Item 5.02 – Departure of Directors
or Certain Officers; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers
On March 30, 2020, the Board of Directors
(the “Board”) of Escalade, Incorporated (“Escalade” or the “Company”) announced that Scott
J. Sincerbeaux has agreed to become the Company’s new Chief Executive Officer and President. Mr. Sincerbeaux is expected
to commence his employment with Escalade on or about April 27, 2020.
Mr. Sincerbeaux, age 52, joins Escalade
from Wolverine World Wide, Inc. (NYSE: WWW), a leading marketer and licensor of branded casual, active lifestyle, work, outdoor
sport, athletic, children’s and uniform footwear and apparel, where he held several positions including President of Direct
to Consumer, President of Global Retail, and President of The Stride Rite Children’s Group. Prior to joining Wolverine in
November 2015, Mr. Sincerbeaux served as Vice President, North America Retail for Godiva Chocolatier from August 2013 to November
2015. Before joining Godiva Chocolatier, Mr. Sincerbeaux held sales and direct-to-consumer management roles at Bare Escentuals,
Crabtree & Evelyn, and ECCO.
There is no arrangement or understanding
between Mr. Sincerbeaux and any other person pursuant to which Mr. Sincerbeaux was hired as the Company’s Chief Executive
Officer and President, nor to which he will be appointed to the Board of Directors following the Company’s Annual Meeting
of Stockholders. Mr. Sincerbeaux has no family relationship with any executive officer or director of Escalade. Mr. Sincerbeaux
has not been involved in any related party transaction with Escalade, nor does he have a direct or indirect material interest
in any of Escalade’s existing or currently proposed transactions.
The initial terms of Mr. Sincerbeaux’s
employment as Chief Executive Officer and President are contained in the offer letter entered into on March 30, 2020 by the Company
and Mr. Sincerbeaux (the “Offer Letter”). Pursuant to the Offer Letter, Mr. Sincerbeaux will be entitled to the following
compensation and benefits:
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Annual base
salary of $435,000, pro-rated for the Company’s 2020 fiscal year; subject to annual
review by Escalade’s Compensation Committee beginning with the Company’s
2021 fiscal year, provided that the annual base salary will not be reduced below $435,000
in any future year.
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A cash incentive
bonus of $300,000 for the Company’s 2020 fiscal year, which will not be pro-rated
or subject to adjustment; thereafter, annual cash incentive bonus will be based on the
performance of the Company and Mr. Sincerbeaux, as determined by Escalade’s Compensation
Committee.
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An
inducement award consisting of restricted stock units (“RSUs”) having a fair
market value equal to $290,000 based on the trailing 30-day volume weighted average trading
per share prices of Escalade common stock on The Nasdaq Stock Market ending on the date
Mr. Sincerbeaux commences employment with the Company; 60% of which RSUs will vest, subject
to continuing employment with Escalade, one third on each of March 4, 2021, March 4,
2022, and March 4, 2023, and 40% of which RSUs will vest in one third increments on the
same dates, subject to continued employment and Company performance targets to be determined
by Escalade’s Compensation Committee in conjunction with Mr. Sincerbeaux.
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An inducement award consisting of 35,000 shares of restricted
stock to be granted on his employment start date, with the restrictions on such shares lapsing in the following increments: (i)
40% on the first anniversary of his commencement date, (ii) 30% on the second anniversary of his commencement date, and (iii) 30%
on the third anniversary of his commencement date, each subject to his continued employment with the Company.
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A signing bonus
of $80,000 payable upon commencement of employment.
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Relocation
expenses equal to Mr. Sincerbeaux’s actual costs incurred, up to an aggregate amount
of $233,000, to assist Mr. Sincerbeaux in moving his family from Alto, Michigan to Evansville,
Indiana.
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Participation
in Escalade’s standard health and welfare plans, consistent with Company policy.
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The foregoing summary of the material terms
of the Offer Letter is qualified in its entirety by the Offer Letter filed as Exhibit 10.1 to this Form 8-K.
As an additional inducement for Mr. Sincerbeaux
to accept the Company’s offer of employment, Escalade and Mr. Sincerbeaux have entered into an Executive Severance Agreement
(the “Executive Agreement”) effective upon commencement of employment. The Executive Agreement and the Offer Letter
provide that Mr. Sincerbeaux is an employee at will. However, under the terms of the Executive Agreement, if Escalade would terminate
Mr. Sincerbeaux’s employment without cause, or if Mr. Sincerbeaux would resign for good reason, then Mr. Sincerbeaux would
receive a payment equal to one year of his base salary. In addition, Escalade would accelerate the vesting of his shares of restricted
stock and RSUs, vesting one-third of all unvested shares and RSUs if the severance occurs less than two years after his employment
commences and vesting two-thirds of all unvested shares and RSUs if the severance occurs more than two years after his employment
commences. Mr. Sincerbeaux will also receive a proportionate amount of any incentive compensation payable for the year in which
such a severance would occur, determined at the end of such year if the incentive criteria are achieved. The agreement has an
initial term ending December 31, 2022, which term may be extended for additional one year terms upon notice by the Board to Mr.
Sincerbeaux not later than one month prior to expiration of the then current term.
The foregoing summary of the material terms
of the Executive Agreement is qualified in its entirety by the Executive Severance Agreement filed as Exhibit 10.2 to this Form
8-K.
As previously disclosed by the Company
in November 2019, the Company’s current Chief Executive Officer and President, David L. Fetherman, announced his retirement
and agreed to continue to serve in those roles until his successor was hired. Mr. Fetherman’s retirement will be effective
on April 24, although he will continue to serve as a consultant to the Company for two years thereafter. As described in Escalade’s
proxy statement for its Annual Meeting of Stockholders, currently scheduled to be held on May 13, 2020, Mr. Fetherman will continue
to serve as a director on Escalade’s Board of Directors through the Annual Meeting. Immediately following the Annual Meeting,
Mr. Fetherman will resign as a director and the Board of Directors intends to fill such vacancy by appointing Mr. Sincerbeaux
to the Board as a director.
Forward-Looking Statements
This report contains forward-looking statements
relating to present or future trends or factors that are subject to risks and uncertainties. These risks include, but are not
limited to: our plans and expectations surrounding the transition to, timing, compensation and roles of Scott Sincerbeaux becoming
our new Chief Executive Officer and David L. Fetherman’s retirement; the impact of competitive products and pricing; product
demand and market acceptance; new product development; Escalade’s ability to achieve its business objectives, especially
with respect to its Sporting Goods business on which it has chosen to focus; Escalade’s ability to successfully achieve
the anticipated results of strategic transactions, including the integration of the operations of acquired assets and businesses
and of divestitures or discontinuances of certain operations, assets, brands, and products; the continuation and development of
key customer, supplier, licensing and other business relationships; the ability to successfully negotiate the shifting retail
environment and changes in consumer buying habits; the financial health of our customers; disruptions or delays in our business
operations, including without limitation disruptions or delays in our supply chain, arising from political unrest, war, labor
strikes, natural disasters, public health crises such as the coronavirus pandemic, and other events and circumstances beyond our
control; Escalade’s ability to control costs; Escalade’s ability to successfully implement actions to lessen the potential
impacts of tariffs and other trade restrictions applicable to our products and raw materials, including impacts on the costs of
producing our goods, importing products and materials into our markets for sale, and on the pricing of our products; general economic
conditions; fluctuation in operating results; changes in foreign currency exchange rates; changes in the securities markets; Escalade’s
ability to obtain financing and to maintain compliance with the terms of such financing; the availability, integration and effective
operation of information systems and other technology, and the potential interruption of such systems or technology; risks related
to data security of privacy breaches; and other risks detailed from time to time in Escalade’s filings with the Securities
and Exchange Commission. Escalade’s future financial performance could differ materially from the expectations of management
contained herein. Escalade undertakes no obligation to release revisions to these forward-looking statements after the date of
this report.