Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
Effective as of April 11, 2017 (the Effective Date), Carl E. Lee, Jr. retired from his positions as
President and Chief Executive Officer and a member of the Board of Directors of the Company, as well as from his positions as an officer and/or director of each of the Companys subsidiaries.
Brian J. Driscoll, age 58 and a member of the Companys Board of Directors since February 2016, has assumed the responsibilities of
interim Chief Executive Officer effective as of April 11, 2017. Mr. Driscoll previously served as President and Chief Executive Officer of Diamond Foods, Inc. (Diamond) and was a member of the Diamond board of directors
from May 2012 until the Company acquired Diamond in February 2016. Prior to joining Diamond, from June 2010 to March 2012, Mr. Driscoll was Chief Executive Officer of Hostess Brands, which filed for Chapter 11 bankruptcy protection in January
2012. From 2002 to June 2010, he held senior management positions at Kraft Foods, Inc., including as President, Sales, Customer Service and Logistics, Kraft North America from 2007 to June 2010. Mr. Driscoll joined Kraft Foods, Inc. as a result
of Krafts acquisition of Nabisco, where he worked from 1995 to 2002, first as President of Sales and Integrated Logistics and later as the Senior Vice President, Biscuit Sales and Customer Service. Mr. Driscoll holds a B.S. degree from
St. Johns University.
In connection with Mr. Driscolls appointment as interim Chief Executive Officer, he entered into
an offer letter with the Company on April 11, 2017 (Driscoll Agreement) pursuant to which he was named interim Chief Executive Officer. Under the terms of the Driscoll Agreement, Mr. Driscoll will be paid $75,000 per month and
is eligible for the Companys 2017 Annual Performance Incentive Plan for Officers and Key Managers with a target bonus of $890,000, prorated for each day of fiscal year 2017 that he is employed as interim Chief Executive Officer. Additionally,
to the extent other bonus programs are made available to the senior executive team, Mr. Driscoll will also be eligible for the maximum bonus percentage opportunity consistent with the other senior executive team members and the criteria for
such bonus opportunities will also be consistent with the criteria for such other senior executive team members. Mr. Driscoll will also remain a member of the Companys Board of Directors and will continue to be treated as
in-service
for purposes of vesting and exercisability of his outstanding equity awards; however, he will not receive any additional compensation as a
non-employee
director
while he is employed by the Company.
On the 30th day after his appointment, Mr. Driscoll will also be granted equity awards
(collectively, the Equity Award) comprised of (i) a restricted stock award with a fair market value of $300,000 and (ii) an option
award with a Black Scholes value of $300,000 with an exercise price equal to the closing price of the Companys stock on the grant date. The Equity Award shall be subject to the following
terms and conditions: (x) the Equity Award shall vest and become fully exercisable at the end of the sixth month period following the grant date subject to Mr. Driscolls continued employment as the interim Chief Executive Officer,
(y) upon a Change of Control of the Company or in the event that Mr. Driscolls employment is terminated due to death, disability, or by the Company without Cause or by Mr. Driscoll for Good Reason (as such defined terms are
defined in the applicable award agreements), the Equity Award will vest and become exercisable in full and will remain exercisable so long as Mr. Driscoll remains a director and for no less than three months thereafter; and (z) the Equity
Award will be subject to the terms and conditions of the 2016 Key Employee Incentive Plan and such award agreements as provided by the Compensation Committee of the Company. Additionally, Mr. Driscoll shall (A) have access to the
Company-owned apartment in Charlotte, NC or receive a monthly housing stipend of $2,500, less required tax withholdings, (B) be reimbursed for his reasonable travel expenses from his home to Charlotte, NC and be eligible for reimbursement of
his reasonable travel and business expenses in accordance with the terms of the Companys expense reimbursement policy, (C) be reimbursed for his legal fees in connection with the Driscoll Agreement not to exceed $5,000, (D) be provided
coverage under the Companys director and officer liability insurance policy at the Companys sole expense and indemnification fullest extent permitted by the Companys organizational documents and applicable law, and (E) be
entitled to participate in the Companys employee benefit plans, including health, dental, disability, life and 401(k) in accordance with the terms and conditions thereof. The Driscoll Agreement will automatically terminate six months from the
Effective Date unless both parties agree to extend it.
In connection with his departure, Mr. Lee and the Company entered into a
Retirement Agreement and General Release dated April 11, 2017 (the Lee Agreement). Mr. Lee has the right, exercisable on or before April 24, 2017, to revoke the Lee Agreement. The Lee Agreement will become effective
on April 25, 2017 if Mr. Lee has not previously revoked it.
Pursuant to the terms of the Lee Agreement, Mr. Lee will receive
the payments and other benefits to which he would have otherwise been entitled had his employment been terminated without cause under the Executive Severance Agreement, dated January 25, 2012, between Mr. Lee and the Company, as
subsequently amended by the Amendment to Executive Severance Agreement dated December 12, 2016 (collectively, the Executive Severance Agreement). As a result, Mr. Lee received a payment representing his unpaid base salary,
unused vacation pay, unreimbursed business expenses and all other items earned by and owed to Mr. Lee through the Effective Date.
Additionally, in accordance with the terms of the Lee Agreement, Mr. Lee will also receive or be entitled to (i) a total payment of
$3,560,000, which is his base salary and target bonus multiplied by two and is payable in 24 monthly installments, commencing on or about the 60
th
day following the Effective Date; (ii) be
eligible for the Companys 2017 Annual Performance Incentive Plan for Officers and Key Managers, subject to actual performance and paid when paid to other plan participants and prorated for the number of days employed in fiscal 2017, which was
101 days out of 365 days; (iii) be eligible for a prorated portion of his outstanding performance equity awards, subject to the satisfaction of the performance goals and paid when active employees are paid for the same performance awards;
(iv) be eligible for awards, if any, owed pursuant to the (A) 2015 long term incentive plan annual grant with a three year performance period payable in 2018 when other active eligible employees are paid, (B) 2016 long term incentive plan
annual grant with a three year performance period payable in 2019 when other active eligible employees are paid and (C) 2017 long term incentive plan annual grant with a three year performance period payable in 2020 when other active eligible
employees are paid; (v) exercise his outstanding vested options for a period of one year following the Effective Date (or the original expiration date, if earlier), while outstanding unvested equity awards will not be accelerated and will be
forfeited and cancelled, except for the 302,867 options he received pursuant to the Executive Retention Agreement dated May 13, 2016, which shall continue to vest in accordance with the current vesting schedule (vesting on May 13, 2019),
except for the continuous employment requirement, and shall be exercisable for a period of one year following the vesting date, (vi) indemnification from any claims asserted against Mr. Lee arising out of his prior performance of his
duties with the Company and its affiliates to the same extent as the Company indemnifies the Companys retired officers or directors; (vii) one year of outplacement assistance, not to exceed a value of $89,0000; and
(viii) reimbursement of applicable health plan reimbursements for up to three years, subject to the limitations set forth in the Executive Severance Agreement.
The Lee Agreement contains a general release by Mr. Lee of all claims against the Company and its affiliates and a reaffirmation of
Mr. Lees obligations under the Executive Severance Agreement, including, without
limitation, Mr. Lees covenant not to compete and not to solicit the Companys customers or employees, and his confidentiality obligations. Mr. Lee has also agreed to
cooperate with the Company for the indefinite future in connection with management transition, licensing issues, pending and potential disputes and other matters relating to the Companys corporate or professional liabilities.
The descriptions of the Driscoll Agreement and Lee Agreement set forth above are qualified in their entirety by reference to the actual terms
of the Driscoll Agreement and Lee Agreement, which are filed as Exhibits 10.1 and 10.2, respectively, to this Current Report on Form
8-K
and are incorporated by reference herein.
On April 17, 2017, the Company issued a press release regarding Mr. Lees departure from the Company and Mr. Driscolls assumption
of the responsibilities of interim Chief Executive Officer. A copy of the press release is attached hereto as Exhibit 99.1. The Company also held a conference call and live webcast on April 17, 2017 to discuss the changes to management, which may be
accessed via reply telephone or web-based replay, as described in the press release.