UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

__________________

SCHEDULE 14A

__________________

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

Filed by the Registrant

Filed by a Party other than the Registrant

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material Pursuant to §240.14a-12

THE LOVESAC COMPANY

(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):

 

No fee required.

 

Fee paid previously with preliminary materials.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

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THE LOVESAC COMPANY
Two Landmark Square, Suite 300
Stamford, CT 06901

April 17, 2023

Dear Fellow Stockholders:

You are invited to attend the 2023 Annual Meeting of Stockholders of The Lovesac Company at 10:00 a.m. Eastern Time on June 1, 2023, to be conducted virtually via live webcast by pre-registering at https://viewproxy.com/LovesacCompany/2023/.

The following Notice of Annual Meeting of Stockholders outlines the business to be conducted at the virtual 2023 Annual Meeting of Stockholders. All stockholders of record of our common stock at the close of business on April 6, 2023, the record date, are entitled to notice of and to vote at this meeting and any continuation, postponement, or adjournment thereof.

You will be able to attend the virtual 2023 Annual Meeting of Stockholders by first registering at https://viewproxy.com/LovesacCompany/2023/. You will receive a meeting invitation by e-mail with your unique link to join along with a password prior to the meeting date. Stockholders will be able to listen, vote and submit questions during the virtual 2023 Annual Meeting of Stockholders. All registrations to attend the virtual 2023 Annual Meeting must be received by 11:59 p.m. Eastern Time on May 31, 2023. Whether or not you expect to attend, we urge you to vote as promptly as possible. If you vote in advance you may still decide to attend the virtual 2023 Annual Meeting of Stockholders and vote your shares during the meeting. Your proxy is revocable in accordance with the procedures set forth in the Proxy Statement.

On behalf of the Board of Directors of The Lovesac Company, I would like to take this opportunity to thank our stockholders for their continued support of Lovesac.

 

Sincerely yours,

   

  

   

Shawn Nelson

   

Founder and Chief Executive Officer

 

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 1, 2023

You are cordially invited to attend the 2023 Annual Meeting of Stockholders (the “Annual Meeting”) of The Lovesac Company at 10:00 a.m. Eastern Time on June 1, 2023, to be conducted virtually via live webcast by pre-registering at https://viewproxy.com/LovesacCompany/2023/.

PROXY MATERIALS

We have elected to provide electronic access to our Annual Meeting materials, which include the Proxy Statement accompanying this Notice of Annual Meeting, in lieu of mailing printed copies. On or about April 6, 2023, we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on how to access our Proxy Statement, our Annual Report on Form 10-K for the fiscal year ended 2023 (“2023 Annual Report”), and form of proxy which will be made available on or about April 17, 2023.

PROPOSALS

(1)    To elect eight (8) directors to the Board of Directors to serve until the 2024 Annual Meeting of Stockholders and until their successors are duly elected and qualified;

(2)    To provide advisory approval of the Company’s fiscal 2023 compensation for its named executive officers;

(3)    To approve the Amendment of the Second Amended and Restated 2017 Equity Incentive Plan that increases the number of shares reserved for issuance thereunder by 225,000 shares;

(4)    To ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 4, 2024; and

(5)    To conduct any and all other business that may properly come before the 2023 Annual Meeting or any continuation, postponement, or adjournment thereof.

RECORD DATE

If you were a stockholder of record on April 6, 2023, you may vote your shares at the 2023 Annual Meeting.

VOTING

You may vote your shares at the Annual Meeting by following the instructions on the Notice of Internet Availability of Proxy Materials. You may vote on the Internet, by telephone or by completing and returning a proxy card to us in the envelope provided. Further information about how to register for and attend the virtual Annual Meeting online, vote your shares online during the meeting and submit questions online during the meeting is included in the accompanying Proxy Statement. Even if you have voted by proxy, you may still vote if you attend the virtual Annual Meeting. If your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must obtain a proxy issued in your name from that record holder. You can revoke a proxy at any time prior to its exercise at the Annual Meeting by following the instructions in the Proxy Statement. Please read the entire Proxy Statement before casting your vote.

IMPORTANT NOTICE REGARDING INTERNET AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING:    Our 2023 Annual Report, this Notice and Proxy Statement and the proxy card are available electronically at https://www.astproxyportal.com/ast/22259.

REVIEW YOUR PROXY
STATEMENT AND VOTE IN
ONE OF THREE WAYS:

Refer to the enclosed proxy materials or information provided by your broker or other holder of record to see which voting methods are available to you.

INTERNET
Visit the website on your proxy card

BY TELEPHONE
Call the number on your proxy card

BY MAIL
Sign, date and
return your
proxy card in the
enclosed envelope

 

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PROXY STATEMENT
2023 ANNUAL MEETING OF STOCKHOLDERS
To be held on Thursday, June 1, 2023

TABLE OF CONTENTS

GENERAL INFORMATION

 

1

     

PROPOSAL 1: ELECTION OF DIRECTORS

 

6

BOARD COMPOSITION

 

6

REQUIRED QUALIFICATIONS FOR BOARD MEMBERSHIP

 

6

KEY QUALIFICATIONS FOR BOARD MEMBERSHIP

 

6

DIRECTOR NOMINEES

 

7

VOTE REQUIREMENT

 

11

     

CORPORATE GOVERNANCE

 

12

GOVERNANCE HIGHLIGHTS

 

12

DIRECTOR INDEPENDENCE

 

12

BOARD MEETINGS

 

12

SELF-EVALUATION PROCESS

 

13

BOARD LEADERSHIP STRUCTURE

 

13

BOARD’S ROLE IN RISK OVERSIGHT

 

13

BOARD COMMITTEES

 

14

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

 

15

CEO SUCCESSION PLANNING

 

16

CONSIDERATIONS IN EVALUATING DIRECTOR NOMINEES

 

16

BOARD DIVERSITY AND BOARD DIVERSITY MATRIX

 

17

CODE OF BUSINESS CONDUCT AND ETHICS

 

18

DIRECTOR COMPENSATION

 

18

DIRECTOR COMPENSATION TABLE FOR FISCAL 2023

 

20

     

EXECUTIVE OFFICERS

 

21

     

PROPOSAL 2: ADVISORY APPROVAL OF THE COMPANY’S FISCAL 2023 COMPENSATION FOR ITS NAMED EXECUTIVE OFFICERS

 

23

VOTE REQUIREMENT

 

23

     

COMPENSATION DISCUSSION AND ANALYSIS

 

24

EXECUTIVE SUMMARY

 

24

NON-GAAP FINANCIAL MEASURES

 

24

FISCAL 2023 BUSINESS HIGHLIGHTS

 

24

EXECUTIVE COMPENSATION POLICIES AND PRACTICES

 

25

COMPENSATION PRINCIPLES AND OBJECTIVES

 

25

ELEMENTS OF COMPENSATION

 

27

COMPENSATION DECISION-MAKING

 

28

ROLE OF THE COMPENSATION COMMITTEE

 

28

ROLE OF THE COMPENSATION CONSULTANT

 

29

COMPENSATION PEER GROUP

 

29

FISCAL 2023 COMPENSATION

 

30

BASE SALARIES

 

30

ANNUAL INCENTIVE PLAN (AIP) COMPENSATION

 

30

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FISCAL 2023 AIP AWARDS

 

30

LONG-TERM INCENTIVE COMPENSATION

 

32

FISCAL 2023 PSU AND RSU AWARDS

 

32

FISCAL 2020 PERFORMANCE STOCK OPTIONS

 

34

RETIREMENT OR SIMILAR BENEFIT PLANS

 

34

OTHER COMPENSATION POLICIES

 

34

ASSOCIATE BENEFITS

 

34

STOCK OWNERSHIP GUIDELINES

 

35

CLAWBACK POLICY

 

35

INSIDER TRADING, ANTI-HEDGING AND PLEDGING POLICIES

 

36

TAX AND ACCOUNTING CONSIDERATIONS

 

36

COMPENSATION COMMITTEE REPORT

 

36

SUMMARY COMPENSATION TABLE

 

37

GRANTS OF PLAN-BASED AWARDS

 

38

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END

 

39

OPTION EXERCISES AND STOCK VESTED

 

40

EXECUTIVE EMPLOYMENT ARRANGEMENTS

 

41

POST-EMPLOYMENT COMPENSATION

 

42

POTENTIAL PAYMENTS UPON TERMINATION OF EMPLOYMENT

 

42

PAY FOR PERFORMANCE

 

44

CEO PAY RATIO

 

46

     

PROPOSAL 3: APPROVAL OF THE AMENDMENT OF THE SECOND AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN

 

47

VOTE REQUIREMENT

 

52

     

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

53

     

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

 

56

RELATED PARTY TRANSACTIONS POLICY

 

56

     

PROPOSAL 4: RATIFICATION OF THE APPOINTMENT OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

57

VOTE REQUIREMENT

 

59

     

OTHER MATTERS

 

60

REPORT OF THE AUDIT COMMITTEE

 

60

DELINQUENT SECTION 16(a) REPORTS

 

61

STOCKHOLDER PROPOSALS FOR FISCAL 2024 ANNUAL MEETING

 

61

STOCKHOLDER COMMUNICATIONS

 

61

WHERE YOU CAN FIND MORE INFORMATION

 

62

     

APPENDIX

 

A-1

RECONCILIATION OF NON-GAAP FINANCIAL MEASURES

 

A-1

AMENDMENT 1 TO THE SECOND AMENDED AND RESTATED 2017 EQUITY INCENTIVE PLAN

 

B-1

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GENERAL INFORMATION

Why am I receiving these materials?

The Board of Directors of The Lovesac Company (which we refer to in this Proxy Statement as “we”, “our”, “us” or “Lovesac”) is providing you these proxy materials in connection with the Board’s solicitation of proxies from our stockholders for our 2023 Annual Meeting of Stockholders (which we refer to as the “Annual Meeting”) and any adjournments and postponements of the Annual Meeting. The Annual Meeting will be held virtually at https://viewproxy.com/LovesacCompany/2023/ on Thursday, June 1, 2023, commencing at 10:00 a.m. Eastern Time.

We have mailed the Notice of Internet Availability of Proxy Materials to all stockholders and beneficial owners of record as of April 6, 2023, the record date for the Annual Meeting (the “Record Date”). All stockholders will have the ability to access the proxy materials via the Internet, including this Proxy Statement, as filed with the U.S. Securities and Exchange Commission, (the “SEC”), and our 2023 Annual Report on or about April 17, 2023 at https://www.astproxyportal.com/ast/22259. The Notice of Internet Availability of Proxy Materials includes information on how to access the proxy materials, how to submit your vote on the Internet, by phone, by mail, or how to request a paper copy of the proxy materials.

What is the purpose of the Annual Meeting?

At the Annual Meeting, you and our other stockholders entitled to vote at the Annual Meeting are requested to vote on proposals to (1) elect eight (8) members of our Board of Directors to serve until our 2024 Annual Meeting of Stockholders; (2) provide advisory approval of the Company’s fiscal 2023 compensation for its named executive officers; (3) approve the Amendment to the Second Amended and Restated 2017 Equity Incentive Plan that increases the number of shares reserved for issuance thereunder by 225,000 shares; (4) ratify the appointment of Deloitte & Touche LLP as our independent registered accounting firm for fiscal year 2024; and (5) conduct any and all other business that may properly come before the 2023 Annual Meeting or any continuation, postponement, or adjournment thereof.

Who is entitled to attend and vote at the Annual Meeting?

Only stockholders of record as of the close of business on the Record Date, or the holders of their valid proxies may attend and shall be entitled to vote at the Annual Meeting and any adjournment or postponement of the Annual Meeting. As of the close of business on the Record Date,15,195,566 shares of our common stock were outstanding and entitled to vote. Each share of common stock entitles the record holder to one vote on each matter to be voted upon at the Annual Meeting.

What do I need to do to attend the Annual Meeting virtually?

To attend our virtual 2023 Annual Meeting live via the Internet, you must register at https://viewproxy.com/LovesacCompany/2023/ by 11:59 PM Eastern Time on Wednesday, May 31, 2023, using your Control Number that was included in your proxy card. If you hold your shares beneficially through a bank or broker, you must provide a legal proxy from your bank or broker during registration and you will be assigned a Control Number to vote your shares during the Annual Meeting. If you are unable to obtain a legal proxy to vote your shares, you will still be able to attend the Annual Meeting (but will not be able to vote your shares) so long as you demonstrate proof of stock ownership. Further instructions on how to connect and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at https://viewproxy.com/LovesacCompany/2023/.

On the day of the Annual Meeting, if you have properly registered, you may enter the Annual Meeting at https://viewproxy.com/LovesacCompany/2023/ by logging in using the password you received via e-mail in your registration confirmation. You are entitled to attend our Annual Meeting only if you were a stockholder as of the Record Date. A webcast replay of the Annual Meeting will be available at https://viewproxy.com/LovesacCompany/2023/ until the earlier of June 1, 2024 or the date of the next Annual Meeting of Stockholders to be held in 2024.

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Is a list of stockholders available?

A list of our stockholders will be available for review at our executive offices in Stamford, Connecticut, during ordinary business hours for a period of ten days prior to the meeting. Stockholders interested in viewing the list should contact InvestorRelations@lovesac.com or Secretary@lovesac.com at least 48 hours prior to any visit. All visitors are subject to the Company’s safety protocols. The list will also be available for examination by stockholders of record during the virtual Annual Meeting live webcast at https://viewproxy.com/LovesacCompany/2023/.

What constitutes a quorum?

The presence by attendance at the Annual Meeting through the virtual webcast or by proxy of the holders of a majority of the outstanding shares of our common stock entitled to vote at the Annual Meeting is required to constitute a quorum for the transaction of business at the Annual Meeting.

Broker non-votes (which are explained under “What are broker non-votes?”) and abstentions will be included in determining the presence of a quorum at the 2023 Annual Meeting but will not be counted or have an effect on the outcome of any matter except with respect to the proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered accounting firm for fiscal year 2024.

What are broker non-votes?

Broker non-votes occur when a person holding shares through a bank or broker, meaning that their shares are held in a nominee name or beneficially through such bank or broker, does not provide instructions as to how to vote their shares and the bank or broker is not permitted to exercise voting discretion. Under the listing rules of the Nasdaq Global Market (“Nasdaq”), your bank or broker is only permitted to exercise voting discretion on routine matters. Accordingly, your bank or broker may vote shares held in beneficial name only with respect to ratifying the appointment of Deloitte & Touche LLP as our independent registered accounting firm for fiscal year 2024 but may not vote on any other matter to be voted at the Annual Meeting.

What vote is required to approve each item to be voted on at the Annual Meeting?

PROPOSAL 1: Election of Directors — A plurality of the votes of the shares present in person, by remote communication or represented by proxy at the Annual Meeting and entitled to vote on the election of directors is required for the election of directors. This means that the eight (8) director nominees receiving the highest number of affirmative votes of the shares present by remote communication or represented by proxy at the Annual Meeting and entitled to vote on the election of directors will be elected to our Board. Abstentions, broker non-votes and votes marked “WITHHOLD AUTHORITY FOR ALL NOMINEES” will have no legal effect on the outcome of the election of directors. With respect to votes marked “FOR ALL EXCEPT,” votes for director nominees that are withheld will have no legal effect on the outcome of the election of directors, while votes for all other director nominees will count toward a plurality.

PROPOSAL 2: Advisory Approval of the Company’s Fiscal 2023 Compensation for its Named Executive Officers  The approval, on an advisory basis, of the Company’s fiscal 2023 compensation for its named executive officers requires the “FOR” vote of a majority of the shares present in person, by remote communication, or represented by proxy duly authorized at the meeting and entitled to vote at the meeting. You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to this proposal. Abstentions are treated as present and entitled to vote and will have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

PROPOSAL 3: Approval of the Amendment of the Second Amended and Restated 2017 Equity Incentive Plan  This proposal requires the affirmative vote of a majority of the shares present in person, by remote communication or represented by proxy duly authorized at the meeting and entitled to vote at the meeting. You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to this proposal. Abstentions are treated as present and entitled to vote and will have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

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PROPOSAL 4: Ratification of the Appointment of the Independent Registered Public Accounting Firm for the Year Ending February 4, 2024  The affirmative vote of the holders of a majority of the shares present in person by remote communication or represented by proxy and entitled to vote on the proposal at the Annual Meeting is required to approve this proposal. You may vote “FOR,” “AGAINST,” or “ABSTAIN” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal, and thus, will have the same effect as a vote “AGAINST” this proposal. This proposal is considered a routine matter where brokers are permitted to vote your shares held by them in their discretion in the event that they do not receive voting instructions from you.

How does the Board of Directors recommend that I vote?

Our Board of Directors recommends that you vote:

         PROPOSAL 1:  FOR each of the nominees for director named in this Proxy Statement.

         PROPOSAL 2: FOR the approval of the Company’s fiscal 2023 compensation for its named executive officers.

         PROPOSAL 3: FOR the approval of the Amendment of the Second Amended and Restated 2017 Equity Incentive Plan that increases the shares reserved for issuance thereunder by 225,000 shares.

         PROPOSAL 4: FOR the ratification of the appointment of Deloitte & Touche LLP as our independent registered accounting firm for fiscal year 2024.

How do I vote my shares?

The answer depends on whether you own your shares of Lovesac common stock as of the Record Date directly (that is, you hold shares in your name as the registered stockholder) or if your shares are held in a brokerage account or by another nominee holder.

         If you own shares of the Company directly (i.e., you are a “registered stockholder”):    Your proxy is being solicited directly by us, and you can vote by Internet, by telephone, by mail or you can vote at our virtual Annual Meeting online. You are encouraged to vote prior to the Annual Meeting to ensure that your shares will be represented.

         If you wish to vote by Internet:    Access www.voteproxy.com and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. Internet voting will close and no longer be available as of 11:59 p.m. Eastern Time on May 31, 2023.

         If you wish to vote by telephone:    Call toll-free 1-800-PROXIES (1-800-776-9437) in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and follow the instructions. Have your proxy card available when you call. Telephone voting will close and no longer be available as of 11:59 p.m. Eastern Time on May 31, 2023.

         If you wish to vote by mail:    Please sign, date and complete the enclosed proxy card and return it by mail in the enclosed postage paid envelope. No postage is necessary if the proxy card is mailed in the United States. If you sign your proxy card but do not indicate how you wish to vote, the proxies will vote your shares in accordance with the recommendations of the Board of Directors as described above, and, in their discretion, on any other matter that properly comes before the Annual Meeting. We have not received notice of other matters that may properly be presented at the Annual Meeting. Unsigned proxy cards will not be counted.

         If you wish to vote at the Annual Meeting:    You will be able to vote your shares if you register to attend by Internet and attend the virtual Annual Meeting pursuant to the instructions below.

         If you hold your shares of the Company through a broker, bank or other nominee:    You are considered to be the beneficial owner of shares held in “street name” and these proxy materials are being made available to you by your broker, bank or nominee. You may not vote

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directly any shares held in “street name”; however, as the beneficial owner of the shares, you have the right to direct your broker, bank or nominee on how to vote your shares. A voting instruction card has been provided to you by your broker, bank or other nominee describing how to vote your shares. If you receive a voting instruction card, you can vote by completing and returning the voting instruction card. Please be sure to mark your voting choices on your voting instruction card before you return it. You may also be able to vote by telephone, via the Internet, or virtually at the Annual Meeting, depending upon your voting instructions. Please refer to the instructions provided with your voting instruction card and see “What do I need to do to attend the Annual Meeting virtually?” above for information about voting in these ways. See also “How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions?” below.

If you plan to vote by mail, telephone or Internet in advance of the Annual Meeting, your vote must be received by 11:59 p.m., Eastern Time, on May 31, 2023 to be counted. Internet voting during the Annual Meeting is also permissible through the virtual webcast at https://viewproxy.com/LovesacCompany/2023/.

Will I have the same participation rights in the virtual Annual Meeting as I would have at an in-person stockholder meeting?

Yes. If you register to attend, and attend, the Annual Meeting pursuant to the instructions above, you will be able to vote online during the Annual Meeting, change a vote you may have submitted previously, or ask questions online that will be reviewed and answered by the speakers. If you wish to submit a question during the virtual Annual Meeting, you may log into https://viewproxy.com/LovesacCompany/2023/ and ask a question on the virtual meeting platform. Our virtual meeting will be governed by our Rules of Conduct which will be available on the virtual meeting platform. We have created and implemented the virtual format in order to facilitate stockholder attendance and participation by enabling stockholders to participate fully, and equally, from any location around the world, at no cost. However, you will bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies. A virtual Annual Meeting makes it possible for more stockholders (regardless of size, resources or physical location) to have direct access to information more quickly, while saving the Company and our stockholders time and money, especially as physical attendance at meetings has declined. We also believe that the online tools we have selected will increase stockholder communication. For example, the virtual format allows stockholders to communicate with us in advance of, and during, the Annual Meeting so they can ask questions of our Board of Directors or executive management in attendance. During the live Q&A session of the Annual Meeting, we may answer questions as they come in and address those asked in advance, to the extent relevant to the business of the Annual Meeting, as time permits.

Both stockholders of record and street name stockholders will be able to attend the Annual Meeting via live audio webcast, submit their questions during the meeting and vote their shares electronically at the Annual Meeting.

What if I have technical difficulties during the virtual Annual Meeting?

There will be technicians ready to assist you with any technical difficulties you may have accessing the Annual Meeting live audio webcast. Please be sure to check in by 9:45 a.m. Eastern Time on June 1, 2023, the day of the meeting, so that any technical difficulties may be addressed before the Annual Meeting live audio webcast begins. If you encounter any difficulties accessing the webcast during the check-in or meeting time, please email VirtualMeeting@viewproxy.com or call 866-612-8937.

How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions?

Brokerage firms and other intermediaries holding shares of our common stock in street name for their customers are generally required to vote such shares in the manner directed by their customers. In the absence of timely directions, your broker will have discretion to vote your shares on our sole “routine” matter: the proposal to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending February 4, 2024. Your broker will not have discretion to vote on any other proposals, which are “non-routine” matters, absent direction from you.

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Can I change my vote after I return my proxy card?

Stockholders of record may revoke their proxies by virtually attending the Annual Meeting and voting online during the virtual meeting, by filing an instrument in writing revoking the proxy prior to the Annual Meeting or by filing another duly executed proxy bearing a later date with our Secretary at the address below before the vote is counted or by voting again using the telephone and Internet before the cut-off time (11:59 p.m., Eastern Time, on May 31, 2023). Your latest telephone or Internet proxy submitted prior to the Annual Meeting is the one that will be counted unless you virtually attend the Annual Meeting and vote your shares online during the meeting. We recommend that you vote by proxy even if you plan to attend the Annual Meeting online. If you hold your shares through a bank, broker or other nominee, you may revoke any prior voting instructions by contacting the institution that holds your shares.

Written notice of revocation may be sent to The Lovesac Company, Two Landmark Square, Suite 300, Stamford, CT 06901, Attention: Secretary.

How will votes be recorded and where can I find the voting results of the Annual Meeting?

We have engaged American Stock Transfer & Trust Company, LLC (“AST”), our transfer agent, as our inspector of elections to receive and tabulate votes. AST will separately tabulate “FOR” and “AGAINST” votes, abstentions and broker non-votes. AST will also certify the results and determine the existence of a quorum and the validity of proxies and ballots. We plan to announce preliminary voting results at the Annual Meeting and to publish the final results in a Current Report on Form 8-K following the Annual Meeting.

Who conducts the proxy solicitation and how much will it cost?

The Company is requesting your proxy for the Annual Meeting and will pay the costs of requesting stockholder proxies. Proxies may be solicited by directors, officers and other associates of the Company, personally or by telephone, Internet, or mail, none of whom will receive compensation for their solicitation efforts. We may also reimburse brokerage firms, dealers, banks, voting trustees or other record holders for their reasonable expenses for forwarding proxy materials to the beneficial owners of our common stock.

Questions and Additional Copies

If you have any additional questions with respect to the Company or the matters described herein, or questions about how to submit your proxy, or if you need additional copies of this Proxy Statement or proxy card, you should contact our Secretary at The Lovesac Company, Two Landmark Square, Suite 300, Stamford, CT 06901, by telephone at (888) 636-1223, or by email at InvestorRelations@lovesac.com or Secretary@lovesac.com.

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Proposal 1

ELECTION OF DIRECTORS

Lovesac’s business and affairs are managed under the direction of our Board of Directors. The number of Directors is determined by our Board of Directors, subject to the terms of our Amended Certificate and Amended and Restated By-Laws (the “By-Laws”). Our Board of Directors currently consists of eight members and is authorized to have no less than five members nor more than nine members. Each of our Directors serves until the next annual meeting of stockholders and until his or her successor is elected and duly qualified, or until his or her earlier death, resignation or removal. On March 23, 2023, our Board of Directors fixed the number of Directors constituting the full Board at eight members.

Board Composition

The Nominating and Governance Committee (the “Nominating Committee”) works with the Board of Directors to determine the appropriate skills and qualifications necessary for Board membership, taking into consideration the Board’s needs at the time. In seeking qualified candidates for Board membership, the Board will consider a variety of factors including professional experience and other individual qualities and characteristics that contribute to a diverse mix of viewpoints and experience represented on the Board.

Required Qualifications for Board Membership

The Board of Directors and Nominating Committee require all Directors and Director candidates to be of high character and integrity and have the ability to guide our Company based on experience gained in positions as leaders with a high degree of responsibility in the companies with which they are or were affiliated. Each Director and Director candidate must also ensure that other existing and anticipated future commitments do not interfere with his or her service as a Director. In determining whether to recommend a Director for re-election, the Nominating Committee also considers the Director’s past attendance at meetings, participation in and contributions to the activities of the Board and the Company, tenure and other qualifications set forth in the Nominating Committee’s charter or developed and approved by the Nominating Committee.

Key Qualifications and Experience for Board Membership

The Board has identified key qualifications and experience that are important to be represented on the Board based on the Company’s current business strategy and future business goals. These qualifications are evaluated regularly and updated to adapt to the evolving needs of the Board and the Company. This list is not exhaustive, but rather represents a summary of the key criteria considered by the Board during the nomination and appointment process.

Executive Leadership

Experience leading and building high functioning teams, developing interdisciplinary long-range strategic plans, policy development and people management.

Business Operations

Experience with day-to-day operational execution of long-range plans and targets, leading sourcing, distribution and transportation strategy, and developing real estate strategy and assessing and negotiating real estate leases.

Marketing and Sales

Experience developing and executing digital marketing strategies, managing the customer experience, brand management, developing sales plans and promotions to meet financial targets, and ecommerce.

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Environmental, Social and Governance

Experience in environmental and sustainability practices, fostering diversity and inclusion culture and programs, and providing accountability and transparency and protecting shareholder interests.

Technology and Security

Experience in safeguarding the generation, transmission and distribution of digital assets, knowledge and experience in the strategic use and governance of information management and information technology

Accounting, Finance and Internal Controls

Experience evaluating financial statements and capital structure, overseeing financial reporting, fundraising across debt/equity markets, investor relations, assessing internal controls and regulatory compliance, and risk valuation and risk management oversight.

Director Nominees

Shawn Nelson, Andrew R. Heyer, John Grafer, Jack A. Krause, Sharon M. Leite, Walter F. McLallen, Vineet Mehra and Shirley Romig have been nominated for election as Directors to serve until the 2024 Annual Meeting of Stockholders and until their successors are elected and have qualified. All our nominees are current Directors. Each nominee has consented to being named in the Proxy Statement and has agreed to serve as a member of the Board of Directors, if elected. If any of the nominees is unable to serve as a Director, it is intended that the proxy will be voted for the election of such substitute nominee, if any, as shall be designated by the Board of Directors. The Board of Directors has no reason to believe that any of the nominees named below will be unable to serve if elected.

The Board of Directors believes that each nominee has valuable skills and experiences that provide us with the knowledge, judgment and strategic vision necessary to provide effective oversight. The biographies below reflect the particular experience, qualifications and skills that led the Board of Directors to conclude that each Director nominee should serve on the Board. There are no family relationships between and among any of our executive officers or Directors. There are no arrangements or understandings between any of our executive officers or Directors and any other person pursuant to which any of them are elected as an officer or Director.

 

Shawn Nelson

Age: 46

Director since: 2017

Independent: No

Committees: None

Skills and Qualifications:

We believe Mr. Nelson is qualified to serve on our board because of his leadership experience as our founder, his extensive knowledge of the Company and his service as our Chief Executive Officer.

Shawn Nelson founded Lovesac in 1998 and is currently serving as our Chief Executive Officer and as a member of the Board of Directors. Mr. Nelson is the lead designer of the Company’s patented products and directly oversees design, product development, public relations, and investor relations. In 2005, Mr. Nelson won Richard Branson’s “The Rebel Billionaire” on Fox and continues to participate in ongoing TV appearances. Mr. Nelson has a master’s degree in Strategic Design and Management and is a former graduate-level instructor at Parsons, The New School for Design in New York City. Mr. Nelson is also fluent in Chinese with a B.A. in Mandarin from the University of Utah.

Other Public Company Directorships:

         Current: None.

         Previous (During Past 5 Years): None.

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Andrew R. Heyer

Age: 65

Director since: 2017

Independent: No

Committees: None

Designation: Chair of the Board

Skills and Qualifications:

We believe Mr. Heyer is qualified to serve on our board because of his extensive experience in private equity investing in the consumer goods industry and his experience on other private and public company boards.

Andrew R. Heyer is the Chair of our Board of Directors. Mr. Heyer is a finance professional with over 35 years of experience investing in the consumer and consumer-related products and services industries. He has deployed in excess of $1 billion of capital over that time frame and has guided several public and private companies as a member of their boards of directors. Mr. Heyer is the Chief Executive Officer and Founder of Mistral Equity Partners, a private equity fund manager founded in 2007 that invests in the consumer industry. Prior to founding Mistral, Mr. Heyer served as a Founding Managing Partner of Trimaran Capital Partners. Until 1995, Mr. Heyer was a vice chairman of CIBC World Markets Corp. and a co-head of the CIBC Argosy Merchant Banking Funds. Prior to joining CIBC World Markets Corp., Mr. Heyer was a Founder and Managing Director of The Argosy Group L.P. Prior to joining Argosy, Mr. Heyer was a Managing Director at Drexel Burnham Lambert Incorporated and, prior to that, he worked at Shearson/American Express. Mr. Heyer serves on the boards of directors of several private companies, including Worldwise, a pet accessories business.

Other Public Company Directorships:

         Current: OneSpaWorld Holdings Limited (since 2019); Arko Corp. (since 2020); Tastemaker Acquisition Corp. (since 2021); AF Acquisition Corp. (since 2021); Haymaker Acquisition Corp. III (since 2019); and Biote Inc. (since 2022).

         Previous (During Past 5 Years): The Hain Celestial Group (2012 – 2019); XpresSpa Group, Inc. (2016 – 2020); and Haymaker Acquisition Corp. (2017 – 2019).

 

John Grafer

Age: 53

Director since: 2017

Independent: Yes

Committees:

•  Compensation Committee

Skills and Qualifications:

We believe Mr. Grafer is qualified to serve on our board because of his substantial experience in private equity investing and investment banking, his accounting expertise and his experience on other company boards.

John Grafer is a member of our Board of Directors. Mr. Grafer is a partner at Satori Capital, a multi-strategy alternative investment firm founded on the principles of conscious capitalism. Mr. Grafer is a member of Satori’s investment committee, a board member of Accelerated Learning Solutions, Hobo, SunTree Snack Foods, Formulife, and Zorch International, a former board observer for Aspen Heights, and a former board member of California Products Corporation, Longhorn Health Solutions, and FWT. Prior to joining Satori in 2009, Mr. Grafer was Senior Vice President at Giuliani Partners, a principal investment and consulting firm founded by former New York City Mayor Rudolph W. Giuliani. Prior to joining Giuliani Partners in 2003, Mr. Grafer was a member of the mergers and acquisitions group at Credit Suisse First Boston, a member of the proprietary trading group at J.P. Morgan Chase, and a team member at Ernst & Young, where he earned his C.P.A. Mr. Grafer has also assisted a family office with early-stage investments in sustainably managed companies, including Honest Tea. Mr. Grafer is an elected member of the board of directors and executive committee of Americans For Fair Taxation® (FairTax®) and was formerly a first-round judge for the McCloskey Business Plan competition at the University of Notre Dame. Mr. Grafer received a B.B.A. from the University of Notre Dame and an M.B.A. in Finance from the University of Chicago Booth School of Business.

Other Public Company Directorships:

         Current: None.

         Previous (During Past 5 Years): None.

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Jack A. Krause

Age: 60

Director since: 2021

Independent: No

Committees: None

Skills and Qualifications:

We believe Mr. Krause is qualified to serve on our board because of his extensive brand management and marketing experience, and his deep knowledge of the Company having served as President and Chief Operating Officer from 2015 to 2021.

Jack A. Krause is the Chief Strategy Officer of The Lovesac Company and a member of the Board of Directors. Previously, he served as President and Chief Operating Officer of Lovesac from 2015 until November 2021. Prior to Lovesac, Mr. Krause served as President of Vitamin World, a division of NBTY. He also served as Senior Vice-President of Watch Station Global Retail and Skagen from 2011 to 2013. Mr. Krause also held the position of General Manager of Sunglass Hut North America from 2008 to 2010 along with other executive positions at Luxottica. Mr. Krause worked for 11 years at Bath and Body Works in roles of increasing responsibility leading to Senior Vice-President of Brand Development from 2004 to 2006. Prior to that he spent 10 years in brand management at Jergens and Marion Consumer Products. Mr. Krause has a Bachelor of Science in Business Administration from Miami University.

Other Public Company Directorships:

         Current: None.

         Previous (During Past 5 Years): None.

 

Sharon M. Leite

Age: 60

Director since: 2021

Independent: Yes

Committees:

•  Audit Committee

•  Nominating and Governance Committee

Skills and Qualifications:

We believe Ms. Leite is qualified to serve on our board because she brings significant general management experience, as well as retail sales, operations, digital, ecommerce, real estate, merchandising and marketing experience.

Sharon M. Leite is a member of our Board of Directors. Since January 2023, Ms. Leite has been the Chief Executive Officer and a member of the Board of Directors of Ideal Image. Previously, she was the Chief Executive Officer of The Vitamin Shoppe, Inc., from 2018 to 2023. She also served as President, North America, for Godiva Chocolatier from October 2017 until August 2018. Prior to joining Godiva, from February 2016 until May 2017, Ms. Leite was the President of Sally Beauty — North America (NYSE: SBH), an international specialty retailer and distributor of professional beauty products, with over 3,000 stores. Prior to joining Sally Beauty, from August 2007 until January 2016, Ms. Leite was the Executive Vice President of Sales, Customer Experience and Real Estate at Pier 1 Imports (NYSE: PIR). In addition, Ms. Leite has held various executive leadership roles at Bath and Body Works (L Brands) as well as various sales and operations positions with other prominent retailers including Gap Inc. and The Walt Disney Company. She serves on the boards of the National Retail Federation, Performing Arts Forth Worth and the Neeley School of Business at Texas Christian University. Ms. Leite attended Loyola University, Kent State University and Delgado College and is completing an M.B.A. at The Jack Welch Management Institute.

Other Public Company Directorships:

         Current: None.

         Previous (During Past 5 Years): Tandy Leather Factory, Inc. (2017 – 2022).

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Walter F. McLallen

Age: 57

Director since: 2019

Independent: Yes

Committees:

•  Audit Committee, Chair

•  Compensation Committee, Chair

•  Nominating and Governance Committee

Skills and Qualifications:

We believe Mr. McLallen is qualified to serve on our board due to his extensive consumer products, operational and board experience, as well as his background in finance.

Walter F. McLallen is a member of our Board of Directors. Mr. McLallen is a finance professional with over 30 years of leveraged finance, private equity and operations experience. Mr. McLallen has been the Managing Member of Meritage Capital Advisors, an advisory boutique firm focused on debt and private equity transaction origination, structuring and consulting, since 2004. Mr. McLallen has extensive board and organizational experience and has served on numerous corporate and non-profit boards and committees, with a significant historical focus on consumer products-related companies.

He also served on the boards of several consumer-focused private companies, including Timeless Wine Company, the producer of consumer luxury wine brands; Worldwise, Inc., a consumer branded pet products company; adMarketplace, a search engine advertiser; and Frontier Dermatology Partners, a dermatology practice management company. Mr. McLallen is the Founder and Co-Chairman of Tomahawk Strategic Solutions, a law enforcement and corporate training and risk management company. From 2006 to 2015, he was Vice Chairman of Remington Outdoor Company, an outdoor consumer platform he co-founded with a major investment firm. Mr. McLallen was formerly with CIBC World Markets from 1995 to 2004, during which time he was a Managing Director, head of Debt Capital Markets and head of High Yield Distribution. Mr. McLallen started his career in the Mergers & Acquisitions Department of Drexel Burnham Lambert and was a founding member of The Argosy Group L.P. Mr. McLallen received a B.A. with a double major in Economics and Finance from the University of Illinois at Urbana-Champaign.

Other Public Company Directorships:

         Current: OneSpaWorld Holdings Limited (since 2017).

         Previous (During Past 5 Years): Centric Brands Inc. (2016 – 2020); AerCap Holdings N.V. (2015 – 2017); and Haymaker Acquisition Corp. II (2019 – 2020).

 

Vineet Mehra

Age: 44

Director since: 2022

Independent: Yes

Committees:

•  Audit Committee

Skills and Qualifications:

We believe Mr. Mehra is qualified to serve on our board based on his expertise in global marketing strategy, brand development, and deep knowledge of the omni-channel retail and consumer products industries.

Vineet Mehra is a member of our Board of Directors. Since June 2022, he has served as the Chief Marketing Officer for Chime, where he oversees all marketing initiatives across the company. Prior to Chime, Vineet was the Chief Growth and Customer Experience Officer of Good Eggs, from 2021 to 2022. From 2019 to 2021, Vineet was the Global Chief Customer and Marketing Officer for Walgreens Boots Alliance (WBA) where he was responsible for laying out the vision and strategic direction for all of WBA’s marketing activities across their full portfolio of Retail and Consumer Brands. From 2017 to 2019, Vineet was the Global Chief Marketing and Revenue Officer for Ancestry.com, the world’s leading Consumer Genomics company, where he was tasked with modernizing the marketing organization, and bringing consumer genomics into the cultural mainstream while owning Ancestry’s worldwide revenue target. Prior to Ancestry, Vineet held

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key leadership positions at Johnson & Johnson from 2013 to 2017 including Global President - Baby Care where he led their flagship portfolio of brands, and Global President - Marketing Services, where he held responsibility for their Global Media budget and Global Consumer Insights & Analytics. Vineet has received numerous accolades and awards throughout his career. He was named by Forbes as one of the world’s Top 50 CMOs, recognized by AdWeek as one of the Top 20 Tech-Driven CMOs, honored with the Top 40 under 40 award by both Ad Age and P&G’s Alumni Association, Chair of the Jury for the Global Media Awards, and an Invited Speaker at the prestigious Cannes Lions Festival of Creativity. His views and opinions have been quoted in major publications such as the Harvard Business Review, Forbes and Ad Age.

Other Public Company Directorships:

         Current: AdTheorent (since 2021).

         Previous (During Past 5 Years): None.

 

Shirley Romig

Age: 45

Director since: 2019

Independent: Yes

Committees:

•  Nominating and Governance Committee, Chair

•  Compensation Committee

Skills and Qualifications:

We believe Ms. Romig is qualified to serve on our board based on her expertise in ecommerce, digital innovation, corporate strategy and scaling complex retail operations.

Shirley Romig is a member of our Board of Directors. Ms. Romig has two decades of experience in operationalizing growth strategies and leading transformational initiatives in complex consumer-oriented and technology organizations. Most recently, Ms. Romig was the Co-Founder and CEO of Mixo Group, a digital creator platform for the $1.7 trillion food market, through December 2022. Prior to that, Ms. Romig was a Vice President with Lyft, leading Global Operations, East and Canada from 2019 to 2022. From 2017 to 2019, Ms. Romig led six lines of businesses at Equinox Fitness Clubs as Group Vice President. From 2016 to 2017, Ms. Romig was the Head of Retail Strategy for SapientRazorfish, a global digital agency. From 2013 to 2015, Ms. Romig was the Senior Vice President of Corporate Strategy with HBC responsible for implementation of growth initiatives across Saks Fifth Avenue, Saks OFF 5th, Lord & Taylor and Hudson’s Bay in Canada. Ms. Romig also served as a Vice President for Saks Incorporated where she led the company’s omnichannel transformation work and launched Saksoff5th.com as well as numerous growth initiatives for Saks.com from 2009 to 2013. Earlier in her career, Ms. Romig worked in equity research and digital and strategy consulting. Ms. Romig holds an M.B.A. from the Darden School of Business and a Bachelor of Science from the McIntire School of Commerce, both at the University of Virginia.

Other Public Company Directorships:

         Current: MamaMancini’s Holdings, Inc. (since 2023).

         Previous (During Past 5 Years): None.

Vote Requirement

The affirmative vote of a plurality of the votes of the shares present in person, by remote communication or represented by proxy at the Annual Meeting and entitled to vote is required for the election of directors.

 

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” ALL EIGHT NOMINEES.

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CORPORATE GOVERNANCE

Our Board of Directors has adopted Corporate Governance Guidelines that serve as a framework within which the Board can perform its duties and foster effective governance of the Company.

Governance Highlights

Board Independence

 

Stockholder Rights

5 out of 8 of our Directors and 100% of Audit, Compensation, and Nominating Committees are independent

 

We annually seek stockholder ratification of our independent registered public accountants

There are no related party transactions with our Directors and officers

 

Stockholders have the same voting rights — one vote per share

Independent Board members meet regularly in Executive Session without management present

 

We do not maintain a stockholder rights plan or “poison pill”

 

A separate Chair of the Board leads board activities allowing our CEO to focus on our business

 

 

Our Board is not classified, and all of our Directors are elected annually by our stockholders

Policies and Procedures

 

Engagement and Refreshment

We have robust stock ownership guidelines for our Directors and NEOs to further align with the interests of our stockholders

 

Our average Board tenure is 2.9 years, and our average Board age is 54 with 6 of our 8 Directors below age 60

We have a Board Diversity Statement which supports the identification and appointment of diverse candidates to our Board

 

Director compensation is reviewed annually by our Compensation and Nominating Committees to ensure competitiveness relative to our peers

Our Board and management are subject to a global Code of Business Conduct and Ethics

 

Our Board and each committee conduct an annual self-evaluation of performance

 

Our Insider Trading Policy restricts stock trading to quarterly windows and requires mandatory preclearance for Directors and NEOs

 

 

In fiscal 2023, all Directors attended our Annual Stockholder Meeting and greater than 75% of meetings of the committees on which they serve

Director Independence

Our Board of Directors has reviewed and evaluated the independence of each Director. Based on information provided by each Director concerning his or her background, employment and affiliations, our Board of Directors has determined that Mr. Grafer, Ms. Leite, Mr. McLallen, Mr. Mehra and Ms. Romig do not have relationships that would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director and that each of our Director nominees (other than Mr. Heyer, Mr. Krause and Mr. Nelson) is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing standards of Nasdaq. In making these determinations, our Board of Directors considered the current and prior relationships that each non-employee Director has with our Company, the beneficial ownership of our common stock by each such non-employee Director and nominee, affiliated entities of each Director and nominee, and their involvement in any transactions described under “Certain Relationships and Related Party Transactions” on page 56, and all other facts and circumstances our Board of Directors deemed relevant in determining their independence and eligibility to serve on the Board.

Board Meetings

During fiscal 2023, the Board of Directors held six meetings and no Director attended fewer than 75% of the total number of meetings of the Board of Directors held during the period such Director served and the total number of meetings held by any of the committees of the Board on which such Director served. We encourage each member of the Board to attend our annual meetings of stockholders. All then-current members of our Board attended the 2022 Annual Meeting of Stockholders.

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Self-Evaluation Process

The Nominating Committee oversees the development and conduct of an annual process for evaluating Board and committee performance. In fiscal 2023, the Board conducted self-evaluations by having each Director complete, on an anonymous basis, detailed questionnaires designed to elicit candid feedback on a variety of topics including board composition and qualifications, corporate governance practices, compensation, roles and responsibilities, Board and committee effectiveness and communications, relationship with management, and areas for possible improvement. The responses were reviewed, compiled and discussed by the Directors and areas of opportunities discussed.

Board Leadership Structure

Our Board of Directors selects the Chair of the Board based upon factors it deems best for the Company at the time of selection. The Board does not have a prescribed policy on whether the roles of Chair and Chief Executive Officer should be separate or combined. Currently, our Board believes that our Company is best served by having a separate Chair of the Board (Mr. Heyer) and Chief Executive Officer (Mr. Nelson) to appropriately balance the powers of the CEO and the independent Directors. This leadership structure enables Mr. Nelson to focus on the growth and development of the business and execution of Company strategy, while Mr. Heyer can oversee the functioning of the Board as a whole and act as a principal liaison between management and the independent Directors. As Chair of the Board, Mr. Heyer presides at all meetings of stockholders and the Board of Directors, and performs other responsibilities as designated by the Board from time to time. The Board will continue to examine its leadership structure and adopt changes, if needed, to best serve the needs of the Company.

Board’s Role in Risk Oversight

The Board of Directors oversees management of the Company’s risks and each of the Board committees supports the Board is fulfilling this responsibility. The Board of Directors focuses on the most significant risks facing the Company such as those relating to supply chain, competition and cybersecurity recognizing that these risks will change over time depending on various external and internal factors. The Board seeks to ensure that actions taken by the Company involve consideration of all relevant risks and are appropriate for the Company based on its business objectives and strategy. Below are descriptions of risk management activities overseen by our Board committees as referenced in their charters.

Audit Committee

The Audit Committee reviews risks that may arise out of our internal control over financial reporting and disclosure controls and procedures. They also review the Company’s processes and procedures with respect to risk assessment and risk management. In addition, the Audit Committee is responsible for reviewing certain proposed related party transactions.

Compensation Committee

The Compensation Committee reviews the risks, if any, associated with the Company’s compensation programs and practices including whether they encourage excessive risk-taking. They also review the Company’s key compensation policies, procedures and disclosures, including the executive compensation disclosure in the proxy statement to ensure it accurately represents the Committee’s compensation philosophy.

Nominating Committee

The Nominating Committee, charged with Board and management succession and overall Company governance matters, examines risks in each of these areas. They define and adopt policies and procedures that support strong corporate governance. They also review issues that may impact Director independence and examine changes in the regulatory landscape and governance trends and their potential impact on the manner in which the Board and Company operate.

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Board Committees

Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating Committee and may establish other committees to facilitate the oversight of our business. The functions of our Board committees are described below. All committees are comprised of only independent Directors.

Audit Committee

4 meetings in fiscal 2023

Fiscal 2023
Members:

William F. McLallen,
Chair

Sharon M. Leite
Vineet Mehra
(1)

Key Oversight Responsibilities

     Appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;

     Overseeing the work of our independent registered public accounting firm and internal auditors, including through the receipt and consideration of reports from such firm;

     Reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;

     Pre-approving all audit and permitted non-audit services from the independent registered public accounting firm;

     Monitoring our internal control over financial reporting and disclosure controls and procedures;

     Overseeing our internal accounting function;

     Discussing our risk management policies;

     Meeting independently with our internal accounting staff, independent registered public accounting firm and management;

     Establishing policies regarding hiring associates from our independent registered public accounting firm and procedures for the receipt and retention of accounting-related complaints and concerns;

     Reviewing and approving or ratifying related party transactions; and

     Preparing the Audit Committee Report as required by SEC rules.

(1)     Vineet Mehra was appointed to the Audit Committee effective March 24, 2023. Ms. Romig stepped off the Audit Committee on March 24, 2023.

The composition of our Audit Committee meets the requirements for independence of Audit Committee members under current Nasdaq listing standards and SEC rules and regulations. Each member of our Audit Committee meets the financial literacy requirements of the current listing standards. In addition, our Board of Directors has determined that Mr. McLallen is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under the Securities Act of 1933, as amended (the “Securities Act”). Our Audit Committee operates under a written charter that is posted on the Investor Relations section of our website at https://investor.lovesac.com.

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Compensation Committee

5 meetings in fiscal 2023

Fiscal 2023
Members:

Walter F. McLallen,
Chair

John Grafer
Shirley Romig

Key Oversight Responsibilities

     Overseeing our overall compensation philosophy, compensation policies, plans and benefits programs;

     Reviewing and approving for our executive officers their annual base salary, annual incentive awards, equity compensation, severance agreements, employment arrangements, and any other benefits, compensation or similar arrangements

     Reviewing our compensation policies and practices as they relate to risk management practices and risk-taking incentives;

     Overseeing evaluations of our senior executives;

     Overseeing and administering our equity incentive plans;

     Reviewing and assessing the independence of compensation advisors;

     Reviewing and making recommendations to our Board with respect to director compensation;

     Reviewing and recommending to the Board approval of the Compensation Discussion and Analysis of the Proxy Statement; and

     Reviewing and approving the Compensation Committee Report in our Proxy Statement as required by SEC rules.

Our Compensation Committee received advice from Frederic W. Cook & Co. (“FW Cook”), an independent compensation consulting firm, with respect to executive compensation decisions for fiscal 2023. Working with management, FW Cook provided various data and recommendations throughout the year as further discussed beginning on page 29. Our Compensation Committee operates under a written charter that is posted on the Investor Relations section of our website at https://investor.lovesac.com.

Compensation Committee Interlocks and Insider Participation

During fiscal 2023, Mr. McLallen, Mr. Grafer, and Ms. Romig served as members of the Compensation Committee. No member of our Compensation Committee served as an executive officer or associate of Lovesac. None of our executive officers currently serve, or have served during fiscal 2023, on the compensation committee or board of directors of any other entity that has one or more executive officers serving as a member of our Board of Directors or Compensation Committee.

Nominating and Governance Committee

5 meetings in fiscal 2023

Fiscal 2023
Members:

Shirley Romig, Chair

Sharon M. Leite
Walter F. McLallen

Key Oversight Responsibilities

     Developing, overseeing and making recommendations to the Board regarding our governance principles;

     Developing, recommending to the Board, implementing and monitoring compliance with the Code of Ethics;

     Reviewing succession plans relating to positions held by executive officers;

     Reviewing and advising the Board on composition and minimum director qualifications for the Board and each Board committee;

     Identifying nominees for election to the Board, consistent with the qualifications and criteria approved by the Board and recommending to the Board the director nominees for the next annual meeting of stockholders;

     Reviewing and evaluating, at least annually, the Nominating Committee’s charter; and

     Developing a self-evaluation process of the Board’s effectiveness and overseeing the evaluation of the Board and its committees.

Our Nominating Committee operates under a written charter that is posted on the Investor Relations section of our website at https://investor.lovesac.com.

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Compensation Risk Assessment

The Compensation Committee regularly examines the design and features of the Company’s executive compensation program from a risk perspective to ensure that it achieves the intended objectives without encouraging excessive or unintended risk-taking. In fiscal 2023, the Compensation Committee reviewed and considered the results of a compensation risk analysis conducted by FW Cook, together with the risk mitigating features of the Company’s compensation policies and practices including the following:

         The Company’s pay philosophy provides an effective balance in cash and equity award mix, short- and long-term performance periods, and formulas and discretion.

         The Compensation Committee has discretion to make positive and negative adjustments to payouts under the Company’s compensation plans.

         Policies are in place to manage or mitigate risk, such as vesting periods on equity awards, stock ownership guidelines, insider trading prohibitions that also restrict hedging and pledging without Board approval, a clawback policy, and independent Compensation Committee oversight.

         Our design and oversight principles also apply to our broad-based employee compensation plans.

Based on this review, the Compensation Committee concluded that the risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

CEO Succession Planning

Our Nominating Committee is delegated with the responsibility for CEO succession planning. As part of its responsibility, the Nominating Committee ensures that succession planning is an ongoing discussion recognizing that leadership development and assessment are critical to our continued success. As part of that discussion, the Nominating Committee reviews the key attributes that a CEO of the Company would need to possess to maximize his or her success. The Nominating Committee reviews and discusses its succession planning activities and related considerations with the full Board of Directors, which then provides valuable input on important succession-related actions and decisions, making the process iterative between the Board of Directors and the Nominating Committee and therefore responsive to the Company’s needs.

Considerations in Evaluating Director Nominees

Identifying Director Nominees

The Nominating Committee identifies qualified candidates through a variety of means, including recommendations from members of the Board, suggestions from our management or third-party search firms. Mr. Mehra was recommended to the Nominating Committee as a board candidate by a third-party search firm and appointed to the Board in July 2022.

Our Nominating Committee will evaluate candidates that have been duly recommended or nominated by stockholders in accordance with our Amended By-Laws. The criteria the Nominating Committee uses for evaluating a candidate duly recommended or nominated by a stockholder are the same criteria used for evaluating candidates recommended by management or members of our Board of Directors. For more information on the procedures to be followed by stockholders who wish to recommend or nominate individuals to serve on our Board of Directors, see “Other Matters — Stockholder Proposals for Fiscal 2024 Annual Meeting of Stockholders” on page 61.

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Director Nominee Qualifications

In evaluating director candidates, including the members of the Board eligible for re-election, our Nominating Committee will consider the current size and composition of our Board of Directors, the needs of our Board of Directors and its respective committees, and other factors that the Nominating Committee deems appropriate and in our stockholders’ best interests. The Nominating Committee requires each nominee to satisfy the following minimum qualifications for a position on the Board:

         The highest level of personal and professional ethics and integrity;

         Proven achievement and competence in the nominee’s field and the ability to exercise sound business judgment;

         Skills that are complementary to those of the existing Board;

         The ability to assist and support management and make significant contributions to the Company’s success; and

         An understanding of the fiduciary responsibilities that are required of a member of the Board and the commitment of time and energy necessary to diligently carry out those responsibilities.

Director candidates must have sufficient time available in the judgment of our Nominating Committee to perform all Board of Directors and applicable committee responsibilities. Members of our Board of Directors are expected to prepare for, attend, and participate in all Board of Directors and applicable committee meetings. Our Nominating Committee also considers these and other factors as it oversees the annual Board of Directors evaluations. After completing its review and evaluation of director candidates, our Nominating Committee recommends to our full Board of Directors the director nominees for selection.

Board Diversity Statement

The Board of Directors adopted a Board Diversity Statement to further advance its commitment to diversity within the Company. The Board Diversity Statement underscores the value and contribution diversity brings in achieving Company objectives and maintaining sound governance practices as it brings together individuals with different perspectives and ideas, from varying backgrounds and experiences, to create balanced and thoughtful decision-making.

The Board Diversity Statement states that in identifying qualified candidates for nomination to the Board, it seeks high performing and dedicated directors with diverse backgrounds and experience able to support the competitive and changing nature of our business and the Company’s strategic direction. Diversity refers to a broad array of individual characteristics that collectively enable the Board to operate effectively and fulfill its responsibilities. These characteristics include, among others, professional qualifications, business experience, age, gender, race and ethnicity.

Our Board of Directors is currently comprised of eight directors with varying backgrounds and characteristics which blend to form a well-rounded group of individuals with deep knowledge of our business and industry, and both seasoned and fresh perspectives.

Board Diversity Matrix (as of April 1, 2023)

 

Female

 

Male

 

Total Number of Directors

 

8

   

Part I: Gender Identity

 

Directors

2

 

6

 

Part II: Demographic Background

 

Asian

1

 

1

 

White

1

 

5

 

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Code of Business Conduct and Ethics

We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”), that applies to all Directors, officers and associates of our Company. This Code of Ethics covers a wide range of business practices and procedures to promote honest and ethical conduct, full, fair, accurate and timely disclosure in all reports and documents that our Company files with the SEC and publicly, and compliance with all applicable governmental laws, rules and regulations. All associates and Directors are required to acknowledge and certify compliance with the Code of Ethics and the Company routinely offers training on topics discussed in the Code to reinforce its principles. The full text of our Code of Ethics is posted on the Investor Relations section of our website at https://investor.lovesac.com.

Director Compensation

Our non-employee Directors are compensated pursuant to the Company’s Director Compensation Policy which supports the objective of assembling a high-performing Board that can best guide the Company in achieving its strategic and operational goals and promoting long-term stockholder value. Board compensation is reviewed annually by the Compensation Committee to ensure that it continues to satisfy the Board’s overall compensation objectives and philosophy. The Compensation Committee and Nominating Committee are guided in their review by an independent compensation consultant, FW Cook, which provides compensation benchmarking and consultation services using the same peer group that is used for purposes of benchmarking executive compensation. In fiscal 2023, the Board of Directors, upon the recommendation of the Compensation Committee, adjusted the compensation payable to outside Directors following a review of FW Cook’s director compensation benchmarking study. Below is a description of compensation approved by our Directors under the amended Director Compensation Policy effective January 27, 2023 (“Amended DCP”).

Cash Compensation

Annual Retainer

Under the Amended DCP each non-employee Director receives an annual cash retainer of $75,000 (formerly $50,000) for serving on the Board of Directors (the “Annual Retainer”) and our Chair of the Board receives an additional $30,000 retainer (the “Board Chair Retainer”).

The Chairs of the Board’s three standing committees are entitled to the following additional cash retainers each year:

Board Committee

Committee Chair Retainer
($)
(1)

Audit Committee

15,000

Compensation Committee

10,000

Nominating and Governance Committee

10,000

(1)     The Audit Committee Chair retainer increased by $2,500 under the Amended DCP.

The cash retainers are paid quarterly in arrears following election to the Board and pro-rated for fractional periods. A non-employee Director may elect to receive his or her cash retainers in the form of RSUs which vest in full upon the 12-month anniversary of the grant date provided that the non-employee Director continues to serve through the applicable vesting date. The number of RSUs is calculated by dividing the value of the Director’s Annual Retainer, Board Chair Retainer, and Committee Chair Retainer (as applicable) by the average closing price of a share of the Company’s common stock for the 30-day trading period prior to the date of grant.

Mr. Nelson and Mr. Krause do not receive any compensation for their service as a Director of the Company. We reimburse our non-employee Directors for reasonable travel and out-of-pocket expenses incurred in connection with attending Board of Director and committee meetings.

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Equity Compensation

Upon election to the Board, each Director is granted RSUs valued at $125,000 (“Annual Grant”). The Annual Grant vests in full on the one-year anniversary of the date of grant. Directors appointed to the Board after the annual stockholder meeting are entitled to a pro-rata portion of the Annual Award based on such Director’s days of service during the 12-month vesting period associated with the most recent Annual Award. The number of RSUs is calculated by dividing the value of the RSU grant by the average closing price of a share of the Company’s common stock for the 30-day trading period prior to the date of grant. Under the amended DCP, the Board eliminated the RSU award, valued at $60,000, granted upon first appointment to the Board (the “Appointment Grant”).

Directors are permitted to defer settlement of their Annual Grant on a tax-deferred basis pursuant to the terms of our Second Amended and Restated 2017 Equity Incentive Plan (the “2017 Equity Plan”). Directors who elect to defer settlement receive payment of their Annual Grant in whole shares within sixty days of their “separation of service” from the Board for any reason, or upon a “change in control” as those terms are defined in the 2017 Equity Plan.

Governance Features

Shareholder-Approved Award Limit.

At the 2022 Annual Meeting, our stockholders approved of raising the cap on non-employee director pay under 2017 Equity Plan. The 2017 Equity Plan now limits the awards that may be granted to any non-employee director during any fiscal year, taken together with any cash compensation paid to such non-employee director for services rendered for such fiscal year, to a maximum of $500,000 in the aggregate. Our current compensation program for non-employee directors is below the limit approved by our stockholders in the 2017 Equity Plan.

Director Stock Ownership Guidelines

Directors are expected to own a meaningful number of shares of stock in the Company to closely align their economic interests with those of other stockholders. Accordingly, the Compensation Committee periodically reviews minimum stock ownership guidelines for non-employee Directors. Non-employee Directors are required to own shares of the Company’s common stock equal to three times their annual cash retainer within five years of joining the Board. The CEO is required to own shares or share equivalents equal to five times his or her annual salary within five years of becoming subject to the ownership requirement. All Directors are in compliance with the stock ownership guidelines or are on track to achieve compliance within the time period prescribed in the guidelines.

Quarterly Trading Windows.

Our Directors (including non-employee directors) may only transact in the Company’s common stock during approved trading windows after satisfying mandatory pre-clearance requirements under our Insider Trading Policy.

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Director Compensation Table for Fiscal 2023

The following table provides information on the compensation paid to persons serving as non-employee Directors of our Company for the fiscal year ended January 29, 2023. Mr. Nelson, our CEO, and Mr. Krause, our Chief Strategy Officer, receive no additional compensation for their service as Directors. Mr. Nelson’s and Mr. Krause’s compensation is discussed in the “Compensation Discussion and Analysis” section beginning on page 24.

Name

Fees Earned or
Paid in Cash
($)
(1)

Stock
Awards
($)
(2)(3)

All Other
Compensation
($)

Total
($)

John Grafer

25,000

88,229

113,229

Andrew R. Heyer

50,000

88,229

138,229

Sharon M. Leite

50,000

88,229

138,229

Walter F. McLallen

43,333

88,229

131,562

Vineet Mehra

50,000

138,182

188,182

Shirley Romig

30,000

88,229

118,229

(1)     The Fees Earned or Paid in Cash column reflects the fees paid to our Directors for their service for the fiscal year ended January 29, 2023. In June 2022, the Board transitioned from single lump sum to quarterly retainer payments. Amounts shown reflect two quarterly payments made in the second half of fiscal 2023, and no payments in the first half of fiscal 2023. Mr. Heyer, Ms. Leite and Mr. Mehra elected to receive the full value of their cash retainers in the form of a single RSU grant (“RSU Retainer Grant”) in the amounts of 2,028, 1,267 and 1,567 shares, respectively. These RSUs vest in full on the anniversary of the grant date. Mr. Heyer and Ms. Leite elected to defer receipt of their RSU Retainer Grant.

(2)     The amounts reported represent the aggregate grant date fair value of RSUs awarded to the director calculated in accordance with FASB ASC Topic 718. The methods and assumptions used in calculating the grant date fair value of RSUs reported in this column are set forth in Note 7 of our audited financial statements included in our 2023 Annual Report. As required by SEC rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions.

(3)     Reflects the fair value of (a) each Director’s Annual Grant awarded on June 2, 2022 (and July 1, 2022 for Mr. Mehra) which vests in full on the one year anniversary of the grant date; (b) for Mr. Mehra, his Appointment Grant awarded on June 1, 2022, which vests in two equal installments on June 1, 2023 and June 1, 2024. Mr. Heyer and Ms. Leite elected to defer receipt of their Annual Grant.

The following table lists all outstanding RSUs (including RSUs for which the payout of shares has been deferred by such Director) held by our non-employee Directors as of January 29, 2023.

Name

Aggregate Number of
Unvested Stock Awards

John Grafer

2,408

Andrew R. Heyer

4,435

Sharon M. Leite

4,068

Walter F. McLallen

2,408

Vineet Mehra

6,424

Shirley Romig

2,408

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EXECUTIVE OFFICERS

The table below sets forth the executive officers of the Company as of January 30, 2023 followed by each of their biographies. For purposes of our Compensation Discussion and Analysis discussion that begins on page 24, our named executive officers, or NEOs, consist of our principal executive officer (Mr. Nelson), our President and Chief Operating Officer (Ms. Fox), our Chief Strategy Officer (Mr. Krause) and our principal financial officer (Ms. Dellomo).

Name

Age

Position

Shawn Nelson

46

Chief Executive Officer

Mary Fox

50

President and Chief Operating Officer

Jack Krause

60

Chief Strategy Officer

Donna Dellomo

58

Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Business Experience

 

Shawn Nelson founded Lovesac in 1998 and is currently serving as our Chief Executive Officer and as a member of the Board of Directors. Mr. Nelson is the lead designer of the Company’s patented products and directly oversees design, product development, public relations and investor relations. In 2005, Mr. Nelson won Richard Branson’s “The Rebel Billionaire” on Fox and continues to participate in ongoing TV appearances. Mr. Nelson has a master’s degree in Strategic Design and Management. and is also fluent in Chinese with a B.A. in Mandarin from the University of Utah.

   

 

Mary Fox is the President and Chief Operating Officer of The Lovesac Company. Previously, she served as General Manager for North America Consumer Products at BIC from 2018 to November 2021. Prior to joining BIC, she spent six years at L’Oréal in various roles within Ecommerce, New Business Development, and Business Transformation in the United States. Before L’Oréal, Ms. Fox held several senior leadership positions at Walmart in both the United States and International divisions. During her time as SVP Global Sourcing at Walmart, Ms. Fox co-founded the Sustainable Apparel Coalition (SAC) in 2009 with Patagonia, which is now the leading global apparel, footwear, and textile coalition focused on sustainable production. Ms. Fox also served as a director of AF Acquisition Corp. (Nasdaq: AFAQU), a special purpose acquisition company from 2021 to 2023, and since March 2023 as an Operating Advisor for AF Ventures, a consumer fund for emerging state growth businesses in categories which include food, beverage, health, wellness and beauty. She also served on the Board of Directors of The Lovesac Company from February 2020 to November 2021. Ms. Fox graduated from Coventry University in the United Kingdom and holds a degree in manufacturing engineering and business studies.

   

 

Jack Krause is the Chief Strategy Officer of The Lovesac Company and a member of the Board of Directors. Previously, he served as President and Chief Operating Officer of the Company from 2015 until November 2021. From 2012 to 2015, Mr. Krause served as President of Vitamin World, a 425-store specialty chain. From 2011 to 2013, he served as Senior Vice President of Watch Station Global Retail and Skagen, where he led the growth of both businesses. From 2008 to 2010, Mr. Krause served as General Manager and in various executive positions at Sunglass Hut (Luxottica). From 2004 to 2006, Mr. Krause served in roles of increasing responsibility at Bath and Body Works, including Senior Vice-President of Brand Development. Prior to that, he spent 10 years in brand management at Jergens and Marion Consumer Products. Mr. Krause has a Bachelor of Science in Business Administration from Miami University.

   

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Donna Dellomo has served as Executive Vice President, Chief Financial Officer, Treasurer and Secretary of the Company since 2017. From January 1998 to January 2017, Ms. Dellomo served as Vice-President and Chief Financial Officer of Perfumania Holdings, Inc., a publicly traded company with over 290 retail locations, owned and licensed brands, and a wholesale distribution network. Between October 1988 and December 1997, Ms. Dellomo served as Internal Audit Manager, Accounting Manager and Corporate Controller at Cybex International, Inc., a publicly traded company that manufactured and distributed fitness, rehabilitative and health care equipment. Ms. Dellomo is a Certified Public Accountant with focus on audit and tax and is also a former member of the Board of Trustees of Molloy University and Chairperson of Molloy’s Fiscal Affairs Committee.

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Proposal 2

ADVISORY APPROVAL OF THE COMPANY’S FISCAL 2023 COMPENSATION FOR ITS NAMED EXECUTIVE OFFICERS

Section 14A of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) requires that we provide our stockholders with the opportunity to vote to approve, on an advisory basis, not less frequently than once every three years, the compensation of our named executive officers as disclosed in the “Compensation Discussion and Analysis” section of this Proxy Statement beginning on page 24. Unless the Board of Directors modifies its policy on the frequency of advisory votes, a non-binding advisory vote on our executive compensation program will again be included in our proxy statement next year.

As described, our executive compensation program is designed to attract, motivate and retain the key executives who drive our business and strategy. At the same time, our compensation program rewards strong performance and aligns the interests of our named executive officers with the interests of stockholders to maximize stockholder value and foster sound strategic planning and decision-making. Stockholders should read the “Compensation Discussion and Analysis” section of this Proxy Statement, the compensation tables and the related narrative disclosure that follows. Our Board of Directors and our Compensation Committee believe that these policies and practices are effective in implementing our compensation philosophy and in achieving our compensation program goals.

Accordingly, we are asking our stockholders to vote on the following resolution at the 2023 Annual Meeting:

“RESOLVED, that the stockholders of The Lovesac Company hereby approve, on an advisory basis, the compensation of the Company’s named executive officers, as disclosed in this Proxy Statement, including in the Compensation Discussion and Analysis, the compensation tables and the narrative discussions that accompany the compensation tables.”

Vote Requirement

The approval, on an advisory basis, of the Company’s fiscal 2023 compensation for its named executive officers requires the “FOR” vote of a majority of the shares present by remote communication or represented by proxy duly authorized at the meeting and entitled to vote at the meeting. Abstentions are treated as present and entitled to vote and will have the same effect as a vote “AGAINST” the proposal. Broker non-votes will have no effect on the outcome of this proposal.

THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPANY’S FISCAL 2023 COMPENSATION FOR ITS NAMED EXECUTIVE OFFICERS AS DISCLOSED IN THIS PROXY STATEMENT.

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COMPENSATION DISCUSSION AND ANALYSIS

Executive Summary

Our executive compensation program is designed to attract, motivate and retain the key executives who drive our business and strategy. It is based on a pay for performance philosophy that rewards executives for achieving financial, operational and other goals, and alignment with the long-term interests of stockholders is key to our compensation program design and decisions. We do this by providing market competitive base salaries, cash incentive compensation opportunities tied to successful achievement of our annual operating goals and individual performance, and by granting long-term equity awards that are intended to deliver increasing value as our stock price increases.

Non-GAAP Financial Measures

This Proxy Statement, including the Compensation Discussion and Analysis, contains financial measures presented on a non-GAAP basis. Our non-GAAP financial measure used in this document is adjusted EBITDA, which we define as earnings before interest, taxes, depreciation and amortization, adjusted for the impact of certain non-cash and other items that we do not consider in our evaluation of ongoing operating performance. These items include management fees, equity-based compensation expense, write-offs of property and equipment, deferred rent, finance expenses and certain other charges and gains that we do not believe reflect our underlying business performance. For a discussion of this measure and for a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measures” in Appendix A of this Proxy Statement.

Fiscal 2023 Business Highlights

Fiscal 2023 was another record year for Lovesac with the business continuing to perform well despite the challenging and volatile backdrop. Our strong financial and operational results for the year are reflective of our unique competitive advantages across our people, brand, business model and operating platform. For the year, we delivered net sales of $651.5 million, an increase of 30.8% from the prior year, gross profit of $345.8 million, an increase of 26.5% from the prior year, and adjusted EBITDA of $60.4 million, an increase of 8.7% from the prior year.

We also achieved many operational accomplishments in fiscal 2023. Key among these, we:

       Exceeded home furnishing category performance by 44 percentage points.

       Opened 53 touchpoints including showrooms, kiosks and shop-in-shops, and held 111 Costco shows and grew our e-commerce business.

       Launched collaborations with Disney, Alice + Olivia, and Anti-Social Social Club to accelerate growth in our StealthTech, Sactional and Sac product lines.

       Improved customer service performance, exceeding our target, through strategic initiatives.

       Delivered 95% of orders on time and a majority within seven days or less.

       Established new Environmental, Social and Governance (ESG) targets to minimize our overall environmental impacts across a range of important measures, and built a plan to achieve zero waste and zero emissions by 2040.

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We believe our strong fiscal 2023 financial and operational performance is a testament to the strength of our people, brand, business model and operating platform. Our strong performance for fiscal 2023 is shown below. Net sales and adjusted EBITDA are measures in our annual and long-term incentive plans.

(1)     Adjusted EBITDA is a non-GAAP measure. For a discussion of this measure and for a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measures” in Appendix A of this Proxy Statement.

Executive Compensation Policies and Practices

Our executive compensation program is weighted towards compensating our executive officers based on our financial and operational performance. We have implemented executive compensation policies and practices that reinforce our pay for performance philosophy and align with sound governance principles. Currently, the following compensation policies and practices are in place:

WHAT WE DO

 

WHAT WE DON’T DO

Place a significant emphasis on performance-based at-risk long-term incentive compensation

 

No repricing of stock option awards without stockholder approval

Have 100% independent Directors on our Compensation Committee

 

No tax gross-ups at all.

Engage an independent compensation consultant that reports to our Compensation Committee

 

No post-employment retirement benefits for our NEOs that are not available to all associates

Maintain a clawback policy covering incentive compensation

 

No executive perquisites offered to our NEOs

Maintain robust stock ownership guidelines for executives to ensure alignment with stockholder interests

 

Our NEOs are employed “at-will” under their Employment Agreements

Compensation Principles and Objectives

Our executive compensation program is designed to attract, motivate and retain the key executives who drive our success. This section provides an overview of our executive compensation philosophy and objectives, and each component of our executive compensation program.

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Overview

We are a technology driven company that designs, manufactures and sells unique, high-quality furniture derived through our Designed for Life® philosophy which results in products that are built to last a lifetime and designed to evolve as our customers’ lives do, and our Circle to Consumer operational philosophy which ensures our business processes and products are optimized for looped (circle) and/or local operations. Our current product offering is comprised of modular couches called Sactionals, premium foam beanbag chairs called Sacs, and their associated home decor accessories. Innovation is at the center of our design philosophy with all our core products protected by a robust portfolio of utility patents. We market and sell our products primarily online directly at www.lovesac.com, supported by direct-to-consumer touch-feel points in the form of our own showrooms as well as through shop-in-shops and pop-up-shops with third party retailers. We believe that our ecommerce centric approach, coupled with our ability to deliver our large, upholstered products through express couriers, is unique to the furniture industry.

Our business is rapidly evolving and intensely competitive. Retailers compete based on a variety of factors, including design, quality, price and customer service. Levels of competition and the ability of our competitors to attract customers through competitive pricing or other factors may impact our results of operations. Our competition includes furniture stores, big box retailers, department stores, specialty retailers and online furniture retailers and marketplaces. We believe our combination of proprietary products, brand strength, loyal customer base, omni-channel approach, technological platform, unique consumer experience, logistical advantages and seasoned management team allow us to compete effectively against and differentiate ourselves from the competition.

To succeed in this environment, we need to attract and retain a highly talented executive team with the leadership skills and experience to drive our business goals and increase stockholder value. We do this by offering competitive, market-based pay packages with short- and long-term incentive opportunities that reward strong performance. We believe this compensation structure and “pay for performance” philosophy aligns the long-term interests of our executive officers with the interests of our stockholders.

As we look ahead, we are confident that Lovesac’s unyielding commitment to sustainable products that are built to last a lifetime and designed to evolve is a distinct and compelling competitive advantage. We expect that adherence to our Designed for Life and Circle to Consumer philosophies will not only drive continued growth and profitability but will also help us reach our goal to operate a 100% circular and sustainable business model, reaching targets of zero waste and zero emissions by 2040.

Our Compensation Objectives

The current objectives of our executive compensation program are to:

       Recruit, incentivize and retain highly qualified executives who have the experience and leadership skills necessary to grow our business;

       Reward executives for achieving our financial, strategic and operational goals, both short- and long-term;

       Align the interests of our executives with those of our stockholders;

       Reflect our long-term corporate strategy;

       Promote a balanced approach to risk; and

       Provide compensation that is competitive and reasonable relative to peers and the overall market.

Our Compensation Committee regularly evaluates the components and structure of the Company’s compensation program to ensure that it continues to fulfill its objectives and makes adjustments as needed.

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Elements of Compensation

Our executive compensation program has three primary components — base salary, annual cash-based incentives and long-term equity-based incentives. We believe that these elements help attract and retain qualified individuals, link individual performance to Company performance, focus the efforts of our NEOs and other executives on the achievement of both our short-term and long-term objectives, and align the interests of our executives with those of our stockholders.

The Company positions total target direct compensation for the NEOs at the median of our peer group, with an opportunity to earn up to the 75th percentile for stretch performance under our LTPA program discussed on page 33. A significant portion of our NEO’s total target direct compensation (for Mr. Nelson, Ms. Fox and Mr. Krause 84%, and for Ms. Dellomo 69%), on average, is at-risk, meaning it is earned only if the Company achieves its performance goals or the value of the award is dependent upon our stock price. Taken together, these elements form a competitive compensation package that achieves our overall compensation objectives as further described in the following table and narrative.

Component

CEO / COO / CSO(1)

CFO(1)

Description

Base Salary

Fixed compensation for performing day-to-day job responsibilities. Reviewed annually for potential adjustment based on market competitiveness, change in responsibilities and other factors.

Annual
Incentive

Annual performance-based award opportunity based on achievements related to Company performance metrics and targets established by the Compensation Committee.

Long-Term
Incentives

Equity awards designed to reward executives for strong long-term performance, serve as a retention tool and to align the interests of executives and stockholders.

(1)     Percentages are based on target values at grant. Excludes Ms. Fox’s Additional Bonus as discussed on page 31.

We also provide our associates, including our NEOs and other executives, with comprehensive benefit programs such as medical, dental and vision insurance, a 401(k) plan, life and disability insurance, and flexible spending accounts, a monthly stipend for home office expenses and discounts on Company product. We do not offer special perquisites to our NEOs.

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Executive Compensation Program Snapshot

Our Compensation Committee regularly evaluates our compensation philosophy and the components of our compensation program to ensure that they are effectively driving the Company’s strategic objectives and promoting strong performance while remaining market competitive. The following table summarizes the components our executive compensation program.

Component

Type

Terms

Salary

Cash

Fixed amount of compensation, reviewed annually for potential adjustment based on market competitiveness, changes in responsibilities and other factors.

Annual Incentive

Cash

Annual performance-based award opportunity based on achievements with respect to the Company’s net sales, adjusted EBITDA and customer satisfaction performance.

Long-Term
Incentives

Time-based RSUs

Time-based RSUs vest in three equal installments over three years subject to continued employment through each vesting date. RSUs are payable in shares of Company stock upon vesting. Unvested RSUs are forfeited upon termination from the Company.

 

Performance-based
RSUs (PSUs)

Eligible to vest based on the Company’s achievements with respect to net sales and adjusted EBITDA targets pre-established by the Compensation Committee for the applicable performance period, subject to completed employment on the vesting date. Once vested, PSUs are payable in shares of Company stock. Unearned PSUs are forfeited.

 

Long-Term Performance Awards (LTPAs)

Eligible to vest based on the Company’s achievements with respect to stretch net sales and adjusted EBITDA targets pre-established by the Compensation Committee for the applicable performance period, subject to continued employment on the vesting date. Once vested, LTPAs are payable in shares of Company stock. Unearned LTPAs are forfeited.

Retirement

401(k)

A qualified safe harbor 401(k) plan that provides participants with the opportunity to defer a portion of their compensation and receive a Company matching contribution equal to 100% of deferrals up to 4% of gross pay.

Compensation Decision-Making

Role of the Compensation Committee

The Compensation Committee is responsible for establishing, approving and adjusting compensation arrangements for our NEOs, and for reviewing and approving corporate goals and objectives relevant to these compensation arrangements. The Compensation Committee also evaluates the performance of our NEOs taking into consideration achievements relative to the Company’s long-term business and financial goals. The Compensation Committee is comprised of independent Directors and works closely with its independent consultant, FW Cook, and senior executives to assess the effectiveness of the Company’s executive compensation program throughout the year.

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Compensation decisions for our NEOs were made by the Compensation Committee with input from FW Cook for fiscal 2023. The Compensation Committee reviewed the cash and equity compensation of our NEOs with the goal of ensuring that our executive officers are properly incentivized and made adjustments it determined to be appropriate.

The Compensation Committee considers compensation data from our peer group as one of several factors that inform its judgment of appropriate compensation levels. The Compensation Committee also considers other factors in determining compensation including those set forth below, and may pay up to the 75th percentile of our peer group in target total direct compensation:

       The performance and experience of each NEO;

       The scope and strategic impact of the NEO’s responsibilities;

       Our past business performance and future expectations;

       Our long-term goals and strategies;

       The difficulty and cost of replacing high-performing leaders with in-demand skills; and

       The relative compensation among our NEOs.

Role of the Compensation Consultant

The Compensation Committee has the authority to retain the services of external advisors, including compensation consultants, legal counsel and other advisors, as needed to carry out its duties. The Compensation Committee engaged FW Cook to assist in guiding and executing our executive and director compensation strategy, assessing the target total direct compensation opportunities of our executive officers relative to market practices, developing a compensation peer group and advising on executive compensation decisions for fiscal 2023.

FW Cook does not provide any services to us other than the services provided to the Compensation Committee. Our Compensation Committee has assessed the independence of FW Cook and has concluded that no conflict of interest exists with respect to the work that FW Cook performs for the Compensation Committee.

Compensation Peer Group

The Compensation Committee reviews market data of companies that we believe are comparable to us. The Compensation Committee, with assistance from FW Cook, determined our peer group for fiscal 2023 based on several factors, including industry classification, company size, and other qualitative and business-related factors. Each year, the Compensation Committee examines our compensation peer group to ensure that it continues to reflect these factors and will make adjustments as needed.

Our peer group for fiscal 2023 compensation decisions consisted of 17 companies the majority of which are consumer goods companies. The Compensation Committee referred to compensation data from this peer group when making base salary, annual incentive award and long-term incentive award decisions for our NEOs. The following is a list of the companies that comprised our fiscal 2023 peer group.

Boot Barn Holdings, Inc.

GrowGeneration Corp.

Oxford Industries, Inc.

CarParts.com, Inc.

Inter Parfums, Inc.

Purple Innovation, Inc.

Casper Sleep Inc.

Johnson Outdoors, Inc.

Rocky Brands, Inc.

Clarus Corporation

Liquidity Services, Inc.

The RealReal, Inc.

e.l.f. Beauty, Inc.

Mohawk Group Holdings, Inc.

XPEL, Inc.

GoPro, Inc.

Nautilus, Inc.

   

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Fiscal 2023 Compensation

Base Salaries

We pay base salaries to our NEOs to compensate them for their performance of their day-to-day responsibilities and provide regular income. The salaries are based on each NEO’s experience, leadership skills, and scope of responsibilities with reference to competitive market pay levels provided by FW Cook. Base salaries are reviewed on an annual basis by our Compensation Committee in consultation with FW Cook. Base salaries may be adjusted to maintain competitive pay positioning, reflect changes in responsibilities and other factors. In fiscal 2023, the base salaries for Mr. Nelson, Ms. Fox, Mr. Krause and Ms. Dellomo were increased by 4% as part of the Compensation Committee’s annual compensation review.

Annual Incentive Plan (AIP) Compensation

A significant portion of each NEO’s compensation is tied to Company performance. We provide for annual performance-based cash incentive opportunities for our NEOs (“AIP Award”) based on achievements relative to Company financial and strategic objectives. Target AIP Award levels are based on a percentage of our NEOs’ base salaries at the conclusion of the applicable performance year and are informed by market data and Compensation Committee judgment. Actual award amounts are based on achievement relative to threshold, target, stretch and maximum performance goals established by the Compensation Committee. Performance is measured at the end of the fiscal year and actual payouts made relative to each NEO’s target AIP Award opportunity as shown in the following table:

AIP Payout Levels based on Performance Levels(1)(2)

 

Threshold

Target

Stretch

Maximum

Name

Performance

Payout

Performance

Payout

Performance

Payout

Performance

Payout

Shawn Nelson

 

$133,530

 

$267,060

 

$400,590

 

$534,120

Mary Fox

50% of
target

$133,530

100% of
target

$267,060

150% of
target

$400,590

200% of
target

$534,120

Jack Krause

$133,530

$267,060

$400,590

$534,120

Donna Dellomo

 

$104,175

 

$208,350

 

$312,525

 

$416,700

(1)     Threshold performance results in a payout of 30% of base salary for Mr. Nelson, Ms. Fox and Mr. Krause, and a payout of 25% of base salary for Ms. Dellomo. Target performance results in a payout of 60% of base salary for Mr. Nelson, Mr. Fox and Mr. Krause, and 50% of base salary for Ms. Dellomo. Stretch performance results in payout of 90% of base salary for Mr. Nelson, Ms. Fox and Mr. Krause, and 75% of base salary for Ms. Dellomo. Maximum performance results in payout capped at 120% of base salary for Mr. Nelson, Ms. Fox and Mr. Krause, and 100% of base salary for Ms. Dellomo. Target levels as a percentage of base salary remain unchanged from the prior fiscal year.

Fiscal 2023 AIP Awards

Company Performance Metrics

For fiscal 2023 AIP Awards, the Compensation Committee selected metrics and weightings that balance a growth measure (net sales) and a profitability-related measure (adjusted EBITDA). In addition, to drive strong customer service the Company established targets for post-purchase customer satisfaction (“CSAT”) survey results as a condition to maximum payout eligibility under the 2023 AIP. If CSAT is not attained, the maximum payout is 180% of target. The performance targets for each metric are based on Company operating and financial plans and other factors.

During fiscal 2023, the Company exceeded net sales performance targets and achieved a 112% payout on the net sales metric. Adjusted EBITDA performance, however, was negatively impacted by unplanned and extraordinary freight costs which resulted in a 790 basis point increase on cost of sales. There was also a substantial decline in the home furnishing category due to inflation and other external factors that led to a decrease in discretionary consumer spending and overall demand. These factors, all of which were generally outside the control of the Company, adversely impacted the adjusted EBITDA AIP performance results. The Compensation Committee carefully considered these factors, the impact the AIP payouts might have on the Company’s ability to retain and reward employees necessary to achieve the Company’s

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financial and strategic goals, and the Company’s record net sales and outperformance relative to industry peers despite significant market headwinds. Accordingly, the Compensation Committee, as permitted under the provisions of the 2023 AIP, determined that it was appropriate to exclude the impact of unplanned and extraordinary freight costs of at least $11 million from adjusted EBITDA resulting in performance of $71.3 million and achievement of a 106% payout on the adjusted EBITDA metric. The Committee then applied negative discretion to decrease the weighted net sales and adjusted EBITDA payout percentage to target level (100%), which is the overall payout level it felt was appropriate for performance in 2023. The amounts shown in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table on page 37 reflect this level of performance.

Metrics

Weight

Performance Levels
(rounded)

Results

Weighted
Payout Percent

Net Sales

40%

Threshold:

$630M =

50%

$651.5M

112%

(Growth measure)

Target:

$642M =

100%

 

Stretch:

$682M =

150%

 

Maximum:

$721M =

200%

Adjusted EBITDA(1)

40%

Threshold:

$68M =

50%

$71.3M

106%

(Profitability-related measure)

Target:

$70M =

100%

 

Stretch:

$76M =

150%

 

Maximum:

$83M =

200%

CSAT(2)

20%

Target:

83.5%

84.2%

Not applicable

(Customer satisfaction measure)

Total Payout Percent

109%

Adjusted Payout Percent

100%

(1)     Adjusted EBITDA is a non-GAAP measure. For a discussion of this measure and for a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measures” in Appendix A of this Proxy Statement. As discussed above and permitted under the 2017 Equity Plan, the adjusted EBITDA results shown in this table reflect an adjustment from actual adjusted EBITDA results reported in the Company’s Form 10-K for the fiscal year ended January 29, 2023.

(2)     Achievement of CSAT targets is a condition to maximum payout. Committee discretion applied.

Mary Fox Fiscal 2023 Performance Bonus

In connection with her appointment to the role of President and Chief Operating Officer in November 2021, in addition to her AIP Award discussed below, Ms. Fox was eligible to receive an additional performance bonus of up to $400,000 (“Additional Bonus”) for fiscal 2023 payable under the AIP. The Additional Bonus was payable in two installments, with 60% of the Additional Bonus payable upon certification of the performance results following the conclusion of the third quarter of fiscal 2023 based on annual operating plan targets for fiscal 2023, and the remaining 40% payable upon certification of performance results following the conclusion of the fourth quarter of fiscal 2023 based on the annual operating plan targets for net sales and adjusted EBITDA, and with the ability to true-up the payment of the third quarter installment based on performance for the fourth quarter of fiscal 2023 to the extent that the third quarter targets were not then met. The Company achieved its net sales and adjusted EBITDA operating plan targets for the third quarter of fiscal 2023 earning Ms. Fox 60%, or $240,000, of her Additional Bonus. As discussed in the Fiscal 2023 AIP Awards section above, for the fourth quarter and fiscal year ended January 29, 2023, the Company exceeded net sales performance targets, but was negatively impacted by unplanned and extraordinary freight costs which resulted in performance below adjusted EBITDA targets. Consistent with its analysis and considerations made with respect to fiscal 2023 AIP Awards, the Compensation Committee, as permitted under the provisions of the 2023 AIP, determined it was appropriate to exclude the impact of unplanned and extraordinary freight costs from adjusted EBITDA which resulted in Ms. Fox earning 40%, or $160,000, of her Additional Bonus. The full value of 100% of Ms. Fox’s Additional Bonus is included in the Summary Compensation Table on page 37.

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Long-Term Incentive Compensation

To encourage a strong focus on long-term performance, our Compensation Committee grants our NEOs stock-based awards, the value of which depends on our stock performance and other performance measures. The Compensation Committee generally awards long-term incentive compensation in the form of time-based RSUs, and performance-based PSUs and LTPAs. Long-term incentive awards are generally granted to our NEOs annually and grant amounts are determined based on various factors including Company performance and market practices.

In fiscal 2023, the Compensation Committee awarded long-term incentives to the NEOs under our 2017 Equity Plan in the form of RSUs, PSUs, and LTPAs weighted approximately 15%, 15% and 70%, respectively, of each NEO’s total long-term incentive target award value. The Compensation Committee selected this award mix to emphasize incentive award opportunities that are contingent upon both strong performance and retention. Target award values for RSUs, PSUs and LTPAs were determined based on peer group data provided by FW Cook. The following table shows the long-term incentive target award values for fiscal 2023 for each of the NEOs:

FISCAL 2023 LONG-TERM INCENTIVE TARGET VALUES

RSU
($)

PSU
($)

LTPA
($)

Total Value
($)

Shawn Nelson

382,500

382,500

1,649,000

2,414,000

Mary Fox

382,500

382,500

1,649,000

2,414,000

Jack Krause

382,500

382,500

735,000

1,500,000

Donna Dellomo

145,500

145,500

420,000

711,000

Actual RSU and PSU share amounts are determined by dividing the target award values by the average closing price of a share of the Company’s common stock for the 30-day trading period prior to the date of grant.

Fiscal 2023 PSU and RSU Awards

PSUs.    The Compensation Committee grants performance-based awards to align executive compensation with stockholder interests. PSU awards are granted to our NEOs and can be earned based on achievement of predefined Company performance metrics and targets measured and certified by the Compensation Committee at the end of three consecutive 12-month performance periods. The Compensation Committee sets performance targets at the beginning of each 12-month performance period and the performance targets may change from year to year. NEOs can earn 50% of their target award for achieving 90% of the performance targets, and up to 100% of their target award for performance above 90% of such targets. There is no payout for performance below 90% of the performance targets. Once earned, PSUs are paid in shares of Company stock.

If the PSU performance targets are met for a given 12-month performance period, one-third of the target PSU award will be paid out to the NEO on the applicable anniversary of the grant date provided that the NEO is employed by the Company on the payout date. If the PSU performance targets are not met for the first or second 12-month performance period, then such unearned PSUs (representing one-third of the target award) will be eligible to vest if the Company’s performance at the end of the next fiscal year exceeds the aggregate of the performance targets for the current fiscal year plus the prior fiscal year. Unearned PSUs may be carried forward only one year in this manner and may only be carried forward twice during the three-year term of the PSU award.

       Fiscal 2023 PSUs.    In fiscal 2023, one-third of target PSUs could be earned by our NEOs based on Company performance relative to the same net sales and adjusted EBITDA performance targets established for the fiscal 2023 AIP Awards for the 12-month performance period ending January 29, 2023 (“Fiscal 2023 PSUs”). During fiscal 2023, the Company exceeded net sales performance targets and achieved a 100% payout on the net sales metric. Adjusted EBITDA performance, however, was negatively impacted by unplanned and extraordinary freight costs as discussed in the AIP Award section on page 30. There was also a substantial decline in the home furnishing category due to inflation and other external factors that led to a decrease in discretionary consumer spending and overall demand. These factors, all of which were generally

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outside the control of the Company, adversely impacted the adjusted EBITDA PSU performance results. The Compensation Committee carefully considered these factors, the impact the PSU payouts might have on the Company’s ability to retain and reward employees necessary to achieve the Company’s financial and strategic goals, and the Company’s record net sales and outperformance relative to industry peers despite significant market headwinds. Accordingly, the Compensation Committee, as permitted under the provisions of the 2017 Equity Plan, determined that it was appropriate to exclude the impact of unplanned and extraordinary freight costs of at least $11 million from adjusted EBITDA resulting in performance of $71.3 million and achievement of a 100% payout on the adjusted EBITDA metric.

Based on the performance ranges and results shown in the table below, the Company exceeded both the net sales and adjusted EBITDA performance targets earning the NEOs one-third of their target Fiscal 2023 PSUs as follows: Mr. Nelson — 2,772 shares, Ms. Fox — 2,772 shares, Mr. Krause — 2,772 shares, and Ms. Dellomo — 1,054 shares.

 

Metrics

Weight

Performance Ranges

Results

Payout
Percent

Net Sales

50%

Threshold:

$630M =

50%

$651.5M

50%

(Growth measure)

Target:

$642M =

100%

Adjusted EBITDA(1)

50%

Threshold:

$68M =

50%

$71.3M

50%

(Profitability measure)

Target:

$70M =

100%

Total Payout Percent

 

100%

(1)     Adjusted EBITDA is a non-GAAP measure. For a discussion of this measure and for a reconciliation to the most directly comparable GAAP measure, see “Reconciliation of Non-GAAP Financial Measures” in Appendix A of this Proxy Statement. As discussed above and permitted under the 2017 Equity Plan, the adjusted EBITDA results shown in this table reflect an adjustment from actual adjusted EBITDA results reported in the Company’s Form 10-K for the fiscal year ended January 29, 2023.

       Fiscal 2022 PSUs.    On June 7, 2021, Mr. Nelson, Mr. Krause and Ms. Dellomo were granted PSUs and on November 18, 2021, Ms. Fox was granted PSUs (the “Fiscal 2022 PSUs”). The Compensation Committee applied the same metrics and targets used for the Fiscal 2023 PSUs (see table above) to the second performance period of the Fiscal 2022 PSU grant earning the NEOs one-third of their target Fiscal 2022 PSUs as follows: Mr. Nelson — 1,457 shares, Ms. Fox — 2,416 shares, Mr. Krause — 1,457 shares and Ms. Dellomo — 555 shares.

       Fiscal 2021 PSUs.    On June 5, 2020, Mr. Nelson, Mr. Krause and Ms. Dellomo were granted PSUs (the “Fiscal 2021 PSUs”). The Compensation Committee applied the same metrics and targets used for the Fiscal 2023 PSUs (see table above) to the third performance period of the Fiscal 2021 PSU grant earning the NEOs one third of their target Fiscal 2021 PSUs as follows: Mr. Nelson — 7,145 shares, Mr. Krause — 7,145 shares, and Ms. Dellomo — 2,723 shares.

       Fiscal 2021 PSU2s.    The Compensation Committee granted PSUs to Mr. Nelson, Mr. Krause and Ms. Dellomo that vest, if the Company achieves $550 million in net sales and $50 million in adjusted EBITDA over a four-year performance period ending in fiscal 2024 (“Fiscal 2021 PSU2s”). Fiscal 2021 PSU2s vest in the fiscal year in which the Company achieves both the net sales and adjusted EBITDA targets but no later than June 5, 2024. Once earned, Fiscal 2021 PSU2s are payable in the year earned. If both targets are not achieved Fiscal 2021 PSU2s are forfeited. Based on Company net sales performance of $651.5 million and adjusted EBITDA performance of $60.3 million, Mr. Nelson, Mr. Krause and Ms. Dellomo earned their target Fiscal 2021 PSU2s as follows: Mr. Nelson — 24,759 shares, Mr. Krause — 24,759 shares, and Ms. Dellomo 23,212 shares.

Long-Term Performance Awards.    In fiscal 2023, the Compensation Committee introduced long-term performance awards (“LTPAs”) to reward strong Company and individual performance and to serve as a retention tool. LTPAs are denominated in performance-based restricted stock units of which 100% may be earned by the NEOs based on performance relative to stretch targets established by the Committee for a

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designated performance period. Once earned, LTPA’s are payable in a single tranche following the fiscal year in which the performance levels were achieved. If the performance targets are not achieved, no LTPAs will be paid. Since they are earned for stretch performance, the LTPA grants may be granted up to an amount that would bring the executive’s target total direct compensation opportunity to the 75th percentile of the Company’s peer group. On April 15, 2022, the Compensation Committee granted LTPAs (“Fiscal 2023 LTPAs”) to the NEOs that vest upon achievement of stretch net sales and adjusted EBITDA targets designed to award accelerated performance over a three-year performance period ending in fiscal 2025. Fiscal 2023 LTPAs vest in the fiscal year in which the Company achieves both the net sales and adjusted EBITDA targets but no later than April 25, 2025.

RSUs.    RSUs provide incentives for executives to remain employed by the Company to execute the Company’s long-term strategic goals. The Compensation Committee believes that RSUs tie compensation to Company performance, given that the value of an RSU can increase or decrease with our stock price. Generally, RSUs vest in three equal annual installments on each of the first three anniversaries of the grant date. Vested shares are settled in common stock on each vest date provided that the executive remains employed by the Company on such date.

Fiscal 2020 Performance Stock Options

On June 5, 2019, Mr. Nelson, Mr. Krause and Ms. Dellomo were awarded performance stock options that were eligible to vest on the third anniversary of the grant date if the average closing price of Company stock was at least $75 for 40 consecutive trading days (“Market Condition”) during the period beginning on the date of grant and ending on June 5, 2022, subject to continued service with the Company (“Employment Condition”). On June 5, 2021, the Market Condition was satisfied. On June 5, 2022, the Employment Conditions were satisfied, and the options became fully vested and exercisable. Stock options provide the opportunity to receive any appreciation in value between the stock price on the date of grant and the date the option is exercised.

Retirement or Similar Benefit Plans

The Lovesac Company 401(k) Plan

Our The Lovesac Company 401(k) Plan is designed to provide retirement benefits to all eligible full-time and part-time associates. The TLC 401(k) Plan provides associates with the opportunity to save for retirement on a tax-favored basis. The 401(k) Plan permits elective deferral contributions, safe harbor matching 100% contributions, not to exceed 4% of their compensation with immediate vesting, and profit-sharing contributions. All our associates (both full-time and part-time) (except for union associates and non-resident aliens) are eligible to participate in the 401(k) Plan as of the first day of the month following 30-days of completed service and are over the age of 21.

Post-Employment Agreements

For a description of the material terms of each contract, agreement, plan or arrangement that provides for payment(s) to a named executive officer at, following, or in connection with the resignation or other termination of a named executive officer, or a change in control, see the section entitled “Executive Employment Arrangements” beginning on page 41.

Other Compensation Policies

Associate Benefits

We provide benefits to all eligible associates, including our NEOs, which the Compensation Committee believes are reasonable and consistent with its overall compensation objective to better enable us to attract and retain associates. These benefits include medical, dental and vision insurance, a 401(k) plan, life and disability insurance, flexible spending accounts, a monthly stipend for home office expenses and discounts on Company product. There are no perquisites offered to our NEOs.

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Stock Ownership Guidelines

The Board of Directors adopted stock ownership guidelines for our NEOs. The guidelines require our NEOs to accumulate and hold shares of the Company’s common stock valued at a multiple of his or her annual base salary within five years of the effective date of the guidelines, or five years of becoming subject to the guidelines, whichever is earlier (“Stock Ownership Requirement”). The Stock Ownership Requirements for our NEOs are set forth below:

Level

Stock Ownership Requirement

CEO

5 times base salary

President and COO

3 times base salary

Chief Strategy Officer

3 times base salary

EVP and CFO

2 times base salary

The following equity holdings qualify toward satisfaction of the Stock Ownership Requirement:

       Shares directly owned by the NEO or his or her immediate family members residing in the same household;

       Shares beneficially owned by the NEO, but held in trust, limited partnerships, or similar entities for the sole benefit of the NEO or his or her immediate family members residing in the same household;

       Shares held in retirement or deferred compensation accounts for the benefit of the NEO or his or her immediate family members residing in the same household; and

       Time-based RSUs that have not vested.

Unexercised stock options, whether vested or unvested, and unearned performance-based awards do not count towards the guidelines. In the event the NEO does not meet the Stock Ownership Requirement as of the applicable deadline, the Compensation Committee may (but is not required to) require that the NEO retain an amount equal to all or a portion of the net shares received following the exercise of Company stock options or the vesting of time-based RSUs until the applicable Stock Ownership Requirement has been satisfied.

As of January 29, 2023, all NEOs were in compliance with the guidelines, or on track for compliance within the time period prescribed under the guidelines.

Clawback Policy

The Board of Directors adopted a Clawback Policy requiring the recovery of or forfeiture to the Company of any excess incentive compensation received from our NEOs if (a) the Company is required to restate any financial results due to the material noncompliance of the Company with any financial reporting requirements under the securities laws, and (b) the Audit Committee determines that the NEOs engaged in misconduct (including, but not limited to an act of fraud or breach of fiduciary duty) that resulted in the material noncompliance.

Excess incentive compensation means an amount up to the difference between (a) any incentive compensation paid, granted, vested, settled or accrued during the three completed fiscal years before the restatement, and (b) the incentive compensation the NEO would have been paid or awarded based on the accurate financial information or restated financial results. The Board may recover, or require the forfeiture of, different amounts from different covered officers on such basis as it shall deem appropriate. Material noncompliance means fraud or intentional failure to comply with any material reporting requirements for the representation of financial results of the Company in a public filing with the SEC.

In 2022, the SEC adopted final rules related to clawbacks under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The rules direct securities exchanges to implement listing standards that will require public companies to maintain and disclose a clawback policy that meets specified requirements. We intend to re-evaluate our clawback policy in light of the final rules and the related Nasdaq listing standards.

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Insider Trading, Anti-Hedging and Pledging Policies

We have an Insider Trading Policy that requires our Directors, NEOs and other senior associates to pre-clear transactions in our common stock with the Company’s finance and legal departments. Trading is permitted only during specified quarterly Company open trading periods. Our NEOs may enter into a trading plan under Rule 10b5-1 of the Exchange Act. These trading plans may be entered into only during an open trading period, must be approved by the Company’s finance and legal departments, and must include a waiting period prior to commencement of trading under the plan. An executive bears the full responsibility if he or she violates the Company policy by permitting shares to be bought or sold without pre-clearance or when trading is restricted.

In addition, our policy prohibits our Directors and NEOs from short-term trading, short selling, buying or selling puts or calls or other derivative securities on the Company’s securities, trading on margin, hedging, or pledging shares of our common stock as collateral for margin loans without the prior approval of our Board of Directors.

Tax and Accounting Considerations

In making decisions about executive compensation, we continue to consider the impact of regulatory provisions, including the provisions of Section 409A of the Internal Revenue Code, as amended, regarding non-qualified deferred compensation and the “golden parachute” provisions of Section 280G of the Internal Revenue Code, as amended, as well as how various elements of compensation will impact our financial results, including the impact of applicable stock compensation accounting rules, which determine how we recognize the cost of employee services received in exchange for awards of equity instruments. While the Compensation Committee considers regulatory provisions and the impact of compensation elements on our financial results as factors in determining executive compensation, the Compensation Committee believes that it is in the best interests of our stockholders to maintain flexibility in our approach to executive compensation and to structure a program that we consider to be the most effective in attracting, motivating and retaining key executives.

Compensation Committee Report

The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis section with management. Based on this review and discussion, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis section be included in this Proxy Statement and incorporated by reference into the Company’s Annual Report on Form 10-K for the fiscal year ended January 29, 2023.

Respectfully submitted by the members of the Compensation Committee of the Board of Directors:

 

THE COMPENSATION COMMITTEE

   

Walter F. McLallen, Chair
John Grafer
Shirley Romig

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Summary Compensation Table

The following Summary Compensation Table summarizes the total compensation paid to or earned by each of our named executive officers for services provided to the Company for fiscal 2023.

Name and
Principal
Position

Year

Salary
($)
(1)

Bonus
($)

Stock
Awards
($)
(2)

Option
Awards
($)

Non-Equity
Incentive Plan
Compensation
($)
(3)

All Other
Compensation
($)
(4)

Total
($)

Shawn Nelson

2023

440,229

2,472,858

267,060

24,536

3,204,682

Chief Executive

2022

405,450

732,744

489,060

12,842

1,640,096

Officer

2021

341,847

1,266,865

582,677

408,000

10,914

2,610,303

Mary Fox

2023

440,404

2,472,858

667,060

12,227

3,592,548

President and Chief

2022

72,692

500,000

1,640,839

489,060

768

2,703,359

Operating Officer

 

Jack Krause

2023

440,229

1,537,620

267,060

24,536

2,269,444

Chief Strategy

2022

405,450

732,744

489,060