Landec Corporation
LANDEC CORP \CA\ (Form: DEF 14A, Received: 08/24/2017 06:04:39)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

SCHEDULE 14A

(Rule 14a-101)

 

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

Filed by the Registrant  

Filed by a Party other than the Registrant 

 

Check the appropriate box:

Preliminary Proxy Statement

Confidential, For Use of the Commission Only (as permitted by 14a-6(e)(2))

Definitive Proxy Statement

Definitive Additional Materials

Soliciting Material Pursuant To §240.14a-12

 

LANDEC CORPORATION


(Name of Registrant as Specified in Its Charter)


 

(Name of Person(s) Filing Proxy Statement if other than the Registrant)

 

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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 19, 2017

 

 

TO THE STOCKHOLDERS OF LANDEC CORPORATION:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Landec Corporation (the “ Company ”) will be held on Thursday, October 19, 2017, at 12: 00 p.m. local time, at Lifecore Biomedical, 3515 Lyman Blvd, Chaska, MN 55318 for the following purposes:

 

 

1.

To elect five directors to serve for a term expiring at the Annual Meeting of Stockholders held in the second year following the year of their election and until their successors are duly elected and qualified;

 

 

2.

To ratify the appointment of Ernst & Young LLP as the Company ’s independent registered public accounting firm for the fiscal year ending May 27, 2018;

 

 

3.

To approve an amendment to the 2013 Stock Incentive Plan that increases the number of shares of Common Stock available for issuance by 1,000,000 shares .

 

 

4.

To approve a non-binding advisory proposal on executive compensation;

     
 

5.

To provide an advisory vote to determine whether a non-binding advisory vote on executive compensation should occur every one, two or three years, and

 

 

6 .

To transact such other business as may properly come before the meeting or any postponement or adjournment(s) thereof.

 

The foregoing items of business are more fully described in the Proxy Statement accompanying this Notice.

 

Only stockholders of record at the clos e of business on August 21, 2017, are entitled to notice of and to vote at the meeting and any adjournment(s) thereof.

 

All stockholders are cor dially invited to attend the meeting in person. However, to assure your representation at the meeting, you are urged to mark, sign, date , and return the enclosed proxy card as promptly as possible in the postage-prepaid envelope enclosed for that purpose or vote your shares by telephone or via the Internet.

 

 

BY ORDER OF THE BOARD OF DIRECTORS

 

/s/ Geoffrey P. Leonard

 

GEOFFREY P. LEONARD

Secretary  

 

Menlo Park, California

August 2 3, 2017

 

 

IMPORTANT

 

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE OR VOTE YOUR SHARES BY TELEPHONE OR VIA THE INTERNET. IF A QUORUM IS NOT REACHED, THE COMPANY MAY HAVE THE ADDED EXPENSE OF RE-ISSUING THESE PROXY MATERIALS. IF YOU ATTEND THE MEETING AND SO DESIRE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON. THANK YOU FOR ACTING PROMPTLY.

 

 

 

 

 

 

 

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON OCTOBER 19, 2017

 

 


 

INFORMATION CONCERNING SOLICITATION AND VOTING

 

General

 

The enclosed proxy is solicited on behalf of the Board of Directors of Landec Corporation, a Delaware corporation (“ Landec ” or the “ Company ”), for use at the annual meeting of stockholders (the “ Annual Meeting ”) to be held on Thursday, October 19, 2017, at 12: 00 p.m., local time, or at any postponement or adjournment thereof, for the purposes set forth herein and in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will be held at Lifecore Biomedical , 3515 Lyman Blvd, Chaska, MN 55318. The telephone number at that location is (952) 368-4300 .

 

The Company ’s principal executive offices are located at 3603 Haven Avenue, Menlo Park, California 94025. The Company’s telephone number at that location is (650) 306-1650.

 

Solicitation

 

These proxy solicitation materials are to be mailed on or about September 21, 2017 to all stockholders entitled to vote at the meeting. The costs of soliciting these proxies will be borne by the Company. These costs will include the expenses of preparing and mailing proxy materials for the Annual Meeting and the reimbursement of brokerage firms and others for their expenses incurred in forwarding solicitation material regarding the Annual Meeting to beneficial owners of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”). The Company may conduct further solicitation personally, telephonically or by facsimile through its officers, directors and regular employees, none of whom will receive additional compensation for assisting with the solicitation.

 

Important Notice Regarding the Availability of Proxy Materials for the

Stockholder Meeting to Be Held on October 19 , 201 7 .

 

This Proxy Statement and the Company’s Annual Report to Stockholders are available at

http://landec.com/proxy

 

 

You may also find a copy of this Proxy Statement and our Annual Report (with exhibits) on the SEC website at http://www.sec.gov. We will, upon written request and without charge, send you additional copies of our Annual Report (without exhibits) and this Proxy Statement. To request additional copies, please send your request by mail to Gregory S. Skinner, Chief Financial Officer, Landec Corporation, 3603 Haven Avenue, Menlo Park, CA 94025 (telephone number: (650) 306-1650). Exhibits to the Annual Report may be obtained upon written request to Mr. Skinner and payment of the Company’s reasonable expenses in furnishing such exhibits.

 

 

 

 

Voting Procedure

 

You may vote by mail.

 

To vote by mail, please sign your proxy card and return it in the enclosed, prepaid and addressed envelope. If you mark your voting instructions on the proxy card, your shares will be voted as you instruct.

 

You may vote in person at the Annual Me eting.

 

We will pass out written ballots to anyone who wants to vote at the Annual Meeting. Holding shares in “ street name” means your shares of stock are held in an account by your stockbroker, bank or other nominee, and the stock certificates and record ownership are not in your name. If your shares are held in “street name” and you wish to attend the Annual Meeting, you must notify your broker, bank or other nominee and obtain proper documentation to vote your shares at the Annual Meeting.

 

You may vot e by telephone or electronically.

 

You may submit your proxy by following the Vote by Phone instructions accompanying the proxy card. Also, you may vote online by following the Vote by Internet instructions accompanying the proxy card.

 

You may change yo ur mind after you have returned your proxy card.

 

If you change your mind after you return your proxy card or submit your proxy by telephone or Internet, you may revoke your proxy at any time before the polls close at the Annual Meeting. You may do this b y:

 

 

signing and returning another proxy card with a later date, or

 

 

voting in person at the Annual Meeting.

 

Voting

 

Holders of Common Stock are entitled to one vote per share.

 

Votes cast in person or by proxy at the Annual Meeting will be tabulated by the Inspector of Elections. The Inspector of Elections will also determine whether or not a quorum is present. A majority of the shares entitled to vote, represented either in person or by proxy, will constitute a quorum for the transaction of business. The Inspector of Elections will treat abstentions as shares that are present and entitled to vote for purposes of determining the presence of a quorum.

 

If a broker indicates on the enclosed proxy or its substitute that it has not received voti ng instructions with respect to shares held in “street name” with such broker and either (i) does not have discretionary authority as to certain shares to vote on a particular matter or (ii) has discretionary voting authority but nevertheless refrained from voting on the matter (“ broker non-votes ”), those shares will be counted for purposes of determining the presence of a quorum, but will not be considered as voting with respect to that matter.

 

Proposal No. 1 – Election of directors: Each director is elected by a majority of the votes cast with respect to such director. Any votes “withheld” for a particular director are effectively votes against that director. Shares present and not voted, whether by broker non-vote, abstention or otherwise, will have no effect on this vote.

 

Proposal No. 2 – Ratification of independent registered public accounting firm: This proposal must be approved by a majority of the shares present and voted on the proposal. Shares present and not voted, whether by broker non-vote, abstention or otherwise, will have no effect on this vote.

 

Proposal No. 3 – Approval of amendment to increase the number of shares in the 2013 Stock Incentive Plan. This proposal must be approved by shares representing a majority of the shares present and entitled to vote on the proposal. Shares present and not voted, whether by broker non-vote, abstention or otherwise, will have the same effect as a vote against this proposal.

 

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Proposal No. 4 — Advisory (non-binding) vote on executive compensation: This advisory proposal will be approved if a majority of the shares present and voted on the proposal are voted in favor of the resolution. Shares present and not voted, whether by broker non-vote, abstention or otherwise, will have no effect on this advisory vote.

 

Proposal  No. 5 — Advisory (non-binding) vote on frequency of votes on executive compensation: This advisory vote provides a choice among three frequency periods for future advisory votes on executive compensation (so-called, “say-on-pay” votes). The frequency period that receives the most votes (every one, two or three years) will be deemed to be the recommendation of the stockholders. As a result, any shares that are present and not voted, whether by broker non-vote, abstention or otherwise, will have no effect on the outcome of this advisory vote.

 

Any proxy which is returned using the form of proxy enclosed and which is not marked as to a particular item will b e voted FOR the election of the director nominees proposed by the Board of Directors; FOR the ratification of the appointment of Ernst & Young LLP to serve as the Company’s independent registered public accounting firm for the fiscal year ending May 27, 2018; FOR the approval of the amendment to increase the number of shares in the Company’s 2013 Stock Incentive Plan, FOR the advisory vote on executive compensation; FOR holding the advisory vote on executive compensation every year; and as the proxy holders deem advisable on other matters that may come before the meeting or any adjournment(s) thereof, as the case may be, with respect to the item not marked. Broker non-votes will not be considered as voting with respect to these matters.

 

Record Date and Sha re Ownership

 

Only stockholders of record at the clos e of business on August 21, 2017, are entitled to notice of, and to vote at, the Annual Meeting. As of August 21, 2017, 27,506,712 shares of the Company’s Common Stock were issued and outstanding.

 

Deadline for Receipt of Stockholder Proposals for the Company ’s Annual Meeting of Stockholders in 2018

 

If any stockholder desires to present a stockholder proposal at the Co mpany’s 2018 Annual Meeting of Stockholders, such proposal must be received by the Secretary of the Company no later than May 15, 2018, in order that they may be considered for inclusion in the proxy statement and form of proxy relating to that meeting.

 

Householding of Proxy Materials

 

Some companies, brokers, banks, and other nominee record holders participate in a practice commonly known as “householding,” where a single copy of our Proxy Statement and Annual Report is sent to one address for the benefit of two or more stockholders sharing that address. Householding is permitted under rules adopted by the SEC as a means of satisfying the delivery requirements for proxy statements and annual reports, potentially resulting in extra convenience for stockholders and cost savings for companies. We will promptly deliver a separate copy of either document to you if you contact our Chief Financial Officer at the address listed above or call us at (650) 306-1650. If you are receiving multiple copies of our Proxy Statement and Annual Report at your household and wish to receive only one, please notify your bank, broker, or other nominee record holder, or contact our Chief Financial Officer at the address listed above.

 

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PROPOSAL NO. 1

 

ELECTION OF DIRECTORS

 

Nominees

 

The Company ’s Bylaws currently provide for no fewer than six (6) and no more than ten (10) directors, and the Company’s Certificate of Incorporation provides for the classification of the Board of Directors into two classes serving staggered terms. Each Class 1 and Class 2 director is elected for a two-year term, with the Class 2 directors elected in odd numbered years ( e.g ., 2017) and the Class 1 directors elected in even numbered years ( e.g ., 2018). Accordingly, at the Annual Meeting , five (5) Class 2 directors will be elected.

 

The Board of Directors has nominated the persons named below to serve as Class 2 directors until the 2019 Annual Meeting, at which their successors will be elected and qualified. Unless otherwise instructed, the proxy holders will vote the proxies received by them for the Company’s five (5) nominees named below. In the event that any nominee of the Company is unable or declines to serve as a director at the time of the Annual Meeting, the proxies will be voted for any nominee who shall be designated by the present Board of Directors to fill the vacancy. In the event that additional persons are nominated for election as directors, the proxy holders intend to vote all proxies received by them in such a manner as will assure the election of as many of the nominees listed below as possible, and, in such event, the specific nominees to be voted for will be determined by the proxy holders. Assuming a quorum is present, the five (5) nominees for director receiving at least a majority of votes cast at the Annual Meeting will be elected.

 

Class 2 Direct ors

 

Name of Director

Age

Principal Occupation

Director Since

Albert D. Bolles, Ph.D

60

Retired Executive Vice President and Chief Technical and Operations Officer, ConAgra Foods, Inc.

2014

Deborah Carosella

60

Retired Chief Executive Officer, Madhava Natural Sweetners

2017

Tonia Pankopf

4 9

Managing Partner, Pareto Advisors, LLC

2012

Robert Tobin

7 9

Retired Chief Executive Officer, Ahold, USA

2004

Molly A. Hemmeter

50

President and Chief Executive Officer of the Company

2015

 

Except as set forth below, each of the Class 2 directors has been engaged in the principal occupation set forth next to his or her name above during the past five years. There is no family relationship between any director and any executive officer of the Company.

 

Alb ert D. Bolles, Ph.D, has served as a director since May 2014. Dr. Bolles currently serves as Chairman of OnFood, a start-up company. Dr. Bolles served as the Executive Vice President and Chief Technical and Operations Officer of ConAgra Foods, Inc. (“ ConAgra ”) until his retirement in August 2015. Dr. Bolles led ConAgra’s Research, Quality & Innovation and Supply Chain organizations. He joined ConAgra in 2006 as Executive Vice President, Research, Quality & Innovation. Under his leadership, the ConAgra Research, Quality & Innovation team brought to market highly successful products that have led to substantial business growth. Prior to joining ConAgra, Dr. Bolles led worldwide research and development for PepsiCo Beverages and Foods. Dr. Bolles serves on several professional advisory boards, including the Grocery Manufacturers Association (GMA) Scientific Regulatory Committee, and is currently the chairman of the Trout Council/Food Science program which is an endowed scholarship fund at Michigan State University in the Department of Food Science and Human Nutrition. He has a Ph.D. and master's degree in food science and a bachelor's degree in microbiology, all from Michigan State University. He holds several patents and has won numerous awards for his contributions to the world of food science.

 

Dr. Bolles is a preeminent leader in food science and provides the Board of Directors with valuable areas of expertise in new product development, innovation, quality , and supply chain in the packaged consumer food business.

 

Ms. Carosella has served as s director since Marc h 2017. Ms. Carosella has over 30 years’ experience in the consumer products goods industry, with particular expertise in branding, strategic marketing and innovation. Most recently she was CEO of Madhava Natural Sweeteners, a Boulder, Colorado-based natural and organic sweetener company. Prior to Madhava, Ms Carosella was Senior Vice President of Innovation and a member of the Executive Leadership Team at Whitewave/Dean Foods. She joined Whitewave/Dean Foods from Conagra Foods where she held various roles including Vice President General Manager and Vice President, Strategic Marketing with business unit and enterprise wide responsibilities. Ms Carosella began her career in the advertising, branding and innovation agency business, serving as President of her own agency after working for several years with large, multi-national agencies.

 

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Ms. Carosella ’s experience in consumer products and specifically in the areas of branding and new product development provides the Board of Directors and management with expertise that will be invaluable as the Company develops its new natural products business strategies.

 

Tonia Pankopf has served as a director since November 2012. Ms. Pankopf has been managing partner of Pareto Advisors, LLC since 2005. Previously, she was a senior analyst and managing director at Palladio Capital Management from January 2004 through April 2005. From 2001 to 2003, Ms. Pankopf served as an analyst and portfolio manager with P.A.W. Capital Partners, LP. Ms. Pankopf was a senior analyst and vice president at Goldman, Sachs & Co. from 1999 to 2001 and at Merrill Lynch & Co. from 1998 to 1999. From November 2003 until July 2017, she was a member of the board of directors of TICC Capital Corp, a business development company, having served on its Audit, Valuation, Nominating and Corporate Governance Committees and chairing its Compensation Committee. Ms. Pankopf served on the Board of the University System of Maryland Foundation from 2006 to 2012. Ms. Pankopf is a member of the NACD and is an NACD Board Leadership Fellow in recognition of her ongoing involvement in director professionalism and engagement with the director community. Ms. Pankopf received a Bachelor of Arts degree summa cum laude from the University of Maryland and an M.S. degree from the London School of Economics.

 

Ms. Pankopf’s extensive financial experience with technology and middle-market companies provides the Board of Directors with valuable insights of an experienced investment manager as well as knowledge of corporate governance issues.

 

Robert Tobin has served as a dire ctor since December 2004. Mr. Tobin retired from his position as Chief Executive Officer of Ahold USA, a food retailer, in 2001. Mr. Tobin has over 40 years of industry experience in the food retail and food service sectors, having served as Chairman and CEO of Stop and Shop Supermarkets. An industry leader, Mr. Tobin serves on the advisory boards of the College of Agriculture and Life Sciences and the Undergraduate Business Program at Cornell University where he received his B.S. in Agricultural Economics.

 

Mr. Tobin ’s experience as the chief executive officer of food retailers and his knowledge of the food retail and food service sectors provide the Board of Directors with significant expertise with respect to issues facing the Company’s food business. In addition, Mr. Tobin’s service on advisory boards provides the Board of Directors with knowledge of the scientific issues that face Apio, Inc. (“ Apio ”).

 

Molly A. Hemmeter has been the Company ’s President and Chief Executive Officer since October 15, 2015. Prior to that she served as the Chief Operating Officer of the Company from January 2014 to October 2015, prior to which she served as Chief Commercial Officer of the Company from December 2010 to January 2014 and Vice President, Business Development and Global Marketing of the Company from June 2009 to December 2010. From July 2006 until joining the Company in June 2009, Ms. Hemmeter was Vice President of Global Marketing and New Business Development for the Performance Materials division of Ashland, Inc., a global specialty chemicals company. Prior to joining Ashland, Inc., Ms. Hemmeter was Vice President of Strategy and Marketing for Siterra Corporation and Chief Marketing Officer for CriticalArc Technologies in the San Francisco Bay Area, both of which were privately held software startup companies that were eventually acquired by larger entities, and she previously held various positions at Bausch & Lomb and Eli Lilly and Company. Ms. Hemmeter received a B.E.S. and M .Eng . from the University of Louisville and an M.B.A. from Harvard University.

 

Ms. Hemmeter ’s significant knowledge and understanding of the Company and its businesses, together with her extensive experience in operations, business development and marketing, has enabled Ms. Hemmeter to lead several of Landec’s significant growth initiatives. Ms. Hemmeter was an integral part of the teams that completed the acquisition of Lifecore in 2010, the financing of Windset Holdings 2010 Ltd. (“Windset”) in 2011, the acquisition of GreenLine Holding Company in 2012 and the acquisition of O Olive Oil, Inc. (“O Olive”) in 2017. More recently, Ms. Hemmeter was instrumental in creating and developing Apio’s line of salad kit products, the fastest growing products in Landec’s long history.

 

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Nominees for C lass 1 Directors

 

Name of  Director

Age

Principal  Occupation

Director  Since

Gary T.  Steele

6 8

Retired Chief Executive Officer of the Company

1991

Frederick Frank  

8 5

Chairman, Evolution Life Sciences  Partners

1999

Steven  Goldby

7 7

Partner,  Venrock and Chairman of the Board of  Directors of the Company

2008

Catherine A. Sohn, Pharma.D.  

6 4

Retired Senior Executive, Glaxo Smith  Kline plc

2012

 

 

Except as set forth below, each of the Class 1 directors has been engaged in the principal occupation set forth next to his or her name above during the past five years. There is no family relationship between any director and executive officer of the Company.

 

Gary T. Steele served as President and Chief Executive Officer of the Company until his retirement in October 2015. Mr. Steele has been a director since September 1991 and was Chairman of the Board of Directors from January 1996 until his retirement. Mr. Steele has over 30 years of experience in the biotechnology, instrumentation and material science fields. From 1985 to 1991, Mr. Steele was President and Chief Executive Officer of Molecular Devices Corporation, a bioanalytical instrumentation company. From 1981 to 1985, Mr. Steele was Vice President, Product Development and Business Development at Genentech, Inc., a biomedical company focusing on pharmaceutical drug development. Mr. Steele has also worked with McKinsey & Company and Shell Oil Company. Mr. Steele received a B.S. from Georgia Institute of Technology and an M.B.A. from Stanford University.

 

Mr. Steele ’s significant knowledge and understanding of the Company and its businesses together with his extensive experience in building and growing technology companies provide the Board of Directors with significant insight into the Company’s businesses and operations.

 

Frederick Frank has served as director since December 1999. Mr. Frank is Chairman of the Board of Evolution Life Sciences Partners. Prior to joining Evolution Life Science Partners, Mr. Frank was Chairman of the Board of Burrill Securities. Prior to joining Burrill Securities, Mr. Frank was Vice Chairman of Peter J. Solomon Company (“ Solomon ”). Before joining Solomon, Mr. Frank was Vice Chairman of Lehman Brothers, Inc. (“ Lehman ”) and Barclays Capital. Before joining Lehman as a Partner in October 1969, Mr. Frank was co-director of research, as well as Vice President and Director of Smith Barney & Co. Incorporated. During his over 50 years on Wall Street, Mr. Frank has been involved in numerous financings and merger and acquisition transactions. He served on the Advisory Board of PDL BioPharma, and was a director for the Institute for Systems Biology and Pharmaceutical Product Development, Inc. Mr. Frank is Chairman of the National Genetics Foundation and he serves on the Advisory Boards for Yale School of Organization and Management and the Massachusetts Institute of Technology Center of Biomedical Innovation and was formerly an Advisory Member of the Johns Hopkins Bloomberg School of Public Health, and the Harvard School of Public Health. He is a graduate of Yale University, received an M.B.A. from Stanford University and is a Chartered Financial Analyst.

   

Mr. Frank has over 50 years of capital markets experience and has been in volved in numerous financings, commercial transactions and mergers and acquisitions. As such, Mr. Frank provides the Board of Directors with extensive experience and knowledge with respect to transactions and financings in the public company context and corporate governance experience based on his experience as a director of public and non-public companies.

 

Steven Goldby has served as a director since December 2008 and Chairman of the Board of Directors in a non-executive capacity since October 2015. Mr. Goldby has been a Partner at Venrock, a venture capital firm, since 2007. Mr. Goldby was Chairman and Chief Executive Officer of Symyx Technologies, Inc. (“ Symyx ”) from 1998 to 2007; he became the Executive Chairman in 2008, and Chairman in 2009. Before joining Symyx, Mr. Goldby served as Chief Executive Officer for more than ten years at MDL Information Systems, Inc., the enterprise software company that pioneered scientific information management. Earlier, Mr. Goldby held various management positions at ALZA Corporation, including President of Alza Pharmaceuticals. Mr. Goldby received a B.S. degree in chemistry from the University of North Carolina and a law degree from Georgetown University Law Center.

 

Mr. Goldby ’s extensive experience with biotechnology companies provides the Board of Directors with significant understanding of the technology issues facing the Company.

 

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Catherine A. Sohn, Pharm. D. has served as a member of our board of directors since November 2012.   Dr. Sohn is the founder of Sohn Health Strategies, where since 2010 she has consulted for pharmaceutical, biotechnology, medical device and consumer healthcare companies in the areas of business strategy, business development and strategic product development.  She has been a member of the board of director of Jazz Pharmaceuticals plc, an international biopharmaceutical company, since July 2012.  From 1982 to 2010, she was with GlaxoSmithKline plc, an international pharmaceutical company, where she served most recently as Senior Vice President, Worldwide Business Development and Strategic Alliances in the $8 billion GSK Consumer Healthcare division.   Previously she was Vice President, Worldwide Strategic Product Development at SmithKline Beecham Pharmaceuticals plc.  Before that, she held a series of positions in U.S. Product Marketing, Pharmaceutical Business Development and Medical Affairs, at SmithKline Beecham and its predecessor company, SmithKline & French.  Dr. Sohn currently holds the position of Adjunct Professor at the University of California, San Francisco.  She received a Pharm.D. from the University of California, San Francisco.  She also received a Certificate of Professional Development from the Wharton School at the University of Pennsylvania.  Dr. Sohn was named Woman of the Year by the Healthcare Businesswomen's Association in 2003 and the UCSF Distinguished Alumnus in 2000. She is a Certified Licensing Professional and a National Association of Corporate Directors (NACD) Board Leadership Fellow.

 

With over 30 years of experience in health-related sectors, Dr. Sohn provides the Board of Directors with significant expertise in business development, strategic marketing and new product development within healthcare, which has a direct benefit to Lande c’s wholly-owned biomedical subsidiary, Lifecore Biomedical, Inc. (“ Lifecore ”).

 

  Board of Directors Meetings and Committees

 

The Board of Directors held a total of five meetings during the fiscal year ended May 28, 2017. Each director attended at least 75% of all Board and applicable committee meetings during fiscal year 2017. The Board of Directors has an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee, each of which operates under a written charter approved by the Board of Directors. The charter for each of the committees is available on the Company’s website (http://landec.com). The Board of Directors also has a Food Innovation Committee. It is our policy to encourage the members of the Board of Directors to attend the Company’s annual meeting of stockholders. All directors on the Board of Directors at the time attended our 2016 Annual Meeting of Stockholders .

 

The Audit Committee currently consists of Ms. Pankopf (Chairperson), Mr. Goldby and Mr. Tobin. In th e determination of the Board of Directors, each of Ms. Pankopf, Mr. Goldby, and Mr. Tobin meets the independence requirements of the Securities and Exchange Commission (the “ SEC ”) and The Nasdaq Stock Market, LLC (“ NASDAQ ”). The Audit Committee assists the Board of Directors in its oversight of Company affairs relating to the quality and integrity of the Company’s financial statements, the qualifications and independence of the Company’s independent registered public accounting firm, the performance of the Company’s internal audit function and independent registered public accounting firm, and the Company’s compliance with legal and regulatory requirements. The Audit Committee is responsible for appointing, compensating, retaining and overseeing the Company’s independent registered public accounting firm, approving the services performed by the independent registered public accounting firm and reviewing and evaluating the Company’s accounting principles and its system of internal accounting controls. Rules adopted by the SEC require us to disclose whether the Audit Committee includes at least one member who is an “audit committee financial expert,” as that phrase is defined in SEC rules and regulations. The Board of Directors has determined that Ms. Pankopf and Mr. Goldby are “audit committee financial experts” within the meaning of applicable SEC rules. The Audit Committee held four meetings during fiscal year 2017. Please see the section entitled “Audit Committee Report” for further matters related to the Audit Committee. The Board has adopted a written charter for the Audit Committee. The Audit Committee reviews the charter annually for changes, as appropriate.

 

The Compensation Committee currently consists of Dr. Sohn (Cha irperson), Mr. Frank and Dr. Bolles. In the determination of the Board of Directors, each of Dr. Sohn, Mr. Frank, and Dr. Bolles meets the current independence requirements of the SEC and NASDAQ. The function of the Compensation Committee is to review and set the compensation of the Company’s Chief Executive Officer and certain of the Company’s most highly compensated officers, including salary, bonuses and other cash incentive awards, and other forms of compensation, to administer the Company’s stock plans and approve stock equity awards, and to oversee the career development of senior management. The Compensation Committee held five meetings during fiscal year 2017 .

 

The Nominating and Corporate Governance Committee currently consists of Mr. Frank (Chair person), Mr. Tobin, Ms. Pankopf and Dr. Bolles, each of whom, in the determination of the Board of Directors, meets the current independence requirements of the SEC and NASDAQ. The functions of the Nominating and Corporate Governance Committee are to recommend qualified candidates for election as officers and directors of the Company and oversee the Company’s corporate governance policies. The Nominating and Corporate Governance Committee held two meetings during fiscal year 2017 .

 

7

 

 

The Nominating and Corpor ate Governance Committee will consider director nominees proposed by current directors, officers, employees and stockholders. Any stockholder who wishes to recommend candidates for consideration by the Nominating and Corporate Governance Committee may do so by writing to the Secretary of the Company, Geoffrey P. Leonard of King & Spalding LLP, 101 Second Street, Suite 2300, San Francisco, CA 94105, and providing the candidate’s name, biographical data and qualifications. The Company does not have a formal policy regarding the consideration of director candidates recommended by stockholders. The Company believes this is appropriate because the Nominating and Corporate Governance Committee evaluates any such nominees based on the same criteria as all other director nominees. In selecting candidates for the Board of Directors, the Nominating and Corporate Governance Committee strives for a variety of experience and background that adds depth and breadth to the overall character of the Board of Directors. The Nominating and Corporate Governance Committee evaluates potential candidates using standards and qualifications such as the candidates’ business experience, independence, diversity, skills and expertise to collectively establish a number of areas of core competency of the Board of Directors, including business judgment, management and industry knowledge. Although the Nominating and Corporate Governance Committee does not have a formal policy on diversity, it believes that diversity is an important consideration in the composition of the Board of Directors, and it seeks to include Board members with diverse backgrounds and experiences. Further criteria include the candidates’ integrity and values, as well as the willingness to devote sufficient time to attend meetings and participate effectively on the Board of Directors and its committees.

 

The Food Innovation Committee currently consists of Dr. Bolles (Chairperson) and Ms. Carosella, each of whom, in the determination of the Board of Directors, meets the current independence requirements of the SEC and NASDAQ. The function of the Food Innov ation Committee is to provide advice and make recommendations to the Board and to management with regard to food management, including new agricultural techniques, plant optimization strategies and new product development insights.  The function of the Food Innovation Committee further entails making possible changes to current practices within the Company’s food business and making recommendations concerning new areas for the Company to pursue. As Chairman of the Food Innovation Committee, Dr. Bolles spent approximately eight days during fiscal year 2017 on site at Apio or in teleconferences with the President of Apio and/or his executive team. Since joining the Board of Directors in March 2017, Ms. Carosella has worked closely with the CEO and senior marketing executives on the innovation and strategic marketing strategies for Apio for the coming year.

 

Corporate Governance

 

The Company provides information about its corporate governance policies, including the Company ’s Code of Ethics, and charters for the Audit, Nominating and Corporate Governance, and Compensation Committees of the Board of Directors on the Corporate Governance page of its website. The website can be found at www.landec.com .

 

The Company ’s policies and practices reflect corporate governance initiatives that are compliant with the listing requirements of NASDAQ and the corporate governance requirements of the Sarbanes-Oxley Act of 2002, including:

 

 

A majority of the members of the Board of Directors are independent;

 

 

All members of the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee and the Food Innovation Committee are independent;

 

 

The independent members of the Board of Directors meet at each board meeting, and at least twice per year, in executive sessions without the presence of management. The Board of Directors will designate a lead independent director or a non-executive Chairman of the Board who, among other duties, is responsible for presiding over executive sessions of the independent directors;

 

 

The Company has an ethics hotline available to all employees, and the Audit Committee has procedures in place for the anonymous submission of employee complaints regarding accounting, internal controls, or audi ting matters; and

 

 

The Company has adopted a Code of Ethics that applies to all of its employees, including its principal executive officer and all members of its finance department, including the principal financial officer and principal accounting officer, as well as the Board of Directors. Any substantive amendments to the Code of Ethics or grant of any waiver, including any implicit waiver, from a provision of the Code of Ethics to the Company’s principal executive officer, principal financial officer or principal accounting officer, will be disclosed either on the Company’s website or in a report on Form 8-K.

 

8

 

 

Following a review of all relevant relationships and transactions between each director (including each director ’s family members) and the Company, the Board has determined that each member of the Board or nominee for election to the Board, other than Mr. Steele and Ms. Hemmeter, is an independent director under applicable NASDAQ listing standards. Mr. Steele and Ms. Hemmeter do not meet the independence standards because Mr. Steele was an employee of the Company within the past three years and Ms. Hemmeter is currently an employee of the Company.

 

Leadership Structure of the Board of Directors

 

The Board of Directors believes that it is important to retain its flexibility to allocate the responsibilities of the positions of the Chairman of the Board (the “ Chairman ”) and Chief Executive Officer in the way that it believes is in the best interests of the Company. The Board of Directors does not have a formal policy with respect to whether the Chief Executive Officer should also serve as Chairman. Rather, the Board of Directors makes this decision based on its evaluation of current circumstances and the specific needs of the Company at any time it is considering either or both roles.

 

With the retirement of Mr. Steele as Chief Executive Officer and the election of Ms. Hemmeter as the Company ’s new Chief Executive Officer in October 2015, the Board of Directors determined that the roles of Chairman and Chief Executive Officer should be separated and Mr. Goldby therefore assumed the role of non-executive Chairman in October 2015. The Board of Directors believes that the appointment of Mr. Goldby as non-executive Chairman allows the Chief Executive Officer, who also possesses significant business and industry knowledge, to lead and speak on behalf of both the Company and the Board of Directors, while also providing for effective independent oversight by non-management directors through a non-executive Chairman.

 

At each Board of Directors meeting, the non-executive Chairman presides over an executive session of the non-management directors without the presence of management. The non-executive Chairman also may call additional meetings of the non-management directors as he deems necessary. If the Board did not have a non-executive Chairman, the lead independent director would serve as a liaison between the Chairman and the non-management directors; advise the Chairman of the informational needs of the Board of Directors and approve information sent to the Board of Directors; and would be available for consultation and communication if requested by major stockholders.

 

The Board of Directors also adheres to sound corporate governance practices, as reflected in the Company ’s corporate governance policies, which the Board of Directors believes has promoted, and continues to promote, the effective and independent exercise of Board leadership for the Company and its stockholders.

 

Stockholder Communications

 

Our Board of Direc tors welcomes communications from our stockholders. Stockholders and other interested parties may send communications to the Board of Directors, or the independent directors as a group, or to any director in particular, including the Chairman, c/o Gregory S. Skinner, Chief Financial Officer, Landec Corporation, 3603 Haven Avenue, Menlo Park, CA 94025. Any correspondence addressed to the Board of Directors or to any one of our directors in care of Mr. Skinner will be promptly forwarded to the addressee. The independent directors review and approve the stockholder communication process periodically to ensure effective communication with stockholders.

 

Oversight of Risk Management

 

The Board of Directors ’ role in the Company’s risk oversight process includes receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal and regulatory, and strategic and reputational risks. Our Audit Committee oversees management of financial risk exposures, including the integrity of our accounting and financial reporting processes and controls. As part of this responsibility, the Audit Committee meets periodically with the Company’s independent registered public accounting firm, our internal auditor and our financial and accounting personnel to discuss significant financial risk exposures and the steps management has taken to monitor, control and report such exposures. Additionally, the Audit Committee reviews significant findings prepared by the Company’s independent registered public accounting firm and our internal auditor, together with management’s response. Our Nominating and Corporate Governance Committee has responsibility for matters relating to corporate governance. As such, the charter for our Nominating and Corporate Governance Committee provides for the committee to periodically review and discuss our corporate governance guidelines and policies.

 

9

 

 

Our management also reviewed with our Compensation Committee the compensation policies and p ractices of the Company that could have a material impact on the Company. Our management review considered whether any of these policies and practices may encourage inappropriate risk-taking, whether any policy or practice may give rise to risks that are reasonably likely to have a material adverse effect on the Company, and whether it would recommend any changes to the Company’s compensation policies and practices. Management also reviewed with the Board of Directors risk-mitigating controls such as the degree of committee and senior management oversight of each compensation program and the level and design of internal controls over such programs. Based on these reviews, the Board of Directors has determined that risks arising from the Company’s compensation policies and practices are not reasonably likely to have a material adverse effect on the Company.

 

The Board of Directors has adopted an executive compensation clawback policy, which provides for recoupment of executive incentive compensation in the ev ent of certain restatements of the financial results of the Company. Under the policy, in the event of a substantial restatement of the Company’s financial results due to material noncompliance with financial reporting requirements, if the Board of Directors determines in good faith that any portion of a current or former executive officer’s incentive compensation was paid as a result of such noncompliance, then the Company may recover the portion of such compensation that was based on the erroneous financial data.

 

The Board of Directors has also evaluated privacy protection, cybersecurity and information security in an effort to mitigate the risk of cyber-attacks and to protect the Company ’s information and that of its customers and suppliers. Based on this review, the Board of Directors has determined that such risks are not reasonably likely to have a material adverse effect on the Company.

 

Compensation of Directors

 

The following table sets forth compensation information for the fiscal year ended May 28, 2017, for each member of our Board of Directors who was not an executive officer during fiscal year 2017. The Chief Executive Officer, Molly A. Hemmeter, who serves on our Board of Directors, does not receive additional compensation for serving on the Board of Directors. See “Summary Compensation Table” for disclosure related to Ms. Hemmeter.

 

Name

 

Fee Earned or Paid in Cash (1)

 

 

Stock Awards (2)

 

 

Other

 

 

Total

 

Albert D. Bolles, Ph.D.

 

$

69,167

 

 

$

 

 

$

 

 

$

69 ,167

 

Deborah Carosella (3)

 

$

8,333

   

$

   

$

   

$

8,333

 

Frederick Frank

 

$

57,500

 

 

$

 

 

$

 

 

$

5 7,500

 

Steven Goldby

 

$

75, 000

 

 

$

 

 

$

 

 

$

7 5,000

 

Tonia Pankopf

 

$

65, 000

 

 

$

 

 

$

 

 

$

65, 000

 

Catherine A. Sohn , Pharma.D.

 

$

56, 000

 

 

$

 

 

$

 

 

$

5 6,000

 

Gary T. Steele

 

$

40 ,000

 

 

$

 

 

$

 

 

$

40 ,000

 

Robert Tobin

 

$

5 5,000

 

 

$

 

 

$

 

 

$

55,000

 

Nicholas Tompkins (3)

 

$

16,667

 

 

$

 

 

$

 

 

$

16,667

 

 

 

(1)

Includes amounts (if any) deferred pursuant to the Company's Nonqualified Deferred Compensation Plan, the terms of which are described under “ Nonqualified Deferred Compensation Plan” below.

 

(2)

The Company’s current compensation policy provides for each member of the Board to receive an annual restricted stock unit (“ RSU ”) award . These awards were granted in May 2016 for fiscal year 2017 and in June 2017 for fiscal year 2018 and therefore no RSUs were actually granted in fiscal year 2017. 

 

(3)

Ms. Carose lla joined the Board on March 14, 2017. Mr. Tompkins retired from the Board at the end of his term as a Class 2 director on October 19, 2016 .

 

At May 28, 2017, the aggregate number of shares subject to outstanding restricted stock unit awards and option awards held by the members of the Board of Directors was: Dr. Bolles – 0 shares; Ms. Carosella – 0 shares; Mr. Frank – 10,000 shares; Mr. Goldby – 10,000 shares; Ms. Pankopf – 6,667 shares; Dr. Sohn – 10,000 shares; Mr. Steele – 125,000 shares; and Mr. Tobin – 10,000 shares.

 

10

 

 

For fiscal year 2017, each non-employee director received an annual retainer of $40,000 for service as a member of our Board of Directors. In addition, each director who served on the Audit Committee and the Food Innovation Committee received an annual retainer of $10,000, with the Chairperson of the Audit Committee and Food Innovation Committee receiving an annual retainer of $20,000. Each director who served on the Compensation Committee received an annual retainer of $7,500, with the Chairperson of the Compensation Committee receiving an annual retainer of $15,000. Each director who served on the Nominating and Corporate Governance Committee received an annual retainer of $5,000, with the Chairperson of the Nominating and Corporate Governance Committee receiving an annual retainer of $10,000. The Chairperson of the Board received an annual retainer of $25,000. Consistent with the general industry trend toward fixed-value RSU awards, each non-employee director currently receives an RSU award each year with a fair value of $60,000, based on the fair market value of the Company’s Common Stock on the date of the grant, vesting on the first anniversary of the date of grant.

 

In addition to cash fees, each director is reimbursed for reasonable out-of-pocket expenses incurred by a director to attend Board meetings, committee meetings or stockholder meetings in his or her capacity as a director.

 

S tock Ownership Requirement

 

The Board of Directors has determined that ownership of Landec Common Stock by officers and directors promotes a focus on long-term growth and aligns the interests of the Company ’s officers and directors with those of its stockholders. As a result, the Board of Directors has adopted stock ownership guidelines stating that the Company’s non-employee directors and its executive officers should maintain certain minimum ownership levels of Common Stock. Under these guidelines, each non-employee director of the Company is expected to maintain ownership of Common Stock having a value of at least three times the amount of the annual cash retainer paid to such non-employee director. For purposes of the guidelines, the value of a share of Common Stock is measured as the greater of (i) the then current market price or (ii) the closing price of a share of Common Stock on the date when the stock was acquired, or the vesting date in the case of RSUs.

     

Newly-elected directors have five year s from the date they are elected to meet these guidelines. In the event a non-employee director’s cash retainer increases, he or she will have two years from the date of the increase to acquire any additional shares or RSUs needed to meet the guidelines. Until the required ownership level is reached, directors are required to retain 50% of net shares acquired upon any future vesting of RSUs and/or exercise of stock options, after deducting shares used to pay any applicable taxes and/or exercise price.

   

Required Vote

 

The election of each of the f ive (5) Class 2 director nominees requires the affirmative vote of the holders of a majority of the shares of the Company’s Common Stock present at the Annual Meeting in person or by proxy and voted with respect to such director. A “WITHHOLD” vote is effectively a vote against a director. This means that in order for a director to be elected, the number of shares voted “FOR” a director must exceed the number of votes cast against that director.

 

THE BOARD OF DI RECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE.

 

11

 

 

  PROPOSAL  NO. 2

 

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee has appointed the firm of Ernst & Young LLP as the Company’s independent registered public accounting firm to audit the financial statements of the Company for the fiscal year ending May 27, 2018, and recommends that the stockholders vote for ratification of this appointment. In the event the stockholders do not ratify such appointment, the Audit Committee may reconsider its selection. Ernst & Young LLP has audited the Company’s financial statements since the fiscal year ending October 31, 1994. Representatives of Ernst & Young LLP are expected to be present at the Annual Meeting with the opportunity to make a statement if they desire to do so, and are expected to be available to respond to appropriate questions.

 

Fees Paid to Independent Registered Public Accounting Firm

 

The following table presents the aggregate fees billed to the Company for professional services rendered by Ernst & Young LLP for the fiscal years ended May 28, 2017 and May 29, 2016 .

 

Fee Category

 

Fiscal Year 2017

 

 

Fiscal Year 201 6

 

Audit Fees

 

$

1,540 ,000

 

 

$

1,417 ,000

 

Audit-Related Fees   

 

 

 

 

 

 

Tax Fees

 

 

 

 

 

 

All Other Fees

 

 

 

 

 

 

Total

 

$

1,540 ,000

 

 

$

1, 417,000

 

 

Audit Fees were for professional services rendered for the integrated audit of the Company’s annual financial statements and internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002, for the review of the Company’s interim financial statements included in the Company’s Quarterly Reports on Form 10-Q, and for assistance with and review of documents filed by the Company with the SEC.

 

Audit Committee Pre-Approval Policies

 

The Audit Committee pre-approves all audit and permissible non-audit services provided by the Company ’s independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. Any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The Company’s independent registered public accounting firm and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent registered public accounting firm in accordance with such pre-approval, and the fees for the services performed to date. The Audit Committee, or its designee, may also pre-approve particular services on a case-by-case basis.

 

Required Vote

 

The ratification of the appointment of Ernst & Young LLP as the Company’s independent registered public accounting firm requires the affirmative vote of the holders of a majority of the shares of the Company’s Common Stock present at the Annual Meeting in person or by proxy and voted on this proposal.

 

THE BOARD OF DI RECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING MAY 27, 2018 .

 

12

 

 

PROPOSAL NO. 3

 

  APPROVAL OF AMENDMENT TO THE 2013 STOCK INCENTIVE PLAN

 

The Landec Corporation 2013 Stock Incentive Plan (the “ Plan ”) was approved by the Company’s stockholders on October 10, 2013 (the “ Effective Date ”). We are requesting that stockholders (1) approve an amendment to the Plan to increase the number of shares of common stock available for issuance by 1,000,000 shares from 2,000,000 to 3,000,000, and (2) re-approve the “performance goals” set forth in the Plan and used by the Company in granting awards that are intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended (the “ Code ”) (as further described below).

 

If stockholders do not approve this Proposal No. 3, the Plan will continue in effect in accordance with its terms as originally approved by the Company ’s stockholders.

 

Reasons for the Proposal

 

The Board of Directors and the Compensation Committee (the “Committee” ) believe there is an insufficient number of shares of the Company’s common stock (individually, a “ Share ” and collectively, the “ Shares ”) remaining for grants under the Plan to achieve the Company’s compensation objectives over the coming years. The Board of Directors and the Committee believe that equity incentives are necessary to remain competitive in the marketplace and align the interests of our employees with our stockholders. If the amendment to increase the number of shares of common stock available for issuance by 1,000,000 shares from 2,000,000 to 3,000,000 (the “ Amendment ”) is not approved by stockholders, the Company’s ability to include equity compensation as part of our directors’ and employees’ total compensation package will be severely limited because there are only 155,239 Shares remaining available for grant under the Plan as of August 21, 2017.

 

As is the case with all publicly-held companies, compensation of more than $1 million paid by the Company in any year to our chief executive officer or to any of our other three most highly paid named executive officers (other than our chief financial officer) is not deductible by the Company unless it qualifies as exempt “performance-based” compensation meeting certain requirements under Section 162(m) of the Code, including the requirement that the material terms of the related performance goals be disclosed to and approved by the Company ’s stockholders. The stockholders must re-approve the performance goals every five years; if the Company’s stockholders do not re-approve such performance goals, the Company will be denied a tax deduction with respect to such “performance-based” compensation. A description of the performance goals is set forth below under “Performance Goals” and the class of employees eligible to receive awards and the maximum amount of compensation that can be paid under the Plan is also described below.

 

General

 

The Plan contains the following compensation and corporate governance best practice provisions:

 

The Plan will be administered by the Committee or the Board of Directors, as further described below, and its authorized delegates. The Committee is composed entirely of independent directors who meet Nasdaq ’s and the Company’s standards for independence and who meet the definition of “outside directors” for purposes of the performance-based compensation exemption under Section 162(m) of Code.

 

If approved by the Company ’s stockholders, a total of 1,155,239 Shares, or approximately 4.2% of the Company’s total outstanding Shares as of August 21, 2017, will be available for issuance of awards under the Plan. The Shares available under the Plan, together with all outstanding awards granted under all of the Company’s prior equity award plans as of August 21, 2017, is equal to approximately 11.8% of the Company’s total outstanding Shares.

 

Participation by employees, directors, non-employee directors and consultants is at the discretion of the Committee. A non-employee director may not receive awards exceeding 30,000 Shares in any fiscal year. The Plan also places limits on the number of awards that other participants may receive in any fiscal year.

 

Stock options and stock appreciation rights must be granted with an exercise price of at least 100% of the fair market value of a Share on the date of grant.

 

Repricing of stock options and stock appreciation rights and cash buyouts of options and stock appreciation rights that are “underwater” cannot be done without prior stockholder approval.

 

The Committee may recover awards and payments under or gain in respect of awards to comply with Section 10D of the Securities Exchange Act of 1934.

 

The Plan has a seven-year life span and therefore expires on October 10, 2020.

 

13

 

 

The following is a summary of the principal features of the Plan. This summary, however, does not purport to be a complete description of all of the provisions of the Plan. A copy of the Plan, together with the Amendment, is attached as Appendix A to this Proxy Statement.

 

Share Reserve

 

Subject to adjustment as provided for below, the aggregate number of Shares that will be available for issuance of awards under the Plan is 3,000,000 Shares. For sake of clarity, the 3,000,000 shar e limit is reduced by the 1,844,761 Shares issued or issuable pursuant to any awards that were previously granted under the Plan as of August 21, 2017.

 

If awards under the Plan are forfeited or terminate before being exercised or becoming vested, then the Shares underlying those awards will again become available under the Plan. Shares that are used by a participant to pay withholding taxes or as payment for the exercise price of an award shall cease to be available under the Plan. Stock appreciation rights that are settled in Shares will be counted in full against the number of Shares available for issuance under the Plan, regardless of the number of Shares issued upon settlement of the stock appreciation rights. To the extent an award under the Plan is paid out in cash rather than Shares, such cash payment shall not result in a reduction of the number of Shares available for issuance under the Plan. Any dividend equivalents distributed as Share equivalents under the Plan will cease to be available under the Plan.

 

Under the Plan, no recipient may be awarded any of the following during any fiscal year: (i) stock options covering in excess of 500,000 Shares; (ii) stock grants and stock units covering in the aggregate in excess of 250,000 Shares; or (iii) stock appreciation rights covering in excess of 500,000 Shares. In addition, a non-employee director may not be granted awards covering in excess of 30,000 Shares in the aggregate during any fiscal year.

 

In the event of a subdivision of the outstanding Shares, a declaration of a dividend payable in Shares, a stock split or reverse stock split, a recapitalization, reorganization, merger, liquidation, spin-off, exchange of Shares or a similar occurrence, the Committee will, in its discretion, make appropriate adjustments to the number of Shares and kind of shares or securities issuable under the Plan (on both an aggregate and per-participant basis) and under each outstanding award. Appropriate adjustments will also be made to the exercise price of outstanding options and stock appreciation rights.

 

Administration

 

The Committee administers and interprets the Plan, provided that the Board of Directors shall administer and interpret the Plan with respect to all awards granted to non-employee directors. The Committee (or with respect to non-employee directors, the Board of Directors) shall have full authority and sole discretion to take any actions it deems necessary or advisable for the administration of the Plan, including the power and authority to: (i) select the individuals who are eligible to receive awards under the Plan; (ii) determining the type, number, vesting requirements and other features and conditions of such awards and amending such awards; (iii) correcting any defect, supplying any omission, or reconciling any inconsistency in the Plan or any award agreement; (iv) accelerating the vesting, or extending the post-termination exercise term, of awards at any time and under such terms and conditions as it deems appropriate; (v) interpreting the Plan; (vi) making all other decisions relating to the operation of the Plan; and (vii) adopting such plans or subplans as may be deemed necessary or appropriate to provide for the participation by employees of the Company and its subsidiaries and affiliates who reside outside the U.S. The Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. The Committee ’s determinations under the Plan shall be final and binding on all persons. The Committee may delegate (i) to one or more officers of the Company the power to grant awards to the extent permitted by Section 157(c) of the Delaware General Corporation Law; and (ii) to such employees or other persons as it determines such ministerial tasks as it deems appropriate.

 

Eligibility and Types of Awards Under the Plan

 

The Plan permits the Committee to grant stock options, stock appreciation rights, stock units and stock grants. Persons eligible to participate in the Plan include employees and consultants of the Company, any parent, subsidiary or affiliate of the Company, and non-employee directors of the Company.

 

14

 

 

Options

 

The Committee may grant nonstatutory stock options or incentive stock options (which may be entitled to favorable tax treatment) under the Plan. The number of Shares covered by each stock option granted to a participant will be determined by the Committee.

 

The stock option exercise price must be at least 100% of the fair market value of a Share on the date of grant (110% for incentive stock options granted to stockholders who own more than 10% of the total outstanding Shares of the Company, its parent or any of its subsidiaries). Each stock option award will be evidenced by a stock option agreement which will specify the date when all or any installment of the award is to become exercisable. The stock option agreement shall also specify the term of the option. A stock option agreement may provide for accelerated vesting in the event of the participant ’s death, disability, or other events. Notwithstanding any other provision of the Plan, no option can be exercised after the expiration date provided in the applicable stock option agreement. Except in connection with certain corporate transactions, repricing of stock options, and cash buyouts of options by the Company at a time when the exercise price of the option exceeds the fair market value of the underlying shares are prohibited without stockholder approval. The exercise price of stock options must be paid at the time the Shares are purchased. Consistent with applicable laws, regulations and rules, payment of the exercise price of stock options may be made in cash (including by check, wire transfer or similar means) or, if specified in the stock option agreement, by cashless exercise, by surrendering or attesting to previously acquired Shares, or by any other legal consideration approved by the Committee.

 

Unless otherwise provided by the Committee, unvested stock options will generally expire upon termination of the participant ’s service, and vested stock options will generally expire six months following the termination of the participant’s service. The term of a stock option shall not exceed seven years from the date of grant (five years for incentive stock options granted to stockholders who own more than 10% of the total outstanding Shares of the Company, its parent or any of its subsidiaries).

 

Stock Grants

 

The Committee may grant awards of Shares under the Plan. Participants may or may not be required to pay cash consideration to the Company at the time of grant of such Shares. The number of Shares associated with each stock grant will be determined by the Committee, and each grant may be subject to time and/or performance vesting conditions established by the Committee. Shares that are subject to such conditions are “restricted,” i.e. subject to forfeiture if the performance goals and/or other conditions are not satisfied. When the restricted stock award conditions are satisfied, then the participant is vested in the Shares and has complete ownership of the Shares. A stock grant agreement may provide for accelerated vesting in the event of the participant ’s death, disability or other events.

 

A holder of a stock grant under the Plan will have the same voting, dividend and other rights as the Company ’s other stockholders; provided, however, that the holder may be required to invest any cash dividends received in additional Shares, with any such additional Shares subject to the same conditions and restrictions as the stock grant with respect to which the dividends were paid.

 

Stock Units

 

The Committee may award stock units under the Plan. Participants are not required to pay any consideration to the Company at the time of grant of a stock unit. The number of Shares covered by each stock unit award will be determined by the Committee. A stock unit is a bookkeeping entry that represents a Share. A stock unit is similar to restricted stock in that the Committee may establish performance goals and/or other conditions that must be satisfied before the participant can receive any benefit from the stock unit. When the participant satisfies the conditions of the stock unit award, the Company will settle the vested stock units in cash or Shares or any combination of both. Settlement may occur or commence when the vesting conditions are satisfied or may be deferred, subject to applicable laws, to a later date. If stock units are settled in cash, the payment amount may be based on the average of the fair market value of a Share over a series of trading days or on other methods. A stock unit agreement may provide for accelerated vesting in the event of the participant ’s death, disability or other events.

 

A holder of stock units will have no voting rights, but may have a right to dividend equivalents. A dividend equivalent right entitles the holder to be credited with an amount equal to the amount of cash dividends paid on a Share while the stock unit is outstanding. A dividend equivalent right may be settled in cash, Shares or a combination of both, and until settlement, will remain subject to the same conditions and restrictions as the stock units to which they attach.

 

15

 

 

Stock Appreciation Rights

 

The Committee may grant stock appreciation rights under the Plan. The number of Shares covered by each stock appreciation right will be determined by the Committee. Upon exercise of a stock appreciation right, the participant will receive payment from the Company in an amount equal to (a) the excess of the fair market value of a Share on the date of exercise over the exercise price multiplied by (b) the number of Shares with respect to which the stock appreciation right is exercised.

 

The exercise price of a stock appreciation right may not be less than 100% of the fair market value of a Share on the date of grant. The stock appreciation right agreement will specify the date when all or any installment of the award is to become exercisable. A stock appreciation right agreement may provide for accelerated vesting in the event of the participant ’s death, disability or other events. Except in connection with certain corporate transactions, repricing of stock appreciation rights and cash buyouts of stock appreciation rights by the Company at a time when the exercise price of the stock appreciation right exceeds the fair market value of the underlying shares are prohibited without stockholder approval. Stock appreciation rights may be paid in cash or Shares or any combination of both, as determined by the Committee, in its sole discretion.

 

Unless otherwise provided by the Committee, unvested stock appreciation rights will generally expire upon termination of the participant ’s service, and vested stock appreciation rights will generally expire six months following termination of the participant’s service. The terms of a stock appreciation right shall not exceed seven years from the date of grant.

 

Transfer of Awards

 

Unless otherwise provided in the applicable award agreement, and then only to the extent permitted by applicable law, awards under the Plan may not be transferred by the holder thereof, other than by will or by the laws of descent and distribution.

 

Performance Goals

 

Awards under the Plan may be made subject to performance conditions in addition to time-based vesting conditions. Such performance conditions may be established and administered in accordance with the requirements of Section 162(m) of the Code for awards intended to qualify as “performance-based compensation” thereunder. Performance conditions under the Plan shall utilize one or more objective measurable performance goals as determined by the Committee based upon one or more factors (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a parent, Company, affiliate, subsidiary, divisional, line of business, unit, project or geographical basis or in combinations thereof), including, but not limited to: (i)  operating income; (ii) earnings before interest, taxes, depreciation and amortization; (iii) earnings; (iv) cash flow; (v) market share; (vi) sales or revenue; (vii) expenses; (viii) cost of goods sold; (ix) profit/loss or profit margin; (x) working capital; (xi) return on equity or assets; (xii) earnings per share; (xiii) economic value added; (xiv)  price/earnings ratio; (xv) debt or debt-to-equity; (xvi) accounts receivable; (xvii) writeoffs; (xviii) cash; (xix) assets; (xx) liquidity; (xxi) operations; (xxii) intellectual property (e.g., patents); (xxiii) product development; (xxiv) regulatory activity; (xxv) manufacturing, production or inventory; (xxvi) mergers and acquisitions or divestitures; and/or (xxvii) financings. To the extent consistent with the requirements of Section 162(m), the Committee may provide that the performance goals applicable to an award will be adjusted in an objectively determinable manner to reflect events (such as acquisitions and dispositions) that affect the performance goals during the applicable performance period. Awards to participants who are not subject to the limitations of Section 162(m) may be determined without regard to performance goals and may involve the Committee’s discretion. The Committee has the authority to award and/or pay compensation that is not exempt from the limits on deductibility under Section 162(m) of the Code.

 

Acceleration of Awards upon a Merger or Sale of Assets

 

In the event of a change in control of the Company or a covered transaction (each as defined in the Plan), the Committee may, with respect to some or all outstanding awards or a portion thereof, provide for the assumption, substitution or continuation of awards, accelerated vesting, or cancellation with or without consideration, in all cases without participant consent. Unless the Committee determines otherwise, each outstanding award will automatically terminate or be forfeited upon consummation of a change in control or a covered transaction, unless it is assumed or substituted.

 

Restrictions

 

The Committee may cancel, rescind, withhold or otherwise limit or restrict any award at any time if the participant is not in compliance with the terms of the award agreement or the Plan, or the participant breaches any other agreement with the Company with respect to non-competition, nonsolicitation or confidentiality. In addition, the Committee may recover awards and payments under or gain in respect of awards to the extent required to comply with any Company policy or Section 10D of the Securities Exchange Act of 1934 or any other applicable law or regulation.

 

16

 

 

Amendment and Termination

 

The Board of Directors may amend the Plan at any time and for any reason, provided that any such amendment will be subject to stockholder approval to the extent such approval is required by applicable laws, regulations or rules. The Board of Directors may terminate the Plan at any time and for any reason. Unless earlier terminated by the Board of Directors, the Plan will expire by its terms on October 10, 2020, the seventh anniversary of the Effective Date. The termination or amendment of the Plan may not impair in any material respect any award previously made under the Plan.

 

Federal Income Tax Consequences

 

The following is a brief summary of the U.S. federal income tax consequences applicable to awards granted under the Plan based on federal income tax laws in effect on the date of this Proxy Statement. This summary is not intended to be exhaustive and does not address all matters which may be relevant to a particular participant based on his or her specific circumstances. The summary expressly does not discuss the income tax laws of any state, municipality, or non-U.S. taxing jurisdiction, or the gift, estate, excise (including the rules applicable to deferred compensation under Section 409A of the Code), or other tax laws other than federal income tax law. The following is not intended or written to be used, and cannot be used, for the purposes of avoiding taxpayer penalties. Because individual circumstances may vary, the Company advises all participants to consult their own tax advisor concerning the tax implications of awards granted under the Plan.

 

A recipient of a stock option or stock appreciation right generally will not have taxable income upon the grant of the stock option or stock appreciation right. For nonstatutory stock options and stock appreciation rights, in general, the participant will recognize ordinary income upon exercise in an amount equal to the difference between the fair market value of the Shares on the date of exercise and the exercise price. Any gain or loss recognized upon any later disposition of the Shares generally will be a capital gain or loss.

 

In general, a participant realizes no ordinary taxable income upon the exercise of an incentive stock option. However, the exercise of an incentive stock option may result in an alternative minimum tax liability to the participant. With some exceptions, a disposition of Shares purchased under an incentive stock option within two years from the date of grant or within one year after exercise produces ordinary income to the participant equal to the value of the shares at the time of exercise less the exercise price. Any additional gain recognized in the disposition is treated as a capital gain. If the participant does not dispose of the Shares until after the expiration of these one and two-year holding periods, any gain or loss recognized upon a subsequent sale is treated as a long-term capital gain or loss.

 

For awards of restricted stock, unless the participant properly elects to be taxed at the time of receipt of the restricted stock, the participant will not have taxable income upon the receipt of the award, but upon vesting will recognize ordinary income equal to the fair market value of the Shares at the time of vesting less the amount (if any) paid for such Shares.

 

A participant is not deemed to receive any taxable income at the time an award of stock units is granted. When vested stock units (and dividend equivalents, if any) are settled and distributed, the participant will recognize ordinary income equal to the amount of cash and/or the fair market value of Shares received less the amount (if any) paid for such stock units.

 

If the participant is an employee or former employee, the amount a participant recognizes as ordinary income in connection with any award is subject to withholding taxes (not applicable to incentive stock options) and the Company is generally allowed a tax deduction equal to the amount of ordinary income recognized by the participant. Section 162(m) of the Code contains special rules regarding the federal income tax deductibility of compensation paid to the Company ’s chief executive officer and to each of the Company’s other three most highly compensated executive officers, other than the chief financial officer. The general rule is that annual compensation paid to any of these specified executives will be deductible only to the extent that it does not exceed $1,000,000. However, the Company can preserve the deductibility of certain compensation in excess of $1,000,000 if such compensation qualifies as “performance-based compensation” by complying with certain conditions imposed by the Section 162(m) rules. The Committee may structure awards to qualify as performance-based compensation, but will continue to have authority to provide compensation that is not exempt from the limits on deductibility under Section 162(m) of the Code.

 

17

 

 

A participant who defers the payout of an award or the delivery of proceeds payable upon an award exercise will recognize ordinary income at the time of payout in the same amounts as described above. If the participant receives Shares, any additional gain or loss recognized upon later disposition of the Shares is capital gain or loss. Any deferrals made under the Plan, including awards granted under the Plan that are considered to be deferred compensation, must satisfy the requirements of Section 409A of the Code to avoid adverse tax consequences to participating employees. If an award is subject to and fails to satisfy the requirements of Section 409A, the recipient of that award may recognize ordinary income on the amounts deferred under the award, to the extent vested, which may be prior to when the compensation is actually or constructively received. Also, if an award that is subject to Section 409A fails to comply with Section 409A ’s provisions, Section 409A imposes an additional 20 percent federal income tax on compensation recognized as ordinary income, as well as interest on such deferred compensation. In addition, certain states (such as California), have laws similar to Section 409A and as a result, failure to comply with such similar laws may result in additional state income, penalty and interest charges.

 

Under the Code, the vesting or accelerated exerc isability of options or the vesting and payments of other awards in connection with a change of control of a corporation may be required to be valued and taken into account in determining whether participants have received compensatory payments, contingent on the change in control, in excess of certain limits. If these limits are exceeded, a substantial portion of amounts payable to the participant, including income recognized by reason of the grant, vesting or exercise of awards, may be subject to an additional 20% federal tax and may be non-deductible to the corporation.

 

Plan Benefits

 

Benefits, if any, payable under the Plan for 2017 and future years are dependent on the actions of the Committee and are therefore not determinable at this time. Our exec utive officers are eligible to receive awards under the Plan and, accordingly, our executive officers have an interest in this Proposal. In 2017, the following grants were made under the Plan to the persons and groups listed below:

Name and Principal Position

 

Awards (Shares)

Fair Value of

Award ($)

Molly A. Hemmeter

 

247,406

1,558,95 9

President and Chief Executive Officer

     
       

Gregory S. Skinner

 

17,825

245,999

Chief Financial Officer and Vice President

     

of Finance and Administration

     
       

Ronald L. Midyett

 

14,290

197,202

Vice President, Chief Operating Officer and

     

President of Apio, Inc

     

 

     

Larry D. Hiebert

 

13,450

185,610

President of Lifecore Biomedical, Inc.

     

and Vice President of Landec

     

 

     

Steven P. Bitler

 

Vice President of Corporate Technology

     
       

All Executive Officers, as a group

 

292,972

2,187,7 70

All Non-employee Directors, as a group

 

All Non-Executive Officer Employees, as a group

 

127,550

665,043

 

Required Vote

 

T he amendment to the Plan to increase the number of shares available for issuance by 1,000,000 shares from 2,000,000 to 3,000,000 and to re-approve the plan’s performance goals for purposes of Code Section 162(m) must be approved by Shares representing a majority of the Shares present and entitled to vote on the proposal. Shares present and not voted, whether by broker non-vote, abstention or otherwise, will have the same effect as a vote against this proposal.

 

18

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “ FOR” PROPOSAL NO. 3 TO APPROVE THE AMENDMENT TO THE PLAN TO INCREASE THE NUMBER OF SHARES AVAILABLE FOR ISSUANCE BY 1,000,000 SHARES FROM 2,000,000 TO 3,000,000 AND TO RE-APPROVE THE PLAN’S PERFORMANCE GOALS FOR PURPOSES OF CODE SECTION 162(m).

 

EQUITY COMPENSATION PLAN INFORMATION

 

The following table summarizes information with respect to options and other equity awards under Landec ’s equity compensation plans as of May 28, 2017:

 

Plan Category

 

Number of

Securities to

be Issued Upon

E xercise

of Outstanding

Options,

Warrants and

Rights (1)

 

 

Weighted

Average

Exercise Price

of Outstanding

Options,

Warrants

and Rights (2)

 

 

Number of

Securities

Available for

Future

Issuance Under

Equity

Compensation

Plans

(Excluding

Securities

Reflected in

Column (a))

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Equity compensation plans approved by stockholders

 

 

2,080,897

 

 

$

13.2 0

 

 

 

155,239

(3)

 

(1)

Consists of stock options and restricted stock units outstanding under Landec’s equity compensation plans, as no stock warrants or other rights were outstanding as of May 28, 2017 .

(2)

The weighted average exercise price does not take restricted stock units into account as restricted stock units have no purchase price.

(3)

Represents shares remaining for issuance pursuant to the 2013 Stock Incentive Plan.

 

The 2013 Stock Incentive Plan

 

The 2013 Stock Incentive Plan (the 2013 Plan ), which was approved by stockholders, authorizes the grant of equity awards, including stock options, restricted stock and restricted stock units to employees, including officers and directors, outside consultants and non-employee directors of the Company. 2,000,000 shares are authorized to be issued under this plan. The exercise price of stock options to be granted under the 2013 Plan will be the fair market value of the Company’s Common Stock on the date the options are granted. Options to be granted under the 2013 Plan will generally be exercisable upon vesting and will generally vest ratably over three years.

 

The 2009 Stock Incentive Plan

 

The 2009 Stock Incentive Plan (the 2009 Plan ), which was approved by stockholders and has been terminated, authorized the grant of equity awards, including stock options, restricted stock and restricted stock units to employees, including officers and directors, outside consultants and non-employee directors of the Company. 1,900,000 shares were authorized to be issued under this plan. The exercise price of stock options granted under the 2009 Plan was the fair market value of the Company’s Common Stock on the date the options were granted. Options granted under the 2009 Plan were exercisable upon vesting and generally vested ratably over three years. No further awards will be made pursuant to the 2009 Plan.

 

19

 

 

  PROPOSAL NO. 4

 

NON-BINDING ADVISORY VOTE ON EXECUTIVE COMPENSATION

 

The Compensation Discussion and Analysis beginning on page 27 of this Proxy Statement describes the Company’s executive compensation program and the compensation decisions that the Compensation Committee and Board of Directors made in fiscal year 2017 with respect to the compensation of our named executive officers. The Board of Directors is asking stockholders to cast a non-binding, advisory vote FOR the following resolution:

 

RESOLVED, that the compensation paid to 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, is hereby APPROVED on an advisory basis.”

 

We urge stockholders to read the Compensation Discussion and Analysis beginning on page 27  of this Proxy Statement, as well as the Summary Compensation Table and related compensation tables, appearing on pages 39 through 42 , which provide detailed information on the Company’s compensation policies and practices.

 

As we describe in the Compensa tion Discussion and Analysis, our executive compensation program is designed to attract, reward and retain talented officers and embodies a pay-for-performance philosophy that supports Landec’s business strategy and aligns the interests of our executives with our stockholders. Specifically, executive compensation is allocated among base salaries and short- and long-term incentive compensation. The base salaries are fixed in order to provide the executives with a stable cash income, which allows them to focus on the Company’s strategies and objectives as a whole, while the short- and long-term incentive compensation are designed to both reward the named executive officers based on the Company’s overall performance and align the named executive officers’ interests with those of our stockholders. Our annual cash incentive award program is intended to encourage our named executive officers to focus on specific short-term goals important to our success. Our executive officers’ cash incentive awards are determined based on objective performance criteria. The Company’s current practice is to grant our named executive officers both stock options and restricted stock units. This mixture is designed to provide a balance between the goals of increasing the price of our Common Stock and aligning the interests of our executive officers with those of our stockholders (as stock options only have value if our stock price increases after the option is granted) and encouraging retention of our executive officers. Because grants are generally subject to vesting schedules, they help ensure that executives always have significant value tied to long-term stock price performance.

 

For these reasons, the Board of Directors is asking stockholders to support this proposal. Although the vote we are asking you to cast is non-binding, the Compensation Committee and the Board of Directors value the views of our stockholders and will consider the outcome of the vote when determining future compensation arrangements for our named executive officers.

 

At the 2016 annual meeting of stockholders, 98.4% of votes cast expressed support for our compensation policies and practices, and we believe our program continues to be effective.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “ FOR” APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.

 

20

 

 

PROPOSAL NO. 5.

 

NON-BINDING ADVISORY VOTE ON FREQUENCY OF EXECUTIVE

 

COMPENSATION ADVISORY VOTES

 

In Proposal 4, we are asking stockholders to cast an advisory vote for the compensation disclosed in this proxy statement that the Company paid in 2017 to our named executive officers. This advisory vote is referred to as a “say-on-pay” vote. In this Proposal 5, the Board of Directors is asking stockholders to cast a non-binding, advisory vote on how frequently we should have say-on-pay votes in the future. Stockholders will be able to mark the enclosed proxy card or voting instruction form on whether to hold say-on-pay votes every one, two or three years. Alternatively, you may indicate that you are abstaining from voting.

 

RESOLVED, that the stockholders of the Company recommend, in a non-binding vote, whether an advisory vote to approve the compensation of the Company’s named executive officers should occur every one, two or three years.

 

After considering this item, the Board of Directors has determined that a vote every year on executive compensation is appropriate. By providing an advisory vote on executive compensation on an annual basis, our stockholders will be able to provide us with timely and direct input on our compensation philosophy, policies and practices as disclosed in the proxy statement every year. Therefore, the Board of Directors recommends that you vote to hold say-on-pay votes every year.

 

This vote, like the say-on-pay vote itself, is not binding on the Board of Directors. However, the Board of Directors values stockholders’ input and will consider the outcome of this vote when determining the frequency of future say-on-pay votes.

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” CONDUCTING FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION EVERY YEAR.

 

21

 

 

AUDIT COMMITTEE REPORT

 

The information contained in this report shall not be deemed to be “ soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended (the “ Securities Act ”), or the Exchange Act.

 

Composition

 

The Audit Committee of the Board of Directors consists of the three directors whose names appear below and operates under a written charter adopted by the Board of Directors. Each member of the Audit Committee meets the independence and financial experience requirements of NASDAQ and the SEC currently in effect. In addition, the Board of Directors has determined that Mr. Goldby and Ms. Pankopf are audit committee financial experts, as defined by the rules and regulations of the SEC.

   

Responsibilities

 

The responsibilities of the Audit Committee include appointing an independent registered public accounting firm and assisting the Board of Dir ector’s oversight of the preparation of the Company’s financial statements. The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements in accordance with generally accepted auditing standards and for issuing a report thereon. Management is responsible for the Company’s internal controls and financial reporting process. The Audit Committee’s responsibility is to oversee these processes and the Company’s internal controls. The Audit Committee members are not acting as professional accountants or auditors, and their functions are not to duplicate or to certify the activities of management and the independent registered public accounting firm.

 

Review with Management an d Independent Auditors

 

The Audit Committee held four meetings during fiscal year 2017. The Audit Committee met and held discussions with management and representatives of the Company’s independent registered public accounting firm, Ernst & Young LLP. Management represented to the Audit Committee that the Company’s consolidated financial statements for the fiscal year ended May 28, 2017 were prepared in accordance with generally accepted accounting principles, and the Audit Committee has reviewed and discussed the consolidated financial statements for the fiscal year ended May 28, 2017 with management and the Company’s independent registered public accounting firm.

 

The Audit Committee met with the Company ’s independent registered public accounting firm, with and without management present, to discuss the overall scope and plans for their audit, the results of their examination, their evaluation of the Company’s internal controls and the overall quality of the Company’s financial reporting. The Audit Committee discussed with the independent registered public accounting firm matters required to be discussed by Statement on Auditing Standards (“ SAS ”) No. 114, The Auditor’s Communication with Those Charged with Governance, as adopted by the Public Company Accounting Oversight Board (“ PCAOB ”) in Rule 3200T, which supersedes SAS No. 61, as amended, including the judgment of the independent registered public accounting firm as to the quality of the Company’s accounting principles.

 

The Audit Committee has received the written disclosures and the letter from Ernst & Young LLP required by the PCAOB regarding the independent accountants’ communications with the Audit Committee concerning independence, and has discussed with Ernst & Young LLP its independence.

 

Summar y

 

Based upon the Audit Committee ’s discussions with management and the Company’s independent registered public accounting firm, the Audit Committee’s review of the representations of management and the report of the independent registered public accounting firm to the Audit Committee, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10- K for the fiscal year ended May 28, 2017, as filed with the SEC.

 

This report is submitted by the Audit Committee.

Tonia Pankopf (Chairperson)

Steven Goldby

Robert Tobin

 

22

 

 

EXECUTIVE OFFICERS OF THE COMPANY

 

The following sets forth certain information with regard to each named executive officer and each executive officer of the Company for fiscal year 2017. Ages are as of August 21, 2017 .

   

Molly A. Hemmeter (age 50) has been the Company’s President and Chief Executive Officer since October 15, 2015. Prior to that she served as the Chief Operating Officer of the Company from January 2014 to October 2015, prior to which she served as Chief Commercial Officer of the Company from December 2010 to January 2014 and Vice President, Business Development and Global Marketing of the Company from June 2009 to December 2010. From July 2006 until joining the Company in June 2009, Ms. Hemmeter was Vice President of Global Marketing and New Business Development for the Performance Materials division of Ashland, Inc., a global specialty chemicals company. Prior to joining Ashland, Inc., Ms. Hemmeter was Vice President of Strategy and Marketing for Siterra Corporation and Chief Marketing Officer for CriticalArc Technologies in the San Francisco Bay Area, both of which were privately held software startup companies that were eventually acquired by larger entities, and she previously held various positions at Bausch & Lomb and Eli Lilly and Company.

 

Gregory S. Skinner (age 5 6) has been Chief Financial Officer and Vice President of Finance of the Company since November 1999 and Vice President of Administration since November 2000. From May 1996 to October 1999, Mr. Skinner served as Controller of the Company. From 1994 to 1996, Mr. Skinner was Controller of DNA Plant Technology and from 1988 to 1994 he was with Litton Electron Devices. Prior to joining Litton Electron Devices, Mr. Skinner was with Litton Industries, Inc. and Arthur Andersen & Company.

 

Ronald L. Midyett (age 5 1) has been Chief Operating Officer since October 2015. He has served as President of Apio since January 2008 and as a Vice President of the Company since February 2008. Mr. Midyett joined Apio in May 2005 as Chief Operating Officer. Prior to joining Apio, Mr. Midyett was Senior Vice President of Operations for Dole Fresh Vegetables. Mr. Midyett has over 30 years of technology and operations experience in the produce industry. Mr. Midyett was a member of the board of directors of the United Fresh Fruit and Vegetable Association from 2009 to 2015 , served as chairman from April 2013 through April 2014 , and is currently a member of its executive committee. Mr. Midyett is currently a director of Windset Holdings 2010 Ltd., a privately held Canadian corporation.

 

Larry D. Hiebert (age 6 1) has been President of Lifecore and a Vice President of the Company since June 2013. Mr. Hiebert served as Lifecore’s Vice President and General Manager from July 2006 to June 2013. Prior to that he was Lifecore’s Vice President of Operations from March 2004 to June 2006 and Director of Operations from March 1997 to March 2004, and held various Manufacturing and Materials Management positions within Lifecore from October 1983 to March 1997. Mr. Hiebert has over 30 years of operational experience in the biomaterials industry.

 

Mr. Hiebert retired as President of Lifecore and a Vice President of the Company on May 28 , 2017. He was replaced by Mr . James Hall who had been serving as the Vice President and General Manager of Lifecore .

 

Steven P. Bitler, Ph.D. (age 5 9) has been Vice President, Corporate Technology of the Company since March 2002. From 1988 until March 2002, Dr. Bitler held various positions with the Company related to the Company’s polymer product development and thermal switch products. Prior to joining the Company, Dr. Bitler developed new high strength polymeric materials at SRI International.

 

23

 

 

COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth the beneficial ownership of the Company ’s Common Stock as of August 21, 2017 as to (i) each person who is known by the Company to beneficially own more than five percent of any class of the Company’s voting stock, (ii) each of the Company’s directors, (iii) each of the executive officers named in the Summary Compensation Table of this proxy statement (the “ Named Executive Officers ”), and (iv) all directors and executive officers as a group. The business address of each director and executive officer named below is c/o Landec Corporation, 3603 Haven Avenue, Menlo Park, CA 94025.

 

 

 

Shares Beneficially Owned (1)

 

Name

 

Number of  Shares

of Common Stock

 

 

Percent of Total (2)

 

 

 

 

 

 

 

 

 

 

5% Stockholders

 

 

 

 

 

 

 

 

NWQ Investment Management Company, LLC

2049 Century Park East, 16 th Floor

Los Angeles, CA 90067

 

 

3,726,173

(3)

 

 

13.55

%

 

 

 

 

 

 

 

 

 

Franklin Resources, Inc

55 Challenger Road, Suite 501  

Ridgefield Park , NJ 07660

 

 

2,847, 300

(4)

 

 

10.35

%

 

 

 

 

 

 

 

 

 

Wynnefield Capital, Inc

450 Seventh Ave, #509

New York, NY 10123

 

 

2,682,400

(5)

 

 

9. 75

%

 

 

 

 

 

 

 

 

 

Dimensional Fund Advisors, L.P.

 

 

2,297,667

(6)

 

 

8. 35

%

6300 Bee Cave Road, Building One

 

 

 

 

 

 

 

 

Austin, TX 78746

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BlackRock, Inc

55 E. 52nd Street

 

 

1,839,207

(7)

 

 

6. 69

%

New York, NY 10055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Executive Officers and Directors

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Molly A. Hemmeter

President and Chief Executive Officer

 

 

359,651

( 8)

 

 

1.29

%

 

 

 

 

 

 

 

 

 

Gregory S. Skinner

Chief Financial Officer and Vice President of Finance and Administration

 

 

303,710

( 9)

 

 

1. 10

%

 

 

 

 

 

 

 

 

 

Ronald L. Midyett

Chief Operating Officer and Vice President

 

 

137,802

(1 0)

 

 

*

 

 

 

 

 

 

 

 

 

 

Larry D. Hiebert

President of Lifecore Biomedical, Inc. and Vice President of Landec

 

 

(1 1)

 

 

*

 

 

 

 

 

 

 

 

 

 

Steven P. Bitler

Vice President of Corporate Technology

 

 

86,332

(1 2)

 

 

*

 

 

24

 

 

 

 

Shares Beneficially Owned (1)

 

Name

 

Number of Shares

of Common Stock

 

 

Percent of Total (2)  

 

Albert D. Bolles, Ph.D., Director

 

 

12,976

 

 

 

*

 

 

               

Deborah Carosella, Director

   

0

     

*

 
                 

Frederick Frank, Director

 

 

56,892

(1 3)

 

 

*

 

 

               

Steven Goldby, Director

 

 

49,373

(1 4)

 

 

*

 

 

               

Tonia Pankopf, Director

 

 

27,551

(1 5)

 

 

*

 

 

               

Catherine A. Sohn, Pharma.D., Director

 

 

29,805

(1 6)

 

 

*

 

 

               

Gary T. Steele , Director

 

 

179,782

(1 7)

 

 

*

 

 

               

Robert Tobin, Director  

 

 

54,459  

( 18)

 

 

*

 

 

               

All directors and executive officers as a group (13 persons)

 

 

1,298,293

( 19)

 

 

4. 62

%

 

               

* Less than 1%

               

 

 

(1)

Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the persons named in the table have sole voting and investment power with respect to all shares of capital stock.

 

 

(2)

As of August 21, 2017, 27,506,712 shares of Common Stock were issued and outstanding. Percentages are calculated with respect to a holder of options exercisable within 60 days after August 21, 2017 as if such holder had exercised his options. Options held by other holders are not included in the percentage calculation with respect to any other holder.

 

 

(3)

This information is based on a Form 13F filed by NWQ Investment Management Company, LLC wi th the SEC showing such beneficial owner’s holdings as of June 30, 2017 .

 

 

(4)

This information is based on a Form 13F filed by Franklin Resources, Inc. with the SEC showing such beneficial owner’s holdings as of June 30, 2017 .

 

 

(5)

This information is based on a Form 13F filed by Wynnefield Capital, Inc with the SEC showing such beneficial owner ’s holdings as of June 30, 2017 .

 

 

(6)

This information is based on a Form 13F filed by Dimensional Fund Advisors LP with the SEC showing such beneficial owner’s holdings as of June 30, 2017 .

 

 

(7)

This information is based on a Form 13F filed by nine institutions with the SEC: BlackRock Institutional Trust Company, N.A.; BlackRock Advisors, BlackRock Advisors, LLC; BlackRock Investment Management, LLC; BlackRock (Netherlands) B.V.; Blackrock Financial Management, Inc, BlackRock Asset Management Canada Limited, Blackrock Asset Management Schweiz AG; Blackrock Asset Management Ireland Limited under the parent company BlackRock, Inc showing such beneficial owners’ holdings as of June 30, 2017 .

   

 

( 8)

This number includes 321,233 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

( 9)

This number includes 65,000 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

25

 

 

 

(1 0)

This number includes 53,333 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(1 1)

Mr. Hiebert retired as President of Lifecore and a Vice President of the Company on May 28, 2017 as such he has zero shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(1 2)

This number includes 16,666 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(1 3)

This number includes 10,000 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(1 4)

This number includes 1 0,000 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(1 5)

This number includes 6,667 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(16 )

This number includes 10,000 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(17 )

This number includes 91,666 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

(18 )

This number includes 1 0,000 shares subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

( 19)

This number includes an aggregate of 594,565 shares held by officers and directors that are subject to outstanding stock options exercisable within 60 days after August 21, 2017 .

 

 

26

 

 

EXECUTIVE COMPENSATION AND RELATED INFORMATION

 

Compensation Discussion and Analysis

 

The following Compensation Dis cussion and Analysis (“CD&A”) describes the philosophy, objectives and structure of our 2017 executive compensation program. This CD&A is intended to be read in conjunction with the tables which immediately follow this section, which provide further historical compensation information.

 

The following executive officers constituted our Named Executive Officers (“ NEOs”) throughout the past fiscal year:

 

Molly Hemmeter

President and Chief Executive Officer

Gregory S. Skinner

Vice President of Finance and Administration, and Chief Financial Officer

Ronald L. Midyett

Vice President and Chief Operating Officer, and President of Apio

Larry D. Hiebert

Vice President and President of Lifecore

Steven P. Bitler

Vice President of Corporate Technology

 

CD&A Reference Guide

 

Executive Summary

Section I

Compensation Philosophy and Objectives

Section II

Establishing Executive Compensation

Section III

Compensation Competitive Analysis

Section IV

Elements of Compensation

Section V

Additional Compensation Practices and Policies

Section  VI

 

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I.

Executive Summary

 

We made good progress toward our long-term strategic vision this past year as we continued to deliver on our mission to create innovative products that support people ’s individual health and wellness goals. Under the leadership of Molly Hemmeter, who became Landec’s President and CEO in October 2015, the strategic direction of our Apio and Lifecore businesses has become more focused and has better positioned Landec for long-term growth.

 

Landec had many noteworthy accomplishments in fiscal year 2017 compar ed to fiscal year 2016:

 

1)     Lifecore delivered a record year with revenues increasing 18% to $59.4 million and operating income increasing 13% to $15.9 million. The shift in Lifecore’s business model from a premium supplier of hyaluronic acid (HA) to a fully integrated contract development and manufacturing organization (CDMO) for difficult-to-handle biomaterials is delivering results.

2)     Apio ’s strategy to focus on innovation and shift its product mix to higher margin products resulted in a 260 basis point increase in gross margin. Despite a 4% decline in revenues, Apio’s gross profit in fiscal 2017 increased $10.5 million, or 23%, which was due to a reduction in lower margin product sales coupled with positive operating efficiencies, including more favorable produce sourcing.

3)     Apio added considerable new distribution late in fiscal year 2017, specifically: (1) Walmart expanded the distribution of our Sweet Kale Salad from 1,400 stores to 3,800 stores; (2) Kroger became Eat Smart ’s newest salad customer, ordering four varieties of Eat Smart® salads that started shipping to 2,000 stores in July 2017; and (3) Fresh Market started up as a new customer and began shipping eight varieties of Eat Smart salads to approximately 177 stores.

4)     Finally, we added O Olive Oil, Inc. to our portfolio in March 2017. O Olive is Landec ’s first step in our stated strategy of moving into natural product segments beyond produce that offer consumers convenient, delicious, and healthy options for everyday eating.

 

Our compensation program has been structured by the Compensation Committee (the “Committee”) of the Board of Directors to reward and incentivize executives to create long-term, sustainable stockholder value growth through a focus on corporate, business unit, and individual achievement. The performance metrics used, and the goals being set, are reflective of our business strategy. Highlights of our fiscal year 2017 compensation program include:

 

●     Introduction of performance-based long-term cash incentive program (LTIP)

This new LTIP delivers value to participants upon the achievement of ROIC goals for fiscal year 2019. We believe that the return on invested capital (ROIC) demonstrates effective use of capital and is an important driver of our long-term growth.

 

●     New long-term incentive (LTI) compensation mix going forward

With the addition of the cash LTIP, th e Committee has structured the LTI as 50% cash-based LTIP, 30% restricted stock units (RSUs) and 20% stock options.

 

●     New short-term incentive (STI) compensation metric added

For 20% of the annual cash incentive award plan, the Committee added “all or nothing” strategic goals for each executive which may be based on corporate, Apio or Lifecore achievements, depending on the responsibility of the executive. The other 80% of the annual cash incentive award plan will still be based on achieving established targets for revenues and operating income for each business unit and consolidated Landec results.

 

●     Revised peer group for fiscal year 2017

We made changes to our peer group this year to better reflect our business practices.

 

●     Continued strong stock holder support for our pay program

Once again, we have received very strong support (over 98%) for our say-on-pay proposal. Our Committee is proud of this achievement and believes it is reflective of the stockholders’ support for our pay-for-performance philosophy and practice.

 

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Components of Our Compensation Program

 

The Committee oversees our executive compensation program, which includes several compensation elements that have each been tailored to reward specific aspects of overall Landec and business line performance that the Board believes are central to delivering long-term stockholder value.

 

Base Salary

Base salaries are set to be competitive to the marketplace. Base salaries are not automatically adjusted annually but instead are adjusted when the Committee judges that a change is warranted due to changes in an executive officer’s responsibilities, demonstrated performance or relevant market data.

Short-Term

Incentives

20% of the annual cash incentive award plan is based on achieving certain strategic goals for each executive which may be based on corporate, Apio or Lifecore achievements, depending on the responsibility of the executive.

 

80% of the annual cash incentive award plan is based on achieving established targets for revenues and operating income for each business unit and consolidated Landec results.

Long-Term

Incentives

Long-term equity awards incentivize executives to deliver long-term stockholder value, while also providing a retention vehicle for our executives.

 

The LTI mix is currently 50% cash LTIP, 30% RSUs and 20% stock options.

 

2017 Target Total Compensation

       

 

To promote our pay-for-performance philosophy, and align the interests of management and stockholders, our 2017 executive compensation program focused extensively on variable compensation components. For example, our CEO’s target pay for fiscal year 2017 consists of over 81% variable, or “at risk” incentive pay. This includes short-term cash incentives, as well as long-term incentives delivered as stock options, RSUs, and our new performance-based cash LTIP vehicle.

   
 

 

Compensation Governance Practices

 

Our pay-for-performance philosophy and compensation governance practices provide an appropriate framework for our executives to achieve our financial and strategic goals without encouraging them to take excessive risks in their business decisions. Some of our practices include:

 

Best Practices We Employ

Long-term focus.   The majority of our executive compensation is tied to long-term performance.

 

Equity Ownership Guidelines . We have robust equity ownership guidelines of 5x salary for our CEO and 3x salary for other executive officers.

 

Equity Holding Requirements. We have implemented holding requirements for executives wherein each executive must retain at least 50% of equity granted until minimum share ownership requirements are achieved.

 

Clawback Policy. We have implemented a strong recoupment, or "clawback", policy, to recover incentive compensation in the event of certain restatements of the financial results of the Company.

 

No Excessive Perquisites. Other than participation in benefit plans offered to all of our employees, we offer no other perquisites to our executive officers.

 

No Section 280G Gross-ups . None of our executive officers are entitled to a Section 280G gross-up.

 

Director Independence. The Committee is made up entirely of independent directors.

 

Independent Compensation Consultant.   The Committee retains an independent compensation consultant to advise on our executive compensation programs and practices.

 

Risk Assessment. We conduct an annual risk assessment of the compensation program.

 

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Say on Pay Voting Results

 

At the 2016 annual meeting of stockholders, our say-on-pay proposal received strong support, garnering support from 98.4% of shares cast. This is consistent with the voting results of 2015 and 2014, which had support levels of 97.4% and 97.9%, respectively. The Company is pleased with these results and believes that stockholders have confirmed our executive compensation philosophy, policies and programs. The Committee took these results into account by continuing to emphasize our pay-for-performance philosophy which utilizes performance measures that provide incentives to deliver value to our stockholders.

 

II.

Compensation Philosophy and Objectives

 

Landec ’s compensation program is intended to meet three principal objectives:

 

 

1)

attract, retain and reward officers and other key emplo yees;

 

2)

motivate these individuals to achieve the Company ’s short-term and long-term strategic goals; and

 

3)

align the interests of our executives with those of our stockholders.

 

The compensation program is designed to balance an executive ’s achievements in managing the day-to-day business and addressing shorter-term challenges facing the Company and its subsidiaries, such as the effects of weather-related disruptions and competitive pressures, with incentives to achieve our long-term vision to be the leader in our food and biomaterials businesses, creating innovative products that support people’s individual health and wellness goals.

 

The above policies guide the Committee in assessing the proper allocation among long-term compensation, current cash compensation and short-term bonus compensation. Other considerations include Landec’s business objectives, its fiduciary and corporate responsibilities (including internal equity considerations and affordability), competitive practices and trends and regulatory requirements.

 

III.

Establishing Executive Compensation

 

Landec ’s executive compensation program is overseen and administered by the Committee, which is comprised entirely of independent directors as determined in accordance with applicable NASDAQ, SEC and Internal Revenue Code rules. The Committee operates under a written charter adopted by our Board of Directors. A copy of the Committee’s charter is available at www.landec.com .

 

In determining the particular elements of compensation that are used to implement Landec ’s overall compensation policies, the Committee takes into consideration a number of objective factors related to Landec’s performance, such as Landec’s earnings per share, profitability, revenue growth and business-unit-specific operational and financial performance, as well as the competitive practices among its peer group. The Committee evaluates the Company’s financial and strategic performance in the context of determining compensation as well as the individual performance of each Named Executive Officer.

 

30

 

 

The Committee meets regularly to review overall executive compensation. The Committee also meets with Landec ’s President and Chief Executive Officer, Ms. Hemmeter, and other executives to obtain recommendations with respect to Company compensation programs, practices and packages for executives and other employees. The Chief Executive Officer makes recommendations to the Committee on the base salary, bonus targets and equity compensation for the executive team and other employees, but not for herself. The Committee, however, has the ultimate responsibility for determining executive compensation, which is recommended to the Board of Directors for its final approval.

 

Role of the Compensation Consultant

 

In March 2017, the Committee retained Radford Consulting, an Aon Hewitt company, to provide consulting services to the Committee, including advice on compensation philosophy, incentive plan design, executive compensation analysis, and CD&A disclosure, amo ng other compensation topics. Radford provides no services to the Company other than consulting services provided to the Committee.

 

The Committee has conducted a specific review of its relationship with Radford, and determined that Radford ’s work for the Committee does not raise any conflicts of interest. Radford’s work has conformed to the independence factors and guidance provided by the Dodd-Frank Act, the SEC and NASDAQ.

 

IV.

Compensation Competitive Analysis

 

Our Committee uses peer group information to provide context for its compensation decision-making for our executive officers. The Committee monitors the peer group to assess its appropriateness as a source of competitive compensation data and reassesses the relevance of the peer group as needed. In an effort to more accurately reflect the significant portion of the Company’s business attributable to Apio’s operations, the peer group was adjusted and simplified in 2014, to allow for comparisons on how these peers address the volatility and unpredictability of financial results as well as to assess competitive pay levels in the food and life sciences industries. Similarly, the Committee revised the Company’s peer group again for fiscal year 2017, with Amplify Snack Brands being added, while Inventure Foods and Snyder’s Lance being removed .

 

Our fiscal year 2017 peer group consisted of the following companies:

 

Albany Molecular Research

John B Sanfilippo & Son

Amplify Snack Brands

Lancaster Colony

Anika Therapeutics

Limoneira

Calavo Growers

National Beverage

Cal-Maine Foods

Omega Protein

CryoLife,

Seneca

Farmer Bros.

SunOpta

J&J Snack Foods

Surmodics

 

Peer group data is gathered with respect to base salary, bonus targets and all equity and non-equity awards (including stock options, performance shares, restricted stock and long-term, cash-based awards).

 

The Committee does not benchmark compensation to a particular level, but rather uses competitive market data as one reference point among several when determining appropriate pay levels. On an overall basis, Landec’s goal is to target total compensation for Named Executive Officers at a level that is competitive with the 50th percentile within the selected peer group for the Named Executive Officers, but other important considerations include each executive's particular experience, unique and critical skills, scope of responsibilities, proven performance, succession management and retention considerations, and the need to recruit new executives. The Committee analyzes base pay, target cash compensation and target total direct compensation within this broader context.

 

31

 

 

V.

Elements of Compensation

 

As outlined above, there are three major elements that comprise Landec ’s compensation program: (i) base salary; (ii) annual cash incentive opportunities; and (iii) long-term incentives, in the form of stock options and/or RSU awards, as well as long-term, performance-based cash awards.

 

Base Salaries

 

The base salaries of executive officers are set at levels intended to be competitive with those companies in ou r peer group with which we compete for executive talent. In determining base salary, the Committee also considers factors such as:

 

 

job performance

 

skill set

 

prior experience

 

the executive ’s time in his or her position with Landec

 

internal consistency regarding pay levels for similar positions or skill levels within the Company

 

external pressures to attract and retain talent, and

 

market conditions generally.

 

    Base salaries are not adjusted annually but are generally adjusted when the Committee judges that a change is warranted by a change in an executive officer’s responsibilities, demonstrated performance or relevant market data.

 

In fiscal years 2017 and 2016, our NEO base salaries were as follows:

 

Name

FY 2017

FY 2016

% Change

Molly A. Hemmeter

475,000

426,000

11.5%

Gregory S. Skinner

380,000

380,000

0.0%

Ronald L. Midyett

340,000

340,000

0.0%

Larry D. Hiebert

300,000

300,000

0.0%

Steven P. Bitler

275,000

273,461

0.6%

 

Ms. Hemmeter has only been in her role since October 2015. When Ms. Hemmeter was promoted to President and CEO, her compensation was initially positioned at approximately the 25 th percentile, in light of the fact that she was new to the President and CEO role. Having demonstrated a proven track record of success in her new role, the Committee is making adjustments to more closely align her compensation with the median of the competitive market.

 

Annual Cash Incentive Award Plan

 

Landec maintains an annual cash incentive award plan (the “ Cash Incentive Award Plan ”) for senior executives to encourage and reward achievement of Landec’s business goals and to assist Landec in attracting and retaining executives by offering an opportunity to earn a competitive level of compensation. This plan is consistent with our overall pay-for-performance philosophy and our goal of attracting and retaining top level executive officers in the industry.

 

In keeping with our pay for performance philosophy, a portion of our executive ’s annual compensation is “at risk” compensation. This has resulted in most of our NEOs not receiving any annual cash incentive award or only a portion of their targeted award in a majority of recent years. This was also the case in fiscal year 2017, where despite a strong year in terms of overall achievements, Apio did not achieve its revenue and operating income targets due to a variety of factors, such as certain customers deciding to change to a multi-sourcing strategy resulting in the loss of some business at Apio and the Company’s long-term strategic decision to discontinue certain low-margin Apio business, which resulted in Apio not achieving its minimum targets for the payment of that portion of the annual cash incentive award in fiscal year 2017.

 

32

 

 

Award targets are set as a percentage of base salary. Incentive awa rd targets and ranges are typically set early in each fiscal year, together with specific criteria for corporate, business unit and individual objectives. The overall corporate and business unit objectives are intended to be challenging but achievable. Such objectives are based on actual performance compared to predetermined financial performance targets, which are weighted depending upon whether the employee is a member of a business unit or the corporate staff. Incentive award targets and criteria for executive officers are subject to approval by the Committee.

 

Fiscal Year 2017 Cash Incentive Award Plan

 

At the beginning of fiscal year 2017, the Committee approved the 2017 Cash Incentive Award Plan for the year which included financial objectives for each business unit and at the corporate level on a consolidated basis. The financial objectives were based on the internally-developed financial plan for the fiscal year. The 2017 Cash Incentive Award Plan was based on established targets for revenues and operating income for each business unit and consolidated Landec results.

 

For fiscal year 2017, the CEO ’s target cash incentive award was 100% of her base salary, and the other Named Executive Officers’ target incentive awards ranged from 40% to 60% of their base salary.

 

In fiscal year 2017, performance measures were broken into two buckets:

 

Strategic goals: “All or nothing” strategic goals (20% weighting)

 

Financial goals: target revenue and operating income (80% weighting)

 

For Ms. Hemmeter and Mr. Skinner, each award target was based on consolidated Landec performance; for Mr. Midyett, the award targets was based on Apio’s annual financial results; for Mr. Hiebert, the award target was based on Lifecore’s annual financial results and for Dr. Bitler, the award target was based on several specific financial goals related to the success and advancement of the Company’s BreatheWay® technology and overall Landec results. No bonuses are payable if revenue or operating income was less than 80% of the target amounts; bonuses can exceed the target bonus for each NEO based on the business unit and/or consolidated Landec results exceeding the targeted amounts.

 

Based on the metrics described above, the Named Executive Officers ’ target incentive awards and actual amounts earned for fiscal year 2017 were as follows:

 

Name

 

Target as %

of Base

Salary

   

Target ($)

   

Actual Earned

2017 Incentive

Award ($)

 

Molly A. Hemmeter

    100 %   $ 475,000     $ 331,088  

Gregory S. Skinner

    60 %   $ 228,000     $ 158,922  

Ronald L. Midyett

    50 %   $ 170,000     $ 34,000  

Larry D. Hiebert

    50 %   $ 150,000     $ 157,525  

Steven P. Bitler

    40 %   $ 110,000     $ 49,336  

 

Long-Term Incentive Compensation

 

Landec provides long-term incentive compensation through equity-based and cash-based awards intended to align the interests of officers with those of the stockholders by creating an incentive for officers to maximize long-term stockholder value. At the same time, our long-term awards are designed to encourage officers to remain employed with Landec despite a competitive labor market in our industry.

 

33

 

 

Award Types

 

Awards to eligible employees, including Named Executive Officers, are generally made on an annual basis. Equity-based awards typically take the form of stock options and RSUs, and are gener ally granted with a three-year vesting schedule. For fiscal year 2017, we also introduced performance-based cash awards to be paid under the LTIP .

 

Landec grants stock options because they can be an effective tool for meeting Landec ’s compensation goal of increasing long-term stockholder value. Employees are able to profit from stock options only if Landec’s stock price increases in value over the stock option’s exercise price. Landec grants RSUs because they provide a more predictable value to employees than stock options, and therefore are efficient tools in retaining and motivating employees, while also serving as an incentive to increase the value of Landec’s stock. RSUs also can be a more efficient means of using equity plan share reserves because fewer RSUs are needed to provide a retention and incentive value as compared to awards of stock options. Finally, we have introduced a performance-based cash LTIP to provide an incentive vehicle directly linked to our strategic goal of focusing on ROIC. We have chosen a cash-based plan to help manage our equity burn rate and avoid dilution. When earned, the cash received by an executive in the LTIP must be placed in a deferred compensation account for a minimum of one year before it can be drawn.

 

LTI Grants in F iscal Year 2017

 

In general, the number of long-term incentive awards granted to each executive officer is determined based on a number of qualitative factors, considered holistically, including an analysis of competitive market data, the officer ’s degree of responsibility, general level of performance, ability to affect future Company performance, salary level and recent noteworthy achievements, as well as prior years’ awards.

 

During fiscal year 2017, the Committee granted equity awards to executive officer s, including our Named Executive Officers, as follows:

 

Name

Stock Options (#)

RSUs (#)

Molly A. Hemmeter

150,000

97,406

Gregory S. Skinner

17,826

Ronald L. Midyett

14,290

Larry D. Hiebert

13, 450

Steven P. Bitler

 

Additionally, the Committee set the following individual target amounts for the cash-based awards to be paid under the LTIP for our NEOs, based on achieving a specific ROIC target for fiscal year 2019:

 

Name

 

Target Amount

 

Molly A. Hemmeter

  $ 327,100  

Gregory S. Skinner

  $ 123,000  

Ronald L. Midyett

  $ 98,600  

Larry D. Hiebert (1)

  $ 92,800  

 

 

(1)

Mr. Hiebert will not receive any payment under the LTIP due to his retirement at the end of fiscal year 2017.

 

34

 

 

Each participant who continues as an employee will receive a payout that is a percentage of their individual target amount, based on a ratio of the actual ROIC to the target ROIC. The payout scale will be as follows:

 

Actual ROIC as a % of Target

ROIC

% of Individual
Target Paid

130% and above

130%

115%

115%

100%

100%

90%

75%

80%

50%

less than 80%

0%

 

 

VI.

Additional Compensation Policies and Practices

 

Clawback Policy

 

In May 2014, the Board of Directors adopted an executive compensation clawback policy, which provides for recoupment of executive incentive compensation in the event of certain restatements of the financial results of the Company. Under the policy, in the event of a substantial restatement of the Company’s financial results due to material noncompliance with financial reporting requirements, if the Board of Directors determines in good faith that any portion of a current or former executive officer’s incentive compensation was paid as a result of such noncompliance, then the Company may recover that portion of such compensation that was based on the erroneous financial data. In determining whether to seek recovery of compensation, the Board of Directors or the Committee may take into account any considerations it deems appropriate, including whether the assertion of a claim may violate applicable law or adversely impact the interests of the Company in any related proceeding or investigation, the extent to which the executive officer was responsible for the error that resulted in the restatement, and the cost and likely outcome of any potential litigation in connection with the Company’s attempts to recoup such compensation.

 

Executive Stock Ownership Requirements

 

To promote a focus on long-term growth and to align the interests of the Co mpany’s officers and directors with those of its stockholder, the Board of Directors has adopted stock ownership guidelines requiring certain minimum ownership levels of Common Stock, based on position:

 

Position

Requirement

Chief Executive Officer

5x base salary

Other executive officers

3x base salary

Non-executive directors

3x annual retainer

 

For purposes of the guidelines, the value of a share of Common Stock is measured as the greater of (i) the then current market price or (ii) the closing price of a share of Common Stock on the date when the stock was acquired, or the vesting date in the case of RSUs.

 

Newly-appointed executive officers have five years from the date they are appointed or promoted to meet these guidelines. In the event of an increase in base salary, the executive officer will have two years from the date of the increase to acquire any additional shares or RSUs needed to meet the guidelines. Until the required ownership level is reached, executive officers are required to retain 50% of net shares acquired upon any future vesting of RSUs and/or exercise of stock options, after deducting shares used to pay any applicable taxes and/or exercise price.

 

35

 

 

Nonqualified Deferred Compensation Plan

 

On July 25, 2013, the Board approved the Nonqualifi ed Deferred Compensation Plan (the “ Deferral Plan ”) for non-employee directors and certain participating employees, including the Named Executive Officers. The Deferral Plan is administered by a committee consisting of the Chief Executive Officer and the Chief Financial Officer of the Company or persons designated by them. The Deferral Plan allows non-employee directors to defer up to 100% of the fees earned for their service as director and allows participating employees to defer up to 50% of their base salary and up to 100% of their annual cash bonus. In addition, any amounts earned by an executive under the LTIP must be placed in a Deferral Plan account for a minimum of one year. Any amounts deferred by a participating employee are invested on behalf of the participating employee, and any investment returns earned thereon are credited to the participating employee’s account. Investment options are determined by the committee that administers the Deferral Plan. Each participating employee may designate the investment option or options for his or her account and may change those investment options at any time.

 

A participating employee may elect to receive distributions from his or her account beginning in a specified payment year no sooner than three years af ter the calendar year to which the deferred compensation relates, to be paid in a lump sum or in annual installments not to exceed ten years, according to the participating employee’s election. This election is made at the time when the participating employee makes an election to defer compensation. The participating employee may subsequently elect to delay the year in which deferred compensation is paid, provided that such election must be made at least 12 months before the year in which payment was previously scheduled to occur, must specify a new payment year that is at least five years after the year in which payment was to be made and will not take effect for 12 months. A participating employee will also receive distributions upon the occurrence of certain events specified in Deferral Plan, including termination of employment.

 

The Company has the discretion, but not the obligation, to make contributions to the Deferral Plan for the benefit of the participating employees, subject to the terms and conditio ns of the Deferral Plan.

 

401(k) Plan and Other Generally Available Benefit Programs

 

Landec maintains a tax-qualified 401(k) plan which provides for broad-based employee participation. Under the 401(k) Plan, all Landec employees are eligible to receive matc hing contributions from Landec. The 401(k) Plan is a safe harbor plan (as defined in the Internal Revenue Code of 1986) with a safe harbor match of 100% on the first 3% of deferrals and 50% on the next 2% of each participant’s pretax contributions; and the match is calculated and paid to participants’ accounts on a payroll-by-payroll basis, subject to applicable federal limits. The 401(k) Plan does not have an associated vesting schedule. Landec also makes an annual “reconciling match” by recalculating the regular matching contribution as if it were paid on an annualized, instead of payroll-by-payroll, basis. If the annualized matching contribution would have been higher, Landec makes a contribution to the participant’s account in an amount equal to the difference between the two amounts. Other than the 401(k) Plan, Landec does not provide defined benefit pension plans or defined contribution retirement plans to its executives or other employees.

 

Landec also offers a number of other benefits to the Named Exec utive Officers pursuant to benefit programs that provide for broad-based employee participation. These benefit programs include medical, dental and vision insurance, long-term and short-term disability insurance, life and accidental death and dismemberment insurance, health and dependent care flexible spending accounts, wellness programs, educational assistance and certain other benefits.

 

The 401(k) Plan and other generally available benefit programs allow Landec to remain competitive with respect to employ ee talent, and Landec believes that the availability of the benefit programs generally enhances employee productivity and loyalty to Landec. The main objectives of Landec’s benefit programs are to give our employees access to quality healthcare, financial protection from unforeseen events, assistance in achieving retirement financial goals and enhanced health and productivity. These generally available benefits typically do not specifically factor into decisions regarding an individual executive’s total compensation or equity award package.

 

36

 

 

Employment Agreements

 

Chief Executive Officer

 

On October 15, 2015 the Company entered into an executive employment agreement with Ms. Hemmeter (the Hemmeter Agreement ) setting forth the terms of her employment. The Hemmeter Agreement expires on December 31, 2018 unless renewed or extended by both parties, and provides that Ms. Hemmeter shall be paid an annual base salary of $475,000 (which was increased to $525,000 effective at the beginning of fiscal year 2018) through the term of the Hemmeter Agreement, and continue to participate in the annual Cash Incentive Award Plan. Ms. Hemmeter is also eligible for grants of equity-based awards at such times and in such amounts as determined by the Committee. See the section entitled “Employment Contracts and Potential Payments upon Termination or Change in Control” for a further discussion of the terms of the Hemmeter Agreement.

 

In making decisions with respect to Ms. Hemmeter ’s salary, target bonus and equity compensation grant, the Committee relied on the peer group data described above and gave considerable weight to the Chief Executive Officer’s significant and direct influence over Landec’s overall performance.

 

Other Named E xecutive Officers

 

On October 15, 2015, the Company entered into a new executive employment agreement with Mr. Skinner (the Skinner Agreement ) setting forth the terms of his employment. The Skinner Agreement expires on December 31, 2018 unless renewed or extended by both parties, and provides that Mr. Skinner shall be paid an annual base salary of $380,000 through the term of the Skinner Agreement, and continue to participate in the annual Cash Incentive Award Plan. Mr. Skinner is also eligible for grants of equity-based awards at such times and in such amounts as determined by the Committee. See the section entitled “Employment Contracts and Potential Payments upon Termination or Change in Control” for a further discussion of the terms of the Skinner Agreement.

 

In making decisions with respect to base salary for Named Executive Officers other than the CEO, the Committee reviews peer group data as described above and takes into account the date of the most recent adjustment in the base pay of each Named Exec utive Officer.

 

Compliance with Internal Revenue Code Section 162(m)

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, generally disallows a tax deduction to public companies for certain compensation in excess of $1 million paid to a company ’s executive officers. Certain compensation, including qualified performance-based compensation, will not be subject to the deduction limit if specified requirements are met. The Committee reviews the potential effect of Section 162(m) periodically and may seek to structure the long-term incentive compensation granted to Named Executive Officers in a manner that is intended to avoid disallowance of deductions under Section 162(m). Nevertheless, there can be no assurance that compensation attributable to long-term incentive awards will be treated as qualified performance-based compensation under Section 162(m). In addition, the Committee reserves the right to authorize compensation payments that may be in excess of the limit when the Committee believes such payments are appropriate and in the best interest of Landec and its stockholders, after taking into consideration changing business conditions and the performance of its employees.

 

Compensation Committee Interlocks and Insider Participation

 

The Committee is composed of Dr. Sohn (Chairperson), Dr. Bolles and Mr. Frank. During fiscal year 2017, none of the Company ’s executive officers served on the board of directors of any entities whose directors or officers serve on the Committee. None of the Committee’s current or former members has at any time been an officer or employee of Landec. None of Landec’s executive officers currently serve, or in the past fiscal year have served, as members of the board of directors or compensation committee of any entity that has one or more of its executive officers serving on Landec’s Board of Directors or the Committee.

 

37

 

 

Compensation Committee Report

 

The information contained in this report shall not be deemed to be “ soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that Landec specifically incorporates it by reference into a document filed under the Securities Act or the Exchange Act.

 

The Committee has reviewed and discussed with ma nagement the Compensation Discussion and Analysis for fiscal year 2017. Based on the review and discussions, the Committee recommended to the Board of Directors, and the Board of Directors has approved, that the Compensation Discussion and Analysis be included in Landec’s Proxy Statement for its 2017 Annual Meeting of Stockholders and incorporated into our Annual Report on Form 10-K for the fiscal year ended May 28, 2017.

 

This report is submitted by the Committee:

 

Catherine A. Sohn, Pharma. D. (Chairperson)

Al Bolles, Ph.D.

Fred Frank

 

38

 

 

Summary Compensation

 

The following table shows compensation information for fiscal years 2017, 2016 and 2015 for the Named Executive Officers.

 

Summary Compensation Table

 

Name and Principal Position

Year

 

Salary

($) (1)

 

 

Stock

Awards

($) (2)

 

 

Option

Awards

($)   (3)

 

 

Non-Equity

Incentive Plan

Compensation

($)   (4)

 

 

All Other

Compensation

($)   (5)

 

 

Total

($)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Molly A. Hemmeter

201 7

 

 

475 ,000

 

 

 

1,221,703

 

 

 

337,25 6

 

 

 

331,088

 

 

 

19,896

 

 

 

2,384,943

 

President and Chief Executive

201 6

 

 

426 ,000

 

 

 

 

 

 

 

 

 

 

 

 

17,320

 

 

 

443,320

 

Officer

201 5

 

 

34 5,000

 

 

 

1 ,439,000

 

 

 

1 ,026,900

 

 

 

195,079

 

 

 

1 2,906

 

 

 

3,018,885

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory S. Skinner

201 7

 

 

380,000

 

 

 

245,999

 

 

 

 

 

 

158,922

 

 

 

10,975

 

 

 

7 95,896

 

Chief Financial Officer and

201 6

 

 

3 80,000

 

 

 

 

 

 

 

 

 

 

 

 

18,290

 

 

 

398,290

 

Vice President of Finance and

201 5

 

 

3 25,000

 

 

 

215,85 0

 

 

 

154,03 5

 

 

 

155,832

 

 

 

1 2,114

 

 

 

862,831

 

Administration

                                                 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ronald L. Midyett

201 7

 

 

340,000

 

 

 

197,202

 

 

 

 

 

 

34,000

 

 

 

26,014

 

 

 

5 97,216

 

Vice President, Chief Operating Officer and

201 6

 

 

340,000

 

 

 

 

 

 

 

 

 

 

 

 

2 6,014

 

 

 

366,014

 

President of Apio, Inc

201 5

 

 

3 40,000

 

 

 

143, 900

 

 

 

1 02,690

 

 

 

192,246

 

 

 

2 7,652

 

 

 

806,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Larry D. Hiebert

201 7

 

 

300,000

 

 

 

185,610

 

 

 

 

 

 

157,525

 

 

 

13,839

 

 

 

656,974

 

President of Lifecore Biomedical, Inc.

201 6

 

 

300,000

 

 

 

56,800

 

 

 

40,393

 

 

 

199,119

 

 

 

1 2,895

 

 

 

609,207

 

and Vice President of Landec

201 5

 

 

300,000

 

 

 

107,925

 

 

 

7 7,018

 

 

 

30, 000

 

 

 

14,339

 

 

 

529,282

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steven P. Bitler

201 7

 

 

275,000

 

 

 

 

 

 

 

 

 

49,336

 

 

 

11,137

 

 

 

335,473

 

Vice President of Corporate

201 6

 

 

2 73,461

 

 

 

 

 

 

 

 

 

 

 

 

1 1,029

 

 

 

284,490

 

Technology

201 5

 

 

2 43,750

 

 

 

71,950

 

 

 

51,300

 

 

 

  75,119

 

 

 

1 0,686

 

 

 

452,805

 

 

 

(1)

Includes amounts (if any) deferred at the election of the Named Executive Officer pursuant to the Deferral Plan.

 

 

(2)

Amounts shown do not reflect compensation actually received by the Named Executive Officer. Instead, the amounts shown are the aggregate grant date fair value of RSUs granted during fiscal year 2017 computed for financial statement reporting purposes in accordance with ASC 718. The assumptions used to calculate the value of the RSU awards are set forth under Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 28, 2017. In accordance with SEC rules, these amounts exclude estimates of forfeitures in the case of awards with service-based vesting conditions.

 

 

(3)

Amounts shown do not reflect compensation actually received by the Named Executive Officer. Instead, the amounts shown are the aggregate grant date fair value of stock options granted during fiscal year 2017 computed for financial statement reporting purposes in accordance with ASC 718. The assumptions used to calculate the value of stock option awards are set forth under Note 1 of the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended May 28, 2017. In accordance with SEC rules, these amounts exclude estimates of forfeitures in the case of awards with service-based vesting conditions.

 

 

(4)

Amounts consist of bonuses earned for meeting and/or exceeding financial performance targets in fiscal yea rs 2017, 2016 and 2015 under the Company’s annual Cash Incentive Award Plans.

 

 

(5)

Amounts consist of Company-paid life insurance and an employer 401(k) match for all Named Executive Officers. The amount shown for Mr. Hiebert also include Company-paid disability insurance for which Mr. Hiebert, is the beneficiary. For Mr. Midyett, the amount shown includes an annual car allowance of $15,000. For Ms. Hemmeter, the amount includes a car allowance expense of $8,336.

 

 

39

 

 

 

  Grants of Plan-Based Awards

 

 

 

 

 

The following table shows all plan-based awards granted to the Named Executive Officers during fiscal year 2017. The option awards and the unvested portion of the stock awards identified in the table below are also reported in the “Outstanding Equity Awards at Fiscal 2017 Year-End” table on the following page.

 

Grants of Plan-Based Awards

 

 

 

 

 

 

Estimated Future Payouts Under

Non-Equity Incentive Plan

Awards (1)

 

 

All Other  

Stock  

Awards:  

Number

of Shares of

 

 

All Other

Option

Awards:

Number

of Securities

 

 

Exercise   or 

Base Price of

  Option

 

 

Grant Date

Fair Value  

of Stock and  

Option

 

 

 

Grant

 

Threshold

 

 

Target

 

 

Maximum

 

 

Stock

 

 

Underlying

 

 

Awards

 

 

Awards

 

Name

 

Date

 

($)

 

 

($)

 

 

($)

 

 

or Units (#)

 

 

Options (#)  

 

 

($/share)

 

 

($)   (2)

 

Molly A. Hemmeter  

 

 

 

 

 

 

 

 

475,000  

 

 

 

  N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

   

10 /2 0/2016

                           

47,406

 

 

 

 

 

 

 

 

 

654,203

 
   

07 /21/2016

                           

50,000

                     

567,500

 
   

07 /21/2016

                             

 

 

 

15 0,000

 

 

 

11.35

 

 

 

337,25 6

 
                                                             

Gregory S . Skinner

 

 

 

 

 

 

 

228 ,000

 

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10 /2 0/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,826

 

 

 

 

 

 

 

 

 

245,999

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                           

Ron Midyett

 

 

 

 

 

 

 

1 70,000

 

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 
   

10 /2 0/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1 4,290

 

 

 

 

 

 

 

 

 

197,202

 
                                                             

Larry D. Hiebert

 

 

 

 

 

 

 

150,000

 

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10 /2 0/2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,450

 

 

 

 

 

 

 

 

 

185,610

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steve P . Bitler

 

 

 

 

 

 

 

1 10,000

 

 

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 
                                                             

 

 

(1)

Amounts shown are estimated payouts for fiscal year 2017 to the Named Executive Officers under the 2017 Cash Incentive Award Plan. The target amount is based on a percentage of the individual’s fiscal year 2017 base salary. All executives received a cash incentive award for fiscal year 2017. For more information on these awards, including the amount actually paid, see “Compensation Discussion and Analysis-Annual Cash Incentive Award Plan.”

 

 

(2)

The value of a stock award or option award is based on the fair value as of the grant date of such award determined pursuant to ASC 718. Stock awards consist only of RSUs. The exercise price for all options granted to the Named Executive Officers is 100% of the fair market value of Landec Common Stock on the grant date. The option exercise price has not been deducted from the amounts indicated above. Regardless of the value placed on a stock option on the grant date, the actual value of the option will depend on the market value of Landec Common Stock at such date in the future when the option is exercised. The value of the option following this exercise does not include the option exercise price. All options vest at the rate of 1/36th per month and therefore all options are fully vested three years after the date of grant. RSUs typically vest on the third anniversary of the date of grant but the grants made on October 20, 2016 in connection with the LTIP have half of the RSUs cliff vesting on the first anniversary of the grant date and the other half vesting on the second anniversary of the grant date .

 

 

40

 

 

Equity Awards

 

The following table shows all outstanding equity awards held by the Named Executive Officers at the end of fiscal year 2017. The awards for fiscal year 2017 identified in the table below are also reported in the “Grants of Plan-Based Awards” table on the previous page.

 

Outstanding Equity Awards at Fiscal 2017 Year-End

 

 

 

 

 

Option Awards

 

Stock Awards

 

 

 

 

 

Number of  

Securities  

Underlying  

Unexercised  

Options

 

 

Number of  

Securities  

Underlying  

Unexercised  

Options

Unexercisable

 

 

Option  

Exercise  

Price

 

Option  

Expiration

 

Number of  

Shares or  

Units of  

Stock That  

Have Not  

Vested

 

 

Market  

Value of

Shares

Or   Units 

of Stock

That  

Have Not

  Vested

 

Name

 

Grant Date

 

Exercisable

 

 

(#) (1)

 

 

( $)

 

D ate

 

(#) ( 2 )

 

 

($) ( 3 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Molly A. Hemmeter

 

10 /2 0/2016

 

 

 

 

 

 

 

 

 

 

 

47,406

 

 

 

647,092

 

   

07/21/2016

   

41,666

     

108,334

     

11.35

 

07/21/2023

   

50,000

     

682,500

 
   

05/28/2015

   

199,500

     

100,500

     

14.39

 

05/28/2022

   

100,000

     

1,365,000

 

 

 

0 6/07/2013

 

 

3 0,000

 

 

 

 

 

 

14.30

 

0 6/07/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gregory S. Skinner

 

10 /2 0/2016

 

 

 

 

 

 

 

 

 

 

 

17,826

 

 

 

243,325

 

   

05/28/2015

   

30,000

     

1 5,000

     

14.39

 

05/28/2022

   

15,000

     

204,750

 

 

 

06/07/2013

 

 

30,000

 

 

 

 

 

 

14.30

 

06/07/2020

 

 

 

 

 

 

                                               

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ronald L. Midyett

 

10 /2 0/2016

 

 

 

 

 

 

 

 

 

 

 

1 4,290

 

 

 

19 5,059

 

   

05/28/2015

   

20,000

     

10,000

     

14.39

 

05/28/2002

   

10,000

     

136,500

 

 

 

06/07/2013

 

 

30,000

 

 

 

 

 

 

14.30

 

06/07/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Larry D. Hiebert

 

10/20/2016

 

 

 

 

 

 

 

 

 

 

 

13,450

 

 

 

183,593

 

   

05/25/2016

   

5,000

     

10,000

     

11.36

 

05/23/2023

   

5,000

     

68,250

 

 

 

05/28/2015

 

 

15,0 00

 

 

 

7,5 00

 

 

 

14.39

 

05/28/2022

 

 

7,500

 

 

 

102,375

 

 

 

06/07/2013

 

 

18,0 00

 

 

 

 

 

 

14.30

 

06/07/2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steven P. Bitler

 

05/28/2015

 

 

10 ,000

 

 

 

5 ,000

 

 

 

14.39

 

05/28/2022

 

 

5,0 00

 

 

 

68,250

 

 

 

06/07/2013

 

 

5,000

 

 

 

 

 

 

14.30

 

06/07/2020

 

 

 

 

 

 

 

 

(1)

All options vest at the rate of 1/36 per month over a three-year period from date of grant, other than the option for 300,000 shares granted to Molly Hemmeter on May 28, 2015, which vests at the rate of 1/3 on first anniversary of the date of grant and then 1/36 monthly thereafter.

 

(2)

The RSUs typically vest on the third anniversary of the date of grant, except that the RSUs granted on October 20, 2016 in connection with the LTIP have half of the RSUs cliff vesting on the first anniversary of the grant date and the other half vesting on the second anniversary of the grant date .

 

(3)

Value is based on the closing price of the Company ’s Common Stock of $13.65 on May 28, 2017 as reported on the Nasdaq Global Select Market.

 

41

 

 

Option Exercises and Stock Vested

 

The following table shows all stock options exercised and the value realized upon exercise and the number of stock awards vested and the value realized upon vesting by the Named Executive Officers during fiscal year 2017 .

 

Option Exercises and Stock Veste d For Fiscal 2017

 

 

 

Option  Awards

 

 

Stock Awards

 

Name

 

Number of

Shares

Acquired

on

Exercise

(#)

 

 

Value

Realized on

Exercise

($) (1)

 

 

Number of

shares

withheld to

cover

exercise

price and

taxes

(#) (2)

 

 

Number of

Shares

Acquired

on

Vesting (#)

 

 

Value

Realized

on Vesting

($)

 

 

Number of

shares

withheld to

cover taxes

(#) (2)

 

Molly A. Hemmeter

 

 

37,500

 

 

 

287,625

 

 

 

19,495

 

 

 

10,000

 

 

 

115,400

 

 

 

3,758

 

Gregory S. Skinner

 

 

75,000

 

 

 

681,572

 

 

 

36,160

 

 

 

10,000

 

 

 

115,400

 

 

 

3,758

 

Ronald L. Midyett

 

 

 

 

 

 

 

 

 

 

 

10,000

 

 

 

115,400

 

 

 

3,719

 

Larry D. Hiebert

 

 

2,500

 

 

 

16,925

 

 

 

1,135

 

 

 

6,000

 

 

 

69,240

 

 

 

1,962

 

Steven P. Bitler

 

 

4 5,000

 

 

 

336,700

 

 

 

16,872

 

 

 

1,667

 

 

 

19,237

 

 

 

 

 

 

(1)

The value realized equals the difference between the option exercise price and the fair market value of Landec Common Stock on the date of exercise, multiplied by the number of shares for which the option was exercised.

 

(2)

Indicates shares withheld at the election of the Named Executive Officer to cover the exercise price and/or the taxes owed on the exercise of the option or the vesting of the stock award.

 

Nonqualified Deferred Compensation

 

The following table s hows all compensation deferred by the Named Executive Officers, and earnings on such deferred compensation, under the Deferral Plan during fiscal year 2017 .

 

Nonqualifed Deferred Compensation

 

Name

 

Executive

Contributions

in Fiscal

Year 2017

($)   (1)

 

 

Registrant

Contributions

in Fiscal

Year 2017

($)

 

 

Aggregate

Earnings

in Fiscal

Year 2017

($)   (2)

 

 

Aggregate

Withdrawals

in Fiscal

Year 2017  

($)

 

 

Aggregate

Balance at

End of

Fiscal Year 2017

($)

 

Molly A. Hemmeter

 

 

 

 

 

 

 

 

24,019

 

 

 

 

 

 

226,460

 

Gregory S. Skinner

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ronald L. Midyett

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Larry D. Hiebert

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Steven P. Bitler

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Contributions reported in this column are reported as compensation in the Salary column of the Summary Compensation Table.

 

(2)

Amounts reported in this column represent the aggregate earnings accrued and credited to a Named Executive Officer ’s account during fiscal year 2017 .

 

42

 

 

Employment Contracts and Potential Payments upon Termination or Change in Control

 

Employment Contracts

 

On October 15 , 2015, the Company entered into an executive employment agreement with Ms. Hemmeter, (the “Hemmeter Agreement ) setting forth the terms of her employment. The Hemmeter Agreement expires on December 31, 2018 unless renewed or extended by both parties, and provides that Ms. Hemmeter shall be paid an annual base salary of $475,000 (which was increased to $525,000 effective at the beginning of fiscal year 2018) through the term of the Hemmeter Agreement (unless modified by the Compensation Committee), and continue to participate in the annual Cash Incentive Award Plan. Ms. Hemmeter is also eligible for grants of equity-based awards at such times and in such amounts as determined by the Compensation Committee.

 

The Hemmeter Agreement provides that upon Ms. Hemmeter ’s death or disability, the Company shall pay Ms. Hemmeter or her estate her unpaid base salary and the pro rata portion of her annual cash incentive award through the date of termination.

 

Ms. Hemmete r agreed, as part of the Hemmeter Agreement, not to solicit, induce, recruit, encourage or take away employees or consultants of the Company for a period of two years following her termination. In addition, Ms. Hemmeter agreed not to solicit any licensor to or customer of the Company for a period of two years following her termination.

 

On October 15, 2015, the Company entered into a new executive employment agreement with Mr. Skinner (the Skinner Agreement ) setting forth the terms of his employment. The Skinner Agreement expires on December 31, 2018 unless renewed or extended by both parties, and provides that Mr. Skinner shall be paid an annual base salary of $380,000 through the term of the Skinner Agreement (unless modified by the Compensation Committee), and continue to participate in the annual Cash Incentive Award Plan. Mr. Skinner is also eligible for grants of equity-based awards at such times and in such amounts as determined by the Compensation Committee.

 

The Skinner Agreement provides that up on Mr. Skinner’s death or disability, the Company shall pay Mr. Skinner or his estate his unpaid base salary and the pro rata portion of his annual cash incentive award through the date of termination. 

 

Mr. Skinner agreed, as part of the Skinner Agreemen t, not to solicit, induce, recruit, encourage or take away employees or consultants of the Company for a period of two years following his termination. In addition, Mr. Skinner agreed not to solicit any licensor to or customer of the Company for a period of two years following his termination.

 

Potential Payments upon Termination or Change in Control

 

If Ms. Hemmeter is terminated without cause or if she terminates her employment for good reason (generally, any relocation of Ms. Hemmeter ’s place of employment, reduction in salary, reduction in her target bonus amount or material reduction of her duties or authority), Ms. Hemmeter will receive a severance payment equal to 100% of her annual base salary over a twelve month period, a pro-rated portion of any annual cash incentive award to which she is entitled and a one-year acceleration of her unvested stock options and other equity awards, and the Company will pay the monthly premiums for health insurance coverage for Ms. Hemmeter (and her spouse and eligible dependents) for the maximum period permitted under COBRA or until such earlier time as Ms. Hemmeter receives substantially equivalent health insurance coverage in connection with new employment. In addition, the Hemmeter Agreement provides that if Ms.Hemmeter is terminated without cause or terminates her employment for good reason within two (2) years following a “change of control,” Ms. Hemmeter will receive a severance payment equal to 150% of her annual base salary over a twelve month period, a pro-rated portion of any annual cash incentive award to which she is entitled and the Company will pay the monthly premiums for health insurance coverage for Ms. Hemmeter (and her spouse and eligible dependents) for the maximum period permitted under COBRA or until such earlier time as Ms. Hemmeter receives substantially equivalent health insurance coverage in connection with new employment. In the event of a “change of control,” all of Ms. Hemmeter’s unvested stock options and other equity awards shall immediately vest and become exercisable.

 

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If Mr. Skinner is terminated without cause or if he terminates his employment for good reason (generally, any relocation of Mr. Skinner ’s place of employment, reduction in salary, reduction in his target bonus amount or material reduction of his duties or authority), Mr. Skinner will receive a severance payment equal to 100% of his annual base salary over a twelve month period, a pro-rated portion of any annual cash incentive award to which he is entitled and a one-year acceleration of his unvested stock options and other equity awards, and the Company will pay the monthly premiums for health insurance coverage for Mr. Skinner (and his spouse and eligible dependents) for the maximum period permitted under COBRA or until such earlier time as Mr. Skinner receives substantially equivalent health insurance coverage in connection with new employment. In addition, the Skinner Agreement provides that if Mr. Skinner is terminated without cause or terminates his employment for good reason within two (2) years following a “change of control,” Mr. Skinner will receive a severance payment equal to 150% of his annual base salary over a twelve month period and a pro-rated portion of any annual cash incentive award to which he is entitled and the Company will pay the monthly premiums for health insurance coverage for Mr. Skinner (and his spouse and eligible dependents) for the maximum period permitted under COBRA or until such earlier time as Mr. Skinner receives substantially equivalent health insurance coverage in connection with new employment. In the event of a “change of control,” all of Mr. Skinner’s unvested stock options and other equity awards shall immediately vest and become exercisable.

 

If Ms. Hemmeter ’s or Mr. Skinner’s employment with the Company had been terminated without cause or for good reason not in connection with a change of control of the Company on May 28, 2017, the last day of Landec’s fiscal year 2017, Ms. Hemmeter and Mr. Skinner would have received the following severance benefits under the Hemmeter Agreement and Skinner Agreement, respectively:

 

Name

 

Base

Salary (1)

 

 

Bonus Payment

 

 

Accelerated

Vesting

of  Options (2)

 

 

Accelerated

Vesting of 

RSUs (3)

 

 

Post- Termination

H ealth I nsurance 

Premiums (4)

 

 

Total

 

Molly A. Hemmeter

 

$

475,000

 

 

$

331,088

 

 

$

249,168

 

 

$

1,688,54 7

 

 

$

23,472

 

 

$

2,767,275

 

Gregory S. Skinner

 

$

380,000

 

 

$

158,922

 

 

$

 

 

$

326,412

 

 

$

23,472

 

 

$

888,806

 

 

 

(1)

Reflects potential payments based on salaries as of May 28, 2017 .

 

(2)

A portion of unvested options for Ms. Hemmeter and all unvested options for Mr. Skinner are out of the money (exercise price above stock price as of May 28, 2017) and therefore there is no value to the acceleration for those options .

 

(3)

Accelerating the vesting of the outstanding RSUs by one year would result in 123,703 and 23,913 of the currently outstanding RSUs vesting as of May 28, 2017 for each of Ms. Hemmeter and Mr. Skinner, respectively.

 

(4)

Represents the maximum amount of premiums that would have been paid under COBRA on behalf of Ms. Hemmeter and Mr. Skinner

 

If Ms. Hemmeter’s or Mr. Skinner’s employment with the Company had been terminated without cause or for good reason in connection with a change of control of the Company on May 28, 2017, the last day of Landec’s fiscal year 2017, Ms. Hemmeter and Mr. Skinner would have received the severance benefits under the Hemmeter Agreement and Skinner Agreement, respectively, set forth above, except that amounts received for base salary would have been $712,500 and $570,00 for Ms. Hemmeter and Mr. Skinner, respectively, and the amounts received for the acceleration of RSUs would have been $2,694,592 and $448,075 for Ms. Hemmeter and Mr. Skinner, respectively. Therefore total compensation would have been $4,010,820 and $1,200,469 for Ms. Hemmeter and Mr. Skinner, respectively.

   

Policies and Procedures with Respect to Related Party Transactions

 

The Audit Committee, all of whose members are independent directors, reviews and approves in advance all related party transactions (other than compensation transactions). I n reviewing related party transactions, the Audit Committee takes into account factors it deems appropriate, such as whether the related party transaction is on terms no less favorable than terms generally available to an unrelated third party under the same or similar conditions and the extent of the related party’s interest in the transaction. To identify related party transactions, each year we require our executive officers and directors to complete a questionnaire identifying any transactions between the Company and the respective executive officer or director and their family members or affiliates. Additionally, under the Company’s Code of Ethics, directors, officers and all other employees and consultants are expected to avoid any relationship, influence or activity that would cause , or even appear to cause , a conflict of interest.

 

 

Certain Relationships and Related Transactions
 

Apio sells products to and earns license fees from Windset Holdings 2010 Ltd., a Canadian corporation (“ Windset ”). Apio holds a 26.9% equity interest in Windset. During fiscal year 2017, Apio recognized $514 ,000 of revenues from Windset.

 

Additionally, unrelated to the revenue transactions above, Apio purchases produce from Windset for sale to third parties. Durin g fiscal year 2017, Apio purchased $22,000 of produce from Windset .
 
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  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

 

Section 16(a) of the Exchange Act requires the Company ’s directors and executive officers, and persons who own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and holders of more than ten percent of the Company’s Common Stock are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

To the Company ’s knowledge, based solely upon review of the copies of such reports filed with the SEC and written representations that no other reports were required, during the fiscal year ended May 28, 2017 all Section 16(a) filing requirements applicable to the Company’s officers, directors and holders of more than ten percent of the Company’s Common Stock were satisfied.

 

OTHER MATTERS

 

The Board of Directors knows of no other matters to be submitted to the stockholders at the annual meeting. If any other matters properly come before the meeting, then the persons named in the enclosed form of proxy will vote the shares they represent in such manner as the Board of Directors may recommend.

 

It is important that the proxies be returned promptly and that your shares be represented. Stockholders are urged to mark, date, execute and promptly return the accomp anying proxy card in the enclosed envelope or vote their shares by telephone or via the Internet.

 

 

BY ORDER OF THE BOARD OF DIRECTORS

 

/s/ Geoffrey P. Leonard

 

GEOFFREY P. LEONARD

SECRETARY

 

Menlo Park, California

August 2 3, 2017

 

45

 

 

Appendix A

 

 

 

FIRST AMENDMENT

 

to the

 

LANDEC CORPORATION

 

2013 STOCK INCENTIVE PLAN

 

 

 

WHEREAS , Landec Corporation (the “ Corporation ”) adopted the Landec Corporation 2013 Stock Incentive Plan (the “ Plan ”), effective October 10, 2013 (the “ Effective Date ”) ; and

 

WHEREAS , the Board of Directors has determined that it is in the best interests of the Corporation and its stockholders to amend the Plan to increase the number of shares of common stock available for issuance under the Plan by 1,000,000 shares from 2,000,000 to 3,000,000, subject to stockholder approval.

 

NOW THEREFORE , the Plan is hereby amended as follows:

 

1.      Section 5.1 of the Plan is hereby deleted in its entirety and replaced with the following:

 

“5.1      Basic Limitation. The stock issuable under the Plan shall be authorized but unissued Shares. The aggregate number of Shares reserved for Awards under the Plan shall not exceed 3,000,000 Shares, subject to adjustment pursuant to Section 10. For sake of clarity, all Shares issued and issuable pursuant to any Awards granted under the Plan on or after the Effective Date shall count against the 3,000,000 Share limit. The aggregate maximum number of Shares that may be issued in connection with ISOs shall be 3,000,000 Shares.”

 

2.      This Amendment shall become effective upon stockholder approval. Except as amended herein, the terms of the Plan shall remain in full force and effect.

 

IN WITNESS WHEREOF, the undersigned has executed this First Amendment to the Landec Corporation 2013 Stock Incentive Plan on August 23, 2017, to become effective upon stockholder approval of this Amendment.

 

 

LANDEC CORPORATION

 

     
     
     
  By:  /s/ Molly A. Hemmeter  
  Name: Molly A. Hemmeter  
  Title: President and Chief Executive Officer  

 

 

 

 

 

46

 

 

APPENDIX A

 

LANDEC CORPORATION
2013 STOCK INCENTIVE PLAN

 

 

SECTION 1.

INTRODUCTION.

 

1.1

The Landec Corporation 2013 Stock Incentive Plan will be effective (the “Effective Date”) upon its approval by an affirmative vote of the holders of a majority of the Shares that are present in person or by proxy and entitled to vote at the 2013 Annual Meeting of Stockholders of the Company. The Plan shall supersede the Existing Equity Plan effective as of the Effective Date such that no further awards shall be made under the Existing Equity Plan on or after such date. However, this Plan shall not, in any way, affect awards under the Existing Equity Plan that are outstanding as of the Effective Date. If the Company’s stockholders do not approve this Plan, no Awards will be made under this Plan and the Existing Equity Plan will continue in effect in accordance with its terms.

 

1.2

The purpose of the Plan is to promote the long-term success of the Company and the creation of Stockholder value by offering Key Service Providers an opportunity to share in such long-term success by acquiring a proprietary interest in the C ompany.

 

1.3

The Plan seeks to achieve this purpose by providing for discretionary Awards in the form of Options (which may constitute Incentive Stock Options or Nonstatutory Stock Options), Stock Appreciation Rights, Stock Grants and Stock Units.

 

1.4

The Plan shall be governed by, and construed in accordance with, the laws of the State of Delaware (except its choice-of-law provisions), and with the applicable requirements of the stock exchanges or other trading systems on which the Stock is listed or entered for trading, in each case as determined by the Committee. Capitalized terms shall have the meaning provided in Section 2 unless otherwise provided in this Plan or any related Stock Option Agreement, SAR Agreement, Stock Grant Agreement or Stock Unit Agreement.

 

SECTION 2.

DEFINITIONS.

 

2.1

Affiliate” means any entity other than a Subsidiary if the Company and/or one or more Subsidiaries have a controlling interest in such entity. For purposes of the preceding sentence, except as the Committee may otherwise determine subject to the requirements of Treas. Reg. §1.409A-1(b)(5)(iii)(E)(1), the term “controlling interest” has the same meaning as provided in Treas. Reg. §1.414(c)-2(b)(2)(i), provided that the words “at least 50 percent” are used instead of the words “at least 80 percent” each place such words appear in Treas. Reg. §1.414(c)-2(b)(2)(i). The Company may at any time by amendment provide that different ownership thresholds (consistent with Section 409A of the Code) apply but any such change shall not be effective for twelve (12) months.

 

2.2

Award” means any award of an Option, SAR, Stock Grant or Stock Unit under the Plan.

 

2.3

Board” means the Board of Directors of the Company, as constituted from time to time.

 

2.4

Cashless Exercise” means, to the extent that a Stock Option Agreement so provides and as permitted by applicable law, (i) a program approved by the Committee in which payment may be made all or in part by delivery (on a form prescribed by the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Exercise Price and any applicable tax withholding obligations relating to the Option or (ii) the withholding of that number of Shares otherwise deliverable upon exercise of the Option whose aggregate Fair Market Value is equal to the aggregate Exercise Price.

 

2.5

Cause” means, except as may otherwise be provided in a Participant’s employment agreement or Award agreement to the extent such agreement is in effect at the relevant time, any of the following events: (i) Participant’s willful failure substantially to perform his or her duties and responsibilities to the Company or deliberate violation of a Company policy; (ii) Participant’s commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company; (iii) unauthorized use or disclosure by Participant of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company; or (iv) Participant’s willful breach of any of his or her obligations under any written agreement or covenant with the Company. The determination as to whether a Participant is being terminated for Cause shall be made in good faith by the Company and shall be conclusive and binding on the Participant. The foregoing definition does not in any way limit the Company’s ability to terminate a Participant’s Service at any time as provided in Section 12(a), and the term “Company” will be interpreted to include any Subsidiary, Parent, Affiliate, or any successor thereto, if appropriate.

 

47

 

 

2.6

Change In Control” except as may otherwise be provided in a Participant’s employment agreement or Award agreement, means the first to occur of any of the following: (i) the consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization if more than 50% of the combined voting power of the continuing or surviving entity’s securities outstanding immediately after such transaction is owned by persons who were not stockholders of the Company immediately prior to such transaction; (ii) the sale, transfer or other disposition of all or substantially all of the Company’s assets; (iii) the direct or indirect sale or exchange in a single transaction or series of related transactions by the stockholders of the Company of more than 50% of the voting stock of the Company to an unrelated person or entity if more than 50% of the combined voting power of the surviving entity’s securities outstanding immediately after such transaction is owned by persons who were not stockholders of the Company immediately prior to such transaction; or (iv) a complete liquidation or dissolution of the Company.

 

 

 

A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company ’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company’s securities immediately before such transactions.

 

2.7

Code” means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.

 

2.8

Committee” means a committee described in Section 3.

 

2.9

Common Stock” means the Company’s common stock, par value $0.001 per share.

 

2.10

Company” means Landec Corporation, a Delaware corporation.

   

2.11

Consultant” means an individual who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate, other than as an Employee or Director or Non-Employee Director.

 

2.12

Covered Employees” means those persons who are subject to the limitations of Section 162(m) of the Code.

 

2.13

Covered Transaction” means any of a consolidation, merger, or similar transaction or series of related transactions, including a sale or other disposition of stock, in which the Company is not the surviving corporation or which results in the acquisition of all or substantially all of the Company’s then outstanding common stock by a single person or entity or by a group of persons and/or entities acting in concert. Where a Covered Transaction involves a tender offer that is reasonably expected to be followed by a merger described herein (as determined by the Committee), the Covered Transaction will be deemed to have occurred upon consummation of the tender offer.

 

2.14

Director” means a member of the Board who is also an Employee.

 

2.15

Disability” means that the Participant is classified as disabled under a long-term disability policy of the Company or, if no such policy applies, the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months.

 

2.16

Employee” means any individual who is a common law employee of the Company, a Parent, a Subsidiary or an Affiliate.

 

2.17

Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

2.18

Exercise Price” means, in the case of an Option, the amount for which a Share may be purchased upon exercise of such Option, as specified in the applicable Stock Option Agreement. “Exercise Price,” in the case of a SAR, means an amount, as specified in the applicable SAR Agreement, which is subtracted from the Fair Market Value in determining the amount payable upon exercise of such SAR.

 

48

 

 

2.19

Existing Equity Plan” means the Company’s 2009 Stock Incentive Plan.

 

2.20

Fair Market Value” means the market price of a Share as determined in good faith by the Committee. Such determination shall be conclusive and binding on all persons. The Fair Market Value shall be determined by the following: (i) if the Shares are admitted to trading on any established national stock exchange or market system, including without limitation the NASDAQ Global Market System, on the date in question, then the Fair Market Value shall be equal to the closing sales price for such Shares as quoted on such national exchange or system on such date; or (ii) if the Shares are admitted to quotation on NASDAQ or are regularly quoted by a recognized securities dealer but selling prices are not reported on the date in question, then the Fair Market Value shall be equal to the mean between the bid and asked prices of the Shares reported for such date.

 

 

 

In each case, the applicable price shall be the price reported in The Wall Street Journal or such other source a s the Committee deems reliable; provided, however, that if there is no such reported price for the Shares for the date in question, then the Fair Market Value shall be equal to the price reported on the last preceding date for which such price exists. If neither (i) or (ii) are applicable, then the Fair Market Value shall be determined by the Committee in good faith on such basis as it deems appropriate, consistent with the requirements of Section 409A or Section 422 of the Code, to the extent applicable.

 

2.21

Fiscal Year” means the Company’s fiscal year.

 

2.22

Grant” means any grant of an Award under the Plan.

 

2.23

Incentive Stock Option” or “ISO” means a stock option intended to be an “incentive stock option” within the meaning of Section 422 of the Code.

 

2.24

Key Service Provider” means an Employee, Director, Non-Employee Director or Consultant who has been selected by the Committee to receive an Award under the Plan.

 

2.25

Non-Employee Director” means a member of the Board who is not an Employee.

 

2.26

Nonstatutory Stock Option” or “NSO” means a stock option that is not an ISO.

 

2.27

Option” means an ISO or NSO granted under the Plan entitling the Optionee to purchase Shares.

 

2.28

Optionee” means an individual, estate that holds an Option.

 

2.29

Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.

 

2.30

Participant” means an individual or estate that holds an Award under the Plan.

 

2.31

Performance Goals” means one or more objective measurable performance factors as determined by the Committee with respect to each Performance Period based upon one or more factors (measured either absolutely or by reference to an index or indices and determined either on a consolidated basis or, as the context permits, on a Parent, Company, Affiliate, Subsidiary, divisional, line of business, unit, project or geographical basis or in combinations thereof), including, but not limited to: (i) operating income; (ii) earnings before interest, taxes, depreciation and amortization (“EBITDA”); (iii) earnings; (iv) cash flow; (v) market share; (vi) sales or revenue; (vii) expenses; (viii) cost of goods sold; (ix) profit/loss or profit margin; (x) working capital; (xi) return on equity or assets; (xii) earnings per share; (xiii) economic value added (“EVA”); (xiv) price/earnings ratio; (xv) debt or debt-to-equity; (xvi) accounts receivable; (xvii) writeoffs; (xviii) cash; (xix) assets; (xx) liquidity; (xxi) operations; (xxii) intellectual property (e.g., patents); (xxiii) product development; (xxiv) regulatory activity; (xxv) manufacturing, production or inventory; (xxvi) mergers and acquisitions or divestitures; and/or (xxvii) financings or refinancings. Awards issued to persons who are not Covered Employees may take into account other factors. To the extent consistent with the requirements for satisfying the performance-based compensation exception under Section 162(m) of the Code, the Committee may provide in the case of any Award intended to qualify for such exception that one or more of the Performance Goals applicable to such Award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the Performance Period that affect the applicable Performance Goals.

 

49

 

 

2.32

Performance Period” means any period not exceeding 36 months as determined by the Committee, in its sole discretion. The Committee may establish different Performance Periods for different Participants, and the Committee may establish concurrent or overlapping Performance Periods.

 

2.33

Plan” means this Landec Corporation 2013 Stock Incentive Plan, as it may be amended from time to time.

 

2.34

Re-Price” means that the Company has lowered or reduced the Exercise Price of outstanding Options and/or outstanding SARs for any Participant(s) in a manner described by Item 402(i)(1) of SEC Regulation S-K (or its successor provision).

 

2.35

SAR Agreement” means the agreement described in Section 7 evidencing each Award of a Stock Appreciation Right.

 

2.36

SEC” means the Securities and Exchange Commission.

 

2.37

Section 16 Persons” means those officers, directors or other persons who are subject to Section 16 of the Exchange Act.

 

2.38

Securities Act” means the Securities Act of 1933, as amended.

 

2.39

Service” means service as an Employee, Director, Non-Employee Director or Consultant. A Participant’s Service does not terminate if he or she is an Employee and goes on a bona fide leave of absence that was approved by the Company in writing and the terms of the leave provide for continued service crediting, or when continued service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to continuing ISO status, an Employee’s Service will be treated as terminating 90 days after such Employee went on leave, unless such Employee’s right to return to active work is guaranteed by law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. The Committee determines which leaves count toward Service, and when Service terminates for all purposes under the Plan. Further, unless otherwise determined by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant provides service to the Company, a Parent, Subsidiary or Affiliate, or a transfer between entities (the Company or any Parent, Subsidiary, or Affiliate); except that, for purposes of Section 4(g)(i) only, a Participant’s Service shall be deemed to terminate if he or she is an Employee and thereafter becomes a Consultant but, for the avoidance of doubt, a Participant’s Service shall not be deemed to terminate if he or she is an Employee and thereafter remains or becomes a Non-Employee Director (even if the Participant is also a Consultant) (it being understood that any post-termination exercise period set forth in Section 4(g)(iii) or (iv) shall commence when the Participant ceases to provide Service in any capacity listed herein); provided, however, in all cases that there is no interruption or other termination of Service.