Form DEF 14A TUESDAY MORNING CORP/DE For: Nov 16

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 ☒

Filed by a Party other than the Registrant ☐

Check the appropriate box:

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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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Tuesday Morning Corporation

(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):

October 5, 2021​

Dear Fellow Stockholder:

We are pleased to invite you to attend our 2021 Annual Meeting on November 16, 2021, at 8:30 a.m. (central time) to be held at the Tuesday Morning Corporate Office, 6250 Lyndon B. Johnson Freeway, Dallas, Texas 75240. At this time, our meeting is planned as an in-person meeting. If conditions require we will hold a virtual meeting following the appropriate notice. The Notice of Annual Meeting and Proxy Statement, following this letter, provides more information regarding the meeting and the business we will conduct at the Annual Meeting.

Fiscal 2021 was a very challenging year. COVID-19 caused significant distress in multiple industries, and tested the strength and resiliency of our Company over the course of the past 18 months. However, our filing of Chapter 11 and our successful emergence from bankruptcy, with repayment to all of our creditors, has only reinforced that Tuesday Morning has tenacity and perseverance in addition to an ability and a willingness to think quickly and move nimbly as we evolve in this unpredictable, ever-changing environment. We are proud of the accomplishments the entire team has made over the past year.

Our Board’s active oversight has been integral to our success in helping management navigate the challenges and impacts associated with the COVID-19 pandemic with their diverse viewpoints, financial acumen and deep industry knowledge and expertise.

We are very excited about the new chapter we have begun. This starts with our strong new leadership team. These new leaders have extensive experience and exceptional track records to return Tuesday Morning to a leader in the off-price segment. Despite near term headwinds, we see tremendous opportunity over the long term for Tuesday Morning. With our team now in place, we are focused on improving our execution of the off-price model across all areas of the organization. We have a strong brand, loyal customers, and an opportunity to grow. Thank you for your continued support, trust and investment in Tuesday Morning. We look forward to your participation at our Annual Meeting.

Attached is our Notice of Annual Meeting. YOUR VOTE IS VERY IMPORTANT TO US. Whether or not you plan to attend the Annual Meeting, we urge you to please cast your vote as soon as possible via the Internet, telephone or mail. We have chosen to furnish our proxy statement and annual report to our stockholders over the internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive the proxy materials by email or, upon request, in printed form by mail. Our proxy statement will instruct you how to vote your shares. Your vote is important. Thank you for your investment in Tuesday Morning.

TUESDAY MORNING CORPORATION
6250 LBJ Freeway
Dallas, Texas 75240

Notice of Annual Meeting of Stockholders

To Be Held November 16, 2021​

The 2021 Annual Meeting of Stockholders (the “Annual Meeting”) of Tuesday Morning Corporation (the “Company”) will be held at Tuesday Morning Corporation’s Headquarters, 6250 LBJ Freeway, Dallas, Texas 75240, on November 16, 2021 at 8:30 a.m., central time. For directions to the Annual Meeting, please write to our Corporate Secretary at Tuesday Morning Corporation, 6250 LBJ Freeway, Dallas, Texas 75240. At the Annual Meeting, the Company will ask the stockholders to:

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Elect eight directors to the Board of Directors;

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Approve, on an advisory basis, the Company’s executive compensation;

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Ratify the selection of Ernst & Young LLP as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2022; and

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4.

Transact any other business that may properly come before the Annual Meeting or any postponement or adjournment thereof.

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This Notice of Annual Meeting, the Proxy Statement for the Annual Meeting and our Annual Report for fiscal 2021 are being made available to our stockholders on or about October 5, 2021 on the internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive the proxy materials by email or, upon request, in printed form by mail.

Only stockholders of record at the close of business on September 21, 2021 are entitled to notice of, and to vote at, the Annual Meeting or any postponement or adjournment thereof. If you are the beneficial owner of shares of our common stock held in “street name,” you will receive voting instructions from your broker, bank or other nominee (the stockholder of record), which will provide you with details as to how to vote these shares. Additionally, you may vote these shares in person at the Annual Meeting if you have requested and received a legal proxy from your broker, bank or other nominee giving you the right to vote the shares at the Annual Meeting, and you complete the legal proxy and present it to us at the Annual Meeting. Stockholders of record may vote over the internet, by telephone, by mail if you received a printed set of proxy materials or in person at the Annual Meeting.

Under applicable rules, if you hold your shares in street name, brokers, banks or other nominees will not have discretion to vote these shares on the election of directors and the advisory vote on executive compensation. Accordingly, if your shares are held in street name and you do not submit voting instructions to your broker, bank or other nominee, these shares will not be counted in determining the outcome of these proposals at the Annual Meeting. We encourage you to provide voting instructions to your broker, bank or other nominee if you hold your shares in street name so that your voice is heard on these matters.

Thank you for your continued support of and interest in Tuesday Morning Corporation.

YOUR VOTE IS IMPORTANT

Your vote is important. We urge you to review the accompanying Proxy Statement carefully and to submit your proxy as soon as possible so that your shares will be represented at the meeting.

 

TUESDAY MORNING CORPORATION
6250 LBJ Freeway
Dallas, Texas 75240

PROXY STATEMENT

for the​

ANNUAL MEETING OF STOCKHOLDERS

to be held on​

Tuesday, November 16, 2021

This Proxy Statement and the related proxy materials are being furnished to stockholders of Tuesday Morning Corporation, a Delaware corporation, on or about October 5, 2021, on the internet, electronically by email for stockholders who have previously consented to electronic delivery or who have requested to receive our proxy materials by email, or, upon request, in printed form by mail. The Board of Directors of the Company (the “Board of Directors” or the “Board”) is soliciting your proxy for use at the Annual Meeting of Stockholders to be held on November 16, 2021, at 8:30 a.m., central time, at our corporate headquarters located at 6250 LBJ Freeway, Dallas, Texas 75240, and at any and all adjournments or postponements thereof  (the “Annual Meeting”). For directions to the Annual Meeting, please write to our Corporate Secretary at Tuesday Morning Corporation, 6250 LBJ Freeway, Dallas, Texas 75240. At the Annual Meeting, our stockholders will act upon the matters outlined in the Notice of Annual Meeting of Stockholders and described in more detail in this Proxy Statement.

As used in this Proxy Statement, the terms “Tuesday Morning,” “Company,” “we,” “us,” and “our” refer to Tuesday Morning Corporation.

Important Notice Regarding Internet Availability

In accordance with rules adopted by the Securities and Exchange Commission (“SEC”), we may furnish proxy materials, including this Proxy Statement and the Company’s 2021 Annual Report to Stockholders, by providing access to these documents on the internet instead of mailing a printed copy of our proxy materials to our stockholders. Based on this practice, most of our stockholders receive a Notice of Internet Availability of Proxy Materials (the “Notice”), which provides instructions for accessing our proxy materials on a website referred to in the Notice and for requesting to receive printed copies of the proxy materials by mail or electronically by email.

If you would like to receive a paper or email copy of our proxy materials for our Annual Meeting or for all future meetings, please follow the instructions for requesting such materials included in the Notice. Please note that if you previously requested or consented to delivery of our proxy materials by mail or electronically via email, you did not receive the separate Notice. Instead, we sent you a full set of our proxy materials, which includes instructions for voting on the proposals described in this Proxy Statement. We believe the delivery options that we have chosen allow us to provide our stockholders with the proxy materials they need, while lowering the cost of the delivery of such materials and reducing the environmental impact of printing and mailing paper copies.

 

 

PROXY STATEMENT SUMMARY

This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting.

Annual Meeting Information

 

 

Annual Meeting Agenda and Voting Recommendations

 

 

Board Nominees

The following table provides summary information about each director nominee.

(1)

Independent Chairperson of the Board

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(2)

Independent Director

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Richard S Willis will not be standing for re-election at the Annual Meeting and the size of the Board will be reduced to eight members immediately prior to the Annual Meeting. The Board thanks Mr. Willis for his years of service to the Company.

Corporate Governance Highlights

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During the fiscal year ended June 30, 2021, all directors (other than our Chief Executive Officer) were independent and met regularly in executive session.

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The roles of Chief Executive Officer and Chairperson of the Board are separate.

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Only independent directors are Committee members.

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All directors are elected annually.

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The Board has a robust director nominee selection process.

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The Board has stock ownership guidelines for directors and executive officers.

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The Company has anti-hedging and anti-pledging policies.

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The Company has a robust clawback policy.

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Board, Committee and director performance evaluations are performed annually.

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The Board and Committees are responsible for risk oversight.

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All of our directors attended at least 75% of the meetings of the Board and Committees on which they served during the 2021 fiscal year.

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Fiscal 2021 Review

The last half of fiscal 2020 was significantly impacted by the COVID-19 pandemic. In March 2020 the COVID-19 pandemic caused major disruptions to our business and had a significant adverse effect on our business, financial performance, operating results, liquidity and cash flow. Throughout the pandemic our top priority has been the safety of our associates and customers. In light of that, in March 2020, we temporarily closed all of our stores nationwide, severely reducing revenues and resulting in significant operating losses and the elimination of substantially all operating cash flow. Stores gradually reopened as allowed by state and local jurisdictions, and all but two of our stores had reopened as of the end of June 2020. These closures led us to make the very difficult decision to furlough most store and many corporate and distribution center associates. During this time we continued to provide benefits including paying 100% of the cost for our associates with medical benefits. We recalled these associates as our stores reopened.

The adverse impact of the pandemic and resultant stores closures was significant, and in May 2020, we filed voluntary petitions under Chapter 11 of the United States Bankruptcy Code. During the pendency of our bankruptcy cases, we continued to operate our businesses as “debtors-in-possession” under the jurisdiction of the bankruptcy court. In early June 2020, in accordance with the orders of the bankruptcy court, we commenced the process to close some of our lower performing stores. In total, we closed 197 stores during fiscal 2021. In addition, we also closed our Phoenix, Arizona distribution center in the second quarter of fiscal 2021.

On December 23, 2020, the bankruptcy court entered an order confirming our Plan of Reorganization. On December 31, 2020, all of the conditions precedent to the Plan of Reorganization were satisfied and we legally emerged from bankruptcy, resolving all material conditions precedent listed in the Plan of Reorganization. In connection therewith, we completed debt financing and sale-leaseback transactions contemplated by the Plan of Reorganization. These transactions, together with the equity financing described below, allowed us to obtain the funding needed to repay all allowed claims of our creditors in full and to operate our business going forward.

In addition to repayments to our creditors, we also provided our equity holders with continued ownership through our Plan of Reorganization. At the close of business on January 4, 2021, each outstanding share of our common stock was exchanged for (1) a new share of our common stock and (2) a right to purchase a pro rata portion of the $24 million of shares available to our shareholders in a $40 million rights offering (the “Rights Offering”). Through the Rights Offering, which closed in February 2021, eligible holders of our common stock purchased approximately $19.8 million of shares of our common stock at a price of  $1.10 per share. As a result, existing holders of our common stock retained a significant portion of our equity following our emergence.

Following our successful emergence, we conducted a thorough and focused search to enhance our executive team. In May 2021, we strengthened our executive team with the addition of Fred Hand as Chief Executive Officer. Under Mr. Hand’s leadership, the following additional executives have joined the Company: Marc D. Katz as Principal and Chief Operating Officer, Paul G. Metcalf as Principal and Chief Merchant, Jennifer N. Robinson as Executive Vice President and Chief Financial Officer, and William M. Bauman as Executive Vice President and Chief Information Officer. These newly hired executives together with Phil D. Hixon, our Executive Vice President of Stores and Real Estate, Bridgett C. Zeterberg, our Executive Vice President Human Resources, General Counsel and Corporate Secretary and Catherine Davis, our Senior Vice President of Marketing, have extensive experience in the retail industry and in the off-price segment. With this executive team we are

 

 

confident that we have the right leaders with the right experience in place to drive results for the Company and our stockholders.

Despite near term headwinds, we see tremendous opportunity over the long term for Tuesday Morning. With our team now in place, we are focused on improving our execution of the off-price model across all areas of the organization. We have a strong brand, loyal customers, and an opportunity to grow store count in a meaningful way. We have confidence in our ability to transform Tuesday Morning into a world class off-price home goods retailer.

Executive Compensation Highlights

Our executive compensation philosophy is to pay for the creation of long-term value for our stockholders. Accordingly, our program is designed to reward performance linked to the creation of stockholder value and to support executive recruitment, engagement and retention. A significant portion of the executives’ total direct compensation is based on the Company’s performance and improving stockholder value. This philosophy is reflected in the design of our executive’s pay, generally, and both our short-term cash incentive and long-term equity incentive programs, specifically. We believe that performance-based and equity compensation better align the interests of executives and stockholders.

In fiscal 2021 none of our executives received base pay salary increases and our annual short and long-term incentive programs were suspended due to the pendency of the bankruptcy proceedings. We implemented a compensation program in fiscal 2021 that was designed to incent our executives to achieve a successful emergence and position the Company to create long-term stockholder value. As a result, our compensation program for fiscal 2021 included a mix of annual base salary and retention incentives put in place in May 2020, to retain key executives through emergence. Following our emergence, to enhance our management team by attracting new executives and retain key existing members of our team, we used a mix of additional incentives, including employment agreements, long-term incentive awards and inducement awards.

As we move forward with our new executive team in place in fiscal 2022 we have returned to the key elements of our pay for performance philosophy which are explained in further detail below.

Some of the compensation “best practices” we employ in furtherance of our philosophy include:

Compensation Governance – What We Do & What We Don’t Do

 

 

Proposal No. 1
Election of Directors

At the Annual Meeting, the holders of Common Stock as of the Record Date will consider and vote upon the election of eight directors. The Board nominated Sherry M. Smith, Fred Hand, Anthony F. Crudele, Douglas J. Dossey, Frank M. Hamlin, W. Paul Jones, John Hartnett Lewis and Reuben E. Slone for election as directors of the Company. Each nominee is currently serving as a director, and each agreed to stand for re-election to our Board. See “Corporate Governance – Post-Emergence Board Composition and Directors Agreement” for additional information regarding the appointment of directors following our emergence from bankruptcy.

If they are elected, each of the nominees will continue to serve until their successors are duly elected and qualified at the next annual meeting of stockholders, or until their earlier death, resignation or removal. Should any nominee become unable or unwilling to accept nomination for election, which is not currently anticipated, the Board may designate a substitute nominee or reduce the number of directors accordingly. The proxy holders will vote for any substitute nominee designated by the Board. Each of the Board’s nominees has indicated his or her willingness to serve the full term.

The following is biographical information about each of the nominees to the Board of Directors, including the specific experience, qualifications, attributes and skills of the nominees that led to the conclusion that each of the nominees should serve as a director of the Company, in light of the Company’s business and structure:

Sherry M. Smith, age 60, joined the Board of Tuesday Morning as a Director in April 2014, and has served as Chairperson of the Board of the Company since December 2020. Ms. Smith served in various positions with SUPERVALU, Inc., a grocery retailer and food distributor, from 1987 to 2013. Ms. Smith served as Chief Financial Officer and Executive Vice President of SUPERVALU, Inc. from December 2010 until August 2013, and she previously served as Senior Vice President, Finance from 2006 until 2010, Senior Vice President, Finance and Treasurer from 2002 until 2005, and in various other capacities with SUPERVALU, Inc. prior to 2002. Ms. Smith has served on the Board of Directors of Deere & Company, a manufacturer and distributor of agricultural, turf, construction and forestry equipment, since December 2011. Ms. Smith has served on the Board of Directors of Realogy Holdings Corporation since December 2014; Ms. Smith has served on the Board of Directors of Piper Sandler Corp since January 2016. From January 2015 to December 2018, Ms. Smith served on the Financial Accounting Standards Advisory Council (FASAC), a group that advises the Financial Accounting Standards Board (FASB) on strategic issues, project priorities and other matters. In nominating Ms. Smith to serve as a director of the Company, the Board of Directors considered her leadership qualities developed from her experience while serving as a senior executive and as Chief Financial Officer of SUPERVALU, Inc., the breadth of her experiences in auditing, finance, accounting, compensation, strategic planning, and other areas of oversight, and her subject matter knowledge in the areas of finance and accounting and other board experience.

Fred Hand, age 57, has served as a director of Tuesday Morning since his appointment as its Chief Executive Officer in May 2021. Prior to becoming CEO of Tuesday Morning, Mr. Hand served in various capacities at Burlington Stores, Inc. where he was most recently Principal and Chief Operating Officer leading its store and real estate organizations. His prior roles at Burlington included Chief Customer Officer/Principal, and Executive Vice President of Stores. Prior to joining Burlington, Mr. Hand served as Senior Vice President and Group Director of Stores of Macy’s, Inc., Senior Vice President, Stores and Visual Merchandising of Filene’s Department Stores, and also held various positions at The May Department Stores Company, including Area Manager, General Manager, and Regional Vice President. In nominating Mr. Hand to serve as a director of the Company, the Board of Directors considered the insights Mr. Hand brings through his demonstrated off-price experience and leadership, including his extensive focus in operating and merchandising.

Anthony F. Crudele, age 64, has served as a director of Tuesday Morning since December 2020. Mr. Crudele has been a member of the Board of Directors of Hibbett Sports, Inc. (NASDAQ:HIBB)

 

 

since May 2012 and currently serves as the Chairman of the Board. He holds a Bachelor of Business Administration degree in Accounting from the University of Notre Dame. Mr. Crudele served as the Executive Vice President, Chief Financial Officer and Treasurer of Tractor Supply Company (TSC) from May 2007 through February 2017 and previously served as their Senior Vice President, Chief Financial Officer and Treasurer since joining the company in September 2005. Prior to that time, he served as Executive Vice President and Chief Financial Officer of Gibson Guitar from 2003 to 2005; as Executive Vice President and Chief Financial Officer of Xcelerate Corp from 2000 to 2003; and in senior financial roles at The Sports Authority from 1989 to 1999, including Senior Vice President and Chief Financial Officer from 1996 to 1999. Mr. Crudele is a certified public accountant and began his career in 1978, spending the majority of his public accounting tenure at the international accounting firm of Price Waterhouse.

Douglas J. Dossey, age 49, has served as a director of Tuesday Morning since December 2020. Mr. Dossey is Co-Founder and Co-Managing Partner of Tensile Capital Management LP (”TCM”). He leads the firm’s private equity investment activities and focuses on sourcing, researching, and executing public and private investments. Prior to Tensile, Mr. Dossey was a Managing Partner, member of the Investment and Management Committees and the Head of Private Equity at Blum Capital Partners, L.P. Previously, Mr. Dossey was a Managing Director and Co-Owner of FdG Associates LLC and, prior to FdG, was an investment banking Analyst and Associate with Merrill Lynch & Co. He has served on 28 boards of directors, including 14 as Chairman.

Frank M. Hamlin, age 53, has served as a director of Tuesday Morning since April 2014. Most recently, from August 2018 through April 2021, Mr. Hamlin was Executive Vice President, Chief Customer Officer of GameStop Corporation (“GameStop”), a global, multichannel video game, consumer electronics and wireless services retailer. Mr. Hamlin had previously served as Chief Marketing Officer of GameStop from June 2014 to August 2016. Mr. Hamlin served as Chief Marketing Officer of Spence Diamonds from May 2018 to August 2018 and as Executive Vice President and Chief Marketing Officer for Tailored Brands, Inc., a leading national menswear retailer from September 2017 to May 2018. Mr. Hamlin previously served as Executive Vice President and GM, Marketing and E-Commerce of Guitar Center, Inc., a musical instruments retailer, from June 2010 until May 2014, and as Executive Vice President and Chief Operating Officer of e-Miles, LLC, an interactive marketing company, from February 2007 to June 2010. From July 2004 until February 2007, he was Director of Marketing, Central Market Division for H.E. Butt Grocery, a fresh, specialty and prepared foods retailer. Prior to that time, Mr. Hamlin held various positions with Brierley & Partners, e-Rewards, Inc., Arista Records and The Walt Disney Company. In nominating Mr. Hamlin to serve as a director of the Company, the Board of Directors considered the various senior executive-level positions he previously held with retail service companies, as well as his extensive experience in marketing, branding strategy and customer engagement.

W. Paul Jones, age 60, has served on the Board of Directors of Tuesday Morning since 2020. Mr. Jones served on the Board of Directors of JC Penney Company, Inc. from 2019 through 2020 where he served on the Corporate Governance Committee and on the Human Resources and Compensation Committee. Prior to serving on the JC Penney board, Mr. Jones was Chief Executive Officer of Payless ShoeSource, Inc. (Footwear retailer) from 2012 to 2017 when he retired. Payless ShoeSource, Inc. filed a voluntary petition under Chapter 11 of the U.S. Bankruptcy Code in April 2017. Prior to serving as CEO of Payless ShoeSource, Inc., Mr. Jones was President, Chairman and Chief Executive Officer of Shopko Stores, Inc. (General Merchandise retailer) from 2009 to 2012, and President and Chief Merchandising Officer of Shopko Stores, Inc. from 2007 to 2009. Mr. Jones was also Senior Vice President, Merchandising for Kohl’s Corporation (Department store) from 1997 to 2004. Prior to Kohl’s, Mr. Jones spent 12 years with May Department Stores Company in progressive leadership roles within merchandising.

John Hartnett Lewis, age 48. In 2002, Mr. Lewis co-founded Osmium Partners LLC., ("Osmium Partners"), an investment management firm that focuses on investing in smaller publicly traded public companies. Mr. Lewis serves as the CEO and as the Chief Investment Officer of Osmium Partners. From July 2014 through November 2017, Mr. Lewis served as a member of the Board of Directors of Spark Networks Inc. (now Spark Networks SE) where he served as Chairman of the

 

 

Nominating Committee, a Member of the Compensation Committee, and on the Audit Committee. From October 2015 through August 2017, he served as a member of the Board of Directors of Intersections, Inc. where he served as a member of the Risk Committee.

Reuben E. Slone, age 59, has served as a director of Tuesday Morning since June 2019. Mr. Slone is currently Executive Vice President, Supply Chain at Advance Auto Parts, Inc. (NYSE: AAP) and sat on the Board of Directors from March 2016 to October 2018. Mr. Slone is a seasoned supply chain executive with experience across multiple consumer-facing industry sectors at best-in-class companies. Previous to Advance Auto Parts, Inc., Mr. Slone was Senior Vice President, Supply Chain at Walgreens, a pharmaceutical retailer from May 2012 to October 2018. From November 2004 until May 2012, Mr. Slone was Executive Vice President, Supply Chain, and General Manager, Services at Office Max. From April 2000 to November 2004, Mr. Slone held various positions at Whirlpool Corporation including Vice President Global Supply Chain, Vice President North American Region Supply Chain and Vice President, Global eBusiness. From February 1997 to March 2000, Mr. Slone was eGM Director, Global eSales and Director, Global Manufacturing Strategic Process and System Alignment at General Motors Corporation. Prior to that time, Mr. Slone held various positions with Federal-Mogul Corporation, Electronic Data Systems, Ernst & Young and Engineering Technology LTD. In nominating Mr. Slone to serve as a director of the Company, the Board of Directors considered his leadership qualities developed from his experience while serving as a senior supply chain executive with Advance Auto Parts, Walgreens, Office Max and Whirlpool, his other board experience, as well as his general business and financial acumen.

 

 

Proposal No. 2
Advisory Vote on Executive Compensation

As required by Section 14A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company is asking stockholders to approve, on an advisory basis, the compensation for the named executive officers (“NEOs”) disclosed in these materials. This proposal, commonly referred to as a “say on pay” proposal, gives stockholders the opportunity to express their views on the compensation of the NEOs.

The vote on this resolution is not intended to address any specific element of compensation. Rather, the vote relates to the compensation of our NEOs, as described in this Proxy Statement in accordance with the compensation disclosure rules of the SEC. The vote is advisory, which means that the vote is not binding on the Company, our Board of Directors or the Compensation Committee of the Board. The Company currently submits the compensation of NEOs to an advisory vote of stockholders on an annual basis.

As described in more detail below under the heading “Executive Compensation – Compensation Discussion and Analysis,” our executive compensation program is designed to motivate our executives to create a successful company. During the pendency of our bankruptcy proceedings, we used compensation components designed to incent and retain our executives through a successful emergence. For fiscal 2022, we have returned to our traditional mix of compensation, with a balance of short-term incentives (including performance-based cash bonus awards) and long-term incentives (including equity awards that vest over certain time periods and performance-based equity awards), which rewards sustained performance that is aligned with long-term stockholder interests. Please read the “Compensation Discussion and Analysis,” compensation tables and narrative discussion sections of this Proxy Statement below for additional details about our executive compensation program, including information about the fiscal 2021 compensation of our NEOs.

We believe a significant amount of total compensation should be in the form of short and long-term incentive awards to align compensation with our financial and operational performance goals as well as individual performance goals. We continually evaluate the individual elements of our executive compensation program in light of market conditions and governance requirements and make changes where appropriate for our business. We believe that the core of our executive compensation program provides opportunities to reward high levels of individual and Company performance and will help drive the creation of sustainable stockholder value.

The Compensation Committee, which is responsible for determining the compensation of our executive officers, is comprised solely of non-employee directors who satisfy the independence requirements under NASDAQ rules and will continue to emphasize responsible compensation arrangements that attract, retain, and motivate high caliber executives to achieve the Company’s business strategies and objectives.

Accordingly, we ask our stockholders to vote on the following resolution at the Annual Meeting:

“RESOLVED, that the Company’s stockholders approve, on an advisory basis, the compensation paid to the Company’s NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”

 

 

Proposal No. 3
Ratification of Selection of Independent Registered Public Accounting Firm

On September 21, 2021, the Audit Committee selected Ernst & Young as the Company’s independent registered public accounting firm for the fiscal year ending June 30, 2022. Although SEC regulations and the NASDAQ listing requirements require the Company’s independent registered public accounting firm to be engaged, retained and supervised by the Audit Committee, the selection is being submitted for ratification at the Annual Meeting with a view towards soliciting the opinion of the Company’s stockholders, which the Audit Committee will take into consideration in future deliberations. If the selection of Ernst & Young as the Company’s independent registered public accounting firm is not ratified at the Annual Meeting, the Audit Committee may consider the engagement of another independent registered public accounting firm, but will not be obligated to do so. The Audit Committee may terminate the engagement of Ernst & Young as the Company’s independent registered public accounting firm without the approval of the Company’s stockholders if the Audit Committee deems termination to be necessary or appropriate. The Company expects that representatives of Ernst & Young will be present at the Annual Meeting to respond to appropriate questions and will have an opportunity to make a statement if they desire to do so.

 

 

CORPORATE GOVERNANCE

Post-Emergence Board Composition and Directors Agreement

In November 2020, following approval of the Bankruptcy Court, the Company entered into agreements with Osmium Partners and Tensile Capital Partners Master Fund LP (“Tensile Master Fund”), pursuant to which Osmium Partners and Tensile Master Fund agreed to provide certain equity and debt financing in connection with the Company’s emergence from bankruptcy. See “Certain Relationships and Related Party Transactions” for additional information regarding these transactions.

In accordance with the Plan of Reorganization and these financing agreements, on December 31, 2020, the Company, Osmium Partners (Larkspur SPV) LP (the “Larkspur SPV”) and Osmium Partners (Osmium Partners and Larkspur SPV together, the “Osmium Group”) entered into an agreement pursuant to which the Osmium Group became entitled to appoint three directors to the Company’s Board of Directors (the “Directors Agreement”).

In accordance with the Plan of Reorganization, effective December 31, 2020, the Company’s Board of Directors was comprised of nine members, including five continuing directors of the Company, Sherry M. Smith, Frank M. Hamlin, Richard S Willis, Reuben E. Slone and Steven R. Becker; three new directors appointed by the Osmium Group pursuant to the Directors Agreement, Douglas J. Dossey, W. Paul Jones and John Hartnett Lewis, and one director, Anthony F. Crudele appointed by the equity committee in the Chapter 11 Cases. As of December 31, 2020, former directors Terry Burman, James T. Corcoran and Barry S. Gluck completed their service as directors of the Company. In accordance with the terms of the Directors Agreement, Mr. Crudele was appointed to serve on the Audit Committee, Mr. Dossey was appointed as Chair of the Compensation Committee, Mr. Lewis was appointed as Chair of the Nominating and Governance Committee, and Mr. Jones was appointed to serve on the Compensation Committee and the Nominating and Governance Committee.

Under the terms of the Directors Agreement, the Company agreed that the Board of Directors would take all necessary actions to nominate Messrs. Dossey, Jones, Lewis and Crudele for election at the 2021 Annual Meeting and to recommend, support and solicit proxies for the election of such nominees in the same manner as for any other nominees of the Company at the 2021 Annual Meeting.

In the event a “triggering event” occurs, the Directors Agreement provides that the Board of Directors will be increased by one member and the Osmium Group will be entitled to elect one additional director to the Board. A triggering event will occur if the Company fails to (1) satisfy certain EBIT levels for any of calendar year 2021, fiscal year 2022 or fiscal year 2023, or (2) maintain certain levels of borrowing availability.

Further, under the terms of the Directors Agreement, each member of the Osmium Group agreed to certain standstill provisions during a standstill period, which was defined as the period from the date of the Directors Agreement until the date that is the first day to submit stockholder nominations for the 2022 annual meeting of stockholders pursuant to the Company’s bylaws.

Director Nomination

The Nominating and Governance Committee of the Board of Directors is responsible for providing oversight as to the identification, selection and qualification of candidates to serve as directors of the Company and will recommend to the Board candidates for election or re-election as directors (or to fill any vacancies on the Board). The members of the Nominating and Governance Committee are John Hartnett Lewis, as Chair, Sherry M. Smith, Frank M. Hamlin, and W. Paul Jones. Each of the members of the Nominating and Governance Committee is an independent director under applicable NASDAQ rules. The Nominating and Governance Committee Charter is available on the Company’s website at www.tuesdaymorning.com under “Investor Relations – Corporate

 

 

Governance – Corporate Governance Documents.” The Nominating and Governance Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

In identifying and evaluating nominees for director, the Nominating and Governance Committee will take into account the following attributes and qualifications: (1) relevant knowledge and mix of background and experience; (2) personal and professional ethics, integrity and professionalism; (3) accomplishments in their respective fields; (4) the skills and expertise to make a significant contribution to the Board, the Company and its stockholders; and (5) whether the candidate has any of the following qualities: financial expertise, general knowledge of the retail industry, and Chief Executive Officer, Chief Financial Officer or other senior management experience. In addition, although the Nominating and Governance Committee does not have a formal diversity policy in place for the director nomination process, diversity is an important factor in the Nominating and Governance Committee’s consideration and assessment of a candidate, with diversity being broadly construed to mean a variety of opinions, perspectives, experiences and backgrounds, including gender, race and ethnicity differences, as well as other differentiating characteristics, all in the context of the requirements of the Board at that point in time. In addition, no person may be considered as a candidate for nomination as a director of the Company if (i) during the last ten years, that person, or any of his or her affiliates, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), or is currently under investigation for same or (ii) during the last ten years, that person, or any of his or her affiliates, was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which that person, or any of his or her affiliates, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws on finding any violation with respect to such laws, or is currently under investigation for same. In addition, the Nominating and Governance Committee will recommend to the Board candidates for re-election as directors. The Nominating and Governance Committee may conduct all necessary and appropriate inquiries into the backgrounds and qualifications of potential candidates. There are no specific or minimum qualities a candidate must have to be recommended as a director nominee by the Nominating and Governance Committee.

The process for evaluating candidates is the same regardless of the source of the recommendation. The Nominating and Governance Committee will not discriminate on the basis of race, color, national origin, gender, religion, sexual orientation or disability in selecting nominees. In addition to those candidates identified through its own internal processes, the Nominating and Governance Committee will evaluate a candidate proposed by any single stockholder (or group of stockholders) that beneficially owns Common Stock provided that the information regarding the potential candidate or candidates has been timely given to the Company. In order to be considered by the Nominating and Governance Committee for evaluation for an upcoming annual meeting of stockholders, a notice from a stockholder regarding a potential candidate must be sent to the Company’s Secretary at the Company’s headquarters by the date specified in the “Stockholders’ Proposals” section of the previous year’s proxy statement for notice of the intention to nominate directors at the meeting. The notice should set forth (a) as to each person whom the stockholder proposes as a potential candidate for director, (i) the name, age, business address and residence address of such person, (ii) the principal occupation or employment of such person, (iii) the class and number of shares of the Company that are beneficially owned by such person, and (iv) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including without limitation such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected); and (b) as to the stockholder giving the notice, (i) the name and address of the stockholder of record, as they appear on the Company’s books, of the beneficial owners, if any, and, if such stockholder or beneficial owner is an entity, the persons controlling such entity, proposing such nomination, (ii) the class and number of shares of the Company which are held of record and beneficially by such stockholder and control persons and a description of certain agreements, arrangements or understandings among the stockholder, beneficial owners or control persons (and a representation to notify the Company of any such agreements, arrangements or understandings in effect as of the record date of the

 

 

meeting), (iii) a representation that the stockholder is entitled to vote at the meeting and intends to appear at the meeting in person or by proxy, and (iv) a representation whether the stockholder or the beneficial owner or control person, if any, will engage in a solicitation with respect to the nomination and, if so, certain information concerning the solicitation. All candidates (whether identified internally or by a stockholder) who, after evaluation and recommendation by the Nominating and Governance Committee, are then nominated by the Board will be included as the Board’s recommended slate of director nominees in the Company’s proxy statement.

In addition to submitting potential candidates for consideration by the Nominating and Governance Committee, any stockholder of the Company may nominate one or more individuals for election as a director of the Company at an annual meeting of stockholders if the stockholder sends a notice to the Company’s Secretary at the Company’s headquarters, in the form specified in the Bylaws, by the date specified in the “Stockholders’ Proposals” section of the previous year’s proxy statement for nomination of directors. The procedures described in the prior paragraph are meant to establish an additional means by which certain stockholders can have access to the Company’s process for identifying and evaluating Board candidates and is not meant to replace or limit stockholders’ general nomination rights in any way.

Director Independence

NASDAQ listing standards require our Board of Directors to be comprised of at least a majority of independent directors. For a director to be considered independent, the Board must determine that the director does not have any direct or indirect material relationship with the Company which would interfere with the exercise of independent judgment in carrying out his or her responsibilities as a director. Based on the independence standards prescribed by NASDAQ, our Board has affirmatively determined that eight of the nine current directors are independent. Mr. Hand is not independent due to his relationship with the Company as Chief Executive Officer. As prescribed by NASDAQ rules, the independent directors have regularly scheduled meetings without management present.

Independent Chairperson of the Board

Since December 2020, Ms. Smith has served as independent Chairperson of the Board. The separation of the roles of Chairperson of the Board and Chief Executive Officer is designed to allow our Chief Executive Officer, Mr. Hand, to focus on the day-to-day management of the Company’s business and to allow our independent Chairperson of the Board, Ms. Smith, to focus on the continued development of a high-performing Board, including (1) ensuring the Board remains focused on the Company’s long-term strategic plans, (2) developing Board agendas, (3) working with Company management to ensure the Board has timely and adequate information, (4) coordinating Board committee activities, (5) supporting the Chief Executive Officer and (6) ensuring effective stakeholder communications. The Board recognizes the time, effort and energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairperson particularly as the Board’s oversight responsibilities continue to grow. The Board believes, due to the continued leadership and experience provided by these two individuals, that having separate positions is the appropriate leadership structure for the Company at this time and demonstrates our commitment to good corporate governance.

Board of Directors’ Role in Risk Oversight

In the normal course of business, our Company faces a variety of enterprise risks, including operational risks, cyber security risks, liquidity risk and risks related to the ongoing COVID-19 pandemic. In fulfilling its risk oversight role, the Board focuses on the adequacy of the Company’s risk management process and overall risk management system. The Board believes an effective risk management system will (1) adequately identify the material risks that the Company faces in a timely manner, (2) implement appropriate risk management strategies that are responsive to the Company’s risk profile and specific material risk exposures, (3) integrate consideration of risk and

 

 

risk management into business decision-making throughout the Company and (4) include policies and procedures that adequately transmit necessary information with respect to material risks to senior executives and, as appropriate, to the Board or relevant committee.

The Board of Directors oversees the Company’s strategic direction and its policies with respect to risk assessment and risk management, as well as major risk exposures and the process used to manage those exposures. Accordingly, the Board of Directors periodically reviews the risks associated with the various departments within the Company, in addition to its other duties. The Board of Directors receives information from Board committees, management and advisors regarding the Company’s risk management process and system, the nature of the material risks the Company faces and the adequacy of the Company’s policies and procedures designed to respond to and mitigate these risks.

Communication with the Board of Directors

Stockholders may communicate with one or more members of the Board in writing by regular mail. The following address may be used by stockholders who wish to send such communications:

Board of Directors
c/o Corporate Secretary
Tuesday Morning Corporation
6250 LBJ Freeway
Dallas, Texas 75240

Such communication should be clearly marked “Stockholder-Board Communication.” The communication must indicate whether it is meant to be distributed to the entire Board, a specific committee of the Board or to specific members of the Board, and must state the number of shares beneficially owned by the stockholder making the communication. The Secretary has the authority to disregard any inappropriate communications. If deemed an appropriate communication, the Secretary will submit such stockholder’s correspondence to the Chairperson of the Board (on behalf of the Board) or to any specific committee, director or directors to whom the correspondence is directed.

Code of Business Conduct

We have adopted “Code of Business Conduct” policies that establish the business conduct to be followed by all of our officers, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions (the “Senior Financial Officers”), and all of our employees and members of our Board and embody the Company’s principles and practices relating to the ethical conduct of the Company’s business and its long-standing commitment to honesty, fair dealing and full compliance with all laws affecting the Company’s business. These policies are reviewed by the Board annually. Amendments to and waivers from the Code of Conduct with respect to the Senior Financial Officers will be posted on our website within four business days after approval by the Board. Any waiver from the Code of Conduct with respect to our Senior Financial Officers requires approval by the Board. There were no waivers from the Code of Conduct with respect to the Senior Financial Officers during the fiscal year ended June 30, 2021. The Code of Conduct is available on the Company’s website at www.tuesdaymorning.com under “Investor Relations – Corporate Governance – Corporate Governance Documents.”

 

 

MEETINGS AND COMMITTEES OF THE BOARD

Board of Directors

Each director is expected to devote sufficient time, energy and attention to ensure diligent performance of his or her duties and to attend all Board, committee and stockholder’s meetings. During the fiscal year ended June 30, 2021, the Board of Directors held 25 meetings. Each of our directors attended more than 75% of the Board and committee meetings held during the fiscal year (or portion of the fiscal year during which he or she served as a director or committee member). Directors are encouraged to attend the Company’s annual meeting of stockholders. The Company did not hold an annual meeting of stockholders during fiscal 2020 during the pendency of its bankruptcy proceedings. All Directors attended the Company’s 2019 Annual Meeting of Stockholders held on November 20, 2019.

Committees of the Board

The Board has three standing committees to facilitate and assist the Board in the execution of its responsibilities. The committees are the Audit Committee, the Compensation Committee and the Nominating and Governance Committee.

Audit Committee

For the fiscal year ended June 30, 2021, the Audit Committee had three members and met 11 times. Such members were Richard S Willis as Chair, Anthony F. Crudele and Reuben E. Slone. Mr. Crudele joined the Committee in December 2020 upon his joining the Board. All Audit Committee members were non-employee directors and the Board has determined all were independent pursuant to the applicable NASDAQ rules and satisfy the SEC requirements relating to the independence of audit committee members. The Board also determined that all the members of the Audit Committee had the ability to read and understand fundamental financial statements.

For the fiscal year ended June 30, 2021, the Board of Directors determined that each of Mr. Willis and Mr. Crudele qualified as an “audit committee financial expert” as defined by applicable SEC rules and designated him as the Company’s audit committee financial expert. The Board has adopted a charter for the Audit Committee, which is available on the Company’s website at www.tuesdaymorning.com under “Investor Relations – Corporate Governance – Corporate Governance Documents.” The Audit Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

The Audit Committee’s responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility to:

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establish policies and procedures for reviewing and approving the appointment, compensation, retention and oversight of our independent registered public accounting firm;

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review and discuss with our independent registered public accounting firm, internal auditors and management the adequacy and effectiveness of the Company’s system of internal controls;

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review the scope and results of our independent registered public accounting firm’s audit of the Company’s annual financial statements, accompanying footnotes and audit report;

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pre-approve all audit and permissible non-audit fees;

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review and discuss with management and the registered independent public accounting firm of the Company the annual and quarterly consolidated financial statements of the Company and related disclosures;

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review and discuss with management and the registered independent public accounting firm of the Company significant issues regarding accounting principles and financial statement presentations;

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review, approve and ratify related party transactions; and

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perform other functions or duties deemed appropriate by the Board.

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The Audit Committee has authority under its charter to retain any independent counsel, experts or advisors (accounting, financial, legal or otherwise) that the Audit Committee believes to be necessary or appropriate to assist in the fulfillment of its responsibilities. Audit Committee Meetings have been regularly attended by the Chairperson of the Board and the Chief Executive Officer. At each meeting, the Audit Committee meets in executive session in which only independent directors are present. The Audit Committee also meets independently with the Company’s independent registered public accounting firm.

Compensation Committee

The Compensation Committee currently has four members and met 12 times during the fiscal year ended June 30, 2021. The Compensation Committee is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to applicable NASDAQ rules. For the fiscal year ended June 30, 2021, the Compensation Committee was comprised of Douglas J. Dossey, as Chair, Frank M. Hamlin, W. Paul Jones and Reuben E. Slone. All Compensation Committee members were non-employee directors and the Board has determined all were independent pursuant to the applicable NASDAQ rules and satisfy the SEC requirements relating to the independence of compensation committee members.

The Board has adopted a charter for the Compensation Committee, which is available on the Company’s website at www.tuesdaymorning.com under “Investor Relations – Corporate Governance – Corporate Governance Documents.” The Compensation Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

The Compensation Committee’s responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility to:

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review and approve the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluate the performance of our Chief Executive Officer in light of those goals and objectives, and determine the compensation of our Chief Executive Officer based on this evaluation;

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review and approve compensation and incentive arrangements (including any employment or severance agreements) for the executive officers of the Company;

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review and assess the results of any stockholder advisory vote with respect to the Company’s executive compensation;

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administer the Company’s equity incentive plans, including the review and grant of stock options and other equity incentive grants to directors, executive officers and other key employees of the Company; and

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perform other functions or duties deemed appropriate by the Board.

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The Compensation Committee also oversees the Company’s stock ownership guidelines for non-employee directors and certain executive officers.

Compensation Committee meetings have been regularly attended by the Chairman of the Board and the Chief Executive Officer. At each meeting, the Compensation Committee meets in an executive session in which only independent directors are present. None of the executive officers are present during voting or deliberations on his or her compensation.

The Compensation Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and legal counsel as it deems necessary to assist in the fulfillment of its responsibilities. See “Executive Compensation – Compensation Discussion and Analysis – How Compensation Decisions Are Made – The Role of the Executive Compensation Consultant” below

 

 

for more information regarding the role of the compensation consultant utilized by the Compensation Committee. Prior to engaging any such advisor, consultant or legal counsel, the Compensation Committee conducts an independence assessment of such advisor pursuant to NASDAQ rules and federal securities laws and regulations, but the Compensation Committee retains discretion to engage any such advisor, without regard to its independence, after considering the findings in such assessment. The Compensation Committee also reviews and discusses with the appropriate officers of the Company any disclosures required under federal securities laws and regulations regarding conflicts of interest with respect to such advisors.

Nominating and Governance Committee

The Nominating and Governance Committee has four members and met two times during the fiscal year ended June 30, 2021. The Nominating and Governance Committee is comprised solely of non-employee directors, all of whom the Board has determined are independent pursuant to applicable NASDAQ rules.

The Nominating and Governance Committee is currently comprised of John Hartnett Lewis, as Chair, Sherry M. Smith, Frank M. Hamlin, and W. Paul Jones. The Board adopted a charter for the Nominating and Governance Committee, which is available on the Company’s website at www.tuesdaymorning.com under “Investor Relations – Corporate Governance – Corporate Governance Documents.” The Nominating and Governance Committee Charter is also available in print to any stockholder who requests a copy from the Secretary of the Company at 6250 LBJ Freeway, Dallas, Texas 75240.

The Nominating and Governance Committee’s responsibilities, which are discussed in detail in its charter include, among other things, the duty and responsibility to:

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evaluate and recommend to the Board from time to time as to changes that the Nominating and Governance Committee believes to be necessary, appropriate or desirable with respect to the size, composition, and functional needs of the Board;

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periodically review the Company’s Certificate of Incorporation and Bylaws and make recommendations to the Board as they relate to corporate governance matters;

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develop and recommend to the Board specific guidelines and criteria for screening and selecting nominees to the Board, including any director nominations submitted by the Company’s stockholders;

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provide oversight as to the identification, selection, and qualification of candidates for the Board, including interviewing and evaluating new candidates for the Board;

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recommend to the Board candidates for election or re-election as directors or to fill any vacancies on the Board;

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recommend to the Board candidates for appointment to the standing committees of the Board in accordance with the policies and principles in such committees’ charters and taking into consideration such other factors as it deems necessary, appropriate or desirable;

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oversee and approve the management continuity planning process and make recommendations to the Board regarding CEO and other executive officer succession;

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periodically review and assess the Company’s corporate governance principles and make recommendations to the Board for changes as deemed necessary, appropriate or desirable; and

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perform other functions or duties deemed appropriate by the Board.

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The Nominating and Governance Committee has authority under its charter to retain, approve fees for and terminate advisors, consultants and legal counsel as it deems necessary to assist in the fulfillment of its responsibilities.

 

 

Executive Officers

In addition to Mr. Hand, the following individuals serve as executive officers of the Company as of the date of this Proxy Statement:

William M. Baumann.   Mr. Baumann, age 59, has served as Executive Vice President and Chief Information Officer of the Company since July 2021. Mr. Baumann joined the Company from Torrid, Inc. where he served as Executive Vice President Customer Experience and Chief Information Officer. In that role, Mr. Baumann’s scope of responsibility included Information Technology, Store Operations and Ecommerce. Prior to that role, Mr. Baumann held the Chief Information Officer position at several retailers including, Total Wine and More, West Marine and Recreational Equipment, Inc. (REI). Mr. Baumann earned a Masters of Business Administration from Saint Mary’s College of California and an undergraduate degree from New Hampshire College.

Phillip D. Hixon.   Mr. Hixon, age 67, has served as the Company’s Executive Vice President, Store Operations since September 2015 and served as a member of the Office of the Chairman from September 2015 until the dissolution of that office in December 2015. From June 2014 to September 2015, Mr. Hixon served as the Company’s Store Vice President, Store Operations, and from September 2013 to June 2014, Mr. Hixon served as the Company’s Vice President, Store Planning. Prior to joining the Company, Mr. Hixon served as Vice President of Business Development of Merchco Services, Inc., a provider of retail store development and support services, from June 2012 until August 2013. From 2011 until 2012 and 2005 until 2006, Mr. Hixon owned and served as principal of Diversified Resources, LLC, where he developed and implemented programs for clients in the areas of strategic planning, effective business practices, process enhancement and organizational effectiveness. From 2009 until 2011, Mr. Hixon served in the Department of Strategy and Innovation at Petco Animal Supplies, Inc., a specialty retailer of pet supplies. From 2006 until 2009, Mr. Hixon held various executive positions with DuckWall-Alco Stores, Inc., a retail chain, including Senior Vice President, Store Operations, Real Estate, Store Development and Senior Vice President, Merchandising. Mr. Hixon served as Vice President, Store Development for Michaels Stores, Inc., a national arts and crafts specialty retailer, from 1987 until 2005.

Marc D. Katz.   Mr. Katz, age 57, has served as Principal and Chief Operating Officer of the Company since September 9, 2021. From May 18, 2021 to September 14, 2021, Mr. Katz served as Interim Chief Financial Officer of the Company. Mr. Katz worked at Burlington Stores, Inc. from 2008 through 2019 with his last position being Chief Financial Officer/Principal. During his tenure at Burlington, he oversaw finance, information technology, supply chain, asset protection and legal. Prior to his eleven years at Burlington, Mr. Katz served as Chief Financial Officer and Executive Vice President of A.C. Moore Arts & Crafts and Chief Information Officer and Senior Vice President at Foot Locker, Inc. Mr. Katz received his MBA from St. Louis University and an undergraduate degree from the University of Missouri – St. Louis.

Paul G. Metcalf.   Mr. Metcalf, age 60, has served as Principal and Chief Merchant since September 14, 2021. From April 2019 to September 2021 Mr. Metcalf was in a consultant capacity with the Company and was Acting Chief Merchant from December 2019 to September 2021. Mr. Metcalf has over 30 years of retail experience. Prior to his consulting role at Tuesday Morning, he was the Executive Vice President and Chief Merchandising Officer at Burlington Stores, Inc. While there, Mr. Metcalf successfully led the transformation of the merchant organization and helped to take the company public in 2013. Prior to his role at Burlington Stores, Inc., Mr. Metcalf was a senior leader in the merchant organization for The TJX Companies, Inc. Most recently Mr. Metcalf led a similar successful merchandise turnaround at the off-price retailer, Gabriel Brothers. He began his career with May Department Stores, where he held a variety of positions within the merchant organization.

Jennifer N. Robinson.   Ms. Robinson, age 45, has served as Executive Vice President and Chief Financial Officer of the Company since September 14, 2021. Ms. Robinson joined the Company from The Michaels Companies, Inc., where she most recently served as Senior Vice President of Finance and Treasurer. With over 20 years of experience, Ms. Robinson has held numerous finance leadership positions including Chief Accounting Officer and Controller. Prior to joining Michaels in 2007,

 

 

Ms. Robinson began her career with the accounting firm of Deloitte. Ms. Robinson is a Certified Public Accountant and has a Master’s of Business Administration from the University of Arkansas.

Bridgett C. Zeterberg.   Ms. Zeterberg, age 58, has served as the Company’s Executive Vice President Human Resources, General Counsel and Corporate Secretary responsible for the Company’s legal matters and oversight of the human resources, risk management and loss prevention functions since February 2019. From April 2017 to February 2019, she served as the Company’s Senior Vice President Human Resources, General Counsel and Corporate Secretary. From July 2016 to April 2017, she served as the Company’s Senior Vice President, General Counsel and Corporate Secretary. Prior to joining the Company, Ms. Zeterberg served as Senior Vice President, General Counsel and Corporate Secretary of Zale Corporation, and as Senior Vice President, General Counsel of Total Wine & More. Ms. Zeterberg served in various roles for the hospitality company Accor North America including Vice President, Assistant General Counsel and Vice President of Human Resources for the Motel 6 Division.

At the time of the Company’s filings of voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in May 2020, each of Ms. Zeterberg and Mr. Hixon served as an executive officer of the Company and Mr. Metcalf served as a consultant and as acting chief merchant.

 

 

COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis provides a summary of our compensation policies, principles and practices. More specifically, it presents a review and analysis of fiscal 2021 earned compensation by our named executive officers. This discussion analysis does include statements regarding Company and individual targets and goals which are disclosed in context of our compensation programs and are not intended to provide estimates of results or to provide other guidance.

Letter from the Compensation Committee Chair

Dear Fellow Stockholders:

On behalf of our Compensation Committee and our entire Board, thank you for your continued support. Tuesday Morning is transforming and rebuilding its business following the challenges of last year due to the COVID-19 Pandemic which caused us to enter Chapter 11. However, in December 2020 Tuesday Morning successfully emerged from bankruptcy and after conducting a thorough and focused search, in fiscal 2021 the Company strengthened its executive team with the addition of Fred Hand as Chief Executive Officer. Under Fred’s leadership the following executives joined our Executive Team: Marc D. Katz as Principal and Chief Operating Officer, Paul G. Metcalf as Principal and Chief Merchant, Jennifer N. Robinson as Executive Vice President and Chief Financial Officer, and William M. Baumann as Chief Information Officer. These newly hired executives together with Bridgett C. Zeterberg, our Executive Vice President Human Resources, General Counsel and Corporate Secretary, Phillip D. Hixon, our Executive Vice President of Stores and Real Estate, and Catherine Davis, our Senior Vice President of Marketing, have extensive retail and off-price experience. With this executive team we are confident that we have the right leaders with the right experience in place to drive results for the Company and our stockholders.

Our strong pay for performance philosophy is evidenced by the compensation realized by our executives for actual performance. When establishing our executive compensation, the Committee follows a thoughtful and deliberate approach that includes analysis of a number of qualitative and quantitative data points that are meant to balance business needs, individual and company performance and compensation rewards. The Compensation Committee is comprised solely of independent directors with significant experience and qualifications, and we take our responsibilities very seriously. We held 12 Compensation Committee meetings during fiscal 2021.

We are committed to ensuring that we have the appropriate executive programs in place to motivate and retain executives to drive sustainable growth and long-term stockholder value by reestablishing the fundamentals of the business in the off-price segment. In the Compensation Discussion and Analysis that follows you will read about the decisions that this Committee made regarding executives’ compensation and the tools used to rebuild this leadership team. In light of this we encourage you to support these efforts by voting FOR Proposal #2, Advisory Vote on Executive Compensation.

Douglas J. Dossey

Chair Compensation Committee

 

 

Compensation Committee Report

The Compensation Committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee has recommended to the Board that the Compensation Discussion and Analysis be included in the Proxy Statement. This report is submitted by the following independent directors, who comprise the Compensation Committee.

THE COMPENSATION COMMITTEE
Douglas J. Dossey, Chair
Frank M. Hamlin
W. Paul Jones
Reuben E. Slone

Our Named Executive Officers (NEOs)

Our NEOs serving as of the last day of fiscal 2021 are listed below:

(1)

Mr. Hand was appointed Chief Executive Officer on May 17, 2021. Steven R. Becker previously served as Chief Executive Officer during fiscal 2021.

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(2)

Mr. Katz served as a consultant and in such role was appointed Interim Chief Financial Officer on May 20, 2021. Stacie Shirley previously served as Chief Financial Officer during fiscal 2021. As discussed further herein, Mr. Katz was appointed Principal and Chief Operating Officer effective as of September 9, 2021, and Jennifer Robinson was appointed Chief Financial Officer effective as of September 14, 2021.

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(3)

Mr. Metcalf served as a consultant during fiscal 2021 and in such role was Acting Chief Merchant. As discussed further herein, Mr. Metcalf was appointed Principal and Chief Merchant effective as of September 14, 2021.

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Executive Compensation Philosophy

Our compensation programs are designed to incent our executives to drive results and to align executive pay with stockholder value. To achieve this goal, historically our compensation program has included a combination of annual base salary, short and long-term equity incentives. As discussed below, following our Chapter 11 filing in the fourth quarter of fiscal 2020 and in light of the uncertainty surrounding COVID-19, we implemented a compensation program for fiscal 2021 that was designed to incent our executives to achieve a successful emergence from bankruptcy and position the Company to create long-term stockholder value. As a result, our compensation program for fiscal 2021 included a mix of annual base salary and retention incentives to retain key executives through emergence and the compensation delivered during restructuring was based on and aligned with relevant and recent Chapter 11 market observations. Following our emergence, to enhance our management team by attracting new executives and retain key existing members of our team, we used a mix of additional incentives, including employment agreements, long-term incentive awards and inducement awards.

As we move forward with our new executive team in place, we have returned to our historical mix of compensation to align executive pay with stockholder value. Accordingly, both our short

 

 

and long-term incentive plans include only financial metrics. Therefore, a significant portion of the executives’ total direct compensation is pay-at-risk tied to the Company’s actual financial performance and to improving stockholder value. We believe that performance-based annual incentives and long-term equity compensation better align the interests of executives and stockholders for the years ahead.

We consider a number of relevant factors when determining an individual executive’s compensation package and manage total compensation around the median of the market as determined by analysis of our peer group and an evaluation of the broader retail industry. Our total compensation program is designed to attract and retain talented executives who are excited about and committed to our future success. As salary is designed to create the foundation of each executive’s ongoing pay package, we aim to reward short-term financial performance achievements through our cash incentive program, while long term value creation is incentivized through our long-term equity incentive program. In addition, we have stock ownership guidelines for executives to ensure direct alignment of executives with stockholders.

Compensation Governance

The Company’s executive compensation programs include key features that align with the interests of our NEOs and with our stockholders.

What We Do & What We Don’t Do

Our commitment to good corporate governance practices and accountability to our stockholders is described below:

Compensation of our Named Executive Officers

Historical Perspective

Prior to the filing of Chapter 11 in May 2020, the Company provided three basic elements of executive compensation, consisting of base salary, short-term incentive cash compensation and long-term equity compensation. In determining executive compensation levels, the Compensation

 

 

Committee consulted with our independent compensation consultants using external peer group and benchmarking data as well as considering input from our CEO as appropriate.

Both the short-term annual cash incentive program and the performance-based restricted stock awards under the long-term equity compensation program were based upon financial performance metrics of the Company. No payments were made to our executives under the Company’s annual cash incentive plan for fiscal 2016, fiscal 2017, fiscal 2018 or fiscal 2020 as the threshold performance levels for each fiscal year were not achieved. In addition, none of the three-year performance-based restricted stock grants made have vested as the respective performance criteria have not been satisfied.

Components of Fiscal 2021 Executive Compensation Programs

Compensation During Pendency of Bankruptcy Proceedings

In consultation with the independent compensation consultant, the Compensation Committee implemented a compensation program that was designed to incent our executives to achieve a successful emergence and position the Company to create long-term stockholder value. This included a mix of base salary and retention incentives.

 

 

In fiscal 2021 during the pendency of the bankruptcy proceedings, our NEOs received no base salary pay increases and all regular short and long-term incentive plans for executives were temporarily discontinued.

In the fourth quarter of fiscal 2020, the Compensation Committee, recognizing that it needed consistent, experienced strong leaders focused on assisting the Company with meeting the daily responses to the COVID-19 pandemic as well as to retain their services during the reopening process, the bankruptcy reorganization proceedings and beyond, entered into retention letters (the “Retention Letters”) with Mr. Becker, Ms. Shirley, Ms. Zeterberg and Mr. Hixon. The Retention Letters provided for the payment on May 22, 2020 of retention awards in the following amounts: $600,000 to Mr. Becker; $250,000 to each of Ms. Shirley, and Ms. Zeterberg; and $150,000 to Mr. Hixon.

Under the terms of each Retention Letter, 50% of the retention award vested on February 1, 2021 (the “Time-Based Vesting Date”), and 50% of the retention award vested on December 31, 2020, the date of confirmation by the applicable court of such plan of reorganization (the “Performance-Based Vesting Date”). Under each Retention Letter, the applicable officer would have been required to repay the portion of the retention award that had not yet vested within 10 days of the first to occur of the following: (1) with respect to 100% of such officer’s retention award, the termination of such officer’s employment by the Company for cause or such officer’s voluntary resignation; or (2) with respect to the portion of the retention award eligible to vest on the Performance-Based Vesting Date, a sale of assets or liquidation other than a sale of assets as a going concern.

In addition, during the pendency of the Company’s bankruptcy proceedings, Mr. Metcalf served as Acting Chief Merchant and was compensated under a consulting agreement with the Company. See “Consultants” below for additional information.

Post-Emergence Equity Grants

In order to retain Company leadership and given the difficulty in setting appropriate and meaningful metrics following emergence from bankruptcy and the uncertainty of performance due to COVID-19, and the consequential financial crisis’ significant effect on the retail industry, in January 2021, in consultation with the independent compensation consultants, the Compensation Committee approved a special emergence equity grant to Ms. Shirley, Ms. Zeterberg and Mr. Hixon under the 2014 Long-Term Incentive Plan, as amended. Each award included 195,000 time-vesting shares of restricted stock, which vest ratably in four equal installments (25% per year) beginning on the first anniversary of the award date. In connection with her termination of employment, Ms. Shirley’s award was forfeited.

Leadership Enhancements

Following the Company’s emergence from bankruptcy, to drive the Company’s post emergence success and transformation, the Board engaged the leading executive search firm of Heidrick &

 

 

Struggles to conduct a thorough and focused search for a new chief executive officer to lead and strengthen its executive team. The Company sought a proven off-price executive with experience with turnaround retail organizations, and exceptional leadership skills. In May the Company hired Fred Hand as Chief Executive Officer. Mr. Hand joined Tuesday Morning from Burlington Stores, Inc., where he had recently served as Principal and Chief Operating Officer and was responsible for leading Burlington’s stores and real estate organizations. He is an industry veteran with outstanding operating, merchandising and leadership skills in the off-price retail sector. In September 2021, Mr. Hand further enhanced the existing executive team by hiring veteran off-price executives, Marc Katz as Principal and Chief Operating Officer and Paul Metcalf as Principal and Chief Merchant. Both of these executives had extensive experience in the off-price segment.

Fred Hand

In connection with his appointment to Chief Executive Officer in May 2021, Mr. Hand entered into an employment agreement with the Company, dated May 2, 2021 (the “Hand Employment Agreement”). In consultation with the independent compensation consultant, the Compensation Committee approved the terms of the Hand Employment Agreement. The terms of the Hand Employment Agreement and Mr. Hand’s compensation are discussed under the “Chief Executive Officer Compensation”, “Narrative Disclosure to Summary Compensation Table” and ”Potential Payments upon Termination or Change in Control” sections below.

Consultants

In fiscal 2021, the Company retained the services of two consultants. Marc D. Katz was retained on May 20, 2021 to serve as Interim Chief Financial Officer and Paul G. Metcalf was retained under an amended consulting agreement to serve as Acting Chief Merchant. Mr. Katz’s and Mr. Metcalf’s consulting agreements are summarized under “Narrative Disclosure to Summary Compensation Table” below.

In connection with his appointment to Principal and Chief Operating Officer, Mr. Katz entered into an employment agreement with the Company, dated September 8, 2021 (the “Katz Employment Agreement”). The terms of the Katz Employment Agreement and Mr. Katz’s compensation are discussed under “Fiscal 2022 Compensation Highlights” and “Potential Payments Upon Termination or Change in Control” sections below.

On September 14, 2021 in connection with his appointment to Principal and Chief Merchant, Mr. Metcalf entered into an employment agreement with the Company, dated September 14, 2021 (the “Metcalf Employment Agreement”). The terms of the Metcalf Employment Agreement and Mr. Metcalf’s compensation are discussed under “Fiscal 2022 Compensation Highlights” and “Potential Payments Upon Termination or Change in Control” sections below.

 

 

Chief Executive Officer Compensation

The following table summarizes Mr. Hand’s compensation pursuant to his employment agreement which is further described under “Narrative Disclosure to Summary Compensation Table” and “Potential Payments Upon Termination or Change in Control” sections below:

Fiscal 2022 Compensation Highlights

The following is a brief summary of certain changes to the compensation of the NEOs and for Ms. Robinson for fiscal 2022 which is intended to provide additional information to stockholders in their review of our compensation program for fiscal 2021.

Summary

For fiscal 2022, the Compensation Committee continues to support a performance-based compensation philosophy as in prior years. The fiscal 2022 compensation programs approved by the Compensation Committee include the following elements:

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Annual Base Salary.​ Following a full analysis and executive compensation assessment and in consultation with it independent compensation consultant the Compensation Committee approved compensation increases for Ms. Zeterberg and Mr. Hixon. Such increases were based

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on individual performance, scope, and complexity of each role, market data, and internal pay equity. Ms. Zeterberg’s annual base salary was increased to $460,000 and Mr. Hixon’s annual base salary was increased to $350,000. Consistent with the terms of their respective employment agreements or offer letter, Mr. Hand will receive an annual base salary of $1,000,000, Mr. Katz will receive an annual base salary of  $700,000, Mr. Metcalf will receive an annual base salary of  $650,000 and Ms. Robinson will receive an annual base salary of  $450,000.

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Annual Cash Incentive Plan. Under the annual cash incentive plan for fiscal 2022, participants will continue to have the opportunity to earn a target annual incentive payout as a percentage of incentive-eligible base salary. Target award opportunities (as a percentage of annual base salary) are 125% for Mr. Hand, 70% for Mr. Katz, 70% for Mr. Metcalf, 60% for Ms. Robinson, 60% for Ms. Zeterberg and 60% for Mr. Hixon. For fiscal 2022, the Compensation Committee determined that each NEO’s annual cash incentive payments will be based on achievement of Adjusted EBITDA goals (50% of total) and achievement of overall comparable stores sales growth percentage (50% of total). Except as described below with respect to Mr. Hand, actual earned awards can range from 0% to a maximum of 200% of their target award opportunity. Executive payments will be based on threshold, target and maximum performance targets for Adjusted EBITDA and Comparable Stores Sales Growth Percentage. As provided in his employment agreement, Mr. Hand will receive a bonus in fiscal 2022 that is no less than 100% of his annual base salary.

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Equity Award Grants. The Company’s long-term incentive program is intended to align NEO interest with stockholders, drive decisions that result in sustained long-term financial and operational performance, and retain key executive talent. Long-term equity compensation was historically granted with the following design features: (1) performance-based restricted stock awards with performance metrics of EBITDA and 100% cliff vest after the three-year performance cycle and (2) time-vested restricted stock awards with a four-year ratable vesting. For fiscal 2018 and 2019, due to the depressed stock price, the Compensation Committee took a flat share approach and approved equity grants in an amount equal to the same number of shares granted in fiscal 2017. For fiscal 2019, this amount was approximately 48% of a regular grant. For fiscal 2020, in an attempt to return to a more regular grant, the Compensation Committee approved equity grants for the NEOs at 65% of the regular grant value but still below the market-based dollar value LTI target award opportunity. For fiscal 2021 no regular annual equity grants were made. Fiscal 2022 equity award grants were made to Mr. Hand, Mr. Katz, Mr. Metcalf and Ms. Robinson in accordance with the terms of their respect employment agreements or offer letter.

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For the fiscal 2022 grants, other than the CEO, the Committee approved a mix of 50% time- based restricted stock units which vest ratably over three years, and 50% performance-based restricted stock units which requires the achievement of pre-established adjusted EBITDA performance targets over a cumulative three-year period through the end of fiscal 2024 to vest.

Fiscal 2022 New Executive Employment Agreements

Marc D. Katz Employment Agreement

In connection with his appointment to Principal and Chief Operating Officer in September 2021, Mr. Katz entered into an employment agreement with the Company, dated September 8, 2021 (the “Katz Employment Agreement”). In the Katz Employment Agreement, Mr. Katz agreed to serve as Principal and Chief Operating Officer for an initial term of three years which automatically renews for additional one-year periods unless either party gives 60 days prior written notice of nonrenewal. Under the terms of the Katz Employment Agreement, Mr. Katz is entitled to an annual base salary of not less than $700,000. The base salary payable to Mr. Katz is intended to provide a fixed component of compensation reflecting his skill set, experience, role and responsibilities.

Mr. Katz also is eligible to earn an annual bonus each fiscal year under the Company’s Annual Cash Incentive Plan based on a target bonus opportunity of no less than 70% of his annual base salary to the extent earned, based on performance against objective performance criteria. The Katz

 

 

Employment Agreement also provided for a $100,000 signing bonus. In the event Mr. Katz’s employment is terminated by the Company for “cause” or by him without “good reason” ​(each as defined in the Employment Agreement) prior to the first anniversary of the effective date of the Employment Agreement, he will be required to repay the full amount of the signing bonus, and if his employment is terminated by the Company for cause or by him without good reason following the first anniversary but prior to the second anniversary of the effective date, he will be required to repay 50% of the signing bonus.

Under the Katz Employment Agreement, Mr. Katz is eligible to participate in the Company’s applicable equity incentive plan, and, each year during the term of the Katz Employment Agreement, he is entitled to receive equity incentive awards having a value of at least $700,000. In September 2021, the Company granted Mr. Katz an initial annual grant of RSUs valued at $700,000, 50% of which are time-based RSUs which vest ratably over three years and 50% of which are performance-based PRSUs which vest if the performance metrics are met by the end of the performance period of three years.

As an inducement to accept employment with the Company, the Employment Agreement also provided for the grant to Mr. Katz of inducement equity awards, including (i) an award of time-based restricted stock units having a grant date fair market value of  $1,500,000 (the “Katz Inducement RSUs”) and (ii) an award of performance-based restricted stock units having a grant date fair market value of  $1,500,000 (the “Katz Inducement PRSUs”). The Katz Inducement RSUs will vest in equal installments on each of the first three anniversaries of the date of grant, so long as Mr. Katz remains employed through each vesting date. The Katz Inducement PRSUs will vest over a period of five years from the date of grant (subject to Mr. Katz’s continuous employment through each vesting date) and are subject to both time-based and performance-based vesting and only fully vest when both time-based and performance-based vesting conditions are met. The Katz Inducement PRSUs are divided into three equal tranches (Tranches A, B, and C), each of which will performance vest if the value of the Company’s common stock equals or exceeds a specified threshold for a period of 30 consecutive trading days as follows: Tranche A, $6.00 per share; Tranche B, $9.00 per share; and Tranche C, $12.00 per share.

In the Katz Employment Agreement, Mr. Katz agreed to certain restrictive covenants during the employment term and for 18 months thereafter.

Under the Katz Employment Agreement, Mr. Katz is entitled to certain severance benefits as discussed below under “Potential Payments upon Termination or Change of Control.”

Paul G. Metcalf Employment Agreement

In connection with his appointment to Principal and Chief Merchant Officer in September 2021, Mr. Metcalf entered into an employment agreement with the Company, dated September 14, 2021 (the “Metcalf Employment Agreement). In the Metcalf Employment Agreement, Mr. Metcalf agreed to serve as Principal and Chief Merchant for an initial term of three years which automatically renews for additional one-year periods unless either party gives 60 days prior written notice of nonrenewal. Under the terms of the Metcalf Employment Agreement, Mr. Metcalf is entitled to an annual base salary of not less than $650,000. The base salary payable to Mr. Metcalf is intended to provide a fixed component of compensation reflecting his skill set, experience, role and responsibilities.

Mr. Metcalf also is eligible to earn an annual bonus each fiscal year under the Company’s Annual Cash Incentive Plan based on a target bonus opportunity of no less than 70% of his annual base salary to the extent earned, based on performance against objective performance criteria.

Under the Metcalf Employment Agreement, Mr. Metcalf is eligible to participate in the Company’s applicable equity incentive plan, and, each year during the term of the Metcalf Employment Agreement, he is entitled to receive equity incentive awards having a value of at least $650,000. In September 2021, the Company granted Mr. Metcalf an initial annual grant of RSUs valued at $650,000, 50% of which are time-based RSUs which vest ratably over three years and 50% of which are performance-based PRSUs which vest if the performance metrics are met by the end of the performance period of three years.

 

 

As an inducement to accept employment with the Company, the Metcalf Employment Agreement also provided for the grant to Mr. Metcalf of inducement equity awards, including (i) an award of time-based restricted stock units having a grant date fair market value of  $500,000 (the “Metcalf Inducement RSUs”) and (ii) an award of performance-based restricted stock units having a grant date fair market value of  $1,000,000 (the “Metcalf Inducement PRSUs”). The Metcalf Inducement RSUs will vest in equal installments on each of the first three anniversaries of the date of grant, so long as Mr. Metcalf remains employed through each vesting date. The Metcalf Inducement PRSUs will vest over a period of four years from the date of grant (subject to Mr. Metcalf’s continuous employment through each vesting date) and are subject to both time-based and performance-based vesting and only fully vest when both time-based and performance-based vesting conditions are met. The Metcalf Inducement PRSUs are divided into two equal tranches (Tranches A and B), each of which will performance vest if the value of the Company’s common stock equals or exceeds a specified threshold for a period of 30 consecutive trading days as follows: Tranche A, $9.00 per share and Tranche B, $12.00 per share.​

In the Metcalf Employment Agreement, Mr. Metcalf agreed to certain restrictive covenants during the employment term and for 18 months thereafter.

Under the Metcalf Employment Agreement, Mr. Metcalf is entitled to certain severance benefits as discussed below under “Potential Payments upon Termination or Change of Control.”

Jennifer N. Robinson Employment Offer Letter

In connection with Ms. Robinson’s appointment as Executive Vice President, Chief Financial Officer, the Company and Ms. Robinson entered into an offer letter dated as of July 29, 2021 (the “Robinson Offer Letter”). The Offer Letter provides for an annual base salary of  $450,000 and an annual target bonus opportunity of 60% of Ms. Robinson’s base salary, with the amount actually earned based on performance. The annual cash incentive plan further provides for a threshold incentive payout opportunity at 25% and a maximum level of performance payout opportunity at 200%. The Robinson Offer Letter also provides for a $300,000 signing bonus. In the event Ms. Robinson terminates her employment with the Company prior to the first anniversary of her employment, she will be required to repay the full amount of the signing bonus, and if she terminates her employment with the Company following the first anniversary but prior to the second anniversary of her employment, she will be required to repay 50% of the signing bonus. In accordance with the terms of the Robinson Offer Letter, in September 2021, the Company granted Ms. Robinson an initial annual grant of RSUs valued at $350,000, 50% of which are time-based RSUs which vest ratably over three years and 50% of which are performance-based PRSUs which vest if the performance metrics are met by the end of the performance period of three years. Such grants are subject to the terms and conditions of a separate award agreement. Ms. Robinson is also entitled to standard employee benefits generally offered to the Company’s employees.

Other Compensation

Executive Severance Plan

On May 1, 2018, the Compensation Committee, following consultation with its independent compensation consultant, and taking into account amongst other things, the competitive pressures in the retail industry and competitive hiring pressures in the Dallas-Fort Worth market, approved the adoption of the Tuesday Morning Corporation Executive Severance Plan (the “Severance Plan”). The adoption of the Severance Plan is to provide financial and transitional assistance to certain executives of the Company with the title of Senior Vice President or higher, which include our NEOs other than our CEO (the “Eligible Executives”), following a termination of employment under certain circumstances. The terms of the Severance Plan are further described under the “Potential Payments Upon Termination or Change in Control” section below.

Other Compensation

With respect to other compensation, our NEOs are entitled to participate in all employee benefit plans, including our 401(k) plan, health and dental plans, life insurance and disability plans.

 

 

We do not offer non-qualified benefits such as deferred compensation, corporate-owned life insurance or supplemental executive retirement programs to our NEOs. In addition, we provide minimal perquisites to our executives which are referenced in footnote (4) of the Summary Compensation Table below. The Compensation Committee believes that the perquisites provided to our executives are reasonable and consistent with its overall compensation program to better enable us to attract and retain superior employees for key positions. We generally do not provide tax gross-ups upon a change in control to our executive officers. However, we determined that it was appropriate and necessary to provide tax gross-ups for certain relocation and commuting expenses in order to retain the services of Mr. Hand and Mr. Katz.

The Role of the Compensation Committee

The Compensation Committee of the Board of Directors (the “Committee”) is responsible for establishing and implementing our executive compensation programs. Our Compensation Committee consists of four independent directors. Each member of the Committee is independent under the listing standards of the NASDAQ. The Committee determines compensation for the officers of the Company at the level of Senior Vice President and above, other than the Chief Executive Officer. The Chief Executive Officer’s compensation is determined by all the independent directors of the Board of Directors considering the Committee’s recommendations. The Committee assesses market data and competitive practices, reviews and approves individual executive annual pay targets, sets financial and business metrics for performance-based plans, reviews results and approves final payout levels for executive officers. As part of the Committee’s deliberations, the Chief Executive Officer makes recommendations for the executive officers other than himself. The Committee considers these recommendations in making its determinations.

The Role of the Independent Compensation Consultant

The Committee engages an independent consultant to assist in its review of and decisions on executive compensation. This independent compensation consultant provides current market research and analysis against which executive compensation programs and proposals can be evaluated, including review of the Company’s peer group, competitive market trends and benchmarks and program design practices. The independent executive compensation consultant reports directly to the Committee which has the authority to retain, terminate, compensate and oversee any compensation consultant or other advisors to assist the Committee in the discharge of its responsibilities.

Since February 2018, the Committee has engaged Willis Towers Watson as its outside independent compensation consultant. For fiscal 2021, Willis Towers Watson assisted the Compensation Committee with:

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advice and analysis of compensation during Chapter 11 and following emergence from Chapter 11;

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•

advice and analysis on the design, structure and level of executive compensation; focused heavily on long-term incentive compensation;

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•

review of market survey and proxy compensation data for benchmarking;

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•

advice on the external retail environment and evolving compensation trends;

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•

peer group review and analysis; and

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•

review of current and past retail practices for delivering performance-based pay in a challenging environment.

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Following a review of the independence of Willis Towers Watson, the Compensation Committee concluded that no conflict of interest exists with respect to the work of Willis Towers Watson. Willis Towers Watson did no other work with the Company in fiscal 2021. The Compensation Committee has a policy that states that any projects done with Willis Towers Watson outside of board and executive compensation activities must be reviewed and approved by the Committee.

 

 

As compensation consultants, Willis Towers Watson representatives attend all Compensation Committee meetings, including executive sessions and are available to the Compensation Committee on an ongoing basis. Although the compensation consultants to the Compensation Committee work with our management on various matters for which the Compensation Committee is responsible, our management does not direct or oversee the retention or activities of Willis Towers Watson.

The Role of Management

Management makes recommendations to the Committee regarding the design and implementation of our executive compensation programs. In reviewing and making compensation decisions, the Compensation Committee considers the CEO’s view of the business, people strategy and the performance of other senior leaders. However, the CEO has no role in setting his own compensation package. Management works with Willis Towers Watson in making recommendations that are consistent with the Company’s philosophy and objectives. The compensation consultant works directly with the Compensation Committee on CEO compensation.

The Role of Peer Group and Benchmarking

The market for executive talent and understanding how other retailers compensate their leaders is critical in the design and assessment of executive compensation programs. Through our bankruptcy and emergence, and subsequently in our ongoing management of executive’s pay, the Committee relies on market data to establish a foundation for making critical pay decisions.

Through the bankruptcy and our emergence, Willis Towers Watson provided market data of similarly situated companies managing pay through a restructuring.

For the year ahead, as in the past, the Committee considers various criteria in determining the peer group including revenue, financial performance and focus on retailers with business characteristics similar to Tuesday Morning. In general, the peer group includes retail, hard goods retail, household goods retail, off-price retail, and other retailers with similar number of stores and employees. In addition to peer group data, the Committee also considers peer group industry surveys to benchmark pay for executives for which peer group data is not available or applicable. Market data is referenced when making compensation determinations, and the Committee also considers Company performance and need as well as individual experience and performance relevant to the executive’s role. Likewise, the Compensation Committee considered relevant data from its independent compensation consultant when hiring executives to rebuild the leadership team as described in this CD&A.

During the pendency of the bankruptcy the Committee with advice from Willis Towers Watson reviewed generally the compensation practices of other companies in bankruptcy. Following emergence in February 2021, the Compensation Committee conducted a comprehensive evaluation of our peer group to assure that it provides a relevant comparison to the market. Based on this review the peer group was updated for purposes of benchmarking executive compensation.

The Compensation Committee, with advice from Willis Towers Watson, elected to make the following changes to our peer group in February of fiscal 2021. Our fiscal 2021 peer group is:

 

 

Internal Pay Relationships

Our executive compensation philosophy reflects the importance of offering a competitive target compensation package. In general, the differences in pay between the NEOs relative to each other and relative to the Chief Executive Officer, as well as non-managerial associates, are based on market differences for the job, job responsibilities and scope, and individual experience and performance, rather than a pre-determined ratio or multiple.

Relationship of Executive Compensation to Risk

In connection with fulfilling its responsibilities, the Committee considers whether the design of the Company’s executive compensation programs encourages executives to engage in excessive risk-taking. The Committee reviews the overall program design, as well as the balance between short-term and long-term compensation, the metrics used to measure performance, and the total award opportunity under the Company’s incentive compensation programs, and other features designed to mitigate risk such as vesting requirements, stock ownership guidelines, the Company’s insider trading policy, the Company’s claw-back policy, and the Company’s prohibition on hedging and pledging of Company securities by directors and senior management. Based on its review, the Committee believes that the Company’s executive compensation programs are aligned with the interest of stockholders, appropriately reward pay for performance and do not promote unnecessary or excessive risk.

Additional Compensation Governance Policy and Practices

Compensation Program Risk

As part of its oversight of our executive pay programs, the Compensation Committee considers the impact of our compensation programs and the incentives created by the potential compensation rewards that it administers on our risk profile. In addition, we review all of our existing compensation policies and plans to determine whether they present a significant risk. Some of the factors included in this review are:

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Board and Committee oversight;

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Mix of fixed and variable compensation pay components;

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Use of performance-based metrics in short-term and long-term equity incentive plans;

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Use of relatively smooth performance ranges around target without steep payout cliffs that might encourage inappropriate short-term business decisions in order to achieve a payout;

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Rewards tied to our formulaic results;

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Caps on potential compensation earnings;

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Stock vesting schedules;

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Adoption of stock ownership requirements;

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Use of independent compensation consultant; and

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Adherence to company policies, internal controls, and risk management guideline.

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Based on this review, we have concluded that our compensation policies and plans are not reasonably likely to have a material adverse effect.

Compensation Committee Interlocks and Insider Participation

None of the persons who served on our Compensation Committee during the last completed fiscal year (Sherry M. Smith, Douglas J. Dossey, Frank M. Hamlin, Reuben E. Slone, W. Paul Jones or Barry S. Gluck): (i) was formerly an officer of the Company; (ii) during the last fiscal year, was an officer or employee of the Company; or (iii) had any relationship requiring disclosure under Item 404 of Regulation S-K, except with respect to Mr. Dossey as a result of his position with TCM (See “Certain Relationships and Related Party Transactions” for a discussion of the participation of an affiliate of TCM in a $25 million term loan and $40 million rights offering in connection with the Company’s emergence from bankruptcy proceedings). None of our executive officers served as a member of the compensation committee or similar committee or as a member of the board of directors of any other entity one of whose executive officers served on the Compensation Committee or as a member of the Board of Directors of the Company.

Stock Ownership Guidelines and Retention/Holding Requirements for Executives and Non-Employee Directors

The Compensation Committee adopted stock ownership requirements for our NEOs and non-employee directors in 2014 which have been updated in 2015 and 2019. These guidelines are intended to encourage the investment by our directors and NEOs in the Company and to promote a long-term perspective in managing the company.

A NEO’s or non-employee director’s minimum stock ownership value is calculated using his or her then current retainer or base salary. In order to reduce the impact of stock price fluctuation on a participant’s ongoing obligation to achieve and maintain compliance with the guidelines, the value of the participant’s holdings, as of any assessment date, will be based on the greater of the closing price of the Company’s stock on the last trading day prior to the assessment, or the following:

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with respect to shares of Company stock purchased on the open market, the cost of such shares,

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with respect to restricted shares acquired under any Company stock incentive plan, the fair market value (as defined under the applicable stock incentive plan) on the date of grant, and

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with respect to shares acquired under stock options, the fair market value at the time of exercise of the option.

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Once a participant has met the applicable ownership guideline, the number of shares a participant is expected to hold to meet the guideline remains fixed, and fluctuations in market value of the Company’s shares do not increase or decrease the number of shares needed.

 

 

For purposes of calculating stock ownership, the following sources may be included:

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shares of common stock owned outright by the non-employee director or officer, as well as stock owned by his or her immediate family members residing in the same household;

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shares of common stock held in trust for the benefit of the non-employee director or officer, as well as his or her family;

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•

unvested restricted stock or restricted stock units;

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if applicable, shares of common stock held pursuant to deferred compensation arrangements; and

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if applicable, shares purchased with amounts invested in the Company’s retirement plans, including, without limitation, the 401(k) plan and any employee stock purchase plan.

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Unexercised options and unearned performance shares are not counted toward stock ownership requirements.

If an NEO or non-employee director has not met the stock ownership requirement, such NEO or non-employee director must retain 50% of the net shares (after cashless exercises of options and the payment of any applicable tax liability related to equity grants by the Company) of the vested long-term incentive plan shares or annual equity retainer awarded to the NEO or non-employee director. The NEO or non-employee director may sell Company stock acquired by exercising stock options for the limited purpose of paying the exercise price of the stock option and may sell shares to pay any applicable tax liability related to equity grants by the Company.

Each of our directors and executive officers is in compliance with these requirements. Certain directors and executive officers have satisfied the minimum ownership levels and all other directors and executive officers are in compliance with the retention and holding requirements.

Clawback Policy

The Company may recoup all or any portion of any shares or cash paid to a participant in connection with an award, in the event of a restatement of the Company’s financial statements as set forth in the Company’s clawback policy, approved by the Board.

Anti-Hedging and Anti-Pledging Policies

We have an anti-hedging policy that prohibits the NEOs, the Company’s Board of Directors and other Company employees from hedging against a decrease in the value of the Company’s stock. Under the policy, the NEOs are prohibited from purchasing any financial instruments designed to offset decreases in the market value of the Company’s stock. During fiscal 2021, all NEOs were in compliance with this policy.

The Company has also adopted an anti-pledging policy that prohibits the NEOs, the Company’s Board of Directors and other Company employees from holding the Company’s stock in a margin account or otherwise pledging the Company’s stock as collateral for a loan. None of the NEOs pledged any Company stock in fiscal 2021.

 

 

Summary Compensation Table

The table below summarizes the total compensation of each of the NEOs for the fiscal year ended June, 30, 2021, June 30, 2020 and June 30, 2019.

(1)

With respect to Mr. Hand, represents a sign-on bonus paid according to the terms of his employment agreement.

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(2)

These columns represent the grant date fair value of the respective equity awards computed in accordance with Financial Accounting Standards Board’s Accounting Standards Codification Topic 718, Compensation — Stock Compensation (“FASB ASC Topic 718”). The amounts reflect the probable outcome of performance conditions and market conditions as of the date of grant that affect the vesting of awards and exclude the impact of estimated forfeitures related to service based vesting conditions. Refer to note (1)(l) and note (7) to the Company’s consolidated financial statements herein for additional information on the valuation assumptions used in the calculation of grant date fair value for stock and option awards included in the Summary Compensation Table above. For additional information regarding stock and option awards to the NEOs, refer to the "Outstanding Equity Awards at 2021 Fiscal Year End" table. The actual value realized by any named executive officer from these awards may range from $0 to greater than the amounts reported, depending on the Company’s performance, the market value of our common stock and the officer’s number of additional years of service with the Company.

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A portion of the amounts reflected under stock awards for fiscal 2021 for Mr. Hand includes the value of performance-based restricted stock awards (assuming all units vest), with a value of

 

 

$4,000,000. Also includes $65,729 of Stock-based compensation for Mr. Hand as futher described under “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal 2021 Table — Employment Agreements or Arrangements — Carried Interest Agreement.”

(3)

There was no annual cash incentive plan for fiscal 2021.

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(4)

The amounts set forth in this column reflect the following for the fiscal year ended June 30, 2021.

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(4-a)

Matching contributions allocated by the Company to each of the NEOs pursuant to the Company’s 401(k) Profit Sharing Plan available to all eligible employees.

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(4-b)

The value attributable to $300,000 of life insurance premiums (and imputed income) provided under the Company’s health benefit program available to all eligible employees.

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(4-c)

The value attributable to Long-term Care benefit coverage provided under a grandfathered long-term care insurance program.

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(4-d)

This includes $93,750 in separation payments made to Mr. Becker in FY21 and a vested cash LTIP award in the amount of  $750,000.

​

(4-e)

Consulting fees paid to Mr. Katz and Mr. Metcalf in FY21. Includes expense reimbursement for Mr. Katz and Mr. Metcalf. Ms. Shirley received consulting fees of $20,000 in fiscal 2021 for services provided following her resignation as Chief Financial Officer.

​

(4-f)

The cost of medical concierge services provided to Mr. Becker in FY21.

​

(4-g)

The cost of COBRA coverage paid for Mr. Becker in FY21.

​

(5)

Mr. Hand was appointed as Chief Executive Officer in May 2021 .

​

(6)

Mr. Becker’s resignation as Chief Executive Officer and President was effective in May 2021.

​

(7)

In fiscal 2021, Mr. Katz provided services to the Company under a consulting agreement. In September 2021, Mr. Katz was appointed Principal and Chief Operating Officer of the Company. See “Compensation Discussion and Analysis — Fiscal 2022 Compensation Highlights” for additional information regarding Mr. Katz’s employment.

​

(8)

Ms. Shirley’s resignation as Chief Financial Officer was effective in May 2021.

​

(9)

In fiscal 2021, Mr. Metcalf provided services to the Company under a consulting agreement. In September 2021, Mr. Metcalf was appointed Principal and Chief Merchant of the Company. See “Compensation Discussion and Analysis — Fiscal 2022 Compensation Highlights” for additional information regarding Mr. Metcalf's employment agreement.

​

(10)

Ms. Zeterberg was promoted to Executive Vice President Human Resources, General Counsel and Corporate Secretary in February 2019. Prior to her promotion to Executive Vice President Human Resources, General Counsel and Corporate Secretary, Ms. Zeterberg held the position of Senior Vice President Human Resources-General Counsel and Corporate Secretary.

​

 

 

(11)

Mr. Hixon has served as Executive Vice President, Store Operations since September 2015. Prior to his promotion, Mr. Hixon held the position of Senior Vice President, Store Operations from June 2014 to September 2015.

​

 

 

Grants of Plan-Based Awards in Fiscal 2021

The following table sets forth certain information with respect of the stock awards granted to the named executive officers during the fiscal year ended June 30, 2021.

(1)

No non-equity incentive plan awards were made in fiscal year 2021.

​

(2)

Reflects performance-based restricted stock units granted to Mr. Hand. One-third of the units will vest upon attainment of a minimum stock price threshold, an additional third will vest upon attainment of a higher stock price threshold, and the final third will vest upon attainment of a higher stock price threshold. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal 2021 Table — Employment Agreements or Arrangements” for additional information.

​

(3)

Includes time-vesting restricted stock granted to the named executive officers. Also includes CEO inducement grant of time-vesting restricted stock and performance-based stock.

​

(4)

This column represents the grant date fair value of the respective equity awards computed in accordance with FASB ASC Topic 718. The amounts shown reflect the probable outcome of performance conditions and market conditions that affect the vesting of awards and exclude the impact of estimated forfeitures related to service-based vesting conditions. Refer to note (1)(l) and note (7) to the Company’s consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 for additional information on the valuation assumptions used in the calculation of grant date fair value for stock and option awards. All equity awards granted during fiscal 2021 were granted pursuant to the 2014 Plan, except that the awards to Mr. Hand were made as separate inducement awards. See “Compensation Discussion and Analysis” above for additional information.

​

(5)

The equity awards granted to Mr. Hand consist of: (i) a grant of 1,538,462 of time-vesting restricted stock units on May 19, 2021, which vest in three equal annual installments on May 19, 2022, May 19, 2023, and May 19, 2024; (ii) a grant of 1,230,769 performance-based restricted stock units on May 19, 2021 which vest in five installments with 20% vesting on May 19, 2024, 30% vesting on November 19, 2024, 40% vesting on May 19, 2025, 5% vesting on November 19, 2025, and 5% vesting on May 19, 2026, subject to certain performance

​

 

 

conditions as futher described in “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal 2021 Table — Employment Agreement or Arrangements.”

(6)

No equity awards were granted to Mr. Becker or Mr. Katz during fiscal 2021.

​

(7)

The equity award granted to Ms. Shirley consists of a grant of 195,000 shares of time-vesting restricted stock on January 21, 2021, which vest in four equal annual installments on January 21, 2022, January 21, 2023, January 21, 2024, and January 21, 2025. As a result of Ms. Shirley’s resignation in May 2021, none of these shares of restricted stock will vest.

​

(8)

The equity award granted to Mr. Metcalf consists of a grant of 195,000 time-vesting restricted stock units on March 30, 2021, which vest in four equal annual installments on March 30, 2022, March 30, 2023, March 30, 2024, and March 30, 2025.

​

(9)

The equity award granted to Ms. Zeterberg consists of a grant of 195,000 shares of time-vesting restricted stock on January 21, 2021, which vest in four equal annual installments on January 21, 2022, January 21, 2023, January 21, 2024, and January 21, 2025.

​

(10)

The equity award granted to Mr. Hixon consists of a grant of 195,000 shares of time-vesting restricted stock on January 21, 2021, which vest in four equal annual installments on January 21, 2022, January 21, 2023, January 21, 2024, and January 21, 2025.

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Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards in Fiscal 2021 Table

Employment Agreements or Arrangements

Employment Agreement with Mr. Hand

In connection with his appointment to Chief Executive Officer in May 2021, Mr. Hand entered into an employment agreement with the Company, dated May 2, 2021 (the “Hand Employment Agreement”). In the Hand Employment Agreement, Mr. Hand agreed to serve as Chief Executive Officer for an initial term of three years which automatically renews for additional one-year periods unless either party gives prior written notice of nonrenewal. Under the terms of the Hand Employment Agreement, Mr. Hand is entitled to an initial annual base salary of  $1,000,000. The base salary payable to Mr. Hand is intended to provide a fixed component of compensation reflecting his skill set, experience, role and responsibilities.

Mr. Hand also is eligible to earn an annual bonus each fiscal year under the Company’s annual cash incentive plan. For the 2022 fiscal year only, Mr. Hand’s annual bonus will be no less than 100% of his base salary. The Hand Employment Agreement also provided for a $1,000,000 signing bonus. In the event Mr. Hand’s employment is terminated by the Company for “cause” or by him without “good reason” ​(each as defined in the Hand Employment Agreement) prior to the first anniversary of the effective date of the Hand Employment Agreement, he will be required to repay the full amount of the signing bonus, and if his employment is terminated by the Company for cause or by him without good reason following the first anniversary but prior to the second anniversary of the effective date, he will be required to repay 50% of the signing bonus. Under the Hand Employment Agreement, Mr. Hand is eligible to participate in the Company’s applicable equity incentive plan, and, with respect to the 2022 fiscal year, he is entitled to receive an award of restricted stock units having an aggregate grant date fair value of  $1,500,000, to be granted at the time equity awards are generally granted for that year. For the 2023 fiscal year, Mr. Hand will be eligible to receive long-term incentive awards with an aggregate grant date fair value of at least $1,750,000, and at least $2,000,000 for each fiscal year after 2023. Mr. Hand will also be eligible to participate in the Company’s benefit plans generally and is entitled to the payment of certain relocation expenses and legal fees in connection with the negotiation and drafting of the Hand Employment Agreement.

 

 

In accordance with the Hand Employment Agreement, in May 2021 Mr. Hand also received a grant of inducement equity awards, including (i) an award of 1,538,462 time-based restricted stock units (the “Hand Inducement RSUs”) and (ii) an award of 1,230,769 performance-based restricted stock units (the “Hand Inducement PRSUs”). The Hand Inducement RSUs will vest in equal installments on each of the first three anniversaries of the date of grant, so long as Mr. Hand remains employed through each vesting date. The Hand Inducement RSUs are intended to replace awards previously granted to Mr. Hand in connection with his prior employment. The Hand Inducement PRSUs will vest over a period of five years from the date of grant (subject to Mr. Hand’s continuous employment through each vesting date) and are subject to both time-based and performance-based vesting and only fully vest when both time-based and performance-based vesting conditions are met. The Hand Inducement PRSUs are divided into three equal tranches (Tranches A, B, and C), each of which will performance vest if the value of the Company’s common stock equals or exceeds a specified threshold for a period of 30 consecutive trading days as follows: Tranche A, $6.00 per share; Tranche B, $9.00 per share; and Tranche C, $12.00 per share.

Under the Hand Employment Agreement, Mr. Hand also is eligible to receive reasonable relocation expenses associated with his relocation to the Dallas, Texas metropolitan area and temporary housing expenses up to a maximum expense of  $50,000. The Company agreed to gross up for tax purposes any income arising from such payments that is treated as nondeductible taxable income so that the economic benefit is the same to Mr. Hand as if such payment or benefits were provided on a nontaxable basis.

Under the Hand Employment Agreement, Mr. Hand is entitled to certain severance benefits as discussed below under “Potential Payments upon Termination or Change of Control.”

In the Hand Employment Agreement, Mr. Hand agreed to certain restrictive covenants during the employment term and for 18 months thereafter.

Carried Interest Agreement

Upon his appointment as the Company’s Chief Executive Officer, Mr. Hand entered into agreements with Osmium Partners, pursuant to which Mr. Hand became entitled to receive 30% of all carry distributions (“Carried Interest”) payable by certain members of Osmium Group in respect of its ownership interest in shares of common stock of the Company (including warrants to purchase 10,000,000 shares of common stock).

Subject to Mr. Hand’s continued employment with the Company, such entitlement will vest over 42 months as follows: (a) on the second anniversary of Mr. Hand’s employment by the Company, Mr. Hand’s entitlement to approximately 17.14% (the product of 30% times 24/42) of the Carried Interest will become vested, and (b) thereafter, Mr. Hand’s entitlement to approximately 0.71% (the product of 30% times 1/42) of the Carried Interest will become vested each month. In addition, Mr. Hand’s entitlement to a portion of the Carried Interest will be subject to a participation threshold in the minimum amount necessary to render his entitlement a valid profit interest for tax purposes.

Under applicable accounting rules, this transaction is treated as a share-based payment by the Company to Mr. Hand with a corresponding capital contribution by Osmium Partners to the Company. Share-based compensation expense with respect to the Carried Interest Agreement was $65,729 for fiscal 2021.

Consulting Agreements

During fiscal 2021, each of Mr. Katz and Mr. Metcalf provided services to the Company as consultants pursuant to consulting agreements.

From May 20, 2021 until his appointment as Chief Operating Officer of the Company on September 9, 2021, Mr. Katz served as a consultant to the Company. Under the terms of a consulting agreement between the Company and Mr. Katz (the “Katz Consulting Agreement”), Mr. Katz received a monthly consulting fee of  $50,000. Additionally, upon his completion of 90 days of

 

 

providing services to the Company, Mr. Katz received a bonus of  $100,000. Upon the Company and Mr. Katz entering into the Katz Employment Agreement on September 8, 2021, the Katz Consulting Agreement terminated. See “Compensation Discussion and Analysis – Fiscal 2022 Compensation Highlights – Fiscal 2022 New Executive Employment Agreements” for additional information regarding the Katz Employment Agreement.

Mr. Metcalf also has provided service to the Company as a consultant under the terms of a consulting agreement (the “Metcalf Consulting Agreement”). Under the terms of the Metcalf Consulting Agreement, Mr. Metcalf was entitled to receive a base consulting fee of  $51,000 per month. In addition, under the terms of the Metcalf Consulting Agreement, Mr. Metcalf was entitled to receive a minimum additional consulting fee of  $225,000, which could be increased to a maximum of  $450,000 based on the achievement of certain performance metrics for the fiscal year ending June 30, 2021. In addition, on March 30, 2021, Mr. Metcalf was granted an equity award of 195,000 of time-vesting RSUs that will vest in four equal installments on the first, second, third, and fourth anniversary of the date of grant. The RSUs provide that if Mr. Metcalf’s termination of service is by the Company without cause or by the Mr. Metcalf for good reason (as defined in the agreement) prior to the first anniversary of the date of grant, then the awarded RSUs that would have vested on the first anniversary of the date of grant shall not be forfeited and shall remain outstanding and vest on the first anniversary of the date of grant as if Mr. Metcalf had not incurred such termination of service. Upon the Company and Mr. Metcalf entering into the Metcalf Employment Agreement on September 14, 2021, the Metcalf Consulting Agreement terminated. See “Compensation Discussion and Analysis – Fiscal 2022 Compensation Highlights – Fiscal 2022 New Executive Employment Agreements” for additional information regarding the Metcalf Employment Agreement.

Other Agreements

Except as disclosed above, the Company is not a party to other employment agreements with any other current or former NEOs identified in the Summary Compensation Table other than at-will employment arrangements. Named executive officers are participants in the Severance Plan as discussed further below under “Potential Payments Upon Termination or Change in Control.”

The Company has entered into indemnification agreements with each named executive officer, each in a form approved by the Board and previously disclosed by the Company. The Company has also entered into a form of the indemnification agreement with each of its directors. The Board has further authorized the Company to enter into the form of indemnification agreement with future directors and executive officers of the Company and other persons or categories of persons that may be designated from time to time by the Board. The indemnification agreement supplements and clarifies existing indemnification provisions of the Company’s Certificate of Incorporation and Bylaws and, in general, provides for indemnification to the fullest extent permitted by law, subject to the terms and conditions provided in the indemnification agreement. The indemnification agreement also establishes processes and procedures for indemnification claims, advancement of expenses and costs and other determinations with respect to indemnification.

 

 

OUTSTANDING EQUITY AWARDS AT FISCAL 2021 YEAR-END

The following table sets forth certain information with respect of the stock awards held by the NEOs as of June 30, 2021.