Freshpet Responds to JANA Partners’ Letter Regarding Freshpet Board Actions
$FRPT
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.
1
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.
1Gordon 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.”
2Article VI, Section 2(a) of the Charter.
3Id.
2
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
4The number of directors in Class III in this table does not give effect to the retirement of Mr. Norris at the 2023 Annual Meeting.
5Class 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.
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.
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3
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 Zaba Partner Sidley Austin LLP
Source:
https://www.sec.gov/Archives/edgar/data/1611647/000121390023044108/ea179506-defa14a_freshpet.htm