Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
As previously announced, Bryan J. Merryman agreed to voluntarily step down as
President and Chief Executive Officer ("CEO") of Rocky Mountain Chocolate
Factory, Inc. (the "Company") upon the hiring of a new President and CEO for the
Company. The Company is actively engaged in the search for a new CEO to succeed
Mr. Merryman who will continue until such time in the capacity of interim CEO.
In connection therewith, the Company and Mr. Merryman entered into a letter
agreement dated November 8, 2021 (the "Letter Agreement"), effective November 3,
2021 (the "Effective Date"), amending that certain Second Restated Employment
Agreement, dated as of February 26, 2019, by and between the Company and Mr.
Merryman (the "Current Employment Agreement"). Pursuant to the Letter Agreement,
among other things, Mr. Merryman will (i) continue as Chief Financial Officer of
the Company, and (ii) until the Company hires a new President and CEO, as the
interim President and CEO of the Company. Except as specifically set forth in
the Letter Agreement, all the terms and provisions of the Current Employment
Agreement remain unmodified and in full force and effect. In addition, on
November 3, 2021, the Compensation Committee of the Board of Directors of the
Company (the "Board") recommended, and the Board unanimously approved, the
acceleration of vesting of approximately 66,667 unvested restricted stock units
previously granted to Mr. Merryman, such that the restricted stock units are
fully vested as of November 3, 2021 (the "RSU Acceleration").
The Compensation Committee recommended, and the Board unanimously approved, the
RSU Acceleration and the Letter Agreement because each believes that the RSU
Acceleration and the Letter Agreement are in the best interest of the Company
and its stockholders due to (i) Mr. Merryman's leadership and deep institutional
knowledge being critical to the Company's Board, leadership and strategy
transition, and (ii) the strong financial management skills and value that Mr.
Merryman brings to the Company in his continued role as Chief Financial Officer.
In addition, the Compensation Committee and the Board believe that the retention
of Mr. Merryman is vital during this transition period for ongoing operations
and employee morale, and that his retention sends an important positive signal
to the Company's employees, many of whom have worked with Mr. Merryman for over
two decades.
Pursuant to the Letter Agreement, if Mr. Merryman's employment terminates for
any reason following the Effective Date, he will be entitled to the following
payments:
? accrued base salary, expense reimbursements and other benefits that remain
unpaid as of the date of termination;
? a cash termination payment in an amount equal $1,326,813, plus any interest or
other earnings on such amount while held in trust (as described below);
? a lump sum cash payment in the amount of $18,000, which represents the
estimated cost to Mr. Merryman of obtaining accident, health, dental,
disability and life insurance coverage for the 18-month period following the
expiration of his continuation (COBRA) rights, plus any interest or other
earnings on such amount while held in trust (as described below); and
? the reimbursement of outplacement services during a two-year period following
Mr. Merryman's termination of employment.
The Compensation Committee and the Board determined that Mr. Merryman would be
entitled to all of the foregoing amounts under his Current Employment Agreement
if he were to resign at this time, and the Compensation Committee and the Board
determined that it would be detrimental to the Company if Mr. Merryman were to
leave under those circumstances. The Letter Agreement provides Mr. Merryman with
the amounts that he otherwise would have been entitled to receive if he resigned
at this time, while retaining him for continued service as Chief Financial
Officer. The Company has agreed to use commercially reasonable efforts to
establish a rabbi trust as soon as practicable after the Effective Date with an
outside third-party trustee, and contribute into the trust account approximately
$1.3 million, which represents the termination payment and the cash payment for
insurance coverage to be paid to Mr. Merryman upon the termination of his
employment in accordance with the payment schedule under the Current Employment
Agreement.
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In addition to the termination payments and benefits described above, consistent
with the Current Employment Agreement, upon termination of Mr. Merryman's
employment due to death or disability, he will be eligible to receive any bonus
to which he would have been entitled for the bonus period if he were still
employed on the last day of such bonus period.
Mr. Merryman is also entitled to a Section 280G gross-up payment in accordance
with the Current Employment Agreement in the event a determination is made that
a change in control event under Section 280G of the Internal Revenue Code
occurred prior to November 3, 2021, and Mr. Merryman incurs an excise tax as a
result of any payments or distributions by the Company to or for the benefit of
Mr. Merryman in connection with that change in control event.
Finally, the provision in the Current Employment Agreement regarding a
consulting agreement is preserved until the first anniversary of the Effective
Date (the "Consulting Period Expiration Date"), such that the Board may request
that Mr. Merryman enter into the Consulting Agreement (as defined in the Current
Employment Agreement) in the event he were to terminate his employment for any
reason prior to the Consulting Period Expiration Date, subject to a decrease in
the consulting term and compensation if Mr. Merryman were to terminate his
employment after the six-month anniversary of the Effective Date and prior to
Consulting Period Expiration Date.
The foregoing description of the Letter Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the full text of the document, which is filed as Exhibit 10.1 to this Current
Report on Form 8-K and incorporated by reference herein.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description
10.1 Letter Agreement, dated November 8,
2021, between Rocky Mountain
Chocolate Factory, Inc. and Bryan J.
Merryman.
104 Cover Page Interactive Data File
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