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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No.        )
Filed by the Registrant   ☒
Filed by a Party other than the Registrant   ☐
Check the appropriate box:

Preliminary Proxy Statement

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

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant to §240.14a-12
SUMMER INFANT, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filling Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check all boxes that apply):
☐   No fee required.
☒   Fee paid previously with preliminary materials.
☐   Fee computed on table in exhibit required by Item 25(b) per Exchange Act Rules 14a-6(i)(1) and 0-11.

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SUMMER INFANT, INC.
1275 Park East Drive
Woonsocket, Rhode Island 02895
MERGER PROPOSED — YOUR VOTE IS VERY IMPORTANT
May 16, 2022
Dear Stockholders:
You are cordially invited to attend a special meeting of stockholders (the “Special Meeting”) of Summer Infant, Inc., a Delaware corporation (“SUMR,” the “Company,” “we,” or “us”), to be held at 9:00 a.m. Eastern Time (ET) on Thursday, June 16, 2022, at the offices of the Company located at 1275 Park East Drive, Woonsocket, Rhode Island 02895.
At the Special Meeting, you will be asked to consider and vote on two matters:
1.
a proposal to adopt the Agreement and Plan of Merger, dated March 16, 2022 (as it may be amended from time to time, the “Merger Agreement”), by and among SUMR, Kids2, Inc., a Georgia corporation (“Parent”), and Project Abacus Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Merger Sub will merge with and into SUMR (the “Merger”), with SUMR continuing as the surviving corporation of the Merger and as a wholly owned subsidiary of Parent (the “Merger Proposal”);
2.
a proposal to approve, on a non-binding, advisory basis, certain compensation that will or may become payable to our named executive officers in connection with the Merger; and
3.
a proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are insufficient votes for, or otherwise in connection with, the approval of the Merger Proposal.
If the Merger is completed, you will be entitled to receive $12.00 in cash (the “Merger Consideration”), without interest and subject to all applicable withholding taxes, for each share of our common stock you own (unless you have properly demanded appraisal for your shares in accordance with, and have complied in all respects with, Section 262 of the General Corporation Law of the State of Delaware).
After reviewing and considering the terms and conditions of the Merger and other factors, including those more fully described in the enclosed proxy statement, our Board of Directors unanimously (i) determined and declared that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the Merger Consideration, are in the best interests of SUMR and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, and (iii) resolved to recommend that SUMR’s stockholders adopt the Merger Agreement.
Our Board of Directors recommends that you vote:   (1) “FOR” the proposal to adopt the Merger Agreement; (2) “FOR” the non-binding, advisory proposal to approve certain compensation that will or may become payable to our named executive officers in connection with the Merger (the “Merger-related Compensation”); and (3) “FOR” the proposal to adjourn the Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are insufficient votes for, or otherwise in connection with, the approval of the Merger Proposal.
The accompanying proxy statement is dated May 16, 2022 and is first being mailed to stockholders of SUMR on or about May 17, 2022. The accompanying proxy statement contains, among other things, detailed information about us, the Special Meeting, the Merger, the Merger-related Compensation and the Merger Agreement. We encourage you to read the accompanying proxy statement, including its appendices and all documents incorporated by reference therein, carefully and in its entirety. You should also carefully consider
 

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the factors discussed in the sections entitled “Cautionary Statement Concerning Forward-Looking StatementsandRisk Factorson pages 21 and 22, respectively, of the accompanying proxy statement.
Your vote is very important, regardless of the number of shares of SUMR common stock that you own. We cannot complete the Merger unless the Merger Agreement is adopted by the affirmative vote of the holders of a majority of the shares of outstanding SUMR common stock as of May 6, 2022 and entitled to vote on the matter. The failure of any stockholder of record to (i) attend and vote in person at the Special Meeting, (ii) vote via the Internet or (iii) submit a signed proxy card will have the same effect as a vote “AGAINST” the Merger Proposal. If you hold your shares in “street name,” the failure to instruct your broker, bank, or nominee on how to vote your shares will have the same effect as a vote “AGAINST” the Merger Proposal. If you sign, date, and return your proxy card without indicating how you wish to vote, your proxy will be voted “FOR” the Merger Proposal.
In connection with entering into the Merger Agreement, SUMR stockholders holding shares of common stock constituting approximately 53% of SUMR’s issued and outstanding common stock have each entered into a Voting and Support Agreement with Parent pursuant to which they agreed to vote their shares of common stock in favor of the Merger, subject to certain exceptions in accordance with the terms of the Voting and Support Agreements.
We hope that you will be able to attend the Special Meeting. However, whether or not you plan to attend, please complete, sign, date, and return the proxy card enclosed with the accompanying proxy statement, or if your shares are held in “street name” through a broker, bank, or nominee, instruct your broker, bank, or nominee on how to vote your shares using the voting instruction form furnished by your broker, bank, or nominee, as promptly as possible. Submitting a signed proxy by mail will ensure your shares are represented at the Special Meeting. If your shares are held in “street name” through a broker, bank, or nominee, you may provide voting instructions through your broker, bank, or nominee by completing and returning the voting form provided by your broker, bank, or nominee, or electronically over the Internet or by telephone through your broker, bank, or nominee if such a service is provided. To provide voting instructions over the Internet or by telephone through your broker, bank, or nominee, you should follow the instructions on the voting instruction form provided by your broker, bank, or nominee.
On behalf of the Board and management of SUMR, we extend our appreciation for your continued support and your consideration of this matter.
Sincerely,
/s/ Stuart Noyes
Stuart Noyes
Chief Executive Officer
 

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SUMMER INFANT, INC.
1275 Park East Drive
Woonsocket, Rhode Island 02895
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 16, 2022
Notice is hereby given that a special meeting of stockholders of Summer Infant, Inc. (“SUMR,” the “Company,” “we” or “us”) will be held at 9:00 a.m. Eastern Time (ET) on Thursday, June 16, 2022, at the offices of the Company located 1275 Park East Drive, Woonsocket, Rhode Island 02895 (the “Special Meeting”) to consider and act upon the following matters:
1.
The Merger Proposal.   To adopt the Agreement and Plan of Merger, dated March 16, 2022 (as it may be amended from time to time, the “Merger Agreement”), by and among SUMR, Kids2, Inc., a Georgia corporation (“Parent”), and Project Abacus Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Parent (“Merger Sub”), pursuant to which, upon the satisfaction or waiver of the conditions to closing set forth therein, Merger Sub will merge with and into SUMR with SUMR surviving the Merger as a wholly owned subsidiary of Parent;
2.
The Compensation Proposal.   To approve, on a non-binding, advisory basis, certain compensation that will or may become payable to our named executive officers in connection with the Merger; and
3.
The Adjournment Proposal.   To approve the adjournment of the Special Meeting to a later date or dates, or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are insufficient votes for, or otherwise in connection with, the approval of the Merger Proposal.
Only stockholders of record as of the close of business on May 6, 2022 (the “Record Date”) are entitled to notice of the Special Meeting and to vote at the Special Meeting or at any adjournment, continuation, rescheduling or postponement thereof.
The accompanying proxy statement contains, among other things, detailed information about the Merger Proposal, the Compensation Proposal and the Adjournment Proposal. In addition, a copy of the Merger Agreement is attached as Appendix A to the accompanying proxy statement and is incorporated by reference therein. We encourage you to read the accompanying proxy statement, including its appendices and all documents incorporated by reference therein, carefully and in its entirety.
The affirmative vote of the holders of a majority of the shares of SUMR common stock outstanding as of the Record Date and entitled to vote on the matter is required to approve the Merger Proposal. A majority of the votes cast “FOR” is required for the approval of the Compensation Proposal and the Adjournment Proposal.
Your vote is very important, regardless of the number of shares of SUMR common stock that you own. The failure of any stockholder of record to (i) attend and vote in person at the Special Meeting, (ii) vote via the Internet or (iii) submit a signed proxy card will have the same effect as a vote “AGAINST” the Merger Proposal, but assuming a quorum is present, will have no effect on the outcome of any vote on the Compensation Proposal or the Adjournment Proposal. If you hold your shares in “street name,” you should instruct your broker, bank, or nominee on how to vote your shares using the voting instruction form furnished by your broker, bank, or nominee. The failure to do so will have the same effect as a vote “AGAINST” the Merger Proposal, but assuming a quorum is present, will have no effect on the outcome of any vote on the Compensation Proposal or the Adjournment Proposal. Abstentions will have the same effect as a vote “AGAINST” the Merger Proposal, but will have no effect on the Compensation Proposal and the Adjournment Proposal. If you sign, date, and return your proxy card without indicating how you wish to vote on a proposal, your proxy will be voted “FOR” such proposal.
The representation in person or by proxy at the Special Meeting of the holders of at least a majority of our outstanding shares of common stock entitled to vote at the Special Meeting will constitute a quorum for the transaction of business at the Special Meeting. Abstentions will be counted as present for purposes of
 

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determining the existence of a quorum. Shares held in “street name” for which the applicable broker, bank, or nominee receives no instructions regarding how to vote on any of the proposals before the Special Meeting will not be counted as present at the Special Meeting for quorum purposes. However, shares held in “street name” for which the applicable broker, bank, or nominee receives instructions regarding how to vote on one or more but not all of the proposals before the Special Meeting will be counted as present at the Special Meeting for quorum purposes.
Stockholders who do not vote in favor of the Merger Proposal and who otherwise meet the requirements of Section 262 of the General Corporation Law of the State of Delaware (the “DGCL”) will have the right to seek appraisal of the fair value of their shares of SUMR common stock, as determined in accordance with Section 262 of the DGCL. In addition to not voting in favor of the Merger Proposal, any stockholder wishing to exercise its appraisal rights must deliver a written demand for appraisal to SUMR before the vote on the Merger Proposal and must comply in all respects with the requirements of Section 262 of the DGCL, the text of which is attached as Appendix C to the accompanying proxy statement and is incorporated by reference therein.
The Board of Directors recommends that you vote: (i) “FOR” the Merger Proposal; (ii) “FOR” the Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.
Special Note Regarding COVID-19:   Given the public health and safety concerns related to COVID-19, we ask that each stockholder evaluate the relative benefits to them personally of in-person attendance at the Special Meeting and take advantage of the ability to vote by proxy, as instructed on the proxy card or voting instructions that have been provided to you. If you elect to attend the Special Meeting in person, we ask that you follow the Company’s current requirements for visiting their corporate offices, which require visitors to wear a mask if they do not have full vaccination (including boosters) and recommended guidance, mandates, and applicable executive orders from federal and state authorities, particularly as they relate to social distancing and attendance at public gatherings. If you are not feeling well or think you may have been exposed to COVID-19, we ask that you vote by proxy for the meeting. Please be advised that SUMR will monitor any further developments with COVID-19 and the impact on the Special Meeting. If SUMR determines that it is not advisable to hold the Special Meeting in person, SUMR will, as promptly as possible, announce details on changes to the Special Meeting, including by issuing a press release and posting such information on our website.
By Order of the Board of Directors
/s/ Mary Beth Schneider
Mary Beth Schneider
SVP, General Counsel and Compliance and Secretary
Woonsocket, Rhode Island
May 16, 2022
 
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YOUR VOTE IS IMPORTANT
Ensure that your shares of SUMR common stock are voted at the Special Meeting by submitting your proxy or, if your shares of SUMR common stock are held in “street name” through a broker, bank, or nominee, by contacting your broker, bank, or nominee. If you do not submit a proxy, vote during the Special Meeting, or instruct your broker, bank, or nominee how to vote your shares, it will have the same effect as voting “AGAINST” the Merger Proposal but, assuming a quorum is present, will have no effect on the outcome of any vote on the Compensation Proposal or the Adjournment Proposal.
If your shares are registered directly in your name, you may vote:

By Mail.   Complete and mail the enclosed proxy card in the enclosed postage prepaid envelope. Your proxy will be voted in accordance with your instructions. If you sign the proxy card but do not specify how you want your shares voted, they will be voted as recommended by our Board. Your proxy card must be mailed by the date shown on the proxy card to be counted.

Via the Internet.   You may vote via the Internet by going to https://www.cstproxy.com and following the on-screen instructions. Please have your proxy card available when you access the webpage. Your vote must be received by 11:59 p.m., Eastern Time (ET), on Wednesday, June 15, 2022 to be counted.

In Person at the Special Meeting.   If you attend the Special Meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which will be available at the Special Meeting, provided that if you hold shares in street name, you provide a legal proxy authorizing you to vote your shares.
If you hold shares in street name, the organization holding your account is considered the stockholder of record for purposes of voting at the Special Meeting. The stockholder of record will provide you with instructions on how to vote your shares. Additionally, if you would like to vote in person at the Special Meeting, contact the broker or other nominee who holds your shares to obtain a legal proxy and bring it with you to the Special Meeting. You will not be able to vote at the Special Meeting unless you have a legal proxy from your broker giving you the right to vote the shares at the Special Meeting.
As a beneficial owner, you have the right to direct your broker, bank, or nominee on how to vote the shares of SUMR common stock in your account. Your broker, bank, or nominee cannot vote on any of the proposals, including the Merger Proposal, without your instructions.
If you fail to submit a signed proxy card, fail to attend the Special Meeting, or, if you hold your shares through a broker, bank, or nominee, fail to provide voting instructions to your broker, bank, or nominee, your shares of SUMR common stock will not be counted for purposes of determining whether a quorum is present at the Special Meeting. However, shares held in “street name” for which the applicable broker, bank, or nominee receives instructions regarding how to vote on one or more but not all of the proposals before the Special Meeting, will be counted present at the Special Meeting for quorum purposes. If you hold your shares of SUMR common stock through a broker, bank, or nominee, you must obtain from the record holder a valid legal proxy issued in your name in order to vote at the Special Meeting. A stockholder providing a proxy may revoke it at any time before 11:59 p.m., Eastern Time (ET) the day before the Special Meeting if such revocation is exercised by providing written notice of revocation to our Corporate Secretary, by voting online during the Special Meeting, or by providing a proxy of a later date, pursuant to the instructions set forth in “Revocability of Proxies” on page 17 of the accompanying proxy statement. Attendance at the Special Meeting alone will not revoke a submitted proxy.
We encourage you to read the accompanying proxy statement, including its appendices and all documents incorporated by reference therein, carefully and in their entirety. If you have any questions concerning the Merger, the Special Meeting, or the accompanying proxy statement, would like additional copies of the accompanying proxy statement or need help voting your shares of SUMR common stock, please contact our proxy solicitor:
Laurel Hill Advisory Group, LLC
Telephone: (888) 742-1305
Email: SUMR@laurelhill.com
 
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YOUR VOTE IS IMPORTANT.   WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE, SIGN, AND RETURN A PROXY CARD, OR INSTRUCT YOUR BROKER, BANK, OR NOMINEE ON HOW TO VOTE YOUR SHARES USING THE VOTING INSTRUCTION FORM FURNISHED BY YOUR BROKER, BANK, OR NOMINEE, AS PROMPTLY AS POSSIBLE.
 
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SUMMARY
This summary, together with the following section of this proxy statement entitled “Questions and Answers About the Special Meeting and the Merger,” highlights selected information from this proxy statement and may not contain all of the information that is important to you as a holder of SUMR common stock or that you should consider before voting on the Merger Proposal at the Special Meeting. To better understand the Merger Proposal, you should read this proxy statement, including its appendices and the documents incorporated by reference herein, carefully and in its entirety. The Merger Agreement and the Support Agreements are attached to this proxy statement as Appendix A and Appendix B, respectively, and are incorporated by reference herein.
Parties Involved in the Merger (page 25)
Summer Infant, Inc.
Summer Infant, Inc. (“SUMR” or the “Company”) is an infant and juvenile products company doing business under the name SUMR Brands. We are a recognized authority in the juvenile product industry, providing parents and caregivers a full range of innovative, high-quality, and high-value products to care for babies and toddlers. We operate in one principal industry segment across geographically diverse marketplaces, selling our products globally to large, national retailers as well as independent retailers, on our partner’s websites, and our own direct to consumer website. In North America, our customers include Amazon.com, Wal-Mart, Target, Buy Buy Baby, Home Depot, and Lowe’s. Our largest European-based customers are Smyths Toys and Amazon. We also sell through international distributors, representatives, and to select international retail customers in geographic locations where we do not have a direct sales presence. Our company was originally founded in 1985 and has publicly traded on the Nasdaq Stock Market (“Nasdaq”) since 2007 under the symbol “SUMR.”
Our principal executive offices are located 1275 Park East Drive, Woonsocket, Rhode Island 02895 and our telephone number is (401) 671-6550. For more information about our Company, please visit our website, www.summerinfant.com. Our website address is provided as an inactive textual reference only. The information contained on our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the U.S. Securities and Exchange Commission (the “SEC”). See “Where You Can Find More Information” on page 90 of this proxy statement.
Kids2, Inc.
Kids2, Inc. (“Parent”) has been producing essential infant and juvenile home products such as bassinets, playards, high chairs, boosters, swings and walkers as well as educational and developmental-focused toys for over 50 years. Parent’s products are sold throughout the world under a number of proprietary brands such as Baby Einstein, Bright Starts and Ingenuity, as well as brands licensed from well-known companies such as Disney, Ford, John Deere and Sesame Street. Parent sells through both e-commerce and traditional retail channels.
Parent’s principal executive offices are located at 3333 Piedmont Road, Suite 1800, Atlanta, Georgia, 30305 and its telephone number is (800) 230-8190. For more information about Parent, please visit its website, www.kids2.com. Parent’s website address is provided as an inactive textual reference only. The information contained on Parent’s website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the SEC.
Project Abacus Acquisition Corp.
Project Abacus Acquisition Corp. (“Merger Sub”) is a Delaware corporation and a wholly owned subsidiary of Parent that was formed by Parent for the sole purpose of entering into the Merger Agreement and completing the transactions contemplated thereby and the related financing transactions. Upon consummation of the Merger of Merger Sub with and into SUMR in accordance with the Merger Agreement, Merger Sub will cease to exist, and SUMR will survive the Merger as a wholly-owned subsidiary of Parent.
 
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Merger Sub’s principal executive offices are located at 3333 Piedmont Road, Suite 1800, Atlanta, Georgia, 30305 and its telephone number is (800) 230-8190.
The Special Meeting (page 16)
Date, Time, and Place
A special meeting of the Company’s stockholders (the “Special Meeting”) will be held on Thursday, June 16, 2022 at the offices of the Company located at 1275 Park East Drive, Woonsocket, Rhode Island 02895, at 9:00 a.m. Eastern Time (ET), unless the special meeting is adjourned or postponed to a later date or dates, or dates.
Purpose
At the Special Meeting, we will ask our stockholders of record as of the Record Date (as defined below) to vote on the following proposals:

the adoption of the Merger Agreement, a copy of which is attached as Appendix A to this proxy statement (the “Merger Proposal”);

to approve the Compensation Proposal on a non-binding, advisory basis certain compensation that will or may become payable to our named executive officers in connection with the Merger (the “Compensation Proposal”); and

to approve the adjournment of the Special Meeting to a later date or dates, or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are insufficient votes for, or otherwise in connection with, the approval of the Merger Proposal (the “Adjournment Proposal”).
Record Date; Shares Entitled to Vote; Quorum
Only stockholders of record as of the close of business on May 6, 2022 (the “Record Date”) are entitled to notice of the Special Meeting and to vote at the Special Meeting or at any adjournments, continuations, reschedulings, or postponements thereof. Each holder of record of SUMR common stock on the Record Date will be entitled to one vote for each share of SUMR common stock held by such holder as of the Record Date on each matter submitted to our stockholders for approval at the Special Meeting.
As of the Record Date, there were 2,164,791 shares of SUMR common stock outstanding and entitled to be voted at the Special Meeting.
A quorum of stockholders is necessary to hold a Special Meeting. The holders of a majority of the shares of SUMR common stock entitled to vote at the Special Meeting, present in person or by proxy representation, will constitute a quorum at the Special Meeting. As a result, 1,082,397 shares must be represented by proxy or by stockholders present and entitled to vote at the Special Meeting to constitute a quorum. If a quorum is not present at the Special Meeting, we expect to adjourn the Special Meeting until a quorum is present.
Required Vote
Approval of the Merger Proposal requires the affirmative vote of the holders of a majority of the shares of SUMR common stock outstanding as of the Record Date and entitled to vote on the matter. A majority of the votes cast “FOR” is required for the approval of each of the Compensation Proposal and the Adjournment Proposal.
Voting and Support Agreements (page 53)
In connection with entering into the Merger Agreement, each of funds affiliated with Wynnefield Capital Management LLC (“Wynnefield”) and Jason Macari, who in the aggregate beneficially own shares of common stock constituting approximately 53% of SUMR’s issued and outstanding common stock, has entered into a similar voting and support agreement (the “Support Agreements”) with Parent pursuant to
 
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which they each agreed to vote their beneficially owned shares of SUMR common stock in favor of the adoption of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Support Agreements. The Support Agreements automatically terminate in certain circumstances, including if the Merger Agreement is terminated or our Board of Directors (the “Board”) changes the Company Board Recommendation (as defined below under “Recommendation of Our Board and Reasons for the Merger”). In addition, under the terms of the Support Agreements, Wynnefield and Mr. Macari have each agreed not to transfer their shares prior to, in the case of Wynnefield, June 30, 2022, subject to an extension through July 31, 2022, and in the case of Mr. Macari until the Effective Time (as defined below under “Certain Effects of the Merger on SUMR”) or earlier termination of the Support Agreement, in each case as set forth in the Support Agreements.
Expenses of Proxy Solicitation (page 18)
Our Board is soliciting your proxy, and SUMR will bear the cost of soliciting proxies. We have engaged the services of Laurel Hill Advisory Group, LLC to provide consulting, analytic, and proxy solicitation services in connection with the Special Meeting. We have agreed to pay Laurel Hill a fee of $7,500, plus reasonable out-of-pocket expenses, for its services, and we will indemnify Laurel Hill for certain losses arising out of its proxy solicitation services. In addition to the solicitation of proxies by mail, proxies may be solicited by our directors, officers and employees by telephone, text message, email, fax, or other means of communication and we may pay persons holding shares for others their expenses for sending proxy materials to their principals. No additional compensation will be paid to our directors, officers, or employees for their services in connection with the solicitation of proxies.
Certain Effects of the Merger on SUMR (page 25)
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, Merger Sub will merge with and into SUMR, with SUMR continuing as the surviving corporation and as a wholly owned subsidiary of Parent. SUMR common stock will be de-listed from Nasdaq and be de-registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable following the Effective Time of the Merger, and at such time, we will cease to be a publicly traded company and will no longer be obligated to file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the surviving corporation, and instead will only be entitled to receive the merger consideration described in “The Merger Agreement — Merger Consideration.” Holders of shares of SUMR common stock that have not voted in favor of the Merger, have properly demanded appraisal rights for such shares in accordance with Section 262 of the DGCL, and have complied in all respects with Section 262 of the DGCL with respect to such shares (“Dissenting Shares”) shall instead only be entitled to receive the “fair value” of such Dissenting Shares as determined by the Delaware Court of Chancery pursuant to an appraisal proceeding as contemplated by Delaware law.
The Effective Time of the Merger will occur upon filing of the certificate of merger with the Secretary of State of the State of Delaware (or such later time as SUMR and Parent may agree and specify in the certificate of merger) (the “Effective Time”).
Effect on SUMR if the Merger is Not Completed (page 26)
If the Merger Proposal is not approved by the holders of a majority of the outstanding shares of SUMR common stock or if the Merger is not completed for any other reason, you will not receive any payment for your shares of SUMR common stock. Instead, we will remain a public company, SUMR common stock will continue to be listed and traded on Nasdaq, subject to compliance with its continued listing requirements, and registered under the Exchange Act, and we will continue to be obligated to file periodic reports with the SEC. Under specified circumstances, we may be required to pay Parent a termination fee upon the termination of the Merger Agreement, as described in “The Merger Agreement — Termination Fee.”
Merger Consideration (page 26)
At the Effective Time, each outstanding share of SUMR common stock (other than (i) shares held by SUMR as treasury stock or held by Parent or Merger Sub or any wholly-owned subsidiary of SUMR, Parent,
 
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or Merger Sub and (ii) Dissenting Shares) will be converted automatically into the right to receive $12.00 in cash, without interest and subject to all applicable withholding taxes, for each share of our common stock you own (the “Merger Consideration”). All shares of SUMR common stock converted into the right to receive the Merger Consideration will automatically be cancelled and cease to exist at the Effective Time, and each certificate formerly representing such shares will thereafter represent only the right to receive the Merger Consideration.
After the completion of the Merger, under the terms of the Merger Agreement, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a SUMR stockholder (except that stockholders who hold Dissenting Shares will have the right to receive a payment for the “fair value” of their Dissenting Shares as determined by the Delaware Court of Chancery pursuant to an appraisal proceeding as contemplated by Delaware law, as described in “The Merger — Appraisal Rights” on page 57 of this proxy statement and Appendix C to this proxy statement).
Treatment of Equity Awards (page 67)
Under the Merger Agreement, and at the Effective Time, each outstanding unexercised, vested or unvested SUMR stock option (“Option”) or unvested restricted stock award (“RSA”) will, without any further action, be cancelled and converted into the right to receive in cash (without interest and subject to deduction for any required withholding tax) an amount equal to: (i) in the case of stock options, the product of the excess, if any, of the Merger Consideration over the exercise price of such stock option, multiplied by the number of shares of our common stock issuable upon exercise of the stock option; or (ii) in the case of unvested RSAs, the product of the Merger Consideration multiplied by the number of shares subject to the RSA.
Recommendation of Our Board and Reasons for the Merger (page 36)
After considering various factors described in “The Merger — Recommendation of Our Board and Reasons for the Merger — Reasons for the Merger,” the Board unanimously (i) determined and declared that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the Merger Consideration, are in the best interests of SUMR and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, and (iii) resolved to recommend that SUMR’s stockholders adopt the Merger Agreement (the “Company Board Recommendation”).
The Board recommends that you vote: (i) “FOR” the Merger Proposal; (ii) “FOR” the Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.
Opinion of Duff & Phelps, Financial Advisor to the Board (page 40)
On March 16, 2022, at a meeting of the Board held to evaluate the Merger Agreement and the transactions contemplated thereby, including the Merger, Kroll, LLC (“Duff & Phelps”), operating through its Duff & Phelps Opinions Practice, delivered its opinion, dated March 16, 2022 (the “Opinion”), to the Board that, as of the date of the Opinion and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in such Opinion, the consideration to be received by the stockholders of the Company (other than shares held by Parent, Merger Sub or SUMR, or any direct or indirect wholly owned subsidiary thereof, and Dissenting Shares) was fair, from a financial point of view, to such stockholders (without giving effect to any impact of the Merger on any particular stockholder other than in its capacity as a stockholder).
The full text of the Opinion is attached as Appendix D to this proxy statement and is incorporated by reference herein in its entirety. The summary of the Opinion set forth herein is qualified in its entirety by reference to the full text of the Opinion. The Company’s stockholders are urged to read the Opinion carefully and in its entirety for a discussion of the procedures followed, assumptions made, other matters considered and limits of the review undertaken by Duff & Phelps in connection with such Opinion. The Opinion does not address any other aspects of the Merger and was not intended to, and does not, constitute advise or a recommendation as to how the Board or stockholders of the Company should vote at any meeting related to the Merger or to take any other action with respect to the Merger.
 
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Interests of the Directors and Executive Officers of SUMR in the Merger (page 50)
When considering the recommendation of the Board that you vote FOR the Merger Proposal, you should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder generally. The Board was aware of these interests in, among other matters, approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted by the stockholders of SUMR. These interests include the following:
Ownership of SUMR common stock.   As of the Record Date, our non-employee directors beneficially owned and are entitled to vote an aggregate of 81,259 shares of SUMR common stock, representing approximately 3.8% of the outstanding shares of SUMR common stock. Our executive officers, Stuart Noyes, our Chief Executive Officer, and Bruce Meier, our Interim Chief Financial Officer, do not own any SUMR common stock. Our non-employee directors own shares of SUMR common stock and will receive Merger Consideration in exchange for such shares. Our non-employee directors have informed us that they currently intend to vote all of their shares of SUMR common stock (i) “FOR” the Merger Proposal, (ii) “FOR” the Compensation Proposal, and (iii) “FOR” the Adjournment Proposal.
Riveron Engagement.   Stuart Noyes, our Chief Executive Officer and a director, and Bruce Meier, our Interim Chief Financial Officer, provide services to the Company pursuant to the terms of an engagement letter between SUMR and Riveron RTS, LLC (“Riveron”). Neither Mr. Noyes nor Mr. Meier receives any compensation directly from SUMR. In connection with the entry into the Merger Agreement, on March 16, 2022, the Riveron engagement letter was amended to provide for a success fee payable to Riveron of approximately $258,120 if the Merger is consummated, and that the engagement letter will terminate concurrently with the consummation of the Merger and Riveron will no longer provide services to the Company, including the services of Messrs. Meier or Noyes. While neither Mr. Noyes nor Mr. Meier will receive directly any portion of such success fee, a portion of the success fee may be deemed indirectly payable to them.
Mr. Stephen Zelkowicz/Wynnefield Capital.   In January 2022, the Company and its subsidiary, Summer Infant (USA), Inc., entered into a Loan and Security Agreement with Wynnefield Partners Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P. I, as lenders, and Wynnefield Capital, Inc., as agent for the lenders. The lenders are existing stockholders of the Company and, together with affiliates, beneficially own approximately 36% of the Company’s outstanding common stock. Stephen Zelkowicz, an employee of Wynnefield Capital, Inc., currently serves on the Board. All amounts owed under the Wynnefield loan agreement will be repaid concurrently with the closing of the Merger, and under the terms of the agreement, Wynnefield will be entitled to a $50,000 termination fee upon repayment.
Indemnification Rights.   Our directors and executive officers are entitled to continued indemnification pursuant to the Merger Agreement, our organizational documents and certain indemnification agreements, as well as directors’ and officers’ liability insurance.
Financing of the Merger (page 53)
In connection with the entry into the Merger Agreement, Parent has obtained (i) a debt commitment letter from Wells Fargo Bank, National Association to provide debt financing upon the terms and subject to the conditions set forth in the debt commitment letter in the aggregate amount of up to $130.0 million in the form of a senior secured revolving loan facility (the “Wells Fargo facility”) and (ii) a debt commitment letter from TCW Asset Management Company LLC to provide debt financing upon the terms and conditions set forth in the debt commitment letter in the aggregate amount of up to $110.0 million in the form of a senior secured first lien term loan facility (the “TCW facility” and with the Wells Fargo facility, the “debt facilities” and the financing available under the debt facilities, the “debt financing”). We expect that approximately $83.0 million of the debt financing will be needed to complete the closing of the Merger, including the funds to pay the SUMR stockholders the amounts due to them under the Merger Agreement.
The proceeds of the debt financing will be used to (i) finance the consummation of the transactions contemplated by the Merger Agreement on the closing date, including the payment of any amounts required to be paid by Parent pursuant to the Merger Agreement on the closing date, (ii) repay indebtedness of
 
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SUMR under its existing credit facilities, (iii) refinance existing Parent indebtedness, (iv) fund working capital and general corporate purposes (including to finance any closing date working capital needs of SUMR or its subsidiaries on the closing date) and (v) pay fees and expenses incurred in connection therewith,
Legal Proceedings Regarding the Merger (page 55)
Since the filing of the Company’s preliminary proxy statement on April 8, 2022, three lawsuits have been filed by purported stockholders of the Company in connection with the preliminary proxy statement. The complaints generally allege that the Company’s preliminary proxy statement materially misrepresents or omits certain purportedly material information including information relating to financial projections of the Company and the valuation analyses performed by one of the Company’s financial advisors, and asserts violations of certain sections of the Exchange Act by the Company and each member of the Board. The plaintiffs seek, among other things, an injunction enjoining consummation of the Merger unless disclosure of all allegedly omitted information is made, rescission of the Merger Agreement or the Merger, if the Proposed Merger is consummated, and awarding costs of the action, including plaintiff’s reasonable attorneys’ and experts’ fees and expenses. For additional information on these complaints, see the section entitled “The Merger — Legal Proceedings Regarding the Merger.”
Additional complaints or demands may be filed in connection with the Merger, which could prevent or delay completion of the Merger and result in additional costs to the Company. While the Company believes that the claims asserted in these complaints are without merit and that no additional disclosure is required under applicable law, in order to avoid the risk of these complaints delaying or adversely affecting the Merger and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, the Company has determined to voluntarily provide certain disclosures in this proxy statement.
Appraisal Rights (page 57)
If the Merger is approved by our stockholders and becomes effective, holders of Dissenting Shares will be entitled to statutory appraisal rights pursuant to Section 262 of the DGCL. This means that such stockholders are entitled to seek appraisal of their Dissenting Shares and to receive payment in cash for the “fair value” of such Dissenting Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. The ultimate amount holders receive in an appraisal proceeding may be less than, equal to, or more than the amount such holders would have received under the Merger Agreement. For a description of the rights of holders of Dissenting Shares and of the procedures to be followed in order to assert such rights and obtain payment of the fair value of such Dissenting Shares, see Section 262 of the DGCL, which is attached as Appendix C to this proxy statement, as well as the information set forth below.
A HOLDER OF SUMR COMMON STOCK WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO SHOULD REVIEW THE DISCUSSIONS SET FORTH ON PAGE 57 AND APPENDIX C CAREFULLY. FAILURE TO COMPLY PRECISELY WITH THE PROCEDURES OF SECTION 262 OF THE DGCL IN A TIMELY AND PROPER MANNER WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS. BECAUSE OF THE COMPLEXITY OF THE PROCEDURES FOR EXERCISING THE RIGHT TO SEEK APPRAISAL UNDER SECTION 262 OF THE DGCL, A HOLDER OF SUMR COMMON STOCK WHO IS CONSIDERING WHETHER TO EXERCISE ITS APPRAISAL RIGHTS, IS ENCOURAGED TO CONSULT WITH ITS OWN LEGAL COUNSEL. ANY SHARES OF SUMR COMMON STOCK HELD BY A SUMR STOCKHOLDER WHO FAILS TO PERFECT, SUCCESSFULLY WITHDRAWS OR OTHERWISE LOSES HIS, HER OR ITS APPRAISAL RIGHTS WILL BE DEEMED TO HAVE BEEN CONVERTED AS OF THE EFFECTIVE TIME INTO THE RIGHT TO RECEIVE THE MERGER CONSIDERATION.
Risk Factors (page 22)
In evaluating the proposals to be presented at the Special Meeting, you should carefully read this proxy statement and especially consider the factors discussed in the sections entitled “Cautionary Statement Concerning Forward-Looking Statements” and “Risk Factors” on pages 21 and 22 of this proxy statement, respectively.
 
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U.S. Federal Income Tax Consequences of the Merger (page 62)
If you are a U.S. holder (as defined in “The Merger — U.S. Federal Income Tax Consequences of the Merger”), the exchange of your shares of SUMR common stock for Merger Consideration (including any amounts required to be withheld for tax purposes) pursuant to the Merger will generally require you to recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between the amount of Merger Consideration you receive pursuant to the Merger (including any amounts required to be withheld for tax purposes) and your adjusted tax basis in such surrendered shares. A non-U.S. holder (as defined in “The Merger — U.S. Federal Income Tax Consequences of the Merger”) will generally not be subject to U.S. federal income tax with respect to the exchange of such non-U.S. holder’s SUMR common stock for Merger Consideration in the Merger unless such non-U.S. holder has certain connections to the United States or SUMR is, or was during the relevant period, a U.S. real property holding corporation. Because particular circumstances may differ, we recommend you consult your tax advisor to determine the U.S. federal income tax consequences to you of the Merger in light of your particular circumstances and any consequences arising under the laws of any state, local, or foreign taxing jurisdiction. A more complete description of the U.S. federal income tax consequences of the Merger is provided in “The Merger — U.S. Federal Income Tax Consequences of the Merger.”
Non-Solicitation of Acquisition Proposals (page 75)
From the date of the Merger Agreement until the earlier of the Effective Time or termination of the Merger Agreement (the “Pre-Closing Period”), SUMR is generally not permitted to solicit or discuss competing proposals with third parties, subject to certain exceptions.
Except as otherwise permitted by the Merger Agreement, during the Pre-Closing Period, SUMR will not, and will cause its subsidiaries not to, and will instruct its representatives not to on behalf of SUMR, do any of the following:

solicit, initiate, facilitate or encourage the submission of any acquisition proposal or engage in any discussions or negotiations with respect thereto;

provide any non-public information relating to SUMR to any third party relating to an acquisition proposal; or

approve, endorse or recommend an acquisition proposal.
Notwithstanding anything to the contrary set forth in the Merger Agreement, if at any time following the date of the Merger Agreement and prior to receipt of the required stockholder approval, (i) SUMR has received a written acquisition proposal from a third party, (ii) SUMR has not breached the non-solicitation covenants described above with respect to such acquisition proposal and (iii) the Board (or a committee thereof) determines in good faith, after consultation with its financial advisors and outside counsel that such acquisition proposal could reasonably be expected to result in a superior proposal, then SUMR may (1) participate in discussions or negotiations with the third party making such acquisition proposal and (2) furnish information with respect to SUMR and its subsidiaries to the third party making such acquisition proposal, its representatives and potential sources of financing subject to compliance with certain notice and other requirements as set forth in the Merger Agreement (as described in “The Merger Agreement — Non-Solicitation of Acquisition Proposals; Change of Recommendation”) and provided that SUMR’s Board (or a committee thereof) has determined in good faith (after consultation with its financial advisor and its outside legal counsel) that the failure to take such action would reasonably be expected to be inconsistent with its fiduciary duties to SUMR and its stockholders under applicable law.
Notwithstanding anything to the contrary contained in the Merger Agreement, and provided SUMR complied with the provisions described in the preceding paragraph, at any time prior to receipt of the required stockholder approval SUMR may enter into an agreement for the implementation of a superior proposal provided that (i) the Board determines in good faith, after consultation with its financial advisor and outside counsel, that the failure to such action would be inconsistent with its fiduciary duties to SUMR and its stockholders under applicable law and (ii) SUMR terminates the Merger Agreement in accordance with its terms.
 
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For a further discussion of the limitations on solicitation of acquisition proposals from third parties and the Board’s ability to respond to an acquisition proposal and enter into an agreement implementing a superior proposal, see “The Merger Agreement — Non-Solicitation of Acquisition Proposals.”
Conditions to the Closing of the Merger (page 80)
The parties expect to complete the Merger in the second quarter of 2022. However, it is possible that factors outside of each party’s control could require them to complete the Merger at a later time or not to complete it at all. The following are some of the conditions that must be satisfied or, where permitted by the Merger Agreement, waived before the Merger may be completed:

the approval of the Merger Agreement and the Merger by the affirmative vote of the holders of a majority of the outstanding SUMR common stock entitled to vote on the matter;

the absence of any governmental order preventing or prohibiting consummation of the Merger or making it illegal;

the accuracy of the representations and warranties of SUMR, on the one hand, and Parent and Merger Sub, on the other hand, in the Merger Agreement, subject in some instances to materiality or “material adverse effect” qualifiers, at and as of the date of the Merger Agreement and at the effective date of the Merger (except for representations and warranties that expressly relate to a specific date or time);

the compliance or performance by SUMR, on the one hand, and Parent and Merger Sub, on the other hand, in all material respects with all agreements, obligations and covenants required by the Merger Agreement to be performed or complied with by it on or prior to the Effective Time;

since the date of the Merger Agreement, there not having occurred any Company Material Adverse Effect (as defined in the Merger Agreement);

not more than five percent of the of the outstanding shares of SUMR common stock constitute Dissenting Shares;

certain third parties provided their consent to the Merger; and

all conditions precedent to the debt financing contained in the debt commitment letters providing for an asset-based credit facility and a term loan, a portion of the proceeds of which will fund Parent’s obligation to pay the Merger Consideration at the closing of the Merger have been satisfied and such debt commitment letters have not been terminated.
Termination of the Merger Agreement (page 81)
In general, the Merger Agreement may be terminated at any time prior to the Effective Time as follows (subject to certain limits and exceptions):

by mutual written agreement of Parent, the Merger Sub and SUMR (as authorized by Merger Sub’s board of directors and the Board);

by either SUMR or Parent or Merger Sub, if the Effective Time does not occur by June 30, 2022;

by either SUMR or Parent, if any governmental entity shall have issued a final and nonappealable order permanently prohibiting the Merger or the transactions contemplated by the Merger Agreement;

by either SUMR or Parent, if the required SUMR stockholder approval was not obtained at the SUMR stockholder meeting;

by SUMR, subject to certain cure periods, if there is any breach of any representation, warranty, covenant or agreement on the part of Parent or Merger Sub set forth in the Merger Agreement, such that the conditions to closing of the Merger would not be satisfied at the closing of the Merger;

by SUMR, if (i) certain specified conditions to Parent’s obligations to consummate the Merger have been satisfied (other than conditions which are to be satisfied as of the closing), (ii) Parent and Merger Sub fail to consummate the closing of the Merger in accordance with the Merger Agreement, (iii) SUMR has notified Parent that it is ready and willing to consummate the Merger and that
 
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certain specified conditions to Parent’s and Merger Sub’s obligation to close the Merger have been satisfied and that SUMR intends to terminate the Merger Agreement, and (iv) Parent and Merger Sub fail to consummate the Merger on or before the third business day following the date of delivery of notice by SUMR to Parent of its intention to terminate;

by SUMR if its Board has authorized SUMR to enter into a contract in connection with a superior proposal (in compliance with the terms of the Merger Agreement) and concurrently pays the applicable termination fee;

by Parent or the Merger Sub, subject to certain cure periods, if there is any breach of any representation, warranty, covenant or agreement on the part of SUMR, as set forth in the Merger Agreement, such that the conditions to closing of the Merger would not be satisfied at the closing of the Merger;

by Parent, if SUMR’s Board (or committee) has approved a change in the Company Board Recommendation; and

by Parent, if SUMR’s Board (or committee) has authorized SUMR and SUMR enters into a contract providing for a superior proposal.
Termination Fee (page 82)
Under the Merger Agreement, in the event that the Merger Agreement is terminated as a result of our Board authorizing SUMR to enter into an agreement providing for a superior proposal or approves a change of the Company Board Recommendation, SUMR must pay to Parent a termination fee of $2,310,600.
Expenses (page 83)
All expenses incurred by the parties to the Merger Agreement will be paid solely by the party which has incurred them, subject to certain provisions of the Merger Agreement.
Specific Performance (page 83)
The parties to the Merger Agreement are entitled to an injunction or injunctions to prevent irreparable injury and to specific performance of the terms of the Merger Agreement where money damages or other legal remedies would not be an adequate remedy. This will not preclude a party from pursuing any other right or remedy to which such party may be entitled or seeking to terminate the Merger Agreement and, with respect to Parent collecting the termination fee. However, Parent cannot pursue an injunction, specific performance or other equitable relief or remedies following the payment by SUMR of the termination fee described above. Any party seeking an injunction or specific performance under the Merger Agreement will not be required to provide any bond or other security in connection with seeking such remedy.
 
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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly address some commonly asked questions regarding the Special Meeting, the Merger Agreement by and among SUMR, Parent and Merger Sub, and the Merger in accordance with the Merger Agreement. These questions and answers may not address all questions that may be important to you as a stockholder of SUMR. Please refer to the preceding section of this proxy statement entitled “Summary” and the more detailed information contained elsewhere in this proxy statement, its appendices, including the Merger Agreement, and the documents incorporated by reference herein, which you should read carefully and in their entirety.
Q:
Why am I receiving these materials?
A:
On March 16, 2022, SUMR entered into the Merger Agreement, pursuant to which, among other things, Merger Sub will merge with and into SUMR, with SUMR remaining as the surviving corporation and becoming a wholly owned subsidiary of Parent. A copy of the Merger Agreement is attached as Appendix A to this proxy statement and is incorporated by reference herein. Our Board is furnishing this proxy statement and proxy card to the holders of SUMR common stock in connection with the solicitation of proxies in favor of the Merger Proposal the Compensation Proposal and the Adjournment Proposal (each as described below) to be voted on at the Special Meeting or at any adjournments continuations, reschedulings or postponements thereof.
Q:
When and where is the Special Meeting?
A:
The Special Meeting will take place as indicated below. Should we decide to change the date, time, and location of our Special Meeting, we will issue a press release, file the announcement as definitive additional soliciting material with the SEC, and take all reasonable steps necessary to inform other intermediaries in the proxy process.
Date: Thursday, June 16, 2022
Time: 9:00 a.m. Eastern Time (ET)
Place: Summer Infant, Inc., 1275 Park East Drive, Woonsocket, RI 02895
Q:
Who can vote at the Special Meeting?
A:
Only stockholders of record at the close of business on May 6, 2022 may vote at the Special Meeting. As of the close of business on May 6, 2022 there were 2,164,791 shares of common stock issued and outstanding, all of which are entitled to vote at the Special Meeting. Each share of Common Stock entitles the holder of that share to one vote on each matter properly brought before the Special Meeting.
Q:
How do I vote?
A:
Stockholder of Record
If your shares are registered directly in your name, you may vote:

By Mail.   Complete and mail the enclosed proxy card in the enclosed postage prepaid envelope. Your proxy will be voted in accordance with your instructions. If you sign the proxy card but do not specify how you want your shares voted, they will be voted as recommended by our Board. Your proxy card must be mailed by the date shown on the proxy card to be counted.

Via the Internet.   You may vote via the Internet by going to https://www.cstproxy.com and following the on-screen instructions. Please have your proxy card available when you access the webpage. Your vote must be received by 11:59 p.m., Eastern Time (ET), on June 15, 2022 to be counted.

In Person at the Special Meeting.   If you attend the Special Meeting, you may deliver your completed proxy card in person or you may vote by completing a ballot, which will be available at the Special Meeting.
Beneficial Owner of Shares Held in Street Name
If you hold shares in street name, the organization holding your account is considered the stockholder of record for purposes of voting at the Special Meeting. The stockholder of record will
 
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provide you with instructions on how to vote your shares. Internet voting will be offered to stockholders owning shares through most banks and brokers. Additionally, if you would like to vote in person at the Special Meeting, contact the broker or other nominee who holds your shares to obtain a legal proxy and bring it with you to the Special Meeting. You will not be able to vote at the Special Meeting unless you have a legal proxy from your broker giving you the right to vote the shares at the Special Meeting.
Q:
How can I attend the Special Meeting?
A:
Only stockholders and our invited guests are permitted to attend the Special Meeting. To gain admittance, you must bring a form of personal identification to the meeting, where your name will be verified against our stockholder list. If a nominee holds your shares and you plan to attend the Special Meeting, you should bring a brokerage statement showing your ownership of the shares as of the Record Date or a letter from the nominee confirming such ownership, and a form of personal identification. If you wish to vote your shares that are held by a nominee at the meeting, you must obtain a legal proxy from your nominee and bring it to the meeting.
Special Note Regarding COVID-19:   Given the public health and safety concerns related to COVID-19, we ask that each stockholder evaluate the relative benefits to them personally of in-person attendance at the Special Meeting and take advantage of the ability to vote by proxy, as instructed on the proxy card or voting instructions that have been provided to you. If you elect to attend the Special Meeting in person, we ask that you follow the Company’s current requirements for visiting their corporate offices, which require visitors to wear a mask if they do not have full vaccination (including boosters) and recommended guidance, mandates, and applicable executive orders from federal and state authorities, particularly as they relate to social distancing and attendance at public gatherings. If you are not feeling well or think you may have been exposed to COVID-19, we ask that you vote by proxy for the meeting. Please be advised that SUMR will monitor any further developments with COVID-19 and the impact on the Special Meeting. If SUMR determines that it is not advisable to hold the Special Meeting in person, we will, as promptly as possible, announce details on changes to the Special Meeting, including by issuing a press release and posting such information on our website.
Q:
What am I being asked to vote on at the Special Meeting?
A:
You are being asked to consider and vote on the following proposals:
Proposal No. 1 — to approve the adoption of the Merger Agreement (the “Merger Proposal”);
Proposal No. 2 —  to approve the Compensation Proposal on a non-binding, advisory basis certain compensation that will or may become payable to our named executive officers in connection with the Merger (the “Compensation Proposal”); and
Proposal No. 3 — to approve the adjournment of the Special Meeting to a later date or dates, or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Special Meeting, there are insufficient votes for, or otherwise in connection with, the approval of the Merger Proposal (the “Adjournment Proposal”).
Q:
What will I receive if the Merger is completed?
A:
Upon completion of the Merger, you will be entitled to receive $12.00 in cash, without interest and less any applicable withholding taxes, for each share of our common stock that you own, unless you are entitled to and have properly demanded appraisal rights and have complied in all respects with Section 262 of the DGCL with respect to each such share. In either case, as a result of the Merger, your shares will be cancelled and you will not own shares in the Surviving Corporation which will be a wholly owned subsidiary of Parent following the Merger.
Q:
How does the Merger Consideration compare to the market price of SUMR common stock prior to the signing of the Merger Agreement?
A:
The Merger Consideration represents a premium of approximately 41.2% over the closing price of our common stock on March 15, 2022 ($8.50), the last trading day before the date when the Merger
 
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Agreement was approved by our Board, and a premium of 41.4% and 26.5% over the 30-day average and 60-day average, respectively, on the same date.
Q:
What will the holders of SUMR restricted stock awards and options receive in the Merger?
A:
Prior to the Effective Time of the Merger:

each unvested RSA will, without any further action, be cancelled and converted into the right to receive in cash (without interest and subject to deduction for any required withholding Tax) an amount equal to the product of the Merger Consideration multiplied by the number of shares subject to the RSA; and

each outstanding unexercised, vested or unvested stock option will, without any further action, be cancelled and converted into the right to receive in cash (without interest and subject to deduction for any required withholding tax) an amount equal to the product of the excess, if any, of the Merger Consideration over the exercise price of each stock option, multiplied by the number of shares of SUMR common stock issuable upon exercise of the stock option.
Q:
What do I need to do now? If I am going to attend the Special Meeting, should I still submit a proxy?
A:
We encourage you to read this proxy statement, its appendices, including the Merger Agreement, and the documents incorporated by reference herein, carefully and in their entirety and consider how the Merger affects you. Whether or not you expect to attend the Special Meeting, we encourage you to complete, sign, date, and return, as promptly as possible, the enclosed proxy card so that your shares of SUMR common stock may be represented and can be voted at the Special Meeting. Submitting a proxy now to vote your shares of SUMR common stock will not prevent you from being able to vote during the Special Meeting. If you attend the Special Meeting and vote at the meeting, your vote will revoke any proxy previously submitted. If you hold your shares of SUMR common stock in “street name,” please refer to the voting instruction forms provided by your broker, bank, or nominee to vote such shares.
Q:
Should I send in my stock certificates now?
A:
No. If the Merger Proposal is approved, shortly after the Merger is completed, under the terms of the Merger Agreement, you will receive a letter of transmittal containing instructions for how to send your stock certificates to the paying agent in order to receive the Merger Consideration for each share of SUMR common stock represented by the stock certificate or book-entry shares. You should use the letter of transmittal to exchange your stock certificates or book-entry shares for the Merger Consideration to which you are entitled upon completion of the Merger. If your shares of SUMR common stock are held in “street name” through a broker, bank, or nominee, you will receive instructions from your broker, bank, or nominee as to how to effect the surrender of your “street name” shares of SUMR common stock in exchange for the Merger Consideration. Please do not send in your stock certificates now.
Q:
What happens if I sell or otherwise transfer my shares of SUMR common stock after the Record Date but before the Special Meeting? What happens if I sell or otherwise transfer my shares of SUMR common stock after the Special Meeting but before the Effective Time?
A:
The Record Date for the Special Meeting is earlier than the date of the Special Meeting and earlier than the date the Merger is expected to be completed. If you sell or transfer your shares of SUMR common stock after the Record Date but before the Special Meeting, unless special arrangements (such as provision of a proxy) are made between you and the person to whom you sell or transfer your shares and each of you notifies SUMR in writing of such special arrangements, you will retain your right to vote such shares at the Special Meeting, but will transfer the right to receive the Merger Consideration if the Merger is completed to the person to whom you sell or transfer such shares.
If you sell or transfer your shares of SUMR common stock after the Special Meeting, but before the Effective Time, you will transfer the right to receive the Merger Consideration if the Merger is completed. In order to receive the Merger Consideration, you must hold your shares of SUMR common stock through the completion of the Merger.
 
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Even if you sell or otherwise transfer your shares of SUMR common stock after the Record Date, we encourage you to sign, date, and return the enclosed proxy card or, if your shares are held in “street name” through a broker, bank, or nominee, instruct your broker, bank, or nominee on how to vote your shares using the voting instruction form furnished by your broker, bank, or nominee.
Q:
What is the vote required for each of the proposals to pass?
A.
For Proposal No. 1 (the Merger Proposal), the affirmative vote of the holders of a majority of the shares of SUMR common stock outstanding as of the Record Date and entitled to vote on the matter is required for approval.
For Proposal No. 2 (the Compensation Proposal), a majority of the votes cast “FOR” the Compensation Proposal we be considered approval.
For Proposal No. 3 (the Adjournment Proposal), a majority of the votes cast “FOR” is required for approval.
Q:
What is “Merger-related Compensation”?
A:
“Merger-related Compensation” is certain compensation that is tied to or based on the completion of the Merger and may be deemed payable to SUMR’s named executive officers, which is the subject of the Compensation Proposal. See “Proposal 2: Advisory Vote on Merger-Related Named Executive Officer Compensation” on page 86 of this proxy statement.
Q:
Why am I being asked to cast a non-binding, advisory vote to approve “Merger-related compensation” that may be deemed payable to SUMR’s named executive officers?
A:
In accordance with the rules promulgated under Section 14(a) of the Exchange Act, we are providing you with the opportunity to cast a non-binding, advisory vote on the compensation that may be payable to our named executive officers in connection with the Merger.
Q:
What will happen if the stockholders do not approve the Compensation Proposal at the Special Meeting?
A:
Approval of the Compensation Proposal is not a condition to the completion of the Merger. The vote with respect to the Compensation Proposal is on an advisory basis and will not be binding on SUMR or Parent. Further, the underlying agreement regarding such compensation is contractual in nature and is not, by its terms, subject to stockholder approval. Accordingly, payment of the “Merger-related Compensation” is not contingent on stockholder approval of the Compensation Proposal.
Q:
What constitutes a quorum?
A:
The representation in person or by proxy of at least a majority of the shares of SUMR common stock entitled to vote at the Special Meeting is necessary to establish a quorum for the transaction of business at the Special Meeting. Abstentions will be counted for purposes of determining whether a quorum is present for the transaction of business at the Special Meeting. Shares held in “street name” for which the applicable broker, bank, or nominee receives no instructions regarding how to vote on any of the proposals before the Special Meeting will not be counted as present at the Special Meeting for quorum purposes. However, shares held in “street name” for which the applicable broker, bank, or nominee receives instructions regarding how to vote on one or more but not all of the proposals before the Special Meeting will be counted as present at the Special Meeting for quorum purposes. If a quorum is not present at the Special Meeting, we expect to adjourn the Special Meeting until a quorum is present.
Q:
What if I am a beneficial owner and I do not give the nominee voting instructions?
A:
Brokerage firms have the authority to vote shares for which their customers do not provide voting instructions on certain “routine” matters. A broker non-vote occurs when a nominee does not vote on a particular item because the nominee does not have discretionary voting authority for that item and has not received instructions from the owner of the shares. Broker non-votes are not included in the calculation of the number of votes considered to be present at the Special Meeting for purposes of
 
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determining the presence of a quorum. None of the proposals described in this proxy statement relate to “routine” matters. As a result, a broker will not be able to vote your shares with respect to Proposal No. 1 (the Merger Proposal), Proposal 2 (the Compensation Proposal) or Proposal No 3 (the Adjournment Proposal) absent your voting instructions.
Q:
Can I change my vote or revoke my proxy?
A:
You may change your vote or revoke your proxy at any time prior to the vote at the Special Meeting by the following means:

You can send a written notice revoking your earlier-dated proxy, addressed to our Secretary at our principal office at 1275 Park East Drive, Woonsocket, Rhode Island 02895.

If you signed and returned a proxy card by mail and want to change your vote, you can complete, sign, date and deliver a new proxy card, dated a later date than the first proxy card.

If you submitted your proxy via the Internet, you may change your vote or revoke your proxy with a later Internet proxy.

You can attend the Special Meeting and vote in person (provided you have a legal proxy from your broker if your shares are held in street name, as indicated below). Your attendance at the Special Meeting will not, however, by itself revoke your proxy. Even if you plan to attend the Special Meeting, we recommend that you also submit your proxy or voting instructions or vote via the Internet so that your vote will be counted if you later decide not to attend the Special Meeting.

If you hold your shares in “street name” and have instructed your broker, bank or other nominee to vote your shares for you, you must follow directions received from your broker, bank or other nominee to change those instructions.
Q:
What does it mean if I receive more than one proxy card?
If you receive more than one proxy card, it means that you hold shares of our common stock in more than one account. To ensure that all your shares are voted, sign and return each proxy card. Alternatively, if you vote via the Internet, you will need to vote once for each proxy card you receive.
Q:
Where can I find the voting results of the Special Meeting?
A:
SUMR intends to announce preliminary voting results of the Special Meeting and publish final results in a Current Report on Form 8-K that will be filed with the SEC following the Special Meeting. All reports that SUMR files with the SEC are publicly available when filed. See “Where You Can Find More Information” on page 90 of this proxy statement.
Q:
When do you expect the Merger to be completed?
A:
We are working towards completing the Merger as quickly as possible and currently expect to complete the Merger in the second quarter of 2022. However, the exact timing of completion of the Merger cannot be predicted because the Merger is subject to conditions, including adoption of the Merger Agreement by the stockholders of SUMR and Parent’s fulfillment of the conditions precedent to the debt financing, a portion of which will be used to pay the Merger Consideration. See “The Merger — Financing of the Merger” on page 53 of this proxy statement.
Q:
Am I entitled to appraisal rights under the DGCL?
A:
Yes. As a holder of our common stock, you are entitled to exercise appraisal rights under the DGCL in connection with the Merger if you take certain actions and meet certain conditions. See “The Merger — Appraisal Rights” on page 57 of this proxy statement.
Q:
Who can help answer my questions?
A:
The information provided above in the Q&A format is for your convenience only and is merely a summary of some of the information in this proxy statement. We encourage you to read this proxy statement, its appendices, including the Merger Agreement, and the documents incorporated by reference
 
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herein, carefully and in their entirety and consider how the Merger affects you. If you have any questions concerning the Merger, the Special Meeting, or this proxy statement, would like additional copies of this proxy statement, or need help voting your shares of SUMR common stock, please contact our proxy solicitor:
Laurel Hill Advisory Group, LLC
Telephone: (888) 742-1305
Email: SUMR@laurelhill.com
You may also wish to consult your legal, tax, and/or financial advisors with respect to any aspect of the Merger, the Merger Agreement, or other matters discussed in this proxy statement.
 
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THE SPECIAL MEETING
The enclosed proxy is solicited on behalf of the Board for use at the Special Meeting or at any adjournments, continuations, reschedulings or postponements thereof.
Date, Time, and Place
The Special Meeting will be held at 9:00 a.m. Eastern Time (ET) on Thursday, June 16, 2022, at the offices of the Company located at 1275 Park East Drive, Woonsocket, Rhode Island 02895, unless the Special Meeting is postponed, adjourned, continued or rescheduled. Only stockholders and our invited guests are permitted to attend the Special Meeting. To gain admittance, you must bring a form of personal identification to the meeting, where your name will be verified against our stockholder list. If a nominee holds your shares and you plan to attend the Special Meeting, you should bring a brokerage statement showing your ownership of the shares as of the record date or a letter from the nominee confirming such ownership, and a form of personal identification. If you wish to vote your shares that are held by a nominee at the meeting, you must obtain a legal proxy from your nominee and bring it to the meeting.
Purpose of the Special Meeting
At the Special Meeting, we will ask our stockholders of record as of the Record Date to consider and vote on the following proposals:
1.
to approve the Merger Proposal;
2.
to approve, on a non-binding, advisory basis, the Compensation Proposal; and
3.
to approve the Adjournment Proposal.
Record Date; Shares Entitled to Vote; Quorum
Only stockholders of record as of the close of business on the Record Date (May 6, 2022) are entitled to notice of the Special Meeting and to vote at the Special Meeting or at any adjournments, continuations, reschedulings, or postponements thereof. Each holder of record of SUMR common stock on the Record Date will be entitled to one vote for each share of SUMR common stock held as of the Record Date on each matter submitted to our stockholders for approval at the Special Meeting. If you sell or transfer your shares of SUMR common stock after the Record Date but before the Special Meeting, you will transfer the right to receive the Merger Consideration, if the Merger is completed, to the person to whom you sell or transfer your shares of SUMR common stock, but you will retain your right to vote those shares at the Special Meeting. A list of stockholders of record entitled to vote at the Special Meeting will be available at least ten days before the Special Meeting, during ordinary business hours, at the offices of the Company at 1275 Park East Drive, Woonsocket, Rhode Island 02895, and will be available at the Special Meeting.
As of the Record Date, there were 2,164,791 shares of SUMR common stock outstanding and entitled to be voted at the Special Meeting.
A quorum of stockholders is necessary to hold a Special Meeting. The holders of a majority of the outstanding shares of SUMR common stock entitled to vote at the Special Meeting, present in person or by proxy representation, will constitute a quorum at the Special Meeting. As a result, 1,082,397 shares must be represented by proxy or by stockholders present and entitled to vote at the Special Meeting to have a quorum. Shares that abstain on one or more of the proposals before the Special Meeting will be deemed to be present for quorum purposes. If you hold your shares in “street name” and you fail to provide your broker, bank, or nominee with instructions how to vote such shares on any of the proposals before the Special Meeting, your shares will not be deemed to be present at the Special Meeting for quorum purposes. However, if you provide your broker, bank, or nominee with instructions on how to vote on one or more but not all of the proposals before the Special Meeting, your shares will be deemed to be present at the Special Meeting for quorum purposes.
In the event that a quorum is not present at the Special Meeting, we expect to adjourn the Special Meeting until a quorum is present.
 
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Vote Required; Abstentions and Broker Non-Votes
The affirmative vote of the holders of a majority of the shares of SUMR common stock outstanding as of the Record Date and entitled to vote on the matter is required to approve the Merger Proposal. Adoption of the Merger Agreement by our stockholders is a condition to the closing of the Merger. An abstention from voting or the failure of any stockholder of record to submit a signed proxy card, vote via the Internet or attend and vote in person at the Special Meeting or, if shares are held through a broker, bank, or nominee, the failure to provide voting instructions to such broker, bank, or nominee, will have the same effect as a vote “AGAINST” the Merger Proposal.
A majority of the votes cast “FOR” is required for the approval of each of the Compensation Proposal and the Adjournment Proposal. Assuming a quorum is present, an abstention from voting or the failure of any stockholder of record to submit a signed proxy card, vote via the Internet or attend and vote in person at the Special Meeting or, if shares are held through a broker, bank, or nominee, the failure to provide voting instructions to such broker, bank, or nominee, will not have any effect on the Compensation Proposal or the Adjournment Proposal.
Stock Ownership and Interests of Certain Persons
As of the Record Date, our directors beneficially owned and are entitled to vote an aggregate of 81,259 shares of SUMR common stock, representing approximately 3.8% of the outstanding shares of SUMR common stock. Our executive officers do not own any SUMR common stock.
Our non-employee directors have informed us that they currently intend to vote all of their shares of SUMR common stock (i) “FOR” the Merger Proposal; (ii) “FOR” the Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.
In addition, certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder generally. The Board was aware of these interests in, among other matters, approving the Merger Agreement and the Merger and in recommending that the Merger Agreement be adopted by the stockholders of SUMR. These interests are discussed in more detail in “The Merger — Interests of the Directors and Executive Officers of SUMR in the Merger” on page 50 of this proxy statement.
Voting of Proxies
If your shares of SUMR common stock are registered in your name with our transfer agent, Continental Stock Transfer & Trust Company, you may cause your shares to be voted at the Special Meeting by submitting your proxy, by voting online or by attending and voting in person at the Special Meeting. Based on your proxy cards, the proxy holders will vote your shares of SUMR common stock according to your directions. You are encouraged to vote by proxy even if you plan to attend the Special Meeting. If you attend the Special Meeting and vote in person at the Special Meeting, your vote will revoke any proxy previously submitted.
Voting instructions are included on your proxy card. All shares of SUMR common stock represented by properly executed proxies received in time for the Special Meeting will be voted at the Special Meeting in accordance with the instructions of the stockholder. Properly executed proxies that do not contain voting instructions will be voted (i) “FOR” the Merger Proposal; (ii) “FOR” the Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.
If your shares of SUMR common stock are held in “street name” through a broker, bank, or nominee, you may provide voting instructions through your broker, bank, or nominee by completing and returning the voting instruction form provided by your broker, bank, or nominee, or over the Internet or by telephone through your broker, bank, or nominee if such a service is provided. To vote over the Internet or by telephone through your broker, bank, or nominee, you should follow the instructions on the voting instruction form provided by your broker, bank, or nominee. Under applicable stock exchange rules, brokers, banks, or nominees have the discretion to vote your shares on routine matters if you fail to instruct your broker, bank, or nominee on how to vote your shares with respect to such matters. The proposals in this proxy statement are non-routine matters, and brokers, banks, and nominees therefore cannot vote on these proposals without
 
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your instructions. If you do not return your broker’s, bank’s, or nominee’s voting instruction form, do not provide voting instructions over the Internet or by telephone through your broker, bank, or other nominee, if applicable, or do not attend the Special Meeting and vote during the Special Meeting with a specific control number from your broker, bank, or nominee, such actions will result in a broker non-vote and will have the same effect as if you voted “AGAINST” the Merger Proposal but, assuming a quorum is present, will have no effect on the outcome of any vote on the Compensation Proposal or the Adjournment Proposal.
Revocability of Proxies
If you are a stockholder of record, you may revoke your proxy at any time before it is voted at the Special Meeting by:

sending a written notice revoking your earlier-dated proxy, addressed to our Secretary at our principal office at 1275 Park East Drive, Woonsocket, Rhode Island 02895;

signing another proxy card with a later date and returning it to us prior to the Special Meeting; or

attending the Special Meeting and voting in person during the Special Meeting.
Please note that to be effective, your new proxy card must be received by our Corporate Secretary by 11:59 p.m., Eastern Time (ET) the day before the Special Meeting. If you have submitted a proxy and you attend the Special Meeting and vote in person, your vote at the Special Meeting will revoke any proxy previously submitted. However, even if you plan to attend the Special Meeting, we recommend that you also submit your proxy or voting instructions or vote via the Internet so that your vote will be counted if you later decide not to attend the Special Meeting.
If you hold your shares in “street name” and have instructed your broker, bank or other nominee to vote your shares for you, you must follow directions received from your broker, bank or other nominee to change those instructions.
Any adjournment of the Special Meeting for the purpose of soliciting additional proxies will allow stockholders of SUMR who have already sent in their proxies to revoke them at any time prior to their use at the Special Meeting, as adjourned, however, any such proxies that are not revoked will be voted at any such Special Meeting, as adjourned. Additionally, if the Special Meeting is postponed, any proxies that are not revoked prior to their use at the Special Meeting, as postponed, will be voted at any such Special Meeting, as postponed.
Board of Directors’ Recommendation
The Board, after considering various factors described in “The Merger — Recommendation of Our Board and Reasons for the Merger” on page 36 of this proxy statement, unanimously (i) determined and declared that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the Merger Consideration, are in the best interests of SUMR and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, and (iii) resolved to recommend that SUMR’s stockholders adopt the Merger Agreement.
The Board recommends that you vote (i) “FOR” the Merger Proposal; (ii) “FOR” the Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.
Expenses of Proxy Solicitation
This proxy statement is being furnished in connection with the solicitation of proxies by the Board. Expenses incurred in connection with the printing and mailing of this proxy statement and in connection with notices or other filings with any governmental entities under any laws are our responsibility. We have engaged the services of Laurel Hill Advisory Group, LLC to solicit proxies for the special meeting. In connection with its retention, Laurel Hill has agreed to provide consulting, analytic, and proxy solicitation services in connection with the special meeting. We have agreed to pay Laurel Hill a fee of $7,500, plus reasonable out-of-pocket expenses for its services, and we will indemnify Laurel Hill for certain losses arising out of its proxy solicitation services. Copies of proxy solicitation materials will also be furnished to banks, brokerage houses, fiduciaries, and custodians holding shares of SUMR common stock in their names
 
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that are beneficially owned by others to forward to those beneficial owners. We may reimburse persons representing beneficial owners of SUMR common stock for their costs of forwarding proxy solicitation materials to the beneficial owners. In addition to the solicitation of proxies by mail, proxies may be solicited by our directors, officers, and employees by telephone, email, text message, fax, or other means of communication and we may pay persons holding shares for others their expenses for sending proxy materials to their principals. No additional compensation will be paid to our directors, officers, or employees for their services in connection with the solicitation of proxies.
Anticipated Date of Completion of the Merger
Assuming timely satisfaction of necessary closing conditions, including the approval of the Merger Proposal by our stockholders and the fulfillment of the conditions pursuant to the debt commitment letters, we anticipate that the Merger will be consummated in the second quarter of 2022, although the actual date of such consummation may change depending on the timing of the satisfaction (or waiver to the extent permitted under the Merger Agreement) of the closing conditions.
Other Matters
At this time, we know of no other matters to be submitted at the Special Meeting.
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting
The proxy statement is available through the Investor Relations section of our website, www.sumrbrands.com, and the “SEC Filings” section therein. Our website address is provided as an inactive textual reference only.
Householding of Special Meeting Materials
Some banks, brokers, and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of these proxy materials may have been sent to multiple stockholders in each household. Stockholders may request separate copies of these proxy materials from the proxy solicitor as noted below under “Questions and Additional Information.”
Rights of Stockholders Who Assert Appraisal Rights
If the Merger is approved and becomes effective, holders of Dissenting Shares who have not voted in favor of the Merger, have properly demanded appraisal rights for such shares in accordance with Section 262 of the DGCL, and have complied in all respects with Section 262 of the DGCL will be entitled to statutory appraisal rights pursuant to Section 262 of the DGCL. This means that such stockholders are entitled to seek appraisal of their Dissenting Shares and to receive payment in cash for the “fair value” of such Dissenting Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, as determined by the Delaware Court of Chancery, together with interest, if any, to be paid upon the amount determined to be the fair value. The ultimate amount holders receive in an appraisal proceeding may be less than, equal to, or more than the amount such holders would have received under the Merger Agreement. For a description of the rights of holders of Dissenting Shares and of the procedures to be followed in order to assert such rights and obtain payment of the fair value of such Dissenting Shares, see Section 262 of the DGCL, which is attached as Appendix C to this proxy statement, as well as the information set forth below and beginning on page 57 of this proxy statement.
IN ORDER TO PROPERLY EXERCISE YOUR APPRAISAL RIGHTS IN CONNECTION WITH THE MERGER, YOU MUST DELIVER A WRITTEN DEMAND FOR APPRAISAL IN ACCORDANCE WITH THE REQUIREMENTS OF SECTION 262 OF THE DGCL TO SUMR BEFORE THE VOTE IS TAKEN ON THE MERGER PROPOSAL AT THE SPECIAL MEETING, AND MUST NOT VOTE, ONLINE DURING THE SPECIAL MEETING OR BY PROXY, IN FAVOR OF THE MERGER PROPOSAL, AND CONTINUE TO HOLD YOUR SHARES OF SUMR COMMON STOCK OF RECORD FROM THE DATE OF MAKING THE DEMAND FOR APPRAISAL THROUGH THE EFFECTIVE TIME AND MUST COMPLY WITH THE OTHER
 
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REQUIREMENTS OF SECTION 262 OF THE DGCL. MERELY VOTING AGAINST THE MERGER PROPOSAL WILL NOT PRESERVE YOUR RIGHT TO APPRAISAL UNDER SECTION 262 OF THE DGCL. BECAUSE A PROXY THAT IS SIGNED AND SUBMITTED BUT DOES NOT OTHERWISE CONTAIN VOTING INSTRUCTIONS WILL, UNLESS REVOKED, BE VOTED IN FAVOR OF THE ADOPTION OF THE MERGER AGREEMENT, IF YOU SUBMIT A PROXY AND WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU MUST INCLUDE VOTING INSTRUCTIONS TO VOTE YOUR SHARES OF SUMR COMMON STOCK AGAINST, OR ABSTAIN WITH RESPECT TO, THE ADOPTION OF THE MERGER AGREEMENT. NEITHER VOTING AGAINST THE ADOPTION OF THE MERGER AGREEMENT, NOR ABSTAINING FROM VOTING OR FAILING TO VOTE ON THE MERGER PROPOSAL, WILL IN AND OF ITSELF CONSTITUTE A WRITTEN DEMAND FOR APPRAISAL SATISFYING THE REQUIREMENTS OF SECTION 262 OF THE DGCL. THE WRITTEN DEMAND FOR APPRAISAL MUST BE IN ADDITION TO AND SEPARATE FROM ANY PROXY OR VOTE ON THE ADOPTION OF THE MERGER AGREEMENT. IF YOU HOLD YOUR SHARES OF SUMR COMMON STOCK THROUGH A BANK, BROKERAGE FIRM, OR NOMINEE AND YOU WISH TO EXERCISE APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR BANK, BROKERAGE FIRM OR NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR APPRAISAL BY SUCH BANK, BROKERAGE FIRM, OR NOMINEE. IN VIEW OF THE COMPLEXITY OF THE DGCL, STOCKHOLDERS WHO MAY WISH TO PURSUE APPRAISAL RIGHTS SHOULD PROMPTLY CONSULT THEIR LEGAL AND FINANCIAL ADVISORS.
Questions and Additional Information
If you have more questions about the Merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact our proxy solicitor:
Laurel Hill Advisory Group, LLC
Telephone: (888) 742-1305
Email: SUMR@laurelhill.com
 
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements concern management’s current assumptions, estimates, beliefs, plans, projections, strategies and expectations and anticipated events or trends and similar expressions concerning matters that are not historical facts. Such forward-looking information may be identified by terms such as “expect,” “anticipate,” “believe,” “outlook,” “may,” “estimate,” “should,” “predict” and similar terms or variations thereof, and includes statements relating to the completion of the Merger and the timing thereof and projections regarding SUMR’s future financial performance. These statements are based on a series of expectations, assumptions, estimates and projections about SUMR, are not guarantees of future results or performance, and involve significant risks, uncertainties and other factors, including assumptions and projections, for all forward periods. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements. Such factors include, among others, the following:

SUMR may be unable to obtain stockholder approval as required for the Merger;

the failure by Parent or Merger Sub to obtain the necessary debt financing set forth in the debt commitment letters received by them in connection with the signing of the Merger Agreement;

the Merger Agreement may be terminated in connection with the receipt of a superior proposal, requiring us to pay a termination fee;

the conditions to the closing of the Merger may not be satisfied or waived;

the business of SUMR may suffer as a result of uncertainty surrounding the Merger;

the effect of the announcement or pendency of the Merger on our business relationships, including with customers and suppliers;

the outcome of any legal proceedings related to the Merger;

SUMR may be adversely affected by other economic, business, legislative, regulatory, and/or competitive factors;

the occurrence of any event, change, or other circumstance that could give rise to the termination of the Merger Agreement;

the attention of SUMR’s management and employees may be diverted from ongoing business concerns as a result of the Merger;

limitations placed on SUMR’s ability to operate its business under the Merger Agreement;

risks that the Merger disrupts current plans and operations and the potential difficulties in employee retention as a result of the Merger;

the fact that under the terms of the Merger Agreement, SUMR is restricted from soliciting other acquisition proposals; and

other risks to consummation of the Merger, including the risk that the Merger will not be completed within the expected time period or at all.
The foregoing review of important factors that could cause actual results to differ from expectations should not be construed as exhaustive and should be read in conjunction with the information contained or incorporated by reference herein, including the information contained under this heading and information contained under “Risk Factors” below. A further description of risks and uncertainties relating to SUMR can be found in our filings with the SEC, including our Annual Report on Form 10-K for the year ended January 1, 2022, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. See “Where You Can Find More Information” on page 90 of this proxy statement. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.
Except as required by applicable law, we do not intend, and assume no obligation, to update any forward-looking statements. SUMR stockholders are advised, however, to consult any future disclosures we make on related subjects as may be detailed in our other filings made from time to time with the SEC.
All information contained in this proxy statement exclusively concerning Parent, Merger Sub, and their affiliates has been supplied by Parent and Merger Sub and has not been independently verified by us.
 
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RISK FACTORS
Set forth below are various risks relating to the proposed Merger. The following is not intended to be an exhaustive list of the risks relating to the Merger and should be read in conjunction with the other information in this proxy statement. In addition, you should refer to the section entitled “Risk Factors” in SUMR’s Annual Report on Form 10-K for the fiscal year ended January 1, 2022 and the Quarterly Reports filed with the SEC thereafter. Stockholders should carefully consider such risk factors, together with all of the other information included in this proxy statement before they decide whether to vote or instruct their vote to be cast to approve the proposals described in this proxy statement. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may adversely affect the ability to complete the Merger, and may have an adverse effect on, among other things, the business, cash flows, financial condition and results of operations of SUMR.
SUMR will be subject to business uncertainties and contractual restrictions while the Merger is pending.
Uncertainty about the effect of the proposed Merger on employees and third parties (including customers and suppliers) may have an adverse effect on the business, financial condition and results of operations of SUMR. These uncertainties may impair SUMR’s ability to retain and motivate key personnel pending the consummation of the Merger, as such personnel and customers may experience uncertainty about their future roles and relationships following the consummation of the Merger. Additionally, these uncertainties could cause customers, suppliers, vendors and others who deal with SUMR to seek to change existing business relationships with SUMR or fail to extend or maintain existing relationships with SUMR.
The pursuit of the Merger and the preparation for the integration of SUMR’s business with Parent’s business may place a burden on SUMR’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have an adverse effect on SUMR’s business, financial condition and results of operations. In addition, the Merger Agreement restricts SUMR from taking certain actions without Parent’s consent while the Merger is pending. These restrictions could have an adverse effect on SUMR’s business, financial condition and results of operations.
The Merger is subject to conditions to closing that may not be satisfied or waived, including that Parent may not obtain the necessary debt financing set forth in the commitment letters received by Parent in connection with the Merger.
The respective obligations of SUMR and Parent to complete the proposed Merger are subject to a number of conditions that must be fulfilled in order to complete the proposed Merger, including (i) the approval of SUMR’s stockholders, (ii) the absence of any governmental order preventing or prohibiting consummation of the Merger or any other transactions contemplated in the Merger Agreement, (iii) the accuracy of the representations and warranties of the parties at closing, and (iv) the satisfaction of the conditions to funding of a debt financing by Parent, a portion of which funding is to be used by Parent to fund the merger consideration. If these conditions are not satisfied or waived, the Merger may not be completed. Parent has entered into the Debt Commitment Letters providing for (i) an asset-based credit facility and (ii) a term loan, a portion of the proceeds of which will fund Parent’s obligation to pay the merger consideration at the closing of the Merger. The obligations of the lenders under the Debt Commitment Letters are subject to a number of conditions, including the receipt of executed loan documentation, accuracy of certain specified representations and warranties, and certain pro forma financial conditions. If these conditions are not waived or satisfied, the lenders will not be obligated to satisfy their commitment. While Parent is obligated under the Merger Agreement to use commercially reasonable efforts to obtain alternative financing if the current commitments are terminated or not available, there is no assurance that Parent will be able to secure alternative financing or otherwise close the Merger.
Failure of the Merger to be completed, the termination of the Merger Agreement or a significant delay in the consummation of the Merger could negatively impact SUMR.
The Merger Agreement is subject to a number of conditions which must be fulfilled in order to complete the Merger. These conditions to the consummation of the Merger may not be fulfilled and,
 
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accordingly, the Merger may not be completed. In addition, if the Merger is not completed by June 30, 2022, either SUMR or Parent may choose to terminate the Merger Agreement if the failure to consummate the transactions contemplated by the Merger Agreement by such date is not caused by any breach of the Merger Agreement by the party electing to terminate the Merger Agreement, before or after approval of the proposed Merger by SUMR’s stockholders.
If the Merger is not consummated, the ongoing business, financial condition and results of operations of SUMR may be adversely affected and the market price of SUMR’s common stock may decline significantly, particularly to the extent that the market price reflects a market assumption that the proposed Merger will be consummated. If the Merger is not consummated, our ongoing business will continue to be subject to the types of risks and uncertainties as those to which we are currently subject, including risks and uncertainties with respect to our business, prospects and results of operations, as such may be affected by, among other things, SUMR’s ability to continue as a going concern and to comply with the continued listing requirements of Nasdaq. If the consummation of the Merger is delayed the business, financial condition and results of operations of SUMR may be adversely affected.
In addition, SUMR has incurred and will incur substantial expenses in connection with the negotiation and completion of the Merger, as well as the costs and expenses of filing, printing and mailing a proxy statement. Any of the foregoing, or other risks arising in connection with the failure of or delay in consummating the Merger, including the diversion of management attention from pursuing other opportunities and the constraints in the Merger Agreement on the ability to make significant changes to SUMR’s ongoing business during the pendency of the Merger, could have an adverse effect on SUMR’s business, financial condition and results of operations.
The Merger Agreement may be terminated under various circumstances, including in connection with a superior proposal, and SUMR would incur fees and expenses in connection with such termination.
The Merger Agreement may be terminated under various circumstances, including in connection with a superior proposal or if the Merger is not completed by June 30, 2022, by either SUMR or Parent if the failure to consummate the transactions contemplated by the Merger Agreement by such date is not caused by any breach of the Merger Agreement by the party electing to terminate the Merger Agreement. If the Board approves a change of the Company Board Recommendation, or authorizes the Company to enter into an agreement providing for the implementation of a superior proposal, SUMR will be required to pay Parent a termination fee of $2,310,600.
The Merger Agreement contains provisions that may discourage other parties from pursuing, announcing or submitting an acquisition proposal to SUMR that might result in greater value to Company stockholders.
The Merger Agreement contains provisions that may discourage a third party from pursuing, announcing or submitting a competing acquisition to SUMR that might result in greater value to Company stockholders than the Merger. These provisions include a general prohibition on SUMR from soliciting or entering into discussions with any third party regarding any acquisition proposal or offers for competing transactions (subject to certain exceptions under the Merger Agreement).
In connection with entering into the Merger Agreement, two of the Company’s stockholders holding shares constituting in the aggregate approximately 53% of the Company’s issued and outstanding common stock have each entered into a Support Agreement with Parent pursuant to which they agreed to vote their beneficially owned shares of common stock in favor of the Merger (subject to certain exceptions that would result in automatic termination of each Support Agreement). The vote of such shares in favor of the Merger would be sufficient to approve the Merger Agreement by the Company’s stockholders under the provisions of Delaware Law and the Company’s Certificate of Incorporation.
Litigation against SUMR or the members of the Board could result in significant costs, management distraction, and/or a delay of or injunction against the Merger.
Many proposed merger transactions are the subject of shareholder litigation. While SUMR believes that any claims that may be asserted by purported shareholder plaintiffs related to the Merger would be without merit, the results of any such potential legal proceedings are difficult to predict and could delay or
 
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prevent the Merger from being completed in a timely manner. The existence of litigation related to the Merger could affect the likelihood of obtaining the required approval from Company stockholders. Moreover, any litigation could be time consuming and expensive, could divert management’s attention away from their regular business and, any lawsuit adversely resolved against SUMR or members of the Board, could have an adverse effect on SUMR’s business, financial condition and results of operations.
If the actions remain unresolved, they could prevent or delay the completion of the Merger. One of the conditions to the consummation of the Merger is the absence of any law or order (whether temporary, preliminary or permanent) by any court or regulatory authority of competent jurisdiction prohibiting, restricting or making illegal consummation of the transactions contemplated by the Merger Agreement (including the Merger). Consequently, if a settlement or other resolution is not reached in any lawsuit that is filed or any regulatory proceeding and a claimant secures injunctive or other relief or a regulatory authority issues an order or other directive prohibiting, restricting or making illegal the consummation of the transactions contemplated by the Merger Agreement (including the Merger), then such injunctive or other relief may prevent the Merger from becoming effective in a timely manner or at all.
As described in “Legal Proceedings Regarding the Merger” beginning on page 55 of this proxy statement, purported stockholders of the Company have filed complaints alleging, among other things, that the Company’s preliminary proxy statement materially misrepresents or omits certain purportedly material information regarding the Merger, including information relating to financial projections and the valuation analyses performed by one of the Company’s financial advisors, breach of fiduciary duties, and asserts violations of certain sections of the Exchange Act by the defendants. The complaints seek, among other things, injunctions enjoining consummation of the Merger, rescission of the Merger Agreement, and awarding costs of the action, including plaintiff’s reasonable attorneys’ and experts’ fees and expenses. Additional complaints or demands may be filed in connection with the Merger, which could prevent or delay completion of the Merger and result in additional costs to the Company. If additional similar complaints or demands are filed or made, absent new or different allegations that are material, the Company will not necessarily announce them.
 
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THE MERGER
This discussion of the Merger is qualified in its entirety by reference to the Merger Agreement, which is attached as Appendix A to, and incorporated by reference into, this proxy statement. You should read the Merger Agreement carefully and in its entirety as it is the legal document that governs the Merger.
Parties Involved in the Merger
Summer Infant, Inc.
SUMR is an infant and juvenile products company doing business under the name SUMR Brands. We are a recognized authority in the juvenile product industry, providing parents and caregivers a full range of innovative, high-quality, and high-value products to care for babies and toddlers. We operate in one principal industry segment across geographically diverse marketplaces, selling our products globally to large, national retailers as well as independent retailers, on our partner’s websites, and our own direct to consumer website. In North America, our customers include Amazon.com, Wal-Mart, Target, Buy Buy Baby, Home Depot, and Lowe’s. Our largest European-based customers are Smyths Toys and Amazon. We also sell through international distributors, representatives, and to select international retail customers in geographic locations where we do not have a direct sales presence. Our company was originally founded in 1985 and has publicly traded on Nasdaq since 2007 under the symbol “SUMR.”
Our principal executive offices are located 1275 Park East Drive, Woonsocket, Rhode Island and our telephone number is (401) 671-6550. For more information about SUMR, please visit our website, www.sumrbrands.com. Our website address is provided as an inactive textual reference only. The information contained on our website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the SEC. See “Where You Can Find More Information” on page 90 of this proxy statement.
Kids2, Inc.
Kids2, Inc. (“Parent”) has been producing essential infant and juvenile home products such as bassinets, playards, high chairs, boosters, swings and walkers as well as educational and developmental-focused toys for over 50 years. Parent’s products are sold throughout the world under a number of proprietary brands such as Baby Einstein, Bright Starts and Ingenuity, as well as brands licensed from well-known companies such as Disney, Ford, John Deere and Sesame Street. Parent sells through both e-commerce and traditional retail channels.
Parent’s principal executive offices are located at 3333 Piedmont Road, Suite 1800, Atlanta, Georgia, 30305 and its telephone number is (800) 230-8190. For more information about Parent, please visit its website, www.kids2.com. Parent’s website address is provided as an inactive textual reference only. The information contained on Parent’s website is not incorporated into, and does not form a part of, this proxy statement or any other report or document on file with or furnished to the SEC.
Project Abacus Acquisition Corp.
Project Abacus Acquisition Corp. (“Merger Sub”) is a Delaware corporation and a wholly owned subsidiary of Parent that was formed by Parent for the sole purpose of entering into the Merger Agreement and completing the transactions contemplated thereby and the related financing transactions. Upon consummation of the Merger of Merger Sub with and into SUMR in accordance with the Merger Agreement, Merger Sub will cease to exist, and SUMR will survive the Merger as a wholly-owned subsidiary of Parent.
Merger Sub’s principal executive offices are located at 3333 Piedmont Road, Suite 1800, Atlanta, Georgia, 30305 and its telephone number is (800) 230-8190.
Certain Effects of the Merger on SUMR
Upon the terms and subject to the conditions of the Merger Agreement, at the Effective Time, Merger Sub will merge with and into SUMR, with SUMR continuing as the surviving corporation and as a wholly
 
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owned subsidiary of Parent. SUMR common stock will be de-listed from Nasdaq and will be de-registered under the Exchange Act as soon as reasonably practicable following the Effective Time and, at such time, will cease to be a publicly traded company and will no longer be obligated to file periodic reports with the SEC. If the Merger is completed, you will not own any shares of the capital stock of the surviving corporation, and instead will only be entitled to receive the Merger Consideration described in “— Merger Consideration” below, or, with respect to Dissenting Shares, will only be entitled to receive the “fair value” of your Dissenting Shares as determined by the Delaware Court of Chancery pursuant to an appraisal proceeding as contemplated by Delaware law.
Effect on SUMR if the Merger is Not Completed
If the Merger Proposal is not approved by the stockholders of SUMR or if the Merger is not completed for any other reason, you will not receive any payment for your shares of SUMR common stock. Instead, we will remain a public company, SUMR common stock will continue to be listed and traded on Nasdaq, subject to compliance with its continued listing requirements, and registered under the Exchange Act, and we will be required to continue to file periodic reports with the SEC.
We anticipate that management will operate the business in a manner similar to that in which it is being operated today, and our stockholders will be subject to similar types of risks and uncertainties as those to which they are currently subject, including risks and uncertainties with respect to SUMR’s business, prospects and results of operations, as such may be affected by, among other things, SUMR’s ability to continue as a going concern and to comply with the continued listing requirements of Nasdaq.
Furthermore, depending on the circumstances that would have caused the Merger not to be completed, it is possible that the price of SUMR common stock will decline significantly if the Merger is not completed. If that were to occur, it is uncertain when, if ever, the price of SUMR common stock would return to the price at which it trades as of the date of this proxy statement.
Accordingly, if the Merger is not completed, there can be no assurance as to the effect of these risks and opportunities on the future value of your shares of SUMR common stock. If the Merger is not consummated, the Board will continue to evaluate and review our business operations, properties and financial condition, among other things, make such changes as are deemed appropriate, and continue to seek to enhance stockholder value. If the Merger Proposal is not approved by the stockholders of SUMR or if the Merger is not completed for any other reason, there can be no assurance that any other transaction acceptable to the Board will be offered or that our business, prospects, or results of operation will not be adversely impacted.
In addition, under specified circumstances, we may be required to pay Parent a termination fee upon the termination of the Merger Agreement, as described under “The Merger Agreement — Termination Fee” on page 82 of this proxy statement.
Merger Consideration
At the Effective Time, each outstanding share of SUMR common stock (other than (i) shares held by SUMR as treasury stock or held by Parent or Merger Sub or any wholly owned subsidiary of SUMR, Parent or Merger Sub and (ii) Dissenting Shares) will be converted automatically into the right to receive $12.00 in cash, without interest and less any applicable withholding taxes, for each share of SUMR common stock that you own (the “Merger Consideration”). All shares of SUMR common stock converted into the right to receive the Merger Consideration will automatically be cancelled and cease to exist at the Effective Time of the Merge, and each certificate formerly representing such shares will thereafter represent only the right to receive the Merger Consideration.
After the completion of the Merger, under the terms of the Merger Agreement, you will have the right to receive the Merger Consideration, but you will no longer have any rights as a SUMR stockholder (except that stockholders who hold Dissenting Shares will have the right to receive a payment for the “fair value” of their Dissenting Shares as determined by the Delaware Court of Chancery pursuant to an appraisal proceeding as contemplated by Delaware law, as described in “The Merger — Appraisal Rights” on page 57 of this proxy statement) and Appendix C to this proxy statement.
 
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Background of the Merger
The Board and Company management regularly review the Company’s financial and operating performance, future growth prospects, and strategic direction and consider potential opportunities to strengthen the Company’s business and enhance stockholder value. These reviews include consideration of whether the continued operation of the Company as a standalone company, or possible strategic opportunities, such as acquisitions, dispositions, commercial partnerships or combinations with third parties, offer viable avenues to maximize stockholder value.
The Board and Company management from time to time have been approached by third parties expressing an interest in exploring a potential strategic transaction with the Company. In August 2016, the Board formed an ad hoc transaction committee, initially consisting of two independent directors, Alan Mustacchi and Stephen Zelkowicz, to oversee indications of interest or other acquisition related matters that may come before the Company or the Board. In July 2019, the Board reconstituted the transaction committee and appointed three independent directors to the committee, Robin Marino, Alan Mustacchi and Stephen Zelkowicz (the “Transaction Committee”). Prior to 2020, no strategic discussions advanced beyond preliminary discussions with third parties gauging each party’s respective interest in pursuing a transaction and such discussions did not result in any specific proposal on price, structure or other material terms.
In December 2019, the Board engaged Riveron RTS, LLC (formerly Winter Harbor LLC), a consulting firm specializing in turnaround and restructuring services, to provide executive services and restructuring advice, including the services of Stuart Noyes as Chief Executive Officer, and other employees of Riveron with respect to restructuring matters, including Bruce Meier who was later appointed as the Company’s Interim Chief Financial Officer in March 2021. In February 2020, the Board authorized the Transaction Committee to interview and engage an investment banking firm to assist the Company to prepare for a strategic process in which third parties would be contacted on a confidential basis to assess their interest in a potential acquisition of the Company. The Transaction Committee, with participation of Company management, interviewed three different investment banking firms, and on April 16, 2020 the Company engaged Consensus Advisory Services, LLC and Consensus Securities LLC (together, “Consensus”) as financial advisor to the Company. From April 2020 through September 2020, the Company, with Consensus, engaged in a marketed, confidential sale process in which Consensus contacted over 200 third parties, including potential strategic acquirors and private equity firms, and 60 of these third parties executed non-disclosure agreements with the Company and were provided with a confidential information memorandum regarding the Company. Of the interested parties, only three potential bidders provided indications of interest and engaged in limited due diligence regarding the Company and its business via a virtual data room and through meetings with Company management. None of these parties were interested in moving forward and declined engaging in discussions or negotiating a letter of intent, and the Board determined to terminate the sale process on September 29, 2020.
In January 2021, the Board re-engaged Consensus to assist the Company with identifying strategic opportunities, such as acquisitions of or investments in complementary businesses, joint ventures, or licensing arrangements. Consensus contacted approximately 33 potential interested parties, including Parent, as well as certain parties originally contacted as part of the 2020 sale process. Between March and July 2021, Consensus met regularly with the Transaction Committee to report on its outreach efforts, and the Transaction Committee kept the full Board informed of Consensus’s activities. During this period, three parties, including Parent, each executed the same form of confidentiality and standstill agreement (which provided that such standstill provisions would fall away, among other things, upon announcement of certain similar potential extraordinary transactions involving the Company) with the Company and engaged in due diligence.
On March 26, 2021, the Company entered into a confidentiality agreement with Party A and began discussions regarding a potential acquisition of the Company by Party A.
On April 13, 2021, the Company entered into a confidentiality agreement with Parent and began discussions regarding a potential acquisition of the Company by Parent.
On May 31, 2021, the Company entered into confidentiality agreements with Party B and its financial advisor, and began discussions regarding a potential acquisition of the Company by Party B.
 
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On June 25, 2021, representatives of Consensus met with representatives of Party B to discuss Party B’s interest in the Company and possible next steps.
On June 30, 2021, representatives of Consensus and the Company met with representatives of Parent, including Ryan Gunnigle, Parent’s CEO, and Mark Mintman, Parent’s CFO, to discuss potential synergies between the Company and Parent. Parent indicated that it would be in contact with Consensus if it determined to move forward with discussions.
On July 2, 2021, Party B delivered an indication of interest to Consensus to acquire 100% of the outstanding shares of Company common stock for cash at a valuation in the range of $52.8 million to $57.2 million. Also on July 2, 2021, Mr. Mintman informed Consensus that Parent had determined to move forward with analyzing a potential transaction and expected to engage Lincoln International (“Lincoln”) to advise Parent with respect to capital raising in connection with a proposed transaction.
On July 7, 2021, Consensus spoke with representatives of Party A concerning their continued interest in a potential transaction. Also on July 7, 2021, the Transaction Committee held a meeting with Consensus, Company management and GT in attendance at which Consensus reviewed with the committee the status of discussions with each of Party A, Party B and Parent. The Transaction Committee instructed management to seek amendments to the confidentiality agreements with each of Party A, Party B and Parent to include a standstill provision.
On July 9, 2021, the Company entered into amendments to each of the confidentiality agreements with Party B and Parent to include a standstill provision.
Also on July 9, 2021, Consensus engaged in further discussions with Party A and requested that Party A sign an amendment to the confidentiality agreement to include a standstill provision.
On July 19, 2021, representatives of the Company and representatives of Party B met to discuss a potential transaction.
On July 20, 2021, the Company and Party A amended their confidentiality agreement to include a standstill provision, and on the same day and on July 21, 2021, representatives of the Company and Consensus and representatives of Party A held meetings at which Company management gave a presentation and the parties engaged in a discussion regarding a potential transaction.
On July 26, 2021, Party B informed Consensus that it had determined not to continue discussions concerning a potential transaction with the Company based on its view that there was a lack of a clear growth plan for the Company and any future acquisitions would only produce small synergies due to the diversity of the Company’s product categories.
On July 27, 2021, Mr. Mintman informed Consensus that Parent’s board of directors had approved moving forward with a potential transaction, and that Parent would be sending due diligence requests to the Company. Between July 29 and August 11, 2021, Parent engaged in additional due diligence and follow up discussions with representatives of Consensus concerning the Company’s performance and indicated that Parent was preparing a proposal to the Company.
Between July 27 and August 11, 2021, Party A engaged in additional due diligence on the Company and held discussions with representatives of Consensus and representatives of the Company regarding the Company’s business and plans and potential synergies to be achieved by Party A from an acquisition of the Company. Consensus also informed Party A that the Company was expecting a proposal from another interested party.
On August 13, 2021, Mr. Mintman and representatives of Lincoln engaged in a discussion with representatives from Consensus and indicated that Parent estimated an enterprise value of approximately $56.0 million for the Company, a multiple of 7x on estimated adjusted EBITDA of approximately $8.0 million (estimated based on reported results for the first and second quarters of fiscal 2021 and estimates for the third and fourth quarters of fiscal 2021).
On August 17, 2021, the Transaction Committee met with Consensus, Company management and GT to discuss the status of negotiations with Party A and Parent. Consensus noted that Party A had indicated
 
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that an EBITDA multiple of 7x to 7.5x was appropriate, for purposes of its valuation but declined to indicate its estimate of adjusted EBITDA. The committee members discussed the proposed indications of value received from Party A and Parent, which they viewed as too low and not taking into consideration potential synergies or other benefits to an acquiror, such as net operating losses available to the Company. The Transaction Committee instructed Consensus to request Party A and Parent to submit their respective offers for consideration by the Board.
On August 18, 2021, the Board held a special meeting, with GT and Company management in attendance. At the meeting, the Transaction Committee updated the Board on the status of negotiations with Party A and Parent. Company management also updated the Board on the Company’s recent financial performance and increasing supply chain costs that were impacting margins, actions that the Company was taking to mitigate these costs, and a summary of the Company’s discussions with its primary lender, Bank of America, with respect to expected liquidity and the status of a potential sale of the Company. The Board also discussed finalizing the terms of engagement with Consensus with respect to the proposed transaction, and engaging a separate, nationally-recognized independent valuation firm to provide a fairness opinion with respect to the proposed transaction for a fixed fee that was not contingent on the closing of the proposed transaction. The Board (i) approved moving forward with the current sale process, (ii) confirmed that the Board delegated to the Transaction Committee the authority to oversee the sale process, obtain and review financial analyses and strategic alternatives, and negotiate the terms of a transaction, (iii) approved the engagement of Consensus as financial advisor and authorized the Transaction Committee to finalize the terms of the engagement, (iv) authorized the Transaction Committee to select and negotiate the engagement of an independent financial advisor to provide a fairness opinion to the Board in connection with a potential transaction, and (v) upon recommendation of the Compensation Committee of the Board, approved compensation for the members of the Transaction Committee for their service on the Transaction Committee.
On August 19, 2021, Consensus requested Parent and Party A to submit indications of interest by August 31, 2021.
On August 23, 2021, representatives of Consensus engaged in a discussion with representatives of Lincoln regarding the sale process. Also on August 23, 2021, representatives of Party A contacted Consensus by email regarding questions on the sale process.
On August 26, 2021, representatives of Consensus and representatives of Lincoln discussed Parent’s proposed letter of intent to the Company and related questions.
On August 27, 2021, Parent delivered a letter of intent to the Company offering to acquire the Company at a purchase price of $13.77 per share in cash, based on an estimated enterprise value of $56.2 million and an assumed level of Company debt to be refinanced in the transaction.
On August 31, 2021, representatives of Consensus spoke with representatives of Party A regarding their continued interest in a transaction and whether Party A was prepared to submit its proposal to the Company as requested by Consensus.
On September 2, 2021, representatives of Consensus spoke with representatives of Lincoln regarding Parent’s letter of intent and the Transaction Committee’s view on the methodology Parent used to value the Company. Also on September 2, 2021, the Company and Consensus entered into a letter agreement with respect to Consensus’s services to the Company as financial advisor in connection with a sale of the Company that superseded all prior engagement letters between the Company and Consensus.
On September 7, 2021, representatives of Consensus contacted representatives of Party A regarding their intention to submit an offer and responded to additional questions from Party A. Representatives of Party A indicated that they would discuss with Party A. Subsequently, also on September 7, 2021, representatives of Consensus and representatives of Lincoln discussed Parent’s letter of intent, and representatives of Lincoln indicated that Parent would revise their offer to $14.39 per share in cash, reflecting a 7.25x multiple to estimated adjusted EBITDA (instead of a 7x multiple).
On September 8, 2021, the Transaction Committee met with Consensus, Company management and GT to discuss the revised price from Parent and determined that it did not appear to take into consideration
 
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any potential synergies to be realized by Parent from an acquisition or potential use of the Company’s net operating losses, to the extent available. The Transaction Committee requested that Consensus prepare a counteroffer and continue to negotiate with Parent based on updated financial information.
On September 10, 2021, and September 11, 2021, representatives of Consensus spoke with representatives of Party A to determine if Party A remained interested in making a proposal to the Company. Party A indicated that it was not interested in proceeding, unless it was for a very low purchase price.
On September 14, 2021, the Board held its regularly scheduled meeting with representatives of Consensus and GT in attendance. The members of the Transaction Committee updated the Board on negotiations since the last Board meeting. Consensus updated the Board on recent discussions with Lincoln and summarized the terms of the indication of interest received from Parent, including Parent’s valuation methodology. Consensus noted that discussions with Party A had ended due to their lack of interest in pursuing a transaction at a reasonable purchase price. Consensus also reviewed with the Board various methodologies that could be used for valuing the Company. Consensus also reviewed with the Board the ongoing supply chain crisis and its impact on the global economy, and the expected short and long-term challenges associated with this ongoing crisis. The Board then discussed the indication of interest received from Parent, Consensus’ presentation to the Board and a potential response to Parent’s offer. The Board also discussed positive and negative implications of the Company continuing as a stand-alone company, especially considering the current supply chain crisis and anticipated longer term trends. The Board determined to move forward with negotiations with Parent but to respond to Parent that its proposal did not reflect the full value of the Company nor considered potential synergies to be gained by Parent in a transaction. The Board directed the Transaction Committee to continue discussions with Parent.
On September 15, 2021 and September 17, 2021, representatives of Consensus engaged in discussions with representatives of Lincoln concerning Parent’s proposal and the Company’s counteroffer of $16.58 per share based on corrected and updated financial information initially utilized by Parent, based on an estimated an enterprise value of approximately $64.2 million (a multiple of 7.25x on estimated adjusted EBITDA of approximately $8.8 million) and an assumed level of Company debt to be refinanced in the transaction. Representatives of Lincoln indicated that Parent accepted the Company’s counteroffer and that Parent expected certain other transactional terms to be reflected in a revised letter of intent.
On September 21, 2021, the Transaction Committee met with Consensus, Company management and GT to discuss open issues on the letter of intent, and instructed GT to relay the open issues to Parent’s counsel, Foley & Lardner LLP (“F&L”). The Transaction Committee also agreed to move forward with interviewing valuation firms to provide a fairness opinion to the Board in connection with a possible proposed transaction. Consequently, members of the Transaction Committee and GT had a conference call with representatives of Duff & Phelps to discuss their potential engagement as an independent financial advisor to the Board to provide a fairness opinion in connection with a sale transaction.
On September 22, 2021, the Transaction Committee met with Company management and GT to discuss outstanding issues on Parent’s letter of intent. Also on September 22, 2021, members of the Transaction Committee and GT had a conference call with representatives of an independent financial advisor to discuss their potential engagement to provide a fairness opinion to the Board in connection with a sale transaction.
On September 23, 2021, the Transaction Committee met with Company management and GT to review various aspects to be considered in connection with the potential transaction with Parent. The Transaction Committee also reviewed the information received from Duff & Phelps and another independent financial advisor regarding their terms of engagement to provide a fairness opinion to the Board in connection with a sale transaction.
On September 28, 2021, the Transaction Committee met with Consensus, Company management and GT to review and discuss the Company’s current and prior efforts to engage in a strategic transaction and Consensus provided an overview and summarized such efforts. The Transaction Committee then discussed the proposed principal terms of a transaction with Parent and various risks related to some of those terms. The Transaction Committee instructed Mr. Noyes to contact Mr. Gunnigle for a business discussion on open issues regarding Parent’s letter of intent.
 
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On September 30, 2021, the Transaction Committee met with Company management and GT to discuss the status of negotiations with Parent. Mr. Noyes reported that he had spoken with Mr. Gunnigle and discussed the Company’s concerns regarding some of Parent’s proposed terms and, in particular, the appropriate normalized EBITDA that, in the Company’s view, Parent should utilize for valuation purposes.
On October 3, 2021, the Transaction Committee met with Company management and GT to discuss outstanding issues on Parent’s letter of intent, and the Transaction Committee instructed Mr. Noyes to further discuss and negotiate the outstanding issues with Mr. Gunnigle, including a further discussion on purchase price.
On October 4, 2021, the Transaction Committee held a meeting with Consensus, Company management, and GT at which Mr. Noyes reported back on his conversation with Mr. Gunnigle and reported that Parent’s per share purchase price was $16.58, and that Parent made various other concessions regarding the transaction terms. After discussion, the Transaction Committee agreed to move forward with negotiations with Parent based on a revised letter of intent reflecting these terms.
On October 5, 2021, the Company signed a revised version of the letter of intent with Parent that provided for, among other things, a purchase price of $16.58 per share (on a fully diluted basis and assuming approximately $27.32 million of net debt, or a proposed Company valuation of $64.257 million), and other revised transaction terms.
On October 7, 2021, representatives of the Company, Parent, F&L, Lincoln, GT and Consensus held a meeting by videoconference to discuss the due diligence process, potential outreach to the significant stockholders of the Company, and expected transaction documentation.
On October 11, 2021, representatives of F&L and GT discussed via conference call the transaction process and timeline, including possible terms of voting and support agreements that Parent required to be obtained from significant Company stockholders. Between October 11 and October 14, 2021, F&L and GT communicated regarding the proposed transaction terms.
On October 12, 2021, the Transaction Committee met with Consensus, Company management and GT to discuss the status of the proposed transaction, Parent’s due diligence request lists and the expected timeline to sign a definitive agreement. The Transaction Committee also discussed the Board’s prior conversations concerning the requested payment of a success fee to Riveron in connection with a completed sale of the Company and also determined to recommend to the Board to move forward to engage Duff & Phelps as independent financial advisor to the Board to provide a fairness opinion in connection with the proposed transaction and to finalize the proposed terms of such engagement.
On October 15, 2021, representatives of the Company, Parent, F&L, Lincoln, GT and Consensus held a meeting by videoconference and discussed the status of due diligence and the status of Parent’s efforts with respect to its proposed debt financing. Also on October 15, 2021, the Company entered into a non-disclosure agreement with Wynnefield Capital, Inc. to permit discussions concerning the proposed transaction with Parent.
On October 18 and 19, 2021, representatives of the Company and Parent met in Riverside, California, where the Company’s distribution center is located, for a series of due diligence meetings.
On October 19, 2021, the Transaction Committee met with Consensus, Company management and GT to discuss the status of the proposed transaction, including progress on due diligence and the status of Parent’s efforts to obtain commitments for debt financing. The committee then discussed proposed terms of engagement of Duff & Phelps and the proposed amendment to Riveron’s engagement letter to provide for a success fee in connection with a possible sale of the Company.
On October 20, 2021, F&L shared with GT a form of voting agreement for review and comment by GT.
On October 21, 2021, representatives from GT spoke to Mr. Macari, a significant stockholder and founder of the Company, regarding signing a non-disclosure agreement, which Mr. Macari subsequently declined to execute.
 
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On October 22, 2021, representatives of the Company, Parent, F&L, Lincoln, GT and Consensus held a meeting by videoconference and discussed the status of due diligence, including site visits and planned in-person meeting between key leaders at Parent and the Company, and Lincoln provided an update on Parent’s debt financing efforts.
On October 26 and on November 1, 2021, the Transaction Committee met with Consensus, Company management and GT to discuss the status of the proposed transaction. Consensus updated the committee members on its conversations with Lincoln regarding Parent’s debt financing efforts and Company management updated the committee members on the status of due diligence, and the expected timing for when the Company would receive a draft merger agreement. The committee also discussed next steps regarding engaging Duff & Phelps.
On October 28, 2022 and October 29, 2022, representatives of the Company and representatives of Parent held a series of in person due diligence meetings.
On November 3, 2021, F&L delivered an initial draft of the merger agreement to GT.
On November 9, 2021, the Transaction Committee met with Consensus, Company management and GT to discuss key issues on the draft merger agreement.
On November 10, 2021, representatives of GT and F&L had a call to discuss key issues regarding the draft merger agreement and, subsequently, the Transaction Committee held a call with GT and Company management to discuss the response of F&L.
Between November 11 and November 23, 2021, representatives of the Company and Parent engaged in multiple due diligence discussions and the Company provided additional due diligence information to Parent.
On November 12, 2021, representatives of the Company, Parent, F&L, Lincoln, GT and Consensus held a meeting by videoconference at which Lincoln updated the parties on Parent’s debt financing efforts and the parties further discussed Parent’s due diligence status.
On November 15, 2021, the independent members of the Board, Ms. Marino, Messrs. Mustacchi and Zelkowicz, Drew Train and Evelyn D’An, held a special meeting at which the Transaction Committee updated the Board on the status of the transaction, key issues with the draft merger agreement, the progress of due diligence, the status of Parent’s efforts to obtain debt financing and expectations for next steps.
Also on November 15, 2021, the Transaction Committee held a meeting with Consensus, Company management and GT at which the committee members were updated on the most recent communications with Parent and Lincoln and asked Consensus and GT, respectively, to follow up with Parent’s advisors on various outstanding issues.
On November 16, 2021, F&L contacted counsel for Wynnefield to discuss a potential voting and support agreement. F&L and counsel for Wynnefield subsequently negotiated a form of voting and support agreement, which Parent and Wynnefield executed on March 16, 2022.
On November 23, 2021, Mr. Mintman contacted Mr. Meier and informed him that Parent was engaged in a quality of earnings analysis and, therefore, Parent could not reaffirm its interest in the proposed transaction, the price at which it was willing to move forward and other possible changes that Parent might want to make to its letter of intent, until such analysis was completed.
On December 1, 2021, representatives of Parent, the Company and GT held a conference call. Parent provided an update on the status of its debt financing efforts and presented revised terms for a proposed transaction. Based on results of its due diligence and its quality of earnings review, Parent revised its price to $11.66 per share in cash. Later that day, the Transaction Committee held a meeting with Consensus, Company management and GT to discuss Parent’s revised offer. The committee members reviewed with Company management and Consensus the reasons given by Parent for its revised terms. The Transaction Committee determined that the revised terms were not acceptable and instructed Mr. Noyes to relay this response to Parent. Subsequently Parent’s letter of intent terminated in accordance with its terms on December 3, 2021.
 
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On December 7, 2021, representatives of Lincoln contacted Consensus to discuss the reasons the transaction was not moving forward and whether there was the possibility of restarting discussions with Parent. Subsequently, on December 7, 2021, the Transaction Committee held a meeting with Consensus, Company management and GT at which Mr. Noyes recounted his conversation with Lincoln and discussed with the committee members potential responses to Lincoln and Parent. The committee members discussed the key transaction terms that would need to be agreed upon to move forward and consulted with Consensus and Company management on an appropriate response. The Transaction Committee instructed Mr. Noyes to contact Mr. Gunnigle to confirm that Parent had directed Lincoln to contact the Company and that the Board would have to determine whether to re-engage in discussions and the parameters for moving forward. The committee members then discussed with Consensus reaching out to Party C to determine if there was any interest in a potential transaction considering the expiration of the letter of intent, and instructed Consensus to do so.
On December 9, 2021, the Board held a regularly scheduled meeting with GT, Company management and Consensus in attendance. At the meeting, the Transaction Committee updated the Board on the status of negotiations with Parent and the revised transaction terms that Parent had proposed. Consensus reviewed with the Board the revised transaction terms from Parent and the basis of Parent’s valuation and discussed with the Board strategies to respond to Parent. Following such discussion, the Board continued to discuss the Company’s current financial position and liquidity needs.
Between December 9 and December 20, 2022, representatives of Consensus and representatives of Lincoln engaged in discussions regarding Parent’s revised offer and views of Parent and the Company on the various adjustments proposed by Parent related to its quality of earnings review and other diligence matters.
On December 16, 2021, Consensus informed the Transaction Committee that Party C was not interested in discussing a potential transaction with the Company.
On December 20, 2021, Parent and the Company entered into a new letter of intent that provided for exclusive negotiations through January 21, 2022 and a per share cash purchase price of $15.00.
On December 21, 2021, the Company engaged Duff & Phelps to provide a fairness opinion to the Board in connection with the proposed transaction.
Between December 22, 2021 and January 5, 2022, F&L and GT communicated regarding the transaction process and documentation.
On January 6, 2022 and January 7, 2022, Mr. Noyes spoke with Mr. Mintman regarding the Company’s preliminary 2021 financial results and current 2022 forecast.
On January 7, 2022, Company management met with the Transaction Committee, Consensus and GT. Mr. Noyes relayed to the committee that management had shared preliminary results for 2021 and the current 2022 forecast with Parent. Mr. Noyes stated that Mr. Mintman was disappointed in the results and indicated that Parent now viewed the price per share for the proposed transaction as closer to $11.78 per share in cash. The committee members then discussed with Consensus and management the current financial situation of the Company and the impact that it could have on the Company’s valuation and instructed Mr. Noyes to inform Parent that the Company would respond to its revised proposed price.
On January 10, 2022, the Transaction Committee met with Company management, Consensus and GT to continue discussion of the revised purchase price proposed by Parent and to receive a report on the main outstanding issues on the draft merger agreement.
On January 12, 2022, the Transaction Committee held a meeting with Company management, Consensus and GT at which Company management presented the updated preliminary results for 2021 (after closing the Company books earlier in the week) and explained that the Company’s performance in the fourth quarter was well below expectations. The committee instructed Company management to inform Parent of and explain the 2021 results.
On January 14, 2022, Mr. Meier spoke to Mr. Mintman concerning the updated 2021 results. Mr. Mintman indicated that this impacted the economics of the deal for Parent, but that Parent was still
 
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interested in pursuing the proposed transaction and also asked for information about the Company’s performance in the first quarter of 2022.
Also on January 14, the Transaction Committee held a meeting with Company management, Consensus and GT at which Company management updated the committee on its discussions with Parent regarding the updated 2021 results. The Transaction Committee and management discussed and agreed that the forecast for 2022 should be updated considering the 2021 preliminary results.
On January 18, 2022, the Transaction Committee had a call with Company management, which informed the committee that a revised forecast had been prepared and that Parent was expecting the Company to propose a counteroffer considering the updated forecast and 2021 results. The committee requested that Consensus and Company management prepare presentations on the revised forecast and 2021 results for the full Board and that the committee would arrange for a meeting of the Board.
On January 19, 2022, the Board held a special meeting, attended by Company management, Consensus and GT. The Board discussed the preliminary results for 2021 and the impact on the 2022 forecast, and that this updated information had been shared with Parent, and the Company’s long-term projections that reflected the revised 2022 forecast. The Transaction Committee updated the Board on Parent’s response to the updated financial information and its request that the Company propose a revised purchase price. The Transaction Committee then asked Consensus to review with the Board its updated analysis with respect to the Company’s valuation based on the updated financial information and responded to questions from the Board on the various valuation methodologies and impact on pricing. The Board agreed to respond to Parent to consider a per share purchase price of $13.00 in cash. Company management also updated the Board on the status of negotiations with the Company’s primary lender and with Wynnefield for a new term loan to ensure adequate liquidity in the first quarter of 2022.
On January 19, 2022, Mr. Mintman called Mr. Noyes to inform him that the Parent’s board of directors view was that $10.50 was an appropriate per share purchase price considering the revised financial information. Mr. Noyes informed Mr. Mintman that the Board could possibly accept a $13.00 per share purchase price.
On January 20, 2022, the Transaction Committee had a call with Consensus, Company management and GT concerning the status of negotiations with Parent. Mr. Noyes informed the committee of his conversation with Mr. Mintman and the price differential between Parent and the Company of $10.50 and $13.00 per share in cash, respectively. The committee members discussed the short-term risks faced by the Company, such as weakened demand, continued supply chain challenges and continued elevated costs, regardless of whether the Company was able to reach a definitive agreement with Parent. The committee determined that a $10.50 per share purchase price was not acceptable to the Board based on the Board’s discussion at its last meeting, and that discussions with Parent should be paused so that the Company could focus on completing its year-end audit and obtaining the new term loan. The Transaction Committee authorized Mr. Noyes to let Mr. Mintman know that the Board rejected the $10.50 per share offer, and that the Company was willing to re-engage at a later date.
On January 21, 2022, Mr. Gunnigle sent an email to Mr. Noyes indicating that the Parent’s board of directors had approved a $12.00 per share offer and expressed disappointment that the Company was not supportive. Mr. Gunnigle noted that their lenders were aware of the Company’s 2021 results and were prepared to finance the transaction based on those numbers. He reiterated Parent’s willingness to move forward at the $12.00 per share purchase price.
Subsequently, Mr. Noyes requested a meeting with the Transaction Committee and GT to discuss the email received from Mr. Gunnigle and the appropriate response. The committee members discussed with Company management the prior conversations with Mr. Mintman and that the committee did not have Board approval to move forward with a $12.00 per share purchase price. The committee members asked that GT work with the Company management to prepare a response to Mr. Gunnigle that would outline management’s understanding of the latest proposal from Parent, requesting clarification on certain aspects of the proposed transaction and stating that the Transaction Committee would need to reconvene the Board to consider the $12.00 per share proposed by Parent. The committee members also requested that Parent provide copies of the debt commitment letters Parent obtained and access to the financial model on which the commitments were based, for the Board to assess the financing contingency to the proposed transaction.
 
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On January 22, 2022, the independent members of the Board held a special meeting at which they discussed the latest response from Parent and its willingness to move forward with a transaction despite the Company’s results in 2021. The Board discussed whether to move forward with the $12.00 per share latest proposed purchase price from Parent in view of the Company’s financial condition and the continued concern regarding the financing contingency. Following discussion, the Board determined to move forward with the proposed transaction based on the $12.00 per share purchase price in cash, and that the Transaction Committee would instruct Mr. Noyes to inform Parent of the Board’s willingness to move forward.
On January 24, 2022, the Transaction Committee held a meeting with GT and Ms. D’An in attendance. The committee also discussed and agreed to recommend to the Board that Mr. Zelkowicz step down from the committee to avoid the appearance of any conflict of interest because Wynnefield was to become a lender to the Company, and to have Ms. D’An replace him.
On January 25, 2022, Parent and the Company entered into a new letter of intent that provided for exclusive negotiations through February 21, 2022 and a per share purchase price of $12.00 in cash, and their respective counsels continued to negotiate the transaction terms and documents.
On January 31, 2022, the Transaction Committee held a meeting with Ms. D’An, Consensus, Company management and GT attending. Consensus updated the committee on the progress with respect to outstanding diligence requests. The committee asked Consensus to summarize their recent discussions with Lincoln with respect to Parent’s debt financing and GT provided an overview of outstanding issues on the draft merger agreement. Also, Mr. Zelkowicz formally resigned from the committee.
On February 9, 2022, the Board held a regularly scheduled meeting attended by Company management, GT and, for a portion of the meeting, representatives of Consensus. At the meeting, among other things, Company management reviewed and discussed with the Board the Company’s 2021 results. In addition, Consensus updated the Board on its recent discussions with Lincoln regarding the status of Parent’s debt financing and timing, and GT updated the Board on the status of the transaction, outstanding issues on the draft merger agreement, and discussions with Duff & Phelps on the fairness opinion analysis. The Board also approved the appointment of Ms. D’An to the Transaction Committee to replace Mr. Zelkowicz.
On February 15, 2022, the Transaction Committee held a meeting with Consensus, Company management and GT attending. Company management and Consensus updated the committee on the status of outstanding diligence requests and noted that Parents’ lenders had commenced their due diligence and, therefore, it was unlikely that they would finish this process by February 21, 2022 (the then end of the exclusivity period) and, therefore, agreed to extend exclusivity to March 15, 2022 (the then expected date of the Company’s earnings release).
On February 21, 2022, Parent and the Company entered into an amendment to the existing letter of intent to extend exclusivity through March 15, 2022.
On February 22, 2022, the Board held a special meeting, attended by representatives of Duff & Phelps and GT and the Company’s general counsel. Duff & Phelps reviewed with the Board its observations of the Company’s business and previewed with the Board its analysis and valuation methodologies with respect to a possible delivery of a fairness opinion and indicated that Duff & Phelps would be able to deliver their fairness opinion based on a transaction price of $12.00 per share in cash. The Board also received a report on the status of the negotiations and other aspects of the proposed transaction which respective counsels for the parties continued to advance.
On March 1, 2022, the Transaction Committee had a meeting with Consensus, Company management and GT attending. Company management and Consensus updated the Board on the status of diligence. GT updated the committee on outstanding issues under the draft merger agreement.
On March 2, 2022, Mr. Macari executed a non-disclosure agreement with the Company in connection with the voting and support agreement requested by Parent.
On March 8 2022, the Transaction Committee met with GT to review the terms of the draft merger agreement and other transaction issues.
 
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Also on March 8, 2022, Mr. Noyes and a representative from GT spoke with Mr. Macari about the pending the transaction, and subsequently connected Mr. Macari and his legal counsel with F&L to discuss a voting and support agreement. On March 11, 2022, F&L informed GT that Parent had agreed with Mr. Macari on the form of a voting and support agreement, which Mr. Macari and Parent executed on March 16, 2022.
Between March 9 and March 15, 2022, representatives of the Company and Parent and their respective legal advisors had multiple conversations to resolve outstanding issues on the draft merger agreement.
Between March 10 and March 15, 2022, the Transaction Committee met multiple times with GT to discuss outstanding issues on the draft merger agreement and approved extending exclusivity for one day, and also met with Company management to discuss revisions to the 2022 forecast provided in January considering preliminary results from February 2022 were lower than expected, and updated long-term projections to reflect the revised 2022 forecast. Company management shared the updated 2022 forecast with Parent, and on March 11, 2022, the Transaction Committee reviewed the updated 2022 forecast and long-term projections.
On March 15, 2022, Parent and the Company entered into an amendment to the existing letter of intent to extend exclusivity through March 16, 2022.
On March 16, 2022, the Board held a meeting by videoconference, with members of Company management and representatives of Consensus, Duff & Phelps and GT in attendance. At the meeting, the Board approved the revised long-term projections prepared by Company management and previously reviewed by the Transaction Committee and previously provided to and used by Duff & Phelps for purpose of the fairness opinion delivered to the Board (as detailed below). Representatives of Consensus reviewed with the Board the marketing efforts that have been undertaken, starting in 2020, and provided a summary of the Debt Commitment Letters and related financial information from Parent regarding Parent’s ability to meet the financial conditions to closing of the financings contemplated by the Debt Commitment Letters. Also at this meeting, Duff & Phelps presented to the Board its analysis of the Merger Consideration, and rendered an oral opinion, confirmed by delivery of a written opinion dated March 16, 2022, to the Board to the effect that, as of such date and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in such opinion, the Merger Consideration to be received by holders of Company common stock (other than shares held by Parent, Merger Sub or the Company, or any direct or indirect wholly owned subsidiary thereof, and Dissenting Shares) pursuant to the Merger Agreement was fair, from a financial point of view, to such holders. Representatives of GT reviewed the key terms of the Merger Agreement. After discussions, including as to the matters described below under “— Recommendation of Our Board of Directors and Reasons for the Merger,” the Board unanimously (i) determined and declared that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the Merger Consideration, are advisable and in the best interests of the Company and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, (iii) directed that the adoption of the Merger Agreement be submitted by the Company to a vote of the Company’s stockholders at a special meeting, and (iv) resolved to recommend that the Company’s stockholders adopt the Merger Agreement.
Following the approval of the Merger Agreement and the transactions contemplated thereby (including the Merger) by the Board and Parent’s Board, the Company, Parent and Merger Sub executed the Merger Agreement and issued a joint press release after the close of market on March 16, 2022, announcing the execution of the Merger Agreement. On March 17, 2022, the Company filed a Current Report on Form 8-K disclosing, among other things, its entry into the Merger Agreement.
Recommendation of Our Board and Reasons for the Merger
Recommendation of Our Board of Directors
The Board, after consulting with its financial advisors and outside legal counsel and carefully reviewing and considering various factors described below, unanimously (i) determined and declared that the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger and the Merger
 
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Consideration, are in the best interests of SUMR and its stockholders, (ii) approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger, and (iii) resolved to recommend that SUMR’s stockholders adopt the Merger Agreement.
The Board recommends that you vote (i) “FOR” the Merger Proposal; (ii) “FOR” the Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.
Reasons for the Merger
In evaluating the Merger Agreement and the transactions contemplated thereby, including the Merger, the Transaction Committee and the Board held a number of meetings and consulted with Company management and the Company’s outside legal and financial advisors. In reaching its decision to approve the Merger Agreement and the Merger, and to recommend that the Merger Agreement be adopted by the Company’s stockholders, the Board considered a number of factors, including the following factors (which are not intended to be exhaustive or listed in any relative order of importance to the Board):

the fact that the Merger Consideration represented a premium of approximately 41.2% over the closing price of the Company’s common stock on March 15, 2022 ($8.50), the trading day prior to the date the Merger Agreement was approved by the Board, and a premium of 41.4% and 26.5% over the 30-day average and 60-day average, respectively, on the same date;

the fact that the Merger Consideration will be paid in cash, and provides certainty, immediate value, and liquidity to the Company’s stockholders, enabling them to realize value for their interest in the Company while eliminating business and execution risk inherent in the Company’s business, including risks and uncertainties associated with continuing as an independent public company;

the Board’s belief that the value offered to stockholders pursuant to the Merger is more favorable to the Company’s stockholders than the potential value from other alternatives reasonably available to the Company, including continuing as an independent public company;

the Company’s short-term and long-term financial projections and the perceived challenges and risks associated with the Company’s ability to meet such projections, including the Company’s financial results for the year ended January 1, 2022, and the implications of the Company’s performance in the first two months of fiscal 2022 on its forecast for 2022 and subsequent years and reflected in the long-term financial projections provided to the Board in March 2022, the competitive landscape, and other factors, including ongoing supply chain challenges that significantly impact the Company, the impact of macroeconomic factors in the U.S. on consumer demand, and other risks and uncertainties described in the “risk factors” and “forward looking statements” sections of the Company’s disclosures filed with the SEC;

the Board’s knowledge of, and discussions with Company management regarding, the Company’s business, operations, financial condition, earnings, strategy and future prospects, including opportunities to create stockholder value in the future on a standalone basis and related potential risks;

the broad outreach to, and extensive discussions with, potentially interested parties, including through the Company’s financial advisor, regarding strategic alternatives for the Company undertaken since 2020;

the fact that the Transaction Committee and the Board met, along with Company management and outside legal and financial advisors, to evaluate and discuss the structure of the Merger and the financial and other terms and conditions of, and other matters related to, the Merger, multiple times between August 1, 2021, which was the date on when Parent and Company began discussing pricing and valuation of the Company, and March 16, 2022, which was the date the Merger Agreement was signed;

the possibility that, if the Board declined to adopt the Merger Agreement, there may not be another opportunity for the Company’s stockholders, in the reasonably foreseeable future, to receive a comparably priced transaction;
 
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the Company’s ability pursuant to the Merger Agreement to respond to, negotiate and agree to an alternative acquisition proposal from a third party if such proposal could reasonably be expected to result in a superior proposal;

the Board’s ability to change its recommendation to the Company’s stockholders to adopt the Merger Agreement in accordance with and as permitted by customary fiduciary out provisions in the Merger Agreement;

the Company’s ability to terminate the Merger Agreement to accept a superior proposal with the payment of a termination fee, which fee the Board believes to be reasonable under the circumstances given the valuation of the Company in the transaction and taking into account the range of such termination fees in similar transactions and believes not to preclude or substantially impede a possible competing proposal;

the fact that the Support Agreements would terminate automatically if the Board changes its recommendation to the Company’s stockholders to adopt the Merger Agreement or authorizes termination of the Merger Agreement, including in connection with superior proposal;

the fact that the Merger Agreement was the product of arm’s-length negotiations with respect to price and other terms and conditions that were, in the Board’s view, advisable and favorable to the Company and its stockholders, as well as the Board’s belief, based on these negotiations, that these were the most favorable terms available to the Company and its stockholders on which Parent was willing to transact;

the fact that Parent has obtained committed debt financing for the transaction from reputable financial institutions, and that Parent has agreed to use reasonable best efforts to consummate the debt financing, and that Parent provided the Company with substantial information to the effect that Parent is likely to be able to consummate the debt financing on the terms set forth in the debt commitment letters;

the oral opinion of Duff & Phelps, independent financial advisor to the Board, rendered to the Board on March 16, 2022, subsequently confirmed by delivery of a written opinion dated March 16, 2022, to the effect that, as of the date of the opinion and subject to and based on the assumptions made, procedures followed, matters considered and limitations of the review undertaken and qualifications described in the written opinion, the Merger Consideration to be received in the Merger by holders of shares of the Company common stock (other than shares held by Parent, Merger Sub or SUMR, or any direct or indirect wholly owned subsidiary thereof, and Dissenting Shares), was fair, from a financial point of view, to such holders, as more fully described in “— Opinion of Duff & Phelps” below;

the likelihood that the Merger will be consummated, based upon, among other things, the likelihood of receiving the necessary approval of the Company’s stockholders to complete the Merger and the limited number of conditions to the Merger; and

the fact that two of the Company’s largest stockholders agreed to vote in favor of the Merger based on the terms contained in the Merger Agreement;

the other terms and conditions of the Merger Agreement and other transaction agreements, including the following related factors:

the customary nature of the representations, warranties, and covenants of the Company in the Merger Agreement;

the ability of the Board, subject to certain limitations, to respond to a written acquisition proposal received from a third party prior to obtaining the stockholder approval if the Board determines in good faith (after consultation with its financial advisor and outside legal counsel), that the acquisition proposal could reasonably be expected to lead to a superior proposal;

the ability of the Board, subject to certain limitations, to withdraw or modify its recommendation that stockholders vote in favor of adoption of the Merger Agreement in connection with the receipt of a superior proposal, and to terminate the Merger Agreement to accept a superior proposal and enter into a definitive agreement with respect to such superior proposal, subject to payment to Parent of a termination fee;
 
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the conclusion of the Board that the termination fee and the circumstances in which such termination fee may be payable are reasonable in light of the benefit of the Merger and would not be a significant impediment to third parties interested in making an acquisition proposal;

the fact that Parent has received debt commitment letters that will provide sufficient funds for Parent to consummate the Merger;

the fact that, pursuant to the Merger Agreement and subject to certain limitations, the Company is entitled to specific performance and other equitable remedies to prevent breaches of the Merger Agreement; and

the availability of statutory appraisal rights to the Company stockholders who do not vote in favor of the adoption of the Merger Agreement and otherwise comply with all required procedures to perfect appraisal rights under the DGCL.
The Board also considered a variety of risks and other potentially negative factors with respect to the Merger Agreement and the Merger, including the following (which are not intended to be exhaustive or listed in any relative order of importance to the Board):

the risk that Parent is unable to meet the conditions for closing its debt financing, a portion of which is to be used by Parent to fund the Merger Consideration and, as a result, the possibility that Parent may not be able to obtain alternative debt financing in a timely manner or be able to consummate the Merger;

the risk that the conditions to the consummation of the Merger may not be satisfied and, as a result, the possibility that the Merger may not be completed in a timely manner or at all, even if the Merger Agreement is adopted by the Company’s stockholders;

the fact that the Company’s stockholders will not participate in any potential future earnings or growth of the Company and will not benefit from any appreciation in its value as a private company;

the restrictions in the Merger Agreement on the Company actively soliciting competing bids to acquire the Company;

the restrictions in the Merger Agreement on the Company’s ability to terminate the Merger Agreement in connection with the receipt of a superior proposal, including the fact that the Board must (i) provide 5 business days’ notice to Parent of its intention to effect a change of Board recommendation in order to provide Parent with an opportunity to match a superior proposal (and a further 3 business days’ notice with respect to any subsequent material revisions to any such superior proposal) and (ii) negotiate in good faith with Parent during such period, and the discouraging effect such restrictions may have on other potential bidders;

the fact that, under certain circumstances in connection with the termination of the Merger Agreement (including if the Board changes its recommendation in light of a superior proposal or if the Company terminates the Merger Agreement to accept a superior proposal), the Company will be required to pay Parent a termination fee of $2,310,600;

the potential negative effects if the Merger is not consummated, including that:

the trading price of the Company common stock could be adversely affected;

the Company will have incurred significant transaction and opportunity costs attempting to complete the Merger;

the Company could lose key employees;

the Company’s business may be subject to significant disruption and decline;

the market’s perceptions of the Company’s prospects could be adversely affected;

the Company’s directors, officers, and other employees will have expended considerable time and efforts to consummate the Merger;

the fact that any gain realized by the Company stockholders as a result of the Merger will generally be taxable for U.S. federal income tax purposes to those stockholders that are U.S. persons subject to taxation in the United States;
 
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the restrictions in the Merger Agreement on the conduct of the Company’s business prior to the consummation of the Merger, which may delay or prevent it from undertaking business or other opportunities that may arise prior to the consummation of the Merger;

the potential distraction to the Company’s business from potential stockholder suits in connection with the Merger; and

the fact that the Company’s executive officers and directors may have interests in the Merger that may be different from, or in addition to, those of the Company’s stockholders.
The Board considered the factors set forth above as a whole, including through engaging in discussions with Company management and outside legal and financial advisors. Based on this review and consideration, the Board concluded that these factors supported a determination that the terms of the Merger Agreement and the Merger were advisable and in the best interests of the Company and its stockholders, and to make its recommendation that the stockholders of the Company adopt the Merger Agreement.
In considering the recommendation of the Board that SUMR’s stockholders vote to adopt the Merger Agreement, SUMR’s stockholders should be aware that the Company’s directors and executive officers may have certain interests in the Merger that are different from, or in addition to, the interests of SUMR’s stockholders generally. For a description of the interests of our directors and executive officers in the merger, see “Interests of the Directors and Executive Officers of SUMR in the Merger” below. The Board was aware of and took these interests into account when approving the Merger Agreement and determining that the terms of the Merger Agreement and the transactions contemplated thereby were advisable and in the best interests of the Company and its stockholders.
The foregoing discussion of the information and factors that the Board considered is not, and is not intended to be, exhaustive. The Board collectively reached the conclusion to approve the Merger Agreement and the consummation of the transactions contemplated thereby, including the Merger, in light of the various factors described above and other factors that the Board believed were appropriate. In light of the wide variety of factors considered, both positive and negative, that the Board considered in connection with its evaluation of the Merger, the Board did not find it practicable to, and did not quantify or otherwise assign relative weights to, any of the factors considered in reaching its determination and recommendation. Moreover, each member of the Board applied his or her own business judgment to the process and may have given different weight to different factors. The Board did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination and recommendation. It should be noted that this explanation of the reasoning of the Board and certain information presented in this section is forward-looking in nature and should be read in light of the factors set forth in “Cautionary Statement Concerning Forward-Looking Statements” on page 21 of this proxy statement.
Opinion of Duff & Phelps, Financial Advisor to the Board
On December 21, 2021, the Company retained Kroll, LLC (“Duff & Phelps”), operating through its Duff & Phelps Opinions Practice, to serve as an independent financial advisor to the Board (solely in their capacity as members of the Board) to provide to the Board a fairness opinion in connection with the Merger. On March 16, 2022, Duff & Phelps delivered its opinion, dated March 16, 2022 (the “Opinion”), to the Board that, as of the date of the Opinion and subject to and based on the assumptions made, procedures followed, matters considered, limitations of the review undertaken and qualifications contained in such Opinion, the consideration to be received by the stockholders of the Company (other than shares held by Parent, Merger Sub or SUMR, or any direct or indirect wholly owned subsidiary thereof, and Dissenting Shares) was fair, from a financial point of view, to such stockholders (without giving effect to any impact of the Merger on any particular stockholder other than in its capacity as a stockholder). For the avoidance of doubt, Duff & Phelps was engaged by and solely responsible to the Board of the Company.
In selecting Duff & Phelps, the Board considered, among other things, the fact that Duff & Phelps is a reputable investment banking firm with experience in the consumer products sector and a global leader in providing fairness opinions to boards of directors and that Duff & Phelps is independent with respect to the Merger, including with respect to Parent, Merger Sub and the Company. Duff & Phelps is continuously
 
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engaged in the valuation of businesses and their securities and the provision of fairness opinions in connection with various transactions.
The full text of the Opinion is attached hereto as Appendix D and is incorporated into this proxy statement by reference. The summary of the Opinion set forth herein is qualified in its entirety by reference to the full text of the Opinion. The Company’s stockholders are urged to read the Opinion carefully and in its entirety for a discussion of the procedures followed, assumptions made, other matters considered and limits of the review undertaken by Duff & Phelps in connection with such Opinion. The Opinion does not address any other aspects of the Merger and was not intended to, and does not, constitute advice or a recommendation as to how the Board or the stockholders of the Company should vote at any meeting related to the Merger or to take any other action with respect to the Merger.
Duff & Phelps’ Opinion was approved by its fairness committee. The Opinion was provided and directed to, the Board in connection with its consideration of the financial terms of the Merger.
In connection with its Opinion, Duff & Phelps made such reviews, analyses and inquiries as it deemed necessary and appropriate under the circumstances to enable it to render its Opinion. Duff & Phelps also took into account its assessment of general economic, market and financial conditions, as well as its experience in securities and business valuation in general, and with respect to similar transactions in particular. Duff & Phelps’ procedures, investigations and financial analyses with respect to the preparation of its Opinion included, but were not limited to, the items summarized below:
1.
Reviewed certain documents including, but not limited to:
a.
the Company’s annual reports on Form 10-K and the audited financial statements included therein filed with the Securities and Exchange Commission for the fiscal years ended December 30, 2017, through January 2, 2021, and the Company’s draft annual report on Form 10-K and audited financial statements included therein for the fiscal year ended January 1, 2022;
b.
unaudited segment and pro forma financial information for the Company for the fiscal years ended December 30, 2017, through January 1, 2022 and the two months ended February 26, 2022, provided to Duff & Phelps by management of the Company, which Company management identified as being the most current financial statements available;
c.
financial projections for the Company for the fiscal years ended on or about December 31, 2022, through December 31, 2025, provided to Duff & Phelps by management of the Company (the “Company Projections”);
d.
other internal documents relating to the history, current operations, and probable future outlook of the Company, provided to Duff & Phelps by management of the Company;
e.
a letter dated March 16, 2022 from the management of the Company which made certain representations to Duff & Phelps as to historical financial statements and the Company Projections and underlying assumptions; and
f.
documents related to the proposed transaction, including the Merger Agreement, the Voting and Support Agreement between Wynnefield Partners Small Cap Value L.P. I and Parent, and the Voting and Support Agreement between Jason Macari and Parent;
2.
Discussed the information referred to above and the background and other elements of the proposed transaction with management of the Company and the Board;
3.
Reviewed the historical trading price and trading volume of the Company’s common stock and the publicly traded securities of certain other companies that Duff & Phelps deemed relevant;
4.
Performed certain valuation and comparative analyses using generally accepted valuation and analytical techniques including a discounted cash flow analysis and an analysis of selected public companies that Duff & Phelps deemed relevant; and
 
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5.
Conducted such other analyses and considered such other factors as Duff & Phelps deemed appropriate.
In performing its analyses and rendering its Opinion with respect to the Merger, Duff & Phelps, with the Company’s consent:

relied upon the accuracy, completeness, and fair presentation of all information, data, advice, opinions, and representations obtained from public sources or provided to it from private sources, including the Company management, and did not independently verify such information;

relied upon the fact that the Board and the Company have been advised by counsel as to all legal matters with respect to the Merger, including whether all procedures required by law to be taken in connection with the Merger have been and will be duly, validly, and timely taken;

assumed that any estimates, evaluations, forecasts, and projections furnished to Duff & Phelps by Company management were reasonably prepared and based upon the best currently available information and good faith judgment of the person furnishing the same, and Duff & Phelps expresses no opinion with respect to such estimates, evaluations, forecasts and projections or their respective underlying assumptions;

assumed that information supplied, and representations made by Company management are substantially accurate regarding the Company and the Merger;

assumed that (i) the representations and warranties made in the Merger Agreement and all related documentation are true and correct pursuant to the Merger Agreement and (ii) each party to the Merger Agreement will fully and timely perform all of the covenants and agreements required to be performed by such party pursuant to the Merger Agreement;

assumed that there has been no material change in the assets, liabilities, financial condition, results of operations, business, or prospects of the Company since the date of the most recent financial statements and other information made available to Duff & Phelps, and that there is no information or facts that would make the information reviewed by Duff & Phelps incomplete or misleading;

assumed that all conditions required to implement the proposed transaction will be satisfied and that the proposed transaction will be completed in accordance with the Merger Agreement without any amendments thereto or any waivers of any terms or conditions thereof (except for non-material waivers permitted under the Merger Agreement that Duff & Phelps has reviewed); and

assumed that all governmental, regulatory, or other consents and approvals, if any, necessary for the consummation of the proposed transaction will be obtained without any effect on the Company.
To the extent that any of the foregoing assumptions or any of the facts on which the Opinion is based prove to be untrue in any material respect to Duff & Phelps’ analysis, Duff & Phelps’ Opinion cannot and should not be relied upon. Furthermore, in Duff & Phelps’ analysis and in connection with the preparation of its Opinion, Duff & Phelps has made numerous assumptions with respect to industry performance, general business, market and economic conditions and other matters, many of which are beyond the control of any party involved in the Merger.
Duff & Phelps prepared its Opinion effective as of March 16, 2022. Its Opinion was necessarily based upon market, economic, financial and other conditions as they existed and could be evaluated as of such date, and Duff & Phelps disclaims any undertaking or obligation to (i) advise any person of any change in any fact or matter affecting its Opinion which may come or be brought to the attention of Duff & Phelps after the date thereof or (ii) reaffirm or revise its Opinion or otherwise comment upon any events occurring after the date thereof.
Duff & Phelps did not evaluate the Company’s solvency or conduct an independent appraisal or physical inspection of any specific assets or liabilities (contingent or otherwise). Duff & Phelps was not requested to, and did not (and Duff & Phelps acknowledged that the Company independently did), (i) initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Merger, the assets, businesses or operations of the Company, or any alternatives to the Merger, (ii) negotiate the terms of the Merger, and therefore, Duff & Phelps has assumed that such terms were negotiated in arm’s length
 
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among the parties to the Merger Agreement and the Merger, or (iii) advise the Board or any other party with respect to alternatives to the Merger.
Duff & Phelps did not express any opinion as to the market price or value of the Company’s common stock after the announcement or the consummation of the Merger. Duff & Phelps’ Opinion should not be construed as a valuation opinion, a credit rating, a solvency opinion, an analysis of the Company’s credit worthiness, as legal, tax or accounting advice. Duff & Phelps did not make, and assumed no responsibility to make, any representation, or render any opinion, as to any legal matter.
In rendering its Opinion, Duff & Phelps was not expressing any opinion with respect to the amount or nature of any compensation to any of the Company’s officers, directors, or employees, or any class of such persons, relative to the consideration to be received by the public stockholders of the Company in the Merger, or with respect to the fairness of any such compensation.
Duff & Phelps’ Opinion was furnished solely for the use and benefit of the Board in connection with its consideration of the Merger and was not intended to, and did not, confer any rights or remedies upon any other person, and was not intended to be used, and may not be used, by any other person or for any other purpose, without Duff & Phelps’ express consent (except as provided therein). Duff & Phelps has consented to the inclusion of the Opinion in its entirety and the description hereof in this proxy statement and any other filing the Company is required to make with the SEC in connection with the Merger if such inclusion is required by the applicable law. The Opinion (i) did not address the merits of the underlying business decision to enter into the Merger versus any alternative strategy or transaction, (ii) did not address any transaction related to the Merger, (iii) was not a recommendation as to how the Board or any stockholder should vote or act with respect to any matters relating to the Merger, or whether to proceed with the Merger or any related transaction, and (iv) did not indicate that the consideration received is the best possibly attainable under any circumstances; instead, it merely states that the consideration in the Merger is within a range suggested by certain financial analyses. The decision as to whether to proceed with the Merger or any related transaction may depend on an assessment of factors unrelated to the financial analysis on which the Opinion is based. Duff & Phelps’ Opinion should not be construed as creating any fiduciary duty on the part of Duff & Phelps to any party.
Set forth below is a summary of the material analyses performed by Duff & Phelps in connection with the delivery of its Opinion to the Board. This summary is qualified in its entirety by reference to the full text of the Opinion, attached hereto as Appendix D. While this summary describes the analyses and factors that Duff & Phelps deemed material in its presentation to the Board, it is not a comprehensive description of all analyses and factors considered by Duff & Phelps. The preparation of a fairness opinion is a complex process that involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis. In arriving at its Opinion, Duff & Phelps did not attribute any particular weight to any analysis or factor considered by it, but rather made qualitative judgments as to the significance and relevance of each analysis and factor. Accordingly, Duff & Phelps believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it in rendering the Opinion without considering all analyses and factors could create a misleading or incomplete view of the evaluation process underlying its Opinion. The conclusion reached by Duff & Phelps was based on all analyses and factors taken as a whole, and also on the application of Duff & Phelps’ own experience and judgment.
The financial analyses summarized below include information presented in tabular format. In order for Duff & Phelps’ financial analyses to be fully understood, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Duff & Phelps’ financial analyses.
Valuation Analyses
Income Approach (Discounted Cash Flow Analysis) Summary
The Income Approach is a valuation technique that provides an estimation of the fair market value of an asset (or business) based on the cash flows that an asset (or business) can be expected to generate over its
 
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remaining useful life. The Income Approach begins with an estimation of the annual cash flows a market participant would expect the subject asset (or business) to generate over a discrete projection period. The estimated cash flows for each of the years in the discrete projection period are then converted to their present value equivalents using a rate of return appropriate for the risk of achieving the projected cash flows. The present value of the estimated cash flows are then added to the present value equivalent of the residual/terminal value of the asset (if any) or the business at the end of the discrete projection period to arrive at an estimate of fair market value.
For business valuations, the Income Approach is typically applied through a Discounted Cash Flow (“DCF”) Analysis. Under the DCF analysis, the valuation is based on the present value of estimated future cash flows for the expected life of the asset (or business) discounted at a rate of return that considers the relative risk of achieving those cash flows and the time value of money.
Duff & Phelps performed a discounted cash flow analysis of the estimated future unlevered free cash flows attributable to the Company for the fiscal years ending on or around December 31, 2022 through December 31, 2025, with unlevered “free cash flow” defined as cash that is available either to reinvest or to distribute to security holders. The discounted cash flow analysis was used to determine the net present value of estimated future free cash flows utilizing a weighted average cost of capital as the applicable discount rate. For the purposes of its discounted cash flow analysis, Duff & Phelps utilized and relied upon the Company Projections, See “— Certain Financial Projections” below. For the DCF analysis, Duff & Phelps used the following unlevered free cash flows:
($ in thousands)
2022
2023
2024
2025
$ 1,798 $ 3,715 $ 3,747 $ 7,102
Duff & Phelps estimated the net present value of all cash flows attributable to the Company after fiscal year 2025 (the “Terminal Value”) using the Gordon Growth Model (which is commonly used for stock valuation) assuming a 3.00% terminal growth rate, which took into consideration an estimate of the expected long-term growth rate of the U.S. and global economy and the Company’s business. Duff & Phelps used discount rates ranging from 13.00% to 15.00%, reflecting Duff & Phelps’ estimate of the Company’s weighted average cost of capital, to discount the projected free cash flows and the Terminal Value. Duff & Phelps estimated the Company’s weighted average cost of capital by estimating the weighted average of the Company’s cost of equity (derived using the capital asset pricing model “CAPM”) and the Company’s after-tax cost of debt. The weighted average cost of capital was based on an estimated cost of equity of 18%, derived from CAPM, and an estimated after-tax cost of debt of 4.3%. The weighting of the cost of equity and the after-tax cost of debt took into consideration the capital structures of the selected public companies included in the Market Approach and the Company. Duff & Phelps believes that this range of discount rates is consistent with the rate of return that security holders could expect to realize on alternative investment opportunities with similar risk profiles.
Based on these assumptions, Duff & Phelps’ discounted cash flow analysis resulted in a range of the estimated present value of future cash flows for the years 2022 through 2025 of $12.0 million to $12.5 million and a range of the estimated present value of the Terminal Value of $46.0 million to $58.5 million, for an estimated enterprise value range for the Company of $58.1 million to $71.0 million.
Market Approach (Selected Public Companies Analysis) Summary
The Market Approach is a valuation technique that provides an estimation of fair market value based on market prices in actual transactions and on asking prices for assets (or businesses). The valuation process is a comparison and correlation between the subject asset (or business) and other similar assets (or businesses). Considerations such as time and condition of sale and terms of agreements are analyzed for comparable assets and are adjusted to arrive at an estimation of the fair market value of the subject asset.
Duff & Phelps analyzed selected public companies for purposes of estimating valuation multiples with which to select multiples to apply to the Company’s estimated 2023 EBITDA figure. Due to limited recent relevant M&A transactions, Duff & Phelps relied on the selected public companies in the Market Approach. This collective analysis was based on publicly available information and is described in more detail in the sections that follow.
 
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The companies utilized for comparative purposes in the following analysis were not directly comparable to the Company. Duff & Phelps does not have access to non-public information of any of the companies used for comparative purposes. Accordingly, a complete valuation analysis of the Company cannot rely solely upon a quantitative review of the selected public companies, but involves complex considerations and judgments concerning differences in financial and operating characteristics of such companies, as well as other factors that could affect their value relative to that of the Company. Therefore, the selected public companies analysis is subject to certain limitations.
Selected Public Companies Analysis.   Duff & Phelps compared certain financial information of the Company to corresponding data and ratios from juvenile products focused publicly traded companies. For purposes of its analysis, Duff & Phelps used certain publicly available historical financial data and consensus equity analyst estimates for the selected publicly traded companies. The 12 companies included in the selected public company analysis were:
Selected Companies
Carter’s, Inc.
Crown Crafts, Inc.
Dorel Industries Inc.
Goodbaby International Holdings Limited
Hasbro, Inc.
JAKKS Pacific, Inc.
Mattel, Inc.
Newell Brands Inc.
Spin Master Corp.
The Children’s Place, Inc.
TOMY Company, Ltd.
Vtech Holdings Limited
Duff & Phelps selected these companies for its analysis based on their relative similarity, primarily in terms of product, end market, or business model, to that of the Company.
The tables below summarize certain observed historical and projected financial performance, on an aggregate basis, and trading multiples of the selected public companies. The estimates for 2022 and 2023 in the tables below with respect to the selected public companies were derived based on information for the 12-month periods ending closest to the Company’s fiscal year ends for which information was available. Data related to the Company’s earnings before interest, taxes, depreciation and amortization (“EBITDA”) were adjusted for purposes of this analysis to eliminate non-recurring income (expenses).
COMPANY
INFORMATION
Company Name
REVENUE GROWTH
EBITDA GROWTH
EBITDA MARGIN
3-YR CAGR
LTM
2022
2023
3-YR CAGR
LTM
2022
2023
3-YR AVG
LTM
2022
2023
Carter’s, Inc.
0.2% 15.3% 2.6% 3.1% 6.2% 59.3% 2.5% 3.4% 14.5% 17.0% 17.0% 17.1%
Crown Crafts, Inc.
4.1 7.5 9.4 2.3 9.3 -1.6 0.5 9.2 12.9 13.2 13.5 14.4
Dorel Industries Inc.
NA 2.4 3.9 3.0 NA -18.0 -5.8 19.0 NA 7.4 6.7 7.7
Goodbaby International
Holdings Limited
5.2 14.3 7.9 7.9 10.8 48.3 19.0 18.0 8.5 9.5 8.0 8.8
Hasbro, Inc.
11.9 -3.9 2.7 5.2 18.0 29.0 0.2 9.4 19.4 20.4 19.9 20.7
JAKKS Pacific, Inc.
3.0 20.4 0.5 3.1 NA 82.3 2.1 7.0 5.1 7.6 7.7 8.0
Mattel, Inc.
6.5 18.9 7.8 7.8 85.2 43.7 10.0 15.1 13.5 17.4 17.7 18.9
Newell Brands Inc.
1.4 12.8 -4.6 1.7 -11.0 14.1 1.5 8.7 13.4 13.6 14.1 15.1
Spin Master Corp.
7.8 30.0 6.0 5.2 11.0 136.8 0.8 6.4 14.4 19.5 18.6 18.8
The Children’s Place, Inc.
-0.4 25.8 -0.4 0.9 15.5 NM NM -1.0 8.8 15.9 13.8 13.6
TOMY Company, Ltd.
-7.3 -22.8 10.3 5.0 -13.8 -40.1 NA NA 11.6 7.9 NA NA
Vtech Holdings
Limited
3.7 9.2 4.8 4.0 4.4 -4.0 1.5 8.4 11.8 10.8 11.0 11.4
Summer Infant, Inc.
-6.1% -9.6% 10.4% 12.1% NM NM 31.6% 117.3% 4.8% -0.2% 3.2% 6.2%
LTM = Latest twelve months; NM = Not meaningful; NA = Not available
Source: S&P Capital IQ, SEC Filings, Annual and Interim Reports, Investor Presentations
 
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COMPANY INFORMATION
Company Name
ENTERPRISE VALUE AS MULTIPLE OF
LTM EBITDA
2022 EBITDA
2023 EBITDA
LTM Revenue
2022 Revenue
2023 Revenue
Carter’s, Inc.
6.5x 6.3x 6.1x 1.10x 1.07x 1.04x
Crown Crafts, Inc.
5.7 5.6 5.1 0.76 0.75 0.73
Dorel Industries Inc.
3.1 3.3 2.8 0.23 0.22 0.22
Goodbaby International Holdings Limited
3.4 4.1 3.4 0.37 0.33 0.30
Hasbro, Inc.
11.5 11.5 10.5 2.35 2.29 2.18
JAKKS Pacific, Inc.
4.4 4.3 4.0 0.33 0.33 0.32
Mattel, Inc.
10.5 9.5 8.3 1.82 1.68 1.56
Newell Brands Inc.
9.6 9.6 8.9 1.30 1.36 1.34
Spin Master Corp.
7.2 7.3 6.9 1.44 1.36 1.29
The Children’s Place, Inc.
3.1 3.6 3.7 0.50 0.50 0.50
TOMY Company, Ltd.
10.3 NA NA 0.82 0.56 0.54
Vtech Holdings Limited
6.8 7.1 6.5 0.80 0.77 0.74
Mean 6.8x 6.6x 6.0x 0.98x 0.94x 0.90x
Median 6.6x 6.3x 6.1x 0.81x 0.76x 0.74x
LTM = Latest twelve months; NM = Not meaningful; NA = Not available
Source: S&P Capital IQ, SEC Filings, Annual and Interim Reports, Investor Presentations
Summary of Selected Public Companies Analysis
In order to estimate a multiple range for the Company, Duff & Phelps took into consideration projected financial performance metrics of the Company relative to such metrics of the selected public companies. Duff & Phelps then analyzed the selected public companies’ trading multiples of enterprise value to their projected revenue and EBITDA.
Rather than applying the average or median multiple from these analyses, Duff & Phelps selected multiples that, in its judgment, reflected the Company’s size, growth outlook, capital requirements, profit margins, revenue mix, and other characteristics relative to the selected public companies. Based on this analysis, Duff & Phelps’ selected an EBITDA multiple range of 5.00x to 6.00x to apply to the Company’s 2023 estimated adjusted EBITDA.
Based on these assumptions, Duff & Phelps’ selected public companies analysis resulted in an estimated enterprise value range for the Company of $54.70 million to $65.7 million.
Summary of Financial Analysis
Duff & Phelps concluded that the Company’s enterprise value was within a range of $56.4 million to $68.4 million as of March 16, 2022, based on the average of the enterprise value indications from the discounted cash flow analysis and the selected public companies analysis.
Based on the enterprise value, Duff & Phelps estimated the range of aggregate equity value of the Company to be $19.398 million to $31.470 million by:

adding the present value of the Company’s tax attributes, comprised of the Company’s net operating loss carryforward and tax-deductible amortization benefit, of $0.911 million to $1.136 million;

adding the Company’s cash balance of $0.142 million as of February 26, 2022;

deducting the Company’s deficit net working capital of $2.039 million as of February 26, 2022;

deducting the Company’s face value of debt of $35.828 million and accrued interest of $0.086 million as of February 26, 2022; and

deducting the after-tax cash settlement of options and RSAs expected to occur immediately after the closing of the Merger of $0.102 million to $0.255 million.
 
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To calculate the per share estimate of the Company’s stock price, Duff & Phelps used the Company’s issued and outstanding shares of 2,164,708 as of March 16, 2022. Based on the foregoing analysis, Duff & Phelps estimated the value of each share to range from $8.96 to $14.54. Duff & Phelps noted that the Merger Consideration of $12.00 per share was within the range of the per share value indicated by its analyses.
Duff & Phelps’ Opinion was only one of the many factors considered by the Board in its evaluation of the Merger and should not be viewed as determinative of the views of the Board.
Fees and Expenses
As compensation for Duff & Phelps’ services in connection with the rendering of its Opinion to the Board, the Company agreed to pay Duff & Phelps a fee of $200,000, payable upon Duff & Phelps informing the Company that it is prepared to deliver its Opinion.
No portion of Duff & Phelps’ fee is refundable or contingent upon the conclusion reached in the Opinion.
Furthermore, Duff & Phelps is entitled to be paid additional fees at Duff & Phelps’ standard hourly rates for any time incurred should Duff & Phelps be called upon to support its findings subsequent to the delivery of its opinion, which additional fees will only become payable upon consummation of the Merger. The Company has also agreed to reimburse Duff & Phelps for its reasonable and documented out-of-pocket expenses and reasonable and documented fees and expenses of counsel retained by Duff & Phelps in connection with the engagement. The Company has also agreed to indemnify Duff & Phelps for certain liabilities arising out of its engagement.
The terms of the fee arrangements with Duff & Phelps, which the Company believes are customary in transactions of this nature, were negotiated at arm’s length, and the Board is aware of these fee arrangements.
Disclosure of Prior Relationships
During the two years preceding the date of the Opinion, Duff & Phelps has not had any material relationship with any party to the Merger for which compensation has been received or is intended to be received, nor is any such material relationship or related compensation mutually understood to be contemplated.
Other Financial Advisory Fees
Since 2020, the Company and the Board has engaged Consensus as a financial advisor with respect to potential strategic transactions. With respect to the Merger, the Board did not engage Consensus to provide a fairness opinion but determined to engage an independent financial advisor, Duff & Phelps, to provide the opinion as described above. Pursuant to the terms of the Company’s engagement letter with Consensus for its services with respect to the Merger, Consensus will be due a fee of approximately $1.0 million, contingent upon the closing of the Merger. In addition, the Company agreed to reimburse Consensus for the reasonable expenses incurred by Consensus in connection with its engagement, regardless if the Merger is completed, and to indemnify Consensus against certain liabilities that may arise out of its engagement by the Company. Since April 2020, the Company has paid Consensus retainer fees of $150,000 and expenses of $2,600 for financial advisory services provided under previous engagements. Other than the compensation payable to the Company, Consensus has not had any material relationship with any party to the Merger for which compensation has been received or is intended to be received, nor is such compensation contemplated.
Certain Financial Projections
The Company does not, as a matter of course, normally publicly disclose long-term forecasts or internal projections as to its future performance, revenue, earnings or other results given, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates, including the difficulty of predicting general economic and market conditions. However, in connection with the Company’s evaluation of a possible transaction with Parent, Company management prepared certain non-public, unaudited, stand-alone financial projections (the “Company Projections”) that were reviewed by the Board and utilized by Duff & Phelps for purposes of performing the financial analyses summarized
 
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above under “— Opinion of Duff & Phelps, Financial Advisor to the Board.” The Company Projections reflect the following key considerations and assumptions as to the future financial performance of the Company:

Projects an increase in gross sales of 10.6% in 2022 driven by an assumed better inventory in-stock position in 2022;

Assumes price increases to customers anticipated in the second half of fiscal 2022 to mitigate elevated container costs and improve profitability;

Assumes year-over-year sales gross growth in 2023 through 2025 of 7.5%, 5.0% and 5.0%, respectively, in juvenile, the Summer™ and SwaddleMe® brands, and the addition of sales from the Company’s new pet brand business, Ozzy & Kazoo™;

Gross margin is anticipated to improve throughout 2022 as a result of price increases and product cost reductions to be implemented in 2022;

Continued elevated supply chain costs, including container costs, and assumes a gradual decline in container rates in 2023 through 2025 toward historical norms;

Assumes selling expense in 2022 remains constant as compared to 2021, with increases as a percentage of revenue in 2023 through 2025 for marketing investment to launch Ozzy & Kazoo™;

Assumes that general and administrative expense remains constant in 2022 as compared to 2021, with an approximately 3.0% increase each year thereafter;

Assumes income tax expense of 25% in 2022 and 28% in subsequent years; and

Assumes adjusted EBITDA of $5.1 million (3.2% of net sales) for 2022 due primarily to continued elevated container costs and anticipated timing of price increases, and for 2023 through 2025, that adjusted EBITDA and adjusted EBITDA as a percentage of net sales increase due primarily as a result of assumed normalization of container rates to lower historical levels but is partially offset by marketing investment necessary in launching Ozzy & Kazoo™, in addition to supporting the Summer™ and SwaddleMe® brands.
The Company Projections are included in the table below. The inclusion of this information should not be regarded as an indication that SUMR, its financial advisors, or any of their respective representatives or any other recipient of this information considered, or now considers, the Company Projections to be necessarily predictive of future results. Management advised the Board that the Company Projections represent SUMR’s management’s best estimates of the future financial performance of SUMR and its business as currently configured as a standalone, publicly listed company.
The following table summarizes the Company Projections, which reflect the assumptions and considerations described above.
Company Projections
(Dollars in thousands, except per share data)
(Shares in thousands)
2022E
2023E
2024E
2025E
Net Sales
$ 158,554 $ 177,784 $ 188,899 $ 202,705
Cost of goods sold
116,527 124,804 132,229 141,894
Gross Profit on Net Sales
42,027 52,980 56,670 60,811
Gross Margin % on Net Sales
26.5%
29.8%
30.0%
30.0%
Selling Expenses
11,788 15,556 16,529 17,737
General and administrative expenses
28,187 28,936 29,804 30,698
Depreciation expense
2,030 2,192 2,259 2,342
Amortization of intangibles
443 489 489 489
Interest Expense
1,571 1,484 1,510 1,345
 
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(Dollars in thousands, except per share data)
(Shares in thousands)
2022E
2023E
2024E
2025E
Stock option expense
456 475 475 475
Operating Income
(2,448) 3,848 5,604 7,726
Income tax expense
(612) 1,077 1,569 2,163
Net Income
(1,836) 2,771 4,035 5,563
Shares
2,190,000 2,190,000 2,200,000 2,300,000
Earnings per share
$ (0.84) $ 1.27 $ 1.83 $ 2.42
EBITDA(1) 2,052 8,488 10,337 12,377
Adjusted EBITDA(2)
5,104 11,011 12,860 14,900
Cash flow from operations
3,350 3,629 4,124 8,146
Cash flow – investing activities
(1,418) (1,499) (1,546) (1,602)
Cash flow – financing activities
(2,056) (2,316) (2,566) (6,234)
(1)
EBITDA means earnings before interest, taxes, depreciation, amortization and non-cash, stock-based compensation expense.
(2)
Adjusted EBITDA means EBITDA plus professional fees (management services, transaction related fees and other addbacks pursuant to the Company’s loan agreement) and board fees, which were estimated as follows for each period presented:
2022E
2023E
2024E
2025E
Professional fees
2,686 2,190 2,190 2,190
Board fees
366 333 333 333
SUMR’s ability to achieve the results set forth in the Company Projections are expressly dependent upon certain assumptions, including the assumptions and considerations described above, the Company’s historical performance, trends in the juvenile product industry and detailed input from various key leaders in the Company’s business. The Company Projections were not prepared with a view to comply with United States generally accepted accounting principles (“GAAP”), the published guidelines of the SEC regarding projections and forward-looking statements or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The Company’s independent auditor, RSM US, LLP, has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the Company Projections and, accordingly, does not express an opinion or any other form of assurance with respect thereto. The Company Projections included herein have been prepared by Company management and are the responsibility of the Company.
Although a summary of the Company Projections is presented with numerical specificity, the Company Projections reflect numerous variables, assumptions, and estimates as to future events made by our management that our management believed were reasonable and supportable at the time the Company Projections were prepared, taking into account the relevant information available to management at the time the Company Projections were prepared. However, this information is not fact and should not be relied upon as being necessarily indicative of actual future results. The Company Projections are forward-looking statements and important factors that may cause actual results to deviate from the Company Projections include the impact of the COVID-19 pandemic on our supply chain and consumer demand, U.S. operations and sales in the U.S.; our reliance on foreign suppliers and potential disruption in foreign markets in which we operate; potential global supply chain disruption and increased costs of freight and transportation; our ability to raise prices to mitigate increased costs of freight and transportation; potential increases in the cost of raw materials used to manufacture our products; increased tariffs, additional tariffs or import or export taxes on the cost of our products and therefore demand for our products; our ability to meet our liquidity requirements; our ability to comply with the covenants in our loan agreement and to maintain availability under our loan agreement; our ability to implement and to achieve the expected benefits and savings of our restructuring initiatives; the concentration of our business with retail customers; our ability to compete in our industry; our ability to continue to control costs and expenses; our ability to develop,
 
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market and launch new products; our ability to manage inventory levels and meet customer demand; our ability to grow sales with existing and new customers and in new channels; and other factors described under “Cautionary Statement Concerning Forward-Looking Statements” on page 21 of this proxy statement. In addition, the Company Projections do not take into account any circumstances or events occurring after the date that they were prepared and do not give effect to the Merger. As a result, there can be no assurance that the Company Projections will be realized, and actual results may be materially better or worse than those contained in the Company Projections. Since the Company Projections cover multiple years, that information by its nature becomes less predictive with each successive year. The inclusion of this information should not be regarded as an indication that the Board, SUMR, our financial advisors, Parent, the Merger Sub or any of their representatives and affiliates or any other recipient of this information considered, or now considers, the Company Projections to be material information of SUMR or that actual future results will necessarily reflect the Company Projections, and the Company Projections should not be relied upon as such. The summary of the Company Projections is not included herein to induce any stockholder to vote in favor of the Merger Proposal at the Special Meeting or to influence any stockholder to make any investment decision with respect to the Merger, including whether or not to seek appraisal rights with respect to shares of SUMR common stock.
The Company Projections should be evaluated, if at all, in conjunction with the historical financial statements, risk factors, and other information regarding the Company contained in our public filings with the SEC. See “Where You Can Find More Information” on page 90 of this proxy statement.
Except to the extent required by applicable federal securities laws, we do not intend, and expressly disclaim any responsibility, to update or otherwise revise the Company Projections to reflect circumstances existing after the date when the Company Projections were prepared or to reflect the occurrence of future events or changes in general economic or industry conditions, even if the assumptions underlying the Company Projections are shown to be in error. By including in this proxy statement a summary of certain financial projections, neither SUMR nor any of its representatives or advisors, makes any representation to any person regarding the ultimate performance of SUMR compared to the information contained in such financial projections and should not be read to do so.
In light of the foregoing factors and the uncertainties inherent in the Company Projections, stockholders are cautioned not to place undue reliance on the Company Projections included herein.
Certain of the measures included in the Company Projections may be considered non-GAAP financial measures, including EBITDA and Adjusted EBITDA. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies. The non-GAAP financial measures were relied upon by Duff & Phelps for purposes of its financial analyses and opinion and by the Board in connection with its consideration of the Merger. These non-GAAP financial measures were included in the Company Projections as the Company believes they provide useful information to better understand, on a period-to-period comparable basis, financial amounts both including and excluding these identified items, as they indicate more clearly the Company’s operations and its ability to meet capital expenditure and working capital requirements. Financial measures provided to a financial advisor in connection with a business combination transaction are excluded from the definition of non-GAAP financial measures and therefore are not subject to SEC rules regarding disclosures of non-GAAP financial measures, which would otherwise require a reconciliation of a non-GAAP financial measure to the most closely related GAAP financial measure, which would be net income. Reconciliations of non-GAAP financial measures were not relied upon by Duff & Phelps for purposes of its financial analyses and opinion or by the Board in connection with its consideration of the Merger. Accordingly, a reconciliation of these financial measures is not included herein.
Interests of the Directors and Executive Officers of SUMR in the Merger
When considering the recommendation of the Board that you vote “FOR” the Merger Proposal, you should be aware that certain of our directors and executive officers may have interests in the Merger that may be different from, or in addition to, your interests as a stockholder generally. The Board was aware of these interests in, among other matters, approving the Merger Agreement and the Merger and in
 
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recommending that the Merger Agreement be adopted by the stockholders of SUMR. You should take these interests into account in deciding whether to vote “FOR” the approval of the Merger Agreement.
These interests are described in more detail below, and certain of them, including the compensation that may be deemed to become payable in connection with the Merger to Stuart Noyes and Bruce Meier, who constitute our named executive officers, are subject to a non-binding, advisory vote of the stockholders of SUMR and are quantified in the narrative below under “— Named Executive Officer Golden Parachute Compensation” and in “Proposal 2: Advisory Vote on Merger-Related Named Executive Officer Compensation” on page 86 of this proxy statement.
Ownership of SUMR Common Stock
As of the Record Date, our non-employee directors beneficially owned and are entitled to vote an aggregate of 81,259 shares of SUMR common stock, representing approximately 3.8% of the outstanding shares of SUMR common stock. The table on page 88 of this proxy statement reflects the beneficial ownership of shares of our common stock of each of our non-employee directors as of the Record Date. None of our directors hold any stock options, restricted stock awards or other rights to acquire SUMR securities. Our named executive officers do not own any SUMR common stock, and none of our named executive officers hold any stock options, restricted stock awards or other rights to acquire SUMR securities.
The shares of our common stock held by our non-employee directors will be treated in the same manner as outstanding shares of SUMR common stock held by other SUMR stockholders entitled to receive the Merger Consideration. The table below sets forth the Merger Consideration to be received by each non-employee director (before any applicable tax or other withholding). Our non-employee directors have informed us that they currently intend to vote all of their shares of SUMR common stock (i) “FOR” the Merger Proposal; (ii) “FOR” the Compensation Proposal; and (iii) “FOR” the Adjournment Proposal.
Director Name
Number of Shares
of SUMR Common
Stock Owned
Merger
Consideration
Payable
Evelyn D’An
9,712 $ 116,544.00
Robin Marino
33,456 $ 401,472.00
Alan Mustacchi
16,394 $ 196,728.00
Andrew Train
7,408 $ 88,896.00
Stephen J. Zelkowicz
14,289 $ 171,468.00
Riveron Engagement
Neither Mr. Noyes, our CEO, nor Mr. Meier, our Interim CFO, receives any compensation directly from SUMR, but have been engaged pursuant to the terms of an engagement letter between SUMR and Riveron RTS, LLC (as amended, the “Letter Agreement”). SUMR originally entered into the Letter Agreement in December 2019, pursuant to which Mr. Noyes was initially appointed to act as SUMR’s Interim CEO. In December 2020, Mr. Noyes was appointed as the CEO and a director of SUMR. The Letter Agreement currently provides for compensation at a weekly rate of $46,000, plus expenses and administrative fees, through the termination of the Letter Agreement, which compensates Riveron for the services of Mr. Noyes, Mr. Meier. SUMR has also agreed to indemnify Riveron, Mr. Noyes, Mr. Meier and other Riveron personnel in connection with the engagement, subject to customary terms and conditions. Either party may terminate the Letter Agreement upon 6 months’ prior written notice, which period may be terminated early upon the appointment of a replacement chief executive officer, and the Letter Agreement automatically terminates immediately following a change in control of the Company. In addition, prior to entering into the Letter Agreement, in November 2019, the Company engaged Riveron (formerly Winter Harbor) to provide financial advisory services (the “Advisor Agreement”). Compensation under the Advisor Agreement is determined based on agreed-upon hourly rates for actual hours worked, plus any out-of-pocket expenses and a 1% administrative fee on the total amount of each invoice to cover administrative costs. Fees for services under the Advisor Agreement engagement are separate from, and in addition to, fees paid under the Letter Agreement for the services of Messrs. Noyes and Meier.
 
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In connection with the entry into the Merger Agreement, on March 16, 2022, the Board approved, and SUMR entered into, an amendment to the Letter Agreement providing for (i) the payment to Riveron of a success fee (the “Riveron Success Fee”), payable at the closing of a transaction constituting a change in control of SUMR (as defined in the Company’s Amended and Restated Change in Control Plan), and (ii) that the engagement letter will terminate concurrently with the consummation of the Merger and Riveron will no longer provide services to the Company, including the services of Messrs. Meier or Noyes. If consummated, the Merger would constitute a change in control under the Letter Agreement and the Riveron Success Fee payable to Riveron would be approximately $258,120 based on the Merger Consideration. While neither Mr. Noyes nor Mr. Meier will receive directly a portion of such fee, as described below, a portion of such fee may be deemed indirectly payable to them.
Mr. Stephen Zelkowicz / Wynnefield Capital
In January 2022, the Company and its subsidiary, Summer Infant (USA), Inc., entered into a Loan and Security Agreement with Wynnefield Partners Small Cap Value, L.P. and Wynnefield Partners Small Cap Value, L.P. I, as lenders, and Wynnefield Capital, Inc., as agent for the lenders. The lenders are existing stockholders of the Company and, together with affiliates, beneficially own approximately 36% of the Company’s outstanding common stock. Stephen Zelkowicz, an employee of Wynnefield Capital, Inc., currently serves on the Board. All amounts owed under the Wynnefield loan agreement will be repaid concurrently with the closing of the Merger, and under the terms of the agreement, Wynnefield will be entitled to a $50,000 termination fee upon repayment.
Insurance and Indemnification of Directors and Executive Officers
Under the Merger Agreement, Parent and Merger Sub agree that all rights to indemnification, advancement of expenses, and exculpation from liabilities for acts or omissions occurring at, or prior to, the Effective Time existing as of the date of the Merger Agreement in favor of the indemnitees as provided in SUMR’s certificate of incorporation and bylaws and indemnification agreements of SUMR will be assumed by the surviving corporation and Parent in the Merger, without further action, at the Effective Time and will survive the Merger and continue in full force and effect in accordance with their terms. For a period of six years from the Effective Time of the Merger, the surviving corporation and its subsidiaries will maintain in effect the indemnification, advancement of expenses, exculpation, and limitations on liability of directors and officers provisions as provided in the certificate of incorporation and bylaws or similar organizational documents in effect as the effective date of the Merger, and will not amend, repeal, or otherwise modify any such provisions in any manner that would adversely affect the rights thereunder of any individuals who immediately before the Effective Time were current or former directors, officers, or employees of SUMR or its subsidiaries.
The Merger Agreement provides that the Company shall purchase a “tail” insurance policy to become effective at the Effective Time with a claims period of at least six years from and after the Effective Time of the Merger, with benefits and levels of coverage no less favorable as SUMR’s existing policies with respect to matters existing or occurring at or prior to the Effective Time of the Merger.
If either Parent or the surviving corporation or any of its successors or assigns (i) consolidates with or merges into any other person and is not the continuing or surviving corporation, partnership, or entity of such consolidation or Merger or (ii) transfers or conveys all or substantially all of its properties and assets to any person, then, and in each case, proper provisions will be made so that the successor or assign expressly assumes the insurance and indemnification obligations described above.
Named Executive Officer Golden Parachute Compensation
Our named executive officers for 2021 were Messrs. Noyes and Meier, and Edmund Schwartz, our former Chief Financial Officer from June 2020 until March 2021. Our named executive officers are not entitled to any payments or benefits in connection with the consummation of the Merger, nor do they own any SUMR common stock that will be converted into the Merger Consideration. While neither Mr. Noyes nor Mr. Meier will receive directly any portion of the Riveron Success Fee of approximately $258,120 that is payable to Riveron as described above under “— Riveron Engagement,” the Company has engaged their services as CEO and Interim CFO, respectively, of the Company, pursuant to the Letter Agreement with
 
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Riveron, and a portion of the Riveron Success Fee may be deemed to be indirectly payable to them.. Accordingly, the following table reflects for each of Mr. Noyes and Mr. Meier the Riveron Success Fee. The compensation summarized in the table below is subject to a non-binding, advisory vote of the Company stockholders as described in “Proposal 2: Advisory Vote on Merger-Related Named Executive Officer Compensation” on page 86 of this proxy statement.
Golden Parachute Compensation
Name
Cash
Stuart Noyes
$ 258,120
Bruce Meier
$ 258,120
Voting and Support Agreements
In connection with entering into the Merger Agreement, each of Wynnefield Capital Management LLC (“Wynnefield”) and Jason Macari, who in the aggregate beneficially own shares of common stock constituting approximately 53% of SUMR’s issued and outstanding common stock, have each entered into a similar Support Agreement with Parent. Pursuant to the Support Agreements, each of Wynnefield and Mr. Macari agreed, among other things, to vote their shares beneficially owned in favor of the adoption of the Merger Agreement, the Merger and the other transactions contemplated by the Merger Agreement, on the terms and subject to the conditions set forth in the Support Agreement. The Support Agreements automatically terminate upon the earlier of (i)the Effective Time of the Merger, (ii) the date on which the Merger Agreement is validly terminated in accordance with its terms, (iii) the termination of the Support Agreement by mutual written consent of the parties and (iv) our Board changes its Company Board Recommendation. In addition, under the terms of the Support Agreements, Wynnefield and Mr. Macari have each agreed not to transfer their shares prior to, in the case of Wynnefield, June 30, 2022, subject to an extension through July 31, 2022, and in the case of Mr. Macari, until the Effective Time or earlier termination of the Support Agreement, in each case as set forth in the Support Agreements.
Financing of the Merger
We anticipate that the total funds needed to complete the Merger (including the funds to pay the SUMR stockholders the amounts due to them under the Merger Agreement), would be approximately $83.0 million, which will be funded using a portion of the proceeds of loan agreements to be entered into by Parent.
In connection with the entry into the Merger Agreement, Parent obtained (i) a debt commitment letter from Wells Fargo Bank, National Association to provide debt financing upon the terms and subject to the conditions set forth in the debt commitment letter in the aggregate amount of up to $130.0 million in the form of a senior secured revolving loan facility (the “Wells Fargo facility”) and (ii) a debt commitment letter from TCW Asset Management Company LLC to provide debt financing upon the terms and conditions set forth in the debt commitment letter in the aggregate amount of up to $110.0 million in the form of a senior secured first lien term loan facility (the “TCW facility” and with the Wells Fargo facility, the “debt facilities” and the financing available under the debt facilities, the “debt financing”).
The proceeds of the debt financing will be used to (i) finance the consummation of the transactions contemplated by the Merger Agreement on the closing date, including the payment of any amounts required to be paid by Parent pursuant to the Merger Agreement on the closing date, (ii) repay indebtedness of SUMR under its existing credit facilities (the “closing refinancing”), (iii) refinance existing Parent indebtedness, (iv) fund working capital and general corporate purposes (including to finance any closing date working capital needs of SUMR or its subsidiaries on the closing date) and (v) pay fees and expenses incurred in connection therewith.
The Wells Fargo facility will be a senior secured revolving loan and letter of credit facility totaling commitments of up to $130.0 million. The Wells Fargo facility will include as borrowers (i) the Parent and all other wholly-owned direct or indirect operating subsidiaries of Kids2 Holding LLC (the “Holdings Subsidiaries”) organized under the laws of the United States (the “Wells US Borrowers”), (ii) Kids2 Australia
 
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Pty Limited and the Holdings Subsidiaries organized under the laws of Australia (the “Wells AU Borrowers”), (iii) Kids2 Canada Co and the Holdings Subsidiaries organized under the laws of Canada (the “Wells CA Borrowers”), (iv) Kids2 Europe B.V. and the Holdings Subsidiaries organized under the laws of the Netherlands (the “Wells Dutch Borrowers”), and (v) Kids2 Far East Limited and the Holdings Subsidiaries organized under the laws of Hong Kong (the “Wells HK Borrowers” and, together with the Wells US Borrowers, the Wells AU Borrowers, the Wells CA Borrowers, and the Wells Dutch Borrowers, the “Wells Borrowers”), in each case subject to borrowing bases for each Wells Borrower determined by Collateral located in the applicable jurisdictions. The Wells Fargo facility will be secured by (a) a first priority security interest in the Wells Borrowers’ (and from time to time certain affiliate guarantors’) present and future assets and properties, and (b) a second priority security interest in the Wells Borrowers’ (and from time to time certain affiliate guarantors’) present and future assets and properties consisting of (i) real property and fixtures, (ii) investment property and general intangibles (including intellectual property), equipment, instruments, letter of credit rights, commercial tort claims and certain other assets, (iii) all books and records relating to the foregoing and (iv) all proceeds relating to the foregoing (subject to customary limitations). The Wells Fargo facility will have a maturity date of five years from the anniversary of the closing date thereof.
The TCW facility will be a term loan facility in an aggregate principal amount of up to $110.0 million. The Parent will be the borrower under the TCW facility (the “TCW Borrower”). The obligations of the Parent under the TCW Facility will be unconditionally guaranteed jointly and severally on a senior secured first lien bases (subject to permitted liens and other customary exceptions) by Holdings, the Holdings Subsidiaries organized in the United States, and certain material Holdings Subsidiaries organized outside of the United States (the “TCW Guarantors”). The TCW facility will be secured by (a) a first priority security interest in the TCW Borrower’s and the TCW Guarantors’ present and future assets and properties consisting of (i) real property and fixtures, (ii) investment property and general intangibles (including intellectual property), equipment, instruments, letter of credit rights, commercial tort claims and certain other assets, (iii) all books and records relating to the foregoing and (iv) all proceeds relating to the foregoing (subject to customary limitations), (b) a first priority security interest in (i) all of the equity interests of the TCW Borrower, each direct subsidiary of the Borrower and of each TCW Guarantor (subject to certain applicable foreign guaranty and pledge limitations). The TCW facility will have a maturity date of five years from the anniversary of the closing date thereof.
With respect to the Wells Fargo facility, the obligations of Wells Fargo under the debt commitment letter to provide the debt financing are subject to a number of limited conditions that are customary for acquisition financing of this type, including, among other things, after giving effect to the application of proceeds of the loans thereunder, (i) the execution and delivery of the loan documents evidencing the Wells Fargo facility will be consistent with the term sheet and the commitment letter executed in connection therewith; (ii) the Merger will have been consummated in all material respects substantially concurrently with the funding of the Wells Fargo facility, in accordance with the terms of the Merger Agreement, subject to any modifications, amendments, consents or waivers thereto, other than those that are materially adverse to the agent, lead arranger or lenders under the Wells Fargo facility; (iii) with respect to SUMR and its subsidiaries, since the date of the Merger Agreement, there shall not have occurred, and there shall not exist, any fact, condition, circumstance, change, development or occurrence that has had or would reasonably be expected to have, a Company Material Adverse Effect (as defined in the Merger Agreement); (iv) with respect to the Parent, since December 31, 2021, there has been no material adverse effect (including but not limited to certain economic sanctions imposed by a governmental authority of the United States of America or the Republic of China in connection with any war or similar conflict, and the loss of any single customer of the Parent or a subsidiary of the Parent, in its entirety, which customer accounts for greater than $50.0 million of the consolidated revenues of the Parent and its subsidiaries); (v) the accuracy of certain limited representations and warranties; (vi) as of the closing date, all existing indebtedness of the Parent will be paid down in connection with the funding of the Wells Fargo facility; (vii) delivery of certain audited and unaudited balance sheets, statements of income, stockholders’ equity and cash flows of the business of SUMR and its subsidiaries and the Parent; (viii) the delivery of certain customary closing documents (including a customary solvency certificate); (ix) the payment of applicable invoiced fees and expenses, and (x) the execution and delivery of the TCW facility documents.
 
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With respect to the TCW facility, the obligations of Wells Fargo under the debt commitment letter to provide the debt financing are subject to a number of limited conditions that are customary for acquisition financing of this type, including, among other things, after giving effect to the application of proceeds of the loans thereunder, (i) the execution and delivery of the loan documents evidencing the Wells Fargo facility will be consistent with the term sheet and the commitment letter executed in connection therewith; (ii) the Merger will have been consummated in all material respects substantially concurrently with the funding of the Wells Fargo facility, in accordance with the terms of the Merger Agreement, subject to any modifications, amendments, consents or waivers thereto, other than those that are materially adverse to the agent, lead arranger or lenders under the Wells Fargo facility; (iii) with respect to SUMR and its subsidiaries, since the date of the Merger Agreement, there shall not have occurred, and there shall not exist, any fact, condition, circumstance, change, development or occurrence that has had or would reasonably be expected to have, a Company Material Adverse Effect (as defined in the Merger Agreement); (iv) with respect to the Parent, since December 31, 2021, there has been no material adverse effect (including (x) certain economic sanctions imposed by a governmental authority of the United States of America or the Republic of China in connection with any war or similar conflict, (y) the loss of any single customer of the Parent or a subsidiary of the Parent, in its entirety, which customer accounts for greater than $50,000,000 of the consolidated revenues of the Parent and its subsidiaries, and (z) Ryan Gunnigle ceasing to serve as the TCW Borrower’s Chief Executive Officer as a result of death or disability); (v) the accuracy of certain limited representations and warranties; (vi) as of the closing date, all existing indebtedness of the Parent will be paid down in connection with the funding of the Wells Fargo facility; (vii) delivery of certain audited and unaudited balance sheets, statements of income, stockholders’ equity and cash flows of the business of the SUMR and its subsidiaries and the Parent; (viii) the delivery of certain customary closing documents (including a customary solvency certificate); (ix) the payment of applicable invoiced fees and expenses; and (x) the execution and delivery of the Wells Fargo facility documents.
The obligations of Wells Fargo under the debt commitment letter to provide its debt financing will terminate upon the earliest to occur of (1) 11:59 p.m., New York City time, on July 29, 2022, (2) the closing of the Merger without the use of such debt financing or (3) the termination of the Merger Agreement.
The obligations of TCW under the debt commitment letter to provide its debt financing will terminate upon the earliest to occur of (1) 11:59 p.m., New York City time, on July 9, 2022, (2) the closing of the Merger with or without the use of such debt financing or (3) the effectiveness of the loan documents and occurrence of the date that the initial loans are funded under the term loan facility and the transactions contemplated under the debt commitment letter, including the closing of the Merger, the closing refinancing and the payment of all related fees and expenses are consummated.
If any portion of the debt financing becomes unavailable on the terms and conditions contemplated by the above mentioned debt commitment letters and the fee letters related thereto, Parent has agreed under the Merger Agreement to use its commercially reasonable efforts to, as promptly as reasonably practicable following the occurrence of such event, (i) obtain alternative financing from alternative sources on terms and conditions not materially less favorable in the aggregate to Parent and the Merger Sub than those set forth in the debt commitment letters and in an amount equal to the debt financing or such unavailable portion thereof and (ii) obtain one or more new debt commitment letters which will replace the existing debt commitment letters in whole or in part.
As of the last practicable date before the printing of this proxy statement, the debt commitment letters are in effect, and Parent has not notified us of any plans to utilize alternative financing. The documentation governing the debt financing contemplated by the debt commitment letters has not been finalized and, accordingly, the actual terms of the debt financing may differ from those described in this proxy statement.
Legal Proceedings Regarding the Merger
On April 13, 2022, a purported stockholder of the Company filed a complaint in the U.S. District Court for the Southern District of New York, captioned Ryan O’Dell v. Summer Infant, Inc., et al., Case No. 1:22-cv-03050-VSB, naming the Company and each member of the Board as defendants. The complaint alleges that the Company’s preliminary proxy statement filed with the SEC on April 8, 2022 materially misrepresents or omits certain purportedly material information relating to financial projections of the Company and the valuation analyses performed by one of the Company’s financial advisors. The complaint
 
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asserts violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against all defendants, and violations of Section 20(a) of the Exchange Act against our Board. The stockholder complaint seeks, among other things, an injunction enjoining consummation of the Merger unless disclosure of all allegedly omitted information is made, rescission of the Merger Agreement, directing the individual defendants to account to the plaintiff for all alleged damages suffered as a result of the alleged wrongdoing, and awarding costs of the action, including plaintiff’s reasonable attorneys’ and experts’ fees and expenses.
On April 20, 2022, a purported stockholder of the Company filed a complaint in the U.S. District Court for the Eastern District of Pennsylvania, captioned Matthew Hopkins v. Summer Infant, Inc., et al., Case No. 2:22-cv-01545-JDW, naming the Company and each member of the Board as defendants. The complaint alleges that the Company’s preliminary proxy statement filed with the SEC on April 8, 2022 omits certain purportedly material information relating to financial projections of the Company, the valuation analyses performed by one of the Company’s financial advisors, and that it fails to disclose whether the Company entered into any confidentiality agreements with “don’t ask, don’t waive” provisions. The complaint asserts violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against all defendants, and violations of Section 20(a) of the Exchange Act against our Board. The stockholder complaint seeks, among other things, an injunction enjoining consummation of the Merger, rescission of the Merger if the Proposed Merger is consummated, directing the individual defendants to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all material facts required in it or necessary to make the statements contained therein not misleading, declaring that the defendants violated Sections 14(a) and/or Section 20 of the Exchange Act, as well as Rule 14a-9, and awarding costs of the action, including plaintiff’s reasonable attorneys’ and experts’ fees.
On April 20, 2022, a purported stockholder of the Company filed a complaint in the U.S. District Court for the Eastern District of New York, captioned Jeffrey D. Justice, II, v. Summer Infant, Inc., et al., Case No. 1:22-cv-02260, naming the Company and each member of the Board as defendants. The complaint alleges that the Company’s preliminary proxy statement filed with the SEC on April 8, 2022, omits certain purportedly material information relating to financial projections of the Company, the valuation analyses performed by one of the Company’s financial advisors, the terms of the engagement of one of the Company’s financial advisors, and that it fails to disclose whether the Company entered into any confidentiality agreements with “don’t ask, don’t waive” provisions. The complaint asserts violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against all defendants, and violations of Section 20(a) of the Exchange Act against our Board. The stockholder complaint seeks, among other things, an injunction enjoining consummation of the Merger, rescission of the Merger if the Proposed Merger is consummated, directing the individual defendants to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all material facts required in it or necessary to make the statements contained therein not misleading, declaring that the defendants violated Sections 14(a) and/or Section 20 of the Exchange Act, as well as Rule 14a-9, and awarding costs of the action, including plaintiff’s reasonable attorneys’ and experts’ fees.
On May 9, 2022, a purported stockholder of the Company filed a complaint in the U.S. District Court for the Southern District of New York, captioned Taylor Johnson v. Summer Infant, Inc., et al., Case No. 1:22-cv-03775, naming the Company and each member of the Board as defendants. The complaint alleges that the Company’s preliminary proxy statement filed with the SEC on April 8, 2022, omits certain purportedly material information relating to the sales process, financial projections of the Company, and the valuation analyses performed by one of the Company’s financial advisors, and that the Board breached their fiduciary duties in agreeing to the Proposed Merger. The complaint asserts breach of fiduciary duties and violations of Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder against all defendants, and violations of Section 20(a) of the Exchange Act against our Board. The stockholder complaint seeks, among other things, an injunction enjoining consummation of the Merger, rescission of the Merger if the Proposed Merger is consummated, declaring the Merger Agreement was agreed to in breach of fiduciary duties of the Board, directing the individual defendants to comply with their fiduciary duties and to disseminate a proxy statement that does not contain any untrue statements of material fact and that states all material facts required in it or necessary to make the statements contained therein not misleading, directing the defendants to account for damages sustained because of the allegations in the complaint, and awarding costs of the action, including plaintiff’s reasonable attorneys’ and experts’ fees.
 
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Additional complaints or demands may be filed in connection with the Merger, which could prevent or delay completion of the Merger and result in additional costs to the Company. If additional similar complaints or demands are filed or made, absent new or different allegations that are material, the Company will not necessarily announce them.
While the Company believes that the claims asserted in these complaints are without merit and that no additional disclosure is required under applicable law, in order to avoid the risk of these complaints delaying or adversely affecting the Merger and to minimize the costs, risks and uncertainties inherent in litigation, and without admitting any liability or wrongdoing, the Company has determined to voluntarily provide certain disclosures in this proxy statement.
Appraisal Rights
General
If the Merger is completed, holders of shares of SUMR common stock who do not vote in favor of the adoption of the Merger Agreement and who properly demand an appraisal of their shares and who otherwise comply with the requirements set forth in Section 262 of the DGCL will be entitled to appraisal rights in connection with the Merger. Strict compliance with the statutory procedures in Section 262 of the DGCL is required. Failure to timely and properly comply with such statutory requirements will result in the loss of your appraisal rights.
This section summarizes certain material provisions of the DGCL pertaining to appraisal rights. The following discussion, however, is not a full summary of the law pertaining to appraisal rights under the DGCL and is qualified in its entirety by reference to the full text of Section 262 of the DGCL, which is attached as Appendix C to this proxy statement and incorporated by reference herein. All references within Section 262 of the DGCL to “stockholder” are to the record holder of shares of SUMR common stock. The following discussion does not constitute any legal or other advice, nor does it constitute a recommendation as to whether or not a SUMR stockholder should exercise its right to seek appraisal under Section 262 of the DGCL.
Under the DGCL, if you hold one or more shares of SUMR common stock, do not vote in favor of the adoption of the Merger Agreement, continuously are the record holder of such shares through the Effective Time and otherwise comply with the requirements set forth in Section 262 of the DGCL, you will be entitled to have your shares appraised by the Delaware Court of Chancery and to receive the “fair value” of such shares (as determined by the Delaware Court of Chancery, exclusive of any element of value arising from the accomplishment or expectation of the Merger or related transactions) in cash, together with interest, if any, to be paid upon the amount determined to be the fair value. It is possible that any such “fair value” as determined by the Delaware Court of Chancery may be more or less than, or the same as, the Merger Consideration which SUMR stockholders will be entitled to receive upon the consummation of the Merger pursuant to the Merger Agreement. These rights are known as appraisal rights.
Under Section 262 of the DGCL, not less than 20 days prior to the Special Meeting at which the adoption of the Merger Agreement will be submitted to the stockholders, SUMR must notify each stockholder who was a SUMR stockholder on the Record Date and who is entitled to exercise appraisal rights that appraisal rights are available and include in the notice a copy of Section 262 of the DGCL. This proxy statement constitutes the required notice, and a copy of Section 262 of the DGCL is attached as Appendix C to this proxy statement.
A HOLDER OF SUMR COMMON STOCK WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR WHO WISHES TO PRESERVE THE RIGHT TO DO SO SHOULD REVIEW THE FOLLOWING DISCUSSIONS AND APPENDIX C CAREFULLY. FAILURE TO COMPLY PRECISELY WITH THE PROCEDURES OF SECTION 262 OF THE DGCL IN A TIMELY AND PROPER MANNER WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS. BECAUSE OF THE COMPLEXITY OF THE PROCEDURES FOR EXERCISING THE RIGHT TO SEEK APPRAISAL UNDER SECTION 262 OF THE DGCL, A HOLDER OF SUMR COMMON STOCK WHO IS CONSIDERING WHETHER TO EXERCISE ITS APPRAISAL RIGHTS IS ENCOURAGED TO CONSULT WITH ITS OWN LEGAL COUNSEL. ANY SHARES OF SUMR COMMON STOCK
 
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HELD BY A SUMR STOCKHOLDER WHO FAILS TO PERFECT, SUCCESSFULLY WITHDRAWS, OR OTHERWISE LOSES HIS, HER, OR ITS APPRAISAL RIGHTS WILL BE DEEMED TO HAVE BEEN CONVERTED AS OF THE EFFECTIVE TIME INTO THE RIGHT TO RECEIVE THE MERGER CONSIDERATION.
How to Exercise and Perfect Your Appraisal Rights
If you are a SUMR stockholder and wish to exercise the right to seek an appraisal of your shares of SUMR common stock, you must comply with ALL of the following:

you must NOT vote “FOR,” or otherwise consent in writing to, the Merger Proposal. Because a proxy that is signed and submitted but does not otherwise contain voting instructions will, unless revoked, be voted in favor of the Merger Proposal, if you submit a proxy and wish to exercise your appraisal rights, you must include voting instructions to vote your shares “AGAINST,” or as an abstention with respect to, the Merger Proposal;

you must continuously hold your shares of SUMR common stock from the date of making the demand through the Effective Time of the Merger. You will lose your appraisal rights if you transfer your shares of SUMR common stock before the Effective Time of the Merger;

prior to the taking of the vote on the Merger Proposal at the Special Meeting, you must deliver a proper written demand for appraisal of your shares; and

you, another stockholder, an appropriate beneficial owner, or the Surviving Corporation must file a petition in the Delaware Court of Chancery requesting a determination of the fair value of your shares of SUMR common stock within 120 days after the Effective Time of the Merger. The Surviving Corporation is under no obligation to file any such petition in the Delaware Court of Chancery and has no intention of doing so. Accordingly, it is the obligation of SUMR stockholders to initiate all necessary action to properly demand their appraisal rights in respect of shares of SUMR common stock within the time prescribed in Section 262 of the DGCL.
Filing a Written Demand
Neither voting against the Merger Proposal, nor abstaining from voting or failing to vote on the Merger Proposal, will in and of itself constitute a written demand for appraisal satisfying the requirements of Section 262 of the DGCL. Any holder of shares of SUMR common stock wishing to exercise appraisal rights must deliver to SUMR, before the taking of the vote on the Merger Proposal at the Special Meeting, a written demand for the appraisal of the stockholder’s shares. A stockholder’s failure to deliver the written demand prior to the taking of the vote on the Merger Proposal at the Special Meeting will constitute a waiver of appraisal rights. The written demand for appraisal must be in addition to and separate from any proxy or vote on the Merger Proposal.
A demand for appraisal must be executed by or on behalf of the stockholder of record. Only a holder of record may demand appraisal rights for the shares of SUMR common stock registered in that holder’s name. Such demand will be sufficient if it reasonably informs SUMR of the identity of the stockholder and that the stockholder intends to demand appraisal of the “fair value” of his, her, or its shares of SUMR common stock. Beneficial owners who do not also hold their shares of SUMR common stock of record may not directly make appraisal demands to SUMR. The beneficial owner must, in such case, arrange for the holder of record, such as broker, bank, or nominee, to timely submit the required demand in respect of those shares of SUMR common stock. A holder of record, such as a broker, bank, or nominee, who holds shares of SUMR common stock as a nominee or intermediary for others, may exercise appraisal rights with respect to the shares of SUMR common stock held for one or more beneficial owners, while not exercising this right for other beneficial owners. The written demand should state the number of shares of SUMR common stock as to which appraisal is sought. Where no number of shares of SUMR common stock is expressly mentioned, the demand will be presumed to cover all shares of SUMR common stock held in the name of the holder of record.
IF YOU HOLD YOUR SHARES OF SUMR COMMON STOCK IN BANK OR BROKERAGE ACCOUNTS OR OTHER NOMINEE FORMS, AND YOU WISH TO EXERCISE APPRAISAL
 
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RIGHTS, YOU SHOULD CONSULT WITH YOUR BANK, BROKER, OR NOMINEE TO DETERMINE THE APPROPRIATE PROCEDURES FOR THE BANK, BROKERAGE FIRM, OR NOMINEE TO MAKE A DEMAND FOR APPRAISAL OF THOSE SHARES. IF YOU HAVE A BENEFICIAL INTEREST IN SHARES OF SUMR COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A NOMINEE OR INTERMEDIARY, YOU MUST ACT PROMPTLY TO CAUSE THE HOLDER OF RECORD TO FOLLOW PROPERLY AND IN A TIMELY MANNER THE STEPS NECESSARY TO DEMAND YOUR APPRAISAL RIGHTS. IF YOU HOLD YOUR SHARES OF SUMR COMMON STOCK THROUGH A BANK OR BROKERAGE WHO IN TURN HOLDS THE SHARES THROUGH A CENTRAL SECURITIES DEPOSITORY NOMINEE, SUCH AS THE DEPOSITORY TRUST COMPANY, A DEMAND FOR APPRAISAL OF SUCH SHARES MUST BE MADE BY OR ON BEHALF OF THE DEPOSITORY NOMINEE AND MUST IDENTIFY THE DEPOSITORY NOMINEE AS THE HOLDER OF RECORD.
If your shares of SUMR common stock are owned of record in a fiduciary capacity, such as by a trustee, guardian, or custodian, execution of the demand for appraisal should be made in that capacity, and if your shares are owned of record jointly with one or more other persons, as in a joint tenancy or tenancy in common, the demand for appraisal should be executed by or for you and all other joint owners. An authorized agent, including an agent for two or more joint owners, may execute the demand for appraisal for a stockholder of record; however, the agent must identify the holder or holders of record and expressly disclose the fact that, in exercising the demand, such person is acting as agent for the holder or holders of record. Stockholders who hold their shares of SUMR common stock in brokerage accounts or other nominee forms and who wish to exercise appraisal rights are urged to consult with their brokers or other nominees to determine the appropriate procedures for the making of a demand for appraisal by such a nominee.
If you elect to exercise appraisal rights under Section 262 of the DGCL, you should mail or deliver a written demand to:
Summer Infant, Inc.
Attention: Secretary
1275 Park East Drive
Woonsocket, Rhode Island 02895
At any time within 60 days after the Effective Time of the Merger, any SUMR stockholder that made a demand for appraisal but has not commenced an appraisal proceeding or joined in such a proceeding as a named party will have the right to withdraw the demand and to accept the Merger Consideration in accordance with the Merger Agreement for his, her, or its shares of SUMR common stock by delivering to the Surviving Corporation a written withdrawal of the demand for appraisal, but after such 60 day period a demand for appraisal may be withdrawn only with the written approval of the Surviving Corporation.
Notice by the Surviving Corporation.   Within ten days after the Effective Time of the Merger, SUMR, as the Surviving Corporation, must notify each holder of SUMR common stock who has made a written demand for appraisal pursuant to Section 262 of the DGCL and has not voted in favor of the Merger Proposal of the date that the Merger has become effective.
Filing a Petition for Appraisal with the Delaware Court of Chancery.   Within 120 days after the Effective Time of the Merger, but not later, either you, provided you have complied with the requirements of Section 262 of the DGCL and are otherwise entitled to appraisal rights, or the Surviving Corporation may commence an appraisal proceeding by filing a petition in the Delaware Court of Chancery, with a copy served on the Surviving Corporation in the case of a petition filed by you, demanding an appraisal of the value of the shares of SUMR common stock held by all stockholders who have properly demanded appraisal. None of Parent, Merger Sub, or SUMR, as the Surviving Corporation is under any obligation to file an appraisal petition or has any intention to do so. If you desire to have your shares of SUMR common stock appraised, you should initiate any petitions necessary for properly demanding your appraisal rights within the time periods and in the manner prescribed in Section 262 of the DGCL. The failure of a holder of SUMR common stock to file such a petition within the time periods specified in Section 262 could nullify the stockholder’s previous written demand for appraisal.
 
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Within 120 days after the Effective Time of the Merger, provided you have complied with the provisions of Section 262 of the DGCL, you will be entitled to receive from the Surviving Corporation, upon written request, a statement setting forth the aggregate number of shares of SUMR common stock not voted in favor of the Merger Proposal and with respect to which SUMR has received demands for appraisal, and the aggregate number of holders of those shares. The Surviving Corporation must mail this statement to you within the later of (i) ten days after receipt by the Surviving Corporation of the request therefor or (ii) ten days after expiration of the period for delivery of demands for appraisal. If you are the beneficial owner of shares of SUMR common stock held in a voting trust or by a nominee on your behalf you may, in your own name, file an appraisal petition or request from the Surviving Corporation the statement described in this paragraph.
If a petition for appraisal is not timely filed or if you deliver to the Surviving Corporation a written withdrawal of your demand for an appraisal and an acceptance of the Merger, either within 60 days after the Effective Time or thereafter with the written approval of the Surviving Corporation, then the right to appraisal will cease.
If a petition for appraisal is duly filed by you or another holder of record of SUMR common stock who has properly exercised his, her, or its appraisal rights in accordance with the provisions of Section 262 of the DGCL, and a copy of the petition is delivered to the Surviving Corporation, the Surviving Corporation will be obligated, within 20 days after receiving service of a copy of the petition, to file with the Delaware Court of Chancery a duly verified list containing the names and addresses of all holders who have demanded an appraisal of their shares of SUMR common stock and with whom agreements as to the value of their shares of SUMR common stock have not been reached by the Surviving Corporation. After notice of the time and place fixed for the hearing of such petition by registered or certified mail to the Surviving Corporation and to the stockholders shown on the list at the addresses therein stated as required by the court, the Delaware Court of Chancery is empowered to conduct a hearing on the petition to determine which SUMR stockholders have complied with Section 262 of the DGCL and have become entitled to appraisal rights and may require the SUMR stockholders demanding appraisal who hold certificated shares of SUMR common stock to submit their stock certificates to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings, and the Delaware Court of Chancery may dismiss the proceedings as to any SUMR stockholder who fails to comply with this direction. Such notice shall also be given by one or more publications at least one week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Delaware Court of Chancery deems advisable. The forms of the notices by mail and by publication shall be approved by the Delaware Court of Chancery, and the costs thereof shall be borne by the Surviving Corporation. In addition, the Delaware Court of Chancery will dismiss the proceedings as to all holders of such shares who are otherwise entitled to appraisal rights unless (i) the total number of shares of SUMR common stock entitled to appraisal exceeds 1% of the outstanding shares of SUMR common stock, or (ii) the value of the consideration provided in the Merger for such total number of shares of SUMR common stock exceeds $1.0 million.
The appraisal proceeding will be conducted as to the shares of SUMR common stock owned by such stockholders, in accordance with the rules of the Delaware Court of Chancery, including any rules specifically governing appraisal proceedings. Through the appraisal proceeding, the Delaware Court of Chancery will determine the fair value of the shares of SUMR common stock held by all SUMR stockholders who have properly demanded their appraisal rights, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Delaware Court of Chancery, in its discretion determines otherwise for good cause shown, and except as otherwise provided in Section 262 of the DGCL, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the Effective Time and the date of payment of the judgment. Upon application by the Surviving Corporation or by any stockholder entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the Surviving Corporation and who has submitted such stockholder’s certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to appraisal. At any time before the entry of judgment in the proceedings, the Surviving
 
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Corporation may pay to each stockholder entitled to appraisal an amount in cash, in which case interest shall accrue thereafter as provided herein only upon the sum of (1) the difference, if any, between the amount so paid and the fair value of the shares as determined by the Delaware Court of Chancery and (2) interest theretofore accrued, unless paid at that time. When the value is determined, the Delaware Court of Chancery will direct the payment of such value, with interest thereon, if any, to the SUMR stockholders entitled to receive the same, forthwith in the case of uncertificated stockholders or upon surrender by certificated stockholders to the Surviving Corporation of their stock certificates.
In determining the fair value, the Delaware Court of Chancery is required to take into account all relevant factors. In Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that could be considered in determining fair value in an appraisal proceeding, stating that “proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court” should be considered and that “[f]air price obviously requires consideration of all relevant factors involving the value of a company.” The Delaware Supreme Court has stated that, in making this determination of fair value, the court must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise, and any other factors which were known or which could be ascertained as of the date of the Merger which throw any light on future prospects of the merged corporation. Section 262 of the DGCL provides that fair value is to be “exclusive of any element of value arising from the accomplishment or expectation of the Merger.” In Cede & Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion is a “narrow exclusion [that] does not encompass known elements of value,” but which rather applies only to the speculative elements of value arising from such accomplishment or expectation. In Weinberger, the Delaware Supreme Court construed Section 262 of the DGCL to mean that “elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the Merger and not the product of speculation, may be considered.” An opinion of an investment banking firm as to the fairness from a financial point of view of the consideration payable in a Merger is not an opinion as to fair value under Section 262 of the DGCL. The fair value of shares of SUMR common stock as determined under Section 262 of the DGCL could be greater than, the same as, or less than the Merger Consideration. Neither Parent nor SUMR, as the Surviving Corporation, anticipates offering more than the Merger Consideration to any SUMR stockholder exercising appraisal rights and reserves the right to assert, in any appraisal proceeding, that, for purposes of Section 262 of the DGCL, the “fair value” of a share of SUMR common stock is less than the Merger Consideration. No representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery.
If no party files a petition for appraisal within 120 days after the Effective Time of the Merger, you will lose the right to an appraisal and will instead receive the Merger Consideration in accordance with the Merger Agreement, without interest thereon, less any withholding taxes.
The Delaware Court of Chancery may determine the costs of the appraisal proceeding (which do not include attorneys’ fees or the fees and expenses of experts) and may tax those costs upon the parties as the Delaware Court of Chancery deems equitable under the circumstances. Upon application of a stockholder, the Delaware Court of Chancery may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including reasonable attorneys’ fees and the fees and expenses of experts, to be charged pro rata against the value of all shares of SUMR common stock entitled to appraisal. In the absence of such an order, each party to the appraisal proceeding bears its own expenses.
If you have duly demanded an appraisal in compliance with Section 262 of the DGCL you will not, from and after the Effective Time of the Merger, be entitled to vote the shares of SUMR common stock subject to the demand for any purpose or receive any dividends or other distributions on those shares, except dividends or other distributions payable to holders of record of SUMR common stock as of a record date prior to the Effective Time of the Merger.
If you have not commenced an appraisal proceeding or joined such a proceeding as a named party you may withdraw a demand for appraisal and accept the Merger Consideration by delivering a written withdrawal of the demand for appraisal and an acceptance of the consideration payable in the Merger to the Surviving Corporation, except that any attempt to withdraw made more than 60 days after the Effective Time will require written approval of the Surviving Corporation, and no appraisal proceeding in the Delaware Court of Chancery will be dismissed as to any stockholder without the approval of the Delaware Court of Chancery. Such approval may be conditioned on the terms the Delaware Court of Chancery deems just; provided,
 
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however, that this provision will not affect the right of any SUMR stockholder that has made an appraisal demand but who has not commenced an appraisal proceeding or joined such proceeding as a named party to withdraw such stockholder’s demand for appraisal and to accept the terms offered in the Merger within 60 days after the Effective Time of the Merger. If you fail to properly demand or successfully withdraw your demand for appraisal, or otherwise lose your appraisal rights, your shares of SUMR common stock will be deemed to have been converted as of the Effective Time into the right to receive the Merger Consideration, without interest thereon, less any withholding taxes.
Failure to follow the steps required by Section 262 of the DGCL for properly demanding appraisal rights may result in the loss of your appraisal rights. In that event, you will be entitled to receive the Merger Consideration for your shares of SUMR common stock in accordance with the Merger Agreement.
THE PROCESS OF DEMANDING AND EXERCISING APPRAISAL RIGHTS REQUIRES STRICT COMPLIANCE WITH THE TECHNICAL PREREQUISITES OF SECTION 262 OF THE DGCL. IF YOU WISH TO EXERCISE YOUR APPRAISAL RIGHTS, YOU SHOULD CONSULT WITH YOUR OWN LEGAL COUNSEL. TO THE EXTENT THERE ARE ANY INCONSISTENCIES BETWEEN THE FOREGOING SUMMARY AND SECTION 262 OF THE DGCL, THE DGCL WILL GOVERN.
Accounting Treatment
The Merger will be accounted for as a “business combination” for financial accounting purposes.
U.S. Federal Income Tax Consequences of the Merger
The following discussion is a summary of the material U.S. federal income tax consequences of the Merger to U.S. holders and non-U.S. holders (each as defined below) of SUMR common stock who receive Merger Consideration in exchange for shares of SUMR common stock pursuant to the Merger. This discussion is for general information purposes only and does not purport to be a complete analysis of all potential tax consequences of the Merger. The tax consequences of the Merger under U.S. federal tax laws other than those pertaining to income tax, such as estate and gift tax laws, and any applicable state, local, and non-U.S. tax laws are not discussed. This discussion is based on the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations promulgated thereunder, judicial decisions and published rulings, and administrative pronouncements of the Internal Revenue Service (the “IRS”), in each case in effect as of the date of this proxy statement. These authorities may change or be subject to differing interpretations, and any such change or differing interpretation may be applied retroactively in a manner that could affect the accuracy of the statements and conclusions set forth in this summary. The U.S. federal income tax laws are complex and subject to varying interpretation. We have not sought, and do not intend to seek, any ruling from the IRS with respect to the statements made and the conclusions reached in the following summary. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the Merger.
This discussion is limited to holders of shares of SUMR common stock who hold such shares as “capital assets” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences that may be relevant to a holder in light of such holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income and the alternative minimum tax. In addition, this discussion does not address the U.S. federal income tax consequences to holders subject to special rules under the U.S. federal income tax laws, including, without limitation:

U.S. expatriates and former citizens or long-term residents of the United States;

U.S. holders whose functional currency is not the U.S. dollar;

persons holding shares of SUMR common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

banks, insurance companies, and other financial institutions;

brokers or dealers in securities;
 
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traders in securities that elect to apply a mark-to-market method of accounting;

“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;

“S corporations,” partnerships, or other entities or arrangements classified as partnerships for U.S. federal income tax purposes or other pass-through entities (and investors therein);

real estate investment trusts and regulated investment companies;

tax-exempt organizations or governmental organizations;

persons subject to special tax accounting rules as a result of any item of gross income with respect to shares of SUMR common stock being taken into account in an applicable financial statement;

persons deemed to sell their shares of SUMR common stock under the constructive sale provisions of the Code;

persons who own an equity interest, actually or constructively, in Parent or, following the Merger, the Surviving Corporation;

persons who hold or received their shares of SUMR common stock pursuant to the exercise of any employee stock option or otherwise as compensation; and

tax-qualified retirement plans.
This discussion also does not address the U.S. federal income tax consequences to holders of shares of SUMR common stock who exercise appraisal rights in connection with the Merger under the DGCL.
If an entity or arrangement classified as a partnership for U.S. federal income tax purposes holds shares of SUMR common stock, the tax treatment of a partner in such partnership will generally depend on the status of the partner, the activities of the partnership, and certain determinations made at the partner level. Accordingly, partnerships holding SUMR common stock and partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences of the Merger to them.
THIS DISCUSSION IS FOR INFORMATION PURPOSES ONLY AND IS NOT TAX OR LEGAL ADVICE. HOLDERS OF SUMR COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO THEM IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES, AS WELL AS ANY TAX CONSEQUENCES OF THE MERGER ARISING UNDER THE U.S. FEDERAL TAX LAWS OTHER THAN THOSE PERTAINING TO INCOME TAX, INCLUDING ESTATE OR GIFT TAX LAWS, OR UNDER ANY STATE, LOCAL, OR NON-U.S. TAX LAWS OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Tax Consequences to U.S. Holders
Definition of a U.S. Holder
For purposes of this discussion, a “U.S. holder” is any beneficial owner of shares of SUMR common stock that, for U.S. federal income tax purposes, is or is treated as:

an individual who is a citizen or resident of the United States;

a corporation (or other entity taxable as a corporation) created or organized under the laws of the United States, any state thereof, or the District of Columbia;

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

a trust that (i) is subject to the primary supervision of a U.S. court and one or more “United States persons” ​(within the meaning of Section 7701(a)(30) of the Code) are authorized to control all substantial decisions of the trust or (ii) has a valid election in effect to be treated as a “United States person” for U.S. federal income tax purposes.
 
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Effect of the Merger
The receipt of Merger Consideration by a U.S. holder in exchange for shares of SUMR common stock in the Merger will generally be a taxable transaction for U.S. federal income tax purposes. The amount of any taxable gain or loss realized by a U.S. holder who receives Merger Consideration for shares of SUMR common stock in the Merger will generally equal the difference, if any, between the amount of Merger Consideration received for such shares (determined before the deduction of any applicable withholding taxes) and the U.S. holder’s adjusted tax basis in such shares. A U.S. holder’s adjusted tax basis in a share will generally be equal to the amount the U.S. holder paid for such share. The amount and character of such gain or loss and the holding period of shares will be determined separately for each block of shares of SUMR common stock (that is, shares acquired at the same cost in a single transaction) exchanged for Merger Consideration in the Merger. Any gain or loss realized by a U.S. holder upon the receipt of Merger Consideration in exchange for a share of SUMR common stock in the Merger will generally be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder has held such share for more than one year at the effective time of Merger. Otherwise, such gain or loss will be short-term capital gain or loss which is subject to U.S. federal income tax at the same rates as ordinary income. Long-term capital gains recognized by certain non-corporate U.S. holders, including individuals, are generally taxable at a reduced rate. The deductibility of capital losses is subject to limitations.
Information Reporting and Backup Withholding
Payments made to a U.S. holder in exchange for shares of SUMR common stock pursuant to the Merger may be subject to information reporting to the IRS and backup withholding. To avoid backup withholding on such payments, U.S. holders that do not otherwise establish an exemption should complete and return to the paying agent a properly executed IRS Form W-9 included in the letter of transmittal certifying that such holder is a U.S. person, that the taxpayer identification number provided is correct and that such holder is not subject to backup withholding. Certain holders (including corporations) are not subject to backup withholding or information reporting rules.
Backup withholding is not an additional tax. Any amounts withheld from payments of Merger Consideration to a U.S. holder pursuant to the Merger under the backup withholding rules may be allowed as a refund or a credit against such U.S. holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS. U.S. holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.
Tax Consequences to Non-U.S. Holders
Definition of a Non-U.S. Holder
For purposes of this discussion, a “non-U.S. holder” is a beneficial owner of shares of SUMR common stock that is neither a U.S. holder nor an entity or arrangement classified as a partnership for U.S. federal income tax purposes.
Effect of the Merger
A non-U.S. holder will generally not be subject to U.S. federal income tax on any gain realized on the receipt of Merger Consideration in exchange for shares of SUMR common stock in the Merger unless:

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, such gain is also attributable to a permanent establishment or, in the case of an individual, a fixed base, maintained by the non-U.S. holder in the United States);

the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition of shares of SUMR common stock in the Merger, and certain other requirements are met; or
 
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SUMR is or has been a U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of the five-year period ending on the date of the Merger or the period that the non-U.S. holder held shares of SUMR common stock and the non-U.S. holder held (actually or constructively) more than 5% of the total fair market value of all shares of SUMR common stock at any time during such five-year period.
Gain described in the first bullet point above will generally be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income tax rates in the same manner as if such non-U.S. holder were a U.S. holder. A non-U.S. holder that is a corporation also may be subject to a branch profits tax on after-tax profits effectively connected with a U.S. trade or business to the extent that such after-tax profits are not reinvested and maintained in the business.
A non-U.S. holder described in the second bullet point above will generally be subject to U.S. federal income tax on gain realized upon the sale or other taxable disposition of SUMR common stock, which may be offset by U.S.-source capital losses of the non-U.S. holder (even though the individual is not considered a resident of the United States), provided the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, the determination of whether SUMR is a USRPHC depends on the fair market value of its United States real property interests relative to the fair market value of its other trade or business assets and its United States and foreign real property interests. SUMR believes it has not been a USRPHC for U.S. federal income tax purposes during the five-year period preceding the Merger.
Non-U.S. holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments made to non-U.S. holders in the Merger may be subject to information reporting to the IRS and backup withholding. Non-U.S. holders generally can avoid information reporting and backup withholding by providing the paying agent with an applicable and properly executed IRS Form W-8BEN, W-8BEN-E, or W-8ECI (or successor form), as the case may be, certifying under penalties of perjury the holder’s non-U.S. status (and the payor or applicable withholding agent does not have actual knowledge or reason to know that the holder is a U.S. person as defined under the Code) or by otherwise establishing an exemption. Copies of information returns that are filed with the IRS may be made available under an applicable tax treaty or information exchange agreement to the tax authorities of the country in which the non-U.S. holder resides or is established. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability, if any, provided the required information is timely furnished to the IRS.
The discussion above of U.S. federal income tax consequences is not intended to constitute a complete description of all tax consequences relating to the Merger. This summary is for general information purposes only and is not tax or legal advice. Because individual circumstances may differ, each holder should consult their own tax advisor regarding the applicability of the rules discussed above to the holder and the particular tax effects to the holder of the Merger in light of such holder’s particular circumstances, including the tax consequences arising under the U.S. federal estate or gift tax rules, or through the application of any state, local, or foreign tax laws.
 
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THE MERGER AGREEMENT
The following summary describes certain material provisions of the Merger Agreement. This summary is not complete and is qualified in its entirety by reference to the Merger Agreement, which is attached to this proxy statement as Appendix A and incorporated into this proxy statement by reference. We encourage you to read the Merger Agreement carefully and in its entirety because this summary may not contain all the information about the Merger Agreement that is important to you. The rights and obligations of the parties are governed by the express terms of the Merger Agreement and not by this summary or any other information contained in this proxy statement.
Explanatory Note Regarding the Merger Agreement and the Summary of the Merger Agreement
The Merger Agreement and the summary of terms included in this proxy statement have been prepared to provide you with information regarding the terms of the Merger Agreement. Factual disclosures about SUMR contained in this proxy statement or in SUMR’s public filings with the SEC, as described in “Where You Can Find More Information” on page 90 of this proxy statement, may supplement, update, or modify the factual disclosures about SUMR contained in the Merger Agreement and described in this summary. The representations, warranties, and covenants contained in the Merger Agreement have been made solely for the purposes of the Merger Agreement and as of specific dates and solely for the benefit of the parties to the Merger Agreement, and:

were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to close the Merger if the representations and warranties of the other party prove to be untrue, due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement instead of establishing these matters as facts;

have been modified or qualified by certain confidential disclosures that were made among the parties to the Merger Agreement in connection with the negotiation of the Merger Agreement, which disclosures are not reflected in the Merger Agreement attached as Appendix A;

may be subject to a contractual standard of materiality in a way that is different from those generally applicable to you or other stockholders and reports and documents filed with the SEC; and

may be subject in some cases to other exceptions and qualifications, including exceptions to the effect that the relevant circumstances do not result in, and would not reasonably be expected to have, a Company Material Adverse Effect, as defined in “— Representations and Warranties” below.
Stockholders should not rely on the representations, warranties, covenants, and agreements or any descriptions thereof as characterizations of the actual state of facts or condition of SUMR, Parent or Merger Sub, or any of their respective affiliates or businesses. In addition, you should not rely on the covenants in the Merger Agreement as actual limitations on the respective businesses of SUMR, Parent, and Merger Sub, because the parties may take certain actions that are either expressly permitted in the confidential Company disclosure letter to the Merger Agreement (the “Disclosure Letter”) or as otherwise consented to, which consent may be given without prior notice to the public. Moreover, information concerning the subject matter of the representations and warranties, which do not purport to be accurate as of the date of this proxy statement, may have changed since the date of the Merger Agreement and subsequent developments or new information qualifying a representation or warranty may not have been included in this proxy statement. Accordingly, the representations, warranties, covenants, and other provisions of the Merger Agreement or any description of such provisions should not be read alone, but instead should be read together with the information provided elsewhere in this proxy statement and in the documents incorporated by reference into this proxy statement, as well as the disclosures in SUMR’s periodic and current reports, proxy statements, and other documents filed with the SEC. See “Where You Can Find More Information” on page 90 of this proxy statement.
The Merger
The Merger Agreement provides that, subject to the terms and conditions of the Merger Agreement, and in accordance with the DGCL, at the Effective Time, Merger Sub will be merged with and into SUMR,
 
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with SUMR continuing as the surviving corporation (the “Surviving Corporation”) and as a wholly-owned subsidiary of Parent from and after the Effective Time of the Merger.
Effects of the Merger; Certificate of Incorporation; Bylaws; Directors and Officers
At the Effective Time, the Surviving Corporation’s certificate of incorporation and bylaws will each be amended in their entirety to be the certificate of incorporation and bylaws that have been agreed upon by SUMR, Parent and Merger Sub as set forth in exhibits to the Merger Agreement.
The Company will take all requisite action so that from and after the Effective Time, the directors of Merger Sub immediately prior to the Effective Time will be the directors of the Surviving Corporation, each to hold office until their respective successors have been duly elected or appointed and qualified or until their earlier death, resignation, or removal in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.
The Company will take all requisite action so that from and after the Effective Time, the officers of Merger Sub immediately prior to the Effective Time will be the officers of the Surviving Corporation, each to hold office until their respective successors are duly appointed in accordance with the certificate of incorporation and bylaws of the Surviving Corporation.
Closing of the Merger; Effective Time
The closing of the Merger will take place by the electronic exchange of documents as soon as practicable on a date no later than the third business day following the approval of the Merger Proposal at the Special Meeting or such other date as agreed to by SUMR and Parent, provided that the other closing conditions have also been satisfied or waived in accordance with the Merger Agreement (as described in “— Conditions to the Closing of the Merger” below).
The parties will consummate the Merger by the filing and acceptance of the Certificate of Merger by the Delaware Secretary of State.
Merger Consideration
In accordance with the terms and conditions of the Merger Agreement, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Merger Sub, SUMR, or the holders of any our common stock, each share of our common stock that is outstanding immediately prior to the Effective Time (other than (i) shares held by SUMR as treasury stock or held by Parent or Merger Sub or any wholly owned subsidiary of SUMR, Parent or Merger Sub and (ii) Dissenting Shares) will be canceled and automatically converted into the right to receive the Merger Consideration upon the surrender of a certificate representing such share of common stock or the transfer of non-certified shares represented by book entry (or in the case of a lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond, if required)) and subject to adjustment to reflect any stock split, reverse stock split, stock dividend, recapitalization or other like change with respect to shares of our common stock having a record date on or after the date of the Merger Agreement and prior to the Effective Time.
Treatment of Restricted Stock Awards
Prior to the Effective Time, each unvested RSA will, without any further action, be cancelled and converted into the right to receive in cash (without interest and subject to deduction for any required withholding tax) an amount equal to the product of the Merger Consideration multiplied by the number of shares subject to the RSA (the “RSA Consideration”).
Treatment of Options
Prior to the Effective Time, each outstanding unexercised, vested or unvested stock option will, without any further action, be cancelled and converted into the right to receive in cash (without interest and subject to deduction for any required withholding tax) an amount equal to the product of the excess, if any, of the Merger Consideration over the exercise price of each stock option, multiplied by the number of shares issuable upon exercise of the stock option (the “Option Consideration”).
 
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Dissenting Shares
Dissenting Shares will not be converted into the right to receive the Merger Consideration but will be converted into the right to receive consideration as may be determined pursuant to the DGCL. If any holder of Dissenting Shares fails to perfect or withdraws or loses their right to appraisal and/or payment, then each share of SUMR common stock of such holder will be treated as if it had been converted as of the Effective Time into the right to receive the Merger Consideration, without interest and less any applicable withholding taxes, in the same manner as any other shares of SUMR common stock that were not Dissenting Shares.
Exchange and Payment Procedures
At or prior to the Effective Time, Parent will designate Continental Stock Transfer & Trust Company as the payment agent (the “Payment Agent”) to handle the exchange of shares of SUMR common stock for the Merger Consideration. On the date of the closing of the Merger, (i) Parent will deposit, or cause to be deposited, with the Payment Agent, cash in U.S. dollars in an amount sufficient to pay the aggregate Merger Consideration (other than Dissenting Shares) to which the holders of SUMR common stock are entitled to at the Effective Time pursuant to the Merger Agreement and (ii) Parent will deposit, or cause to be deposited, with the Surviving Corporation, cash in an amount sufficient to pay the aggregate RSA Consideration and Option Consideration to which holders of RSAs and stock options are entitled to at the Effective Time pursuant to the Merger Agreement, and amounts sufficient to pay the employer portion of any payroll or other taxes that are or will be incurred in connection with such payments. The cash deposited with the Payment Agent and with the Surviving Corporation by Parent is referred to as the “Payment Fund.”
Promptly after the Effective Time, Parent will instruct the Payment Agent to mail to each person that was, immediately prior to the Effective Time, a holder of record of SUMR common stock, represented by a stock certificate or as book-entry shares (other than Dissenting Shares), which shares were converted into the right to receive the Merger Consideration, a letter of transmittal together with instructions for effecting the surrender of the stock certificates or transfer book entry shares in exchange for payment of the Merger Consideration. Upon receipt of (i) a stock certificate, a surrendered certificate or certificates (or affidavit of loss) together with the signed letter of transmittal, or (ii) in the case of shares of SUMR common stock held in book-entry form, the receipt of the signed letter of transmittal, receipt of an “agent’s message” by the Payment Agent (or such other evidence, if any, of transfer as the Payment Agent may reasonably request) the holder of such shares will be entitled to receive the Merger Consideration in exchange therefor and such certificates or book-entry shares will be cancelled. If certificates or book-entry shares are presented to the Surviving Corporation after the Effective Time for any reason, they will be canceled and exchanged for the Merger Consideration, as provided for in the Merger Agreement. Until surrendered, certificates and book-entry shares represent only the right to receive the Merger Consideration. The amount of any Merger Consideration paid to the stockholders may be reduced by any applicable withholding taxes. No interest will be paid or accrued on the cash payable upon the surrender or transfer of certificate or book-entry shares.
From and after the Effective Time, there will be no further registration of transfers on the records of the Surviving Corporation for shares of SUMR common stock that were issued and outstanding immediately prior to the Effective Time, other than transfers for trades that took place prior to the Effective Time.
Termination of Payment Fund
Any portion of the Payment Fund (including any interest) that remains undistributed to the holders of SUMR common stock one year after the Effective Time will be delivered to the Surviving Corporation and any holders of SUMR common stock who have not complied with the exchange procedures in the Merger Agreement must look to the Surviving Corporation for payment of the Merger Consideration, without interest and subject to any applicable withholding taxes and abandoned property, escheat, or similar laws. Any portion of the Payment Fund (including any interest) that remains unclaimed by the holders of SUMR common stock two years after the Effective Time will become the property of the Surviving Corporation, free and clear of any claims or interest, subject to any applicable withholding taxes and abandoned property, escheat, or similar laws.
 
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Lost, Stolen, or Destroyed Certificates
The owners of any stock certificate that has been lost, stolen or destroyed, must deliver an affidavit of that fact to the Paying Agent who will, in exchange for such lost, stolen, or destroyed stock certificate, pay the Merger Consideration pursuant to the Merger Agreement. However, the Surviving Corporation may require the owners of lost, stolen or destroyed stock certificates to deliver a bond as indemnity against any claim that may be made against Surviving Corporation in connection with the alleged lost, stolen or destroyed certificate.
Representations and Warranties
In the Merger Agreement, SUMR has made certain customary representations and warranties to Parent that are subject, in some cases, to specified exceptions and qualifications contained in the Merger Agreement and/or in the Disclosure Letter. Such representations and warranties relate to, among other things:

the valid existence, good standing, and corporate power of SUMR to carry on and operate its business;

the organizational documents of SUMR are correct and accurate and in full force and effect and SUMR is not in conflict or violation of its organizational documents;

the minutes of SUMR provided to Parent are complete and correct since January 1, 2019;

the requisite corporate power and authority of SUMR to enter into the Merger Agreement and complete the Merger and the other transactions contemplated by the Merger Agreement and no additional authorizations are necessary (subject to obtaining stockholder approval);

the execution, delivery and enforceability of the Merger Agreement against SUMR;

the unanimous approval and recommendation by SUMR’s Board for the adoption of the Merger Agreement and the transactions contemplated by the Merger Agreement by SUMR’s stockholders

the absence of additional actions necessary to consummate the Merger and the inapplicability of certain restrictions on business combinations under the DGCL;

the compliance with and authorizations required by DGCL and any other applicable law;

the receipt of an opinion on behalf of Duff & Phelps as to the fairness from a financial point of view, of the Merger Consideration to be received by holders of SUMR common stock;

the absence of any other class or series of SUMR capital stock whose vote is necessary for approval of the Merger Proposal;

the absence of any additional consents or approvals necessary to execute and deliver the Merger Agreement (other than certain agreed consents);

the absence of (i) any conflict with or violation of the organizational documents of SUMR or its subsidiaries, (ii) any conflict with or violation of applicable laws or (iii) any required consents or approvals under, or breach, violation, loss of benefit, change of control, or default under, any permit or material contract of SUMR or its subsidiaries, in each case, as a result of the execution and delivery by SUMR of the Merger Agreement and the completion by SUMR of the Merger;

the consents, filings, and authorizations required by governmental entities in connection with the transactions contemplated by the Merger Agreement;

the capitalization of SUMR;

the subsidiaries of SUMR;

compliance with SEC filing requirements for SUMR’s SEC filings including the accuracy of information contained in such filings and compliance with GAAP and the rules and regulations of the SEC with respect to the consolidated financial statements contained therein;

the adequacy of disclosure controls and internal controls over financial reporting;
 
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the accuracy of information contained in this proxy statement;

the absence of certain undisclosed liabilities;

the absence of certain changes and events since January 1, 2022;

the absence of a Company Material Adverse Effect (as defined below) since the date of the Merger Agreement;

material contracts and the absence of breaches of or defaults under material contracts;

compliance with laws;

material compliance with all necessary permits;

environmental matters;

litigation matters;

tax matters;

employee benefit plans;

labor and other employment matters;

the leased real property of SUMR and its subsidiaries;

intellectual property matters;

insurance policies and claims;

related party transactions;

brokers’ and financial advisors’ fees related to the Merger;

government contracts;

anti-corruption law and international trade law compliance;

indebtedness of SUMR;

material customers and material vendors;

accounts receivable and inventory;

PPP and CARES Act matters;

product liability and warranty matters; and

the absence of any additional representations and warranties, except for the representations and warranties otherwise set forth in the Merger Agreement.
Certain of SUMR’s representations and warranties are qualified (i) by reference to the disclosure in SUMR’s filings with the SEC prior to the execution of the Merger Agreement and (ii) as set forth in the Disclosure Letter.