Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On December 15, 2020, the Company issued a press release announcing that effective December 16, 2020, Herschel Segal resigned as interim Chief Executive Officer, but will remain Chairman of the Board of Directors. During the period commencing on December 16, 2020, Mr. Segal will serve as the Company’s Strategic Advisor, as set forth in an Employment Agreement effective as of December 16, 2020. Mr. Segal’s base annual compensation will be CAD $150,000. He will be eligible for approved business expenses and special discretionary travel and expense reimbursements. The foregoing description of the Mr. Segal’s Employment Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the agreement, a copy of which is attached hereto as Exhibit 10.1, and hereby incorporated by reference herein.
The Company also announced that Frank Zitella was appointed as President effective as of December 16, 2020. Mr. Zitella, 55, joined the Company on December 10, 2018 as Chief Financial Officer and Corporate Secretary and on April 26, 2019 assumed responsibilities as the Company’s Chief Operating Officer. Mr. Zitella has close to 30 years of finance, strategic planning and corporate tax planning experience and served for over eleven years as the Vice President and Chief Financial Officer of DST Health Solutions, LLC, a subsidiary of SS&C Technologies Holdings, Inc. (Nasdaq: SSNC), and for over eight years as the Chief Financial Officer of International Financial Data Services, a joint venture between State Street Bank and SS&C Technologies Holdings, Inc. Mr. Zitella received his Bachelor of Commerce degree from Concordia University, Montreal, Québec and his Graduate Diploma in Public Accountancy from McGill University, Montreal, Québec. Mr. Zitella is a resident of Québec, Canada.
The Company also announced that Sarah Segal was appointed as Chief Executive Officer effective as of December 16, 2020. Ms. Segal, 36, served as the President and Head of Product Development and Tea Department for the Company from December 2010 to September 2012. Since May 2013, Ms. Segal has served as the CEO of the retail company Oink Oink Candy Inc. “SQUISH Candies”), based in Montreal, Québec. In 2017, Ms. Segal was appointed VP, Product Development & Innovation at the Company and August 21, 2018 was appointed Chief Brand Officer. Ms. Segal received a Bachelor of Arts degree in Environmental Health from McGill University, Montreal, Québec, and an M.Sc. degree in Water Science, Policy and Management from Oxford University, Oxford, England. Ms. Segal is a resident of Québec, Canada. Ms. Segal is the daughter of Herschel Segal, Chairman of the Board of Directors of the Company and the owner of Rainy Day Investments Ltd. (“RDI”), which controls approximately 46% of the outstanding shares of the Company.
During the second quarter of 2019, the Company entered into a secured loan agreement, as amended September 13, 2019 with Squish Candies, as borrower, and RDI, as guarantor pursuant to which the Company agreed to lend to Squish an up to $2.0 million. During the first quarter of 2020, the loan was fully repaid.
The Company has entered into new Executive Employment Agreements (each an “Executive Employment Agreement”) with Mr. Zitella and Ms. Segal (each an “Executive”) dated December 16, 2020, pursuant to which Mr. Zitella’s base annual compensation will be CAD $425,000 and Ms. Segal’s base annual compensation will be CAD $450,000 (each, that Executive’s “Base Salary”). Each Executive will receive a CAD $7,200 annual transportation allowance. Commencing with the Company’s fiscal year ending January 2022, each Executive will be eligible for a short-term cash incentive bonus of up to 100% of the Executive’s Base Salary, non-cash incentive bonus of up to 50% of the Executive’s Base Salary, and will be eligible for a long-term incentive award of up to 30% of the Executive’s Base Salary pursuant to the Company’s Long-Term Incentive Award Program. Short-term incentive bonuses are based on achieving performance objectives established by the Human Resources and Compensation Committee of the Board of Directors (“HRCC”) in respect of each applicable fiscal year. The structure of long-term incentive awards are determined by the HRCC, and to the extent awards include performance measures, such performance measures will be determined by the HRCC in consultation with the Executive. Each Executive’s Executive Employment Agreement is also be subject to the following terms and any term not defined in the below description shall have the meaning ascribed to in the respective Executive’s Employment Agreement:
Termination for Cause
Upon termination for Cause the Executive shall only be entitled to (i) earned but unpaid Base Salary, (ii) unpaid business expense reimbursement and (iii) an amount payable for accrued but unused vacation days.
Voluntary Resignation
Upon voluntary resignation, the Executive is entitled to payment of the (i) earned but unpaid Base Salary, (ii) unpaid business expense reimbursement, (iii) an amount payable for accrued but unused vacation days,(iv) the payment of any awarded but unpaid bonus for the year preceding the year during which the resignation occurs and (v) is also eligible for a prorated portion of any bonus that becomes payable for that fiscal year, as determined by the HRCC at the end of that fiscal year (collectively, the “Termination Payments”).
Termination Without Cause
If the Executive’s employment is terminated by the Company without Cause or the Executive resigns for Good Reason, the Executive will be entitled to the Termination Payments. In addition, any stock options, RSUs, stock units or other long-term incentive grants held by the Executive will be deemed vested on the date of termination. If the Executive remains a full-time employee of the Company for a period of six months following a Change of Control of the Company, the Executive shall be entitled to the Termination Payments and acceleration applicable in the event of termination without Cause or for Good Reason.
In addition, if Ms. Segal has less than eighteen complete years of service with the Company as of the date the termination notice is given, payment of an indemnity in lieu of notice equal to eighteen months of her Base Salary will be awarded, plus an amount equal to the performance based bonus at Target. If Ms. Segal has more than eighteen complete years of service with the Company as of the date the termination notice is given, payment of an indemnity in lieu of notice equal to twenty-fourth months of her Base Salary will be awarded, plus an amount equal to two times the performance based bonus at Target.
In addition, if Mr. Zitella has less than ten complete years of service with the Company as of the date the termination notice is given, payment of an indemnity in lieu of notice equal to twelve months of his Base Salary will be awarded, plus an amount equal to the performance based bonus at Target. if Mr. Zitella has more than ten complete years and less than eighteen years of service with the Company as of the date the termination notice is given, payment of an indemnity in lieu of notice equal eighteen months of his Base Salary will be awarded, plus an amount equal to one and a half times the performance based bonus at Target. If Mr. Zitella has more than eighteen complete years of service with the Company as of the date the termination notice is given, payment of an indemnity in lieu of notice equal to twenty-fourth months of his Base Salary will be awarded, plus an amount equal to two times the performance based bonus at Target.
The foregoing descriptions of each of Executive’s Employment Agreement does not purport to be complete and each description is qualified in its entirety by reference to the full text of the respective Executive Employment Agreement, copies of which are attached hereto as Exhibits 10.2 and 10.3 and hereby incorporated by reference herein.