Item 5.02.
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Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
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President and Chief Executive Officer
On April 12,
2018, Hostess Brands, Inc. (the Company) announced the appointment of Andrew P. Callahan as President and Chief Executive Officer, effective May 7, 2018. Mr. Callahan replaces C. Dean Metropoulos, who has served as the
Companys interim President and Chief Executive Officer since March 31, 2018, pending the appointment of a permanent principal executive officer. Mr. Metropoulos will remain Executive Chairman of the Companys Board of Directors
(the Board). Today, Mr. Callahan was also appointed to the Board for a term expiring at the Companys 2020 Annual Meeting of Stockholders. The Board believes that Mr. Callahans extensive experience in the food
industry and daily involvement in the business and operations of the Company make him well-qualified to serve on the Board.
Mr. Callahan, 52, most
recently served as the President of North American Foodservice & International at Tyson Foods, Inc. (Tyson Foods), one of the worlds largest producers of meat and prepared food products from February 2017 until September
2017. While at Tyson, Mr. Callahan also managed Tysons retail consumer brands, as President of Retail Packaged Brands, including iconic brands such as Tyson
®
, Jimmy Dean
®
, Hillshire Farm
®
, Sara Lee
®
,
Aidells
®
and Ball Park
®
, from August 2014 to February 2017. He served as an Executive Vice President and President of Retail at The
Hillshire Brands Company (formerly known as Sara Lee Corporation), a producer of packaged meat and frozen bakery products, from June 2012 until its acquisition by Tyson Foods in August 2014. Prior to joining The Hillshire Brands Company,
Mr. Callahan served in positions of increasing responsibility in marketing, sales and general management for Sara Lee Corporation and Kraft Foods, Inc. Prior to joining Kraft Foods, Inc., Mr. Callahan spent seven years in the U.S. Navy as
a Naval Flight Officer. Mr. Callahan previously served on the Board of Directors for the Grocery Manufacturers Association (GMA), the International Foodservice Manufacturers Association (IFMA), as well as the
Make-A-Wish
Foundation of Illinois.
On April 12, 2018, the Company entered into an employment agreement
with Mr. Callahan to serve as the Companys President and Chief Executive Officer (the Employment Agreement). The Employment Agreement has a term beginning on the first day of Mr. Callahans employment with the
Company (the Employment Date), which will be May 7, 2018, and continuing for three years. The term will automatically renew for consecutive
one-year
periods, unless
Mr. Callahans employment is otherwise earlier terminated or the Company or Mr. Callahan provides notice of
non-renewal
at least 90 days prior to the applicable expiration date. The Company
will pay Mr. Callahan an annual base salary of $825,000. In addition, Mr. Callahan will be eligible for annual cash bonuses pursuant to the terms of the Companys incentive compensation plan, with an annual target bonus of 110%
of his base salary; provided that, for 2018, Mr. Callahan will be guaranteed a minimum annual bonus of 55% of his base salary, prorated from the Employment Date. In the event that Mr. Callahan is terminated without cause, resigns for
good reason or experiences a change in control termination (in each case, as defined in the Employment Agreement), Mr. Callahan will be entitled to payment of a
pro-rated
bonus, based on the
Companys performance through the date of his termination of employment.
The Employment Agreement provides that Mr. Callahan is entitled to a
sign-on
equity grant of restricted stock units (RSUs),
non-qualified
stock options (NQSOs) and performance share units (PSUs) related to
2018 and 2019 performance, with an aggregate grant date value of $2,700,000, subject to the terms and conditions of the Companys 2016 Equity Incentive Plan. Mr. Callahans RSUs will vest
one-third
of the award on each of the first three anniversaries of the Employment Date; NQSOs will vest
one-fourth
of the award on each of the first four anniversaries
of the Employment Date; and PSUs will vest
one-half
of any PSUs earned based on 2018 and 2019 performance on December 31, 2019, and the remaining
one-half
on
December 31, 2020, subject to the Compensation Committees certification of the performance goals and Mr. Callahans continued employment with the Company on the applicable PSU vesting date. Mr. Callahan is eligible to
receive long-term incentive awards for each fiscal year after 2018 during the term under the Companys 2016 Equity Incentive Plan on terms established by the Compensation Committee, with the target award or grant for fiscal years after 2018
expected to have a value of no less than the value of Mr. Callahans
sign-on
equity grant.
Under the terms of the Employment Agreement, Mr. Callahan will be eligible for reimbursement of reasonable
relocation and commuting expenses.
In the event that Mr. Callahans employment with the Company is terminated for any reason, he is entitled to
receive: (i) his base salary and unused vacation time up to and including the date of termination of employment, (ii) any unreimbursed expenses, and (iii) any vested accrued compensation, equity awards or benefits provided under the
Companys benefit plans upon or following a termination of employment (the Accrued Obligations). Mr. Callahan will be entitled to severance and other benefits payable under the HB Key Executive Severance Benefit Plan (the
Severance Plan) if he experiences a qualifying termination or change in control termination, as applicable (in each case, as defined in the Severance Plan, as modified by the Employment Agreement). Upon a qualifying termination of
Mr. Callahans employment, his cash severance amount will be 18 months of annual compensation (defined as annual base salary and target annual incentive cash bonus), and upon a change in control termination of Mr. Callahans
employment, his cash severance amount will be 24 months of annual compensation. Any payment of severance to Mr. Callahan will be subject to his execution and delivery of the Companys standard release agreement. If
Mr. Callahans employment with the Company terminates due to death or disability (as defined in the Severance Plan), Mr. Callahan (or his estate or designated beneficiary) will receive the Accrued Obligations and severance under the
Severance Plan as if such death or disability is a qualifying termination or change in control termination, as applicable.
The Employment Agreement also
includes
non-competition
and
non-solicitation
restrictions which apply during the employment term and for a period of 18 months following termination of employment.
The foregoing description of the Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the complete text of
the Employment Agreement, filed as Exhibit 10.1 hereto and incorporated by reference herein, and the Severance Plan, filed as Exhibit 10.1 to the Companys Current Report on Form
8-K
filed on
September 18, 2017.