DEF 14A of GrowGeneration Corp., Apr 26, 2024

DEF 14A of GrowGeneration Corp.

Filed Apr 26, 2024 · FY20230001628280-24-018512

Open on EDGAR

  1. BOARD OF DIRECTORS

    BOARD OF DIRECTORS

  2. Director Compensation

    Director Compensation During the fiscal year ended December 31, 2023, each non-employee director of the Company received cash compensation of $2,000 per month and an equity grant of 20,000 shares of Common Stock for services rendered as a director. The Chairperson of the Audit Committee received an additional 5,000 shares of Common Stock. Directors who are employees of the Company receive no separate compensation for their service as directors. In addition to cash and equity-based compensation, non-employee directors receive reimbursement of all reasonable travel and other expenses for attending Board meetings and certain other Company-related functions.

  3. Director Compensation Philosophy

    Director Compensation Philosophy Our director compensation program is intended to enable us to attract and retain qualified non-employee directors by providing compensation that is competitive with other companies, and to align directors’ interests with shareholders’ interests by including equity as a significant portion of the compensation package. In setting director compensation, we consider compensation offered to directors by other companies, the amount of time that our directors spend providing services to us, the experience, skill, and expertise that our directors possess, and the performance of the Company.

  4. Non-Employee Director Compensation

    Non-Employee Director Compensation The following table summarizes the compensation paid to each non-employee director in 2023.

  5. Non-Employee Director Compensation

    | Name | Fees Earned or Paid in Cash | Stock Awards (1) | All Other Compensation | Total | | Eula Adams | $24,000 | $73,500 | $— | $97,500 | | Stephen Aiello | $24,000 | $58,800 | $— | $82,800 | | Paul Ciasullo (2) | $24,000 | $58,800 | $— | $82,800 |

  6. Non-Employee Director Compensation

    (1) The amounts reflect the aggregate grant date fair value of restricted stock granted in 2023. The grant date fair value was determined using the value of the underlying shares of Common Stock on the applicable date of grant computed in accordance with the Financial Accounting Standards Board Accounting Standards Codification Topic No. 718, Compensation-Stock Compensation (FASB ASC Topic 718), excluding the effect of any estimated forfeitures. These amounts may not correspond to the actual value eventually realized by the director, which depends in part on the market value of our Common Stock in future periods. Assumptions used in the calculation of these amounts are described in the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC. (2) Paul Ciasullo resigned from the Board effective April 23, 2024, and the Board appointed Star Carter to the Board effective April 25, 2024 to fill the vacancy.

  7. PROPOSAL 1: ELECTION OF DIRECTORS

    PROPOSAL 1: ELECTION OF DIRECTORS Upon the recommendation of the Governance Committee, the Board has nominated Darren Lampert, Michael Salaman, Eula Adams, Stephen Aiello, and Star Carter to stand for election to the Board, each to hold office until the 2025 Annual Meeting of Shareholders and until their respective successors are elected and qualified. Set forth below is biographical information for each person nominated for election to the Board, including a description of the experience, qualifications, attributes, and skills that led to the conclusion that the person should serve as a director of the Company, in light of the Company’s business strategy, prospects, and structure. The Company has no reason to believe that any of these nominees will refuse or be unable to serve as a director if elected; however, if any of the nominees refuses or is unable to serve, each proxy that does not direct otherwise will be voted for a substitute nominee designated by the Board. Proxies cannot be voted for a greater number of persons than the number of nominees in this Proxy Statement.

  8. Nominees for Director

    Nominees for Director

  9. Nominees for Director

    | Name | Age | Tenure | | Darren Lampert | 63 | 10.1 | | Michael Salaman | 61 | 10.1 | | Eula Adams | 74 | 2.7 | | Stephen Aiello | 63 | 10.0 | | Star Carter | 41 | — |

  10. Nominees for Director

    Darren Lampert has been our CEO, a Director, and the Chairperson of the Board since our inception in 2014. Mr. Lampert began his career in 1986 as a founding member of the law firm of Lampert and Lampert (1986-1999), where he concentrated on securities litigation, NASD (now FINRA) compliance, and arbitration and corporate finance matters. Mr. Lampert has represented clients in actions and investigations brought before government agencies and self-regulatory bodies. From 1999 to 2014, Mr. Lampert worked as a portfolio manager and proprietary trader at a number of broker-dealer firms. From 2010 to 2014, Mr. Lampert was a private investor. Mr. Lampert graduated in 1982 with a Bachelor of Science degree in business administration from Ithaca College. Mr. Lampert received a J.D. from Bridgeport University School of Law in 1985. Mr. Lampert was admitted to practice law in New York in 1986 and is also admitted to practice before the United States District Courts for the Southern and Eastern Districts of New York. Mr. Lampert has extensive experience in our industry and knows our operations from top to bottom, having led the Company for 10 years as its CEO and Chairperson of the Board. In addition, his experience in the finance and legal fields make him an excellent asset for GrowGeneration as a rapidly-growing public company, navigating the capital markets, making acquisitions, and leading the Company through other critical business matters and initiatives. Michael Salaman has been our President and a Director since our inception in 2014. Mr. Salaman began his business career as Vice President of Business Development for National Media Corp., an infomercial marketing company in the United States, from 1985 to 1993. From 1993 to 1995, Mr. Salaman worked as a consultant. From 1995 to 2001, Mr. Salaman started a digital media company called American Interactive Media, Inc., a developer of Web TV set-top boxes and ISP services. In 2002, Mr. Salaman became the principal officer of that entity, directing its operations as a marketing and distribution company, and in 2005 focused its efforts in the enhanced water business. Mr. Salaman served as the Chairperson of Skinny Nutritional Corp. from 2002 to 2014 and as Chief Executive Officer and President of Skinny Nutritional Corp. from 2010 to 2014. Mr. Salaman received a Bachelor of Business Administration degree in business from Temple University in 1986. Mr. Salaman has been with the Company for 10 years as its President and a Director, providing him with deep knowledge of our business, people, and industry. In addition, his experience as an innovator and leader in sales and marketing is particularly beneficial to GrowGeneration as a company with thousands of products, including both established and new proprietary brands, which are sold through multiple channels, including retail, e-commerce, and distribution. Eula Adams has been a Director of the Company since September 2021. Mr. Adams began his career as an auditor at Touche Ross in 1972, eventually becoming an audit partner there (which became Deloitte & Touche following a merger in 1989) until 1991. From 1991 to 2003, Mr. Adams worked at First Data Corporation (now Fiserv), holding positions as President of Merchant Services, President of Card Issuer Services and President of Teleservices. From 2004 to 2006, he served as Senior Vice President of StorageTek, which was acquired in 2006 by Sun Microsystems. From 2006 to 2008, he served as Senior Vice President of Sun Microsystems Storage Division. From 2008 to 2013, Mr. Adams was Chief Operating Officer of Xcore Corporation. Most recently, Mr. Adams was Chief Executive Officer and director at Neuromonics, Inc. from 2013 to 2019. Mr. Adams currently serves on the boards of the White House Historical Association and the Transportation Commission of Colorado and is a former director of Harvest Health and Recreation Inc. and Your Way Cannabis Brands Inc. Mr. Adams is a graduate of Morris Brown College with a Bachelor of Science degree in accounting, has a Master of Business Administration from Harvard Business School, and is a Certified Public Accountant. Mr. Adams contributes tremendous accounting and finance expertise to the Company as a certified public accountant and former audit partner, as well as broad operational experience as a former Chief Executive Officer and Chief Operating Officer, among other roles. Mr. Adams serves as the Chairperson of the Audit Committee, as well as a member of the Compensation Committee. Stephen Aiello has been a Director of the Company since 2014. From 1986 to 2001, Mr. Aiello was a partner at Montgomery Securities, where he managed the sales and trading institutional desk. From 2001 to 2003, he worked at 033 Asset Management, a long/short equity fund where he was responsible for day-to-day trading of the portfolio. Mr. Aiello was a partner at Jones and Company from 2004 to 2008. Mr. Aiello has been a private investor focusing on cannabis and real estate since 2008. Mr. Aiello received a Bachelor of Arts in Psychology from Ithaca College and a Master of Business Administration from Fordham University. Mr. Aiello brings deep knowledge of finance and capital markets to the Board, as well as general business and management expertise as an MBA. In addition, Mr. Aiello has prior experience in the cannabis industry, and his real estate expertise is well-suited to help the Company manage its large real estate portfolio. Mr. Aiello serves as the Chairperson of the Compensation Committee and the Governance Committee, as well as a member of the Audit Committee. Star Carter joined the Board in April 2024. Ms. Carter began her career as an attorney at large, internationally recognized law firms, including Weil Gotshal & Manges LLP from 2006 to 2014 and Sidley Austin LLP from 2014 to 2017, where she became Counsel. She also worked as Senior Associate Counsel for Hudson Advisors, the advisory arm of Lone Star Funds, from 2017 to 2018. From 2018 to 2022, Ms. Carter co-founded and served as a director, Chief Operations Officer, and General Counsel of Kanarys, Inc., a technology platform focused on fostering diversity, equity, and inclusion in the workplace. Ms. Carter also served on the board of directors for Legal Aid of Northwest Texas from 2013 to 2022, including as Chairperson and a member of the Nomination Committee and Audit and Finance Committee. She is currently a leadership advisor at a global firm specializing in leadership development. Ms. Carter holds a Juris Doctor from Harvard Law School and a Bachelor of Business Administration with honors from the University of Texas at Austin. Ms. Carter brings nearly two decades of expertise in corporate strategy and law. She has led complex legal matters, facilitated corporate transactions, and provided strategic guidance on corporate governance, mergers and acquisitions, and other matters. Ms. Carter also contributes her experience in operational strategy and execution, corporate leadership, and diversity, equity, and inclusion. Ms. Carter serves as a member of the Audit Committee, the Compensation Committee, and the Governance Committee. The Board of Directors recommends that you vote “FOR” the election of each of the nominees named above.

  11. Components of Compensation

    | Component | Description | Purpose | | Base Salary | Fixed cash component. | Reward for level of responsibility, experience, and sustained individual performance. | | Annual Cash Incentive | Cash bonus based on achievement of predetermined performance goals. | Reward achievement of business objectives and financial results. | | Long-Term Equity Incentive | Equity grants primarily consisting of restricted stock units vesting over two or three years. | Reward creation of shareholder value, align the interests of employees and shareholders, and retain executives for the long-term. | | Other Compensation | Various health, life, and disability insurance plans and other customary employee benefits generally available to all our U.S. employees. | Provide an appropriate level of employee benefit plans and programs. | | Other Policies | Insider trading policy, which includes anti-hedging and anti-pledging policies, stock ownership guidelines, and incentive compensation clawback policy. | Enhance alignment with shareholder interests and avoid pay-for-failure. |

  12. Components of Compensation

    Base Salary Base salary is the primary fixed element of total compensation. Base salary also impacts certain variable compensation elements to the extent they are linked directly or indirectly to base salary. The Compensation Committee reviews base salary levels for NEOs annually based on competitive market salaries and a subjective assessment of organizational and individual qualities and characteristics, such as role, responsibilities, experience, skill level, and individual and enterprise performance. Annual Cash Incentive Annual cash incentives are intended to drive and reward achievement of near-term business objectives set by the Board. The Compensation Committee sets performance target goal that are intended to be challenging yet attainable and tied to driving strong operational and financial performance. The Compensation Committee generally establishes goals early in the fiscal year based upon current forecasts, business strategies, and expectations. The Compensation Committee has the discretion to include or exclude any extraordinary items affecting performance goals and to adjust performance goals to take into account changes in accounting and other matters that the Compensation Committee deems relevant. Actual annual cash bonus amounts payable to our NEOs generally depend on the level of actual achievement above or below performance targets, with higher levels of achievement resulting in higher bonus earned (subject to a maximum amount), and lower levels of achievement resulting in lower or no bonus earned. The Compensation Committee may reduce, increase, or eliminate the amount payable to an NEO based on factors that it determines warrant such adjustment. The Compensation Committee may also award additional discretionary bonuses based on an individual executive’s role and performance, among other factor considered relevant by the Compensation Committee. Long-Term Equity Incentives Long-term equity compensation is intended to align the interests of our executives with those of the Company and its shareholders, to reward the creation of long-term shareholder value, and to help retain executives as employees of the Company. The Compensation Committee has historically awarded time-based restricted stock, restricted stock units, and stock options to our executive officers. The Compensation Committee periodically reviews outstanding share-based compensation grants to monitor the effectiveness of such grants, especially considering the volatility of our stock price. Long-term equity incentives awarded to executive officers is set forth in the employment agreement for each executive officer, as well as in an equity award agreement. Most recently, long-term equity incentive awards have been time-vested, with biannual vesting near the end of the second and fourth quarters. In the future, and in response to shareholder feedback, the Compensation Committee intends to include performance-vesting components in a portion of executive equity awards.

  13. Compensation Determinations

    Compensation Determinations The use and weight of each compensation component is based on a determination by the Compensation Committee of the importance of each component in meeting our overall objectives, as well as general market practices. In general, the Compensation Committee wants a significant amount of each NEO’s potential compensation “at risk” based on corporate performance and stock price. As part of its process for determining compensation for NEOs, the Compensation Committee reviews compensation analyses provided by its independent compensation consultant. Such analyses include an estimate of the market 25th percentile, median and, 75th percentile positions for base salary, target total cash compensation (base salary plus target bonus), and target compensation (base salary plus target bonus plus target long-term incentive compensation) for each NEO. Although the Compensation Committee does not target a specific market position, it considers the median, or 50th percentile, of the market data as one of many factors in its analysis of the competitive, reasonable, and appropriate levels of compensation for our NEOs, and is guided by, and seeks to promote, the best interests of the Company and its shareholders. The Compensation Committee also considers several other factors when determining appropriate compensation levels for each executive officer, including: •analyses of competitive compensation practices; •individual performance in light of Company goals and objectives relevant to executive compensation; •individual role, responsibilities, leadership, experience, expertise, skills, and knowledge; •labor market conditions (which affect the compensation required to attract and retain key talent); and •analyses and advice from its independent compensation consultant, including competitive market data pertaining to executive compensation at comparable companies. The Compensation Committee’s approach to evaluating these factors is subjective and not formulaic, and the Compensation Committee may place more or less weight on a particular factor, or consider other factors it deems relevant, when determining compensation. In determining the total compensation for each executive officer other than our President and CEO, the Compensation Committee also considers the specific recommendations of our President and CEO. Recommendations to the Compensation Committee typically include discussion of the role and responsibilities of the executive within the Company, the performance of the executive, the expected future contributions of the executive, the executive’s own expectations, and market considerations. Although our President and CEO make recommendations regarding other executive officers, neither participates in the discussions concerning his own compensation. The Compensation Committee may consider, in addition to the factors described above: •the individual’s accumulated vested and unvested equity awards; •the vesting schedule of the individual’s outstanding equity awards; •a comparison of individual equity awards between executive officers and in relation to other compensation elements; •potential shareholder dilution resulting from stock awards to employees; •total accounting expense resulting from executive compensation; •shareholder advisory votes on executive compensation; and •past levels of compensation awarded and earned.

  14. Risk and Compensation

    Risk and Compensation We believe our compensation programs for executive officers are designed to encourage prudent risk-taking to achieve long-term growth in shareholder value. A variety of principles and practices contribute to the alignment of our executive compensation programs with our overall risk profile, including the following: •All Compensation Committee members are independent, non-employee directors. •Our programs are designed to drive achievement of strategic objectives, short- and long-term financial performance, and growth in shareholder value, while also promoting the attraction and retention of executive talent. •Our programs balance strategic, financial, and shareholder measures. •Our programs balance short- and long-term performance through equity compensation. •The vesting periods of long-term incentives provide long-term alignment with shareholders. •Maximum amounts payable are established under performance-based incentive programs. •Our Board and Compensation Committee generally establish both strategic and financial measures at the beginning of a performance period. •Our Compensation Committee reviews all elements of executive compensation, with the assistance of an independent compensation consultant from time to time. •Base salaries and annual adjustments for executive officers are generally based on market practices and our financial condition. •Annual cash incentive payouts will vary over time, commensurate with business and individual executive performance. •The Company maintains a policy requiring the Company to recover certain incentive compensation erroneously paid to executive officers. •The Company maintains share ownership guidelines for executive officers to help ensure alignment with shareholder interests and long-term value creation. •The Company maintains a policy prohibiting hedging, pledging, and similar transactions by directors, executive officers, and other insiders. The Compensation Committee is generally responsible for administering and overseeing our risk mitigation practices and policies in the context of our executive compensation programs. The Compensation Committee regularly assesses such practices and policies for effectiveness and compliance with applicable laws and regulations.

  15. Competitive Market Compensation Survey

    Competitive Market Compensation Survey As discussed above, the Compensation Committee considers competitive compensation practices as a factor to determine compensation for the Company’s executives, including for the purpose of determining the extent to which the Company’s executive compensation practices are competitive relative to competitors and peer companies to attract and retain talented executives. The Committee reviews aggregated data from survey sources analyzed by its independent compensation consultant, including general industry surveys, retail/wholesale surveys, and consumer retail industry surveys. The Compensation Committee generally focuses on a subset of companies within a comparable industry and/or range of revenues. In November 2021, the Compensation Committee hired Hays Companies, a Brown & Brown company, as an independent compensation consultant to assist the Compensation Committee in fulfilling its responsibilities, including to review executive compensation levels in comparison to those of peer group companies and market practices generally, as well as to update the Company’s executive compensation philosophy, policies, and practices. In March 2022, the Committee reviewed pay practices and compared compensation for the Company’s executive team against a set of peers that included: Hydrofarm Holdings Group, Inc.; e.l.f. Beauty; Funko, Inc.; Quotient Technology, Inc.; Duluth Holdings, Inc.; Central Garden and Pet Company; Ollie’s Bargain Outlet Holdings, Inc.; and At Home Group Inc. prior to their acquisition. The Compensation Committee has the sole authority to hire or fire its compensation consultants and to approve fee arrangements for work performed. The Compensation Committee has assessed the independence of Hays pursuant to SEC rules and concluded that Hays’ work for the Compensation Committee does not raise any conflict of interest. In fiscal year 2023, Hays did not perform work for the Compensation Committee or management.

  16. Summary Compensation Table

    Summary Compensation Table The following table sets forth information regarding the total compensation of our named executive officers, as determined under Item 402 of Regulation S-K, for the years ended December 31, 2023, 2022, and 2021.

  17. Summary Compensation Table

    | Name | Year | Salary | Performance Bonus | Bonus | Option Awards | Stock Awards (1) | All Other Compensation | Total | | Darren Lampert | 2023 | $493,031 | $— | $— | $— | $785,000 | $20,117 | $1,298,148 | | Chief Executive Officer | 2022 | $345,354 | $991,664 | $— | $— | $— | $6,100 | $1,343,118 | | | 2021 | $301,354 | $1,713,577 | $— | $— | $— | $25,201 | $2,040,132 | | Michael Salaman | 2023 | $493,031 | $— | $— | $— | $785,000 | $27,145 | $1,305,176 | | President | 2022 | $337,889 | $991,664 | $— | $— | $— | $12,755 | $1,342,308 | | | 2021 | $301,354 | $1,713,577 | $— | $— | $— | $25,201 | $2,040,132 | | Greg Sanders (2) | 2023 | $335,833 | $— | $— | $— | $394,800 | $23,134 | $753,767 | | Chief Financial Officer | 2022 | $252,360 | $66,500 | $— | $— | $2,309,900 | $10,205 | $2,638,964 | | | 2021 | $— | $— | $— | $— | $— | $— | $— | | Monty Lamirato (3) | 2023 | $— | $— | $— | $— | $— | $— | $— | | Former Chief Financial Officer | 2022 | $— | $— | $— | $— | $— | $— | $— | | | 2021 | $124,647 | $— | | $— | $— | $4,467 | $129,114 | | Tony Sullivan (4) | 2023 | $— | $— | $— | $— | $— | $— | $— | | Former Chief Operating Officer | 2022 | $— | $— | $— | $— | $— | $— | $— | | | 2021 | $298,071 | $— | $— | $— | $— | $11,923 | $309,994 | | Jeffrey Lasher (5) | 2023 | $— | $— | $— | $— | $— | $— | $— | | Former Chief Financial Officer | 2022 | $438,359 | $182,355 | $— | $— | $1,319,200 | $8,809 | $1,948,723 | | | 2021 | $211,864 | $11,255 | $63,200 | $— | $3,286,800 | $— | $3,573,119 | | Paul Rutenis (6) | 2023 | $— | $— | $— | $— | $— | $— | $— | | Former Chief Merchandising Officer | 2022 | $334,833 | $7,932 | $— | $— | $786,845 | $— | $1,129,610 | | | 2021 | $146,591 | $7,932 | $— | $— | $1,474,800 | $— | $1,629,323 |

  18. Summary Compensation Table

    | (1) The amounts in the Stock Based Awards column reflect the aggregated grant date fair value of awards granted during 2023, 2022, and 2021 as computed in accordance with FASB ASC Topic 718. | | (2) Mr. Sanders was appointed Chief Financial Officer on August 12, 2022. Prior to that, Mr. Sanders had served as the Company’s Corporate Controller. Listed compensation for 2022 is for the full year. | | (3) As of May 15, 2021, Monty Lamirato resigned as Chief Financial Officer and Secretary. | | (4) As of December 13, 2021, Tony Sullivan resigned as Chief Operating Officer. | | (5) As of August 12, 2022, Jeffrey Lasher resigned as Chief Financial Officer. | | (6) As of June 9, 2022, Paul Rutenis resigned as Chief Merchandising Officer. |

  19. Summary Compensation Table

    Salary Base salaries paid to our named executive officers are set forth in the “Salary” column of the SCT. As noted under Compensation Overview above, the Company undertook several initiatives across the enterprise during 2022 and 2023 to reduce expenses as a result of a prolonged industry downturn. In connection with these initiatives, our NEOs also agreed to reduced base salary levels for 2023, as described immediately below. First, our CEO and Co-Founder, Darren Lampert, and our President and Co-Founder, Michael Salaman, each entered into a new two-year employment agreement, effective January 1, 2023, that provided for reduced total compensation compared to their compensation in prior years, including base salary of $500,000 per year. The Compensation Committee believes such salary levels to be below market for similar executives of similar companies, however the Compensation Committee was supportive of Mr. Lampert’s and Mr. Salaman’s willingness to accept below-market salaries given the near-term, industry-wide pressures the Company has faced. Furthermore, the Compensation Committee believes that such below-market salaries do not create retention risk, as Mr. Lampert and Mr. Salaman have displayed steadfast dedication to the Company since its founding approximately 10 years ago. Second, our CFO, Greg Sanders, agreed to forgo a portion of the guaranteed base salary increase provided for in his current employment agreement. Specifically, Mr. Sanders agreed to irrevocably waive his right to receive over $10,000 of base salary to which he was otherwise entitled in 2023. Salaries paid to our named executive officers in 2022 and 2021 are set forth in the SCT. Performance Bonus The amounts set forth in the “Performance Bonus” column of the SCT consist of performance bonuses paid to executive officers, which are based on either an annual performance bonus program established by the Compensation Committee, a bonus program established in an employment agreement approved by the Compensation Committee, or discretionary bonuses awarded by the Compensation Committee. No performance bonuses were paid to our NEOs with respect to fiscal year 2023. The performance bonus for our CEO and our President in 2022 and 2021 was an amount equal to 0.5% of revenue over $79.8 million in the given year, as provided in their respective employment agreements then in effect. For executive officers other than our CEO and our President, the performance bonus was discretionary for all years shown in the SCT, except that a portion of the 2023 performance bonus for our CFO was provided for in his employment agreement then in effect. Under the Company’s annual cash incentive plan for fiscal year 2023 (“2023 Cash Bonus Plan”), short-term incentive compensation for NEOs was based on achievement of Adjusted EBITDA for the enterprise. (Refer to the Reconciliation of EBITDA and Adjusted EBITDA section in this Proxy Statement for the Company’s definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to GAAP net income (loss)). Each NEO’s target bonus is established in their respective employment agreements as an amount equal to 50% of base salary, which can be achieved by obtaining the target performance goal. In addition, highest bonus opportunity is an amount equal to 100% of base salary. The Compensation Committee established positive Adjusted EBITDA targets for the 2023 Cash Bonus Plan. No bonuses were paid pursuant to the 2023 Cash Bonus Plan, however, due to negative Adjusted EBITDA achievement of the Company in fiscal year 2023 primarily resulting from challenging industry conditions. The Compensation Committee recognizes that the use of a single performance goal in the 2023 Cash Bonus Plan is a departure from its practice in 2022 but believes it was appropriate and in the best interests of shareholders. In 2023, industry headwinds and market factors outside management’s control demanded a nimble approach to managing our business. As a result, the Compensation Committee sought to incentivize management to achieve a positive overall outcome for the Company in the near-term while also giving management flexibility to manage the business to rapidly evolving market conditions. The Compensation Committee chose Adjusted EBITDA as an appropriate overall performance goal that represents the culmination of numerous inputs that management would have the opportunity to affect and that also reflects appropriate adjustments for non-recurring items provoked by near-term market challenges. For the Company’s annual cash incentive plan for fiscal year 2024, the Compensation Committee has determined it is in the best interests of the Company and its shareholders to return to using multiple performance goals, including Adjusted EBITDA, same-store-sales, and a non-financial goal to establish a program to monitor and reduce vehicle emissions from our delivery vehicle fleet. The Compensation Committee also approved a long-term cash incentive program over a three-year performance period beginning with fiscal year 2024, which is based on achievement of proprietary brand sales as a percentage of total Company sales. The Company’s annual cash incentive plan for fiscal year 2022 (“2022 Cash Bonus Plan”) for its executive officers (other than the President and CEO, whose bonuses were established in their respective employment agreements in effect at the time) was based on achievement of three different financial goals, each of which is weighted, set forth in the list below: •Enterprise generation of gross profit, weighted at 40% of target bonus opportunity; •Adjusted EBITDA, weighted at 40% of target bonus opportunity; and •Cash from operations, weighted at 20% of target bonus opportunity. The Compensation Committee set a target bonus under the 2022 Cash Bonus Plan of an amount equal to 50% of base salary, which would be achieved by obtaining the target performance goal. In addition, highest bonus opportunity was an amount equal to 100% of base salary, and lowest bonus opportunity was an amount equal to 25% of base salary. Highest bonus would be achieved if actual performance is 120% or more of the target performance goal, and lowest bonus would be achieved if actual performance is 80% of the target performance goal. Bonus achievement varied for actual performance between 80% and 120% of target performance. In 2021, the Compensation Committee awarded executive officers (other than the CEO and President, whose bonuses were established in their respective employment agreements in effect at the time) bonuses from a discretionary pool based on financial and stock price performance, as well as the executive’s role and performance, among other factor considered relevant by the Compensation Committee. Bonus The amounts set forth in the “Bonus” column of the SCT consist of cash awards made to the executive officers that are time-based awards in conjunction with employment agreements. Only one such award was paid to our former CFO in 2021. Option Awards The “Options Award” column of the SCT shows the value of stock options awarded to certain NEOs under our 2014 Equity Incentive Plan and Amended and Restated 2018 Equity Incentive Plan. No options were granted to our NEOs in 2023, 2022, or 2021. Stock Awards We awarded restricted shares and time-based restricted stock units (“RSUs”) to our NEOs under our 2014 Equity Incentive Plan and Amended and Restated 2018 Equity Incentive Plan. The amounts set forth in the “Stock Awards” column represent the value of such awards at the time of grant.

  20. Summary Compensation Table

    In 2023, our CEO and our President were each granted 200,000 RSUs pursuant to their respective employment agreements, which vest ratably on a biannual basis through December 2024. These awards were subject to an initial clerical error. The original award was effective January 1, 2023 and included 100,000 RSUs. This award was amended and corrected on June 15, 2023 to increase the total RSUs to 200,000. In 2022, our CFO, Greg Sanders, was granted 90,000 RSUs on August 9, 2022 pursuant to his 2022 employment agreement, which vest ratably on a biannual basis over three years. As of June 15, 2023, Mr. Sanders entered into a new employment agreement that superseded and replaced his prior employment agreement, canceling the 75,000 unvested RSUs from the August 9, 2022 grant. The new employment agreement granted 180,000 RSUs on June 15, 2023, which vest 30,000 shares each six months of service beginning June 15, 2023. Stock awards in 2023 represent the incremental fair market value of the incremental 105,000 RSUs granted, net of the cancelled RSUs, with the new employment agreement. In addition, Mr. Sanders was granted 15,000 RSUs on January 5, 2022 as a discretionary award made when he was our Corporate Controller, which vest ratably on an annual basis through December 2025. During 2021, Jeff Lasher was granted 60,000 RSUs on April 15, 2021 pursuant to his employment agreement in his former capacity as CFO, which were to vest ratably on a biannual basis through April 2024. Mr. Lasher was granted an additional 100,000 RSUs on January 5, 2022 as a discretionary award in his former capacity as CFO, which were to vest ratably on an annual basis through December 2025. Such awards were partially forfeited upon Mr. Lasher’s resignation on August 9, 2022, however Mr. Lasher was granted 30,000 RSUs on August 12, 2022 in connection with his separation and release agreement. During 2021 Paul Rutenis was granted 40,000 RSUs on June 1, 2021 pursuant to his employment agreement in his former capacity as Chief Merchandising Officer, which were to vest ratably on a biannual basis through June 2024. Mr. Rutenis was granted an additional 65,000 RSUs on January 5, 2022 as a discretionary award in his former capacity as Chief Merchandising Officer, which were to vest ratably on an annual basis through December 2025. Such awards were partially forfeited upon Mr. Rutenis’s resignation on June 9, 2022, however Mr. Rutenis was granted 9,999 RSUs on June 9, 2022 in connection with his separation and release agreement. All Other Compensation The “All Other Compensation” column of the SCT shows compensation paid to our NEOs that is not already reflected in other columns of the SCT, which includes 401(k) matching contributions, health insurance contributions, and other employee benefits. Our 401(k) Plan is our tax qualified retirement savings plan pursuant to which our U.S. employees, including NEOs, are able to make pre-tax contributions from their cash compensation. In 2024, the Company stopped making matching contributions for all plan participants, including NEOs, as part of its ongoing cost control measures. In 2023, 2022, and 2021, the Company made matching contributions for all participants each year equal to 100% of their elective deferrals up to 3% of their total eligible compensation and 50% of their elective deferrals from 3% to 5% of eligible annual compensation. The Internal Revenue Code limits the amount of compensation that can be deferred under the 401(k) Plan and also limits the amount of salary and bonus with respect to which matching contributions can be made under that plan. We provide our NEOs with competitive benefits, and we generally do not provide perquisites or tax reimbursements or other benefits to NEOs that are not available to other employees. In addition to our 401(k) Plan described above, our NEOs are offered other benefits that are substantially the same as those offered to all of our U.S. employees. These benefits included medical, dental, and vision insurance. We also provide an enhanced long-term disability benefit to our executive officers. This benefit is designed to provide additional protection to our executive officers in the event of catastrophic illness or disability.

  21. Outstanding Equity Awards

    Outstanding Equity Awards The following table summarizes, for each NEO, the number of shares of Common Stock underlying outstanding stock options held as of December 31, 2023. Market values for outstanding stock awards are presented as of the end of 2023 based on the closing price on the NASDAQ Market on December 31, 2023 of $2.51.

  22. Outstanding Equity Awards

    | | Option Awards | | | | | | Stock Awards | | | | | Name | Number of securities underlying unexercised options, exercisable | Number of securities underlying unexercised options, unexercisable | Equity Incentive Plan Awards: Number of Securities underlying exercisable Options | Equity Incentive Plan Awards: Number of Securities underlying unexercised unearned Options | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock that have not Vested | Market Value of Shares or Units of Stack that Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested | Equity Incentive Plan Awards: Market of Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested | | Darren Lampert | — | — | — | — | $— | | — | — | 50,000 | 125,500 | | Darren Lampert | — | — | — | — | $— | | — | — | 50,000 | 125,500 | | Darren Lampert | — | — | 16,666 | — | $2.96 | 3/26/2024 | — | — | — | — | | Darren Lampert | — | — | 200,000 | — | $4.10 | 12/31/2024 | — | — | — | — | | Michael Salaman | — | — | — | — | $— | | — | — | 50,000 | 125,500 | | Michael Salaman | — | — | — | — | $— | | — | — | 50,000 | 125,500 | | Michael Salaman | — | — | 16,666 | — | $2.96 | 3/26/2024 | — | — | — | — | | Michael Salaman | — | — | 200,000 | — | $4.10 | 12/31/2024 | — | — | — | — | | Gregory Sanders | — | — | — | — | $— | | — | — | 2,500 | 6,275 | | Gregory Sanders | — | — | — | — | $— | | — | — | 7,500 | 18,825 | | Gregory Sanders | — | — | — | — | $— | | — | — | 120,000 | 301,200 | | Gregory Sanders | — | — | 20,000 | — | $3.84 | 10/14/2024 | — | — | — | — |

  23. Option Exercises and Stock Vested

    Option Exercises and Stock Vested The following table summarizes the number of shares acquired upon exercise of options and the number of restricted shares that vested during the fiscal year ended December 31, 2023:

  24. Option Exercises and Stock Vested

    | | Option Awards | | Stock Awards | | | Name | Number of Shares Acquired on Exercise | Value Realized on Exercise (1) | Number of Shares Acquired on Vesting | Value Realized on Vesting (2) | | Darren Lampert | — | — | 100,000 | 305,000 | | Michael Salaman | — | — | 100,000 | 305,000 | | Greg Sanders | — | — | 66,250 | 201,000 | | (1) The aggregate dollar value realized upon exercise is computed by multiplying the number of shares at exercise by the difference between the market price of Common Stock and the exercise price of the options. | | | | | | (2) The aggregate dollar value realized upon vesting is computed by multiplying the number of shares vested by the closing stock price on the vesting date. | | | | |

  25. Option Exercises and Stock Vested

    On March 6, 2014, the Board adopted an Equity Compensation Plan (the “2014 Plan”). The 2014 Plan was approved by the shareholders on March 6, 2014. The 2014 Plan expired by its terms as of March 5, 2024 and is no longer if effect. As of March 5, 2024, the date of expiration of the 2014 Plan, there had been a total of 2,281,500 options (of which 2,108,833 options had been exercised, 172,667 had been forfeited and 0 remained outstanding) and 382,351 shares of Common Stock issued under the 2014 Plan. No shares remain available for issuance under the 2014 Plan due to its expiration.

  26. Pay Ratio Disclosure

    Pay Ratio Disclosure We are providing the following information about the relationship of the annual total compensation of our “median employee” and the annual total compensation of our CEO pursuant to Item 402(u) of Regulation S-K. For 2023, our last completed fiscal year: (i) the annual total compensation of our median employee (other than our CEO) was $41,177; and (ii) the total annual compensation of our CEO was $1,298,148. Based on this information, the ratio of the annual total compensation of our CEO to the annual total compensation of the median employee was 32 to 1 for 2023. To identify the annual total compensation of the median employee, the methodology and the material assumptions, adjustments, and estimates that we used were as follows: •We excluded individuals who had worked at the Company and its consolidated subsidiaries for less than 3 months in 2023 in order to better represent our typical employee population. After excluding such individuals, we determined that there were 541 individuals (other than our CEO) in our employee population during 2023. •We selected December 31, 2023, which is within the last three months of 2023, as the date upon which we would identify the median employee because it enabled us to make such identification in a reasonably efficient manner, including to more easily calculated total annualized compensation for each employee. •To identify the median employee from our employee population, we calculated each employee’s annualized compensation for 2023 based on compensation reported in Box 1 on Form W-2 for 2023. •Using this methodology, we determined that the median employee was a full-time, hourly employee located in one of our retail stores, with annualized total compensation for 2023 in the amount of $41,177. With respect to the annual total compensation of our CEO, we used the amount reported in 2023 in the “Total” column of our SCT included in this Proxy Statement. The SEC’s rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their employee populations and compensation practices. As a result, the pay ratio reported by other companies may not be comparable to the pay ratio reported above, as other companies have different employee populations and compensation practices and may utilize different methodologies, exclusions, estimates, and assumptions in calculating their own pay ratios.

  27. Pay-Versus-Performance

    | Adjustments to Determine Compensation Actually Paid for PEO | 2023 | 2022 | 2021 | | Deduction for Amounts Reported under the “Stock Awards” column in SCT | $(785,000) | $— | $— | | Change in fair value of awards granted during the year that remain unvested as of year-end | $251,000 | $— | $— | | Increase/Deduction for Change in Fair Value from prior Year-end to current year-end for Awards that were Outstanding and Unvested as of year-end | $— | $— | $— | | Increase/Deduction for Change in Fair Value from prior Year-end to current year-end for awards that were vested as of year-end | $— | $2,128,000 | $7,184,000 | | Adjustments to Determine Compensation Actually Paid for non-PEO NEOs | | | | | Deduction for Amounts Reported under the “Stock Awards” column in SCT | $589,900 | $1,103,986 | $952,320 | | Change in fair value of awards granted during the year that remain unvested as of year-end | $276,100 | $338,100 | $1,185,384 | | Increase/Deduction for Change in Fair Value from prior Year-end to current year-end for Awards that were Outstanding and Unvested as of year-end | $(111,922) | $(65,246) | $(5,434,000) | | Increase/Deduction for Change in Fair Value from prior Year-end to current year-end for awards that were vested as of year-end | $(6,500) | $(18,000) | $2,013,589 |