Freshpet adopts new executive severance plan

In a recent filing with the Securities and Exchange Commission, Freshpet, Inc. (NASDAQ:FRPT) disclosed the adoption of a new severance plan for key executives, designed to standardize severance arrangements and protect the company's intellectual property. The Freshpet, Inc. Key Executive Severance Plan was established by the Compensation and Human Resources Committee of the Board of Directors on Tuesday, August 27, 2024.

The plan, which replaces existing employment agreements, aims to retain key officers and employees by providing severance benefits in the event of termination without cause or for good reason, subject to non-competition and non-solicitation agreements. The plan includes provisions for cash severance payments, COBRA health insurance reimbursement, and outplacement services.

Severance benefits under the plan vary depending on the circumstances of termination. If termination occurs without cause or for good reason not related to a change in control, executives will receive cash severance equal to one and one-half times their base salary and target bonus over 18 months, COBRA reimbursement for the same period, and a $25,000 lump sum for outplacement services.

In the event of a termination connected to a change in control, the severance benefits increase. For example, certain executives would receive a lump sum equal to two and one-half times their base salary and target bonus, while CEO William B. Cyr would receive a lump sum equal to six times his monthly base salary and target bonus, plus additional payments for 18 months.

The plan also outlines treatment for equity awards and contains provisions to comply with Section 409A of the Internal Revenue Code, as well as measures to prevent payments from constituting an excess parachute payment under Section 280G of the Code.

The adoption of this plan is part of Freshpet's strategy to ensure stability within its leadership team and comes with restrictive covenants including noncompetition and confidentiality obligations. The Committee retains the right to amend or terminate the plan, with certain restrictions especially around the time of a change in control.

In other recent news, Freshpet demonstrated strong growth in the second quarter with a 28% increase in sales, leading the company to raise its sales guidance to a 26% increase or more. This performance was attributed to volume growth and effective media strategies.

Analysts from TD Cowen and DA Davidson have expressed positive outlooks for Freshpet, emphasizing the company's solid market position and potential for sustained growth.

TD Cowen maintains a Buy rating on Freshpet shares, predicting the company will achieve a 19% EBITDA margin by 2027. Meanwhile, DA Davidson has increased Freshpet's price target from $157.00 to $175.00, maintaining a Buy rating. Baird also increased its price target on Freshpet to $140, maintaining an Outperform rating.

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