors. However, when a director is elected or appointed to our Board, we
generally follow a practice of granting options to such director to purchase up to 30,000 shares of our common stock, with the
size of the option grant being determined based on the number of months the new director will serve as a director in the fiscal
year in which the option grant is awarded. Thereafter, we generally issue annual option grants to all non-employee directors to
purchase up to 48,000 shares. In June 2011 and 2010, there were no option grants to our non-employee directors.
Securities Authorized for Issuance
Under Equity Compensation Plans
The following table sets forth certain information
regarding our equity compensation plans as of December 31, 2011.
|
|
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
|
|
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
|
|
Number of securities
remaining available for
future issuance under
equity compensation plans
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans approved by security holders (1)
|
|
|
3,772,000
|
|
|
$
|
0.42
|
|
|
|
1,728,000
|
|
Equity compensation plans not approved by security holders
|
|
|
19,690,000
|
|
|
$
|
0.12
|
|
|
|
—
|
|
Total
|
|
|
23,462,000
|
|
|
|
|
|
|
|
1,728,000
|
|
|
(1)
|
Consists of shares underlying our 2005 Stock Incentive Plan, of which an aggregate of 5,500,000
shares have been reserved for issuance. All outstanding awards under the 2005 option plan consist of stock options.
|
Material Features of Individual Equity Compensation
Plans not Approved by Stockholders
On August 18, 2011,
we issued a warrant to purchase 12,500,000 shares of our common stock to Monto Holdings (Pty) Limited (“Monto”) in
conjunction with the issuance of a note payable in the amount of $1,000,000 to Monto. The warrant has an exercise price of $0.08,
a term of five years and is exercisable immediately. No proceeds were received by us as a result of the warrant issuance.
On June 24, 2011, we
issued a warrant to purchase 3,750,000 shares of our common stock to Monto in connection with an asset purchase agreement pursuant
to which we sold Monto a $750,000 receivable. The warrant has an exercise price of $0.20, a term of five years and is exercisable
immediately. No proceeds were received by us as a result of the warrant issuance.
On February 3, 2011, Colin Dyne, our Chief
Executive Officer, was awarded an option to purchase 3,000,000 shares of our common stock at an exercise price of $0.15 per share.
The option has a term of ten years, vested immediately, and was granted outside our 2005 Stock Incentive Plan. The option was granted
to Mr. Dyne as compensation for personal guaranties Mr. Dyne provided in connection with our factoring arrangements.
Effective October 1, 2007, we entered into
a consulting agreement with Europlay Capital Advisors, LLC. Under the terms of the consulting agreement, Europlay Capital Advisors
acted as our exclusive financial advisor to raise capital and provide other financial advisory and investment banking services
to us for a term of one year. In conjunction with the consulting agreement, we issued to Europlay Capital Advisors a warrant to
purchase 250,000 shares of our common stock at an exercise price of $0.50 per share. The warrant is fully vested and has a term
of five years. No proceeds were received by us as a result of the warrant issuance.
On November 13, 2007,
we issued a warrant to purchase 150,000 shares of our common stock to Tennman WR-T, Inc. The warrant has an exercise price of $0.40,
vested immediately and has a term of five years. No proceeds were received by us as a result of the warrant issuance.
On
March 19, 2008, we issued a warrant to purchase 40,000 shares of our common stock to CCG Investor Relations for consulting services.
The warrant has an exercise price of $0.50, a five-year term and vested over the 9-month term of the service contract. No proceeds
were received by us as a result of the warrant issuance.
REPORT OF THE BOARD ON AUDIT COMMITTEE
FUNCTIONS
During our fiscal year
ended December 31, 2011, we did not have an Audit Committee. For the fiscal year ended December 31, 2011, our Board of Directors
performed the duties of an Audit Committee. The Board of Directors has furnished the following report:
The role of the Board
of Directors is to oversee the Company’s financial reporting processes. Management of Sequential Brands Group has the primary
responsibility for the Company’s financial statements as well as the Company’s financial reporting processes, principles
and internal controls. The independent auditors are responsible for performing an audit of the Company’s financial statements
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 fiscal year 2011, the Board of Directors:
|
·
|
Reviewed and discussed the audited financial
statements for the year ended December 31, 2011 with management and Weinberg and Company (the “Auditors”), the Company’s
independent auditors;
|
|
|
|
|
·
|
Reviewed and discussed with the Auditors
the matters required to be discussed by Statement on Auditing Standards No. 61 (Communication with Audit Committees), as amended;
|
|
|
|
|
·
|
Received written disclosures and the letter
from the Auditors regarding its independence as required by applicable requirements of the Public Company Accounting Oversight
Board. The Board discussed with the Auditors their independence;
|
|
|
|
|
·
|
Considered whether the Auditors’
provision of non-audit services is compatible with maintaining their independence; and
|
|
|
|
|
·
|
Discussed with management and the Auditors
the adequacy of the Company’s internal controls.
|
Based on the reviews
and discussions referred to above, the Board of Directors approved the inclusion of the audited financial statements in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2011, for filing with the SEC.
The information in
this Report of Board of Directors shall not be deemed to be “soliciting material,” or to be “filed” with
the Securities and Exchange Commission or to be subject to Regulation 14A or 14C as promulgated by the Securities and Exchange
Commission, or to the liabilities of Section 18 of the Exchange Act.
Board of Directors
Colin Dyne
Al Gossett
Susan White
Matthew Eby
Richard Gersten
William Sweedler
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table
presents information regarding the beneficial ownership of our common stock as of April 30, 2012 by:
|
·
|
each of the 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 30, 2012 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 36,002,563 shares of our common stock outstanding on April 30, 2012. Unless otherwise indicated, the
address of each of the executive officers and directors and 5% or more stockholders named below is c/o Sequential Brands Group,
Inc., 17383 Sunset Boulevard, Suite A310, Pacific Palisades, CA 90272.
Name of Beneficial Owner
|
|
Number of Shares
Beneficially
Owned
|
|
|
Percentage of
Shares
Outstanding
|
|
|
|
|
|
|
|
|
Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
Colin Dyne (1)
Director, Chief Executive Officer, Chief Financial Officer and Secretary
|
|
|
10,531,560
|
|
|
|
27.0
|
%
|
William Sweedler (2)
Chairman of the Board of Directors
|
|
|
99,428,570
|
|
|
|
73.4
|
%
|
Matthew Eby (2)
Director
|
|
|
99,428,570
|
|
|
|
73.4
|
%
|
Richard Gersten (2)
Director
|
|
|
99,428,570
|
|
|
|
73.4
|
%
|
Al Gossett
|
|
|
-
|
|
|
|
-
|
|
Susan White (3)
Director
|
|
|
102,000
|
|
|
|
*
|
|
Andrea Sobel (4)
President of Licensing
|
|
|
933,020
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
Named Directors and officers as a group (7 persons) (5)
|
|
|
110,995,150
|
|
|
|
79.6
|
%
|
Name of Beneficial Owner
|
|
Number of Shares
Beneficially
Owned
|
|
|
Percentage of
Shares
Outstanding
|
|
|
|
|
|
|
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
Gerard Guez (6)
|
|
|
10,698,387
|
|
|
|
29.7
|
%
|
Monto Holdings (Pty) Ltd. (7)
|
|
|
16,250,000
|
|
|
|
31.1
|
%
|
TCP WR Acquisition LLC (2)
|
|
|
99,428,570
|
|
|
|
73.4
|
%
|
__________________________
|
(1)
|
Consists of 7,531,560 shares of common stock and options to purchase 3,000,000 shares of common
stock.
|
|
(2)
|
Consists of debentures convertible into 82,857,142 shares of our common stock and 16,571,428 warrants
to purchase shares of our common stock at an exercise price of $0.175 per share issued to TCP WR Acquisition LLC. Our directors,
William Sweedler, Matthew Eby and Richard Gersten, as co-managing members of Tengram Capital Associates, LLC, which is the managing
member of TCP WR Acquisition, LLC, exercise voting and investment authority over the shares issuable upon conversion of the debentures
and the shares issuable upon exercise of the warrants held by this company. The address of TCP WR Acquisition LLC is 15 Riverside
Avenue, Floor 1, Westport, CT 06880.
|
|
(3)
|
Consists of 102,000 options to purchase common stock.
|
|
(4)
|
Consists of 933,020 options to purchase common stock.
|
|
(5)
|
Consists of 7,531,560 shares of common stock, options to purchase 4,035,020 shares of common stock,
debentures convertible into 82,857,142 shares of our common stock and 16,571,428 of warrants to purchase shares of our common stock
at an exercise price of $0.175 per share.
|
|
(6)
|
Consists of 10,698,387 shares of common stock. The address of Gerard Guez is 9000 Sunset Boulevard,
Penthouse West Hollywood, CA 90069.
|
|
(7)
|
Consists of 3,750,000 warrants to purchase shares of common stock at an exercise price of $0.20
per share and 12,500,000 warrants to purchase our common stock at an exercise price of $0.08 per share. Ronald Dyne exercises voting
and investment authority over the shares issuable upon exercise of the warrants held by this company. The address of Monto Holdings
(Pty), Ltd. is Level 3, 100 New South Head Road, Edgecliff NSW 2027.
|
PROPOSAL NO. 2
APPROVAL OF AN AMENDMENT
TO OUR CERTIFICATE OF INCORPORATION TO EFFECT A REVERSE STOCK SPLIT AT THE DESCRETION OF THE BOARD OF DIRECTORS
Summary
Our Board of Directors
has unanimously adopted resolutions approving and declaring advisable a proposal to amend our Certificate of Incorporation to effect
a reverse stock split of all our outstanding shares of common stock at a ratio within a range of 1-for-5 to 1-for-15. If this proposal
is approved, the Board of Directors will have the authority to determine, within twelve months from the Annual Meeting, whether
to implement the reverse stock split and the exact amount of the reverse stock split within this range if it is to be implemented.
If the Board of Directors determines to implement the reverse stock split, it will become effective after filing the amendment
with the Secretary of State of the State of Delaware. Even if the stockholders approve the reverse stock split, it is within the
discretion of our Board of Directors when, if at all, to effect the reverse stock split within twelve months from the Annual Meeting,
and to select the exchange ratio within the approved range. Such determination will be based upon many factors, including existing
and expected marketability and liquidity of our common stock, prevailing market trends and conditions and the likely effect of
the reverse stock split on the market price of our common stock. If the reverse split is implemented, the number of issued and
outstanding shares of our common stock would be reduced in accordance with the exchange ratio selected by our Board of Directors.
In connection with the reverse split, the total number of authorized shares of our common stock would not, however, be reduced
from the current total of 150,000,000.
The text of the form
of amendment to the Certificate of Incorporation, which would be filed with the Secretary of State of the State of Delaware to
effect the reverse stock split, is set forth in Appendix A to this proxy statement. The text of the form of amendment accompanying
this proxy statement is, however, subject to amendment to reflect any changes that may be required by the office of the Secretary
of State of the State of Delaware or that the Board of Directors may determine to be necessary or advisable ultimately to comply
with applicable law and to effect the reverse stock split.
Our Board of Directors
is seeking stockholder approval of the reverse stock split in order to increase our stock price and to increase the number of shares
of our common stock that are available for issuance as further described below.
Our Board of Directors
believes that approval of the amendment to effect the reverse stock split is in the best interests of the Company and our stockholders
and has unanimously recommended that the proposed amendment be presented to our stockholders for approval.
Purpose of the Reverse Stock Split
The purpose for seeking
approval to effect the reverse stock split is to (i) increase the market price per share of our common stock and (ii) to make additional
shares of our common stock available for issuance. We believe that the increased market price of our common stock expected as a
result of implementing the reverse stock split will improve the marketability and liquidity of our common stock and will encourage
interest and trading in our common stock. Because of the trading volatility often associated with low-priced stocks, many brokerage
houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced
stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies
and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally,
because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions
on higher-priced stocks, the current average price per share of our common stock can result in individual stockholders paying transaction
costs representing a higher percentage of their total share value than would be the case if the share price were substantially
higher. It should be noted, however, that the marketability and liquidity of our common stock may in fact be adversely affected
by the proposed reverse stock split given the reduced number of shares that would be outstanding after the reverse stock split.
The purpose of seeking
stockholder approval of a range of exchange ratios from 1-for-5 to 1-for-15 (rather than a fixed exchange ratio) is to provide
us with the flexibility to achieve the desired results of the reverse stock split. If the stockholders approve this proposal, the
Board of Directors would implement a reverse stock split only upon its determination that a reverse stock split would be in our
best interests at that time. If the Board of Directors were to effect a reverse stock split, the Board of Directors would set the
timing for the reverse stock split and select the specific ratio within the ratio described in this proxy statement. No further
action on the part of stockholders would be required to either implement or abandon the reverse stock split. If the stockholders
approve the proposal, and the Board of Directors determines to effect the reverse stock split, we would communicate to the public,
prior to the effective date, additional details regarding the reverse split, including the specific ratio selected by the Board
of Directors. If the Board of Directors does not implement the reverse stock split within twelve months from the Annual Meeting,
the authority granted in this proposal to implement the reverse stock split will terminate. The Board of Director reserves its
right to elect not to proceed with the reverse stock split if it determines, in its sole discretion, that this proposal is no longer
in our best interests.
For the above reasons,
we believe that having the ability to effect the reverse stock split could improve the marketability and liquidity of our common
stock, and is therefore in the best interests of the Company and our stockholders.
The reverse stock split
will also enable us to meet our obligation under the Securities Purchase Agreement to make available a sufficient number of authorized
shares of common stock available for issuance upon the exercise of the warrants and conversion of certain debentures issued pursuant
to such agreement
(see the heading “Certain Relationships and Related Transactions” for
further information on the Securities Purchase Agreement)
.
However, we cannot assure
you that the reverse stock split will have the desired effect of proportionately raising our common stock price over the long term,
or at all. The effect of a reverse split upon the market price of our common stock cannot be predicted with any certainty, and
the history of similar stock splits for companies in similar circumstances to ours is varied. The market price of our common stock
may vary based on other factors which are unrelated to the number of shares outstanding, including our future performance.
Principal Effects
of the Reverse Stock Split
Common Stock Holdings
.
If the amendment to our Certificate of Incorporation to give effect to the reverse stock split is approved at the Annual Meeting
and the Board of Directors determines to effect the reverse stock split, a certificate of amendment to the Certificate of Incorporation
will be filed with the Secretary of State of the State of Delaware. Each issued share of common stock immediately prior to the
effective time of the reverse stock split will automatically be changed, as of the effective time of the reverse stock split, into
a fraction of a share of common stock based on the exchange ratio within the approved range determined by the Board of Directors.
In addition, proportional adjustments will be made to the maximum number of shares issuable under, and other terms of, our stock
plans, as well as to the number of shares issuable under, and the exercise price of, our outstanding options and warrants. Similarly,
proportional adjustments will be made to the conversion prices of any outstanding convertible notes.
Because the reverse
stock split would apply to all issued shares of our common stock, the proposed reverse stock split would not alter the relative
rights and preferences of existing stockholders nor affect any stockholder’s proportionate equity interest in us (except
for the effect of eliminating fractional shares).
The following table
sets forth the approximate percentage reduction in the outstanding shares of our common stock and the approximate number of shares
of our common stock that would be outstanding as a result of the reverse stock split at various ratios that the Board of Directors
may determine in its discretion:
Proposed
Reverse
Stock Split Ratio
|
|
Percentage
Reduction In
Outstanding
Shares
|
|
|
Shares Outstanding After
Reverse Stock Split
(
based on 36,002,563
shares of our common
stock issued and
outstanding immediately
prior to reverse split)*
|
|
|
Shares Outstanding After
Reverse Stock Split
(
based on 118,855,563 shares of
our common stock issued and
outstanding immediately prior to
the reverse split, assuming the
conversion of $14,500,000 of
debentures into common stock)*
|
|
1-for-5
|
|
|
80
|
%
|
|
|
7,200,513
|
|
|
|
23,771,113
|
|
1-for-10
|
|
|
90
|
%
|
|
|
3,600,256
|
|
|
|
11,885,556
|
|
1-for-15
|
|
|
93.33
|
%
|
|
|
2,400,171
|
|
|
|
7,923,704
|
|
* Approximate;
does not account for elimination of fractional shares.
Stockholders should
note that it is not possible to accurately predict the effect of the reverse stock split on the market prices for the common stock,
and the history of reverse stock splits is varied. In particular, there is no assurance that the price per share of the common
stock after the reverse stock split will increase in an amount proportionate to the decrease in the number of issued and outstanding
shares, or will increase at all. In addition, there can be no assurance that the market price of the common stock immediately after
the reverse stock split will be maintained for any period of time. Further, because some investors may view the reverse stock split
negatively, there can be no assurance that approval of this proposal or the actual implementation of the reverse stock split would
not adversely affect the market price of the common stock.
“Public Company”
Status.
Our Common Stock is currently registered under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”), and we are subject to the “public company” periodic reporting and other requirements of
the Exchange Act. The proposed reverse stock split will not affect our status as a public company or this registration under the
Exchange Act. The reverse stock split is not intended as, and will not have the effect of, a “going private transaction”
covered by Rule 13e-3 under the Securities Exchange Act of 1934.
Odd Lot Transactions.
It is likely that some of our stockholders will own “odd-lots” of less than 100 shares following a reverse stock split.
A purchase or sale of less than 100 shares (an “odd lot” transaction) may result in incrementally higher trading costs
through certain brokers, particularly “full service” brokers, and generally may be more difficult than a “round
lot” sale. Therefore, those stockholders who own less than 100 shares following a reverse stock split may be required to
pay somewhat higher transaction costs and may experience some difficulties or delays should they then determine to sell their shares
of common stock. The Board of Directors believes, however, that these potential effects are outweighed by the benefits of the reverse
stock split.
Authorized but Unissued
Shares; Potential Anti-Takeover Effects.
Our Certificate of Incorporation presently authorizes 150,000,000 shares of common
stock and 10,000,000 shares of preferred stock. In the event the Board decides to implement a reverse split, the number of authorized
shares of our common stock would not change. In addition, the Board would not decrease the number of authorized shares of preferred
stock and the reverse stock split would not change the number of authorized shares of preferred stock. Following a reverse split,
the number of shares remaining available for issuance by us in the future would increase, as the number of outstanding shares following
the reverse split would be significantly less than 150,000,000, as illustrated in the above table.
These additional shares
would be available for issuance from time to time for corporate purposes such as issuances of common stock in connection with capital-raising
transactions and acquisitions of companies or other assets, as well as for issuance upon conversion or exercise of securities such
as convertible preferred stock, convertible debt, warrants or options convertible into or exercisable for common stock. We believe
that the availability of the additional shares will provide us with the flexibility to meet business needs as they arise, to take
advantage of favorable opportunities and to respond effectively in a changing corporate environment. For example, we may elect
to issue shares of common stock to raise equity capital, to make acquisitions through the use of stock, to establish strategic
relationships with other companies, to adopt additional employee benefit plans or reserve additional shares for issuance under
such plans, where the Board of Directors determines it advisable to do so, without the necessity of soliciting further stockholder
approval, subject to applicable stockholder vote requirements under Delaware corporation law. If we issue additional shares for
any of these purposes, the aggregate ownership interest of our current stockholders, and the interest of each such existing stockholder,
would be diluted, possibly substantially.
The additional shares
of our common stock that would become available for issuance upon an effective reverse stock split could also be used by us to
oppose a hostile takeover attempt or delay or prevent a change of control or changes in or removal of our management, including
any transaction that may be favored by a majority of our stockholders or in which our stockholders might otherwise receive a premium
for their shares over then-current market prices or benefit in some other manner. For example, without further stockholder approval,
the Board of Directors could strategically sell shares of common stock in a private transaction to purchasers who would oppose
a takeover or favor our current Board of Directors. Although the increased proportion of authorized but unissued shares to issued
shares could, under certain circumstances, have an anti-takeover effect, the reverse stock split is not being proposed in order
to respond to a hostile takeover attempt or to an attempt to obtain control of us.
Criteria to be
Used for Decision to Apply the Reverse Stock Split
If the stockholders
approve the reverse stock split, the Board of Directors will be authorized to proceed with the reverse split. In determining whether
to proceed with the reverse split and setting the exact amount of split, if any, the Board of Directors will consider a number
of factors, including market conditions, existing and expected trading prices of our common stock, our additional funding requirements
and the amount of our authorized but unissued common stock.
Fractional Shares
No fractional shares
of common stock will be issued as a result of the proposed reverse stock split. In lieu of issuing fractional shares, we intend
to directly pay each stockholder who would otherwise have been entitled to a fraction of a share an amount in cash equal to the
closing sale price of the common stock, as quoted on the OTCQB on the Effective Date, multiplied by the fractional share amount.
The number of shares which will result in fractional interests cannot be precisely predicted, as we cannot determine in advance
the number of stockholders whose total holdings will not be evenly divisible by the applicable ratio at which the reverse stock
split may be implemented.
No Dissenters’
Rights
Under Delaware law,
our s stockholders would not be entitled to dissenters’ rights or rights of appraisal in connection with the implementation
of the reverse stock split, and we will not independently provide our stockholders with any such rights.
Certain United
States Federal Income Tax Consequences
The following is a summary
of certain United States federal income tax consequences of the reverse stock split. It does not address any state, local or foreign
income or other tax consequences, which may vary significantly depending upon the jurisdiction and the status of the stockholder/taxpayer.
It applies to you only if you held pre-reverse stock split common stock, and if you hold your post-reverse stock split common stock,
as capital assets for tax purposes. This discussion does not apply to you if you are a member of a class of holders subject to
special rules, such as (a) a dealer in securities or currencies, (b) a trader in securities that elects to use a mark-to-market
method of accounting for your securities holdings, (c) a bank, (d) a life insurance company, (e) a tax-exempt organization, (f)
a person that owns shares of common stock that are a hedge, or that are hedged, against interest rate risks, (g) a person who owns
shares of common stock as part of a straddle or conversion transaction for tax purposes or (h) a person whose functional currency
for tax purposes is not the U.S. dollar. The discussion is based on the Internal Revenue Code of 1986, as amended (the “Internal
Revenue Code”), its legislative history, existing, temporary and proposed regulations under the Internal Revenue Code, published
rulings and court decisions, all as currently in effect. These laws, regulations and other guidance are subject to change, possibly
on a retroactive basis. We have not sought and will not seek an opinion of counsel or a ruling from the Internal Revenue Service
regarding the federal income tax consequences of a reverse stock split.
PLEASE CONSULT YOUR OWN
TAX ADVISOR CONCERNING THE CONSEQUENCES OF THE REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE
CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.
Tax Consequences
to United States Holders of Common Stock.
A United States holder, as used herein, is a stockholder who or that is: (a) a citizen
or resident of the United States, (b) a domestic corporation, (c) an estate whose income is subject to United States federal income
tax regardless of its source, or (d) a trust, if a United States court can exercise primary supervision over the trust’s
administration and one or more United States persons are authorized to control all substantial decisions of the trust. This discussion
applies only to United States holders.
No gain or loss should
be recognized by a stockholder upon such stockholder’s exchange of pre-reverse stock split shares for post-reverse stock
split shares pursuant to the reverse stock split (except to the extent of cash received in lieu of a fractional share). The aggregate
adjusted basis of the post-reverse stock split shares of common stock received will be the same as the aggregate adjusted basis
of the common stock exchanged for such new shares, reduced by the amount of the adjusted basis of any common stock exchanged for
such new shares that is allocated to any fractional share for which cash is received. The stockholder’s holding period for
the post-reverse stock split shares will include the period during which the stockholder held the pre-reverse stock split shares
surrendered. A stockholder who receives cash in lieu of a fractional share of new common stock generally will recognize taxable
gain or loss equal to the difference, if any, between the amount of cash received and the portion of the stockholder’s aggregate
adjusted tax basis in the shares of old common stock allocated to the fractional share. If the shares of old common stock allocated
to the fractional shares were held by the stockholder as capital assets, the gain or loss resulting from the payment of cash in
lieu of the issuance of a fractional share will be taxed as capital gain or loss. Such capital gain or loss will be short term
if the pre-reverse split shares were held for one year or less and long term if held more than one year.
Payment of cash in lieu
of fractional shares within the United States or through certain U.S. related financial intermediaries is subject to both backup
withholding and information reporting unless the beneficial owner certifies under penalties of perjury that it is not a U.S. holder
(and the payor does not have actual knowledge or reason to know that the beneficial owner is a U.S. holder) or the stockholder
otherwise establishes an exemption. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit
against such stockholder’s U.S. federal income tax liability provided the required information is furnished to the Internal
Revenue Service.
Tax Consequences
to the Company.
We do not expect to recognize any gain or loss as a result of the reverse stock split.
Accounting Consequences
Following the date of
the reverse stock split, if any, the par value of our common stock would remain unchanged at $0.001 per share after the reverse
stock split. The additional paid-in capital as designated on our consolidated balance sheet would be increased by an amount equal
to the amount by which the common stock was decreased. In addition, the net income or loss and net book value per share of common
stock will be increased because there will be fewer shares of the common stock outstanding. We do not anticipate that any other
material accounting consequences would arise as a result of the reverse stock split.
Effective Date
If the proposed amendment
to the Certificate of Incorporation to give effect to the reverse stock split is approved at the Annual Meeting and the Board of
Directors determines to effect the reverse stock split, the reverse stock split will become effective as of 4:30 p.m. Eastern Time
on the effective date of the applicable certificate of amendment to our Certificate of Incorporation with the office of the Secretary
of State of the State of Delaware, which we would expect to be the date of filing. We refer to this time and date as the “Effective
Date.” Except as explained above with respect to fractional shares, on the Effective Date, each share of our common stock
issued and outstanding immediately prior thereto will be, automatically and without any action on the part of the stockholders,
combined, converted and changed into that fraction of a share of our common stock as determined by the ratio within the approved
range implemented by the Board of Directors.
Exchange of Stock
Certificates
As of the Effective
Date, each certificate representing shares of our common stock outstanding before the reverse stock split will be deemed, for all
corporate purposes, to evidence ownership of the reduced number of shares of our common stock resulting from the reverse stock
split. All shares underlying options, warrants and other securities exchangeable or exercisable for or convertible into common
stock also automatically will be adjusted on the Effective Date.
Our transfer agent,
Stalt, Inc., will act as the exchange agent for purposes of exchanging stock certificates subsequent to the reverse stock split.
Shortly after the Effective Date, stockholders of record will receive written instructions requesting them to complete and return
a letter of transmittal and surrender their old stock certificates for new stock certificates reflecting the adjusted number of
shares as a result of the reverse stock split. Certificates representing shares of common stock issued in connection with the reverse
stock split will continue to bear the same restrictive legends that were borne by the surrendered certificates representing the
shares of common stock outstanding prior to the reverse stock split. No new certificates will be issued until such stockholder
has surrendered any outstanding certificates, together with the properly completed and executed letter of transmittal, to the exchange
agent. Until surrendered, each certificate representing shares of common stock outstanding before the reverse stock split would
continue to be valid and would represent the adjusted number of shares, based on the ratio of the reverse stock split.
Any stockholder whose
stock certificates are lost, destroyed or stolen will be entitled to a new certificate or certificates representing post-reverse
stock split shares upon compliance with the requirements that we and our transfer agent customarily apply in connection with lost,
destroyed or stolen certificates. Instructions as to lost, destroyed or stolen certificates will be included in the letter of instructions
from the exchange agent.
Upon the reverse stock
split, we intend to treat stockholders holding our common stock in “street name,” through a bank, broker or other nominee,
in the same manner as registered stockholders whose shares are registered in their names. Banks, brokers and other nominees will
be instructed to effect the reverse stock split for their beneficial holders holding our common stock in “street name.”
However, such banks, brokers and other nominees may have different procedures than registered stockholders for processing the reverse
stock split. If you hold your shares in “street name” with a bank, broker or other nominee, and if you have any questions
in this regard, we encourage you to contact your bank, broker or nominee.
YOU SHOULD NOT DESTROY
YOUR STOCK CERTIFICATES AND YOU SHOULD NOT SEND THEM NOW. YOU SHOULD SEND YOUR STOCK CERTIFICATES ONLY AFTER YOU HAVE RECEIVED
INSTRUCTIONS FROM THE EXCHANGE AGENT AND IN ACCORDANCE WITH THOSE INSTRUCTIONS.
If any certificates
for shares of common stock are to be issued in a name other than that in which the certificates for shares of common stock surrendered
are registered, the stockholder requesting the reissuance will be required to pay to us any transfer taxes or establish to our
satisfaction that such taxes have been paid or are not payable and, in addition, (a) the transfer must comply with all applicable
federal and state securities laws, and (b) the surrendered certificate must be properly endorsed and otherwise be in proper form
for transfer.
Vote Required
and Recommendation
The affirmative vote,
in person or by proxy, of the holders of a majority of our outstanding common stock and Series A Preferred Stock, voting together
as a single class, will be required to approve the proposed amendment to our Certificate of Incorporation to effect the reverse
stock split.
Our Board of Directors
adopted resolutions on April 12, 2012, declaring that an amendment to the Certificate of Incorporation to effect the reverse stock
split may be advisable and in our best interests and in the best interests of our stockholders and recommends that our stockholders
vote “FOR” the amendment to the Certificate of Incorporation to give effect to the reverse stock split.
THE BOARD OF DIRECTORS RECOMMENDS A
VOTE IN FAVOR OF THE FOREGOING PROPOSAL TO APPROVE AN
Amendment to OUR
CERTIFICATE
OF INCORPORATION
to Effect a Reverse Stock Split
.
PROPOSAL NO. 3
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Board of Directors
has appointed Weinberg and Company as our independent auditors for the fiscal year ending December 31, 2012. As a matter
of good corporate governance, the Board of Directors has decided to submit its selection of the independent audit firm to our stockholders
for ratification. If the selection of Weinberg and Company is not ratified by the majority of our voting securities present or
represented at the Annual Meeting and entitled to vote on the matter, the Board of Directors will review its future selection of
an independent registered public accounting firm in the light of that vote result. Weinberg and Company has no financial interest
of any kind in Sequential Brand Group, except the professional relationship between auditor and client. Representatives of Weinberg
and Company will be invited to attend the Annual Meeting. If a representative of Weinberg and Company 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.
Change in Independent Auditor
On April 21, 2011,
our Board of Directors approved the engagement of Weinberg and Company as our new independent registered public accounting firm
and on April 22, 2011, Crowe Horwath LLP was dismissed as our independent registered public accounting firm.
During our fiscal years
ended December 31, 2010 and 2009 and through April 21, 2011, we did not consult with Weinberg and Company on (i) the application
of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that may be rendered
on our financial statements, and Weinberg and Company did not provide either a written report or oral advice to us that Weinberg
and Company concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial
reporting issue; or (ii) the subject of any disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions,
or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K. At our annual meeting of stockholders
held on June 17, 2011, our stockholders ratified the appointment of Weinberg and Company as our independent registered public accounting
firm for the fiscal year ending December 31, 2011.
Information Pertaining to Crowe Horwath
LLP
The audit reports of
Crowe Horwath LLP on the financial statements of the Company as of and for the fiscal years ended December 31, 2010
and 2009 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit
scope or accounting principles.
In connection with
the audits of our financial statements for the fiscal years ended December 31, 2010 and 2009 and through April 21, 2011, there
were: (i) no disagreements between the Company and Crowe Horwath LLP on any matters of accounting principles or practices, financial
statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Crowe Horwath
LLP, would have caused Crowe Horwath LLP to make reference to the subject matter of the disagreement in their reports on our financial
statements for such fiscal years, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation
S-K.
We provided Crowe Horwath
LLP a copy of the disclosures in our Current Report on Form 8-K filed on April 27, 2011 reporting the change in our independent
registered public accounting firm and requested that Crowe Horwath LLP furnish us with a letter addressed to the Securities and
Exchange Commission stating whether or not it agrees with our statements under Item 4.01 of the Current Report on Form 8-K. A copy
of the letter dated April 27, 2011, furnished by Crowe in response to that request is filed as Exhibit 16.1 to the 8-K.
Fees Paid to Independent Accountants
Audit Fees
Fees for audit and review
services provided by Weinberg and Company totaled approximately $62,000 during the year ended December 31, 2011, including fees
associated with the December 31, 2011 audit, and the reviews of our quarterly financial statements for the periods ended March
31, 2011, June 30, 2011 and September 30, 2011.
Fees for audit services
provided by Crowe Horwath LLP totaled approximately $90,000 during the year ended December 31, 2011 for fees associated with our
December 31, 2010 audit. Fees for audit and review services provided by Crowe Horwath LLP totaled approximately $149,000 during
the year ended December 31, 2010, including fees associated with the December 31, 2010 audit, the reviews of our quarterly financial
statements for the periods ended March 31, 2010, June 30, 2010 and September 30, 2010, and the restatement of our financial statements
for the annual and quarterly periods beginning January 1, 2008 through March 31, 2010.
Audit-Related
Fees
There were no fees billed
in each of the last two fiscal years for assurance and related services by our principal accountant that reasonably relate to the
performance of the audit or review of our financial statements.
Tax Fees
There were no fees billed
in each of the last two fiscal years for professional services by our principal accountant for tax compliance, tax advice, and
tax planning.
All Other Fees
No other fees were incurred
during the years ended December 31, 2011 and 2010 for services provided by Crowe Horwath LLP.
Generally,
the Board approves in advance audit and non-audit services to be provided by our independent accounting firms. In other cases,
in accordance with Rule 2-01(c)(7) of Securities and Exchange Commission Regulation S-X, the Board has delegated pre-approval authority
to the Chairman of the Board for matters which arise or otherwise require approval between regularly scheduled meetings of the
Board of Directors, provided that the Chairman reports such approvals to the Board at the next regularly scheduled meeting of the
Board of Directors. No audit-related 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, 2011 and December 31, 2010.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS A VOTE “FOR” RATIFICATION OF THE SELECTION OF WEINBERG AND COMPANY AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.
OTHER PROPOSALS
We are not aware of
any other business to be presented to the meeting and we do not intend to bring any other matters before the meeting. However,
if any other matters properly come before the meeting, the persons named in the accompanying proxy are empowered, in the absence
of contrary instructions, to vote according to their best judgment.
2013 STOCKHOLDER PROPOSALS
Any stockholder who
intends to present a proposal at the 2013 annual meeting of stockholders for inclusion in our proxy statement and proxy form relating
to such annual meeting must submit such proposal to us at our principal executive offices no later than January 23, 2013. In addition,
in the event a stockholder proposal is not received by the Company by April 8, 2013, the proxy to be solicited by the Board of
Directors for the 2013 annual meeting will confer discretionary authority on the holders of the Proxy to vote the shares if the
proposal is presented at the 2013 annual meeting without any discussion of the proposal in the proxy statement for such meeting.
SEC rules and regulations
provide that if the date of our 2013 annual meeting is advanced or delayed more than 30 days from first anniversary of the 2012
annual meeting, stockholder proposals intended to be included in the proxy materials for the 2013 annual meeting must be received
by us within a reasonable time before we begin to print and mail the proxy materials for the 2013 annual meeting. If we determine
that the date of the 2013 annual meeting will be advanced or delayed by more than 30 days from the first anniversary of the 2012
annual meeting, we will publicly disclose such change.
COMMUNICATIONS WITH DIRECTORS
You may communicate
with our Board of Directors by sending communications via email to board@sequentialbrandsgroup.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
distributed 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 should be excluded including the following: 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 similarly unsuitable will not be distributed, with the provision
that any communication that is not distributed will be made available to any independent director upon request.
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. We may also reimburse brokers, banks,
custodians, nominees and other fiduciaries for their reasonable charges and expenses in connection with the distribution of proxy
materials.
ANNUAL REPORT
Our financial statements
for the year ended December 31, 2011 are included in our 2011 Annual Report to Stockholders, which we are sending to our stockholders
at the same time as this proxy statement. Our 2011 Annual Report on Form 10-K, which has been filed with the SEC, will be made
available to stockholders without charge upon written request to the Corporate Secretary of Sequential Brands Group, Inc., at our
principal executive offices, 17383 Sunset Boulevard, Suite A310 Pacific Palisades, CA 90272
|
By Order of the Board of Directors
|
|
|
|
/s/ William Sweedler
|
|
William Sweedler
|
|
|
|
Chairman of the Board
|
Los Angeles, California
May [__], 2012
PLEASE PROMPTLY VOTE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED STATES. PROMPT RESPONSE IS HELPFUL AND YOUR COOPERATION WILL BE APPRECIATED.
IF YOU ARE A STOCKHOLDER OF RECORD, YOU MAY REVOKE YOUR PROXY AT ANY TIME BEFORE THE ANNUAL MEETING EITHER BY FILING WITH THE CORPORATE
SECRETARY OF PEOPLE’S LIBERATION, AT OUR PRINCIPAL EXECUTIVE OFFICES, A WRITTEN NOTICE OF REVOCATION OR A DULY EXECUTED PROXY
BEARING A LATER DATE, OR BY ATTENDING THE ANNUAL MEETING AND EXPRESSING A DESIRE TO VOTE 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 NOMINEE. YOU
MUST CONTACT YOUR BROKER, BANK OR OTHER NOMINEE TO FIND OUT HOW TO DO SO. ATTENDANCE AT THE MEETING WILL NOT IN AND OF ITSELF REVOKE
A PROXY.
THE ANNUAL MEETING IS ON JUNE 12, 2012
PLEASE RETURN YOUR PROXY IN TIME
SEQUENTIAL BRANDS GROUP, INC.
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned, a
stockholder of SEQUENTIAL BRANDS GROUP, INC., a Delaware corporation, formerly known as People’s Liberation, Inc. (the “Company”),
hereby nominates, constitutes and appoints Colin Dyne and Susan White as proxies of the undersigned, with full power of substitution,
to attend, vote and act for the undersigned at the Annual Meeting of Stockholders of the Company, to be held on June 12, 2012,
and any postponements or adjournments thereof, and in connection therewith, to vote and represent all of the shares of the Company
which the undersigned would be entitled to vote with the same effect as if the undersigned were present, as follows:
A VOTE FOR ALL PROPOSALS IS RECOMMENDED
BY THE BOARD OF DIRECTORS:
Proposal 1. To elect the Board of Directors’ nominees
as a Class I Directors:
Colin Dyne
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William Sweedler
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FOR ALL NOMINEES LISTED ABOVE (except as marked to the contrary below)
¨
WITHHELD for all nominees listed above
(INSTRUCTION: To withhold authority to vote for any
individual nominee, write that nominee’s name in the space below:)
_______________________________________________________________________________
The undersigned hereby confer(s)
upon the proxy discretionary authority with respect to the election of directors in the event that any of the above nominees is
unable or unwilling to serve.
Proposal 2. To
approve an amendment to the Company’s Certificate of Incorporation to effect a reverse stock split
of our outstanding
common stock
:
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FOR
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¨
AGAINST
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¨
ABSTAIN
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Proposal 3. Proposal to ratify the selection of Weinberg and
Company as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2012.
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FOR
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AGAINST
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ABSTAIN
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The undersigned hereby
revokes any other proxy to vote at the Annual Meeting, and hereby ratifies and confirms all that said attorneys and proxy, and
each of them, may lawfully do by virtue hereof. With respect to matters not known at the time of the solicitation hereof, said
proxy is authorized to vote in accordance with his best judgment.
THIS PROXY WILL BE
VOTED IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH ABOVE OR, TO THE EXTENT NO CONTRARY DIRECTION IS INDICATED, WILL BE TREATED
AS A GRANT OF AUTHORITY TO VOTE FOR ALL PROPOSALS. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS PROXY CONFERS
AUTHORITY TO AND SHALL BE VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE PROXY.
The undersigned acknowledges
receipt of a copy of the Notice of Annual Meeting and accompanying Proxy Statement dated May [__], 2012, relating to the Annual
Meeting.
Dated:___________________________, 2012
Signature:_____________________________
Signature:_____________________________
Signature(s) of Stockholder(s)
(See Instructions Below)
The Signature(s) hereon should correspond
exactly with the name(s) of the Stockholder(s) appearing on the Share Certificate. If stock is held jointly, all joint owners should
sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If signer is a corporation,
please sign the full corporation name, and give title of signing officer.
¨
Please indicate by checking this box if you anticipate attending the Annual Meeting.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY
USING THE ENCLOSED ENVELOPE
OR FAX DIRECTLY TO STALT, INC. AT (650) 321-7113
Appendix
A
CERTIFICATE OF AMENDMENT
TO THE
RESTATED
CERTIFICATE OF INCORPORATION
OF
SEQUENTIAL BRANDS GROUP, INC.
The undersigned, Colin
Dyne, Chief Executive Officer of Sequential Brands Group, Inc. (the “Corporation”), a corporation organized and existing
by virtue of the General Corporation Law (the “GCL”) of the State of Delaware, does hereby certify pursuant to Section
103 of the GCL as to the following:
1.
The
name of the Corporation is Sequential Brands Group, Inc. The original name of the Corporation is Philco Financial Management Corp.,
and the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on December 29, 1982.
2.
The
terms and provisions of this Certificate of Amendment (i) have been approved by the Board of Directors of the Corporation in a
resolution setting forth and declaring advisable the amendment contained herein and (ii) have been duly approved by the required
number of shares of outstanding stock of the Corporation, in each case pursuant to and in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
3. Article fourth,
paragraph A, of the Corporation’s Amended and Restated Certificate of Incorporation is hereby amended and restated as follows:
“A. Capital
Stock: The aggregate number of shares of all classes of stock which the Corporation shall have authority to issue is 160,000,000
shares, of which 150,000,000 shares shall be classified as common stock, $0.001 par value per share (“Common Stock”),
and 10,000,000 shares shall be classified as preferred stock, $0.001 par value per share (“Preferred Stock”). Effective
as of 4:30 p.m. Eastern Standard Time on the date of filing of this Certificate of Amendment of Restated Certificate of Incorporation
(the “Effective Time”), each share of Common Stock of the Corporation issued and outstanding or held as treasury shares
at the Effective Time (the “Old Common Stock”) shall automatically be reclassified and continued (the “Reverse
Split”), without any action on the part of the holder thereof, as [______] of one share of Common Stock. No fractional shares
will be issued for any fractional share interest created by the Reverse Split. Stockholders who otherwise would be entitled to
receive fractional shares of Common Stock shall be entitled to receive cash (without interest or deduction) from the Corporation's
transfer agent in lieu of such fractional share interests, upon receipt by the Corporation's transfer agent of the stockholder's
properly completed and duly executed transmittal letter and, where shares are held in certificated form, the surrender of the stockholder's
Old Certificates (as defined below), in an amount equal to the proceeds attributable to the sale of such fractional shares following
the aggregation and sale by the Corporation's transfer agent of all fractional shares otherwise issuable. Each certificate that
immediately prior to the Effective Time represented shares of Old Common Stock (“Old Certificates”), shall thereafter
represent that number of shares of Common Stock into which the shares of Old Common Stock represented by the Old Certificate shall
have been combined, subject to the elimination of fractional share interests as described above.
The Corporation’s
authorized shares of Common Stock, each having a par value of $0.001 per share, shall not be changed. The Corporation’s stated
capital shall be reduced by an amount equal to the aggregate par value of the shares of Common Stock issued prior to the effectiveness
of this Certificate of Amendment which, as a result of the Reverse Split provided for herein, are no longer issued shares of Common
Stock.”
IN WITNESS WHEREOF,
the undersigned has executed this Certificate of Amendment of Amended and Restated Certificate of Incorporation as of the [___]
day of [_____].
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Colin Dyne, Chief Executive Officer
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