DEF 14A: A.K.A. Brands Holding Corp. to Hold Virtual Annual Meeting on May 22, 2024; Shareholders to Vote on Director Elections, Incentive Plan Amendment, and Auditor Ratification

A.K.A. Brands Holding Corp. will conduct its annual shareholder meeting virtually on May 22, 2024, to vote on key proposals including the election of directors, an amendment to the incentive plan, and the ratification of the company's auditor.

Summary

• A.K.A. Brands Holding Corp. will hold its Annual Meeting of Shareholders virtually on May 22, 2024.
• Shareholders of record as of March 28, 2024, are entitled to vote.
• The meeting will address the election of two Class III directors, the approval of an amendment to the 2021 Omnibus Incentive Plan to increase the number of shares by 1,100,000, and the ratification of PricewaterhouseCoopers LLP as the independent registered public accounting firm for the year ending December 31, 2024.
• The Board recommends voting for the director nominees, the incentive plan amendment, and the auditor ratification.
• Shareholder proposals for the 2025 annual meeting must be received by December 25, 2024.
• Advance notice for presenting a proposal or nominating a director at the 2025 annual meeting must be received between January 22, 2025, and February 21, 2025.
• As of April 15, 2024, the Board consists of eight directors.
• Summit Partners holds significant influence over the company, with rights to designate nominees for election to the Board based on their ownership percentage.
• The company has an Audit Committee, a Compensation Committee, and a Nominating Committee.
• The Board has determined that Christopher Dean, Ilene Eskenazi, Sourav Ghosh, Matthew Hamilton, Myles McCormick and Kelly Thompson are independent for purposes of all applicable NYSE listing standards.
• The company prohibits employees, directors, and officers from engaging in hedging transactions involving company securities.
• The Board oversees an enterprise-wide approach to risk management, with committees delegated primary oversight of certain risks.
• The company has adopted a Code of Ethics applicable to all employees, officers, and directors.
• The company's Named Executive Officers for 2023 include Jill Ramsey, Ciaran Long, Michael Trembley, and Kenneth White.
• The company has a Clawback Policy in place to recover erroneously awarded incentive-based compensation.
• The company is seeking shareholder approval to increase the number of shares available under the 2021 Omnibus Plan by 1,100,000 shares.
• PricewaterhouseCoopers LLP has been appointed as the independent registered public accounting firm for the year ending December 31, 2024, subject to shareholder ratification.
• PricewaterhouseCoopers Australia resigned as the independent registered public accounting firm for the Company, effective immediately on March 11, 2024.
• The Audit Committee has adopted a policy that requires advance approval of all audit services as well as non-audit services to the extent required by the Exchange Act and the Sarbanes-Oxley Act of 2002.

Sentiment

Score: 6

Explanation: The document is largely procedural, outlining the agenda for the annual meeting and seeking shareholder approval for routine matters. The negative sentiment is driven by the disclosure of material weaknesses in internal controls and the failure to achieve performance targets, offset by the positive aspects of the company's governance structure and compensation policies.

Positives

• The company is taking steps to improve its internal control over financial reporting and remediate the deficiencies that led to material weaknesses.
• The company has a Clawback Policy in place to recover erroneously awarded incentive-based compensation, promoting accountability.
• The company is committed to ensuring the Board and its committees are consistently updated on threats to the business and receive consistent updates on risk mitigation processes.
• The company is seeking shareholder approval to increase the number of shares available under the 2021 Omnibus Plan, which is necessary for the Company to continue to attract, retain, motivating, and rewarding certain employees, officers, directors, and consultants of the Company and its affiliates and promoting the creation of long-term value for shareholders of the Company by closely aligning the interests of such individuals with those of such shareholders.

Negatives

• The company did not achieve its performance targets in 2023, resulting in no annual cash bonuses for Named Executive Officers.
• The company identified material weaknesses in its internal control over financial reporting related to (i) the Company not having sufficiently designed, implemented and documented internal controls at the entity level and across key business and financial processes to allow the Company to achieve complete, accurate and timely financial reporting and (ii) the Company not designing and implementing controls to maintain appropriate segregation of duties in its manual and information technology-based business processes.
• PricewaterhouseCoopers Australia resigned as the independent registered public accounting firm for the Company, effective immediately on March 11, 2024.

Risks

• Failure to approve the increase in shares available under the 2021 Omnibus Plan could limit the company's ability to attract and retain key employees.
• The company's reliance on exemptions from certain NYSE corporate governance requirements due to its status as a controlled company may reduce shareholder protections.
• The company's ability to obtain a deduction for amounts paid under the 2021 Omnibus Plan could be limited by Section 162(m) of the Code.
• The Companys ability (or the ability of one of our subsidiaries) to obtain a deduction for future payments under the 2021 Omnibus Plan could also be limited by the golden parachute rules of Section 280G of the Code, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation.

Future Outlook

The company expects that the shares available under the 2021 Omnibus Plan for future awards, if the 2021 Omnibus Plan Second Amendment is approved by our shareholders, will be sufficient for currently-anticipated awards for the next three years.

Management Comments

• The Board believes that, at this time, separating the roles of Chair and Chief Executive Officer is the most effective leadership structure because it allows the Chief Executive Officer to focus on the management of the Company, day-to-day operations and engaging with external stakeholders.
• The Board believes that the 2021 Omnibus Plan has benefited the Company by attracting, retaining, motivating, and rewarding certain employees, officers, directors, and consultants of the Company and its affiliates and promoting the creation of longterm value for shareholders of the Company by closely aligning the interests of such individuals with those of such shareholders.
• We monitor the use of equity compensation carefully and limit the number of equity awards granted annually to an amount that we believe is necessary to attract, retain and motivate our employees, to grow the business, and to create stockholder value.

Industry Context

The document reflects standard corporate governance practices for publicly traded companies, including the solicitation of proxies, the election of directors, and the ratification of auditors. The use of an omnibus incentive plan is a common method for aligning the interests of employees and shareholders in the current market.

Comparison to Industry Standards

• The company's total potential dilution (or total overhang) under the 2021 Omnibus Plan (total shares issued and outstanding plus shares available to grant as a % of total common shares outstanding) was 23.0% which ranks below the 20th percentile of all our compensation peer companies and, therefore, is at the lower end of typical market practices for a company of our size and maturity.
• Including the share reserve increase to be effected by the 2021 Omnibus Plan Second Amendment, our total overhang as a percent of common shares outstanding would be between the 50th and 75th percentile of our peers.

Management Changes

Corporate Governance

Related Party Transactions

• The company has entered into a Registration Rights Agreement with certain equity holders, including Summit and investors affiliated with the Beard and Bryett families, granting them registration rights subject to customary terms, conditions, and limitations.
• The company is party to indemnification agreements with each of its officers, directors, and director nominees, providing them with contractual rights to indemnification, expense advancement, and reimbursement to the fullest extent permitted under Delaware law.
• The company entered into a Director Nomination Agreement with Summit that provides Summit the right to designate nominees for election to the Board.
• The company entered into a Stockholders Agreement with its Principal Stockholder and certain equity holders, providing that a Founder Investor may only sell shares of common stock acquired prior to the closing of the IPO contemporaneously with sales of common stock by our Principal Stockholder or by Summit in either a public or private sale to unaffiliated third parties.

Stakeholder Impact

• Shareholders are asked to vote on key proposals that will impact the company's governance and compensation structure.
• Employees may be affected by changes to the incentive plan, which could impact their compensation.
• The company's performance and governance practices could impact its reputation with customers and suppliers.

Next Steps

• Shareholders to vote on proposals at the Annual Meeting on May 22, 2024.
• The company will file a registration statement on Form S-8 to register the offering and issuance of additional shares of common stock under the 2021 Omnibus Plan, assuming shareholder approval.
• The company will continue to implement measures designed to improve its internal control over financial reporting and remediate the deficiencies that led to material weaknesses.

Key Dates

Keywords

Annual Meeting, Proxy Statement, Board of Directors, Shareholders, Director Election, Incentive Plan, Auditor Ratification, Executive Compensation, Corporate Governance, Risk Management, PricewaterhouseCoopers, Summit Partners, Omnibus Plan, AKA Brands