Freshpet, Inc. (NASDAQ: FRPT) (“Freshpet” or the “Company”) today
delivered the following letter to the legal counsel of the JANA
Partners in response to JANA’s letter, dated May 25, 2023, to
Freshpet’s legal counsel regarding actions taken by the Freshpet
Board of Directors. The full text of the letter follows:
May 30, 2023
By Email and FedEx
Michael E. SwartzSchulte Roth & Zabel LLP919 3rd AvenueNew
York, New York 10022
Dear Michael:
We write on behalf of our client, Freshpet, Inc.
(the “Company”), in response to your letter of May
25, 2023 on behalf of JANA Strategic Investments Benchmark Master
Fund, L.P. (“JANA”). Your letter contains several
erroneous and unfounded claims about the Company’s board of
directors (the “Board”), the composition of the
Board’s classes, and the date of the Company’s 2023 Annual Meeting
of Stockholders. Furthermore, you have omitted information critical
to understanding the intent and effect of the Board’s actions
addressed by your letter.
Contrary to your assertions, the Board has acted
in the best interests of all stockholders, in accordance with the
directors’ fiduciary duties, and in compliance with the
requirements of the Company’s Sixth Amended and Restated
Certificate of Incorporation (the “Charter”).
Regarding the two primary claims made by your letter:
- You claim that Charles Norris’s
upcoming retirement at the 2023 Annual Meeting is “pretext” and
intended to reduce the seats subject to election at the 2023 Annual
Meeting. In fact, Mr. Norris is not standing for re-election
pursuant to the retirement policy adopted by the Board in June
2021.
- You claim that the Board appointed
David Biegger to serve as a director in Class I, rather than Class
III, to avoid the need to subject him to an election contest at the
2023 Annual Meeting. In fact, the provisions of the Charter
required Mr. Biegger’s appointment to Class I.
You also reference the date of the 2023 Annual
Meeting. Holding the meeting in July is the opposite of
entrenchment and did not disadvantage JANA’s nomination efforts,
which were first publicly disclosed on September 22, 2022, prior to
last year’s annual meeting.
Charles Norris is not seeking
re-election due to the Board’s age-based retirement policy adopted
in June 2021
The announcement of Mr. Norris’s upcoming
retirement should not have come as a surprise to JANA. The
retirement is the result of an age-based retirement policy adopted
and publicly disclosed years ago.
On August 14, 2020, the Company publicly
announced a five-year corporate governance enhancement program. The
following slide describing these governance enhancements appeared
on page 7 of the Company’s 2020 proxy statement, which is available
on the Company’s investor relations website. Among other changes,
the plan contemplated the adoption of a “director retirement
policy” in 2021.
On June 8, 2021, the Company adopted a director
retirement policy pursuant to which non-employee directors who
attained the age of 75 would not be nominated for re-election or
reappointment to the Board. The director retirement policy was
discussed on pages 11 and 12 of the Company’s 2021 and 2022 proxy
statements, respectively, which are likewise available on the
Company’s investor relations website.
As disclosed in the Company’s 2021 proxy
statement, Mr. Norris was then 75, and no other director was more
than 64. It should have been clear to JANA that the retirement
policy would result in Mr. Norris not standing for re-election at
the 2023 Annual Meeting. Indeed, as I am confident your client is
aware, the prominent event-driven equity research firm Gordon
Haskett Research Advisors commented on the retirement policy and
its implications in a March 16, 2023 note to subscribers.1
In light of the foregoing, we are skeptical that
JANA ever believed that Mr. Norris would stand for re-election at
the 2023 Annual Meeting, nor therefore believed that four director
seats would be up for election.
The Charter required that David Biegger
join the Board as a Class I director
On May 17, 2023, the Company announced Mr.
Biegger’s appointment as a Class I director. The terms of the
Charter mandated Mr. Biegger’s designation as a Class I director.
Your assertions that the Board should have done otherwise are
meritless.
As you acknowledge, the Charter requires that
directors “be divided into three classes as nearly equal in size as
is practicable, designated Class I, Class II and Class III.”2 The
Charter further provides that “[if] the number of directors divided
into classes as set forth herein is hereafter changed, any newly
created directorship(s) . . . shall be so apportioned among the
classes as to make all classes as nearly equal in number as
practicable.”3
Put simply, if the Board had done what JANA now
seemingly demands (appointing Mr. Biegger into Class III), the
Board would have violated the Charter. This is demonstrated by the
below table that sets forth the classification of the Board before
and after Mr. Biegger’s appointment compared to the classification
that JANA apparently prefers.
|
Class III(2023 Term)4 |
Class I(2024 Term) |
Class II(2025 Term) |
Immediately prior to Mr. Biegger’s appointment |
4 |
25 |
4 |
Following Mr. Biegger’s appointment |
4 |
3 |
4 |
If the Board had appointed Mr. Biegger to Class III as JANA
seemingly demands |
5 |
2 |
4 |
As this table plainly illustrates, the
classification seemingly sought by JANA would have violated the
aforementioned “as nearly equal in size as is practicable” Charter
requirements. By contrast, appointing Mr. Biegger as a Class I
director complied with the requirements of the Charter and resulted
in class sizes that are no fewer than three and no greater than
four.
In short, the Board complied with the Charter.
The classification sought by JANA would not have complied.
Holding the 2023 Annual Meeting in July
is the opposite of entrenchment and did not disadvantage
JANA
Finally, you suggest in passing that holding the
meeting in July, rather than in October, serves to entrench the
Board. To the contrary, the change results in the terms of the
incumbent directors up for re-election at the 2023 Annual Meeting
being shortened by two months, and provides an earlier opportunity
for the election of JANA’s slate of directors in lieu of incumbent
directors. This is the opposite of entrenchment.
Further, nothing about this timing disadvantages
JANA’s nomination efforts. On September 22, 2022, JANA disclosed
that it had entered into nomination agreements with three
individuals to stand for election at the 2023 Annual Meeting. In
fact, JANA’s announcement of its potential nominees occurred eleven
days prior to last year’s Annual Meeting. On December 9, 2022, JANA
announced it had entered into a nomination agreement with a fourth
candidate. Thus, including Scott Ostfeld (a JANA principal), JANA
had five pre-arranged nominees from which to select at the time the
Company announced the date of the 2023 Annual Meeting. Indeed, on
May 25, 2023, JANA delivered a nomination notice to the Company
with a slate of directors chosen from among these individuals.
Thus, the notion that JANA’s nomination efforts were disadvantaged
does not comport with the facts.
* * * *
The Board has acted in the best interests of all
stockholders, in accordance with the directors’ fiduciary duties,
and in compliance with the Charter’s requirements. Should JANA
decide to challenge these actions or otherwise continue to make
ill-informed and baseless accusations, the Company intends to
vigorously defend itself and its record.
If you would like to discuss further, please
feel free to contact me privately. This might be preferable to the
public exchange of letters on these matters that was initiated by
JANA’s press release of your prior letter.
The Company expressly reserves, and does not
waive, any and all rights, claims and defenses with respect to this
matter.
Sincerely,
/s/ Derek Zaba
Derek ZabaPartnerSidley Austin LLP
Cc:
Jessica Wood, Sidley Austin LLPAndrew Stern, Sidley Austin
LLPCharlotte Newell, Sidley Austin LLPA. Thompson Bayliss, Abrams
& Bayliss
About FreshpetFreshpet is the leading fresh
food for dogs and cats. Since its conception in 2006, Freshpet has
been on a mission to transform the lives of dogs and cats through
the power of fresh, nutritious food, while pushing the boundaries
of sustainable practices. The recipes are developed by Veterinarian
Nutritionists and made with natural whole ingredients, like fresh
meats, vegetables and fruits, which are cooked in small batches at
lower temperatures to preserve their natural goodness.
Sustainably-made in Bethlehem, PA and their new Kitchens in Ennis
TX, Freshpet foods and treats are kept refrigerated until they
arrive at Freshpet fridges in your local market, or are delivered
direct to your door.
Freshpet is available in a growing number of mass, grocery,
natural food, club, and pet specialty retailers across the United
States, Canada and Europe, as well as online in the U.S. for direct
delivery and through its partnership with Petco. From the care
taken in partnering with farmers whose values align with theirs, to
how each recipe is made, Freshpet’s commitment to integrity,
transparency and social responsibility is a point of pride.
Connect with
Freshpet:https://www.facebook.com/Freshpet
https://twitter.com/Freshpet http://instagram.com/Freshpet
http://pinterest.com/Freshpet https://www.tiktok.com/@freshpet
Forward-Looking
StatementsCertain of the Company’s statements included
herein constitute “forward-looking” statements, including
statements related to the future impact of the novel coronavirus,
the future progress of our Freshpet Kitchens expansion, future
governance changes, our growth potential and plans, our projected
or targeted operating results, our ability to meet our
sustainability targets, goals, and commitments, including due to
the impact of climate change, our expectations regarding our future
operating and economic environment, and our long-term capacity
planning. These statements are based on management’s current
opinions, expectations, beliefs, plans, objectives, assumptions or
projections regarding future events or future results. These
forward-looking statements are only predictions, not historical
fact, and involve certain risks and uncertainties, as well as
assumptions. Actual results, levels of activity, performance,
achievements and events could differ materially from those stated,
anticipated or implied by such forward-looking statements. While
Freshpet believes that its assumptions are reasonable, it is very
difficult to predict the impact of known factors, and, of course,
it is impossible to anticipate all factors that could affect actual
results. There are risks and uncertainties that could cause actual
results to differ materially from forward-looking statements made
herein, including potential costs associated with shareholder
activism. For a detailed discussion of risks, uncertainties and
other factors that could cause our actual results to differ
materially from those anticipated or expressed in any
forward-looking statements, see the section entitled “Risk Factors”
in the Company’s latest annual report on Form 10-K and its
quarterly reports on Form 10-Q filed with the SEC. Such
forward-looking statements are made only as of the date they are
made. Freshpet undertakes no obligation to publicly update or
revise any forward-looking statement because of new information,
future events or otherwise, except as otherwise required by law. If
we do update one or more forward-looking statements, no inference
should be made that we will make additional updates with respect to
those or other forward-looking statements.
Important Additional Information and
Where to Find ItThis communication is being made in
connection with the Company’s upcoming 2023 annual meeting of
shareholders (the “Annual Meeting”). The Company intends to file a
proxy statement (the “Proxy Statement”), an accompanying WHITE
proxy card and other relevant documents with the Securities and
Exchange Commission (the “SEC”) in connection with the Annual
Meeting. BEFORE MAKING ANY VOTING DECISION, SECURITY HOLDERS ARE
URGED TO READ THE PROXY STATEMENT ANY OTHER RELEVANT DOCUMENTS
FILED OR TO BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE ANNUAL
MEETING. Security holders may obtain free copies of the Definitive
Proxy Statement and other documents containing important
information about Freshpet once such documents are filed with the
SEC, free of charge through the website maintained by the SEC at
www.sec.gov. Copies of the documents will also be available free of
charge on the “Investors” section of Freshpet’s website at
www.investors.freshpet.com.
Participants in the
SolicitationFreshpet, members of our Board of Directors
and certain of our executive officers are “participants” in the
solicitation of proxies from the Company’s shareholders in
connection with the Annual Meeting. Information regarding the
Company’s Board of Directors and executive officers and their
respective interests in the Company, by security holdings or
otherwise, is set forth in the Company’s Annual Report on Form 10-K
for the fiscal year ended December 31, 2022, filed with the SEC on
February 28, 2023, as amended on May 1, 2023. To the extent such
ownership interests have changed since such filings, such changes
have been reflected on Statements of Change in Ownership on Form 4
filed with the SEC, and will be reflected in the Proxy Statement
for the 2023 Annual Meeting when filed with the SEC. Security
holders may obtain free copies of these documents as described
above.
Investor ContactICRJeff
Sonnek646-277-1263Jeff.sonnek@icrinc.com
Media
Contact:Freshpet@edelmansmithfield.com
________________________1 Gordon Haskett wrote: “…Chairman
Charlie Norris is 76 and the board adopted a retirement policy in
2021 that says non-employee directors will not be re-nominated for
re-election after reaching age 75. It so happens Norris is up for
re-election this year, so this policy falls squarely on him, and it
makes him something of a lame duck.”2 Article VI, Section 2(a) of
the Charter.3 Id.4 The number of directors in Class III in this
table does not give effect to the retirement of Mr. Norris at the
2023 Annual Meeting.5 Class I had been composed of two directors
since Robert C. King resigned from the Board on September 24, 2020,
and there were no director appointments between Mr. King’s
resignation and the appointment of Mr. Biegger.
A photo accompanying this announcement is available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/a9330299-d5bf-47d7-9df8-18bf7e7f293c
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