Our goal is to make Freshpet the most sustainable pet food company in the world. Our commitment to nourishing Pets, People and Planet continues to expand with the following
efforts undertaken over the last year:
COMMITMENT TO GOOD CORPORATE GOVERNANCE | 20
OUR GOAL
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OUR RESPONSE
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Continue to innovate to enhance the sustainability of our products
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We know that Nature’s Fresh consumers are concerned about climate change. As of July 2020, Nature’s Fresh became Freshpet’s first carbon neutral brand by purchasing offsets to cover all Scope 1, 2, and 3
emissions.
Based on strong consumer interest and feedback from existing Freshpet consumers, we are launching Freshpet Spring and Sprout, our first meatless dog food. This product is expected to bring in new consumers
and offer a more sustainable carbon footprint than traditional meat based dog food.
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Commit to achieving company-wide carbon neutrality
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We partnered with 3Degrees to calculate Freshpet’s Scope 1, 2, and 3 carbon emissions for 2019 and 2020. This extensive analysis used the latest science based approach to estimate emissions of our Scope 3
value chain including protein sources and distribution, among other points. These insights will help guide us toward emission reduction at the source in the future.
We acknowledge the importance of mitigating the effects of climate change sooner rather than later. Our engineering and operations team is working to reduce our emissions, but we realize these efforts will
take time. As an interim step, we aim to neutralize all Scope 1 and 2 emissions for calendar year 2021 using offsets. Additionally, we plan to be carbon neutral across scopes 1, 2, and 3 by 2025 using a combination of source reduction and
offsets.
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Expand our water conservation commitment
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In 2020, we backed our belief in water conservation with major infrastructure investments via on-site wastewater treatment and rainwater capture facilities. For 2021, we have completed a water footprint
analysis and our first engagement with CDP, a recognized non-profit that works with companies to disclose their environmental and water impacts.
In 2022, our new Kitchens 3.0 manufacturing facility in Ennis, Texas, will include a state-of-the-art steam recapture system that is expected to save up to 200,000 gallons of water a day.
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In addition to the initiatives outlined above, we have added a strong corporate governance plan, centered with a diverse and independent board. Please see “—Freshpet’s
Commitment to Good Corporate Governance: Roadmap to 2025” for more information. We began sharing our current structure and long-term governance plan last year, and we plan to continue to highlight our progress and future plans.
Our 2021 sustainability report, which we plan to release in August, will provide more details on all our sustainability efforts.
COMMITMENT TO GOOD CORPORATE GOVERNANCE | 21
COMMITMENT TO HUMAN CAPITAL MANAGEMENT
At Freshpet, our vision is to create a happier, healthier world where Pets, People and the Planet thrive. We know that our people are our enduring advantage and we are
obsessed in our mission to ensure that all people who touch Freshpet are better in some way. We strive to be the place where people love to work and we encourage everyone to be grow, have fun and deliver on our vision. Our overall human resource
strategy is designed to attract, develop and retain the best qualified employees to meet our business goals on an ongoing basis and to execute our growth strategy.
As of December 31, 2020, Freshpet had employed 591 team members, an increase of approximately 28% from one year earlier, based across our 3 locations of Bethlehem,
Pennsylvania, Secaucus, New Jersey, and Ennis, Texas. In Europe, Freshpet has employed 7 employees as of December 31, 2021. None of our employees are represented by a labor union or covered by a collective bargaining agreement.
As of December 31, 2021, our workforce consisted of approximately 374 hourly production employees, 118 salaried and managerial employees in manufacturing and 99 salaried
and managerial employees in other functions, such as Marketing, Finance, Sales, Consumer Care, and other support and distribution roles.
Employee Engagement
In 2020, Freshpet achieved an engagement score of 82% with a total participation rate of 70%. Our Net Promoter score was 8.3, a 7% increase from our prior Net Promoter
Score, which we believe demonstrates our employees’ positive perception about the future of Freshpet and strong belief in our vision.
At Freshpet, our programs are designed to reward and support employees through competitive pay, creative incentive programs and generous benefits. We strive to ensure that
our benefit offerings meet the evolving needs of our diverse workforce across all of our locations. The surge in growth coupled with the COVID-19 pandemic put significant strain on our human resources in 2020. Labor shortages driven by factors relating
to the pandemic forced us to rethink our approach to attracting and retaining the right talent in the business. Freshpet implemented a number of creative employee incentive programs and invested heavily in marketing of employment opportunities to
recruit a high number of production and sanitation employees into our kitchens. Labor shortages compounded by high absenteeism due to testing, quarantine and childcare issues led to a series of systemic changes to our recruitment, training and
retention strategies. These revised practices will continue to form part of our ongoing efforts to ensure a strong, skilled employee base.
Health and Safety
The COVID-19 pandemic provided us with a defining moment to support and further develop and entrench our employee-centric culture. This showed up in our prioritization of
the health, safety and welfare of our employees. Our comprehensive response to the COVID-19 pandemic has included:
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Adopting a COVID-19 screening and contact tracing process;
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Establishing physical distancing procedures in our kitchens;
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Modifying office workstations with physical dividers;
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Implementing additional cleaning and disinfecting procedures;
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Mandating work from home for our corporate office employees in Secaucus, New Jersey; and
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Suspending our absenteeism policy to encourage those who did not feel well to stay home.
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As a result of the COVID pandemic, we have added a full-time, bi-lingual on-site industrial nurse who
COMMITMENT TO GOOD CORPORATE GOVERNANCE | 22
works with our team on health-related issues. This has become a popular and heavily utilized resource for our team.
At our Freshpet Kitchens, the Company provides employees with extensive safety gear and protective clothing as well as a wide array of hot beverages and warm soups to help
our team members stay warm in our refrigerated facilities.
The Freshpet team regularly monitors and evaluates injury rates, safety observances and near-misses, and takes proactive steps to ensure employee safety is paramount in all
our planning.
Diversity and Inclusion
We believe that a diverse workforce is critical to our success, and our goal is to create a culture where we provide equal and fair opportunities for all of our employees.
Our values are reflected in our diverse workforce, and we believe that our competitive advantage lies in our diversity of thought, creativity in solving systemic problems and strengthening our partnerships with pet-caring organizations and the
communities in which we live.
Our workforce reflects the communities in which we operate. For example, our staff in the Freshpet Kitchens in Bethlehem, Pennsylvania is approximately 53% white, 30%
Hispanic, 10% African American and 7% other ethnicities as of December 31, 2020.
The Company and the Board have made deliberate efforts to expand the diversity of our leadership and Board, and create an inclusive environment. Currently, of the nine
non-executive members of the Board, three are women. One of the members of the Board is African American.
The Company’s senior leadership team consists of eight people, two of whom are women and one is African American. The Company made three significant new senior management
hires late in 2019 and during 2020. Two were female, one of whom is African American. The third is a Hispanic male. Each leads a significant part of our organization as they lead our Finance function (female), HR (female, African American) and
Manufacturing (male, Hispanic).
Employee Benefits
Freshpet offers a comprehensive collection of benefits designed to make Freshpet competitive within the talent pools from which it recruits. All Freshpet employees are
eligible for the same benefits regardless of title. In order to incentivize and engage our workforce, Freshpet provides:
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Industry-leading compensation, including stock compensation for every employee (granted after 12-months of continuous employment for hourly employees)
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Industry-leading healthcare offered equitably for every employee (including pet insurance)
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Multi-year equity grants to “One-of -a-Kind Talent” employees identified by the Board
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401(k) matching for every employee
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Competitive perquisites, including pet insurance, free healthy snack room and catered lunches (including ice cream Fridays)
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We also allow each employee to take home one package of Freshpet each day to feed their pet or the pet of someone close to them.
Recruitment
Freshpet aggressively recruits for talent to fill our rapidly growing manufacturing operations. We have three full-time recruiters on staff who screen potential new hires
and conduct on-boarding training for them. We advertise on social media, billboards and radio and uses a variety of job referral services to attract the skilled labor we require.
COMMITMENT TO GOOD CORPORATE GOVERNANCE | 23
To fill the increasing managerial roles because of Freshpet’s growth, we use third-party recruiters who are experts on what makes Freshpet unique and have a deep
understanding of our culture and requirements. These recruiters have successfully filled a wide range of roles with a focus on increasing the diversity of our managerial ranks.
Governance of Corporate Responsibility
We believe good governance at all levels is necessary to drive corporate responsibility, and that our corporate governance is more effective when we consider environmental
and social issues as a part of corporate strategy, key risks, and our operations. As a part of this endeavor, our Board oversees the management team fulfilling responsibilities relating to sustainability and corporate social responsibility,
particularly those that may affect the stakeholders and stockholders of our Company, and the communities in which we operate. Our Board and its committees play a critical role in oversight of our corporate culture and holds management accountable for
its maintenance of high ethical standards, governance practices and compliance programs to protect our business, employees and reputation.
To promote honesty, integrity and compliance with applicable laws, we established our Code of Ethics that applies to every director, officer and employee. All Freshpet
employees are required to certify that they comply with the Code of Ethics and its related policies and programs.
Freshpet has a zero-tolerance policy for bribery and corruption. The Board established a robust Whistleblower Policy with regard to reports of concerns made by employees
and other parties, and to protect whistleblowers against harassment or retaliation. The Whistleblower line is monitored directly by our CEO and is reported to the Audit Committee quarterly. Freshpet did not receive any hotline inquiries in 2020.
COMMITMENT TO GOOD CORPORATE GOVERNANCE | 24
DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 26
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
BOARD OF DIRECTORS
Set forth below is the name, age (as of August , 2021), position and a description of the business experience of each of our directors and director nominees:
NAME
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AGE
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POSITION(S)
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CLASS
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APPOINTED
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CURRENT TERM EXPIRATION
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DIRECTOR NOMINEES
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Daryl G. Brewster
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64
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Director
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I
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Jan 2011
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2021
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Jacki S. Kelley
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55
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Director
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I
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Feb 2019
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2021
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CONTINUING DIRECTORS
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J. David Basto
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49
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Director
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II
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Dec 2010
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2022
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Lawrence S. Coben, Ph.D.
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63
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Director
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II
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Nov 2014
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2022
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Walter N. George, III
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64
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Director
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II
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Nov 2014
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2022
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Craig D. Steeneck
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63
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Director
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II
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Nov 2014
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2022
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Charles A. Norris
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75
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Chairman of the Board and Director
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III
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Oct 2006
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2023
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William B. Cyr
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58
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Director and Chief Executive Officer
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III
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Sept 2016
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2023
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Olu Beck
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55
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Director
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III
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Oct 2019
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2023
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Leta D. Priest
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62
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Director
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III
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Sept 2018
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2023
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DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 27
BACKGROUND OF DIRECTORS
DIRECTOR NOMINEES
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Director
Daryl G. Brewster has been a member of our Board of Directors since January 2011. Since 2021, Mr. Brewster has served as the Chief Executive Officer of Transformational CPG Acquisition Corp., a
newly organized blank check company focused on effecting a potential transaction in the consumer packaged goods industry. Since 2013, Mr. Brewster has served as the Chief Executive Officer of CECP, a coalition of chief executive officers from
over 200 large cap companies focused on driving sustainable business and improving communication with strategic investors. Since 2008, Mr. Brewster has also been the founder and chief executive officer of Brookside Management, LLC, a boutique
consulting firm that provides C-level consulting and support to consumer companies and service providers to the industry. Mr. Brewster serves as an Operating Advisor to The Carlyle Group and previously served as a Management Advisor to MidOcean
Partners. Mr. Brewster served as the Chief Executive Officer of Krispy Kreme Doughnuts, Inc. from March 2006 through January 2008. From 1996 to 2006, Mr. Brewster was a senior executive at Nabisco, Inc. and Kraft, Inc. (which acquired Nabisco
in 2000), where he served in numerous senior executive roles, most recently as Group Vice President and President, Snacks, Biscuits and Cereal. Before joining Nabisco, Mr. Brewster served as Managing Director, Campbell’s Grocery Products
Ltd.—UK, Vice-President, Campbell’s Global Strategy, and Business Director, Campbell’s U.S. Soup. Mr. Brewster serves on the boards of several middle-market growth companies, and previously served on the board of E*Trade Financial Services,
Inc. Mr. Brewster provides the Board of Directors with experience in corporate leadership, public company operations, and an understanding of the pet and consumer packaged goods industries.
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Director
Jacki S. Kelley has been a member of our Board of Directors since February 2019. Ms. Kelley has over 25 years of executive and senior leadership experience in the media and digital industries. Ms.
Kelley currently serves as CEO/Americas at Dentsu, Inc., a role she has held since January 2020. Prior to her current role, Ms. Kelley spent five years at Bloomberg, first joining as Chief Operating Officer of Bloomberg Media in 2014 and then
moving to Bloomberg LP in 2017 after being appointed Deputy Chief Operating Officer. Before joining Bloomberg, Ms. Kelley was the CEO, North America, and President of Global Clients for IPG Mediabrands as well as Global CEO, Universal McCann.
Ms. Kelley was also a Vice President, Worldwide Strategy & Solutions, at Yahoo! and worked with USA Today for 18 years, leaving the company as a Senior Vice President. Ms. Kelley also serves on the board of directors of Comic Relief USA and
is an Executive Board member of the Ad Council. Ms. Kelley was originally identified to the Board as a director candidate by Spencer Stuart, an executive and leadership search firm. Ms. Kelley provides the Board of Directors with corporate
leadership and extensive senior management experience in media and marketing.
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CONTINUING DIRECTORS
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Chairman of the Board and Director
Charles A. Norris has been a member of our Board of Directors and Chairman of the Board since October 2006. Mr. Norris served as a member of the board of directors of Primo Water Corporation from
2016 to April 2020 and previously served as the Chairman of Glacier Water Services Inc. from 2001 to 2016. Mr. Norris was previously a member of the board of directors of Advanced Engineering Management and MP Holdco LLC, and was Chairman of
the Board of Day Runner from September 2001 to November 2003, when it was sold. Mr. Norris is the retired President of McKesson
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DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 28
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Water Products Company, a bottled water company and division of McKesson Corporation, where he served as President from 1990 until he retired in October
2000. From 1981 through 1989, Mr. Norris served as President of Deer Park Spring Water Company, which was a division of Nestlé USA, and then led an investor group that acquired the business in 1985 until it was sold to Clorox in 1987. Mr.
Norris remained with Clorox through 1989 following their acquisition of Deer Park. From 1973 to 1985, Mr. Norris served in various operational executive positions with Nestlé in both Switzerland and the United States. Mr. Norris has been
nominated to serve as Chairman of the Board of Directors of Transformational CPG Acquisition Corp., a newly organized blank check company focused on effecting a potential transaction in the consumer packaged goods industry. Mr. Norris provides
the Board of Directors with extensive corporate leadership experience as well as a deep understanding of our business.
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Director and CEO
William B. Cyr has been a member of our Board of Directors and our Chief Executive Officer since September 2016. Before assuming his role at Freshpet, Mr. Cyr served as President and Chief Executive
Officer of Sunny Delight Beverages Co. (“SDBC”) from August 2004 to February 2016. Prior to joining SDBC, Mr. Cyr spent 19 years at Procter & Gamble, where he ultimately served as the Vice President and General Manager of the North American
Juice Business and Global Nutritional Beverages. Mr. Cyr serves as a Board and Executive Committee Member of the Consumer Brands Association, a position he has held since 2002. Additionally, during his time as President and Chief Executive
Officer of SDBC, Mr. Cyr was a member of the Board of Directors of American Beverage Association from 2007 until 2016 and on the Executive Committee from 2012 to 2016. Mr. Cyr holds an A.B. from Princeton University. Mr. Cyr provides the Board
of Directors with knowledge of the daily affairs of the Company, expertise in the consumer products industry and extensive experience in corporate leadership.
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Director
J. David Basto has been a member of our Board of Directors since December 2010. Mr. Basto is a Managing Director of The Carlyle Group, which he joined in 2015. Prior to joining The Carlyle Group,
Mr. Basto was Founding Partner and Managing Director of Broad Sky Partners, from its formation in 2013 to 2015. Prior to co-founding Broad Sky Partners, Mr. Basto worked for MidOcean Partners from its inception in 2003 through 2013, most
recently as Managing Director and co-head of MidOcean Partner’s consumer sector investing team. Prior to MidOcean Partners, Mr. Basto worked for DB Capital Partners and its predecessor BT Capital Partners from 1998 through 2003. Previously, Mr.
Basto held positions with Juno Partners and Tucker Anthony Inc. Mr. Basto currently serves as chairman of the board of directors of PurposeBuilt Brands, Inc. Mr. Basto also serves on the board of directors of the parent entities of Manna Pro
Products, Arctic Glacier, Inc., Every Man Jack and Hive Brands. Mr. Basto provides the Board of Directors with extensive core business and leadership skills as well as expertise in analyzing financial issues and insights into the consumer
sector.
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Director
Olu Beck has been a member of our Board of Directors since October 2019. Since January 2013, Ms. Beck has been the Founder and Chief Executive Officer of The Beck Group NJ, a boutique strategic and
management consulting firm. Ms. Beck also served as Chief Executive Officer and a member of the board of directors of Wholesome Sweeteners, Inc., a maker of consumer-packaged natural and organic sweeteners and snacks, from January 2016 to June
2018. Prior to that, Ms. Beck served as Head of Global & U.S. Marketing & Health and Wellness for Johnson and Johnson, Inc. from 2010 to 2012. Prior to Johnson and Johnson, Inc., Ms. Beck served in various executive leadership roles in
Finance and Sales at Mars Incorporated from 1989 to 2009, including serving as Chief Financial Officer of Uncle Ben’s Rice. Ms.
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DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 29
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Beck also serves on the board of directors and audit committees of Hostess Brands, Inc. and Denny’s Inc. Ms. Beck has more than 25 years of experience in
portfolio business management and general management, including direct experience in transformational and strategic growth—both organically and through mergers and acquisition. Ms. Beck provides the Board of Directors with diversified,
cross-functional and global experience, extensive board and management experience in the consumer packaged goods industry and insights into leading practices in executive compensation, corporate governance and audit.
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Director
Lawrence S. Coben, Ph.D. has been a member of our Board of Directors since November 2014. Dr. Coben has served as Chairman of the Board of NRG Energy since February 2017 and has been a director of
NRG since December 2003. Dr. Coben was Chairman and Chief Executive Officer of Tremisis Energy Corporation LLC from 2003 to December 2017. Dr. Coben was Chairman and Chief Executive Officer of Tremisis Energy Acquisition Corporation II, a
publicly held company, from July 2007 through March 2009 and of Tremisis Energy Acquisition Corporation from February 2004 to May 2006. From January 2001 to January 2004, Dr. Coben was a Senior Principal of Sunrise Capital Partners L.P., a
private equity firm. From 1997 to January 2001, Dr. Coben was an independent consultant. From 1994 to 1996, Dr. Coben was Chief Executive Officer of Bolivian Power Company. Dr. Coben served on the advisory board of Morgan Stanley Infrastructure
II, L.P. from September 2014 through December 2016. Dr. Coben is also Executive Director of the Escala Initiative (formerly the Sustainable Preservation Initiative) and a Consulting Scholar at the University of Pennsylvania Museum of
Archaeology and Anthropology. Dr. Coben provides the Board of Directors with significant managerial, strategic, and financial expertise, particularly as it relates to company financings, transactions and development initiatives.
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Director
Walter N. George, III has been a member of our Board of Directors since November 2014. Mr. George is the President of G3 Consulting, LLC, a boutique advisory firm specializing in value creation in
small and mid-market consumer products companies, a company he founded in 2013. Mr. George served as President of the American Italian Pasta Company and Corporate Vice President of Ralcorp Holdings from 2010 until its sale to Conagra Foods in
2013. Mr. George served as Chief Operating Officer at American Italian Pasta Company from 2008 to 2010. From 2001 to 2008, Mr. George served in other executive roles with American Italian Pasta Company, including Senior Vice President—Supply
Chain and Logistics and Executive Vice President—Operations and Supply Chain. From 1988 through 2001, Mr. George held a number of senior operating positions with Hill’s Pet Nutrition, a subsidiary of Colgate Palmolive Company, most recently as
Vice President of Supply Chain. Mr. George currently serves on the boards of Old World Spice and Seasonings and Vision Bank. Mr. George is non-executive chairman of the board of Indigo Wild, LLC. Mr. George provides the Board of Directors with
operations expertise, consumer products and pet food industry expertise and public company experience.
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Director
Leta D. Priest has been a member of our Board of Directors since September 2018. Ms. Priest has over 30 years of executive and senior leadership experience in the retail and consumer packaged goods
industries. Ms. Priest was a key leader in food for Walmart from May 2003 to November 2015 during Walmart’s expansion of grocery, including having served as Senior Vice President and General Merchandising Manager, Fresh Food from 2009 to 2015.
Ms. Priest also served as Senior Vice
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DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 30
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President, General Merchandising Manager in other key areas of food for Walmart from January 2007 through 2015. Ms. Priest began her career with Walmart as Vice President of Food Development. Ms.
Priest joined Walmart from Safeway, where she served as Vice President Corporate Brands, North America from January 1998 to April 2003. Prior to her time at Safeway, Ms. Priest had 11 years of consumer products experience in senior leadership
roles across brand management and product development with The Torbitt & Castleman Company and Dole Food Company. Ms. Priest serves as a director on the following boards: Gehl Foods since November 2019 and Milo’s Tea Company since April
2018. In 2017, Ms. Priest completed seven years as a director on the Board of Feeding America. Ms. Priest provides the Board of Directors with corporate leadership, public company experience and extensive senior management experience in the
retail and consumer packaged goods industries.
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Director
Craig D. Steeneck has been a member of our Board of Directors since November 2014. Mr. Steeneck served as the Executive Vice President and Chief Financial Officer of Pinnacle Foods Inc. from July
2007 to January 2019, where he oversaw the company’s financial operations, treasury, tax, investor relations, corporate development and information technology and was an integral part of the integration team for several of its acquisitions.
From June 2005 to July 2007, Mr. Steeneck served as Executive Vice President, Supply Chain Finance and IT of Pinnacle Foods, helping to redesign the supply chain to generate savings and improve financial performance. Pinnacle Foods was acquired
by Conagra Brands in October 2018. From April 2003 to June 2005, Mr. Steeneck served as Executive Vice President, Chief Financial Officer and Chief Administrative Officer of Cendant Timeshare Resort Group (now Wyndham Destinations, Inc.),
playing key roles in wide-scale organization of internal processes and staff management. From March 2001 to April 2003, Mr. Steeneck served as Executive Vice President and Chief Financial Officer of Resorts Condominiums International (now
Wyndham Destinations, Inc.). From October 1999 to February 2001, Mr. Steeneck was the Chief Financial Officer of International Home Foods Inc. Mr. Steeneck has served as a board member and Chairman of the Audit Committee of Hostess Brands, Inc.
since November 2016 and as lead independent director from January 2019 to December 2019. Mr. Steeneck has served as a board member of Collier Creek Holdings (now Utz Brands, Inc.) since November 2018, where he is Chairman of the Audit Committee
and member of the Compensation Committee. Mr. Steeneck served on the Board of Directors of Kind, Inc. from May 2019 to July 2020. Mr. Steeneck provides the Board of Directors with extensive management experience in the consumer-packaged goods
industry as well as accounting and financial expertise.
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Stock Ownership Guidelines for Non-Employee Directors
Stock ownership guidelines are in place for our non-employee directors to encourage significant ownership of our common stock by our non-employee directors and to further
align the personal interests of our non-employee directors with the interests of the Company’s stockholders. Non-employee directors are expected to own common stock valued at an amount at least three times the cash retainer, as calculated for each
calendar year on the first trading day of each calendar year.
Family Relationships
There are no family relationships among any of our directors and executive officers.
Corporate Governance, Board Structure and Director Independence
Our Board of Directors consists of 10 members and is currently divided into three classes with staggered three-year terms. At each annual general meeting of stockholders,
the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. The authorized number of directors may be changed by resolution of the Board of
Directors. Vacancies on the Board of Directors can be filled by resolution of the Board of
DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 31
Directors. Mr. Norris serves as the Chairman of our Board of Directors. We believe that each of the members of our Board of Directors, except Mr. Cyr, is independent
consistent with the Nasdaq rules. Mr. Brewster and Ms. Kelley are the Class I directors, and their terms will expire at the Annual Meeting, unless reelected by stockholders. Mr. Basto, Mr. George, Mr. Steeneck and Dr. Coben are the Class II directors,
and their terms will expire in 2022. Mr. Norris, Ms. Priest, Ms. Beck and Mr. Cyr are the Class III directors, and their terms will expire in 2023. The division of our Board of Directors into three classes with staggered three-year terms may delay or
prevent a change of our management or a change in control. If the Declassification Proposal is approved by our stockholders at our Annual Meeting, our Board will be fully declassified by 2025. See “—Commitment to Good Corporate Governance” and
“Proposals—Proposal IV” for additional information.
Our Board of Directors met seven times during 2020. Under the Company’s corporate governance guidelines, Board members are expected to attend all meetings of the Board and
committees on which they serve. Each director serving on the Board in 2020 attended at least 75% of the total meetings of the Board and of Committees on which he or she served during the time he or she was on the Board in 2020. All of the members of
our Board of Directors serving at the time attended our 2020 annual stockholders’ meeting. Our corporate governance guidelines are available on our corporate website at www.freshpet.com. Our website is not part of
this Proxy Statement.
Board Committees
Our Board of Directors has three standing committees: an Audit Committee; a Nominating and Corporate Governance Committee; and a Compensation Committee. Each committee
reports to the Board of Directors as they deem appropriate, and as the Board of Directors may request. The composition, duties and responsibilities of these committees are set forth below. In the future, our Board of Directors may establish other
committees, as it deems appropriate, to assist it with its responsibilities.
AUDIT COMMITTEE
The Audit Committee is responsible for, among other matters: (1) appointing, compensating, retaining, evaluating, terminating and overseeing our independent registered
public accounting firm; (2) discussing with our independent registered public accounting firm their independence from management; (3) reviewing with our independent registered public accounting firm the scope and results of their audit and the audit
fee; (4) approving all audit and permissible non-audit services to be performed by our independent registered public accounting firm, including taking into consideration whether the independent auditor’s provision of any non-audit services to us is
compatible with maintaining the independent auditor’s independence; (5) overseeing the financial reporting process and discussing with management and our independent registered public accounting firm the interim and annual consolidated financial
statements that we file with the SEC; (6) reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements; (7) establishing procedures for the confidential
anonymous submission of concerns regarding questionable accounting, internal controls or auditing matters; (8) reviewing and approving related person transactions; (9) annually reviewing the Audit Committee charter and the committee’s performance; and
(10) handling such other matters that are specifically delegated to the Audit Committee by our Board of Directors from time to time.
Our Audit Committee consists of Mr. Steeneck (chair), Mr. Basto and Ms. Beck. Our Board of Directors has affirmatively determined that Mr. Steeneck, Mr. Basto and Ms. Beck
meet the definition of “independent directors” for purposes of serving on an Audit Committee under applicable SEC and Nasdaq rules. In addition, Mr. Steeneck qualifies as our “audit committee financial expert,” as such term is defined in Item 407 of
Regulation S-K. The Audit Committee met four times during 2020.
Our Board of Directors adopted a written charter for the Audit Committee, which is available on our corporate website at www.freshpet.com.
Our website is not part of this Proxy Statement.
DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 32
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
The Nominating and Corporate Governance Committee is responsible for developing and recommending to the Board of Directors criteria for identifying and evaluating
candidates for directorships and making recommendations to the Board of Directors regarding candidates for election or re-election to the Board of Directors at each annual stockholders’ meeting. In addition, the Nominating and Corporate Governance
Committee is responsible for overseeing our corporate governance guidelines and reporting and making recommendations to the Board of Directors concerning corporate governance matters. The Nominating and Corporate Governance Committee is also
responsible for making recommendations to the Board of Directors concerning the structure, composition and function of the Board of Directors and its committees.
In considering director nominees, the Nominating and Corporate Governance Committee considers a number of factors, including:
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1
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the independence, judgment, strength of character, reputation in the business community, ethics and integrity of the individual;
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2
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the business or other relevant experience, skills and knowledge that the individual may have that will enable him or her to provide effective oversight of the Company’s business;
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3
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the fit of the individual’s skill set and personality with those of the other Board members so as to build a Board that works together effectively and constructively; and
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4
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the individual’s ability to devote sufficient time to carry out his or her responsibilities as a director in light of his or her occupation and the number of boards of directors of other public companies on which he or she serves.
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When formulating its Board membership recommendations, the Nominating and Corporate Governance Committee will consider advice and recommendations from stockholders,
management and others as it deems appropriate. Although we do not have a formal policy regarding Board diversity, when evaluating candidates for nomination as a director, the Nominating and Corporate Governance Committee does consider diversity in its
many forms, including among others, experience, skills, ethnicity, race and gender. We believe a diverse Board, as so defined, provides for different points of view and robust debate and enhances the effectiveness of the Board. Upon identifying a
potential nominee, members of the Nominating and Corporate Governance Committee will interview the candidate, and based upon that interview, reference checks and committee discussions, make a recommendation to the Board.
The Nominating and Corporate Governance Committee evaluates director candidates recommended by a stockholder according to the same criteria as a candidate identified by the
Nominating and Corporate Governance Committee. To date, the Company has not received a recommendation for a director candidate from our stockholders.
Stockholders may recommend candidates at any time, but to be considered by the Nominating and Corporate Governance Committee for inclusion in the Company’s proxy statement
for the 2022 annual meeting of stockholders, recommendations must be submitted to the attention of the Chairman of the Nominating and Corporate Governance Committee not earlier than the close of business on May 26, 2022 nor later than the close of
business on June 25, 2022 (assuming the Company does not change the date of the 2022 annual meeting of stockholders by more than 30 days before or 70 days after the anniversary of the 2021 Annual Meeting). A stockholder recommendation must contain:
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1
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the candidate’s name, a detailed biography outlining the candidate’s relevant background, professional and business experience and other significant accomplishments;
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2
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an acknowledgment from the candidate that he or she would be willing to serve on the Board, if elected;
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3
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a statement by the stockholder outlining the reasons why this candidate’s skills, experience and
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DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 33
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background would make a valuable contribution to the Board; and
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4
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a minimum of two references from individuals that have either worked with the candidate, served on a board of directors or board of trustees with the candidate, or can otherwise provide relevant perspective on the candidate’s capabilities as a
potential Board member.
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Stockholder submissions recommending director candidates for consideration must be sent to the Company’s corporate offices, located at 400 Plaza Drive, 1st Floor, Secaucus,
NJ 07094, Attention: Corporate Secretary.
Our Nominating and Corporate Governance Committee consists of Mr. George (Chair), Dr. Coben and Ms. Kelley. Our Board of Directors has affirmatively determined that Mr.
George, Dr. Coben and Ms. Kelley meet the definition of “independent directors” for purposes of serving on a Nominating and Corporate Governance Committee under applicable SEC and Nasdaq rules. Our Nominating and Corporate Governance Committee met four
times during 2020.
Our Board of Directors adopted a written charter for the Nominating and Corporate Governance Committee, which is available on our corporate website at www.freshpet.com. Our website is not part of this Proxy Statement.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for, among other matters: (1) reviewing key employee compensation goals, policies, plans and programs; (2) reviewing and approving
the compensation of our directors, Chief Executive Officer and other executive officers; (3) reviewing and approving employment agreements and other similar arrangements between us and our executive officers; and (4) administering our stock plans and
other incentive compensation plans. The Compensation Committee may delegate its responsibilities to a subcommittee formed by the Compensation Committee. The Compensation Committee, in its sole discretion, may also engage legal, accounting, or other
consultants or experts, including compensation consultants, to assist in carrying out its responsibilities.
Our Compensation Committee consists of Mr. Brewster (Chair), Ms. Beck and Ms. Priest. Our Board of Directors has affirmatively determined that Mr. Brewster, Ms. Beck and
Ms. Priest meet the definition of “independent directors” for purposes of serving on a Compensation Committee under applicable SEC and Nasdaq rules. Our Compensation Committee met seven times during 2020. Mr. King served on the Compensation Committee
until his resignation from the Board in September 2020, and Ms. Kelley served on the Compensation Committee until June 2021.
Our Board of Directors adopted a written charter for the Compensation Committee, which is available on our corporate website at www.freshpet.com.
Our website is not part of this Proxy Statement.
Risk Oversight
Our Board of Directors is responsible for overseeing our risk management process. The Board of Directors focuses on our general risk management strategy and the most
significant risks facing us and ensures that appropriate risk mitigation strategies are implemented by management. The Board of Directors is also apprised of risk management matters in connection with its general oversight and approval of corporate
matters and significant transactions.
Our Board of Directors does not have a standing risk management committee, but rather administers this oversight function directly through our Board of Directors as a
whole, as well as through various standing committees of our Board of Directors that address risks inherent in their respective areas of oversight. In particular, our Board of Directors is responsible for monitoring and assessing strategic risk
exposure, our Audit Committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor and control these exposures and our Compensation Committee assesses and monitors whether any of our
compensation policies and programs has the potential to encourage unnecessary risk-taking. In addition, our Audit Committee oversees the performance of our
DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 34
internal audit function and considers and approves or disapproves any related-party transactions.
Our management is responsible for day-to-day risk management. This oversight includes identifying, evaluating and addressing potential risks that may exist at the
enterprise, strategic, financial, operational, compliance and reporting levels.
Leadership Structure of the Board of Directors
The positions of Chairman of the Board and Chief Executive Officer are presently separated. We believe that separating these positions allows our Chief Executive Officer to
focus on our day-to-day business, while allowing the Chairman of the Board to lead the Board of Directors in its fundamental role of providing advice to and independent oversight of management. Our Board of Directors recognizes the time, effort and
energy that the Chief Executive Officer is required to devote to his position in the current business environment, as well as the commitment required to serve as our Chairman. While our Bylaws and corporate governance guidelines do not require that our
Chairman and Chief Executive Officer positions be separate, our Board of Directors believes that having separate positions is the appropriate leadership structure for us at this time and demonstrates our commitment to good corporate governance.
Compensation Committee Interlocks and Insider Participation
None of the members of the Compensation Committee is or has been an executive officer or employee of the Company, nor did they have any relationships requiring disclosure
by the Company under Item 404 of Regulation S-K. During 2020, none of our executive officers served as a director or a member of a compensation committee (or other committee serving an equivalent function) of any other entity, an executive officer of
which served as one of our directors or a member of the Compensation Committee.
Code of Ethics
We adopted a written General Code of Ethics (“General Code”) which applies to all of our directors, officers and other employees, including our principal executive officer,
principal financial officer and controller. In addition, we adopted a written Code of Ethics for Executive Officers and Principal Accounting Personnel (“Code of Ethics”), which applies to our principal executive officer, principal financial officer,
controller and other designated members of our management. Copies of each code are available on our corporate website at www.freshpet.com. The information contained on our website does not constitute a part of this
Proxy Statement. We will provide any person, without charge, upon request, a copy of our General Code or Code of Ethics. Such requests should be made in writing to the attention of our Corporate Secretary at the following address: Freshpet, Inc., 400
Plaza Drive, 1st Floor, Secaucus, New Jersey 07094.
Communications to the Board of Directors
Stockholders and other interested parties may contact any member (or all members) of the Board by U.S. mail. Such correspondence should be sent c/o Corporate Secretary,
Freshpet, Inc., 400 Plaza Drive, 1st Floor, Secaucus, New Jersey 07094.
All communications received as set forth in the preceding paragraph will be opened by the Corporate Secretary for the sole purpose of determining whether the contents
represent a message to the Company’s directors. The Corporate Secretary will forward copies of all correspondence that, in the opinion of the Corporate Secretary, deals with the functions of the Board or its committees or that he or she otherwise
determines requires the attention of any member, group or committee of the Board.
Executive Officers
Set forth below is the name, age (as of August , 2021), position and a description of the business experience of each of our executive officers (business experience
for Mr. Cyr, who is both a director and executive officer, can be found in the section entitled “—Board of Directors”).
DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 35
NAME
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AGE
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POSITION(S)
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William B. Cyr
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58
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Director and Chief Executive Officer
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Scott Morris
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52
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President and Chief Operating Officer
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Heather Pomerantz
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47
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Chief Financial Officer
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Stephen L. Weise
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62
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Executive Vice President, Manufacturing & Supply Chain
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Stephen Macchiaverna
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63
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Executive Vice President, Secretary and Treasurer
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Cathal Walsh
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49
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Senior Vice President, Managing Director of Europe
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Thembeka “Thembi” Machaba
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43
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Senior Vice President, Human Resources
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Ivan Garcia
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36
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Vice President, Controller
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Background of Executive Officers
President, Chief Operating Officer & Co-Founder
Scott Morris is a co-founder of Freshpet and has served as our Chief Operating Officer since July 2015 and President since March 2016. Mr. Morris served as our Chief
Marketing Officer from January 2014 to July 2015 and Senior Vice President of Sales and Marketing from 2010 to 2013. Mr. Morris is involved in all aspects of Company development and focuses his time helping to build the team, cultural values and
innovative approach that has led the Company to success. Prior to joining Freshpet, Mr. Morris was Vice President of Marketing at The Meow Mix Company from 2002 to 2006. Previously, Mr. Morris worked at Nestlé Purina from 1990 to 2002, holding various
leadership positions in Sales and Marketing. Mr. Morris also works as an advisor and investor in several small consumer packaged goods companies with strong social missions and a focus to improve food and the world. Additionally, in 2020, Mr. Morris
co-founded Hive Brands, an e-commerce marketplace that curates sustainable food and household goods brands.
Chief Financial Officer
Heather Pomerantz has served as Chief Financial Officer since October 2020. Ms. Pomerantz previously served as our Executive Vice President of Finance from January
2020 to October 2020. Prior to joining Freshpet, from March 2019 to December 2019, Ms. Pomerantz served as the Vice President of Finance for North America for The Nature’s Bounty Co. Prior to joining The Nature’s Bounty Co., Ms. Pomerantz served in
various finance and accounting roles at Unilever from June 2001 to February 2019, concluding as Vice President of North America Transformation. Prior to joining Unilever, Ms. Pomerantz worked as a consultant at PricewaterhouseCoopers LLP, where she had
responsibilities for ERP implementations. Ms. Pomerantz has over twenty years of oversight and leadership experience in finance and systems roles in the consumer packaged goods industry.
EVP, Manufacturing & Supply Chain
Stephen L. Weise has served as EVP of Manufacturing & Supply Chain, previously titled Executive Vice President of Operations, since July 2015. Mr. Weise has over 25 years of experience in the manufacturing and distribution of consumer
products. Prior to joining Freshpet, from June 2013 to July 2015, Mr. Weise was an Account Manager at TBM Consulting, a consulting firm that specialized in operational excellence and lean manufacturing. From 2003 to February 2013, Mr. Weise held the
role of COO at the Arthur Wells Group, a 3PL specializing in consumer products and temperature-controlled distribution. Prior to that, from 2002 to 2003, Mr. Weise served as the SVP of Operations for the B. Manischewitz Company, a specialty food
manufacturer. From 2000 to 2002, Mr. Weise served as Chief Operating Officer at the Eight in One Pet Products Company, from 1995 to 2000 as VP of Manufacturing at Chock Full O’ Nuts, and from 1986 to 1995 in various positions at Kraft Foods.
EVP, Secretary & Treasurer
Stephen Macchiaverna has served as Executive Vice President, Secretary and Treasurer since September 2020. Prior to that time, Mr. Macchiaverna served as Senior Vice
President, Controller & Secretary, from October 2006. Prior to joining Freshpet, Mr. Macchiaverna was the Controller for The Meow Mix Company from its inception in 2002 through its sale and transition to Del Monte Foods in 2006. From 1999 to 2001,
Mr. Macchiaverna was the Vice President of Finance and Treasurer of Virgin Drinks USA, Inc. Mr. Macchiaverna began his consumer-packaged goods career with First Brands Corporation, where he worked from 1986 to 1999, most recently as Divisional
Controller for all domestic subsidiaries.
DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 36
Mr. Macchiaverna has over 30 years’ experience in consumer-packaged goods financial management.
Co-Founder, SVP and Managing Director of Europe
Cathal Walsh is a co-founder of Freshpet and has served as Senior Vice President, Managing Director of Europe, previously titled Senior Vice President of Cooler
Operations, since January 2011 and previously served as our Chief Operating Officer from October 2006 to January 2011. Prior to joining Freshpet, Mr. Walsh was Zone Marketing Manager at Nestlé Worldwide from 2000 to 2005 and was Marketing Manager at
Nestlé Pet Care from 1996 to 2000. Mr. Walsh has over 25 years’ experience in packaged goods marketing, sales and management, including in international food markets.
SVP, Human Resources
Thembeka “Thembi” Machaba joined Freshpet in August 2020 as SVP of Human Resources. Ms. Machaba has over 20 years’ experience in the Manufacturing, Food & Beverage industries. Prior to joining Freshpet, Ms. Machaba was a Vice President of
Global Human Resources and Organization Development at Molson Coors from January 2019 to August 2020 and Senior Director of Global Human Resources from October 2016 to December 2018. Ms. Machaba held various roles within Human Resources at MillerCoors,
the North American Business unit of Molson Coors, from August 2012 to October 2016. Prior to moving to the United States, Ms. Machaba served in a number of senior Human Resource roles in SABMiller, a global brewing company in South Africa, from 2003 to
2011. Prior to joining SABMiller, Ms. Machaba worked in a training role at AFROX, a chemical manufacturing company in South Africa. Prior to that, Ms. Machaba worked at Unilever SA in various Human Resources roles.
VP of Finance, Controller
Ivan Garcia has served as Vice President of Finance since April 2017 and Controller since September 2020, having previously served as Director of Financial Reporting and Budgeting from June 2015 to March 2017 and Manager of Financial Reporting
from February 2014 to May 2015. Prior to joining Freshpet, Mr. Garcia held progressive roles at KPMG LLP, including Manager of Audit, from September 2007 to January 2014, where he served both public and private clients mainly in the consumer and
industrial market segments.
Stock Ownership Guidelines
Stock ownership guidelines (or Guidelines) are in place for our senior executive officers (or Covered Persons)—including our NEOs—to encourage significant ownership of our
common stock by our senior executives and to further align the personal interests of our senior executives with the interests of our stockholders. The Guidelines require (i) our CEO to own common stock valued at four times annual base pay, (ii) our
NEOs, other than our CEO, to own common stock valued at three times annual base pay, and (iii) our other senior executive officers to own common stock valued at up to two times annual base pay, based on seniority.
Covered Persons are required to achieve their respective levels of stock ownership within the later of five years of the date they enter the listed positions or the date
the Guidelines were adopted. If a Covered Person is not in compliance with the Guidelines, the Covered Person will be required to retain at least 50% of the Covered Person’s vested stock options and vested stock units granted pursuant to a stock
incentive plan of the Company. If the Covered Person falls below the Guidelines solely as a result of a decline in the value of our common stock, the Covered Person will have a period of 12 months within which to increase such Covered Person’s stock
ownership to meet the Guidelines. Notwithstanding the terms of the Guidelines, Covered Persons may sell or otherwise dispose of shares of our common stock to (a) pay the exercise price of Company stock options in a net-share stock option transaction;
and (b) satisfy any applicable tax withholding obligations due in connection with the exercise of options or the vesting or payment of any restricted stock units. If the Guidelines place a hardship on a Covered Person, the Compensation Committee is
empowered to develop an alternative stock ownership guideline for a Covered Person that reflects both the intention of the Guidelines and the personal circumstances of the Covered Person.
DIRECTORS, EXECUTIVE OFFICERS, & CORPORATE GOVERNANCE | 37
EXECUTIVE COMPENSATION | 39
INTRODUCTION
This CD&A describes the material elements of compensation awarded to, earned by, or paid to each of our named executive officers (or NEOs). This CD&A also describes
Freshpet’s philosophy behind and objectives for executive compensation, as well as the manner in which the Company awards, and our NEOs earn, such compensation. Finally, this CD&A is intended to supplement the data presented in the Summary
Compensation Table and other compensation tables that follow the CD&A.
The following table lists our NEOs for 2020, which is the group consisting of each individual who served as our Chief Executive Officer or Chief Financial Officer during
2020, and our three other most highly compensated executive officers who were serving as executive officers on December 31, 2020.
NAME
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PRINCIPAL POSITION
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William B. Cyr
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Chief Executive Officer
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Scott Morris
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President and Chief Operating Officer
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Heather Pomerantz
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Chief Financial Officer
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Stephen L. Weise
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Executive Vice President, Manufacturing & Supply Chain
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Cathal Walsh
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Senior Vice President, Managing Director of Europe
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Richard Kassar
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Vice Chairman, formerly Chief Financial Officer
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*
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Mr. Kassar stepped down from his role as Chief Financial Officer and began an advisory role as Vice Chairman on September 30, 2020. Heather Pomerantz was appointed as our Chief Financial Officer effective October 1, 2020.
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LEADERSHIP CHANGES
Heather Pomerantz, previously Executive Vice President of Finance, became the Chief Financial Officer in October 2020 and Richard Kassar, previously Chief Financial
Officer, began an advisory role as Vice Chairman at that time. Additionally, the Company announced two significant new hires in 2020: Thembi Machaba joined Freshpet in August 2020 as Senior Vice President of Human Resources, and Ricardo Moreno joined
the Company as Vice President of Manufacturing in December 2020.
COMPENSATION PHILOSOPHY AND OBJECTIVES
Our philosophy is to align our executive compensation with the interests of our stockholders by basing our more fundamental compensation decisions on financial objectives
that our Board of Directors (or Board) believes have a significant impact on long-term stockholder value. An important goal of our executive compensation program is to help ensure that we hire and retain talented and experienced executives who are
motivated to achieve or exceed our short-term and long-term corporate goals. Our executive compensation program is designed to reinforce a strong pay-for-performance orientation and to serve the following purposes:
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to reward our NEOs for sustained financial and operating performance and strong leadership;
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·
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to align our NEOs’ interests with the interests of our stockholders; and
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·
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to encourage our successful NEOs to remain with us for the long-term.
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Underpinning our compensation philosophy is the belief that Freshpet is a growth company with the potential to have a significant impact on the pet food industry. Achieving
that potential should result in value creation for our stockholders. Thus, we believe that management’s incentives, our annual goals, and our longer-term goals set by the Company’s Compensation Committee (or Compensation Committee) and the Board should
reflect that growth orientation.
COMPENSATION STRATEGY
The Compensation Committee has numerous tools at its disposal to help Freshpet accomplish its short-
EXECUTIVE COMPENSATION | 40
and long-term performance goals. The Compensation Committee generally chooses to utilize those tools as follows in its administration and oversight of our executive
compensation program.
The Compensation Committee selects a peer group for compensation comparison purposes that includes a blend of comparably-sized companies in similar industries, including
pet-related companies—our most likely sources of talent to support our growth. But the Compensation Committee also deliberately adds companies experiencing significant growth to help ensure that our compensation practices are competitive with—and
relevant to—the circumstances found in growth-oriented companies so that they contribute to the growth potential of Freshpet. The Company considers peer group data for overall compensation and for specific elements of compensation.
Significant Portion of Compensation as Equity
We award a significant portion of executive compensation as equity as we believe this is an effective way to help management focus on our long-term goals while also
aligning stockholder and management interests. A meaningful portion of our executive compensation consists of stock options, which awards have no value to the recipient unless our stock price rises. Additionally, supplemental awards within the broader
organization are rarely paid in cash but instead consist of equity awards. Finally, in 2020, we again decided to include all employees Company-wide in our equity compensation program, including hourly employees, in order to better foster an ownership
mentality and drive long-term growth. For each grant, the vesting requirement is typically at least three years or tied to a specific, long-term achievement.
Long-Term Goal Setting
We set a four-year growth goal for management in 2016 and have issued significant equity awards to our most senior managers tied to that goal. For our CEO, Mr. Cyr, his
2016 award of stock options replaced subsequent annual awards in order to emphasize the importance of achieving our long-term growth goals. Messrs. Kassar, Morris and Weise also received stock options with the same objectives in 2016 to help ensure
alignment amongst our leadership team with the Company’s long-term goals. Additionally, our COO, Mr. Morris, was granted a significant number of stock options in 2017 (replacing subsequent annual grants) to drive similar behavior. Further, the Board
has continually reinforced to management its belief in driving long-term growth via annual goals that are set. The Board has encouraged management to make prudent, near-term investments—even at the expense of near-term earnings—to better drive
long-term growth and to enable Freshpet to satisfy our overarching goal of long-term growth.
In 2020, upon the conclusion of the performance period for the 2016 multi-year grants, the Company set new long-term goals and issued significant multi-year grants to the
current leadership and the leading candidates to be the next generation of leadership within the Company. In total, eight individuals (including two women and two leaders who identify as minorities) were included in the program. The program included
aggressive growth goals, and the Company believes that delivery of those goals would generate significant long-term value creation for the Company and its investors. For the NEOs, the equity grants are 75% performance-based and 25% time-based and
replace all annual grants for the next four years for those individuals. Our experience with the 2016 program and the results it delivered would indicate that this approach will focus and align management on the greatest long-term value creation.
Encouraging Teamwork
We strongly believe that teamwork among our workforce is essential to help us achieve our long-term growth potential. Thus, all bonus-eligible employees—including our
NEOs—are compensated using the same bonus formula. Each employee earns the same percentage of his or her target award each year, assuming there are no outstanding, individual performance issues. We believe that this creates an “all-for-one and
one-for-all” mentality within Freshpet that allows individual employees to make the right choices for the Company without regard to their impact on the achievement of less important functional or personal goals. Additionally, Mr. Cyr, at his own
recommendation, has chosen to forego salary increases and instead has reallocated those dollars within his leadership team to reinforce his commitment to our teams and to recognize the strong performance of his colleagues. For 2021, Mr. Cyr
specifically allocated his base salary increase to three leaders who were most responsible for protecting the safety of our team during the COVID pandemic.
EXECUTIVE COMPENSATION | 41
Incenting Sales Growth
We set what we believe to be aggressive net sales growth targets for management each year and our annual incentive plan formula places equal value—both weighting (50%) and
economic value ($ at risk)—on the achievement of those net sales growth targets versus profitability goals. This helps to ensure that our management seeks to drive sales growth in concert with profit growth.
Demanding Quality
We believe that no factor is more important to our long-term success than the quality of the products that we produce every day. As such, every manufacturing employee is
incentivized each quarter for the achievement of a set of goals, many of which are either directly or indirectly connected to the production of outstanding pet foods that meet our high-quality standards. The Board also regularly reviews the Company’s
performance against its quality targets.
HOW ELEMENTS OF OUR EXECUTIVE COMPENSATION PROGRAM ARE RELATED TO EACH OTHER
The various components of our compensation program are related but distinct and are designed to emphasize “pay for performance,” with a significant portion of total
compensation reflecting a risk aspect tied to our long-term and short-term financial and strategic goals. Our compensation philosophy is designed to foster entrepreneurship at all levels of the organization and is focused on employee value and
retention by making long-term, equity-based incentive opportunities a substantial component of our executive compensation. The appropriate level for each compensation component is based in part, but not exclusively, on internal equity and consistency,
experience, and responsibilities, and other relevant considerations such as rewarding extraordinary performance. The Compensation Committee has not adopted any formal or informal policies or guidelines for allocating compensation between long-term and
currently paid out compensation, between cash and non-cash compensation, or among different forms of non-cash compensation.
BUSINESS HIGHLIGHTS AND FISCAL 2020 OVERVIEW
While fiscal year 2020 has been uniquely challenging to businesses around the globe, including Freshpet, the Board and management team
focused on responding decisively to manage the business impacts of the pandemic while maintaining our philosophy of pay-for-performance in the midst of significant and unprecedented challenges. As a result, the Company delivered its strongest year of
net sales growth since 2015 despite the numerous challenges presented by the COVID pandemic.
EVENT/TOPIC
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IMPACT/RESPONSE
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COVID-19
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We experienced increased demand and lower media costs.
Despite lockdowns and labor challenges, the Company completed construction and commenced the operations of Freshpet Kitchens 2.0 at our Freshpet Kitchens in Bethlehem,
Pennsylvania, the Company’s largest completed capital project.
We strived to keep our employees safe to ensure their health and well-being and so that the Company could fulfill its responsibilities to customers and consumers who
depend on a steady supply of Freshpet.
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2020 Company Performance
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Net sales increased 30% for the year ended 2020, our highest annual growth for net sales in 5 years.
Household penetration of Freshpet increased 24%, and the buying rate of the brand increased 7%, in each case, compared to the prior fiscal year.
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EXECUTIVE COMPENSATION | 42
Pay Governance & Philosophy
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We have tied our executive compensation plans to strategic and financial objectives of Freshpet’s long-term strategy and shareholder value creation.
A significant portion of the pay for our NEOs is at-risk in both short- and long-term incentives, with a greater emphasis on payout conditions directly tied to achievement
of aggressive objectives of the Feed the Growth strategy. Please see “—Annual Incentive Awards” and —Long-Term Equity Compensation” for further details.
Our shareholders annually vote on Say-on-Pay, helping to show a proven track record of investor support of executive compensation plans. Please see “Proposals—Proposal
III” for more information.
We have a disciplined approach compared to historical CEO pay levels despite total shareholder outperformance compared to peer companies. Please see “Pay-For-Performance
Alignment” for further details.
We have implemented a pay governance framework that we believe promotes long-term shareholder interests. Please see “—Long-Term Equity Compensation” for further details.
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Long-Term Incentivization to
Maximize Shareholder Value
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Our stock options generally contain a time-based vesting feature
to promote executive retention and align the interests of our executive officers with our stockholders. Please see “—Long-Term Equity Compensation” for further details.
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2020 NEO Pay
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In 2020, we paid annual incentive awards to our NEOs totaling
approximately $1.3 million in the aggregate. In 2020, we also made multi-year grants of stock options under our 2014 Plan to our NEOs with a grant date fair value, assuming the highest
level of performance, of approximately $56 million in the aggregate, with 75% of those options being performance-based grants and 25% being time-based grants. Please see “—Executive
Compensation Tables—Summary Compensation Table” for further details.
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Why you should support the Say-on-Pay
Proposal
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In 2020, Freshpet adapted to the COVID-19 pandemic to achieve a record year of growth in net sales.
Our Compensation Committee’s long-term focused executive compensation plan directly incentivized management to deliver outstanding shareholder returns over both short- and
long-term time horizons. For example, our stock price improved from $10.15 on December 30, 2016 to $161.19 on July 2, 2021.
We are committed to incentive programs that motivate and retain a high-quality management team to focus on Freshpet’s strategy execution.
Our 2020 incentive plans are aligned with Company performance and achievement of strategic goals over the long-term.
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EXECUTIVE COMPENSATION | 43
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Freshpet’s strong pay-for-performance alignment as well as past Say-on-Pay support from shareholders demonstrate the discipline of the Company’s executive compensation
program that we believe is directly tied to shareholder value creation.
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PAY-FOR-PERFORMANCE ALIGNMENT
The following graph provides a three-year realizable pay-for-performance overview for our CEO, beginning with December 31, 2017 and ending
with December 31, 2020. As illustrated below, the Compensation Committee has maintained our CEO’s compensation below the median of the competitive market despite top total shareholder return (“TSR”) outperformance.
3-Year TSR Performance Percentile Rank(1)
(Annualized TSR with period ending 12/31/2020)
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(1)
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Please see “—Peer Group” for our list of peers and their corresponding exchange ticker symbols. Craft Brew Alliance, Inc. is excluded from the above chart as it was purchased by Anheuser-Busch InBev in late 2020.
|
The following graph compares our total common stock return with the total return for (i) the NASDAQ Composite Index (the “NASDAQ
Composite”) and (ii) the Russell 3000 Index (the “Russell 3000”) for the five year period ended December 31, 2020. The graph assumes that $100 was invested on December 31, 2015, in each of our common stock, the NASDAQ Composite and the Russell 3000.
EXECUTIVE COMPENSATION | 44
As shown above, Freshpet’s total common stock return for the 5-year period ended December 31, 2020 has significantly outpaced the total
return for the NASDAQ Composite and the Russell 3000 indices over the same period. The comparisons in the graph are not intended to forecast or be indicative of possible future performance of our common stock.
The Compensation Committee believes that its disciplined, long-term focused approach to compensation design incentivizes management to
achieve challenging objectives of Freshpet’s long-term strategy, which we believe directly correlates to the Company’s peer-leading shareholder value creation and rigorous pay-for-performance alignment. Please see “—Long-Term Equity Compensation” for
further details.
FISCAL 2019 SAY-ON-PAY VOTE RESULTS
In September 2020, at our last annual meeting of stockholders, our Say-on-Pay proposal was approved by approximately 99.5% of the votes
cast by our stockholders. The Compensation Committee and management are committed to continually strengthening our pay-for-performance correlation, as well as the overall design of our executive compensation program to support driving the right
behaviors for sustainable success, aligning with best practices in corporate governance and reflecting the interests of our stockholders and stakeholders. The Compensation Committee and management view the annual say-on-pay vote as an important
guidepost when considering stockholder perspective.
INDEPENDENT COMPENSATION CONSULTANT
In 2019 and 2020, the Compensation Committee retained Korn Ferry (“KF”) to advise it on compensation practices for our top nine officers, including each NEO. Specifically,
KF was engaged to review our compensation peer group and our compensation structure for our executive officers, develop and recommend targets for our executive compensation program by analyzing the compensation structures of our peer group companies
and market trends, and provide advice to the Compensation Committee on our executive compensation structure and program based on KF’s analysis. KF was also engaged to
EXECUTIVE COMPENSATION | 45
separately review the compensation arrangements applicable to employees at the director level and above, and the non-employee, independent directors of the Board. The
Compensation Committee, in consultation with KF, decided to continue in 2020 the executive compensation structure suggested by KF in 2018, as the Compensation Committee determined that the program remained effective in achieving our objectives of
retaining talented and experienced executives who are motivated to achieve or exceed our short-term and long-term corporate goals.
PEER GROUP
The Compensation Committee, in consultation with KF, considered several factors in selecting an industry-specific compensation peer group for our 2020 compensation program.
Considerations generally included the following:
|
·
|
revenue between 0.4 and 2.5 times Freshpet’s revenue;
|
|
·
|
companies in the food, beverage, and pet products industries;
|
|
·
|
companies with similar location and geographical reach;
|
|
·
|
companies with similar span, scope, and vertical integration;
|
|
·
|
companies experiencing similar rates of growth;
|
|
·
|
companies with similar operating complexity; and
|
|
·
|
other publicly traded companies.
|
Based on the foregoing considerations, the Compensation Committee determined that our compensation peer group for 2020 would consist of the following entities:
|
·
|
Beyond Meat, Inc. (BYND)
|
|
·
|
John B. Sanfilippo & Son, Inc. (JBSS)
|
|
·
|
PetIQ Inc. (PETQ)
|
|
|
|
|
|
|
|
|
|
|
·
|
Bridgford Foods Corporation (BRID)
|
|
·
|
Landec Corporation (LNDC)
|
|
·
|
PetMed Express, Inc. (PETS)
|
|
|
|
|
|
|
|
|
|
|
·
|
Craft Brew Alliance, Inc. (BREW)
|
|
·
|
Medifast, Inc. (MED)
|
|
·
|
The Simply Good Foods Company (SMPL)
|
|
|
|
|
|
|
|
|
|
|
·
|
Farmer Bros. Co. (FARM)
|
|
·
|
Natural Alternatives International, Inc. (NAII)
|
|
·
|
Tootsie Roll Industries, Inc. (TR)
|
|
|
|
|
|
|
|
|
|
|
·
|
Hostess Brands, Inc. (TWNK)
|
|
·
|
Nature’s Sunshine Products, Inc. (NATR)
|
|
|
|
We target the total compensation amount for each of our NEOs (based on position) to be competitive with similarly situated executives within our compensation peer group
(bearing in mind that we pay a significant portion of our compensation in the form of long-term, performance-based equity awards). We believe that these targets will help us to achieve an important goal of our executive compensation program, which is
to hire and retain talented and experienced executives who are motivated to achieve or exceed our short-term and long-term goals. We also believe that this compensation structure will help us to achieve our objectives of aligning our NEOs’ interests
with the interests of our stockholders and encouraging our successful NEOs to remain with us for the long term.
Consideration of Say-on-Pay Vote
We will hold an advisory stockholder vote on executive compensation (a “Say-on-Pay vote”) every year,
EXECUTIVE COMPENSATION | 46
with the most recent vote occurring in 2020, which is based on the preference expressed by our stockholders at our 2019 Annual Meeting and is planned to be held yearly
until the next “Say-on-Pay” frequency vote, which will be held at our 2025 Annual Meeting. In the 2020 Say-on-Pay vote, over 99% of votes cast approved, on an advisory basis, the compensation for our NEOs. The Compensation Committee viewed this vote as
supportive of our compensation program for our NEOs and did not take any specific actions with respect to 2020 compensation decisions for our NEOs as a result of the 2020 Say-on-Pay vote. The Compensation Committee intends to continue to consider the
results of future Say-on-Pay votes when making compensation decisions.
ELEMENTS OF EXECUTIVE COMPENSATION FOR 2020
We used three primary elements of compensation in our executive compensation program in 2020: base salary, annual incentive awards, and long-term equity compensation.
Annual incentive awards and long-term equity compensation represent the performance-based elements of our compensation program. The performance goals tied to these compensation elements are flexible in application and can be tailored to meet our
specific objectives. The amount of a specific individual’s annual incentive award for a performance period is intended to reflect that individual’s relative contribution to the Company in achieving or exceeding our annual goals, and the amount of an
individual’s long-term incentive compensation is intended to reflect the individual’s expected contribution to the Company over longer performance periods.
Base Salary
We pay our NEOs a base salary based on the experience, skills, knowledge, and responsibilities required of each executive officer. We believe base salaries are an important
element in our overall compensation program because base salaries provide a fixed element of compensation that reflects job responsibilities and value to us. None of our NEOs is currently party to any agreement or arrangement that provides for
automatic or scheduled increases in base salary. Base salaries for our NEOs are determined by the Compensation Committee.
The following table sets forth each NEO’s annual base salary rate for 2020:
NAME
|
ANNUAL BASE SALARY RATE
|
William B. Cyr
|
$600,000*
|
Scott Morris
|
$475,000
|
Heather Pomerantz
|
$400,000
|
Stephen L. Weise
|
$285,000
|
Cathal Walsh
|
$285,000**
|
Richard Kassar*
|
$320,000***
|
|
*
|
Mr. Cyr, at his own recommendation, has chosen to forego salary increases and instead has reallocated those dollars within his leadership team to reinforce his commitment to our teams and to recognize the strong performance of his colleagues.
For 2021, Mr. Cyr has specifically re-allocated his base salary increase to three leaders most responsible for keeping our team safe during COVID-19.
|
|
**
|
Does not include $62,727 in expat adjustment.
|
|
***
|
Mr. Kassar’s base salary was revised from $320,000 effective September 30, 2020 to $160,000, in relation to his new advisory role as Vice Chairman.
|
EXECUTIVE COMPENSATION | 47
Annual Incentive Awards
The Board assesses our management’s performance against both long-term and short-term goals—with a strong bias towards the achievement of long-term, strategic goals. These
goals are primarily linked to the “Feed the Growth” strategic plan that the Company adopted in late 2016, which focuses our Company and our management on re-accelerating the Company’s growth to take full advantage of the Company’s first-mover position
in the emerging fresh pet food market.
Awards under our annual incentive plan, which are calculated as a percentage of base salary, are designed to motivate our employees to achieve our annual goals based on our
strategic, financial, and operating performance objectives. For 2020, Messrs. Cyr, Morris, Kassar, Weise and Walsh and Ms. Pomerantz had the opportunity to earn annual target awards equal to 90%, 60%, 50%, 40%, 35% and 50%, respectively, of their base
salaries.
In 2020, the Company delivered its strongest year of net sales growth since 2015 despite the numerous challenges presented by the COVID pandemic. For the
year-ended 2020, the Company:
|
·
|
Increased net sales 30% as compared to the year-ended 2019, the Company’s strongest growth for net sales in 5 years;
|
|
·
|
Increased household penetration of Freshpet by 24% and increased the buying rate of the brand by 7%, in each case, compared to the prior fiscal year;
|
|
·
|
Completed construction and commenced the operations of Freshpet Kitchens 2.0 in Bethlehem, Pennsylvania, our largest capital project completed, despite lockdowns and labor challenges
presented by the pandemic;
|
|
·
|
Broke ground on a larger capacity expansion project in Ennis, Texas; and
|
|
·
|
Focused significant efforts on keeping employees safe to ensure the health and well-being of our employees and so that the Company could fulfill its responsibilities to customers and
consumers who depend on a steady supply of Freshpet.
|
EXECUTIVE COMPENSATION | 48
Our 2020 annual incentive program was based on the Company’s operating performance, which was calculated 50% based on net sales and 50% based on Adjusted EBITDA. For each
performance metric, the Company then establishes performance targets and minimum performance thresholds. Performance above and below each performance metric target results in increases or decreases in the bonuses earned based on pre-determined factors
that are based on the economic value added or lost by shareholders due to the over/under performance. To encourage teamwork, the Compensation Committee determines a single Company performance result as an aggregate percentage of the target Company
performance metrics. The resulting percentage is then multiplied against each eligible employee’s target bonus amount to determine their annual incentive compensation.
|
Weighting
|
Target
(millions)
|
Minimum
Threshold
|
Result
(millions)
|
Net Sales
|
50%
|
$315.0
|
$300.0
|
$320.4
|
Adjusted EBITDA before bonus accrual
|
50%
|
$54.2
|
$48.7
|
$51.6
|
As noted above, our 2020 targets were as follows: $315.0 million of net sales and $54.2 million of Adjusted EBITDA. On a pre-bonus basis, and after adjusting to recognize
an accounting change (as determined by the Board), the Company delivered as follows: $320.4 million of net sales and $51.6 million of Adjusted EBITDA. Adjusted EBITDA is not a financial measure prepared in accordance with U.S. generally accepted
accounting principles (“GAAP”). This metric is explained in more detail in the section “—Non-GAAP Financial Measures.”
The Compensation Committee also considered the potential impact of the COVID pandemic on the Company’s performance in determining the awards. The Company chose to add back
to its publicly reported Adjusted EBITDA those costs that were directly related to keeping our team safe and ensuring the continuity of our operations during the pandemic. These costs, totaling approximately $4.0 million, included supplemental pay to
hourly workers, pay to workers who were out for testing and quarantine, incremental costs for deep cleanings of our facilities, and health screenings for our employees.
Beyond those direct COVID-related costs, the Board believes that the business was both helped and hurt by the COVID crisis, and that it would be almost impossible to
ascertain the exact balance between the benefits and detriments. On the positive side, the Company experienced increased demand and lower media costs. On the negative side, the Company experienced reduced production (and lost sales) and delayed fridge
installations. Absent a clear method for accurately defining the appropriate balance between the benefits and detriments, the Compensation Committee chose to accept the actual results and chose to make no further COVID-related adjustments beyond the
addbacks described above.
For 2020, based on the foregoing, we paid annual incentive awards to each NEO as follows:
NAME
|
|
AMOUNT OF AWARD
|
% OF TARGET AWARDED
|
William B. Cyr
|
|
$
|
545,940
|
|
101.1%
|
Scott Morris
|
|
$
|
288,135
|
|
101.1%
|
Heather Pomerantz
|
|
$
|
196,106
|
|
101.1%
|
Stephen L. Weise
|
|
$
|
112,254
|
|
101.1%
|
Cathal Walsh
|
|
$
|
103,767
|
|
101.1%
|
Richard Kassar*
|
|
$
|
80,880
|
*
|
101.1%
|
|
*
|
Mr. Kassar’s target award was revised from $160,000 effective September 30, 2020 to $80,000, in relation to his new advisory role as Vice Chairman.
|
Long-Term Equity Compensation
Although we do not have a formal policy covering the grant of equity compensation awards to our executive officers, we believe that equity compensation provides our
executive officers with a strong link to our long-term performance, creates an ownership culture, and helps to align the interests of our
EXECUTIVE COMPENSATION | 49
executive officers and our stockholders. Further, we believe that stock options with a time-based vesting feature promote executive retention, as they incentivize our
executive officers to remain employed with us for the applicable vesting period. Accordingly, the Compensation Committee (or alternatively, the Board) periodically reviews the equity compensation of our NEOs and from time to time may grant awards as it
deems appropriate.
Our 2014 Omnibus Incentive Plan (the “2014 Plan”) was adopted by the Board in connection with our initial public offering, approved by our stockholders in October 2014 and
subsequently amended and restated in September 2016 to increase the number of shares available for issuance under the 2014 Plan. The 2014 Plan was again amended and restated in September 2020 to increase the number of shares available for issuance and
to add key provisions designed to protect stockholder interests, promote effective corporate governance and reflect the use of corporate governance best practices. Each of our NEOs is eligible to participate in our 2014 Plan. Our 2014 Plan allows for
awards of tax-qualified incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, other stock-based awards, and other cash-based awards to our directors, officers, employees, consultants, and advisors.
The Compensation Committee (or alternatively, the Board) determines the size and vesting terms of all awards made under our 2014 Plan and administers all other aspects of
the plan. In 2020, the Compensation Committee took into account a number of factors when making awards under our 2014 Plan, including, among others, the eligible employee’s expected contribution to the long-term success of the Company and information
gathered by the Compensation Committee regarding compensation paid to similarly situated executives at companies in our compensation peer group, as well as the amounts of outstanding stock options that each NEO held at such time.
The four most senior managers of the Company were granted significant, multi-year equity grants in 2016 with vesting directly tied to the achievement of long-term goals
established in concert with the new strategic plan. For our CEO, this grant replaced all subsequent grants during the performance period.
The year 2020 marked the culmination of the 2016 multi-year equity grant program, with vesting based on the Company’s performance through the end of 2020.
Since the adoption of the “Feed the Growth” strategy, Freshpet’s growth has accelerated, and the Company has delivered a compounded annual growth rate (“CAGR”) of 25% in
net sales over the performance period—and, for the year-ended 2020, had 30% growth in net sales compared to the prior period.
EXECUTIVE COMPENSATION | 50
Embedded in that strategy is the belief that increased scale would create both strategic and financial advantages for the Company.
Since the plan was adopted, the Company’s stock price has grown from approximately $9.00 to approximately $160.00 and the Company’s market capitalization has
grown from approximately $300 million to approximately $7 billion as of July 1, 2021. This performance has placed the Company in the top 1% in percentage growth of stock price of all companies listed on a national securities U.S. exchange over that
five-year period. Freshpet was recently added to the Russell 1000.
We believe this performance validates both our strategy and our belief that focusing our top management on the achievement of long-term goals is a highly effective way of
creating shareholder value. And with $162.01 as the price of our common stock as of market close on July 1, 2021, the approximate cost of the multi-year equity grants for our four most senior managers in 2016 (including any unexercised options) was
only 2.83% of the shareholder value created.
As a result, the Compensation Committee chose to use a similar approach to long-term compensation for the next four-year period under our refreshed “Feed the Growth”
strategy. That plan:
|
·
|
Includes “stretch” goals that are moderate-to-difficult to achieve that are in excess of the Company’s publicly stated targets;
|
|
·
|
Includes vesting that is 75% based on achievement of those goals;
|
|
·
|
Includes both the most senior management of the Company as well as members of the leadership team who represent key parts of our management succession plan; and
|
|
·
|
Replaces annual equity grants to those senior leaders in the organization for the next four years.
|
In 2020, we granted Messrs. Morris, Kassar, and Weise and Ms. Pomerantz stock options to purchase shares of our common stock under our 2014 Plan in amounts of 15,618,
8,220, 4,932, and 9,864, respectively, 50% of which are scheduled to vest and become exercisable in equal installments on each of the first three anniversaries of the grant date and 50% of which are scheduled to vest and become exercisable annually on
a sliding scale according to the achievement of Adjusted EBITDA performance-based conditions (and in each case subject to the NEO’s continued employment with us). In 2020, we also granted Mr. Walsh 59,932 stock options to purchase shares of our common
stock under our 2014 Plan, 39,932 of which vest and become exercisable in equal installments on each of the first three anniversaries of the grant date and 20,000 of which are scheduled to vest and become exercisable
EXECUTIVE COMPENSATION | 51
following the achievement of certain annual net sales goals in the 2023 calendar year (and in each case subject to Mr. Walsh’s continued employment with us). Mr. Cyr did
not receive an annual incentive equity grant in April 2020 as he had previously been granted a multi-year grant designed to replace all subsequent grants until the completion of that program at the end of 2020.
In December 2020, we made multi-year grants of stock options under our 2014 Plan to Messrs. Cyr, Morris, and Weise and Ms. Pomerantz in amounts of 273,439, 205,079,
136,719, and 136,719, respectively, as well as an additional grant of 306,250 stock options to three other senior officers under our 2014 Plan. These grants are designed to align the most senior management of the Company with the new, long-term goals
established by the Company in early 2020, and cover a four-year performance period ending December 31, 2024. The Compensation Committee will not make any additional grants to these individuals during this performance period. For the NEOs, the grants
are 75% performance-based and 25% time-based and the performance targets are in excess of the long-term goals communicated to investors. For competitive reasons, we are not disclosing the specific goals and instead they will be disclosed upon the
conclusion of the four-year performance period. For additional information, see “—Outstanding Equity Awards at Fiscal Year-End.”
Other Compensation
In addition to base salary and annual and long-term performance-based compensation, our NEOs are also eligible for the following benefits on a similar basis as our other
eligible employees:
|
·
|
health, dental, and vision insurance;
|
|
·
|
paid time off including vacation, personal holidays, and sick days;
|
|
·
|
life insurance and supplemental life insurance; and
|
|
·
|
short-term and long-term disability insurance.
|
Retirement Benefits
We maintain a 401(k) retirement savings plan (or 401(k) Plan) under which all of our employees (including our NEOs) are eligible to participate beginning on the first day
of the month after their employment with us begins. The 401(k) Plan includes a deferral feature under which a participant may elect to defer his or her compensation by up to the statutorily prescribed IRS limits. Currently, we also match participant
contributions to the 401(k) Plan up to 4% of the participant’s annual eligible earnings. We believe that providing a vehicle for retirement savings through our 401(k) Plan, and making matching contributions, adds to the overall desirability of our
executive compensation program and further incentivizes our NEOs in accordance with our compensation policies.
Other than the 401(k) Plan, we do not maintain any pension plans or non-qualified deferred compensation plans for the benefit of our employees or other service providers.
EMPLOYMENT AGREEMENTS WITH NEOS
The Company is party to an employment agreement with each of Messrs. Cyr, Morris, Kassar, Weise and Walsh. Each agreement provides for an initial term of one year and for
automatic one-year extensions beginning on the expiration of the initial term. Any automatic extension may be cancelled upon at least 90 days’ prior written notice from the respective NEO or the Company. Under their agreements, Messrs. Cyr, Morris,
Kassar, Weise and Walsh are entitled to receive minimum annual base salaries of $600,000, $400,000, $302,500, $312,394, and $270,000, respectively, subject to annual review by the Board. Further, Messrs. Cyr, Morris, Kassar, Weise and Walsh have the
opportunity to earn annual target bonuses equal to at least 75%, 60%, 50%, 40% and 35%, respectively, of their base salaries. Each executive is also entitled to participate in the Company’s employee and fringe benefit plans as may be in effect from
time to time on the same basis as other employees of the Company generally. The Company is also party to an offer letter with Ms. Pomerantz, which is described further below.
EXECUTIVE COMPENSATION | 52
Employee Agreement with William Cyr
The Company entered into an employment agreement with Mr. Cyr in July 2016. In the event of a termination of Mr. Cyr’s employment by the Company without “cause,” or by Mr.
Cyr for “good reason” (each as defined in his employment agreement), he is generally eligible to receive, subject to his timely execution and non-revocation of a general release of claims against the Company: (i) an amount equal to (A) one and one-half
times the sum of his (x) base salary and (y) target bonus for a period of 18 months, payable in equal monthly installments in accordance with the Company’s normal payroll practice; and (ii) Company payment of premiums (at active employee rates) for
continuation of group health coverage for him and his eligible dependents for 18 months. In the event of a termination of Mr. Cyr’s employment due to “permanent disability” (as defined in his employment agreement), he is generally eligible to receive,
subject to his timely execution and non-revocation of a general release of claims against the Company, Company payment of premiums (at active employee rates) for continuation of group health coverage for him and his eligible dependents for 18 months.
Mr. Cyr’s employment agreement contains a cutback provision for “parachute payments” under Internal Revenue Code (or Code) Section 280G, under which he may receive a
cutback of certain change-in-control payments in order to avoid any excise tax or loss of deduction under Code Section 280G, if the cutback would result (after factoring any potential excise taxes under Section 280G) in a larger after-tax payment to
Mr. Cyr.
Mr. Cyr’s employment agreement contains the following restrictive covenants: (i) a non-compete covenant that prohibits him from competing against the Company for 24 months
after employment; (ii) non-solicit covenants that prohibit him from actively soliciting the Company’s employees, customers, or suppliers during employment and for 24 months after employment; and (iii) a perpetual confidentiality covenant that protects
the Company’s proprietary information, developments, and other intellectual property.
Employee Agreements with Scott Morris, Richard Kassar, Stephen Weise, and Cathal Walsh
The Company entered into employment agreements with Messrs. Morris, Kassar and Walsh in October 2014, and with Mr. Weise in July 2015. Under the agreements, in the event of
a termination of the NEO by the Company without “cause,” by the NEO for “good reason,” or due to “permanent disability” (each as defined in the respective employment agreements), each NEO is generally eligible to receive, subject to his timely
execution and non-revocation of a general release of claims against the Company: (i) an amount equal to 12 months of the NEO’s base salary in accordance with the Company’s normal payroll practice; (ii) Company payment of premiums (at active employee
rates) for continuation of group health coverage for the NEO and his eligible dependents for 12 months; and (iii) only in the event of a termination by the Company without “cause” or by the NEO for “good reason” after June 30th during any year in which
the employment agreement is effective, a pro-rated annual incentive award based on actual performance for the year in which termination occurs.
Each of the employment agreements with Messrs. Morris, Kassar, Weise and Walsh contains a cutback provision for “parachute payments” under Code Section 280G, under which
the NEO may receive a cutback of certain change-in-control payments in order to avoid any excise tax or loss of deduction under Code Section 280G, if the cutback would result (after factoring any potential excise taxes under Section 280G) in a larger
after-tax payment to the NEO.
Each of the employment agreements with Messrs. Morris, Kassar, Weise and Walsh contains the following restrictive covenants: (i) a non-compete covenant that prohibits the
NEO from competing against the Company for 12 months after employment; (ii) non-solicit covenants that prohibit the NEO from actively soliciting the Company’s employees, customers, or suppliers during employment and for 12 months after employment; and
(iii) a perpetual confidentiality covenant that protects the Company’s proprietary information, developments, and other intellectual property.
Offer Letter with Heather Pomerantz
The Company entered into an offer letter with Ms. Pomerantz in December 2019. The offer letter required
EXECUTIVE COMPENSATION | 53
that Ms. Pomerantz enter into the Company’s confidentiality and no-hire agreement, which includes customary confidentiality and non-solicitation provisions that extend for
12 months after termination or resignation of employment with the Company.
Richard Kassar Transition of Employment
In connection with Mr. Kassar’s transition to Vice Chairman of the Company on September 30, 2020, Mr. Kassar’s compensation was reduced to 50% of his previous compensation
to reflect his reduced responsibilities with the Company. This reduction resulted in Mr. Kassar’s annual base salary being reduced to $160,000 and target annual incentive being reduced to $80,000. While he serves as Vice Chairman, Mr. Kassar will
continue to receive equity grants and will be eligible to participate in all Company benefit plans. Beginning on July 1, 2021, Mr. Kassar will become a consultant to the Company, and he will no longer be eligible to participate in Company benefit plans
(other than pursuant to COBRA).
NON-GAAP FINANCIAL MEASURES
In this proxy statement, we refer to Adjusted EBITDA, a non-GAAP financial measure. Adjusted EBITDA should be considered as a supplement to the GAAP reported measures,
should not be considered a replacement for, or superior to, any GAAP measure and may not be comparable to similarly named measures used by other companies.
Adjusted EBITDA is not prepared in accordance with U.S. GAAP. We define EBITDA as net income (loss) plus interest expense, income tax expense and depreciation and
amortization. Adjusted EBITDA represents EBITDA plus loss on equity method investment, non-cash share-based compensation, launch expenses, plant start-up expense, fees related to equity offerings of our common stock, implementation and other costs
associated with the implementation of an ERP system, loss on disposal of equipment and COVID-19 expenses.
We believe that Adjusted EBITDA provides an additional metric to evaluate our operations and, when considered with both our U.S. GAAP results and the reconciliation to the
closest comparable U.S. GAAP measure, provides a more complete understanding of our business than could be obtained absent this disclosure. We use Adjusted EBITDA, together with U.S. GAAP financial measures, to assess our historical and prospective
operating performance, to provide meaningful comparisons of operating performance across periods, to enhance our understanding of our operating performance and to compare our performance to that of our peers and competitors.
Adjusted EBITDA is also an important component of internal budgeting and setting management compensation.
Adjusted EBITDA is presented here because we believe it is useful to investors in assessing the operating performance of our business without the effect of non-cash items,
and other items as detailed below. Adjusted EBITDA should not be considered in isolation or as alternatives to net income (loss), income (loss) from operations or any other measure of financial performance calculated and prescribed in accordance with
U.S. GAAP. Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. Our non-GAAP financial measures, such as Adjusted EBITDA, may not be comparable to similarly titled measures in
other organizations because other organizations may not calculate non-GAAP financial measures in the same manner as we do.
Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by the expenses that are excluded from that term or
by unusual or non-recurring items. We recognize that non-GAAP financial measures have limitations as analytical financial measures. For example, Adjusted EBITDA does not reflect:
|
·
|
our capital expenditures or future requirements for capital expenditures;
|
|
·
|
the interest expense, or the cash requirements necessary to service interest expense or principal payments, associated with indebtedness;
|
EXECUTIVE COMPENSATION | 54
|
·
|
depreciation and amortization, which are non-cash charges, although the assets being depreciated and amortized will likely have to be replaced in the future, nor any cash requirements for such replacements; and
|
|
·
|
changes in or cash requirements for our working capital needs.
|
Additionally, Adjusted EBITDA excludes (i) non-cash share-based compensation expense, which is and will remain a key element of our overall long-term incentive compensation
package, and (ii) certain costs essential to our sales growth and strategy, including an allowance for marketing expenses for each new store added to our network and non-capitalizable freight costs associated with Freshpet Fridge replacements. Adjusted
EBITDA also excludes certain cash charges resulting from matters we consider not to be indicative of our ongoing operations.
The following table provides a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure presented in accordance with U.S. GAAP:
|
|
Twelve Months Ended December 31,
|
|
|
2020
|
|
|
2019
|
|
|
2018
|
|
|
2017
|
|
|
|
(in thousands)
|
Net loss
|
|
$
|
(3,188)
|
|
|
$
|
(1,383)
|
|
|
$
|
(5,361)
|
|
|
$
|
(4,262)
|
|
Depreciation and amortization
|
|
|
21,125
|
|
|
|
15,921
|
|
|
|
14,068
|
|
|
|
12,692
|
|
Interest expense
|
|
|
1,211
|
|
|
|
991
|
|
|
|
296
|
|
|
|
910
|
|
Income tax expense
|
|
|
65
|
|
|
|
144
|
|
|
|
77
|
|
|
|
75
|
|
EBITDA
|
|
$
|
19,213
|
|
|
$
|
15,673
|
|
|
$
|
9,080
|
|
|
$
|
9,414
|
|
Loss on disposal of equipment
|
|
|
1,805
|
|
|
|
787
|
|
|
|
142
|
|
|
|
104
|
|
Non-cash share-based compensation
|
|
|
10,925
|
|
|
|
7,834
|
|
|
|
6,808
|
|
|
|
4,438
|
|
Launch expense (a)
|
|
|
3,421
|
|
|
|
4,563
|
|
|
|
3,540
|
|
|
|
3,066
|
|
Plant start-up expenses (b)
|
|
|
5,962
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Warrant fair valuation (c)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
335
|
|
Equity offering fees (d)
|
|
|
58
|
|
|
|
302
|
|
|
|
362
|
|
|
|
—
|
|
Leadership transition expenses (e)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
63
|
|
Enterprise Resource Planning (f)
|
|
|
1,682
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Litigation expense (g)
|
|
|
—
|
|
|
|
—
|
|
|
|
348
|
|
|
|
145
|
|
COVID-19 expense (h)
|
|
|
3,854
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Adjusted EBITDA
|
|
$
|
46,920
|
|
|
$
|
29,159
|
|
|
$
|
20,280
|
|
|
$
|
17,565
|
|
|
(a)
|
Represents new store marketing allowance of $1,000 for each store added to our distribution network, as well as the non-capitalized freight costs associated with Freshpet Fridge replacements. The expense enhances the overall marketing spend to
support our growing distribution network.
|
|
(b)
|
Represents additional operating costs incurred in connection with the start-up of our new manufacturing lines as part of the Freshpet Kitchens expansion projects.
|
|
(c)
|
Represents the change of fair value for the outstanding common stock warrants. All outstanding warrants were converted to common stock in September 2017.
|
|
(d)
|
Represents fees associated with public offerings of our common stock.
|
|
(e)
|
Represents charges associated with our former Chief Executive Officer’s separation agreement as well as changes in estimates associated with leadership transition costs.
|
|
(f)
|
Represents implementation and other costs associated with the implementation of an ERP system.
|
|
(g)
|
Represents fees associated with the response to two securities lawsuits.
|
|
(h)
|
Represents COVID-19 expenses including (i) costs incurred to protect the health and safety of our employees during the COVID-19 pandemic, (ii) temporary increased compensation expense to ensure continued operations during the pandemic, and
(iii) costs to mitigate potential supply chain disruptions during the pandemic.
|
POLICY PROHIBITING HEDGING
We consider it improper and inappropriate for our directors, officers, and other employees at or above the Vice President level to engage in any transactions that hedge or
offset, or are designed to hedge or offset, any decrease in the value of our securities. As such, we have implemented a policy that prohibits our directors, officers, and other employees at or above the Vice President level from engaging in any
speculative or hedging transactions or any other transactions that are designed to offset any decrease in the value of our securities.
EXECUTIVE COMPENSATION | 55
ACCOUNTING CONSIDERATIONS
We consider the accounting impact reflected in our financial statements when establishing the amounts and forms of executive compensation. The forms of compensation that we
select are intended to be cost-efficient. We account for all awards settled in equity in accordance with FASB ASC Topic 718, under which the fair value of the grant, net of estimated forfeitures, is expensed over the service/vesting period based on the
number of options, shares, or units, as applicable, that vest. The estimated payout amount of performance awards, along with any changes in that estimate, is recognized over the performance period under “liability” accounting. Our ultimate expense for
performance awards will equal the value earned by/paid to the award recipients.
TAX CONSIDERATIONS; DEDUCTIBILITY OF COMPENSATION; TAX CUTS AND JOBS ACT
When setting executive compensation, we consider many factors, such as attracting and retaining executives and providing appropriate performance incentives. We also
consider the after-tax cost to the Company in establishing executive compensation programs, both individually and in the aggregate, but tax deductibility is not our sole consideration. Section 162(m) of the Code generally disallows a federal income tax
deduction to public companies for annual compensation over $1 million (per individual) paid to their chief executive officer, chief financial officer, and the next three most highly compensated executive officers (as well as certain other officers who
were covered employees in years after 2016). The 2017 Tax Act eliminated most of the exceptions from the $1 million deduction limit, except for certain arrangements in place as of November 2, 2017. As a result, most of the compensation payable to our
NEOs in excess of $1 million per person in a year will not be fully deductible.
COMPENSATION RISK ASSESSMENT
As a publicly traded company, we are subject to SEC rules regarding risk assessment. Those rules require a publicly traded company to determine whether any of its existing
incentive compensation plans, programs, or arrangements create risks that are reasonably likely to have a material adverse effect on the Company. We do not believe that our incentive compensation plans, programs, or arrangements create risks that are
reasonably likely to have a material adverse effect on Freshpet.
Compensation Committee Report
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth above. Based on this review and discussion, the
Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and our annual report.
THE COMPENSATION COMMITTEE OF FRESHPET, INC.,
|
|
|
|
Daryl G. Brewster (Chair)
|
Olu Beck
|
Leta D. Priest
|
|
|
|
EXECUTIVE COMPENSATION | 56
EXECUTIVE COMPENSATION | 57
Executive Compensation Tables
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation for 2020 for each NEO. Compensation information for 2019 and 2018 is presented for individuals who were also our NEOs in
those years.
Name and
Principal Position
|
Year
|
Salary ($)(1)
|
Options ($)(2)
|
Non-Equity
Incentive Plan
Compensation
($)(3)
|
All Other
Compensation
($)(4)
|
Total ($)
|
William B. Cyr(5)
Chief Executive Officer
|
2020
|
600,000
|
|
14,701,112
|
(6)
|
545,940
|
|
11,400
|
|
15,858,452
|
|
2019
|
600,000
|
|
—
|
|
555,750
|
|
11,200
|
|
1,166,950
|
|
2018
|
600,000
|
|
—
|
|
562,500
|
|
53,486
|
|
1,215,986
|
|
Scott Morris
President and Chief Operating Officer
|
2020
|
475,000
|
|
11,342,468
|
(7)
|
288,135
|
|
11,400
|
|
12,117,003
|
|
2019
|
415,000
|
|
—
|
|
311,220
|
|
11,200
|
|
737,420
|
|
2018
|
400,000
|
|
—
|
|
300,000
|
|
11,000
|
|
711,000
|
|
Heather Pomerantz
Chief Financial Officer
|
2020
|
400,000
|
|
7,972,163
|
(8)
|
196,106
|
|
9,846
|
|
8,578,115
|
|
Stephen L. Weise
EVP, Manufacturing & Supply Chain
|
2020
|
285,000
|
|
7,450,526
|
(9)
|
112,254
|
|
11,400
|
|
7,859,180
|
|
2019
|
279,375
|
|
140,568
|
|
139,555
|
|
11,200
|
|
570,698
|
|
2018
|
270,000
|
|
305,099
|
|
135,000
|
|
11,000
|
|
721,099
|
|
Cathal Walsh
SVP, Managing Director Europe
|
2020
|
285,000
|
|
3,204,674
|
|
103,767
|
|
—
|
|
3,593,441
|
|
2019
|
333,269
|
|
139,846
|
|
119,949
|
|
—
|
|
593,064
|
|
2018
|
312,394
|
|
132,835
|
|
117,031
|
|
—
|
|
562,260
|
|
Richard Kassar
Vice Chairman, formerly Chief Financial Officer
|
2020
|
282,000
|
(10)
|
166,656
|
|
80,880
|
|
11,400
|
|
540,936
|
|
2019
|
310,000
|
|
227,816
|
|
192,969
|
|
11,200
|
|
741,985
|
|
2018
|
302,500
|
|
508,489
|
|
189,063
|
|
11,000
|
|
1,011,052
|
|
|
(1)
|
Amounts reflect base salary earned during the year, including any amounts voluntarily deferred under our qualified 401(k) plan.
|
|
(2)
|
Amounts reflect the aggregate grant date fair value of options granted in the year computed in accordance with FASB ASC Topic 718 and are based on the valuation assumptions described in Note 10 to our consolidated financial statements included
in our Annual Report.
|
|
(3)
|
Amounts for 2020 reflect cash awards earned by our NEOs under the Company’s 2020 annual incentive plan. Please see “Annual Incentive Awards” in the CD&A above for further information about our 2020 annual incentive plan.
|
|
(4)
|
Amounts for 2020 reflect all other compensation for each of our NEOs, including a matching Company contribution under our 401(k) plan.
|
|
(5)
|
Mr. Cyr also serves as a member of the Board but does not receive any additional compensation for his service as a director.
|
|
(6)
|
Grant date fair value of awards granted to Mr. Cyr assuming the achievement of the highest level of performance conditions is $19,933,703.
|
|
(7)
|
Grant date fair value of awards granted to Mr. Morris assuming the achievement of the highest level of performance conditions is $15,266,905.
|
|
(8)
|
Grant date fair value of awards granted to Ms. Pomerantz assuming the achievement of the highest level of performance conditions is $10,588,446.
|
|
(9)
|
Grant date fair value of awards granted to Mr. Weise assuming the achievement of the highest level of performance conditions is $10,066,808.
|
|
(10)
|
Reflects a reduction in Mr. Kassar’s base salary effective September 30, 2020 in relation to his new advisory role as Vice Chairman. Please see “Richard Kassar Transition of Employment” in the CD&A above for further information.
|
EXECUTIVE COMPENSATION | 58
2020 GRANTS OF PLAN-BASED AWARDS
The following table sets forth certain information with respect to grants of plan-based awards to our NEOs during 2020. Please see “Annual Incentive Awards” in the CD&A
above for additional information about the non-equity incentive plan awards reflected in the table below. Please see the “Outstanding Equity Awards at Fiscal Year-End” table below for additional information about the vesting parameters that are
applicable to equity awards reflected in the table immediately below.
|
|
|
Estimated Future Payouts Under Non-
Equity Incentive Plan Awards
|
Estimated Future Payouts Under
Equity Incentive Plan Awards
|
|
|
|
Name
|
Award Type
|
Grant Date
|
Threshold
($)
|
Target ($)
|
Maximum ($)
|
Threshold (#)
|
Target (#)
|
Maximum (#)
|
All Other
Option
Awards:
Number of
Securities
Underlying
Options (#)
|
Exercise or
Base Price
of Option
Awards
(/Sh)
|
Grant Date
Fair Value
of Stock
and Option
Awards ($)
|
William B. Cyr
|
Annual Incentive
|
—
|
—
|
540,000
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Performance-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
82,032
|
205,079
|
205,079
|
—
|
142.79
|
14,950,259
|
|
Time-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
68,360
|
142.79
|
4,983,444
|
Scott Morris
|
Annual Incentive
|
—
|
—
|
285,000
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Performance-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
61,524
|
153,809
|
153,809
|
—
|
142.79
|
11,212,676
|
|
Time-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
51,270
|
142.79
|
3,737,583
|
|
Performance-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
1,302
|
7,809
|
7,809
|
—
|
63.87
|
79,161
|
|
Time-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
7,809
|
63.87
|
237,484
|
Heather Pomerantz
|
Annual Incentive
|
—
|
—
|
193,972
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Performance-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
41,016
|
102,539
|
102,539
|
—
|
142.79
|
7,475,093
|
|
Time-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
34,180
|
142.79
|
2,491,722
|
|
Performance-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
822
|
4,932
|
4,932
|
—
|
63.87
|
149,990
|
|
Time-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
4,932
|
63.87
|
49,997
|
|
Time-Vesting Options
|
1/12/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
15,000
|
60.70
|
421,644
|
Stephen L. Weise
|
Annual Incentive
|
—
|
—
|
114,000
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Performance-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
41,016
|
102,539
|
102,539
|
—
|
142.79
|
7,475,093
|
|
Time-Vesting Options
|
12/24/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
34,180
|
142.79
|
2,491,722
|
|
Performance-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
411
|
2,466
|
2,466
|
—
|
63.87
|
24,998
|
|
Time-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
2,466
|
63.87
|
74,995
|
Cathal Walsh
|
Annual Incentive
|
—
|
—
|
99,750
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Performance-Vesting Options
|
10/1/2020
|
—
|
—
|
—
|
20,000
|
20,000
|
20,000
|
—
|
111.65
|
1,110,794
|
|
Time-Vesting Options
|
10/1/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
35,000
|
111.65
|
1,943,890
|
|
Time-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
4,932
|
63.87
|
149,990
|
Richard Kassar
|
Annual Incentive
|
—
|
—
|
80,000 (1)
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
|
Performance-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
685
|
4,110
|
4,110
|
—
|
63.84
|
41,664
|
|
Time-Vesting Options
|
4/1/2020
|
—
|
—
|
—
|
—
|
—
|
—
|
4,110
|
63.87
|
124,992
|
|
(1)
|
Mr. Kassar’s base target annual incentive was revised from $120,000, in relation to his new advisory role as Vice Chairman. Please see “Richard Kassar Transition of Employment” in the CD&A above for further information.
|
EXECUTIVE COMPENSATION | 59
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth certain information with respect to outstanding equity awards at December 31, 2020. Vesting of awards reflected in the table is generally
subject to continuous service with the Company, with accelerated vesting in certain circumstances, as reflected in the footnotes to the table.
EXECUTIVE COMPENSATION | 60
Name
|
Grant Date
|
Number of
Securities
Underlying
Unexercised
Options
Exercisable (#)
|
Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#)
|
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise Price
($)
|
Option
Expiration Date
|
William B. Cyr
|
9/6/2016
|
1,000,000
|
|
—
|
|
—
|
|
10.23
|
|
9/6/2026
|
|
12/24/2020
|
—
|
|
68,360
|
(1)
|
205,079
|
(2)
|
142.79
|
|
12/24/2030
|
Scott Morris
|
9/27/2016
|
133,000
|
|
—
|
|
—
|
|
9.05
|
|
9/27/2026
|
|
4/3/2017
|
82,790
|
|
—
|
|
—
|
|
11.00
|
|
4/3/2027
|
|
4/1/2020
|
2,603
|
|
7,809
|
(3)
|
5,206
|
(4)
|
63.87
|
|
4/1/2030
|
|
12/24/2020
|
—
|
|
51,270
|
(1)
|
153,809
|
(2)
|
142.79
|
|
12/24/2030
|
Heather Pomerantz
|
1/12/2020
|
—
|
|
15,000
|
(3)
|
—
|
|
60.70
|
|
1/12/2030
|
|
4/1/2020
|
1,644
|
|
4,932
|
(3)
|
3,288
|
(4)
|
63.87
|
|
4/1/2030
|
|
12/24/2020
|
—
|
|
34,180
|
(1)
|
102,539
|
(2)
|
142.79
|
|
12/24/2030
|
Stephen L. Weise
|
5/10/2016
|
26,945
|
|
—
|
|
—
|
|
9.05
|
|
5/10/2026
|
|
9/27/2016
|
53,200
|
|
—
|
|
—
|
|
8.90
|
|
9/27/2026
|
|
4/3/2017
|
23,173
|
|
—
|
|
—
|
|
11.00
|
|
4/3/2027
|
|
3/30/2018
|
13,409
|
|
2,683
|
(5)
|
—
|
|
16.45
|
|
3/30/2028
|
|
4/1/2019
|
3,531
|
|
2,357
|
(6)
|
1,178
|
(4)
|
42.29
|
|
4/1/2029
|
|
4/1/2020
|
822
|
|
2,466
|
(3)
|
1,644
|
(4)
|
63.87
|
|
4/1/2030
|
|
12/24/2020
|
—
|
|
34,180
|
(1)
|
102,539
|
(2)
|
142.79
|
|
12/24/2030
|
Cathal Walsh
|
5/10/2016
|
20,463
|
|
—
|
|
—
|
|
9.05
|
|
5/10/2026
|
|
4/3/2017
|
23,173
|
|
—
|
|
—
|
|
11.00
|
|
4/3/2027
|
|
3/30/2018
|
10,726
|
|
5,366
|
(5)
|
—
|
|
16.45
|
|
3/30/2028
|
|
4/1/2019
|
2,273
|
|
4,547
|
(6)
|
—
|
|
42.29
|
|
4/1/2029
|
|
4/1/2020
|
—
|
|
4,932
|
(3)
|
—
|
|
63.87
|
|
4/1/2030
|
|
10/1/2020
|
—
|
|
35,000
|
(7)
|
|
|
111.65
|
|
10/1/2030
|
|
10/1/2020
|
—
|
|
—
|
|
20,000
|
(8)
|
—
|
|
10/1/2030
|
Richard Kassar
|
9/27/2016
|
79,800
|
|
—
|
|
—
|
|
8.90
|
|
9/27/2026
|
|
4/3/2017
|
18,940
|
|
—
|
|
—
|
|
11.00
|
|
4/3/2027
|
|
3/30/2018
|
9,723
|
|
—
|
|
4,471
|
(4)
|
16.45
|
|
3/30/2028
|
|
4/1/2019
|
5,722
|
|
3,817
|
(6)
|
1,908
|
(4)
|
42.29
|
|
4/1/2029
|
|
4/1/2020
|
1,370
|
|
4,110
|
(3)
|
2,740
|
(4)
|
63.87
|
|
4/1/2030
|
|
(1)
|
Scheduled to vest annually in approximately equal installments on the first four anniversaries of the grant date, subject to continued employment, with accelerated pro rata vesting upon a termination of employment by the Company without cause
or upon a resignation by the executive for good reason (as defined in the grant agreement) within two years after a change in control of the Company.
|
|
(2)
|
Eligible to vest on a sliding scale based upon the achievement of performance goals upon the conclusion of a four-year performance period, subject to continued employment, with (a) the opportunity to vest in a pro rata portion upon an
involuntary termination other than for cause, based on actual Company performance through the end of the performance period, and (b) the opportunity to vest in part or in full upon a termination of employment by the Company without cause or upon
a resignation by the executive for good reason (as defined in the grant agreement) within a two years after a change in control of the Company, based on actual Company performance through the change in control. For competitive reasons, these
performance goals shall not be disclosed until the end of the performance period.
|
|
(3)
|
Scheduled to vest annually in approximately equal installments on the first three anniversaries of the grant date, subject to continued employment, with accelerated vesting upon an involuntary termination within two years after a change in
control of the Company.
|
|
(4)
|
Eligible to vest on a sliding scale in equal annual installments based upon the achievement of EBITDA performance goals that the Compensation Committee considers moderate-to-difficult to achieve.
|
|
(5)
|
Scheduled to vest annually in approximately equal installments through 2021, subject to continued employment, with accelerated vesting upon an involuntary termination within two years after a change in control of the Company.
|
|
|
|
|
(6)
|
Scheduled to vest annually in approximately equal installments through 2022, subject to continued employment, with
|
EXECUTIVE COMPENSATION | 61
|
|
accelerated vesting upon an involuntary termination within two years after a change in control of the Company.
|
|
(7)
|
Scheduled to vest on the third anniversary of the grant date, with accelerated vesting if, in connection with a change of Control of the Company, the options are not assumed, repurchased by the Company, or terminated.
|
|
(8)
|
Eligible to vest based upon the achievement of a net sales goal for 2023 that the Compensation Committee considers moderate-to-difficult to achieve, with the opportunity to vest in full upon a change in control of the Company, based on actual
Company performance through the change in control.
|
EXECUTIVE COMPENSATION | 62
OPTIONS EXERCISES AND STOCK VESTED
The following table sets forth certain information regarding the exercise of stock options by our NEOs in 2020. Our NEOs did not have any stock awards that vested in 2020.
NAME
|
NUMBER OF SHARES ACQUIRED ON
EXERCISE (#)
|
VALUE REALIZED ON
EXERCISE ($)1
|
William B. Cyr
|
—
|
|
—
|
|
Scott Morris
|
24,163
|
|
2,091,135
|
|
Heather Pomerantz
|
—
|
|
—
|
|
Stephen L. Weise
|
10,000
|
|
810,677
|
|
Cathal Walsh
|
48,523
|
|
3,176,672
|
|
Richard Kassar
|
10,000
|
|
619,906
|
|
|
(1)
|
Amounts reflect the aggregate difference between the market price of our common stock at the exercise date and the exercise price of the stock options.
|
PENSION BENEFITS
Currently, the Company does not, and does not intend to, sponsor or adopt any pension plans (other than our 401(k) plan).
NONQUALIFIED DEFERRED COMPENSATION
Currently, the Company does not, and does not intend to, sponsor or adopt a nonqualified deferred compensation plan.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
The following table sets forth information regarding the severance payments and the change in control payments that could have been made to our NEOs had they experienced a
termination of employment or a change in control as of December 31, 2020. The fair market value of a share of our common stock on December 31, 2020 was $141.99. The table only includes information for employment termination and change in control events
that trigger vesting or severance-related payments, and assumes that each NEO will take all action necessary to receive the maximum available benefit, such as execution of a release of claims. Any amounts payable to the NEOs in the event of a change in
control of the Company may be subject to reduction under Code Sections 280G and 4999. The amounts below are estimates of the incremental amounts that could be received upon a change in control or termination of employment; the
EXECUTIVE COMPENSATION | 63
actual amount could be determined only at the time of any actual change in control or termination of employment.
Name
|
|
Cash and COBRA ($)(1)(2)
|
|
Equity ($)(3)
|
|
Total ($)
|
William B. Cyr
|
|
|
|
|
|
|
|
|
|
Termination due to permanent disability
|
|
48,510
|
|
|
—
|
|
|
48,510
|
|
Involuntary termination (4)
|
|
2,565,000
|
|
|
—
|
|
|
2,565,000
|
|
Change in control
|
|
—
|
|
|
—
|
|
|
—
|
|
Involuntary termination after change in control
|
|
2,565,000
|
(5)
|
|
—
|
|
|
2,565,000
|
|
Scott Morris
|
|
|
|
|
|
|
|
|
|
Termination due to permanent disability
|
|
507,340
|
|
|
—
|
|
|
507,340
|
|
Involuntary termination (4)
|
|
792,340
|
|
|
—
|
|
|
792,340
|
|
Change in control
|
|
—
|
|
|
—
|
|
|
—
|
|
Involuntary termination after change in control
|
|
792,340
|
(5)
|
|
610,039
|
|
|
1,402,379
|
|
Heather Pomerantz
|
|
|
|
|
|
|
|
|
|
Termination due to permanent disability
|
|
—
|
|
|
—
|
|
|
—
|
|
Involuntary termination (4)
|
|
—
|
|
|
—
|
|
|
—
|
|
Change in control
|
|
—
|
|
|
—
|
|
|
—
|
|
Involuntary termination after change in control
|
|
—
|
|
|
406,450
|
|
|
406,450
|
|
Stephen L. Weise
|
|
|
|
|
|
|
|
|
|
Termination due to permanent disability
|
|
308,144
|
|
|
—
|
|
|
308,144
|
|
Involuntary termination (4)
|
|
422,144
|
|
|
—
|
|
|
422,144
|
|
Change in control
|
|
—
|
|
|
—
|
|
|
—
|
|
Involuntary termination after change in control
|
|
422,144
|
(5)
|
|
764,461
|
|
|
1,186,605
|
|
Cathal Walsh
|
|
|
|
|
|
|
|
|
|
Termination due to permanent disability
|
|
317,340
|
(6)
|
|
—
|
|
|
317,340
|
|
Involuntary termination (4)
|
|
417,090
|
(6)
|
|
—
|
|
|
417,090
|
|
Change in control
|
|
—
|
|
|
1,668,700
|
(7)
|
|
1,668,700
|
|
Involuntary termination after change in control
|
|
417,090
|
(5)
|
|
2,574,171
|
(7)
|
|
2,991,261
|
|
Richard Kassar
|
|
|
|
|
|
|
|
|
|
Termination due to permanent disability
|
|
183,144
|
|
|
—
|
|
|
183,144
|
|
Involuntary termination (4)
|
|
263,144
|
|
|
—
|
|
|
263,144
|
|
Change in control
|
|
—
|
|
|
—
|
|
|
—
|
|
Involuntary termination after change in control
|
|
263,144
|
(5)
|
|
701,628
|
|
|
964,772
|
|
|
(1)
|
If an NEO’s employment (other than with respect to Ms. Pomerantz) is terminated by us without “cause,” due to the NEO’s “permanent disability,” or due to the NEO’s resignation with “good reason” (each as defined in each NEO’s respective
employment agreement), the NEO will be entitled to the cash severance benefits set forth in the NEO’s employment agreement described in the CD&A above under “Employment Agreements with NEOs.”
|
|
(2)
|
Assumes that (i) a qualifying termination occurs on December 31, 2020 and (ii) any bonus is earned at 100% of target.
|
|
(3)
|
See “Outstanding Equity Awards at Fiscal Year-End” above for an overview of the termination and change in control vesting terms of unvested options and stock awards as of December 31, 2020.
|
|
(4)
|
An “involuntary termination” means a termination by the Company without cause or by the NEO for good reason.
|
|
(5)
|
Amounts are the same as would be payable upon an involuntary termination not in connection with a change in control.
|
|
(6)
|
Does not include $62,727 in expat adjustment.
|
|
(7)
|
Assumes options are not assumed, repurchased by the Company, or terminated.
|
EXECUTIVE COMPENSATION | 64
CEO PAY RATIO
To determine the ratio of our CEO’s annual total compensation to the median annual total compensation of all
our employees excluding the CEO, we identified, as of December 31, 2020, the median employee using annual base salary. Due to the increase in the number of employees, we believe this measure reasonably reflects the typical annual compensation of our
employee population and we consistently applied this measure for all employees. We estimate that the median employee’s 2020 total compensation (as determined in the same manner as “Total” compensation in the Summary Compensation Table) was $61,582. Mr.
Cyr’s 2020 total compensation was $15,858,452, which was approximately 258:1 times that of the median of the annual total compensation of all our employees.
The annual total compensation of our CEO includes a multi-year grant, which will be realized over four years. Excluding portions of the multi-year grant that will be
realized in subsequent years, Mr. Cyr’s realized compensation for 2020 is $2,318,449, approximately 38:1 times that of the median of the annual total compensation of all of our employees.
DIRECTOR COMPENSATION
The full Board approved director compensation for 2020, based on the recommendation of the Compensation Committee with assistance from KF, and in accordance with the
Company’s non-employee director compensation program. For 2020, each non-employee member of the Board who served for the entire year received an annual cash retainer of $50,000 (or $80,000 for the Chair of the Board), paid quarterly. In 2020, each
Board member was also granted an award of time-vesting RSUs under our 2014 Plan, which vest on the first anniversary of the grant date, subject to continued service, with an upfront grant date value of $70,000 (or $90,000 for the Chair of the Board).
In addition, certain directors who served as Chairs of Board committees received additional cash payments for 2020 as follows: $15,000 for the Chair of the Company’s Audit Committee and $7,500 each for the Chairs of the Compensation Committee and the
Nominating and Corporate Governance Committee.
In 2018, our Nominating and Corporate Governance Committee recommended that the Board actively recruit new members to diversify the Board. To begin that process, the Board
conducted a study of Board compensation practices to ensure that our non-employee director compensation program was sufficient to attract the necessary talent to achieve its diversification goals. The compensation of the Board had not changed since the
Company went public in 2014. As such, in April 2018, we conducted a study of board compensation practices using the same peer group selected for the Company’s management. Based on the outcomes of that study and consistent with the compensation
principles that we apply to management, the Board revised the non-employee director compensation policy, effective with payments made in the fourth quarter of 2018. The changes increased the overall compensation (both cash and equity) to be between the
50th and 75th percentile of the peer group and to weight compensation for 2019 more towards equity than cash (approximately 60% equity, 40% cash). With these compensation changes, we were able to successfully recruit two new, qualified directors.
EXECUTIVE COMPENSATION | 65
EXECUTIVE COMPENSATION | 66
The following table shows compensation paid to each of our non-employee directors who served during 2020.
Name
|
Fees Earned or
Paid in Cash ($)
|
Stock Awards
($)(1)
|
Total ($)
|
Charles A. Norris (2)
|
80,000
|
|
90,000
|
|
170,000
|
|
J. David Basto
|
50,000
|
|
70,000
|
|
120,000
|
|
Olu Beck
|
50,000
|
|
70,000
|
|
120,000
|
|
Daryl G. Brewster (3)
|
57,500
|
|
70,000
|
|
127,500
|
|
Lawrence S. Coben (4)
|
55,625
|
|
70,000
|
|
125,625
|
|
Walter N. George III (5)
|
51,875
|
|
70,000
|
|
121,875
|
|
Jacki S. Kelley
|
50,000
|
|
70,000
|
|
120,000
|
|
Robert C. King (6)
|
37,500
|
|
70,000
|
|
107,500
|
|
Leta D. Priest
|
50,000
|
|
70,000
|
|
120,000
|
|
Craig D. Steeneck (7)
|
65,000
|
|
70,000
|
|
135,000
|
|
William B. Cyr (8)
|
—
|
|
—
|
|
—
|
|
|
(1)
|
Represents the aggregate grant date fair value of RSUs granted under our 2014 Plan without regard to forfeitures, computed in accordance with FASB ASC Topic 718. This amount does not reflect the actual economic value realized by the director.
The stock awards reflected in the table comprise all outstanding equity awards held by our non-employee directors at the end of 2020.
|
|
(2)
|
Charles A. Norris serves as Chair of the Board.
|
|
(3)
|
Daryl G. Brewster serves as Chair of the Compensation Committee.
|
|
(4)
|
Lawrence S. Coben served as Chair of the Nominating and Corporate Governance Committee for a portion of 2020.
|
|
(5)
|
Walter N. George III succeeded Mr. Coben as Chair of the Nominating and Corporate Governance Committee.
|
|
(6)
|
Robert C. King resigned from the Board in September 2020.
|
|
(7)
|
Craig D. Steeneck serves as the Chair of the Audit Committee.
|
|
(8)
|
William B. Cyr is an NEO and does not receive separate compensation for serving on the Board.
|
EXECUTIVE COMPENSATION | 67
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own more than 10 percent of the Company’s common stock
(collectively, “Reporting Persons”) to file with the SEC initial reports of ownership and changes in ownership of the Company’s common stock. Based solely on its review of the copies of such reports received or written representations from certain
Reporting Persons that no other reports were required, the Company believes that during its fiscal year ended December 31, 2020 all filing requirements applicable to the Reporting Persons were timely met except (i) Mr. Macchiaverna did not timely file
a Form 4 in connection with a grant of RSU on April 1, 2020; (ii) Mr. Walsh did not timely file a Form 4 in connection with a grant of options on June 8, 2020; and (iii) Mr. Brewster did not timely file a Form 4 in connection with a purchase of 500
shares of the Company’s common stock on November 27, 2015, in Mr. Brewster’s case due to administrative oversight and in Mr. Walsh’s and Mr. Macchiaverna’s case due to administrative delays.
EXECUTIVE COMPENSATION | 68
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
& MANAGEMENT & RELATED STOCKHOLDER MATTERS | 70
EQUITY COMPENSATION PLAN INFORMATION
The Company administers three current equity compensation plans: our 2014 Plan, a 2016 inducement stock option grant to Mr. Cyr and a 2020 inducement stock option grant to
Ms. Pomerantz. The Company also administers two legacy equity compensation plans: our 2010 Stock Option Plan (or 2010 plan) and our 2006 Stock Incentive Plan (or 2006 Plan). The following table provides information as of December 31, 2020 regarding
shares of our common stock that may be issued under the plans.
Plan Category
|
Number
of Securities to be
Issued Upon Exercise of
Outstanding Options,
Warrants, and Rights
(#)
(a)
|
Weighted-Average Exercise
Price of Outstanding Options,
Warrants, and Rights
($)
(b)(1)
|
Number of Securities Remaining
Available for Future Issuance Under
Equity Compensation Plans
(Excluding Securities Reflected in
Column (a))
(#)
(c)
|
Equity Compensation Plans Approved by Security Holders
|
2,631,697
|
(2)
|
78.15
|
908,433
|
Equity Compensation Plans Not Approved by Security Holders
|
1,015,000
|
(3)
|
10.98
|
—
|
Total
|
3,646,697
|
|
$59.45
|
908,433
|
|
|
|
|
|
|
(1)
|
RSUs reflected in column (a) are not reflected in these weighted-average exercise prices.
|
|
(2)
|
Includes 2,404,926 options outstanding under our 2014 Plan with a weighted average exercise price of $78.92; 193,185 RSUs outstanding under our 2014 Plan; and 26,130 options outstanding under our 2010 Plan with a weighted average exercise price
of $7.10.
|
|
(3)
|
Reflects a September 2016 inducement grant to our CEO, Mr. Cyr, and a January 2020 inducement grant to our CFO, Ms. Pomerantz, which grants are described below.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
& MANAGEMENT & RELATED STOCKHOLDER MATTERS | 71
2014 OMNIBUS PLAN
Our 2014 Plan was adopted by the Board in connection with our initial public offering and approved by our stockholders in October 2014. Our 2014 Plan allows for awards of
tax-qualified incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock, other stock-based awards, and other cash-based awards to our directors, officers, employees, consultants, and advisors. Upon the adoption of
our 2014 Plan, we discontinued our 2010 Plan, as described below.
INDUCEMENT GRANT TO MR. CYR
In September 2016, we granted our CEO, Mr. Cyr, an inducement grant of stock options in accordance with the Nasdaq Marketplace Rules. Mr. Cyr’s inducement grant consisted
of 500,000 performance-vesting options and 500,000 time-vesting options. See “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End” above for an overview of the vesting terms of these options.
INDUCEMENT GRANT TO MS. POMERANTZ
In January 2020, we granted our CFO, Ms. Pomerantz, an inducement grant of stock options in accordance with the Nasdaq Marketplace Rules. Ms. Pomerantz’s inducement grant
consisted of 15,000 time-vesting options. See “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End” above for an overview of the vesting terms of these options.
2010 STOCK OPTION PLAN
Our 2010 Plan was adopted by the Board and approved by our stockholders in December 2010. Our 2010 Plan allowed for the grant of tax-qualified incentive stock options and
nonstatutory stock options to our employees, officers, directors, consultants, and advisors. We discontinued our 2010 Plan in March 2014 and no new awards have been granted under the plan since that time. Any award outstanding under our 2010 Plan at
the time of its discontinuance will remain in effect until the award is exercised or has expired in accordance with its terms.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
& MANAGEMENT & RELATED STOCKHOLDER MATTERS | 72
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows information about the beneficial ownership of our common stock, as of June , 2021, by:
|
·
|
each person known by us to beneficially own 5% or more of our outstanding common stock;
|
|
·
|
each of our directors, director nominees and named executive officers; and
|
|
·
|
all of our directors and executive officers as a group.
|
The numbers listed below are based on shares of our common stock outstanding as of June , 2021. Unless otherwise indicated, the address of each individual
listed in this table is c/o Freshpet, Inc., 400 Plaza Drive, 1st Floor, Secaucus, New Jersey 07094.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
& MANAGEMENT & RELATED STOCKHOLDER MATTERS | 73
NAME AND ADDRESS OF BENEFICIAL OWNER1
|
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
|
PERCENT OF COMMON STOCK OUTSTANDING
|
PRINCIPAL STOCKHOLDERS:
|
|
|
Blackrock, Inc.2
|
4,075,905
|
%
|
The Vanguard Group, Inc.3
|
3,673,108
|
%
|
NAMED EXECUTIVE OFFICERS AND DIRECTORS:
|
|
|
William B. Cyr4
|
|
%
|
Charles A. Norris5
|
|
%
|
J. David Basto
|
|
*
|
Olu Beck
|
|
*
|
Daryl G. Brewster
|
|
*
|
Lawrence S. Coben, Ph.D.
|
|
*
|
Walter N. George, III
|
|
*
|
Richard Kassar6
|
|
*
|
Jacki S. Kelley
|
|
*
|
Scott Morris
|
|
*
|
Heather Pomerantz
|
|
*
|
Leta D. Priest
|
|
*
|
Craig D. Steeneck
|
|
*
|
Cathal Walsh
|
|
*
|
Stephen L. Weise
|
|
*
|
EXECUTIVE OFFICERS AND
DIRECTORS AS A GROUP (17 PERSONS)7
|
|
%
|
|
1
|
A “beneficial owner” of a security is determined in accordance with Rule 13d-3 under the Exchange Act and generally means any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, has
or shares:
|
|
•
|
voting power, which includes the power to vote, or to direct the voting of, such security; and/or
|
|
•
|
investment power, which includes the power to dispose, or to direct the disposition of, such security.
|
Unless otherwise indicated, each
person named in the table above has sole voting and investment power, or shares voting and investment power with his or her spouse (as applicable), with respect to all shares of stock listed as owned by that person. Shares issuable upon the exercise of
options exercisable on July , 2021 or within 60 days thereafter are considered outstanding and to be beneficially owned by the person holding such options for the purpose of computing such person’s beneficial ownership percentage but are not deemed
outstanding for the purposes of computing the beneficial ownership percentage of any other person.
|
2
|
Represents shares of common stock beneficially owned as of December 31, 2020, based on a Schedule 13G filed on January 8, 2021, by Blackrock, Inc. In such filing, Blackrock, Inc. lists its address as 55 East 52nd Street, New York, NY 10055.
|
|
3
|
Represents shares of common stock beneficially owned as of December 31, 2020, based on a Schedule 13G filed on February 10, 2021, by The Vanguard Group, Inc. In such filing, The Vanguard Group, Inc., lists its address as 100 Vanguard Blvd.,
Malvern, PA 19355.
|
|
4
|
Includes 75,532 shares of common stock and 742,500 options to purchase common stock held by Mr. Cyr directly, 55,000 options to purchase shares of common stock held by his spouse, 107,500 options to purchase shares of common stock held by
Irrevocable Spousal Trust for Linda W. Cyr, and 95,000 options to purchase shares of common stock held by Linda W. Cyr 2020 Irrevocable Trust for Descendant.
|
|
5
|
Includes 25,173 shares of common stock held by Mr. Norris directly, 503,568 shares of common stock held by Norris Trust Ltd 6/18/02, 30,000 shares of common stock held by the Charles Norris 2020 Annuity Trust and 30,000 shares held by the
Margaret Norris 2020 Annuity Trust.
|
|
6
|
Includes 151,188 shares of common stock held directly by Mr. Kassar and 50,000 shares of common stock held by Richard Kassar 2020 GRAT.
|
|
7
|
Excludes Mr. Kassar, as he is no longer an executive officer of the Company.
|
Certain Relationships and Related Party
Transactions
CERTAIN RELATIONSHIPS & RELATED PARTY TRANSACTIONS | 75
PROCEDURES FOR APPROVAL OF RELATED PARTY TRANSACTIONS
There are no related person transactions that require reporting under SEC rules. Our Board of Directors has adopted a written related party transaction policy, which sets
forth the policies and procedures for the review and approval or ratification of related party transactions. This policy is administered by our Audit Committee. These policies provide that, in determining whether or not to recommend the initial
approval or ratification of a related party transaction, the relevant facts and circumstances available shall be considered, including, among other factors it deems appropriate, whether the interested transaction is on terms no less favorable than
terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction.
AUDIT COMMITTEE REPORT | 77
This report of the Audit Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any filing under the Securities Act or under the Exchange Act except to the extent that the Company specifically incorporates this information by reference, and will not otherwise
be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
Our management is responsible for the preparation, presentation and integrity of our financial statements for the appropriateness of the accounting principles and reporting
policies that we use, and for establishing and maintaining adequate internal control over financial reporting. KPMG LLP, our independent registered public accounting firm for 2020, was responsible for performing an independent audit of our consolidated
financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 (the “Annual Report”), and expressing an opinion on the conformity of those financial statements with generally accepted accounting principles.
The Audit Committee has reviewed and discussed with management our audited financial statements included in the annual report. In addition, the Audit Committee discussed
with KPMG LLP those matters required to be discussed under applicable standards of the Public Company Accounting Oversight Board (the “PCAOB”). Additionally, KPMG LLP provided to the Audit Committee the written disclosures and the letter required by
applicable requirements of the PCAOB regarding KPMG LLP’s communications with the Audit Committee concerning independence. The Audit Committee also discussed with KPMG LLP its independence from the Company.
Based upon the review and discussions described above, the Audit Committee recommended to the Board that the audited financial statements be included in the Annual Report
for filing with the SEC.
The Audit Committee
Craig D. Steeneck (chair)
J. David Basto
Olu Beck
PROPOSALS | 79
OVERVIEW OF PROPOSALS
This Proxy Statement contains four proposals requiring stockholder action:
PROPOSAL I
requests the re-election of two directors to the Board;
PROPOSAL II
requests the ratification of KPMG LLP as the Company’s independent registered public accounting firm for 2021;
PROPOSAL III
requests the approval of, by advisory vote, the compensation of the Company’s named executive officers; and
PROPOSAL IV
requests the approval of an amendment to our Certificate of Incorporation to declassify the Board of Directors as set forth herein.
Each proposal is discussed in more detail below.
PROPOSALS | 80
PROPOSAL I: RE-ELECTION OF DIRECTORS
The Board has nominated Mr. Brewster and Ms. Kelley to be elected to serve until the third succeeding annual meeting of stockholders after their re-election and until their
respective successors are duly elected and qualified.
At the Annual Meeting, proxies cannot be voted for a greater number of individuals than the two nominees named in this Proxy Statement. Holders of proxies solicited by this
Proxy Statement will vote the proxies received by them as directed on the proxy card or, if no direction is made, for the re-election of the Board’s two nominees. If any nominee is unable or declines to serve as a director at the time of the Annual
Meeting, the proxy holders may vote for any nominee designated by the present Board to fill the vacancy.
The Board of Directors recommends a vote “FOR”
the re-election of directors Brewster and Kelley.
PROPOSAL II: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee has re-appointed KPMG LLP as the Company’s independent registered public accounting firm and as auditors of the Company’s consolidated financial
statements for 2021. KPMG LLP has served as the Company’s independent registered public accounting firm since 2013.
At the Annual Meeting, the stockholders are being asked to ratify the appointment of KPMG LLP as the Company’s independent registered public accounting firm for 2021. In
the event of a negative vote on such ratification, the Audit Committee will reconsider its selection. Even if this appointment is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public
accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its stockholders. Representatives of KPMG LLP are expected to attend the Annual Meeting, will have an
opportunity to make a statement if they desire to do so, and will be available to respond to questions.
Fees for Services Rendered by Independent Registered Public Accounting Firm
The following table presents fees for professional services rendered by our current independent registered public accounting firm for the fiscal years ended December 31,
2020 and 2019.
|
2020
|
2019
|
Audit Fees1
|
$858,500
|
$725,000
|
Audit-Related Fees2
|
$170,000
|
$96,500
|
Tax Fees
|
–
|
–
|
All Other Fees3
|
$1,897
|
$1,780
|
Total
|
$1,030,397
|
$823,280
|
(1)
|
Audit Fees: These fees include fees related to the audit of the Company’s annual financial statements and review of the Company’s quarterly financial statements as well as services that are normally provided by independent registered public
accounting firms in connection with statutory and regulatory filings or engagements.
|
(2)
|
Audit-Related Fees: Audit-related fees are for assurance and related services including, among others, due diligence services and consultation concerning financial accounting and reporting standards. Additionally, fees include services in
connection with the Company’s filing of a registration statement and preparation of a comfort letter in connection with a secondary offering.
|
(3)
|
KPMG’s Accounting Research Online (“ARO”) Subscription.
|
Pre-Approval Policies and Procedures
The Audit Committee’s policy is to pre-approve all audit and permissible non-audit services provided by the independent auditor and to not engage the independent auditor to
perform the non-audit services proscribed by law or regulation. The Audit Committee may adopt pre-approval policies and procedures detailed as to particular services and delegate pre-approval authority to a member of the Audit
PROPOSALS | 81
Committee. The decisions of any Audit Committee member to whom pre-approval authority is delegated must be presented to the full Audit Committee at its next scheduled
meeting.
All services provided by KPMG, LLP subsequent to the formation of the Audit Committee in November 2014 were pre-approved by the Audit Committee.
The Board of Directors recommends a vote “FOR” Proposal Two.
PROPOSAL III: ADVISORY VOTE ON NAMED EXECUTIVE OFFICER COMPENSATION
As required by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and Schedule 14A of the Exchange Act, we are providing our
stockholders with the opportunity to approve, by advisory vote, the compensation of our named executive officers, as disclosed in this Proxy Statement in accordance with the rules of the SEC.
This proposal, commonly referred to as the “Say-on-Pay” vote, gives our stockholders the opportunity to express their views on the compensation of our named executive
officers. This vote is not intended to address any specific item of compensation or any specific named executive officer, but rather the overall compensation of all of our named executive officers and our executive compensation philosophy, objectives
and program, as described in this Proxy Statement. Accordingly, we ask our stockholders to approve the compensation of our named executive officers, as disclosed pursuant to Item 402 of Regulation S-K of the Exchange Act in the section entitled
“Executive Compensation” of this Proxy Statement, including the Compensation Discussion and Analysis, the compensation tables and the related narrative disclosure.
“RESOLVED, that the stockholders of Freshpet, Inc. (the “Company”) approve, on a non-binding advisory basis, the compensation of the Company’s named executive officers, as
disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”
As an advisory vote, the result will not be binding on the Board or the Compensation Committee. The Say-on-Pay vote will, however, provide us with important feedback from
our stockholders about our executive compensation philosophy, objectives and program. The Board and the Compensation Committee value the opinions of our stockholders and expect to take into account the outcome of the vote when considering future
executive compensation decisions and when evaluating the Company’s executive compensation program.
The Board of Directors recommends a vote “FOR” the approval, on a non-binding
advisory basis, of the compensation of the Company’s named executive officers,
as disclosed in this Proxy Statement.
PROPOSAL IV: APPROVAL OF AN AMENDMENT TO OUR CERTIFICATE OF INCORPORATION TO DECLASSIFY OUR BOARD OF DIRECTORS
After careful consideration, the Board of Directors, upon the recommendation of the Nominating and Corporate Governance Committee, unanimously approved, and recommends that
the Company’s stockholders approve, amendments to Freshpet’s Certificate of Incorporation to fully declassify the Board of Directors by the 2025 annual meeting of stockholders, as described below and set forth on Appendix A.
The Declassification Proposal
Under our current Certificate of Incorporation, the Board is divided into three classes (Class I, Class II and Class III), with members of each class holding office for
staggered three-year terms. We are asking stockholders to adopt the Declassification Proposal in order to fully declassify the Board, and provide for the annual election of directors, by our 2025 annual meeting of stockholders. The Board has approved
the Declassification Proposal and declared it to be advisable and in the best interests of the Company and its stockholders, and recommends that the stockholders adopt the Declassification Proposal.
PROPOSALS | 82
If the Declassification Proposal is approved by the stockholders at this meeting, the annual election of directors would be phased in over a three-year period beginning at
the 2023 annual meeting of stockholders. The Declassification Proposal does not shorten the term of any director currently in office or elected before the 2023 annual meeting. Assuming the Declassification Proposal is adopted, at the 2023 annual
meeting, Class III directors will be elected to hold office for a term expiring at the 2025 annual meeting; and at the 2024 annual meeting, Class I directors will be elected to hold office for a term expiring at the 2025 annual meeting. Beginning with
the 2025 annual meeting of stockholders, the entire Board would stand for election annually for one-year terms. If a vacancy occurs prior to the Board being fully declassified, the new Board member would be appointed to fill the remaining portion of
the term of the person who has departed the Board.
In addition, because the Board is currently classified, our directors can be removed only for cause, whereas Delaware law provides that directors serving on boards of
directors that are not classified may be removed with or without cause. The amendment to the Certificate of Incorporation for the Declassification Proposal would permit stockholders to remove directors with or without cause following our 2025 annual
meeting of stockholders. Directors with a term expiring on or before the 2025 annual meeting would continue to be removable only for cause.
Background of Proposal
In deciding to approve the Declassification Proposal and to recommend that the stockholders vote to adopt the Declassification Proposal, the Board, upon the recommendation
of the Nominating and Corporate Governance Committee, considered the advantages and disadvantages of maintaining a classified board structure. A classified Board can benefit stockholders by: promoting continuity and stability of the Board; encouraging
directors to take a long-term perspective; reducing the Company’s vulnerability to coercive takeover tactics and special interest groups that may not be acting in the best interests of all stockholders; and enhancing the independence of non-management
directors by providing them with a longer term of office and insulating them against pressure from special interest groups. While the Board continues to believe that these are important benefits, the Board has also considered that a classified board
structure may have the effect of reducing the accountability of directors to stockholders, and recognizes the benefit of providing stockholders an annual opportunity to express their satisfaction or dissatisfaction with the actions of the Board. In
addition, the Board believes it is important for it to maintain stockholder confidence by demonstrating that it is responsive and accountable to stockholders and committed to strong corporate governance. Therefore, following careful consideration of
the matter, and due to its belief that a declassified board structure provides more accountability to stockholders and promotes stronger corporate governance, the Board has adopted resolutions to approve the Declassification Proposal, to declare the
Declassification Proposal advisable and in the best interests of the Company and its stockholders, and to submit the Declassification Proposal to its stockholders for consideration.
The Board believes that beginning the declassification in 2023 rather than immediately is appropriate based on the Company’s circumstances. The Company has been
transitioning to a new executive leadership team with changes to the CEO and CFO, in 2016 and 2020. In 2020, the Company also launched “Feed the Growth—5 by 2025,” the Company’s new five-year strategic plan. Furthermore, since 2018, the Board has
appointed three new Board members. Considering all of these factors and the Board’s confidence in the Company’s long-term strategic plans, the Board believes that the appropriate time to begin declassification would be after the completion of a cycle
of director elections for the full Board in 2023 to provide the Company with time to focus on a successful transition and successful execution of its strategic plan with stable Board leadership.
Vote Required and Effectiveness
The affirmative vote of a majority of the voting power of all of the shares of our common stock outstanding as of the Record Date is required to adopt the Declassification
Proposal. If our stockholders adopt the Declassification Proposal, the Board has authorized our officers to file an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware (the “Restated Certificate”), and
the Restated Certificate would become effective upon acceptance by the Delaware Secretary of
PROPOSALS | 83
State. We intend to make that filing as soon as practicable if the Declassification Proposal is adopted at the Annual Meeting. However, even if our stockholders adopt the
Declassification Proposal, the Board may abandon the Declassification Proposal without further stockholder action prior to the effectiveness of the filing of the Restated Certificate with the Delaware Secretary of State and, if abandoned, the Restated
Certificate will not become effective. If the Board abandons the Declassification Proposal, we will publicly disclose that fact and the reason for its determination.
Text of the Proposal
The proposed changes to the Certificate of Incorporation, with deletions indicated by strike-outs and additions indicated by double underlining, is contained in Appendix A
to this Proxy Statement. If the Declassification Proposal is approved, the language in Appendix A will be incorporated into a full amendment and restatement of the Certificate of Incorporation, which as indicated above, the Board intends to file as
soon as practicable if the Declassification Proposal is adopted at the Annual Meeting. The description of the Declassification Proposal set forth above is qualified in its entirety by reference to the text attached as Appendix A to this Proxy
Statement.
The Board recommends that you vote “FOR” the approval of an amendment to our Certificate of
Incorporation to declassify the Board of Directors as set forth above.
PROPOSALS | 84
OTHER MATTERS | 86
HOUSEHOLDING
Any stockholder, including both stockholders of record and beneficial holders who own their shares through a broker, bank or other nominee, who share an address with
another holder of our common stock are only being sent one set of proxy materials, unless such holders have provided contrary instructions. We will deliver promptly upon written or oral request a separate copy of these materials to any holder at a
shared address to which a single copy of the proxy materials was delivered. If you wish to opt out of householding and receive a separate copy of these materials in the future or if you are receiving multiple copies and would like to receive a single
copy, you may do so at any time prior to thirty (30) days before the mailing of the proxy materials (which typically will be in August of each year) by notifying us in writing at: Corporate Secretary, Freshpet, Inc., 400 Plaza Drive, 1st Floor,
Secaucus, NJ 07094, Attention: Corporate Secretary or by telephone at 201-520-4000.
OTHER MATTERS
The Company knows of no other matters to be submitted to the stockholders at the Annual Meeting, other than the proposals referred to in this Proxy Statement. If any other
matters properly come before the stockholders at the Annual Meeting, it is the intention of the persons named on the proxy to vote the shares represented thereby on such matters in accordance with their best judgment.
Dated: August , 2021
By Order of the Board of Directors,
Charles A. Norris
Chairman of the Board
APPENDIX A | A-1
DECLASSIFICATION PROPOSAL AMENDMENT (REDLINE)
ARTICLE VI
SECTION 2. CLASSIFICATION OF DIRECTORS.
(a) Subject to any rights of the
holders of any series of Preferred Stock to elect additional directors under specified circumstances, until the Corporation’s annual meeting
of stockholders in 2025, the directors of the Corporation shall be divided into three classes as nearly equal in size as is practicable, designated Class I, Class II and Class III. The term of office
of the initial Class I directors shall expire at the first annual meeting of stockholders occurring after this Certificate of Incorporation becomesoriginally became effective in accordance with the Delaware General Corporation Law (the “Effective Time”); the term of office of the
initial Class II directors shall expire at the second annual meeting of stockholders occurring after the Effective Time; and the term of office of the initial Class III directors shall expire at the third annual meeting of the stockholders occurring
after the Effective Time. The initial Class I directors shall be Christopher B. Harned, Daryl G. Brewster and Robert King, the initial Class II directors shall be J. David Basto, Walter N. George, Craig Steeneck and Lawrence S. Coben and the initial
Class III directors shall be Charles A. Norris, Jonathan S. Marlow and Richard Thompson. The address of each of the initial Class I, Class II, and Class III directors is c/o Freshpet, Inc., 400 Plaza Drive, 1st Floor, Secaucus, New Jersey 07094,
Attention: Corporate Secretary. Commencing with the first annual meeting of stockholders following the Effective Time and ending with (and
including) the Corporation’s annual meeting of stockholders in 2022, each director elected to the class of directors whose term expires at such annual meeting shall be elected to hold office until the
third succeeding annual meeting and until his or her successor shall have been duly elected and qualified, or until his or her earlier death,
resignation, removal, disqualification or retirement. Directors elected to the respective classes of directors whose terms expire at the Corporation’s annual meeting of stockholders in each of 2023 and 2024 shall be elected to hold office until the
Corporation’s annual meeting of stockholders in 2025 and until his or her successor shall have been duly elected and qualified, or until his or her earlier death, resignation, removal, disqualification
or retirement. If the number of directors divided into classes as set forth herein is hereafter changed, any newly created directorship(s), or any decrease in the number of directors shall be so apportioned among the classes as to make all classes as
nearly equal in number as practicable. Elections of directors need not be by written ballot unless the bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”)
shall so provide. The Board of Directors is authorized to assign members of the Board of Directors already in office to their respective classes at the Effective Time.
(b) Commencing
with
the annual meeting of stockholders held in 2025, subject to any rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, all of the directors of the Corporation shall be elected at the
annual meeting of stockholders, with each director so elected to hold office until the
APPENDIX A | A-2
Corporation’s annual meeting of stockholders in the following year
and until his or her successor shall have been duly elected and qualified, or until his or her earlier death, resignation, removal, disqualification or retirement.
(c) Elections
of
directors need not be by written ballot unless the bylaws of the Corporation (as the same may be amended and/or restated from time to time, the “Bylaws”) shall so provide.
SECTION 4. REMOVAL OF DIRECTORS.
(a) Subject
Prior to the Corporation’s annual meeting of stockholders in 2025, subject to the
rights of the holders of any series of Preferred Stock, any director may be removed from office at any time but only with cause, at a meeting called for that purpose, by the affirmative vote of the holders of at least a majority of the voting power
of all outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class.
(b) From and after the Corporation’s annual meeting of
stockholders in 2025, subject to the rights of the holders of any series of Preferred Stock, any director may be removed from office at any time, with or without cause, at a meeting called for that purpose, by the affirmative vote of the holders of
at least a majority of the voting power of all outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class.
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