PROPOSAL NO. 1
ELECTION OF DIRECTORS
Historically, under our certificate of incorporation, our Board was divided into three classes as nearly equal in number as possible, with each class of directors elected to serve three-year staggered terms. At our 2013 annual meeting of stockholders, our stockholders approved a phased-in declassification of our Board. Beginning with this Annual Meeting, our Board is now fully declassified.
In May 2016, our Board amended our Bylaws to adopt a majority voting standard in uncontested elections of directors, providing that a nominee for director shall be elected to the board if the votes cast for such nominees election exceed the votes cast against such nominees election, with a plurality vote standard retained for contested director elections, that is, when the number of director nominees exceeds the number of directors to be elected. For more information, see Other Governance Matters Majority Voting below.
Our Board currently has eight members. Two of our current directors, Dan Almagor and Derial Sanders, have chosen not to stand for re-election at the Annual Meeting. The Board therefore determined that, effective upon the date of the Annual Meeting, the number of members of the Board will be reduced to six members. Based on the recommendation of its Nominating/Governance Committee, the Board nominated the following current directors for election at the Annual Meeting, each for a one-year term that expires at the 2017 annual meeting and until their successors are duly elected and qualified: (i) Martin Fogelman, (ii) Robin Marino, (iii) Alan Mustacchi, (iv) Robert Stebenne, (v) Richard Wenz and (vi) Stephen Zelkowicz.
Each nominee has consented to be named in this proxy statement and to serve if elected. If, prior to the meeting, any nominee should become unavailable to serve, the shares of our common stock represented by a properly executed and returned proxy will be voted for such other person as shall be designated by our Board, unless the Board determines to reduce the number of directors in accordance with our Bylaws.
Below are biographies for each of the director nominees and certain information regarding the individual and the experiences, qualifications, attributes skills and qualifications that caused our Board to determine that such individual should be serving as a director of our Company.
Martin Fogelman
, 72, a director since March 2007, is an independent consultant and private investor in the juvenile products industry. He was instrumental in the conception and development of the Babies R Us retail chain and served as senior vice president of both Toys R Us and Babies R Us, where he was employed from 1986 to May 2003. From May 2003 until March 2007, Mr. Fogelman was President of Baby Trend, Inc., a manufacturer of infant products. He is currently an advisory board member of Babyganics Products, pbc, a baby healthcare products Company. Mr. Fogelman brings to our Board his extensive experience in our industry, including his experience in creating strategic growth at Toys R Us and Babies R Us, and his knowledge of our Company and business operations.
Robin Marino
, 61, a director since August 2015, is currently an independent brand consultant. From June 2011 to November 2014, Ms. Marino served as Group President, Accessories and Home, of LFUSA/Global Brands Group (GBG), a branded apparel, footwear, fashion accessories and related lifestyle product company, where she oversaw five divisions. Prior to joining GBG, Ms. Marino was President and CEO of Merchandising at Martha Stewart Living Omnimedia, which she originally joined in 2005. Ms. Marino was also President and COO of Kate Spade from 1999 to 2005. Prior to that, she served in a variety of management positions for fashion and retail companies such as Burberry Limited , Wathne LTD and Federated Department Stores, Inc. Ms. Marino currently serves as a director of Hampshire Group, Limited, a publicly-traded provider of fashion apparel across a broad range of product categories, channels of distribution and price points. Ms. Marino holds a B.B.A. from Stetson University. Ms. Marino brings to our Board over 35 years of sales and merchandising experience in consumer products.
Alan Mustacchi
,
55, director since May 2015, is currently Executive Vice President, Capital Markets of GreenSky, LLC, a technology-focused consumer finance platform, which he joined in November 2014. Prior to joining GreenSky, Mr. Mustacchi was Managing Director and Head of Consumer Products & Specialty Retail Investment Banking of Dresner Partners, a middle market investment bank specializing in merger & acquisition
6
advisory, institutional private placements of debt and equity, financial restructuring and corporate turnaround, valuation and strategic consulting, from 2013 until 2014. From 2005 until 2013, Mr. Mustacchi was at Navigant Capital Advisors, LLC, where the last position he held was Managing Director, Investment Banking. He was also Managing Director, Merchant Banking Group, at BNP Paribas, where he spent 11 years, and Vice President of The Bank of New York in its commercial finance group. Early in his career, Mr. Mustacchi spent six years as a Certified Public Accountant. He holds an M.B.A. in Finance and International Business, and a B.S. in Accounting and Economics and from New York Universitys Stern School of Business. Mr. Mustacchi brings to our Board significant capital markets experience and financial acumen.
Robert Stebenne
, 63, a director since March 2007, was appointed our Chief Executive Officer in May 2015 and has been President and Chief Operating Officer since March 2015. Mr. Stebenne has served as a director of our Company since March 2007. Prior to joining our Company, Mr. Stebenne owned and managed Bob Stebenne Associates, a firm he founded in 2002 that provided consulting services in the areas of brand development, product development, and strategic planning. From February 1999 to July 2002, Mr. Stebenne was the president of new business development for Hasbro Industries, a provider of childrens and family leisure time products and services. From 1991 to February 1999, he was president of Hasbros FOB/LC division, where he created a U.S. marketing, sales, product development, finance and logistics group. From 1982 to 1991, he was president of Hasbros Playskool Baby division. Mr. Stebenne holds a B.A. in American History from the Roger Williams University. Mr. Stebenne brings to our Board his extensive experience in our industry, including his experience at Hasbro and his operational experience, and as our Chief Executive Officer provides our Board with insight into the day-to-day operations of our Company.
Richard E. Wenz
, 66, a director since March 2007, is a consultant and private investor. During 2002 and 2003, Mr. Wenz served as Chief Executive Officer of Jenny Craig International. From 2000 to 2003, Mr. Wenz was an operating partner/affiliate of DB Capital Partners, LLC, the private equity arm of Deutsche Bank A.G., and served on the boards of directors of a number of portfolio companies, including NewRoads, Inc., Nations Rent and Jenny Craig International. From 1997 to 2000, Mr. Wenz was President and Chief Operating Officer of Safety 1st, Inc., a manufacturer of safety and juvenile products. During 1995 and 1996, Mr. Wenz was the partner in charge of the Chicago office of The Lucas Group, a business strategy consulting firm. Prior to 1995, Mr. Wenz held senior executive positions including Executive Vice President of Wilson Sporting Goods Co., Chief Financial Officer of Electrolux Corporation and The Regina Company, and President of the Professional Golf Corporation. From 2010 to 2016, Mr. Wenz served as a director of Armstrong World Industries, a publicly traded international manufacturer of flooring and ceiling products (AWI), and, following the spin-off of Armstrong Flooring, Inc. from AWI in April 2016, now serves as a director of Armstrong Flooring, Inc. and as chair of its audit committee. Since 2010, he also has served as a director of Pet Supplies Plus, a pet retail chain, and is chairman of its audit committee and a member of its compensation committee. Mr. Wenz previously served as a director of Easton-Bell Sports, Inc., Coach America, Inc., Radica Games (HK), Inc., Hunter Fan Company, Strategic Partners, Inc., The First Years, Inc., Babyganics Products, pbc, and Baby Jogger, Inc. Mr. Wenz began his career in 1971 with Arthur Young & Company (predecessor of Ernst & Young) and left the firm as a partner in 1983. Mr. Wenz is a certified public accountant (inactive). Mr. Wenz brings to our Board substantial leadership and financial experience, his experience as a certified public accountant, as well as experience in the juvenile products industry at The First Years, Safety 1st, Baby Jogger and Babyganics, and past service on other public company boards of directors.
Stephen J. Zelkowicz
, 43, has been a director since August 2014. Since 1999, he has served as an equity research analyst at Wynnefield Capital, Inc., an investment firm specializing in small, publicly-traded companies. Mr. Zelkowicz holds a B.A. from the University of Pennsylvania. Mr. Zelkowicz brings to our Board his knowledge of our Company and industry and his experience in the capital markets.
Recommendation
Our Board recommends that stockholders vote
FOR
the election of Ms. Marino and Messrs. Fogelman, Mustacchi, Stebenne, Wenz and Zelkowicz to the Board.
7
committee is an independent director under the rules of the Nasdaq Stock Market. During 2015, we had changes in the membership of the committee. Mr. Stebenne served on the committee until March 2, 2015, when he became an officer of our Company, and was replaced by Mr. Zelkowicz. Mr. Wenz served on the committee until August 4, 2015, when he was replaced by Mr. Fogelman, who became Chairman of the committee at that time. As previously disclosed, Mr. Sanders chose not to stand for re-election as a director at the Annual Meeting. The Board has appointed Ms. Marino to succeed Mr. Sanders on the committee on the date of the Annual Meeting.
As described in the committees charter, which is available on our website at
www.summerinfant.com
, the committee has the overall responsibility, on behalf of our Board, for approving and evaluating all compensation plans, programs and policies as they affect our Chief Executive Officer and our other executive officers, and for matters involving the compensation of our directors. The committee will meet as often as necessary to carry out its responsibilities, and may invite to its meetings any director, management, or such other persons as it deems necessary to carry out such responsibilities. The committee will review and approve, at least annually, the annual base salaries and annual incentive opportunities of our Chief Executive Officer and our other executive officers. The committee also acts as administrator of our compensation programs as they affect all of our employees.
Use of Outside Advisors
. All compensation decisions are made with consideration of the committees guiding principles to provide competitive compensation for the purpose of attracting and retaining talented executives and employees and of motivating our employees to achieve improved Company performance, which ultimately benefits our stockholders. The committee has the sole authority to retain and terminate any advisors, including independent counsel, compensation consultants and other advisors to assist as needed, and has sole authority to approve the advisors fees, which will be paid by the Company, and the other terms and conditions of their engagement. The committee considers input and recommendations from management, including our Chief Executive Officer whom shall not be present during any committee deliberations with respect to his compensation, and outside compensation consultants in connection with its review of our Companys compensation programs and its annual review of the performance of the other executive officers. From time to time, the committee has engaged the services of an independent compensation consultant, Pearl Meyer. As further described below under Executive Compensation - Role of Compensation Consultant, Pearl Meyer has assisted the committee from time to time with executive compensation matters. The committee retains Pearl Meyer directly, although in carrying out assignments Pearl Meyer also interacts with management when necessary and appropriate to obtain compensation and performance data. In addition, Pearl Meyer may, in its discretion, seek input and feedback from management regarding its consulting work product prior to presentation to the committee in order to confirm alignment with our business strategy, identify data questions and other similar issues, if any. As required under SEC rules, the committee reviews the services of its compensation consultants to evaluate whether any conflicts of interest are raised, taking into consideration certain factors, including whether the consultant provides any other services to our Company, the amount of fees our Company pays to the consultant, whether there are any business or personal relationship with an executive officer of our Company or with any committee member, and whether the consultant owns any stock of our Company. The committee determined, based on its evaluation, that the work of Pearl Meyer has not created any conflict of interest. On an annual basis, the committee will continue to monitor the independence of its compensation consultants.
The committee takes into consideration the recommendations of its compensation consultant and our Chief Executive Officer, but retains absolute discretion as to whether to adopt such recommendations in whole or in part, as it deems appropriate. For additional information on the processes followed by the committee and the objectives, methodologies and components of compensation considered by the committee in connection with executive compensation and overall compensation for employees, see the Executive Compensation section of this proxy statement.
Nominating/Governance Committee
The Nominating/Governance Committee met six times in 2015. As described in the committees charter, which is available on our website at
www.summerinfant.com,
the committee is responsible for (i) overseeing and reviewing the size, functioning, composition and needs of the Board and its committees, including recruitment of qualified board members and recommending nominees to the Board for election as directors, (ii) developing and recommending corporate governance guidelines and monitoring those guidelines and (iii) overseeing the management continuity planning process.
10
The committee currently consists of four members: Marty Fogelman, Derial H. Sanders, Richard E. Wenz (Chairman) and Stephen Zelkowicz. Each member of the committee is an independent director under the rules of the Nasdaq Stock Market. During 2015, we had changes in the membership of the committee. Mr. Stebenne served on the committee until March 2, 2015, when he became an officer of our Company, and was replaced by Mr. Sanders. Mr. Almagor served as Chairman of the committee until May 5, 2015, when he became executive Chairman, and was replaced by Mr. Wenz. Mr. Zelkowicz was appointed as an additional member of the committee on August 4, 2015. Following the Annual Meeting, the committee will consist of three members as a result of Mr. Sanders not standing for re-election at the Annual Meeting.
Process for Identifying and Evaluating Potential Director Nominees
. The committee will consider persons identified by its members, management, stockholders, investment bankers and others for nomination to the Board. The committee follows the process described in this proxy statement and its charter when determining nominees to our Board.
The committee will identify, evaluate and recommend candidates to become members of our Board with the goal of creating a Board that, as a whole, consists of individuals with various and relevant career experience, industry knowledge and experience, financial expertise (including whether a candidate satisfies the criteria for being an audit committee financial expert, as defined by the SEC), and community ties. The committee will also consider minimum individual qualifications of candidates, including strength of character, mature judgment, familiarity with our Companys business and industry, independence of thought, an ability to work collegially and whether the candidate is independent within the meaning of SEC and Nasdaq Stock Market rules. While our Board has not adopted a mandatory retirement age or term limits for its members, in re-nominating incumbent members to the Board, the committee takes into account the tenure of the member and the appropriateness of the directors continued service. Candidates, whether identified by the committee or proposed by stockholders, will be reviewed in the context of the current composition of our Board, our operating requirements and the long-term interests of our stockholders. Although the committee does not have a formal diversity policy concerning membership of the Board, the committee does consider diversity in its broadest sense when evaluating candidates, including persons diverse in gender, ethnicity, experience, and background.
Process for Stockholder Nominations
. Nominations to our Board may be submitted to the committee by our stockholders in accordance with the process described in our Bylaws. Stockholders who wish to recommend a candidate for election to our Board should send their letters to us at 1275 Park East Drive, Woonsocket, Rhode Island 02895, Attention: Secretary. These letters will be promptly forwarded to the members of the Nominating/Governance Committee.
All stockholder recommendations for director candidates must be submitted to us not less than 60 calendar days or more than 90 calendar days prior to the annual meeting at which the nominee is requested to be proposed. Stockholders must follow certain procedures to recommend or propose candidates for election as directors described in our Bylaws and summarized below.
The notice must contain certain information about the stockholder making the recommendation or proposal of a candidate for election to the Board, as described in our Bylaws, including (i) the name and address of the stockholder and its affiliates making the recommendation and (ii) the number of shares of our common stock directly or indirectly beneficially owned by the stockholder, including any rights to acquire shares of our common stock. The recommendation must contain the following information about the candidate being proposed for election to the Board as described in our Bylaws, including (i) the name and address of the candidate, (ii) the number of shares of our common stock directly or indirectly beneficially owned by the candidate, including any rights to acquire shares of our common stock and (iii) the information that would be required to be disclosed in a proxy statement in connection with the solicitation of proxies for election of directors in a contested election under Section 14 of the Exchange Act. The candidate must also submit a written representation and agreement to us that he or she is not party to any agreement with another person (other than our Company) that, if elected, would obligate the candidate to act or vote on a certain issue or that provides for compensation or other reimbursement for service on the Board, and that if elected, the candidate would be in compliance with all of our applicable Company guidelines and policies.
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AUDIT COMMITTEE REPORT
This Audit Committee Report shall not be deemed to be soliciting material or to be filed with the Securities and Exchange Commission or subject to Regulation 14A or 14C under the Exchange Act, or to the liabilities of Section 18 of the Exchange Act. Notwithstanding anything to the contrary set forth in any of our previous filings under the Securities Act of 1933 or the Exchange Act that might incorporate future filings, including this proxy statement, in whole or in part, this report shall not be incorporated by reference into any such filings.
The Audit Committee reviews our financial reporting process on behalf of our Board. Management has the primary responsibility for the financial statements and the reporting process. Our independent auditors are responsible for expressing an opinion on the conformity of our audited financial statements to accounting principles generally accepted in the United States of America.
In this context, the Audit Committee has reviewed and discussed our audited financial statements with management and the independent auditors. The Audit Committee has discussed with the independent auditors the matters required to be discussed by the Auditing Standard No. 16, Communications with Audit Committees, issued by the Public Company Accounting Oversight Board (the PCAOB). In addition, the Audit Committee has received the written disclosures and the letter from the independent auditors required by the applicable requirements of the PCAOB regarding the independent auditors communications with the Audit Committee concerning independence, and has discussed with the independent auditor the independent auditors independence. In addition, the Audit Committee has considered whether the independent auditors provision of non-audit services to us is compatible with the auditors independence.
In reliance on the reviews and discussions referred to above, the Audit Committee recommended to the Board that our audited financial statements be included in our Annual Report on Form 10-K for the year ended January 2, 2016, for filing with the SEC.
The foregoing report has been furnished by the Audit Committee.
Alan Mustacchi, Chairman
Richard Wenz
Robin Marino
18
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial ownership of our common stock as of June 13, 2016 by:
·
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;
·
each of our directors and named executive officers listed in the Summary Compensation Table under the section entitled Executive Compensation; and
·
all of our current executive officers and directors as a group.
Name and Address of Beneficial Owner (1)
|
|
Amount and
Nature of
Beneficial
Ownership (2)(3)
|
|
Percent of
Common Stock (4)
|
|
5% Stockholders
|
|
|
|
|
|
Wynnefield Capital Management LLC and related entities (5)
|
|
4,098,606
|
|
22.2
|
%
|
Jason Macari (6)
|
|
3,187,775
|
|
17.3
|
%
|
Paradigm Capital Management, Inc. (7)
|
|
1,820,600
|
|
9.9
|
%
|
Privet Fund LP (8)
|
|
1,335,707
|
|
7.2
|
%
|
Tocqueville Asset Management, L.P. (9)
|
|
1,330,000
|
|
7.2
|
%
|
|
|
|
|
|
|
Directors and Named Executive Officers
|
|
|
|
|
|
Dan Almagor
|
|
611,035
|
|
3.3
|
%
|
Carol E. Bramson (10)
|
|
218,058
|
|
1.2
|
%
|
Marty Fogelman
|
|
84,964
|
|
*
|
|
Robin Marino
|
|
20,000
|
|
*
|
|
William E. Mote, Jr.
|
|
20,500
|
|
*
|
|
Alan Mustacchi
|
|
10,000
|
|
*
|
|
Kenneth Price
|
|
|
|
|
|
Derial H. Sanders
|
|
76,964
|
|
*
|
|
Robert Stebenne (11)
|
|
351,354
|
|
1.9
|
%
|
Richard Wenz
|
|
181,231
|
|
*
|
|
Stephen J. Zelkowicz
|
|
9,516
|
|
*
|
|
All directors and current executive officers as a group (9 persons)(12)
|
|
1,583,622
|
|
8.4
|
%
|
*
Less than 1%
(1)
Unless otherwise noted, the business address of each named person is 1275 Park East Drive, Woonsocket, Rhode Island 02895.
(2)
Unless otherwise noted, each person named in the table has sole voting and investment power with regard to all shares beneficially owned, subject to applicable community property laws.
(3)
Includes the following number of shares that may be acquired through the vesting of restricted stock awards or stock options exercisable within 60 days of June 13, 2016 as follows:
Directors and Named Executive Officers
|
|
Options Exercisable/Stock Vesting
|
|
|
|
|
|
Mr. Almagor
|
|
140,000
|
|
Mr. Fogelman
|
|
40,000
|
|
Mr. Mote
|
|
13,500
|
|
Mr. Sanders
|
|
40,000
|
|
Mr. Stebenne
|
|
118,048
|
|
Mr. Wenz
|
|
40,000
|
|
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(4)
The percentages shown are calculated based on 18,424,520 shares of common stock issued and outstanding on June 13, 2016. In calculating the percentage of ownership, all shares of common stock that the identified person or group had the right to acquire within 60 days of June 13, 2016 are deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by that person or group, but are not deemed to be outstanding for the purpose of computing the percentage of the shares of common stock owned by any other person or group.
(5)
The information is as reported on Amendment No. 4 to Schedule 13D filed with the SEC on December 22, 2015. The address for Wynnefield Capital Management, LLC and related entities is 450 Seventh Avenue, Suite 509, New York, NY 10123. Of the shares indicated, 1,220,836 shares are beneficially owned by Wynnefield Partners Small Cap Value, L.P. (Partners), 1,859,801 shares are beneficially owned by Wynnefield Partners Small Cap Value, L.P. I (Partners I), 864,663 shares are beneficially owned by Wynnefield Small Cap Value Offshore Fund, Ltd. (Fund), and 153,306 shares are beneficially owned by Wynnefield Capital, Inc. Profit Sharing Plan (Plan). Wynnefield Capital Management, LLC has an indirect beneficial interest in the shares held by Partners and Partners I. Wynnefield Capital, Inc. has an indirect beneficial interest in the shares held by the Fund. Nelson Obus may be deemed to hold an indirect beneficial interest in the shares held by Partners, Partners I, the Fund and the Plan because he is the co-managing member of Wynnefield Capital Management, LLC, a principal executive officer of Wynnefield Capital, Inc. (the investment manager of the Fund), and the portfolio manager of the Plan. The inclusion of information in the Schedule 13D with respect to Mr. Obus shall not be considered an admission that he, for the purpose of Section 16(b) of the Exchange Act, is the beneficial owner of any shares in which he does not have a pecuniary interest. Mr. Obus disclaims any beneficial ownership of the shares of common stock covered by the Schedule 13D. Joshua Landes may be deemed to hold an indirect beneficial interest in the shares held by Partners, Partners I and the Fund because he is the co-managing member of Wynnefield Capital Management, LLC and a principal executive officer of Wynnefield Capital, Inc. (the investment manager of the Fund). The inclusion of information in the Schedule 13D with respect to Mr. Landes shall not be considered an admission that he, for the purpose of Section 16(b) of the Exchange Act, is the beneficial owner of any shares in which he does not have a pecuniary interest. Mr. Landes disclaims any beneficial ownership of the shares of common stock covered by the Schedule 13D.
(6)
The information is as reported on Amendment No. 1 to Schedule 13D filed with the SEC on October 26, 2015. The address of Mr. Macari is 3100 Diamond Hill Road, Cumberland, RI 02864. Mr. Macari has sole power to direct the disposition and voting of the shares indicated.
(7)
The information is as reported on Amendment No. 2 to Schedule 13G filed with the SEC on February 11, 2016. The address of Paradigm Capital Management, Inc. is Nine Elk Street, Albany, NY 12207. Paradigm Capital Management, Inc. has sole power to direct the disposition and voting of the shares indicated.
(8)
The information is as reported on Amendment No. 1 to Schedule 13D filed with the SEC on May 12, 2016. The address of Privet Fund LP (Privet) is 79 West Paces Ferry Road, Suite 200B, Atlanta, GA 30305. Privet Management LLC (Privet Management) is the Managing Partner of Privet, and Ryan Levenson is the sole managing member of Privet Management. Accordingly, Privet Management and Mr. Levenson may be deemed to hold shared voting and dispositive power with respect to the shares held by Privet. Each of Privet, Privet Management and Mr. Levenson could be deemed to beneficially own the shares indicated, however each of Privet, Privet Management and Mr. Levenson (each a Reporting Person) disclaims beneficial ownership of the shares held by each other Reporting Person.
(9)
The information is as reported on Schedule 13G filed with the SEC on January 29, 2016. The address of Tocqueville Asset Management, L.P. is 40 West 57th Street, 19th Floor, New York, NY 10019. Tocqueville Asset Management, L.P. has sole power to direct the disposition and voting of the shares indicated.
(10)
Of these shares, 86,269 shares are held indirectly through TBG Capital, LLC Defined Pension Plan and Trust, 105,518 shares are held indirectly through the Carol E. Bramson Trust & Howard Bramson Trust Tenants in Common and 9,625 shares are held indirectly through the TBG Capital, LLC 401(k) PSP & T, F/B/O Carol E. Bramson. Ms. Bramson resigned as Chief Executive Officer in May 2015 and resigned from our Board effective July 1, 2015.
(11)
The shares are held indirectly through the Robert Stebenne Revocable Trust.
(12)
Includes an aggregate of 389,884 shares that may be acquired through the vesting of stock options exercisable within 60 days of June 13, 2016.
20
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our directors and officers, and persons who own more than 10% of a registered class of our equity securities, to file with the SEC reports of ownership and changes in ownership of our common stock and other equity securities. Officers, directors and greater than 10% stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of the copies of such reports furnished to us during the fiscal year ended January 2, 2016 and on written representations from our officers, directors and 10% stockholders known to us, we believe that each person who, at any time during the fiscal year, was a director, officer or beneficial owner of more than 10% of our common stock, complied with all Section 16(a) requirements during the fiscal year, except for the following: (1) Ms. Marino filed a Form 4 late reporting the purchase of shares of our common stock; (2) Mr. Price filed (i) a Form 4 late reporting the exercise of a stock option and subsequent sale of shares acquired upon such exercise and (ii) a Form 4 late reporting the sale of shares of our common stock; (3) Mr. Almagor filed a Form 4 late reporting an annual stock grant; (4) Mr. Macari filed a Form 4 late reporting the purchase of shares of our common stock; and (5) Wynnefield Partners Small Cap Value LP filed a Form 4 late reporting the purchase of shares of our common stock.
EXECUTIVE OFFICERS
Information concerning our current executive officers is set forth below. All executive officers hold their positions for an indefinite term and serve at the pleasure of our Board.
Current Executive Officers
Robert Stebenne
, 63, was appointed our Chief Executive Officer in May 2015 and has been President and Chief Operating Officer since March 2015. Mr. Stebenne has served as a director of our Company since March 2007. Prior to joining our Company, Mr. Stebenne owned and managed Bob Stebenne Associates, a firm he founded in 2002 that provided consulting services in the areas of brand development, product development, and strategic planning. From February 1999 to July 2002, Mr. Stebenne was the president of new business development for Hasbro Industries, a provider of childrens and family leisure time products and services. From 1991 to February 1999, he was president of Hasbros FOB/LC division, where he created a U.S. marketing, sales, product development, finance and logistics group. From 1982 to 1991, he was president of Hasbros Playskool Baby division. Mr. Stebenne holds a B.A. in American History from the Roger Williams University.
William E. Mote, Jr.
, 46, was appointed our Chief Financial Officer in November 2014. Prior to joining our Company, from February 2013 to November 2014 Mr. Mote was Chief Financial Officer of the Poarch Band of Creek Indians, the largest hospitality and gaming operator in Alabama, where he was responsible for all financial operations of the Sovereign Nation. From January 2010 to February 2013, Mr. Mote was Executive Vice President of Finance at JAKKS Pacific, a diversified childrens entertainment company, where he was a member of the executive team in charge of worldwide financial operations. Prior to joining JAKKS Pacific, Mr. Mote was Vice President and Corporate Controller at Easton-Bell Sports, Inc. from 2005 to 2010, where he was responsible for worldwide financial planning and analysis and strategic planning. Mr. Mote spent five years working in various global finance positions with increasing responsibility at Hewlett-Packard Company beginning in 2000. Mr. Mote is a Certified Public Accountant and holds a M.B.A. and a B.S. in Accounting from Louisiana State University.
21
EXECUTIVE COMPENSATION
Executive Summary
We are a premier juvenile products company originally founded in 1985 and create branded juvenile safety and infant care products (targeted for ages 0-3 years) that are intended to deliver a diverse range of parenting solutions to families. Our industry is highly competitive and has many participants, and our ability to compete effectively in our industry is dependent in part on our ability to attract, motivate and retain key management personnel and other qualified employees. The Compensation Committee has approved a pay-for-performance compensation philosophy, which is intended over time to bring base salaries and total executive compensation in line with approximately the median (50th percentile) of the companies represented in our peer group. However, we have not been able to compensate our executives at this level in recent years due to our Companys financial performance, stock price and the limited pool of shares available for issuance under our equity plans. Short-term incentive compensation, based on the achievement of specified goals and objectives, may be awarded in the form of a cash performance bonus. We also provide equity awards to reward our executives for long-term Company performance and to align their interests with the interests of our stockholders. Total compensation may vary significantly from year-to-year based on a combination of total Company and individual performance.
In fiscal 2015, our Company continued to focus on our core product offerings, phasing out less profitable categories, liquidating related inventory, and improving our balance sheet and working capital positions. As our Company executed these initiatives, sales increased slightly while gross margins declined primarily due to the liquidation of closeout inventory as well as the unfavorable effect of currency exchange rates (primarily on Canadian sales). As a result, net sales in fiscal 2015 were relatively flat as compared to fiscal 2014, as reflected in the following chart:
In 2015, we experienced changes in our executive team, as Mr. Stebenne was appointed Chief Executive Officer in May 2015 replacing Ms. Bramson. In addition, our Compensation Committee adjusted our annual incentive bonus program design to provide for potential payouts based on achievement of Company-wide performance targets related to pre-bonus adjusted EBITDA, contribution margin and operating cash flow, as further described below. As a result, based on the Companys performance in fiscal 2015, we had a modest bonus payout under our annual incentive bonus program equal to approximately 7.5% of target bonus to eligible named executive
22
officers. Our equity awards granted in fiscal 2015 were generally below the market 25th percentile for similar companies due to our stock price.
The following chart shows the mix of total direct compensation actually earned by our Chief Executive Officer for fiscal 2015.
CEO 2015 Total Direct Compensation (1)
(1)
Reflects solely the 2015 compensation of Mr. Stebenne, who was appointed Chief Executive Officer in May 2015.
Compensation Philosophy and Objectives
Our Board has appointed a Compensation Committee consisting of independent directors as required by applicable SEC and Nasdaq Stock Market rules. The Compensation Committee is authorized to determine and approve, or make recommendations to our Board with respect to, the compensation of our Chief Executive Officer and our other executive officers and to grant or recommend the grant of stock-based compensation to our Chief Executive Officer and other executive officers. The Compensation Committee also reviews our compensation policies and practices for all employees.
Our philosophy is to compensate our executives at levels that enable us to attract, motivate and retain highly qualified executives. As our business evolves, we seek to foster a performance-oriented culture, where individual performance is aligned with organizational objectives. We will continue to establish an annual bonus program designed to reward individuals for performance based primarily on our financial results and their achievement of personal and corporate goals that contribute to our long-term goal of building stockholder value. Grants of stock-based awards are intended to provide additional incentive to executives to work to enhance long-term total return to stockholders and to align the interests of our executives with those of our stockholders. Total compensation levels reflect the executives position, responsibilities, tenure, individual experience and achievement of goals. As a result of our performance-based philosophy, compensation levels may vary from year to year and among our various executive officers with fixed and variable pay components.
Compensation Components
Each year the Compensation Committee reviews the various components of executive compensation to determine an appropriate mix for each named executive officer, as described below. In determining each component of an executives compensation, numerous factors are considered, including:
·
the individuals particular background and circumstances, including prior relevant work experience;
·
the demand for individuals with the individuals specific expertise and experience;
·
the individuals role with us and the compensation paid to similar positions determined through benchmark studies;
23
·
the individuals performance and contribution to the achievement of Company goals and objectives;
·
comparison to other executives within our Company; and
·
the overall financial performance of our Company.
Our policy for allocating between short-term and long-term compensation is to ensure adequate annual cash compensation to attract and retain personnel, while providing incentives (in the form of equity awards) to maximize long-term value for our Company and our stockholders. Accordingly, (i) we provide cash compensation in the form of base salary and annual incentive bonuses to meet competitive salary norms and reward Company performance on an annual basis and (ii) we provide non-cash compensation in the form of stock-based awards to reward superior performance against long-term objectives.
Base Salary
. The Compensation Committee strives to provide salaries to executives that are competitive with those paid by comparable companies for similar work, based on each executives experience and performance. We target cash compensation at market median levels to help attract and retain executive talent. When setting executive pay, the Compensation Committee considers a combination of factors as outlined in the bulleted list above. In addition, in the case of new hires, the Compensation Committee will also consider the current recruitment market and negotiations with the specific individual.
Following the end of each fiscal year, the Compensation Committee reviews executives base salaries, and takes into consideration each executives performance, achievement of specific short-term goals and our Companys performance in the prior year. The Compensation Committee also meets with the Chief Executive Officer to review base salary recommendations for other named executive officers, including his performance evaluation of all such persons and the basis of the recommendations, the scope of each persons duties, oversight responsibilities and individual objectives and goals against results achieved for the applicable fiscal year.
Annual Incentive Bonus
. Our Company generally uses short-term cash-based incentive compensation programs to recognize and reward executives and other employees who contribute meaningfully to an increase in stockholder value and profitability. In general, the funding of the annual incentive bonus pool is dependent upon our Company achieving certain financial targets, historically earnings before interest, taxes, depreciation and amortization (before deducting incentive compensation). As further described below, in 2015 the Compensation Committee adjusted our annual incentive bonus program design to provide for potential payouts based on achievement of Company-wide performance targets related to pre-bonus adjusted EBITDA, contribution margin and operating cash flow. Each named executive officer typically has the ability to receive up to 200% of his or her target bonus award opportunity based on our Company and the individual achieving stretch (or superior) performance levels. The percentage of the bonus actually paid to each named executive officer depends on the attainment of corporate financial targets and individual performance goals.
Long-Term Equity Incentive Awards
. The Compensation Committee believes that stock-based compensation ensures that our executives have a continuing stake in the long-term success of our Company. In general, long-term incentive awards are targeted between the 25th and 50th percentiles of the compensation peer group with appropriate adjustments for individual and Company performance, though historically awards have generally been at or below the 25th percentile market level due to share constraints and stock price. Long-term incentive awards have been in the form of stock options, restricted stock awards, or a combination of both types of awards. Vesting for these awards extends over a four-year period, with 25% of the total number of shares subject to an award vesting each year beginning on the first anniversary of the date of grant. If a named executive officer leaves our Company prior to the completion of the applicable vesting schedule, the unvested portion of the option or stock grant is forfeited unless otherwise provided in his or her employment agreement or termination agreement. The Compensation Committee also grants equity awards outside of the regular annual grant program for new hires, promotions or other reasons deemed appropriate by the committee.
Perquisites and Fringe Benefits
. We provide only certain executive fringe benefits. Our executives receive health and welfare benefits, such as group medical, dental, life and long-term disability coverage, under plans generally available to all other employees. We believe that our executives should be able to provide for their retirement needs from the total annual compensation they earn based on our performance. Accordingly, other than
24
an employer matching contribution under our 401(k) plan, which is the same that we provide all of our employees, we do not offer our executives any nonqualified pension plans, supplemental executive retirement plans, deferred compensation plans or other forms of compensation for retirement. We may provide for fringe benefits, such as auto allowances or commuting benefits, in individually negotiated executive employment agreements in order to attract and retain key executives who are essential to the long-term success of our Company.
Role of the Compensation Committee and Management
The Compensation Committee currently determines the compensation of our Chief Executive Officer and our other executive officers. Annually, our Compensation Committee evaluates the performance of our Chief Executive Officer and determines the compensation of our Chief Executive Officer in light of the goals and objectives of our compensation program for that year. Our Compensation Committee annually assesses the performance of our other executive officers and considers recommendations from our Chief Executive Officer when determining the compensation of our other executive officers. As discussed below, the Compensation Committee also considers input from other independent directors, our compensation consultant and benchmarking studies and surveys, but retains absolute discretion as to whether to adopt any recommendations as it deems appropriate.
At the request of our Compensation Committee, our Chief Executive Officer and SVP of Human Resources may attend our Compensation Committee meetings, including meetings at which our compensation consultant is present. This enables our Compensation Committee to review with senior management the corporate and individual goals that are important to achieve our overall success. Although the participation of management could influence performance targets and individual goals, including the targets and goals set for our Chief Executive Officer, our Compensation Committee ultimately makes all determinations regarding individual and corporate goals and targets. Our Chief Executive Officer does not attend any portion of meetings at which his compensation is discussed.
Additionally, as part of ongoing efforts to drive outstanding operational and financial performance, the Compensation Committee will, in consultation with its independent compensation consultant, consider changes to our compensation programs as appropriate in response to input from stockholders through our annual Say on Pay vote and evolving factors such as the business environment and competition for talent.
The Compensation Committee has authority to retain (at our Companys expense) outside counsel, compensation consultants and other advisors to assist as needed. The Compensation Committee considers input and recommendations from our outside compensation consultants in connection with its review of our Companys compensation programs and its annual review of the performance of the other executive officers. The Compensation Committee has engaged the services of an independent compensation consultant, Pearl Meyer. As further described below, Pearl Meyer has assisted the Compensation Committee from time to time with executive compensation matters. The Compensation Committee retains Pearl Meyer directly, although in carrying out assignments Pearl Meyer also interacts with management when necessary and appropriate to obtain compensation and performance data. As required under SEC rules, the Compensation Committee reviews the services of its compensation consultants to evaluate whether any conflicts of interest are raised, taking into consideration certain factors, including whether the consultant provides any other services to our Company, the amount of fees our Company pays to the consultant, whether there are any business or personal relationships with an executive officer of our Company or with any committee member, and whether the consultant owns any stock of our Company. The Compensation Committee determined, based on its evaluation, that the work of Pearl Meyer has not created any conflict of interest. On an annual basis, the Compensation Committee will continue to monitor the independence of its compensation consultants.
Role of the Compensation Consultant
The Compensation Committee retains Pearl Meyer to provide advice on various compensation matters and recommends compensation program designs, including market trends, peer group composition and compensation for our executive officers. Pearl Meyer reports directly to the Compensation Committee, meets the independence requirements of applicable SEC rules and does not provide any other services to our Company beyond those requested or approved by the Compensation Committee. Pearl Meyer regularly attends meetings of the Compensation Committee, either in person or by telephone. In 2015, Pearl Meyer assisted the Compensation Committee with the following:
25
·
attended Compensation Committee meetings as requested;
·
provided advice and analysis of the competitiveness of the compensation of the CEO and other senior executives; and
·
reviewed and provided comments on named executive officers compensation and the disclosure regarding executive compensation in the proxy statement for the 2015 annual meeting of stockholders.
Compensation Benchmarking
In determining compensation levels, the Compensation Committee believes that it is important when making compensation-related decisions to be informed as to the practices of publicly-held companies of similar size, revenue and market focus. As a result, the Compensation Committee relies on its independent compensation consultant to help define the appropriate competitive market using a combination of peer group companies and industry-specific compensation surveys. The Companys peer group currently consists of:
Acme United Corporation
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Gaiam, Inc.
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Black Diamond. Inc.
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JAKKS Pacific, Inc.
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Cobra Electronics Corp.
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Joes Jeans Inc.
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Crown Crafts, Inc.
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Leapfrog Enterprises Inc.
|
CSS Industries Inc.
|
Nautilus Inc.
|
Delta Apparel, Inc.
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Rocky Brands, Inc.
|
Emerson Radio Corp.
|
ZAGG Inc.
|
Escalade Inc.
|
|
Named Executive Officer Compensation in 2015
Our named executive officers for 2015 were Robert Stebenne, Chief Executive Officer (beginning in May 2015), President and Chief Operating Officer, William E. Mote, Jr., Chief Financial Officer; Carol E. Bramson, our former Chief Executive Officer until May 2015; and Kenneth Price, our former President of Global Sales & Marketing until May 2015.
Base Salaries
. In 2015, Mr. Stebenne was newly appointed as an executive officer and his base salary was the result of individual negotiation with him. As is our practice, we review base salaries for our existing named executive officers each fiscal year. In 2015, no increases were approved for named executive officers who were not new hires in 2015. Please see the Summary Compensation Table below for the actual amounts paid to our named executive officers in 2015.
Annual Incentive Bonus
. In 2015, the Compensation Committee reviewed with input from management and its compensation consultant the structure of our annual incentive bonus program in light of the fact that no payouts had been made in recent years based solely on the achievement of EBITDA targets. The Compensation Committee approved modifications to the design of the annual incentive bonus that are intended to ensure continuing focus on critical financial performance metrics while increasing the potential for meaningful payouts for performance. The Compensation Committee modified the annual incentive bonus program design to be based on achievement of three key metrics, each with a specific weighting: pre-bonus EBITDA, contribution margin and operating cash flow. Each metric is calculated separately, and then results are aggregated to determine funding of the overall bonus pool.
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The following table sets forth the weighting of each target, the threshold, target and maximum amounts for each of the three metrics, and the actual results for each metric in 2015:
Performance Metric
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Actual
|
|
Weighting
|
|
Adjusted EBITDA
|
|
$
|
16,065,000
|
|
$
|
18, 900,000
|
|
$
|
26,460,000
|
|
$
|
9,697,050
|
|
40
|
%
|
Contribution Margin
|
|
$
|
48,331,000
|
|
$
|
56,860,000
|
|
$
|
79,604,000
|
|
$
|
44,170,046
|
|
30
|
%
|
Operating Cash Flow
|
|
$
|
8,857,000
|
|
$
|
10,420,000
|
|
$
|
14,588,000
|
|
$
|
9,030,579
|
|
30
|
%
|
Following the end of 2015, the Compensation Committee determined that while the Company did not achieve the threshold for payout under the EBITDA and contribution margin metrics, the Company did exceed the threshold under the cash flow metric resulting in a 25% achievement payout level for that component. Because the cash flow metric makes up 30% of the overall bonus potential, the final payout to eligible participants was approximately 7.5% of target bonus (30% * 25%).
Long-Term Equity Incentive Awards
. For 2015, our annual equity-based incentive compensation awards for executive officers and senior management employees were in the form of restricted stock awards and stock options. The amount of annual equity-based awards granted to executive officers who were not new hires during 2015 reflected the executives position within our Company, their individual performance and equity-based awards by comparable companies for comparable positions, with the goal to bring the executive to within the 25th percentile of such comparable companies. The vesting schedule for our annual equity-based awards is 25% per year, with vesting beginning on the first anniversary of the grant date. The vesting schedule is designed to encourage executives to continue in the employ of our Company. Each executive forfeits the unvested portion, if any, of the equity-based awards if the executives service to our Company is terminated for any reason, except as may otherwise be determined by our Board. Mr. Stebenne received an equity grant in connection with his hiring, as further described below.
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SUMMARY COMPENSATION TABLE
The following table sets forth, for fiscal years 2014 and 2015, information regarding compensation of our named executive officers:
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
All Other
|
|
|
|
Name and
|
|
|
|
Salary
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Total
|
|
Principal Position
|
|
Year
|
|
($)
|
|
($)
|
|
($) (1)
|
|
($) (1)
|
|
($)
|
|
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert Stebenne (2)
|
|
2015
|
|
242,308
|
|
18,675
|
|
|
|
415,000
|
|
10,962
|
(3)
|
686,945
|
|
Chief Executive Officer, President and Chief Operating Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William Mote
|
|
2015
|
|
285,000
|
|
8,550
|
|
21,120
|
|
21,420
|
|
90,471
|
(4)
|
426,561
|
|
Chief Financial Officer
|
|
2014
|
|
32,885
|
|
|
|
36,000
|
|
41,200
|
|
21,692
|
|
131,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carol Bramson (5)
|
|
2015
|
|
138,233
|
|
|
|
52,800
|
|
61,200
|
|
12,421
|
(6)
|
264,654
|
|
Former Chief Executive Officer
|
|
2014
|
|
309,615
|
|
100,000
|
|
|
|
240,000
|
|
2,019
|
|
651,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kenneth Price (7)
|
|
2015
|
|
163,499
|
|
|
|
21,120
|
|
21,420
|
|
16,749
|
(8)
|
222,788
|
|
Former President Global Sales & Marketing
|
|
2014
|
|
329,808
|
|
50,000
|
|
46,250
|
|
73,500
|
|
10,246
|
|
509,804
|
|
(1)
The amounts for 2015 reflect the aggregate grant date fair value computed in accordance with FASB ASC Topic 718. Assumptions used in the calculation of these amounts are included in Note 7 to our audited consolidated financial statements for the fiscal year ended January 2, 2016, included in our Original Filing filed with the SEC on February 24, 2016.
(2)
Mr. Stebenne was appointed President and Chief Operating Officer in March 2015 and as Chief Executive Officer in May 2015. The amounts reflected do not include amounts Mr. Stebenne received while serving as a director of our Company from January 2015 until March 2015. Please see Director Compensation above for information on compensation Mr. Stebenne received for his service as a director prior to his appointment as an officer of our Company.
(3)
Includes (i) $7,500 auto allowance and (ii) $3,462 of employer contributions to our Companys 401(k) plan.
(4)
Includes (i) $40,134 of living expenses and auto expense, (ii) $46,233 of travel expenses to and from Mr. Motes residence to our Companys executive offices and (iii) $4,104 of employer contributions to our Companys 401(k) plan.
(5)
Ms. Bramsons employment with our Company ended in May 2015.
(6)
Includes (i) $7,656 of paid time-off and (ii) $4,765 of employer contributions to our Companys 401(k) plan.
(7)
Mr. Prices employment with our Company ended in May 2015.
(8)
Includes (i) $11,384 of paid time-off, (ii) $3,750 auto allowance and (ii) $1,615 of employer contributions to our Companys 401(k) plan.
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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table provides information about outstanding equity awards held by the named executive officers at the end of 2015:
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
Award
Grant
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
|
|
Option
Exercise
Price
Per
|
|
Option
Expiration
|
|
Equity
Incentive
Plan
Awards
Number
of
Unearned
Shares or
Units
That
Have Not
Vested
|
|
Equity
Incentive
Plan
Awards
Market
Value of
Unearned
Shares or
Units
That
Have Not
|
|
Name
|
|
Date (1)
|
|
Exercisable
|
|
Unexercisable
|
|
Share
|
|
Date
|
|
(2)
|
|
Vested
|
|
Robert Stebenne
|
|
03/07/2007
|
(3)
|
40,000
|
|
|
|
5.25
|
|
03/07/2017
|
|
|
|
|
|
|
|
03/03/2015
|
(4)
|
69,440
|
|
180,560
|
|
2.85
|
|
03/03/2025
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William E. Mote, Jr.
|
|
11/10/2014
|
|
10,000
|
|
30,000
|
|
1.80
|
|
11/10/2024
|
|
|
|
|
|
|
|
11/10/2014
|
|
|
|
|
|
|
|
|
|
15,000
|
|
33,450
|
|
|
|
03/24/2015
|
|
|
|
14,000
|
|
2.64
|
|
03/24/2025
|
|
|
|
|
|
|
|
03/24/2015
|
|
|
|
|
|
|
|
|
|
8,000
|
|
17,840
|
|
(1)
Unless otherwise noted, option grants vest as follows: 25% of the total number of shares subject to the options vest and become exercisable on each of the first, second, third and fourth anniversaries of the date of grant.
(2)
Unless otherwise noted, restricted stock grants have a vesting schedule as follows: 25% of the total number of shares underlying the award vest on each of the first, second, third and fourth anniversaries of the date of grant.
(3)
Represents option grant received by Mr. Stebenne upon his initial appointment to our Board of Directors in 2007.
(4)
Represents option grant received by Mr. Stebenne upon his appointment as our President and Chief Operating Officer. The option vests in 36 equal monthly installments following the date of grant.
Employment Arrangements and Change in Control Agreements with Current Named Executive Officers
Robert Stebenne
. Under the terms of his offer letter, Mr. Stebenne receives an annual base salary of $300,000, and is eligible to receive a cash bonus with a target bonus award equal to 100% of his base salary under our Companys annual short-term incentive plan. He is also eligible to participate in our Companys long-term incentive plan and any other bonus plans, as determined by the Compensation Committee, and is eligible to receive all medical, dental and other benefits to the same extent as provided to other senior management employees. Mr. Stebenne also receives a monthly automobile allowance in the amount of $750 per month. Upon his appointment in March 2015, Mr. Stebenne received a stock option to purchase 250,000 shares of our common stock that vests in 36 equal monthly installments, beginning on the first monthly anniversary of the date of grant; provided, however, that in the event our Company undergoes a change in control (as defined in the change of control agreement), the stock option shall vest in full. In addition, if Mr. Stebennes employment is terminated by us without cause, or Mr. Stebenne terminates his employment for good reason, he is entitled to receive payments equal to his then current base salary for a period of six months following such date of termination. Mr. Stebenne also is party to our standard change of control agreement, as described below, pursuant to which he is eligible to receive 100% of his base salary for a period of 12 months if he is terminated following a change of control.
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William E. Mote, Jr.
Pursuant to the terms of his offer letter, Mr. Mote receives an annual base salary of $285,000, and is eligible to receive a cash bonus with a target bonus award equal to 40% of his base salary under our annual short-term incentive plan. He is also eligible to participate in our long-term incentive plan and any other bonus plans, as determined by the Compensation Committee, and is eligible to receive all medical, dental and other benefits to the same extent as provided to other senior management employees. Upon the commencement of his employment, Mr. Mote received a stock option to purchase 40,000 shares of our common stock at an exercise price equal to the closing price of the common stock on the date of grant, and a restricted stock award of 20,000 shares. Both equity awards will vest in four equal annual installments, with the first 25% of the award vesting and becoming exercisable on the first anniversary of the date of grant. Mr. Mote is also entitled to certain relocation benefits, including reimbursement of: (i) up to $20,000 in relocation expenses, (ii) $2,500 per month for temporary housing expenses for a period up to 12 months, and (iii) certain air travel expenses. In 2015, the Compensation Committee approved the extension of housing and travel expenses for an additional 12 months. In addition, we agreed to pay a relocation and signing bonus of $30,000, payable on the first regular pay date following his move to a residence within 60 miles of the Companys current corporate headquarters. In addition, if Mr. Motes employment is terminated by us without cause, or Mr. Mote terminates his employment for good reason, he is entitled to receive payments equal to his then current base salary for a period of six months following such date of termination. Mr. Mote is also party to our standard change of control agreement, as described below, pursuant to which he is eligible to receive 100% of his base salary for a period of 12 months if he is terminated following a change of control.
Change of Control Agreements
Certain executive officers and members of senior management of our Company are party to the Companys standard change of control agreement. Under the change of control agreement, which was most recently amended and restated in December 2015, the employee will be entitled to certain payments and benefits if (1) there is a change in control of the Company and (2) within 12 months following a change in control, his or her employment is terminated, other than for cause, as a result of his or her death or disability, or by the employee for good reason. If these events occur, the employee will be entitled to a cash payment equal to a percentage of his or her then current annual base salary, continued benefits and any earned or accrued, but unpaid, bonus for the fiscal year in which the employee is terminated, for a period of six to twelve months. The change of control agreement also contains non-competition and similar covenants that remain in effect for a period of six to twelve months.
Retirement Plans
We have a Section 401(k) plan and provide an employer matching contribution, which is the same that we provide all of our employees. We do not offer our executives any nonqualified pension plans, supplemental executive retirement plans, deferred compensation plans or other forms of compensation for retirement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 2009, our wholly owned subsidiary, Summer Infant (USA), Inc. (Summer USA), entered into a definitive agreement with Faith Realty II, LLC, a company whose members are Jason P. Macari, our former Chief Executive Officer and a former director, and his spouse. Under this agreement, Faith Realty purchased our corporate headquarters located at 1275 Park East Drive, Woonsocket, Rhode Island for $4,052,500 and subsequently leased the headquarters back to Summer USA for an annual rent of $390,000 for an initial seven-year term. The lease was amended in May 2015 and now provides for an initial term ending on March 31, 2018 that may be extended at Summer USAs election for one additional term of three years upon twelve months prior notice. The annual rent for the last two years of the initial term is set at $429,000 and the annual rent for the extension period, if elected, is set at $468,000. Faith Realty agreed to provide an aggregate improvement allowance of not more than $78,000 during the initial term, to be applied against Summer USAs monthly rent, and an additional improvement allowance of $234,000 for the extension term, if elected, to be applied against Summer USAs monthly rent during such extension term.
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OTHER MATTERS
We know of no other matters that may come before the Annual Meeting. If any other matters should properly come before the Annual Meeting, it is the intention of the persons named in the accompanying proxy to vote in accordance with their judgment on those matters. This discretionary authority is conferred by the proxy.
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YOUR VOTE IS IMPORTANT. PLEASE VOTE TODAY. Vote by Internet QUICK EASY IMMEDIATE - 24 Hours a Day, 7 Days a Week or by Mail Your Internet vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. Votes submitted electronically over the Internet must be received by 7:00 p.m., Eastern Time, on August 2, 2016. INTERNET/MOBILE www.cstproxyvote.com Use the Internet to vote your proxy. Have your proxy card available when you access the above website. Follow the prompts to vote your shares. MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope provided. FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED PROXY Please mark your votes like this THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. FOR AGAINST ABSTAIN 1. ELECTION OF DIRECTORS. To elect six director nominees, each to serve for a one-year term expiring at the 2017 annual meeting of stockholders, and until their respective successors are duly elected and qualified: 2. ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICER COMPENSATION FOR 2015. FOR AGAINST ABSTAIN FOR AGAINST ABSTAIN 3. RATIFICATION OF AUDITORS. To ratify the selection of RSM US LLP, an independent registered public accounting firm, as the independent auditor of our company for the fiscal year ending December 31, 2016. (01) Marty Fogelman AGAINST ABSTAIN (02) Robin Marino FOR AGAINST ABSTAIN (03) Alan Mustacchi FOR AGAINST ABSTAIN In their discretion, the proxy holders are authorized to vote upon such other matters as may properly come before the Annual Meeting or any adjournments or postponements thereof. (04) Robert Stebenne FOR AGAINST ABSTAIN (05) Richard Wenz FOR AGAINST ABSTAIN (06) Stephen J. Zelkowicz COMPANY ID: PROXY NUMBER: ACCOUNT NUMBER: Signature Signature Date , 2016. Note: Please sign exactly as name or names appear on this Proxy. When shares are held by jointly, each holder should sign. When signing as executor, ad ministrator, attorney, tr ustee or guardian, please give full title as such. If signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. X PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY.
FOLD HERE DO NOT SEPARATE INSERT IN ENVELOPE PROVIDED PROXY SUMMER INFANT, INC. Proxy for 2016 Annual Meeting of Stockholders August 3, 2016 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The undersigned hereby appoints William E. Mote, Jr. and Robert Stebenne, and each of them severally, as proxies of the undersigned, each with full power to appoint his substitute, to act for and to vote all shares of Summer Infant, Inc. common stock owned by the undersigned, upon the matters set forth in the Notice of Meeting and related Proxy Statement at the Annual Meeting of Stockholders of Summer Infant, Inc., to be held at 10:30 a.m., local time, on Wednesday, August 3, 2016, at the Courtyard Marriott, 32 Exchange Terrace at Memorial Boulevard, Providence, Rhode Island 02903 and at any adjournments or postponements of the meeting. The proxies, and any of them, are further authorized to vote, in their discretion, upon other such business as may come before the Annual Meeting, or any adjournments or postponements of the meeting. YOUR SHARES WILL BE VOTED FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR, AND FOR ITEMS 2 AND 3 UNLESS OTHERWISE INDICATED. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE DO NOT RETURN THE PROXY CARD IF YOU ARE VOTING ELECTRONICALLY. (Continued, and to be marked, dated and signed, on the reverse side)
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