DEF 14A
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

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 Rule 14a-6(e)(2))
  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12

TREEHOUSE FOODS, INC.

(Name of registrant as specified in its charter)

 

(Name of person(s) filing proxy statement, if other than the registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.
  Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

     

  (2)  

Aggregate number of securities to which transaction applies:

 

     

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

 

     

  (4)  

Proposed maximum aggregate value of transaction:

 

     

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Total fee paid:

 

     

  Fee paid previously with preliminary materials.
  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

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Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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LOGO

TREEHOUSE FOODS, INC.

2021 SPRING ROAD

SUITE 600

OAK BROOK, ILLINOIS 60523

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

ON APRIL 27, 2017

To the Stockholders of TreeHouse Foods, Inc.:

You are cordially invited to attend the Annual Meeting of Stockholders (“Annual Meeting”) of TreeHouse Foods, Inc. (“TreeHouse” or the “Company”) that will be held at 2015 Spring Road, Lower Level, Conference Room A, Oak Brook, Illinois 60523, on Thursday, April 27, 2017, at 9:00 a.m. Central Daylight Time.

Once again, we are pleased to take advantage of the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the Internet. We believe that this e-proxy process expedites stockholders’ receipt of proxy materials, while also lowering the costs and reducing the environmental impact of our Annual Meeting. On or about March 13, 2017, we will mail to our stockholders who have not already requested paper material a Notice of Internet Access and Availability of Proxy Materials (“Notice”), which contains instructions on how to vote, how to access our 2017 Proxy Statement (“Proxy Statement”) and 2016 Annual Report on Form 10-K (“Annual Report”) online, and how to request paper copies of the materials. All stockholders who have elected to continue to receive paper copies will receive a copy of the Proxy Statement and Annual Report by mail. The Proxy Statement also contains instructions on how you can (i) receive a paper copy of the Proxy Statement and Annual Report, if you only received a Notice by mail, or (ii) elect to receive your Proxy Statement and Annual Report over the Internet, if you received them by mail this year.

At the Annual Meeting you will be asked to vote on the following matters and to transact such other business as may properly come before the Annual Meeting or any adjournment or postponement thereof:

 

  1. To elect three directors to hold office until the 2020 Annual Meeting of Stockholders;

 

  2. To ratify the selection of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2017;

 

  3. To provide an advisory vote to approve the Company’s executive compensation;

 

  4. To provide an advisory vote to approve the frequency of future advisory votes of the Company’s executive compensation program; and

 

  5. To approve the amendment and restatement of the TreeHouse Foods, Inc. Equity and Incentive Plan, including an increase in the number of shares subject to the plan.

The matters listed above are fully discussed in the Proxy Statement accompanying this Notice. A copy of our Annual Report is available online or by request as previously described.

The record date for the Annual Meeting is February 27, 2017. Only stockholders of record as of February 27, 2017, are entitled to notice of, and to vote at, the Annual Meeting.

Whether or not you attend the Annual Meeting, it is important that your shares be represented and voted at the Annual Meeting. Therefore, I urge you to promptly vote and submit your proxy by phone, via the Internet, or by completing, signing, dating, and returning the enclosed proxy card in the enclosed envelope. If you decide to attend the Annual Meeting, you will be able to vote in person, even if you have previously submitted your proxy. If for any reason you wish to revoke your proxy, you may do so at any time before it is voted at the Annual Meeting.

 

 

LOGO

Thomas E. O’Neill

Corporate Secretary

March 2, 2017


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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 27, 2017

This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting.

Our Proxy Statement and our Annual Report are available at www.envisionreports.com/thfi. Our Proxy Statement includes information on the following matters, among other things:

 

   

The date, time, and location of the Annual Meeting;

 

   

A list of the matters being submitted to the stockholders for approval; and

 

   

Information concerning voting in person at the Annual Meeting.

If you want to receive a paper copy or e-mail of these documents, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy to Computershare Shareowner Services by telephone at 1-866-641-4276 or online at www.envisionreports.com/thfi or contact the Company’s Investor Relations Department directly at our principal executive office: TreeHouse Foods, Inc., 2021 Spring Road, Suite 600, Oak Brook, Illinois 60523, telephone (708) 483-1331. Please make your request on or before April 14, 2017, to facilitate timely delivery.


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TABLE OF CONTENTS

 

     Page  

SUMMARY OF THE ANNUAL MEETING

     1  

Who May Vote

     1  

How Proxies Work

     1  

Shares Held Through a Bank, Broker, or Other Nominee

     2  

Quorum

     2  

Revoking a Proxy

     2  

Required Vote

     2  

Resignation Policy

     3  

Method and Cost of Soliciting and Tabulating Votes

     3  

Householding

     3  

ELECTION OF DIRECTORS (PROPOSAL 1)

     4  

Election of Dennis F. O’Brien

     5  

Election of Sam K. Reed

     6  

Election of Ann M. Sardini

     7  

RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PROPOSAL 2)

     8  

CORPORATE GOVERNANCE

     8  

Current Board Members

     8  

Corporate Governance Guidelines and Code of Ethics

     9  

Director Independence

     9  

Nomination of Directors

     9  

BOARD LEADERSHIP STRUCTURE

     10  

Board Chairman and CEO Roles

     10  

Lead Independent Director

     10  

Determination That Current Board Leadership Structure is Appropriate

     10  

The Board’s Role in Risk Oversight

     11  

Meetings of the Board of Directors

     11  

COMMITTEE MEETINGS/ROLE OF COMMITTEES

     11  

Role of Compensation Consultants

     12  

STOCK OWNERSHIP

     13  

Holdings of Management

     13  

Security Ownership of Certain Beneficial Owners and Management

     13  

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     15  

DIRECTORS AND MANAGEMENT

     16  

Directors and Executive Officers

     16  

Compensation Risk Assessment

     21  

COMPENSATION DISCUSSION AND ANALYSIS

     22  

Objectives of Our Compensation Program

     22  

Our Compensation Aligns to Business Results

     22  

Compensation Process Overview

     24  

Summary of 2016 Executive Compensation Program

     25  

Role of 2016 Advisory Approval of Executive Compensation in the Compensation Setting Process

     27  

Components of Compensation

     27  

 

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2016 Long-Term Incentive Grant

     29  

Stock Ownership and Holding Policies

     31  

General Compensation Matters

     31  

EXECUTIVE COMPENSATION

     34  

2016 Summary Compensation Table

     34  

Details Behind All Other Compensation Columns

     35  

2016 Grants of Plan Based Awards

     36  

Management Changes

     37  

Employment Agreements

     37  

Awards

     38  

2016 Outstanding Equity Awards at Fiscal Year-End

     39  

2016 Option Exercises and Stock Vested

     42  

2016 Non-Qualified Deferred Compensation

     43  

Potential Payments Upon Termination or Change in Control

     43  

2016 DIRECTOR COMPENSATION

     49  

Cash Compensation

     49  

Equity-Based Compensation

     50  

Board Stock Ownership and Age Requirements

     50  

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     51  

COMMITTEE REPORTS

     51  

REPORT OF THE AUDIT COMMITTEE

     52  

REPORT OF THE NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

     53  

REPORT OF THE COMPENSATION COMMITTEE

     53  

FEES BILLED BY INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

     53  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

     54  

ADVISORY VOTE TO APPROVE THE COMPANY’S EXECUTIVE COMPENSATION PROGRAM (PROPOSAL 3)

     54  

ADVISORY VOTE TO APPROVE THE FREQUENCY OF FUTURE ADVISORY VOTES OF THE COMPANY’S EXECUTIVE COMPENSATION PROGRAM (PROPOSAL 4)

     55  

APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE TREEHOUSE FOODS, INC. EQUITY AND INCENTIVE PLAN, INCLUDING AN INCREASE IN THE NUMBER OF SHARES SUBJECT TO THE PLAN (PROPOSAL 5)

     56  

STOCKHOLDER PROPOSALS FOR 2018 ANNUAL MEETING OF STOCKHOLDERS

     66  

STOCKHOLDER COMMUNICATION WITH THE BOARD

     66  

OTHER MATTERS

     67  

APPENDIX A — TREEHOUSE FOODS, INC. EQUITY AND INCENTIVE PLAN

     A-1  

APPENDIX B — CORPORATE GOVERNANCE GUIDELINES: DIRECTOR INDEPENDENCE

     B-1  

 

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TREEHOUSE FOODS, INC.

2021 SPRING ROAD

SUITE 600

OAK BROOK, ILLINOIS 60523

PROXY STATEMENT

SUMMARY OF THE ANNUAL MEETING

We are furnishing this Proxy Statement in connection with the solicitation of proxies by the Board of Directors (“Board”) of TreeHouse Foods, Inc. (“TreeHouse,” “Company,” “we,” “us,” or “our,” as the context requires) for use in voting at our 2017 Annual Meeting of Stockholders (“Annual Meeting”). The Meeting will be held at 2015 Spring Road, Lower Level, Conference Room A, Oak Brook, Illinois 60523, on Thursday, April 27, 2017, at 9:00 a.m. Central Daylight Time for the purpose of considering and acting upon the matters specified in the notice accompanying this Proxy Statement. This Proxy Statement is being sent to stockholders on or about March 13, 2017.

Who May Vote

If you are a stockholder of record on February 27, 2017, you are entitled to vote at the Meeting. As of that date, there were 56,850,026 shares of the Company’s common stock (“Common Stock”) outstanding, the only class of voting securities outstanding. You are entitled to one (1) vote for each share of Common Stock you own, without cumulation, on each matter to be voted upon at the Meeting.

How Proxies Work

Only votes cast in person at the Meeting or received by proxy before the beginning of the Meeting will be counted at the Meeting. Giving us your proxy means you authorize us to vote your shares at the Meeting in the manner you direct. If your shares are held in your name, you can vote by proxy in three (3) convenient ways:

 

   

By Internet:    Go to www.envisionreports.com/thfi and follow the instructions.

 

   

By Telephone:    Call toll-free 1-800-652-VOTE (8683) and follow the instructions.

 

   

By Mail:    Complete, sign, date, and return your proxy card in the enclosed envelope.

Telephone and Internet voting facilities for stockholders of record will be available twenty-four (24) hours a day and will close at 12:00 a.m. Central Daylight Time on April 27, 2017.

As permitted by Securities and Exchange Commission (“SEC”) rules, TreeHouse is making this Proxy Statement and its Annual Report on Form 10-K (“Annual Report”) available to its stockholders electronically via the Internet. On or about March 13, 2017, we will mail our stockholders a Notice of Internet Access and Availability of Materials (“Notice”), which contains instructions on how to vote, access this Proxy Statement and our Annual Report online, and how to request paper copies of the materials. If you receive a Notice by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice instructs you on how to access and review all of the important information contained in the Proxy Statement and Annual Report. The Notice also instructs you on how you may submit your proxy over the Internet. If you receive a Notice by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials contained in the Notice.

If your proxy is properly returned, the shares it represents will be voted at the Meeting in accordance with your instructions. If you execute and return your proxy but do not give specific instructions, your shares will be voted as follows:

 

   

FOR the election of each of the three (3) nominees for director set forth herein;

 

   

FOR the ratification of the selection of Deloitte & Touche LLP as our independent registered public accounting firm for 2017;

 

   

FOR the advisory approval of the compensation of the Company’s named executive officers as described in this Proxy Statement under “Compensation Discussion and Analysis” and “Executive Compensation”;

 

   

FOR the advisory approval of the Company’s executive compensation program to occur every year;

 

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FOR the approval of the TreeHouse Foods, Inc. Equity and Incentive Plan, including an increase in the number of shares subject to the plan; and

 

   

with respect to any other matter that may properly come before the Meeting, at the discretion of the persons voting the respective proxies.

The Board does not intend to bring any matters before the Meeting except those indicated in the Notice. If any other matters properly come before the Meeting, however, the persons named in the enclosed proxy, or their duly constituted substitutes acting at the Meeting, will be authorized to vote or otherwise act thereon in accordance with their judgment on such matters.

Shares Held Through a Bank, Broker, or Other Nominee

If you are the beneficial owner of shares held in “street name” through a bank, broker, or other nominee, such bank, broker, or nominee, as the record holder of the shares, must vote those shares in accordance with your instructions. If you do not give instructions to your broker, your broker can vote your shares with respect to “discretionary” items but not with respect to “non-discretionary” items. On non-discretionary items for which you do not give instructions, the shares will be treated as “broker non-votes”. A discretionary item is a proposal that is considered routine under the rules of the New York Stock Exchange (the “NYSE”). Shares held in street name may be voted by your broker on discretionary items in the absence of voting instructions given by you. The proposal concerning the ratification of the independent registered public accounting firm (Proposal 2) is discretionary. All other proposals to be voted on at the Meeting are non-discretionary and, accordingly, cannot be voted upon without your instruction.

Quorum

Stockholders of record may vote their proxies by telephone, the Internet, or mail. By using your proxy to vote in one of these ways, you authorize any of the two (2) officers whose names are listed on the back of the proxy card accompanying this Proxy Statement to represent you and vote your shares. Holders of a majority of the shares entitled to vote at the Meeting must be present in person or represented by proxy to constitute a quorum. Of course, if you attend the Meeting, you may vote by ballot. If you are not present, your shares can be voted only when represented by a properly submitted proxy. Abstentions and broker non-votes (as described below under the heading “Required Vote”) are counted for purposes of determining whether a quorum is met.

Revoking a Proxy

Submitting your proxy now will not prevent you from voting your shares at the Meeting if you desire to do so, as your proxy is revocable at your option. You may revoke your proxy at any time before it is voted at the Meeting by:

 

   

delivering to Thomas E. O’Neill, our Executive Vice President, General Counsel, Chief Administrative Officer, and Corporate Secretary, a signed written revocation letter dated later than the date of your proxy;

 

   

submitting a proxy to the Company with a later date; or

 

   

attending the Meeting and voting in person (your attendance at the Meeting will not, by itself, revoke your proxy; you must also vote in person at the Meeting).

Required Vote

The election of the nominees for director (Proposal 1) in an uncontested election will become effective only upon the affirmative vote of shares of common stock representing a majority of the votes cast “for” or “against” such nominee. The ratification of the selection of our independent registered public accounting firm (Proposal 2), the advisory approval of the compensation of the Company’s named executive officers as described in this Proxy Statement under “Compensation Discussion and Analysis” and “Executive Compensation” (Proposal 3), the approval of the amendment and restatement of the TreeHouse Foods, Inc. Equity and Incentive Plan, including an increase in the number of shares subject to the plan (Proposal 5), and the approval of any other matter that may

 

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properly come before the Meeting will become effective only upon the affirmative vote of shares of Common Stock representing a majority of the votes cast “for” or “against” such proposal. Votes cast as “for” or “against” are counted as a vote, while votes cast as abstentions will not be counted as a vote but will be counted for purposes of determining a quorum. On Proposal 4, the frequency alternative that receives the most votes will be the choice of stockholders. Abstentions will have no effect on Proposals 1, 2, 3, 4 and 5. So-called “broker non-votes” (brokers failing to vote by proxy shares of the common stock held in nominee name for customers on any non-discretionary matters) will not be counted as votes at the Meeting and will not have a direct impact on any non-discretionary proposal (i.e., Proposals 1, 3, 4 and 5).

Resignation Policy

Our Corporate Governance Guidelines utilize a resignation policy in the election of directors. Accordingly, if an incumbent director nominee receives a greater number of votes marked “against” his or her election than votes marked “for” his or her election, that nominee is required to tender his or her resignation following certification of the stockholder vote. The Nominating and Corporate Governance Committee is required to make recommendations to the Board with respect to any such resignation. The Board is required to take action with respect to this recommendation and to disclose its decision-making process.

Method and Cost of Soliciting and Tabulating Votes

The solicitation of proxies from our stockholders is being made by the Board and management of the Company. TreeHouse will bear the costs of soliciting and tabulating your votes, including the cost of preparing and mailing the Proxy Statement, the Proxy Card, Notice, and the Annual Report. TreeHouse has retained the services of Broadridge Financial Solutions, Inc., to assist in distributing these proxy materials. D.F. King & Co., Inc. will act as our proxy solicitor in soliciting votes for a fee of approximately $15,000 plus the reimbursement of reasonable out of pocket expenses. Solicitation will be primarily through the use of the U.S. Postal Service and the Internet, but our officers, directors, and regular employees may solicit proxies personally or by telephone without additional remuneration for such activity.

TreeHouse will reimburse banks, brokers, and other holders of record for reasonable, out-of-pocket expenses for forwarding these proxy materials to you, and obtaining proxies from you, according to certain regulatory fee schedules. The actual amount will depend on variables such as the number of packages mailed, the number of stockholders receiving electronic delivery, and postage costs.

Computershare, our transfer agent, will act as the proxy tabulator and Inspector of Elections.

Householding

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy materials with respect to two or more stockholders sharing the same address by delivering a single proxy statement and annual report addressed to those stockholders. This process, which is commonly referred to as “householding”, potentially means extra convenience for stockholders and cost savings for companies. We have not implemented householding rules with respect to our record holders. However, a number of brokers with account holders who are stockholders may be “householding” our proxy materials. If a stockholder receives a householding notification from his, her, or its broker, a single Proxy Statement and annual report will be delivered to multiple stockholders sharing an address unless contrary instructions have been received from an affected stockholder. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise.

Stockholders who currently receive multiple copies of the proxy materials at their address and would like to request “householding” of their communications should contact their broker. In addition, if any stockholder that receives a “householding” notification wishes to receive a separate annual report and proxy statement at his, her or its address, such stockholder should also contact his, her or its broker directly. Stockholders who in the future wish to receive multiple copies may also contact the Company at: 2021 Spring Road, Suite 600, Oak Brook, IL, 60523, Attention: Investor Relations or by phone at (708) 483-1331.

 

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ELECTION OF DIRECTORS (PROPOSAL 1)

We have a classified Board consisting of three (3) classes. At each annual meeting a class of directors is elected for a term of three (3) years to succeed any directors whose terms are expiring. We believe this classified board structure is appropriate for the Company. Obtaining a three-year (3) commitment from our directors assists us in retaining highly qualified directors who have experience and familiarity with our business and the markets in which we operate. The Board believes that such long-term institutional knowledge benefits TreeHouse and enables the Board to better consider and provide long-term strategic planning.

At the Meeting, you will elect a total of three (3) directors to hold office, subject to the provisions of the Company’s By-Laws, until the annual meeting of stockholders in 2020 and until their successors are duly elected and qualified. Unless you instruct otherwise, the shares represented by your proxy will be voted FOR the election of Mr. Dennis F. O’Brien, Mr. Sam K. Reed and Ms. Ann M. Sardini, the nominees set forth below. The affirmative vote of a majority of the votes cast is required to elect each director. In other words, the number of votes “for” a director must exceed the number of votes “against” a director in order to elect such director. For information regarding our resignation policy, see “Summary of the Annual Meeting — Resignation Policy” in this Proxy Statement.

Mr. O’Brien, Mr. Reed and Ms. Sardini have each agreed to be nominated and to serve as a director if elected. However, if any nominee at the time of his or her election is unable or unwilling to serve, or is otherwise unavailable for election, and as a result, another nominee is designated by the Board, then you or your designee will have discretion and authority to vote or refrain from voting for such nominee.

 

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Proposal 1 — Election of Directors

Election of Dennis F. O’Brien — Continuing in office — Term expiring 2020

The Nominating and Corporate Governance Committee has recommended and the Board has nominated Mr. O’Brien for re-election to the Company’s Board. Certain information about Mr. O’Brien is set forth below.

 

   

LOGO

  

DENNIS F. O’BRIEN has served as a Director since August 2009. Mr. O’Brien is a partner of Gryphon Investors, Inc., a private equity firm, a position he has held since April 2008. Prior to joining Gryphon, Mr. O’Brien was the Chief Executive Officer of Penta Water Company, a privately owned bottled water company, from April 2007 to April 2008. On October 5, 2009, Penta Water Company, Inc. filed for bankruptcy under Chapter 11. Mr. O’Brien held a series of executive positions with ConAgra Foods, Inc., including President and Chief Operating Officer, Retail Products from 2004 to 2006, President and Chief Operating Officer, Grocery Foods from 2002 through 2004, Executive Vice President, Grocery Foods from 2001 to 2002 and President, ConAgra Store Brands from 2000 through 2001. In addition, Mr. O’Brien previously held executive and marketing positions at Armstrong World Industries, Campbell’s Soup Company, Nestle S.A. and Procter & Gamble. Mr. O’Brien holds a Bachelor of Science degree in marketing from the University of Connecticut. Mr. O’Brien previously sat on the audit committee of Senomyx, Inc.. Mr. O’Brien is a member of the Compensation Committee and Chairman of the Nominating and Corporate Governance Committee of our Board.

 

Mr. O’Brien provides insight and perspective on strategic, marketing and food industry matters stemming in part from his significant food industry experience.

 

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Election of Sam K. Reed — Continuing in office — Term expiring 2020

The Nominating and Corporate Governance Committee has recommended and the Board has nominated Mr. Reed for re-election to the Company’s Board. Certain information about Mr. Reed is set forth below.

 

   

LOGO

  

SAM K. REED is the Chairman of our Board. Mr. Reed has served as our Chairman and Chief Executive Officer since January 27, 2005 and as President from July 1, 2011 until August 4, 2016. Prior to joining us, Mr. Reed was a principal in TreeHouse LLC, an entity unrelated to the Company that was formed to pursue investment opportunities in consumer packaged goods businesses. From March 2001 to April 2002, Mr. Reed served as Vice Chairman of Kellogg Company. From January 1996 to March 2001, Mr. Reed served as the President and Chief Executive Officer, and as a director of Keebler Foods Company. Prior to joining Keebler, Mr. Reed served as Chief Executive Officer of Specialty Foods Corporation’s (unrelated to Dean Foods, as defined below) Western Bakery Group division from 1994 to 1995. Mr. Reed has also served as President and Chief Executive Officer of Mother’s Cake and Cookie Co. and has held Executive Vice President positions at Wyndham Bakery Products and Murray Bakery Products. In addition to our Board, Mr. Reed has previously served on the boards of directors of Weight Watchers International, Inc. and Tractor Supply Company. Mr. Reed holds a B.A. from Rice University and an M.B.A. from Stanford University.

 

We believe that as our Chairman and Chief Executive Officer, Mr. Reed has led a transformation of the Company focused on increasing value for customers and stockholders. With Mr. Reed’s broad experience and deep understanding of the Company and the food industry, and as Chief Executive Officer, he provides leadership and industry experience to the Board and to the Company.

 

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Election of Ann M. Sardini — Continuing in office — Term expiring 2020

The Nominating and Corporate Governance Committee has recommended, and the Board has nominated, Ms. Sardini for re-election to the Company’s Board. Certain information about Ms. Sardini is set forth below.

 

   

LOGO

  

ANN M. SARDINI has served as a Director since May 2008. Ms. Sardini is currently since 2013 an independent advisor and consultant to early and mid-stage companies and private equity firms. From April 2001 to June 2012, when she retired from that position, Ms. Sardini served as the Chief Financial Officer of Weight Watchers International, Inc. She served as Chief Financial Officer of Vitamin Shoppe.com, Inc., a seller of vitamins and nutritional supplements, from September 1999 to December 2001, and from March 1995 to August 1999 she served as Executive Vice President and Chief Financial Officer for the Children’s Television Workshop. In addition, Ms. Sardini has held finance positions at QVC, Inc., Chris Craft Industries, and the National Broadcasting Company. In addition to our Board, Ms. Sardini has served on the board of directors of Pier 1 Imports, Inc. since 2013 and currently chairs its Audit Committee, and since 2016, on the board of directors of Ideal Protein and chairs its Audit Committee. In addition, Ms. Sardini currently serves on the advisory boards of To The Market and PetTrax since 2016, and Everplans since 2017. Previously, Ms. Sardini has served on the boards of directors for Promise Project Fund for the City of New York from 2012 to 2015, Weight Watchers Danone China Ltd. from 2008 to 2010 and Veneca Inc. from 2005 to 2007, and on the advisory board of Learnvest.com from 2013 to 2015. Ms. Sardini holds a B.A. from Boston College and an M.B.A from Simmons College Graduate School of Management. Ms. Sardini is our Lead Independent Director and a member of the Compensation Committee of our Board.

 

Ms. Sardini is a financial expert and transformation leader with over twenty (20) years of experience in senior financial management positions in branded media and consumer products and services companies, ranging in scope from multi-national to early stage start-up companies. She currently consults with companies and investors on business, strategic and operational matters. She provides independent guidance to the Board on a wide variety of general corporate and strategic matters based on her extensive executive experience, her financial experience as chief financial officer of a public company, and her broad operating business background.

RECOMMENDATION:

THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF ALL

DIRECTOR NOMINEES TO SERVE ON THE COMPANY’S BOARD

PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE ELECTION OF EACH

DIRECTOR NOMINEE UNLESS STOCKHOLDERS SPECIFY A CONTRARY VOTE.

 

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RATIFICATION OF THE SELECTION OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM (PROPOSAL 2)

Deloitte & Touche LLP audited our financial statements for fiscal year 2016 and has been selected by the Audit Committee of our Board to audit our financial statements for fiscal year 2017. A representative of Deloitte & Touche LLP will attend the Meeting, where he or she will have the opportunity to make a statement, if he or she desires, and will be available to respond to appropriate stockholder questions.

Stockholder ratification of the selection of Deloitte & Touche LLP is not required by our By-laws. However, our Board is submitting the selection of Deloitte & Touche LLP to you for ratification as a matter of good corporate practice. If our stockholders fail to ratify the selection, our Audit Committee will reconsider whether or not to retain Deloitte & Touche LLP. Even if the selection is ratified, the Audit Committee, in its discretion, may direct the appointment of a different independent registered public accounting firm if they determine such a change would be in the best interests of the Company and the Company’s stockholders.

The affirmative vote of a majority of the votes cast is required to approve this Proposal 2.

For information regarding audit and other fees billed by Deloitte & Touche LLP for services rendered in fiscal years 2015 and 2016, see “Fees Billed by Independent Registered Public Accounting Firm” on page 53 in this Proxy Statement.

RECOMMENDATION:

THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF THE SELECTION OF OUR INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

PROXIES SOLICITED BY THE BOARD WILL BE VOTED FOR THE RATIFICATION OF THE

SELECTION OF OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM UNLESS

STOCKHOLDERS SPECIFY A CONTRARY VOTE.

CORPORATE GOVERNANCE

Current Board Members

The members of the Board on the date of this Proxy Statement, and the committees of the Board on which they serve, are identified below.

 

Director

   Compensation
Committee
   Audit
Committee
   Nominating
and Corporate
Governance
Committee

Sam K. Reed

        

George V. Bayly

   **      

Linda K. Massman

      *   

Dennis F. O’Brien

   *       **

Frank J. O’Connell

      **   

Ann M. Sardini***

   *      

Gary D. Smith

      *    *

Terdema L. Ussery, II

      *    *

David B. Vermylen

        

 

* Member

 

** Chairman

 

*** Lead Independent Director

 

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Corporate Governance Guidelines and Code of Ethics

We are committed to high standards of business integrity and corporate governance. All of our directors, executives and employees must act ethically and in accordance with our Code of Ethics. All of the Company’s corporate governance materials, including the Corporate Governance Guidelines, committee charters and the Code of Ethics are published on the Company’s website at www.treehousefoods.com in the investor relations information section and are also available upon request from the Corporate Secretary. The Board regularly reviews corporate governance developments and modifies the Company’s corporate governance materials from time to time. We will post any modifications of our corporate governance materials, including our Code of Ethics, on our website.

Director Independence

The NYSE listing rules require that a majority of the Company’s directors be independent. The Board determined that (i) Messrs. Bayly, O’Brien, O’Connell, Smith and Ussery and Ms. Massman and Ms. Sardini have no direct or indirect material relationships with management, and that they satisfy the NYSE’s independence guidelines and are independent and (ii) that Messrs. Reed and Vermylen are not independent.

All members of our Audit, Compensation and Nominating and Corporate Governance Committees are independent directors and our Compensation Committee members meet the enhanced independence requirements for Compensation Committee members under the NYSE’s listing standards. The Board has determined that all of the members of our Audit Committee also satisfy the SEC independence requirement, which provides that they may not accept directly or indirectly any consulting, advisory or other compensatory fee from the Company or any of its subsidiaries other than their directors’ compensation. The portion of the Corporate Governance Guidelines addressing director independence is attached to this Proxy Statement as Appendix B.

Nomination of Directors

The Board is responsible for approving candidates for Board membership and has delegated the process of screening and recruiting potential director nominees to the Nominating and Corporate Governance Committee in consultation with the Chairman of the Board and Chief Executive Officer. The Nominating and Corporate Governance Committee seeks candidates who have a reputation for integrity, honesty, and adherence to high ethical standards and who have demonstrated business acumen, experience, and an ability to exercise sound judgment in matters that relate to the current and long-term objectives of the Company. The Nominating and Corporate Governance Committee considers diversity as one of a number of factors in identifying nominees for director. The Committee views diversity broadly to include diversity of experience, skills, and viewpoint as well as traditional diversity concepts such as race and gender. When the Nominating and Corporate Governance Committee reviews a candidate for Board membership, the Nominating and Corporate Governance Committee looks specifically at the candidate’s background and qualifications in light of the needs of the Board and the Company at that time, given the then-current composition of the Board. The aim is to assemble a Board that provides a significant breadth of experience, knowledge, and abilities that assist the Board in fulfilling its responsibilities. The current members of the Board hold or have held senior executive positions in large, complex organizations and have operating experience that meets this objective. In these positions, they have gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management, and leadership development. Many of our directors also have experience serving on boards of directors and board committees of other public companies and have an understanding of corporate governance practices and trends. We consider the members of our Board to have a diverse set of business and personal experiences, backgrounds and expertise.

The Nominating and Corporate Governance Committee receives suggestions for new directors from a number of sources, including current Board members and stockholders (see “Stockholder Proposals for 2018 Annual Meeting of Stockholders” for further details). It also may, in its discretion, employ a third-party search firm to assist in identifying candidates for director. Once a potential director candidate has been identified, including through the recommendation of a stockholder in accordance with the procedures set forth in our By-laws, the Nominating and Corporate Governance Committee evaluates the candidate according to the factors described above.

 

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BOARD LEADERSHIP STRUCTURE

Board Chairman and CEO Roles

The Board has determined that the appropriate leadership structure for the Board at this time is for Mr. Reed, our Chief Executive Officer, to serve as Chairman of the Board, while also selecting an independent, non-management director to serve as a lead director (“Lead Independent Director”) to provide independent leadership. Mr. Reed possesses detailed and in-depth knowledge of the issues, opportunities, and challenges facing the Company and its businesses and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters.

His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s stockholders, employees, customers, and suppliers, particularly during times of turbulent economic and industry conditions.

With the exception of Messrs. Reed and Vermylen, each of the directors is independent, and the Board believes that the independent directors provide effective oversight of management.

We do not have a formal policy that requires the Chief Executive Officer or any other member of management to serve as Chairman of the Board, and the Board, in its discretion, may subsequently decide to change our leadership structure.

Lead Independent Director

The Company has chosen to combine the Chairman and Chief Executive Officer roles, and as a result, the Board appointed the Lead Independent Director to coordinate the activities of the other non-management directors, and to perform such other duties and responsibilities described below and as the Board may from time to time determine.

Currently, the Lead Independent Director is Ann M. Sardini. The role of the Lead Independent Director includes:

 

   

Conducting and presiding at executive sessions of the Board;

 

   

Serving as a liaison to and acting as a regular communication channel between the non-employee members of the Board and the Chief Executive Officer of the Company;

 

   

In the event of the unavailability or incapacity of the Chairman of the Board, calling and conducting special meetings of the Board; and

 

   

Consulting with the Chairman and Chief Executive Officer about the concerns of the Board.

While serving as Lead Independent Director, Ms. Sardini has followed governance practices established by the Board that support effective communication and effective Board performance. The Lead Independent Director role fosters a Board culture of open discussion and deliberation, with thoughtful evaluation of risk to support sound decision-making.

Our directors undergo an annual Board self-evaluation to determine whether the Board and its committees are functioning effectively. As part of the self-evaluation process, directors provide feedback evaluating Board effectiveness and committee effectiveness on multiple criteria. The Nominating and Corporate Governance Committee receives comments from all directors and reports annually to the Board with an assessment of the Board’s performance. Each committee also conducts a self-evaluation and reports its assessment of effectiveness to the Board. The assessments are discussed with the full Board each year.

Determination That Current Board Leadership Structure is Appropriate

The Board has determined that the current Board leadership structure is appropriate for TreeHouse for the following reasons:

 

   

The current structure is working well and the Lead Independent Director is highly effective in her role;

 

   

There is strong evidence that the Board is acting independently;

 

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There are effectiveness and efficiency advantages of having a Chairman of the Board with the Chief Executive Officer’s significant food industry strategy, marketing, and operations knowledge and experience;

 

   

The Board has open discussions and thoughtful deliberations, especially in the evaluation of risk and in support of sound decision-making;

 

   

The current size, food industry focus, and relatively straightforward organizational structure of the Company allows the Chairman of the Board and Chief Executive Officer roles to be effectively combined; and

 

   

The non-management directors meet regularly in private sessions to discuss issues regarding the Company.

The Board’s Role in Risk Oversight

Together with the Board’s standing committees, the Board is responsible for ensuring that material risks are identified and managed appropriately. The Board and its committees regularly review material operational, financial, compensation and compliance risks with senior management. As part of its responsibilities as set forth in its charter, the Audit Committee is responsible for discussing with management the Company’s policies and guidelines to govern the process by which risk assessment and risk management are undertaken by management, including guidelines and policies to identify the Company’s major financial risk exposures, and the steps management has taken to monitor and control such exposures. For example, our Vice President & Chief Audit Executive reports to the Audit Committee on a regular basis with respect to compliance with our risk management policies. The Audit Committee also performs a central oversight role with respect to financial and compliance risks, and reports on its findings at each regularly scheduled meeting of the Board after meeting with our Vice President & Chief Audit Executive and our independent auditor, Deloitte & Touche LLP. The Compensation Committee considers risk in connection with its design of compensation programs for our executives. The Nominating and Corporate Governance Committee annually reviews the Company’s Corporate Governance Guidelines and their implementation. Each committee regularly reports to the Board.

Meetings of the Board of Directors

The Board met seven (7) times during 2016. Each of the members of the Board participated in over 75% of the meetings of the Board and committees that took place while such person was a member of the Board and the applicable committee. Members of the Board are expected to attend each meeting, as set forth in the Company’s Corporate Governance Guidelines. It is the Board’s policy that all of our directors attend the Annual Meeting of Stockholders, absent exceptional cause. Each of the directors attended the Annual Meeting of Stockholders in 2016. The non-management directors of the Company meet regularly (at least quarterly) in executive sessions of the Board without management present. The Lead Independent Director presides over non-management sessions.

The Board has established standing Audit, Compensation, and Nominating and Corporate Governance Committees. The Board determines the membership of each of these committees from time to time, and only outside, independent directors serve on these committees.

COMMITTEE MEETINGS/ROLE OF COMMITTEES

Audit Committee:    The Audit Committee held nine (9) meetings during 2016. The Audit Committee presently consists of Messrs. O’Connell, Smith and Ussery and Ms. Massman. The Audit Committee operates pursuant to a written charter and is composed entirely of independent directors, in accordance with the NYSE listing standards and SEC rules. In addition, the Board has determined that Messrs. O’Connell, Smith and Ussery and Ms. Massman are each qualified as an audit committee financial expert within the meaning of SEC regulations, and the Board has determined that each of them has accounting and related financial management expertise as required by the listing standards of the NYSE. The Audit Committee reviews and approves the scope and cost of all services, both audit and non-audit, provided by the firm selected to conduct the audit. The Audit Committee also, among other duties, monitors the effectiveness of the audit process and financial reporting and inquiries into the adequacy of financial and operating controls. The report of the Audit Committee is set forth later in this Proxy Statement.

 

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Nominating and Corporate Governance Committee:    The Nominating and Corporate Governance Committee held four (4) meetings in 2016. The Nominating and Corporate Governance Committee presently consists of Messrs. O’Brien, Smith and Ussery. The Nominating and Corporate Governance Committee is composed entirely of independent directors and operates pursuant to a written charter. The purposes of the Nominating and Corporate Governance Committee are (i) to identify individuals qualified to become members of the Board, (ii) to recommend to the Board the persons to be nominated for election as directors at any meeting of the stockholders, (iii) in the event of a vacancy on or increase in the size of the Board, to recommend to the Board the persons to be nominated to fill such vacancy or additional Board seat, (iv) to recommend to the Board the persons to be nominated for each committee of the Board, (v) to develop and recommend to the Board a set of corporate governance guidelines applicable to the Company, including the Company’s Code of Ethics, and (vi) to oversee the evaluation of the Board. The Nominating and Corporate Governance Committee will consider nominees who are recommended by stockholders, provided such recommendations are made in accordance with the nominating procedures set forth in the Company’s By-laws. The report of the Nominating and Corporate Governance Committee is set forth later in this Proxy Statement.

Compensation Committee:    The Compensation Committee held eight (8) meetings in 2016. The Compensation Committee presently consists of Mr. Bayly, Mr. O’Brien and Ms. Sardini. The Compensation Committee operates pursuant to a written charter and is composed entirely of independent directors. The Compensation Committee reviews and approves salaries and other matters relating to compensation of the senior officers of the Company, including the administration of the TreeHouse Foods, Inc. Equity and Incentive Plan. The Compensation Committee also reviews the Company’s general compensation and benefit policies and programs, administers the Company’s 401(k) plan, and recommends director compensation programs to the Board. The report of the Compensation Committee is set forth later in this Proxy Statement.

Role of Compensation Consultants

The Compensation Committee has elected to engage Meridian Compensation Partners, LLC (“Meridian”) as the Compensation Committee’s on-going independent executive compensation consultant (“Independent Consultant”). Meridian does not provide consulting services to the Company other than the services provided directly to the Compensation Committee. Meridian provides a review of the competitiveness and appropriateness of all elements of compensation for the Chief Executive Officer, Chief Financial Officer and the three most highly compensated executive officers of the Company other than the Chief Executive Officer and Chief Financial Officer (collectively, the “Named Executive Officers” or “NEOs”) and advice on new and existing executive compensation programs and other related matters.

At the Compensation Committee’s direction, management provides all executive compensation materials to the independent consultant and discusses all such materials and recommendations with the independent consultant. The independent consultant considers the information and provides independent data to the Compensation Committee to facilitate its decision-making process. The independent consultant regularly meets with the Compensation Committee in executive sessions without members of management present.

The Compensation Committee has reviewed the independence of Meridian in light of SEC rules and NYSE listing standards regarding compensation consultants and has concluded that Meridian’s work for the Compensation Committee does not raise any conflict of interest.

 

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STOCK OWNERSHIP

Holdings of Management

The executive officers and directors of the Company own shares, and exercisable rights to acquire shares, representing an aggregate of 1,964,402 shares of Common Stock or approximately 3.5% of the 56,850,026 outstanding shares of Common Stock as of February 27, 2017 (see “Security Ownership of Certain Beneficial Owners and Management”). Such officers and directors have indicated an intention to vote in favor of each Proposal.

Our anti-hedging policy is disclosed on our website under “Investor Relations” “Governance Documents” “Insider Trading Policy”. The Insider Trading Policy makes it clear that Section 16 persons (TreeHouse Foods, Inc. executive officers and Board of Directors) may not engage in short sales and “may not engage in transactions in publicly traded options on Company securities (such as puts, calls and other derivative securities) on an exchange or in any other organized market.” We also prohibit holding Company stock in a margin account or pledging Company securities as collateral for a loan.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of the close of business on February 27, 2017, certain information with respect to the beneficial ownership of common stock beneficially owned by (i) each director of the Company, (ii) the NEOs, (iii) all executive officers and directors as a group and (iv) each stockholder who is known to the Company to be the beneficial owner, as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of more than five percent (5%) of the outstanding Common Stock. Each of the persons listed below has sole voting and investment power with respect to such shares, unless otherwise indicated. The address of the directors and officers listed below is c/o TreeHouse Foods, Inc., 2021 Spring Road, Suite 600, Oak Brook, Illinois 60523. The percentage calculations set forth in the table below are based on the number of shares of stock outstanding as of February 27, 2017, rather than the percentages set forth in the stockholders’ filings with the SEC.

 

     Common Stock     Percent of  

Name of Beneficial Owner

   Beneficially Owned     Class(1)  

Directors and Named Executive Officers:

    

Sam K. Reed

     1,050,980 (2)      1.8

George V. Bayly

     19,950 (3)      *  

Linda K. Massman

           *  

Dennis F. O’Brien

     15,650 (4)      *  

Frank J. O’Connell

     26,450 (5)      *  

Ann M. Sardini

     9,610 (6)      *  

Gary D. Smith

     19,750 (7)      *  

Terdema L. Ussery, II

     27,950 (8)      *  

David B. Vermylen

     225,351 (9)      *  

Dennis F. Riordan

     210,918 (10)      *  

Matthew J. Foulston

           *  

Thomas E. O’Neill

     251,223 (11)      *  

Rachel R. Bishop

     15,721 (12)      *  

Erik T. Kahler

     86,384 (13)      *  

Christopher D. Sliva

     16,998 (14)      *  

All directors and executive officers as a group (15 persons)

     1,964,402 (15)      3.5

5% Beneficial Stockholders:

    

T. Rowe Price Associates, Inc.

     7,160,299 (16)      12.6

BlackRock, Inc.

     4,405,631 (17)      7.7

The Vanguard Group.

     4,320,675 (18)      7.6

Wells Fargo & Company

     4,049,586 (19)      7.1

JPMorgan Chase & Co.

     3,830,493 (20)      6.7

FMR LLC

     3,564,732 (21)      6.3

 

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Except as otherwise noted, the directors and executive officers, and all directors and executive officers as a group, have sole voting power and sole investment power over the shares listed.

 

(1) An asterisk indicates that the percentage of Common Stock projected to be beneficially owned by the named individual does not exceed one percent of our Common Stock outstanding at February 27, 2017.

 

(2) Includes 406,920 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017 and 599,217 shares jointly held in family trusts. This amount also includes 44,843 shares directly held.

 

(3) Includes 2,230 shares directly held and 17,720 vested restricted stock units, deferred until termination of service from the Board.

 

(4) Includes 9,960 shares directly held and 5,690 vested restricted stock units, deferred until termination of service from the Board.

 

(5) Includes 8,200 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017 and 15,450 vested restricted stock units, deferred until termination of service from the Board. This amount also includes 2,800 shares directly held.

 

(6) Includes 3,700 vested restricted stock units, deferred until termination of service from the Board. This amount also includes 5,910 shares directly held.

 

(7) Includes 19,750 vested restricted stock units, deferred until termination of service from the Board.

 

(8) Includes 8,200 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017 and 17,340 vested restricted stock units, deferred until termination of service from the Board. This amount also includes 2,410 shares directly held.

 

(9) Includes 71,350 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017 and 113,671 shares jointly held in a family trust. The amount also includes 9,740 vested restricted stock units that are deferred until termination of service from the Board and 30,590 shares directly owned.

 

(10) Includes 153,151 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017, and 57,767 shares directly held.

 

(11) Includes 108,710 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017, and 142,513 shares directly held.

 

(12) Includes 9,027 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017 and 6,694 shares directly held.

 

(13) Includes 63,227 shares of Common Stock issued under options currently exercisable within 60 days of February 27, 2017 and 23,157 shares directly held.

 

(14) Reflects Mr. Sliva’s ownership as of his date of departure from the Company in November 2016.
(15) Mr. Sliva left the Company in November 2016 and, therefore, shares beneficially owned by Mr. Sliva are not included herein.

 

(16) We have been informed pursuant to the Schedule 13G/A filed with the SEC on February 7, 2017 by T. Rowe Price Associates, Inc. that (i) T. Rowe Price Associates, Inc. beneficially owns 7,160,299 shares of our Common Stock; and (ii) T. Rowe Price Associates, Inc. has (A) sole voting power as to 1,827,843 shares, (B) no shared voting power, (C) sole dispositive power as to 7,160,299 shares, and (D) no shared dispositive power. The principal business address of T. Rowe Price Associates, Inc. is 100 E. Pratt Street, Baltimore, MD 21202.

 

(17) We have been informed pursuant to the Schedule 13G/A filed with the SEC on January 27, 2017 by BlackRock, Inc. that (i) BlackRock, Inc. beneficially owns 4,405,631 shares of our Common Stock; and (ii) BlackRock, Inc. has (A) sole voting power as to 4,139,034 shares, (B) no shared voting power, (C) sole dispositive power as to 4,405,631 shares, and (D) no shared dispositive power. The principal business address of BlackRock, Inc. is 55 East 52nd Street, New York, NY 10055.

 

(18)

We have been informed pursuant to the Schedule 13G/A filed with the SEC on February 13, 2017 by The Vanguard Group (“Vanguard”) that (i) Vanguard is the beneficial owner of 4,320,675 shares of our

 

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  Common Stock; (ii) Vanguard has (A) sole voting power as to 33,261 shares, (B) shared voting power as to 6,002 shares, (C) sole dispositive power as to 4,284,114 shares and (D) shared dispositive power as to 36,561 shares. The principal address of Vanguard is 100 Vanguard Blvd., Malvern, PA 19355.

 

(19) We have been informed pursuant to the Schedule 13G/A filed with the SEC on January 25, 2017 by Wells Fargo & Company (“Wells Fargo”) that (i) Wells Fargo is the beneficial owner of 4,049,586 shares of our Common Stock; (ii) Wells Fargo has (A) sole voting power as to 10,886 shares, (B) shared voting power as to 926,499 shares, (C) sole dispositive power as to 10,886 shares and (D) shared dispositive power as to 4,038,701 shares. The principal address of Wells Fargo is 420 Montgomery Street, San Francisco, CA 94163.

 

(20) We have been informed pursuant to the Schedule 13G/A filed with the SEC on January 27, 2017 by JPMorgan Chase & Co. (“JPMorgan”) that (i) JPMorgan beneficially owns 3,830,493 shares of our Common Stock; and (ii) JPMorgan Chase has (A) sole voting power as to 3,744,381 shares, (B) no shared voting power, (C) sole dispositive power as to 3,819,160 shares and (D) no shared dispositive power. The principal business address of JPMorgan is 270 Park Ave., New York, NY 10017.

 

(21) We have been informed pursuant to the Schedule 13G/A filed with the SEC on February 14, 2017 by FMR LLC (“FMR”) that (i) FMR is the beneficial owner of 3,564,732 shares of our Common Stock; (ii) FMR has (A) sole voting power as to 362,567 shares, (B) no shared voting power, (C) sole dispositive power as to 3,564,732 shares and (D) no shared dispositive power. The principal address of FMR is 245 Summer Street, Boston, MA 02210.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company’s executive officers and directors and persons who own more than ten percent (10%) of a registered class of the Company’s equity securities (collectively, the “Reporting Persons”) to file reports of ownership and changes in ownership with the SEC and to furnish the Company with copies of these reports. Mr. Foulston became the Company’s Chief Financial Officer on December 2, 2017, however, his initial statement of beneficial ownership of securities on Form 3 was filed late with the SEC on December 19, 2016 due to inadvertent administrative error. Based on the Company’s review of the copies of these reports received by it, and written representations, if any, received from Reporting Persons with respect to such filings, and except as noted above, we believe that all of our directors and executive officers complied with the reporting requirements of Section 16(a) of the Exchange Act during 2016.

 

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DIRECTORS AND MANAGEMENT

Directors and Executive Officers

The following table sets forth the names and ages of the Company’s directors and executive officers. In addition, biographies of the Company’s directors and officers are also provided below, with the exception of Mr. O’Brien, Mr. Reed and Ms. Sardini, whose biographies are set forth in “Proposal 1 — Election of Directors” in this Proxy Statement.

 

Name

  

Age

   

Position

Sam K. Reed

     70 (a)    Chief Executive Officer and Chairman of the Board

George V. Bayly

     74 (c)    Director

Linda K. Massman

     50 (c)    Director

Dennis F. O’Brien

     59 (a)    Director

Frank J. O’Connell

     73 (b)    Director

Ann M. Sardini

     67 (a)    Director

Gary D. Smith

     74 (c)    Director

Terdema L. Ussery, II

     58 (b)    Director

David B. Vermylen

     66 (b)    Director, Senior Advisor, and Former President and Chief Operating Officer

Dennis F. Riordan

     59     President; Former Executive Vice President and Chief Financial Officer

Matthew J. Foulston

     52     Executive Vice President and Chief Financial Officer

Thomas E. O’Neill

     61     Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary

Erik T. Kahler

     51     Senior Vice President, Corporate Development

Rachel R. Bishop

     43     Senior Vice President, Chief Strategy Officer

Lori G. Roberts

     56     Senior Vice President, Human Resources

 

 

(a) Messrs. O’Brien and Reed and Ms. Sardini comprise a class of directors who are nominated for re-election at the Meeting.

 

(b) Messrs. O’Connell, Ussery and Vermylen comprise a class of directors whose terms expire in 2018.

 

(c) Messrs. Bayly and Smith and Ms. Massman comprise a class of directors whose terms expire in 2019.

 

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Current Directors

 

   
LOGO   

GEORGE V. BAYLY has served as a Director since June 2005. Mr. Bayly currently serves as principal of Whitehall Investors, LLC, a consulting and venture capital firm, having served in that role since August 2008. Mr. Bayly served as Chairman and Chief Executive Officer of Altivity Packaging LLC, a maker of consumer packaging products and services, from September 2006 to March 2008. He also served as CEO and Co-Chairman of U.S. Can Corporation from 2003 to 2006 and Chief Executive Officer in 2005. In addition, from January 1991 to December 2002, Mr. Bayly served as Chairman, President and Chief Executive Officer of Ivex Packaging Corporation. From 1987 to 1991, Mr. Bayly served as Chairman, President and Chief Executive Officer of Olympic Packaging, Inc. Mr. Bayly also held various management positions with Packaging Corporation of America from 1973 to 1987. Prior to joining Packaging Corporation of America, Mr. Bayly served as a Lieutenant Commander in the United States Navy. In addition to our Board, Mr. Bayly currently serves on the board of directors of ACCO Brands Corporation, Multi-Packaging Solutions Limited and Miami University’s Farmel School of Business and is a member of a five-person (5) roundtable at Madison Dearborn Partners. Mr. Bayly formerly served on the boards of directors of Huhtamaki Oyj, General Binding Corporation, Packaging Dynamics, Inc., U.S. Can Corporation, Ryt-Way Industries, Inc. Altivity Packaging LLC and Graphic Packaging Holding Company. Mr. Bayly holds a B.S. from Miami University and an M.B.A from Northwestern University. Mr. Bayly is Chairman of the Compensation Committee of our Board.

 

As a former executive of numerous large companies and a principal of a consulting and venture capital firm, Mr. Bayly has a broad understanding of the operational, financial and strategic issues facing public and private companies. This experience gives him valuable knowledge and perspective as Chairman of the Compensation Committee.

 

LOGO   

LINDA K. MASSMAN was appointed to the Company’s Board of Directors on July 28, 2016. Ms. Massman serves as the President and Chief Executive Officer of Clearwater Paper Corporation where she has been in position since 2013. Previously, Ms. Massman served as the company’s President and Chief Operating Officer from 2011-2013. Prior to that, Ms. Massman served as the company’s Chief Financial Officer from 2008 to 2011. Before joining Clearwater Paper, Ms. Massman served as group vice president of finance and corporate planning for SUPERVALU Inc., following its acquisition of Albertson’s Inc, where she served in a similar capacity. Prior to that, Ms. Massman was a business strategy consultant for Accenture. Ms. Massman serves on the Board of Directors of Clearwater Paper Corporation and Black Hills Corporation. In 2016, she was elected as the first vice chairwoman for the American Forest & Paper Association. She earned her Bachelor of Business Administration in finance from the University of North Dakota and holds an MBA from Harvard Business School. Ms. Massman is a member of the Audit Committee of our Board of Directors.

 

Ms. Massman’s experience as a CEO, CCO and CFO of a company with extensive private label offerings in paper products provides the Board with an experience-based understanding of key private label customers. In addition, Ms. Massman’s experience in corporate planning, capital structure optimization and transactional structuring provides great benefit to the Board and Company as it considers acquisitions and business integration.

 

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LOGO   

FRANK J. O’CONNELL has served as a Director since June 2005. Mr. O’Connell currently serves as the General Partner of the Quincy Investment Pools LP and is a co-founder of Tuckerman Capital, a Private Equity firm. Mr. O’Connell previously served as a senior partner of The Parthenon Group from June 2004 until May 2012. From November 2000 to June 2002, Mr. O’Connell served as President and Chief Executive Officer of Indian Motorcycle Corporation. From June 2002 to May 2004, Mr. O’Connell served as Chairman of Indian Motorcycle Corporation. Prior to Indian Motorcycle Corporation, from 1996 to 2000, Mr. O’Connell served as Chairman, President and Chief Executive Officer of Gibson Greetings, Inc. From 1991 to 1995, Mr. O’Connell served as President and Chief Operating Officer of Skybox International. Mr. O’Connell has previously served as President of Reebok Brands, North America, President of HBO Video and Senior Vice President of Mattel’s Electronics Division. Mr. O’Connell is the Non-Executive Chairman of Schylling Inc., a private company and is on the board of King Arthur Flour, an employee-owned corporation. Mr. O’Connell holds a B.A. and an M.B.A. from Cornell University. Mr. O’Connell is Chairman of the Audit Committee of our Board.

 

As an experienced financial and operational leader with companies in a variety of industries, Mr. O’Connell brings a broad understanding of the operating priorities across diverse industries while having an in-depth knowledge of the food industry to the board. Mr. O’Connell brings to the board a focus on shifting consumer behavior and its impact on product development. Mr. O’Connell’s experience leading organic and acquisition growth initiatives and as a strategic consultant to many companies has contributed significantly to our acquisition approach and extensive due diligence of food industry sectors and target companies.

 

   
LOGO   

GARY D. SMITH has served as a Director since June 2005. Mr. Smith is Chairman of Encore Associates, Inc., a consulting firm specializing in serving the national food and retail goods sectors, a position he has held since January 2001. Since 2005, he has been a Founding Managing Director of Encore Consumer Capital. From April 1995 to December 2004, Mr. Smith served as Senior Vice President — Marketing of Safeway Inc. In addition, Mr. Smith held various management positions at Safeway Inc. from 1961 to 1995. In addition to our Board, Mr. Smith currently serves on or has previously served on the boards of directors of AgriWise, Inc., Altierre Corporation, Philly’s Famous Water Ice, Inc., the Winery Exchange, Inc., FreshKO Produce Services, Inc., Aidell’s Sausage Company, Inc., Mesa Foods, Inc., Brownie Brittle, LLC and Fantasy Cookie Company.

 

Mr. Smith is an experienced business leader with skills that make him a valuable asset in his role as a member of the Audit and Nominating and Corporate Governance Committees of our Board. Mr. Smith’s deep understanding of the grocery channel and experience as an acquirer and investor in businesses adds significantly to acquisitions and customer insight.

 

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LOGO   

TERDEMA L. USSERY has served as a Director since June 2005. Mr. Ussery was President and Chief Executive Officer of the Dallas Mavericks, a professional basketball team, a position he held from April 1997 to September 2015, when he left to join Under Armour for a brief stint as President of Global Sports Categories. From September 2001 through June 2012, Mr. Ussery served as Chief Executive Officer of HDNet, a provider of high definition television programming. From 1993 to 1996, Mr. Ussery served as the President of Nike Sports Management. From 1991 to 1993, Mr. Ussery served as Commissioner of the Continental Basketball Association (the “CBA”). Prior to becoming Commissioner, Mr. Ussery served as Deputy Commissioner and General Counsel of the CBA from 1990 to 1991. From 1987 to 1990, Mr. Ussery was an attorney at Morrison & Foerster LLP. In addition to our Board, Mr. Ussery currently serves on, or has previously served on, the boards of directors of The Timberland Company and Entrust, Inc. He also serves on the Advisory Board of Wingate Partners, LP and as Chairman of the Board of Commissioners of the Dallas Housing Authority. Mr. Ussery holds a B.A. from Princeton University, an M.P.A. from Harvard University, a J.D. from the University of California at Berkeley, and an M.A.R. from Yale University. Mr. Ussery is a member of the Nominating and Corporate Governance Committee and Audit Committee of our Board.

 

As the former President and CEO of the Dallas Mavericks and former CEO of HDNet, Mr. Ussery brings operating, management experience, leadership capabilities, financial knowledge and business acumen to the Board. Mr. Ussery’s experience on other boards adds significantly to governance, compensation and public relations matters.

 

   
LOGO   

DAVID B. VERMYLEN has served as a Director since August 2009. Mr. Vermylen has been a Senior Advisor to TreeHouse since July 1, 2011. Mr. Vermylen held the positions of President and Chief Operating Officer for TreeHouse, from January 2005 to July 2011. Prior to joining us, Mr. Vermylen was a principal in TreeHouse, LLC, an entity unrelated to the Company that was formed to pursue investment opportunities in consumer packaged goods businesses. From March 2001 to October 2002, Mr. Vermylen served as President and Chief Executive Officer of Keebler Foods, a division of Kellogg Company. Prior to becoming Chief Executive Officer of Keebler, Mr. Vermylen served as the President of Keebler Brands from January 1996 to February 2001. Mr. Vermylen served as the Chairman, President and Chief Executive Officer of Brother’s Gourmet Coffee, and Vice President of Marketing and Development and later President and Chief Executive Officer of Mother’s Cake and Cookie Co. His prior experience also includes three (3) years with the Fobes Group and fourteen (14) years with General Foods Corporation where he served in various marketing positions. In addition to our Board, Mr. Vermylen currently serves on or has previously served on the boards of directors of Aeropostale, Inc., Birds Eye Foods, Inc. and Brownie Brittle LLC. Mr. Vermylen holds a B.A. from Georgetown University and an M.B.A. from New York University.

 

Mr. Vermylen has a deep understanding of the Company, and he brings insight and knowledge from his executive experience at other companies in the food industry and service on public company boards.

 

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Executive Officers

Dennis F. Riordan is currently our President. From July 1, 2011 to November 4, 2016, Mr. Riordan was Executive Vice President and Chief Financial Officer. From January 3, 2006 to July 1, 2011 Mr. Riordan was Senior Vice President and Chief Financial Officer of the Company. Prior to joining us, Mr. Riordan was Senior Vice President and Chief Financial Officer of Océ-USA Holding, Inc., a manufacturer of printers and printing supplies and services, where he was responsible for the company’s financial activities in North America. Mr. Riordan joined Océ-USA, Inc. in 1997 as Vice President and Chief Financial Officer and was elevated to Chief Financial Officer of Océ-USA Holding, Inc. in 1999. In 2004, Mr. Riordan was named Senior Vice President and Chief Financial Officer and assumed the chairmanship of the company’s wholly owned subsidiaries Arkwright, Inc. and Océ Mexico de S.A. Prior to his employment with Océ-USA, Mr. Riordan held positions with Sunbeam Corporation, Wilson Sporting Goods and Coopers & Lybrand. Mr. Riordan has also served on the boards of directors of Océ-USA Holdings, Océ North America, Océ Business Services, Inc. and Arkwright, Inc., all of which are wholly owned subsidiaries of Océ NV. Mr. Riordan is a Certified Public Accountant and holds a B.A. from Cleveland State University.

Matthew J. Foulston is Executive Vice President and Chief Financial Officer of TreeHouse Foods, Inc. Mr. Foulston joined TreeHouse in December 2016. Prior to joining TreeHouse Foods, Mr. Foulston was the Chief Financial Officer at Compass Minerals International Inc. from December 2014 to December 2016. During his tenure at Compass he was responsible for accounting, financial planning and reporting, tax, internal audit, capital investment management and investor relations. Additionally, he was a board member of Produquimica S.A. Prior to joining Compass Minerals, Mr. Foulston was Senior Vice President of Operations and Corporate Finance at Navistar International and Vice President and Chief Financial Officer at Navistar Truck. He previously held senior leadership positions at Mazda North America and Ford Motor Company in Germany, the United Kingdom and the United States. Mr. Foulston earned his Bachelor of Science degree with honors in Economics from Loughborough University in Leicestershire, United Kingdom.

Thomas E. O’Neill is our Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary. From January 27, 2005 to July 1, 2011, Mr. O’Neill was Senior Vice President, General Counsel, Chief Administrative Officer, and Corporate Secretary of the Company. Prior to joining us, Mr. O’Neill was a principal in TreeHouse, LLC, an entity unrelated to the Company that was formed to pursue investment opportunities in consumer packaged goods businesses. From February 2000 to March 2001, he served as Senior Vice President, Secretary and General Counsel of Keebler Foods Company. He previously served at Keebler as Vice President, Secretary and General Counsel from December 1996 to February 2000. Prior to joining Keebler, Mr. O’Neill served as Vice President and Division Counsel for the Worldwide Beverage Division of the Quaker Oats Company from December 1994 to December 1996; Vice President and Division Counsel of the Gatorade Worldwide Division of the Quaker Oats Company from 1991 to 1994; and Corporate Counsel at Quaker Oats from 1985 to 1991. Prior to joining Quaker Oats, Mr. O’Neill was an attorney at Winston & Strawn LLP. In 1991, Mr. O’Neill completed the Program for Management Development at Harvard Business School. Mr. O’Neill holds a B.A. and J.D. from the University of Notre Dame.

Lori G. Roberts is our Senior Vice President of Human Resources. Lori joined TreeHouse in January 2015. Prior to joining TreeHouse, Ms. Roberts was Vice President and Chief Human Resources Officer at TMK Ipsco, Inc. from May 2010 to March 2013. From February 2007 to December 2009, Ms. Roberts was Vice President Human Resources at Claymore Group, Inc. Ms. Roberts was not employed between March 2013 and December 2014 and between January 2010 and April 2010. She previously held senior level human resources roles at Pliant Corporation, Wallace Computer Services, Inc. and Cummins Inc. Ms. Roberts holds a B.S. and an M.A. from Indiana University.

Rachel R. Bishop is our Senior Vice President and Chief Strategy Officer. Prior to joining TreeHouse, Ms. Bishop was at the Walgreen Company from 2009 where she was most recently Group Vice President, Retail Strategy. From 2001-2009 Ms. Bishop was at McKinsey & Company, where she worked with consumer businesses on a broad range of sales, marketing, and operational topics with a focus on growth strategy development and implementation. Ms. Bishop earned a Ph.D. in Materials Science and Engineering with a minor in technology management from Northwestern University, where she was a National Science Foundation

 

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fellowship recipient and graduate fellow at GE Research & Development Center. She holds B.S. degrees in Materials Science and Engineering and in Geophysics from Brown University.

Erik T. Kahler is our Senior Vice President Corporate Development. Prior to joining TreeHouse, Mr. Kahler served as Managing Director of Dresdner Kleinwort Securities, LLC, a full service global investment bank for public and private companies, from May 2004 to October 2006. From November 1997 to July 2003, Mr. Kahler held senior investment banking leadership roles at Citigroup, Inc., as Director — Mergers and Acquisitions Citigroup Global Markets Holdings Inc. and at Wasserstein Perella & Company, Inc., where he was Vice President — Mergers and Acquisitions. Prior to joining Wasserstein Perella, Mr. Kahler worked for Ernst & Young and CIBC in various financial advisory roles. Mr. Kahler holds a B.A. from Colorado College and an M.B.A. from J.L. Kellogg Graduate School of Management at Northwestern University.

Compensation Risk Assessment

Senior human resource executives of the Company and the Compensation Committee Independent Consultant have conducted a risk assessment of our employee compensation programs, including our executive compensation programs. The Compensation Committee and its Independent Consultant reviewed and discussed the findings of the assessment and concluded that our employee compensation programs are designed with the appropriate balance of risk and reward in relation to our Company’s overall business strategy and do not incentivize executives or other employees to take unnecessary or excessive risks. As a result, we believe that risks arising from our employee compensation policies and practices are not reasonably likely to have a material adverse effect on the Company. In its discussions, the Compensation Committee considered the attributes of our programs in 2016, including:

 

   

The appropriate compensation mix between fixed (base salary) and variable (annual and long-term incentive (“LTI”)) pay opportunities;

 

   

The assessment of fixed, variable, and total direct compensation pay opportunities with market data and market practices for the NEOs;

 

   

The alignment of annual and LTI award objectives to ensure that both types of awards encourage consistent behaviors and sustainable performance results;

 

   

Performance metrics that are tied to key Company measures of short and long-term performance;

 

   

The alignment of the timing of the achievement and realization of income from annual and LTI performance and payouts from these plans;

 

   

Stretch yet achievable performance targets in the annual and LTI plans; and

 

   

The mix of LTI vehicles that encourage value creation, retention, and stock price appreciation.

 

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COMPENSATION DISCUSSION AND ANALYSIS

This section provides information regarding the compensation program in place for NEOs. This section also includes information regarding, among other things, the overall objectives of our compensation program and each element of compensation that we provide.

Objectives of Our Compensation Program

Since the Company’s inception in 2005, our overriding compensation philosophy, goals and objectives for executive compensation programs have been:

 

   

To attract, motivate and retain superior leadership talent for the Company;

 

   

To closely link NEO compensation to our performance goals with particular emphasis on rapid growth, operational excellence and acquisitions through attractive annual incentive opportunities based on stretch targets;

 

   

To support business strategies, plans and initiatives that drive superior long-term value for stockholders;

 

   

To link pay to performance by providing a significant majority of NEOs’ total compensation opportunity in variable or “pay at risk” compensation programs (annual and LTI plans); and

 

   

To align our NEOs’ financial interests with those of our stockholders by delivering a substantial portion of their total compensation in the form of equity awards and other LTI vehicles.

Our Compensation Aligns to Business Results

Our Compensation Committee is committed to the principle of aligning actual compensation received by our executives to the business results of the Company. Our performance goals require significant effort to obtain target and we hold our executives accountable to those objectives. Our Compensation Committee has never exercised discretion in determining final payouts of incentives. As seen in the chart below, over nine years, our annual cash incentive payouts have varied widely from year-to-year, depending upon the Company’s performance against its annual operating cash flow(1) and operating net income(2) targets (as described in the Components of Compensation section).

 

LOGO

 

(1) “Operating cash flow” represents the change in net debt (change in total debt less change in cash on hand) excluding the impact of financing acquisitions.
(2) “Operating net income” is reported as “adjusted net income” in our fiscal year 2016 Form 10-K.

 

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In addition to the annual incentive plan, the Compensation Committee provides a portion of LTI compensation to senior executives in the form of Performance Units or Cash Long-Term Incentive Plan awards. These LTI awards were first granted in 2008 and are paid on the 3rd anniversary of the grant date. Awards granted in 2009 through 2011 were in the form of cash, with all other years being Performance Units. The Company plans to continue using Performance Units as the primary method of delivering these awards. The following chart shows the variability of the amounts earned associated with these LTI awards over the past six years, each year representing the culmination of the two and a half year performance cycle.

 

 

LOGO

While the Compensation Committee targets a specific level of total compensation to each NEO based on competitive pay practices and their individual skill and experience, the actual compensation received by each executive is determined by the financial performance of the Company. The charts below show the Company’s total shareholder return and operating net income growth on a one year and three year basis.

 

LOGO    LOGO

 

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Compensation Process Overview

Below we highlight certain executive compensation practices that we consider instrumental in driving Company performance while mitigating risk, as well as practices that we avoid because we do not believe they would serve the interest of the shareholders.

 

WHAT WE DO

  

WHAT WE DO NOT DO

✓       Maintain a pay mix that is majority performance-based.

  

×        Backdate stock options.

 

×        Reprice stock options without shareholder approval.

 

×        Permit hedging transactions or short sales by executives or directors.

 

×        Permit pledging or holding company stock in a margin account by executives or directors.

 

×        Maintain excise tax gross-up provisions for executives.

 

×        We do not have a “poison pill” take-over defense plan.

 

✓       Fully disclose the financial performance drivers used in our incentives, in numeric terms.

  

✓       Use different performance metrics in the annual incentive and LTI plan, to avoid heavy reliance on one definition of success (see “Components of Compensation” section).

  

✓       Maintain stock ownership and holding guidelines for executive officers.

  

✓       Require double trigger vesting for cash severance payments in the executive severance policy.

  

✓       Retain an independent compensation consultant engaged by, and reporting directly to, the Compensation Committee.

  

✓       Hold Compensation Committee executive sessions without management present.

  

✓       Maintain an incentive recoupment, or “claw back” policy.

  

✓       Allow stockholders the right to call special meetings via majority voting.

  

✓       Beginning in 2017, the Company intends to transition from a June equity award to a first quarter award and measure future performance awards on a 36-month performance period.

  

 

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Summary of 2016 Executive Compensation Program

The following table provides an overview of TreeHouse compensation programs granted in 2016 and program objectives for our NEOs.

 

Program

  

Descriptions

  

Program Objectives

Annual Cash Compensation

  

Base Salary

   Fixed cash compensation based on size and scope of individual’s role and level of performance   

• Retain & attract talented executives

• Motivate individual contribution

Annual Cash Incentive Plan

   Target annual incentive awards are expressed as a percent of base salary, are payable in cash, with payouts that range from 0%-200% of target depending on Company performance   

• Drive performance on operating net income & cash flow

• Encourage collaboration across teams and business units

Long Term Incentive Compensation

  

Stock Options

   Equity awards that vest annually in three approximately equal tranches, beginning one year from grant date; represented 37.5% of grant value for NEOs in 2016   

• Drive long-term share price appreciation

• Increase stock ownership & alignment with stockholders

Performance Units

   Performance-based, overlapping 21/2 year performance cycle, running from 7/1/16 - 12/31/18; represented 37.5% of grant value for NEOs in 2016   

• Retain talented executives

• Drive long-term performance on operating net income

Restricted Stock Units

   Time-based equity awards that vest annually in three approximately equal tranches, beginning one year from grant date; represented 25% of grant value for NEOs in 2016   

• Retain talented executives

• Increase stock ownership & alignment with stockholders

Total Compensation Pay Mix and Pay-for-Performance

We believe our key stakeholders, including stockholders and employees, are best served by having our executives focused and rewarded based on the long-term results of the Company. In addition, it is important that a significant portion of NEO pay be tied to incentive compensation to reinforce our pay-for-performance compensation philosophy.

In 2016, at target, NEOs received 44%-70% of their total compensation opportunity awarded through LTI awards. In addition, NEOs received 17%-25% of their total compensation opportunity in the form of the annual incentive award. In total, approximately 79% of NEOs’ total direct compensation opportunity, on average, is delivered in the form of incentive compensation, which supports our pay-for-performance compensation philosophy.

 

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Total Compensation Pay Mix of NEOs in 2016 (Opportunity at Target)

 

                 % Long-Term  

Executives

   % Base Salary     % Annual Incentive     Incentive  

Sam K. Reed

     13     17     70

Matthew J. Foulston

     23     21     56

Dennis F. Riordan

     25     25     50

Thomas E. O’Neill

     26     23     51

Rachel R. Bishop

     32     24     44

Erik T. Kahler

     31     24     45

Christopher D. Sliva

     24     24     52

When setting executive pay, we benchmark pay against similarly sized companies using a compensation comparator group (the “Compensation Comparator Group”). We work with the Compensation Committee’s consultant, Meridian, to review our compensation programs to ensure competitiveness and benchmark these programs (on a size-adjusted basis) with companies with whom we compete for our management talent. We use benchmark data as one of the many factors to determine the competitive positioning of each executive. The Compensation Committee does not target a specific percentile of market but rather reviews both 50th and 75th percentile competitive levels and determines each named executive officer’s pay levels based upon a number of factors including: performance, experience, skills, the nature of their role within TreeHouse and competitive benchmark information. These companies consist of competitors in one or more of our product categories and other similar companies in the private label and general food and beverage industry and form TreeHouse’s Compensation Comparator Group. During 2016, the Company updated its Compensation Comparator Group to reflect the new, larger size of our Company (resulting from the February 1, 2016 acquisition of the private brands business (“Private Brands”) of ConAgra Brands, Inc., formerly known as ConAgra Foods, Inc.). The acquisition roughly doubled the size of our Company. New to the Compensation Comparator Group are Kellogg Co., General Mills Inc., Pilgrim’s Pride Corp. and Campbell Soup Co., while Snyders-Lance Inc. and Lancaster Colony Corp. were removed due to their smaller size. The 2016 Compensation Comparator Group is as follows:

 

Company

   2015 Annual Revenues      March 2015
Market Capitalization
     Total CEO
Compensation
 
            (In millions)         

GENERAL MILLS INC.

   $ 16,563      $ 33,739      $ 7.2  

KELLOGG CO

   $ 13,472      $ 23,491      $ 8.0  

HORMEL FOODS CORP

   $ 9,264      $ 15,012      $ 7.3  

PILGRIM’S PRIDE CORP

   $ 8,180      $ 5,867      $ 3.2  

CAMPBELL SOUP CO

   $ 8,082      $ 14,514      $ 8.3  

SMUCKER (JM) CO.

   $ 7,811      $ 13,849      $ 6.2  

HERSHEY CO.

   $ 7,387      $ 16,016      $ 8.5  

INGREDION INC

   $ 5,958      $ 5,565      $ 7.9  

POST HOLDINGS INC.

   $ 4,648      $ 2,452      $ 6.6  

KEURIG GREEN MOUNTAIN INC. 1

   $ 4,520      $ 18,108      $ 7.1  

MCCORMICK & CO.

   $ 4,296      $ 9,897      $ 5.9  

WHITEWAVE FOODS CO

   $ 3,866      $ 7,734      $ 8.1  

FLOWERS FOODS INC

   $ 3,779      $ 4,762      $ 2.7  

COTT CORP

   $ 2,944      $ 874      $ 3.6  

SANDERSON FARMS INC

   $ 2,803      $ 1,846      $ 6.0  

HAIN CELESTIAL GROUP INC

   $ 2,705      $ 6,515      $ 15.4  

PINNACLE FOODS INC

   $ 2,656      $ 4,748      $ 5.0  

PEER GROUP MEDIAN

   $ 4,648      $ 7,734      $ 7.1  

PEER GROUP AVERAGE

   $ 6,408      $ 10,882      $ 6.9  

TREEHOUSE FOODS INC

   $ 3,206      $ 3,638      $ 6.5  

 

1) Keurig Green Mountain Inc. was sold in March 2016.

 

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In addition to the Compensation Comparator Group, Meridian provides survey data for other companies of similar size to the Company from both general industry and the packaged foods sector. We believe that this additional information broadens our awareness of the practices of companies with whom we compete for management talent. Meridian then uses a combination of these sources to help us determine appropriate salary levels, annual incentive target percentages and metrics used in the annual incentive plan, and appropriate LTI plan design, including grant values for our Named Executive Officers. The Compensation Committee also considers recommendations from the Company’s Chief Executive Officer regarding salary, annual incentive and LTI awards for senior executives other than the Chief Executive Officer.

Once NEO total compensation opportunities have been determined using the above-mentioned executive compensation data sources, we set performance objectives for our management team with respect to long-term incentives based on a review of our (1) Long-Term Strategic Plan and (2) a broader food and beverage-focused performance comparator group (“Performance Comparator Group”). During this review, we consider and assess the expected performance of our Performance Comparator Group, our internal long-term strategic plan, and the external expectations of our Company. At the conclusion of our review and assessment of the inputs described above, LTI targets are established. We believe this provides a clear and objective way of ensuring our management team’s compensation and incentives are aligned with stockholder interests. There is considerable overlap between our Compensation Comparator Group used for benchmarking and our Performance Comparator Group. However, some differences exist as our Performance Comparator Group includes companies of varying size who are competitors of the Company while not all of these companies would be appropriate for benchmarking compensation.

The following companies are included in our Performance Comparator Group*:

 

B&G Foods, Inc.

  

Flowers Foods, Inc.

  

Lancaster Colony Corp

Campbell Soup Co.

  

General Mills, Inc.

  

McCormick & Co. Inc.

ConAgra Brands Inc.

  

Hain Celestial Group, Inc.

  

Pinnacle Foods Inc.

Cott Corp

  

J&J Snack Foods Corp.

  

Post Holdings, Inc.

Dean Foods

  

JM Smucker Co.

  

Snyders-Lance, Inc.

Farmer Bros. Inc.

  

Kellogg Co.

  

 

* In 2016, ConAgra Foods Inc. changed its name to ConAgra Brands, Inc.

Role of 2016 Advisory Approval of Executive Compensation in the Compensation Setting Process

The Compensation Committee reviewed the results of the 2016 stockholder advisory approval of NEO compensation and incorporated the results as one of many factors considered in connection with the discharge of its responsibilities. A substantial majority of our stockholders at the 2016 Annual Meeting approved the compensation program described in our 2016 proxy statement. The Compensation Committee did not implement any material changes to our executive compensation program as a direct result of the 2016 stockholder advisory approval of NEO compensation.

Components of Compensation

There are three primary components to our management compensation program: base salary, annual cash incentive and LTI compensation. The Compensation Committee sets total compensation of each individual executive based on their unique skills, experience and performance. We seek to have each of the pay components at levels that are competitive with our Compensation Comparator Group. The Company continues to assess the competitive position of each of our components of compensation in relation to our competitors. In connection with the February 1, 2016 acquisition of Private Brands, the Company’s net sales increased from $3.2 billion in 2015 to approximately $6.2 billion in 2016. Due to the significant growth of the Company, and to better align compensation of our NEOs with those of our new Compensation Comparator Group, the Compensation Committee increased each component of compensation for our NEOs.

 

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Base Salary:    Effective March 1, 2016, and due to the size of the Company, the Compensation Committee increased the base salaries of our NEOs as follows:

 

     Previous      New      Base Salary  
     Base Salary      Base Salary      Increase  

Sam K. Reed

     1,014,000        1,064,700        5.0

Dennis, F. Riordan

     528,000        570,000        8.0

Thomas E. O’Neill

     474,000        545,000        15.0

Rachel R. Bishop

     411,000        445,000        8.3

Erik T. Kahler

     353,000        420,000        19.0

Chris D. Sliva

     542,000        580,000        7.0

In August 2016, Mr. Sliva’s base salary increased an additional 14.7% when he was promoted to President of TreeHouse Foods, Inc., and in November 2016, Mr. Riordan’s base salary increased an additional 16.7% when he was promoted to President of TreeHouse Foods, Inc., upon Mr. Sliva’s departure.

Annual Cash Incentive Plan:    The annual cash incentive for all NEOs is based on attaining specific annual operating net income targets determined by the Board, as adjusted positively or negatively for unusual items, and cash flow targets. The operating net income measure was selected because it aligns with, and helps drive our profitable growth strategy. The operating cash flow measure has been chosen because substantive positive cash flow enables us to pay down debt and help fund our “growth through acquisition” strategy.

For all NEOs in 2016, 80% of the potential incentive was tied to the achievement of an operating net income target of approximately $168 million (based on the Company’s budgeted operating net income established by the Compensation Committee). The remaining 20% of the potential incentive was tied to the achievement of an operating cash flow target of approximately $335 million. We do not otherwise use discretion in determining the amount of incentive compensation paid to NEOs. We consider the market expectations of our stock in the following fiscal year and year-over-year internal stretch goals, in setting our budget with targets reflecting performance that exceeds the expected performance of our Performance Comparator Group. In establishing goals, the Compensation Committee strives to ensure that the targets are consistent with the strategic goals set by the Board, and that the goals set are sufficiently ambitious so as to provide meaningful results, but with an opportunity to exceed targets if performance exceeds expectations. We believe the annual incentive plan keeps management focused on attaining strong near term financial performance. The 2016 annual incentive opportunity for the NEOs was awarded as follows:

 

         Minimum     Target     Maximum     Actual  

Sam K. Reed

   Chairman and Chief Executive Officer   $ 0     $ 1,384,110     $ 2,768,220     $ 997,034  

Matthew J. Foulston*

   Executive Vice President and Chief Financial Officer   $ 0     $ 41,040     $ 82,080     $ 29,563  

Dennis F. Riordan

   President; Former Executive Vice President and Chief Financial Officer   $ 0     $ 665,000     $ 1,330,000     $ 438,978  

Thomas E. O’Neill

   Executive Vice President, General Counsel, Chief Administrative Officer and Corporate Secretary   $ 0     $ 490,500     $ 981,000     $ 353,328  

Rachel R. Bishop

   Senior Vice President, Strategy   $ 0     $ 333,750     $ 667,500     $ 240,414  

Erik T. Kahler

   Senior Vice President, Corporate Development   $ 0     $ 315,000     $ 630,000     $ 226,908  

Christopher D. Sliva**

   Former President   $ 0     $ 665,000     $ 1,330,000     $ 0  

 

 

* Mr. Foulston was hired in December 2016 and his bonus was prorated based on his hire date.

 

** Mr. Sliva voluntarily left the Company in November 2016 and was not eligible for a 2016 annual incentive award.

 

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NEOs begin to earn payouts under the plan upon achievement of 90% of the targets ratably up to the achievement of targeted payment upon the full achievement of 100% of the targets. In addition, a NEO can earn 200% of the targeted payment if 110% or more of the targets are achieved. In 2016, after adjusting for unusual items, we attained approximately $166 million in operating net income or 99% of the operating net income target, which provided a payout of 90% on this performance measure. In 2016, TreeHouse achieved approximately $258 million of the operating cash flow or approximately 77% of the cash flow target which resulted in 0% of target payment on this performance measure. On a combined basis, approximately 72% of the target was earned. The actual amounts listed in the table above are included in the summary compensation table.

Long-Term Incentive Compensation:      The long-term incentive compensation program was established to ensure that our senior management team is focused on long-term growth, profitability, and value creation. We believe our key stakeholders, including stockholders and employees, are best served by having our executives focused and rewarded based on the longer-term results of our Company. We accomplish this through five primary programs, the use of which has varied over the years:

 

   

Stock Options

 

   

Restricted Stock

 

   

Restricted Stock Units

 

   

Performance Units

 

   

Cash Long-Term Incentive Plan

2016 Long-Term Incentive Grant

The Compensation Committee reviews the LTI plan on an annual basis. In determining the target LTI award opportunity for 2016, the Compensation Committee considers the overall total compensation positioning of each executive relative to our Compensation Comparator Group, the individual performance of each NEO and the past annual LTI target opportunity provided. The Committee believes the 2016 target LTI opportunities provide a competitive value that aligns each executive’s long-term compensation opportunities with the interest of shareholders. The LTI plan designs of our Compensation Comparator Group were carefully considered for prevalence and mix of long-term incentive vehicles utilized in their programs. Balancing the needs of our business strategy, market practices, and share availability, an LTI plan was designed, approved, and implemented. Each year, the Compensation Committee, with the assistance of Meridian, reviews the design of the LTI plan and makes revisions if necessary.

Our 2016 LTI award was granted in June; however, beginning in 2017, the Compensation Committee intends to transition from a June award date for long-term incentive awards, to a first quarter award date. A first quarter LTI grant date will better align with our business operating cycle and will allow us to measure future performance units on a 36-month performance period rather than our current 30-month period. Moving our grant date also helps to align our grant practices with industry standards. We do not expect this change to have any impact on our overall objectives or compensation philosophy.

 

   

For NEOs and other Senior Vice Presidents and Vice Presidents, we utilized three LTI vehicles to deliver the appropriate value: non-qualified stock options, restricted stock units and performance units.

 

   

Stock Options: The non-qualified stock options vest annually in three approximately equal tranches, subject to the grantee’s continued employment with TreeHouse, beginning on the first anniversary of the grant date, and represented 37.5% of the LTI grant value.

 

   

Restricted Stock Units: The restricted stock units vest annually in three approximately equal tranches, subject to the grantee’s continued employment with TreeHouse, beginning on the first anniversary of the grant date, and represented 25% of the LTI grant value.

 

   

Performance Units: Performance units are earned based on achieving operating net income goals in each of the performance periods. Performance is measured over three consecutive periods for each award: a six-month period beginning on the date of grant through the end of the calendar year, and two 12-month

 

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periods for each successive calendar year. Each performance unit grant is also subject to a cumulative 30-month performance period that can impact the overall payout of the award. As noted above, we will move to a 36-month performance period with the 2017 grant. The number of units that will be earned is based on the level of achievement relative to the targets. There is no payout below 80% achievement, and payout is capped at 200% of target if achievement meets or exceeds 120% of the operating net income target. The performance units are converted to stock or cash at the discretion of the Compensation Committee on the third anniversary of the date of grant. The Company expects the performance units to be settled in stock and has the shares available to do so.

The operating net income goals represent stretch goals that are only achievable through the combination of long-term strategic decisions and operating efficiencies. Payouts of these awards have varied over the years and have ranged from 17% to 200%.

The 2016 performance unit grant represents 37.5% of the 2016 LTI grant value. The performance periods of the 2016 performance units are as follows: July 1, 2016 through December 31 2016; calendar year 2017; calendar year 2018; and the cumulative period July 1, 2016 through December 31, 2018. For the performance period July 1, 2016 through December 31, 2016, the operating net income target was approximately $108 million. The operating net income targets for calendar years 2017, 2018 and the cumulative performance period are 132% of the calendar year 2016 operating net income budget, 130% of the calendar year 2017 target, and the sum of the three target amounts, respectively.

 

   

For senior director level leaders, we delivered the LTI value using two vehicles: stock options and restricted stock units.

 

   

Stock Options: The non-qualified stock options vest annually in three approximately equal tranches, subject to the grantee’s continued employment with TreeHouse, beginning on the first anniversary of the grant date, and represented 37.5% of the LTI grant value.

 

   

Restricted Stock Units: The restricted stock units vest annually in three approximately equal tranches, subject to the grantee’s continued employment with TreeHouse, beginning on the first anniversary of the grant date, and represented 62.5% of the LTI grant value.

 

   

For all other eligible participants, the LTI value was delivered through the granting of restricted stock units that vest ratably over a three year period, subject to the grantee’s continued employment at TreeHouse, beginning on the first anniversary of the grant date.

2014 Long-Term Incentive Grant

The performance periods for the performance unit awards granted on June 27, 2014 ended on December 31, 2016 and will be converted to stock upon approval of the Compensation Committee. The conversion will take place on the third anniversary of the grant date. The table below demonstrates the calculation used to determine the number of performance units earned in each period.

 

If the Percentage of Target Earned is 100% or greater    ((Percentage of Target Earned – 100%)*5) + 100%

If the Percentage of Target is less than 100%

but greater or equal to 80%

   ((Percentage of Target Earned – 80%)*2.5) + 50%
If the Percentage of Target is less than 80%    No Performance Units are earned

 

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The table below outlines the operating net income targets for each of the performance periods, as well as the actual performance and payout achieved.

 

     Operating Net
Income Target
     Actual Operating Net
Income Achieved
     Percentage of
Target Earned
    Payout Earned*  

7/1/2014 – 12/31/2014

   $ 72,409      $ 80,103        110.6     153.1

1/1/2015 – 12/31/2015

   $ 149,579      $ 139,690        93.4     83.5

1/1/2016 – 12/31/2016

   $ 166,647      $ 166,261        99.8     99.4

Cumulative

   $ 388,635      $ 386,054        99.3     98.3 %1 

 

* Capped at 200%

 

1) Blended payout percentage for the three tranches associated with the 2014 incentive grant awards.

Stock Ownership and Holding Policies

Since the Company’s inception in 2005, we have maintained a strong stock ownership culture at TreeHouse, with our NEO stock positions traditionally exceeding stock ownership guidelines at nearly all Fortune 500 companies. In addition, the NEO team beneficially owns approximately 2.8% of TreeHouse shares outstanding as of February 27, 2017.

Consistent with prevalent and best practices at publicly traded companies, we have adopted formal stock ownership and holding guidelines for our executive officers. These guidelines provide that our officers must achieve, within five years of reaching officer status, specified stock ownership levels based on a multiple of such officer’s base salary. TreeHouse maintains a formal stock ownership policy, and is now incorporating a holding provision, whereby those executives who have not yet reached their ownership levels are required to hold at least 50% of net profit shares until stock ownership guidelines are met. Shares of stock owned outright or through a trust, vested restricted stock and restricted stock units count towards fulfillment of the guidelines. The required stock ownership levels that must be attained by our executive officers within the five-year period are as follows:

 

     Required Share

Position

   Ownership Level

Chief Executive Officer

   5X of Base Salary

Other Named Executive Officers

   3X of Base Salary

Other Executive Officers

   2X of Base Salary

All of our corporate officers are currently in compliance with these guidelines with the exception of Ms. Bishop, Ms. Roberts and Mr. Foulston, who recently joined TreeHouse Foods, Inc. in May 2014, January 2015 and December 2016, respectively.

Based on the practice of significant stock ownership at TreeHouse and desire to give freedom of choice, other than in connection with the satisfaction of stock ownership guidelines, we do not have equity holding policies for employees upon the exercise of stock options and the vesting of performance units or restricted stock units.

General Compensation Matters

All matters of our executive compensation programs are reviewed and approved by the Compensation Committee of the Board. This includes approving both the amounts of compensation and the timing of all grants. The Compensation Committee is given full access to its Independent Consultant, and has elected to use Meridian to provide consulting services with respect to the Company’s executive compensation practices including salary, bonus, perquisites, equity incentive awards, deferred compensation and other matters. The Compensation Committee regularly meets with Meridian representatives without the presence of Company management.

More details regarding the employment agreements of our management investors are summarized below.

Executive Perquisites:    TreeHouse annually reviews the Company’s practices for executive perquisites with the assistance of Meridian. We believe that the market trend is moving toward a cash allowance in lieu of

 

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various specific executive benefits such as automobile plans, financial planning consulting or club fees. We have granted an annual allowance of $25,000 to Mr. Reed and $10,000 to all other NEOs to cover these types of benefits. This approach reduces the administrative burden of such programs and satisfies the desire to target market practices. These allowances are not included as eligible compensation for bonus or other purposes, and do not represent a significant portion of the executive’s total compensation. Our Board has also adopted policies regarding the personal use of the Company-owned aircrafts by our NEOs. Generally, personal use is permitted, subject to availability. Personal use of the Company aircrafts is principally utilized by our Chief Executive Officer. Personal use by other NEOs is infrequent. We calculate compensation for personal use based on the incremental costs of operating the aircrafts. The largest single component of this cost is fuel. The 2016 Summary Compensation Table beginning on page 34 of this Proxy Statement contains itemized disclosure of all perquisites to our NEOs, regardless of amount.

Equity Plan Share Reservation:    Under the TreeHouse Foods, Inc. Equity and Incentive Plan we have sufficient shares available for projected 2017 LTI awards, and are seeking shareholder approval in this proxy for additional shares under the plan to allow for future awards.

Deferred Compensation Plan:    Our Deferred Compensation Plan allows certain employees, including the NEOs, to defer receipt of salary and/or bonus payments. Deferred amounts are credited with earnings or losses based on the rate of return of mutual funds selected by the participants in the plan. We do not “match” amounts that are deferred by employees in the Deferred Compensation Plan. However, to the extent that employees in the Deferred Compensation Plan have their match in the 401(k) plan limited as a result of participating in the Deferred Compensation Plan, the lost match would be credited instead to the Deferred Compensation Plan.

Distributions are paid either upon termination of employment or at a specified date (at least two years after the original deferral) in the future, as elected by the employee. The employee may elect to receive payments in either a lump sum or a series of installments. Participants may defer up to 100% of eligible salary and bonus payments. The Deferred Compensation Plan is not funded by us, and participants have an unsecured contractual commitment from us to pay the amounts when due. When such payments are due to employees, the cash will be distributed from our general assets.

We provide deferred compensation to permit our employees to save for retirement on a tax-deferred basis. The Deferred Compensation Plan permits them to do this while also receiving investment returns on deferred amounts, as described above. We believe this is important as a retention and recruitment tool, as many of the companies with which we compete for executive talent provide a similar plan for their senior employees.

Employment Agreements:    We have entered into employment agreements with Messrs. Reed, O’Neill, Riordan, Foulston and Sliva (Mr. Sliva is no longer employed by the Company). All other executive officers are covered by the TreeHouse Foods, Inc. Executive Severance Plan (“Severance Plan”). These agreements provide for payments and other benefits if the officer’s employment terminates for a qualifying event or circumstance, such as being terminated without “Cause” or leaving employment for “Good Reason,” as these terms are defined in the agreements. The agreements also provide for benefits upon a qualifying event or circumstance after there has been a “Change-in-Control” (as defined in the agreements) of the Company. Additional information regarding the agreements, including a definition of key terms and a quantification of benefits that would have been received by our NEOs had termination occurred on the last business day of the fiscal year, December 30, 2016, is found under the heading “Potential Payments Upon Termination Or Change In Control.”

We believe these severance programs are an important part of our overall compensation arrangements for our NEOs. We also believe these agreements will help to secure the continued employment and dedication of our NEOs prior to or following a change in control, without concern for their own continued employment. We also believe it is in the best interest of our stockholders to have a plan in place that will allow management to pursue all alternatives for the Company without undue concern for their own financial security. We also believe these agreements are important as a recruitment and retention device, as most of the companies with which we compete for executive talent have similar agreements in place for their senior employees. We have received consulting services from Meridian with regard to market practices in an evaluation of severance programs.

401(k) Savings Plan:    Under the TreeHouse Foods Savings Plan (the “Savings Plan”), a tax-qualified retirement savings plan, Company employees, including our NEOs, may contribute up to 80% of regular earnings

 

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on a before-tax basis into their Savings Plan accounts (subject to IRS limits). Total contributions may not exceed 80% of eligible compensation. In addition, under the Savings Plan, we match an amount equal to one dollar for each dollar contributed by participating employees on the first 3% of their eligible compensation and fifty cents for each additional dollar contributed on the next 2% of their eligible compensation. Beginning in 2017, the Company will change the amount we match to 100% on the first 5%. Amounts held in Savings Plan accounts may not be withdrawn prior to the employee’s termination of employment, or such earlier time as the employee reaches the age of 59 1/2, subject to certain exceptions established by the IRS.

Recoupment Policy:    We have a recoupment (“clawback”) policy effective for all cash and equity based incentive awards granted on or after January 1, 2014. The policy applies to all our employees at or above the Vice President level (which includes our NEOs) and is administered by our Compensation Committee. Under the policy, if the Company is required to restate its financial statements due to material noncompliance with its financial reporting requirements under securities laws and a covered individual is determined to have knowingly and willfully engaged in conduct which was a material factor in such restatement, the Compensation Committee may seek reimbursement of any excess compensation from any cash and equity based awards granted to such covered individual in the preceding 3 years (or preceding 12 months in the case of recoupment of proceeds from the sale of shares pursuant to stock options or restricted stock units).

Tax Treatment of Executive Compensation:    Section 162(m) of the Code imposes a limitation on the deductibility of non-performance-based compensation in excess of $1 million for the Chief Executive Officer of the Company and each of the three next most highly compensated executive officers (other than the Chief Financial Officer). The TreeHouse Foods, Inc. Equity and Incentive Plan is designed to allow us to grant awards that may qualify for the performance-based exception to the Section 162(m) deductibility limit. Many of our key incentive programs are linked to the financial performance of the Company, and, therefore, we believe that we

will preserve the deductibility of these executive compensation payments. However, deductibility of executive compensation is only one important factor considered by the Compensation Committee when determining compensation and the Compensation Committee retains the flexibility to award compensation that is not intended to meet the performance-based compensation exception or that may exceed the limitation on deductibility under Section 162(m) when it believes it is in the Company’s and stockholders’ best interests.

 

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EXECUTIVE COMPENSATION

The following table sets forth annual and long-term compensation for the Company’s Chief Executive Officer, current and former Chief Financial Officer, three other most highly compensated officers and one former executive officer during 2016 as well as certain other compensation information for NEOs during the years indicated.

2016 Summary Compensation Table

 

Name and Principal Position

  Year     Salary
($)(a)
    Bonus
($)(b)
    Non-Equity
Incentive
Plan
Compensation

($)(c)
    Grant Date Fair
Market Value of
Stock Awards
($)(d)
    Grant Date
Fair Market
Value of
Options
($)(e)
    All Other
Compensation
($)(f)
    Total
($)
 

Sam K. Reed

    2016       1,056,250       0       997,034       4,134,639       2,169,592       145,884       8,503,399  

Chief Executive Officer

    2015       1,009,500       0       75,266       3,349,570       1,900,418       144,228       6,478,982  
    2014       982,667       0       633,107       2,997,473       1,618,656       170,699       6,402,602  

Matthew J. Foulston

    2016       45,672       304,817       29,563       547,200       288,235       62,000       1,277,487  

Executive Vice President and

               

Chief Financial Officer

               

Dennis F. Riordan

    2016       578,468       0       438,978       979,851       513,962       22,059       2,533,318  

President; Former Executive

Vice President and Chief

Financial Officer

    2015       525,667       0       27,434       892,710       506,837       27,682       1,980,330  
    2014       511,667       0       230,792       824,465       445,096       21,708       2,033,728  

Thomas E. O’Neill

    2016       533,167       0       353,328       798,034       418,647       21,964       2,125,140  

Executive Vice President,

    2015       472,000       0       24,629       669,914       380,128       21,805       1,568,476  

General Counsel and Chief

    2014       460,000       0       207,444       674,271       364,232       21,576       1,727,523  

Administrative Officer

               

Rachel R. Bishop

    2016       439,333       0       240,414       869,131       228,281       15,700       1,792,859  

Senior Vice President,

    2015       409,167       0       18,304       379,211       211,255       16,583       1,034,520  

Strategy

    2014       235,821       465,627       153,947       955,850       202,274       10,596       2,024,115  

Erik T. Kahler

    2016       408,833       0       226,908       782,381       228,281       21,645       1,668,048  

Senior Vice President,

               

Corporate Development

               

Christopher D. Sliva

    2016       520,288       0       0       1,027,131       554,284       21,874       2,123,577  

Former President

    2015       539,667       0       28,162       818,699       464,454       21,978       1,872,960  
    2014       525,667       0       237,079       749,369       404,780       21,744       1,938,639  

 

a) This amount represents employee wages earned during the year.

 

b) This amount represents new hire cash payments to Matthew J. Foulston in 2016 and Rachel R. Bishop in 2014.

 

c) The amounts in this column are payments made under our Annual Incentive Plan (“AIP”).

 

d) The awards shown in this column include performance units and restricted stock unit grants under the TreeHouse Foods, Inc. Equity and Incentive Plan in 2014, 2015 and 2016. The amounts listed above are based on the grant date fair market value of the awards computed in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. As it relates to the performance units granted in 2016, Mr. Reed was granted 25,240 units with a grant date fair value of $2,480,587, Mr. Riordan was granted 5,980 units with a grant value of $587,714, Mr. Sliva was granted 5,980 units with a grant date fair value of $587,714, and Mr. O’Neill was granted 4,870 units, with a grant date fair value of $478,624. Ms. Bishop and Mr. Kahler were each granted 2,660 units with a grant date fair value of $261,425. As each of the performance units provide a maximum achievement equal to 200% of the initial grant, Mr. Reed has the opportunity to earn up to 50,480 units with a grant date fair value of $4,961,174, Mr. Riordan has the opportunity to earn up to 11,960 units with a grant date fair value of $1,175,429, Mr. Sliva could earn up to 11,960 units with a grant date fair value of $1,175,429, and Mr. O’Neill may earn up to 9,740 units, with a grant date fair value of $957,247. Ms. Bishop and Mr. Kahler each have the opportunity to earn up to 5,320 awards with a grant date fair value of $522,850. Due to his hire date, Mr. Foulston was not granted performance units.

 

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e) The awards shown in this column include stock options granted in 2016, 2015, and 2014 based on the grant date fair market value of the awards computed in accordance with FASB ASC Topic 718.

 

f) The amounts shown in this column include matching contributions under the Company’s 401(k) plan, cash payments in lieu of perquisites, personal use of the Company’s corporate aircraft, life insurance premiums and relocation payments.

Details Behind All Other Compensation Columns

 

Name

  Registrant
Defined Contribution
$
    Cash Payment in
Lieu of Perquisites
$
    Aircraft
Usage
$
    Life
Insurance
$
    Relocation
Fees
$
    Total
$
 

Sam K. Reed

    10,600       25,000       107,728       2,556       0       145,884  

Matthew J. Foulston

    0       0       0       0       62,000       62,000  

Dennis F. Riordan

    10,600       10,000       0       1,459       0       22,059  

Thomas E. O’Neill

    10,600       10,000       0       1,364       0       21,964  

Rachel R. Bishop

    4,576       10,000       0       1,124       0       15,700  

Erik T. Kahler

    10,600       10,000       0       1,045       0       21,645  

Christopher D. Sliva

    10,600       10,000       0       1,274       0       21,874  

 

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2016 Grants of Plan Based Awards

The following table sets forth annual and long-term compensation for the Company’s NEOs during 2016.

2016 Grants of Plan Based Awards

 

Name

        Grant
Date
    Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan
Awards:
Target
(#)(a)
    Estimated
Future
Payouts
Under
Non-Equity
Incentive
Plan
Awards:
Maximum
(#)(a)
    Estimated
Future
Payouts
Under
Equity
Incentive
Plan
Awards:
Threshold
(#)(b)
    Estimated
Future
Payouts
Under
Equity
Incentive
Plan
Awards:
Target
(#)(b)
    Estimated
Future
Payouts
Under
Equity
Incentive
Plan
Awards:
Maximum
(#)(b)
    All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(c)
    All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(d)
    Exercise
or Base
Price of
Option
Awards
($/Sh)
    Grant
Date Fair
Value of
Stock and
Option
Awards
($)(e)
 

Sam K. Reed

    AIP       1/1/2016       1,384,110       2,768,220       0       0       0       0       0       0       0  
    PSU       6/27/2016       0       0       12,620       25,240       50,480       0       0       0       2,480,587  
    RSU       6/27/2016       0       0       0       0       0       16,830       0       0       1,654,052  
    Options       6/27/2016       0       0       0       0       0       0       82,400       98.28       2,169,592  

Matthew J. Foulston

    AIP       12/2/2016       41,040       82,080       0       0       0       0       0       0       0  
    PSU         0       0       0       0       0       0       0       0       0  
    RSU       12/31/2016       0       0       0       0       0       7,580       0       0       547,200  
    Options       12/31/2016       0       0       0       0       0       0       13,240       72.19       288,235  

Dennis F. Riordan

    AIP       1/1/2016       665,000       1,330,000       0       0       0       0       0       0       0  
    PSU       6/27/2016       0       0       2,990       5,980       11,960       0       0       0       587,714  
    RSU       6/27/2016       0       0       0       0       0       3,990       0       0       392,137  
    Options       6/27/2016       0       0       0       0       0       0       19,520       98.28       513,962  

Thomas E. O’Neill

    AIP       1/1/2016       490,500       981,000       0       0       0       0       0       0       0  
    PSU       6/27/2016       0       0       2,435       4,870       9,740       0       0       0       478,624  
    RSU       6/27/2016       0       0       0       0       0       3,250       0       0       319,410  
    Options       6/27/2016       0       0       0       0       0       0       15,900       98.28       418,647  

Rachel R. Bishop

    AIP       1/1/2016       333,750       667,500       0       0       0       0       0       0       0  
    PSU       6/27/2016       0       0       1,330       2,660       5,320       0       0       0       261,425  
    RSU       3/31/2016       0       0       0       0       0       5,000       0       0       433,750  
    RSU       6/27/2016       0       0       0       0       0       1,770       0       0       173,956  
    Options       6/27/2016       0       0       0       0       0       0       8,670       98.28       228,281  

Erik T. Kahler

    AIP       1/1/2016       315,000       630,000       0       0       0       0       0       0       0  
    PSU       6/27/2016       0       0       1,330       2,660       5,320       0       0       0       261,425  
    RSU       3/31/2016       0       0       0       0       0       4,000       0       0       347,000  
    RSU       6/27/2016       0       0       0       0       0       1,770       0       0       173,956  
    Options       6/27/2016       0       0       0       0       0       0       8,670       98.28       228,281  

Christopher D. Sliva

    AIP       1/1/2016       665,000       1,330,000       0       0       0       0       0       0       0  
    PSU       6/27/2016       0       0       2,990       5,980       11,960       0       0       0       587,714  
    RSU       6/27/2016       0       0       0       0       0       3,990       0       0       392,137  
    RSU       8/4/2016       0       0       0       0       0       490       0       0       47,280  
    Options       6/27/2016       0       0       0       0       0       0       19,520       98.28       513,962  
    Options       8/4/2016       0       0       0       0       0       0       1,580       96.49       40,322  

 

(a) Consists of awards under our AIP program, which is granted under the TreeHouse Foods, Inc. Incentive Plan. In 2016, approximately 72% of the target was earned by Ms. Bishop and Messrs. Reed, Foulston, Riordan, O’Neill and Kahler. Mr. Sliva left the Company in November 2016 and was not eligible for a payment under the AIP program. These AIP amounts are reported as Non-Equity Incentive Plan Compensation in the 2016 Summary Compensation Table. Payouts under the AIP may range from $0 up to the maximum as described above. Therefore, in accordance with SEC rules, we have omitted the threshold column.

 

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(b) Consists of performance units that are granted under the TreeHouse Foods, Inc. Equity and Incentive Plan. The performance unit awards have a cumulative performance period of July 1, 2016 to December 31, 2018. For the interim performance period of July 1, 2016 to December 31, 2016, the performance measure results were 98.4% of target; accordingly, each NEO earned 96.0% of the first tranche of the award.

 

(c) Consists of restricted stock units granted under the TreeHouse Foods, Inc. Equity and Incentive Plan that vest annually in three approximately equal tranches, beginning on the first anniversary of the grant date.

 

(d) Consists of non-qualified stock options granted under the TreeHouse Foods, Inc. Equity and Incentive Plan that vest annually in three approximately equal tranches, beginning on the first anniversary of the grant date. Non-qualified stock options granted to Mr. Foulston have a strike price of $72.19. Non-qualified stock options granted to Mr. Sliva had a strike price of $98.28 and $96.49. Non-qualified stock options granted to Mr. Reed, Riordan, O’Neill and Ms. Bishop have a strike price of $98.28 which was the closing price of our Common Stock on date of grant.

 

(e) The grant date fair value of the performance units is based on target performance.

Management Changes

In August 2016, Dennis F. Riordan, our former Executive Vice President and Chief Financial Officer, announced his intention to retire. The Company subsequently hired Matthew J. Foulston as the new Executive Vice President and Chief Financial Officer. Mr. Foulston started with the Company in December 2016.

In November 2016, Christopher D. Sliva, our former President, left the Company to pursue other opportunities. Upon Mr. Sliva’s departure, the Company named Dennis F. Riordan as the new President. Despite Mr. Riordan’s previous announcement, he is fully committed to the Company.

Employment Agreements

The Company has entered into employment agreements with Messrs. Reed, O’Neill, Riordan, Foulston and Sliva (Mr. Sliva is no longer employed by the Company). The terms of these employment agreements are substantially similar, other than the individual’s title, salary, bonus, and long-term incentive award entitlements (stock options, restricted stock units and performance units). The employment agreements provide an annual base salary, plus an incentive bonus based upon the achievement of certain performance objectives, all of which are determined by the Board. The employment agreements also provide for one-year automatic extensions, absent written notice from either party of its intention not to extend the agreement. None of these employment agreements contain a “gross up” payment from the Company to the extent the covered individuals incur excise taxes under Section 4999 of the tax code (the “Code”).

Each individual is also entitled to participate in any benefit plan we maintain for our senior executive officers, including any life, medical, accident, or disability insurance plan, and any pension, profit sharing, retirement, deferred compensation or savings plan for our senior executive officers. We also will pay the reasonable expenses incurred by each management investor in the performance of his duties to us and indemnify the management investor against any loss or liability suffered in connection with such performance.

We are entitled to terminate each employment agreement with or without “Cause” (as defined in the employment agreements). Each individual is entitled to terminate his employment agreement for “Good Reason” (as defined in the employment agreements) which includes a reduction in base salary or a material alteration in duties and responsibilities or for certain other specified reasons, including the death, disability or retirement of the management investor. If an employment agreement is terminated without Cause by us or with Good Reason by the covered individual, the covered individual will be entitled to a severance payment equal to two times (or three times, in the case of Mr. Reed) the sum of the annual base salary payable and the target bonus amount owed to the covered individual immediately prior to the end of the employment period, plus continuation of all health and welfare benefits for three years (two years in the case of Mr. O’Neill). If an employment agreement is terminated under the same circumstances and within 24 months after a change of control of the Company, the covered individual will be entitled to a severance payment equal to three times the annual base salary and target bonus amount payable to the covered individual immediately prior to the end of the employment period, plus continuation of all health and welfare benefits for three years.

 

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Ms. Bishop and Mr. Kahler are covered under the Severance Plan. They are entitled to the severance provisions for involuntary termination by the Company without Cause, or for voluntary termination by the executive for Good Reason. The Severance Plan provides payments for three tiers of executives. Ms. Bishop and Mr. Kahler are considered tier two executives and are eligible for severance payments equal to one times their base salary and target incentive compensation, plus continuation of all health and welfare benefits for 1 year. In the event of their involuntary termination by the Company without Cause or voluntary termination for Good Reason within 24 months of a change in control, under the Severance Plan, Ms. Bishop and Mr. Kahler are entitled to severance equal to two times their base salary, two times their target incentive compensation, and continuation of all health and welfare benefits for 2 years. The Severance Plan does not contain a “gross up” payment from the Company to the extent the covered individuals incur excise taxes under Section 4999 of the tax code (the “Code”).

Awards

The grant for each NEO is listed in the 2016 Grants of Plan Based Awards Table on page 36. The significant features of the 2016 equity incentives are as follows:

2016 Non-Qualified Stock Options

The NEOs (except for Mr. Foulston) received an annual stock option grant on June 27, 2016, that vests annually in three approximately equal tranches, beginning on the first anniversary of the grant date. Mr. Foulston’s awards were granted on December 31, 2016.

2016 Restricted Stock Units

The NEOs (except for Mr. Foulston) and other managers of the Company received an annual restricted stock unit grant on June 27, 2016, that vests annually in three approximately equal tranches, beginning on the first anniversary of the grant date. Mr. Foulston’s awards were granted on December 31, 2016.

2016 Performance Units

The performance units are earned based on achieving operating net income goals in each of the performance periods listed below and represented 37.5% of the LTI grant value. The performance periods of the 2016 performance units are as follows: July 1, 2016 through December 31 2016; calendar year 2017; calendar year 2018; and the cumulative period of July 1, 2016 through December 31, 2018. The performance units will be converted to stock or cash at the discretion of the Compensation Committee on the third anniversary of the date of grant. The Company expects the performance units to be settled in stock and has the shares available to do so. For the performance period July 1, 2016 through December 31, 2016, the operating net income target was approximately $108 million. The operating net income targets for calendar years 2017, 2018 and the cumulative performance period are approximately 132% of calendar year 2016 operating net income budget, 130% of the calendar year 2017 target, and the sum of the three target amounts, respectively. The number of units that will be earned is based on the level of achievement relative to the targets. There is no payout below 80% achievement, and payout is capped at 200% of target if achievement meets or exceeds 120% of the operating net income target.

During 2016, in addition to the annual awards, Mr. Sliva, Ms. Bishop and Mr. Kahler received additional awards. Mr. Sliva’s awards were granted in connection with his promotion to President of the Company. Ms. Bishop and Mr. Kahler received their awards in connection with their expanded duties and responsibilities resulting from the acquisition of Private Brands.

 

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Table of Contents

2016 Outstanding Equity Awards at Fiscal Year-End

 

          Option Awards     Stock Awards  

Name

  Grant Date     Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(a)
    Option
Exercise
Price  ($)
    Option
Expiration
Date
    Number
of Shares
or Units of
Stock That

Have Not
Vested (#)(b)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
    Equity Plan
Number of
Unearned
Shares,
Other  Rights
That Have
Vested (#)(c)
    Equity
Plan Awards:
Market Value
Unearned
Shares, Units,
Other Rights
That Have
Vested ($)
 

Sam K. Reed

    6/27/2008       114,800       0       24.06       6/27/2018       0       0       0       0  
    6/28/2010       41,700       0       46.47       6/28/2020       0       0       0       0  
    6/27/2011       47,000       0       54.90       6/27/2021       0       0       0       0  
    6/27/2012       58,930       0       61.41       6/27/2022       0       0       0       0  
    6/27/2013       69,070       0       65.97       6/27/2023       0       0       0       0  
    6/27/2014       0       0       0             0       0       45,020       3,249,994  
    6/27/2014       0       0       0             5,003       361,167       0       0  
    6/27/2014       46,573       23,287       79.89       6/27/2024       0       0       0       0  
    6/26/2015       0       0       0             0       0       26,340       1,901,485  
    6/26/2015       0       0       0             11,706       845,056       0       0  
    6/26/2015       28,847       57,693       76.30       6/26/2025       0       0       0       0  
    6/27/2016       0       0       0             0       0       25,240       1,822,076  
    6/27/2016       0       0       0             16,830       1,214,958       0       0  
    6/27/2016       0       82,400       98.28       6/27/2026       0       0       0       0  

Matthew J. Foulston

    12/31/2016       0       0       0             3,550       256,275       0       0  
    12/31/2016       0       0       0             4,030       290,926       0       0  
    12/31/2016       0       13,240       72.19       12/31/2026       0       0       0       0  

Dennis F. Riordan

    6/27/2007       47,100       0       26.48       6/27/2017       0       0       0       0  
    6/27/2008       25,500       0       24.06       6/27/2018       0       0       0       0  
    6/28/2010       13,650       0       46.47       6/28/2020       0       0       0       0  
    6/27/2011       12,400       0       54.90       6/27/2021       0       0       0       0  
    6/27/2012       15,580       0       61.41       6/27/2022       0       0       0       0  
    6/27/2013       18,420       0       65.97       6/27/2023       0       0       0       0  
    6/27/2014       0       0       0             0       0       12,380       893,712  
    6/27/2014       0       0       0             1,377       99,406       0       0  
    6/27/2014       12,807       6,403       79.89       6/27/2024       0       0       0       0  
    6/26/2015       0       0       0             0       0       7,020       506,774  
    6/26/2015       0       0       0             3,120       225,233       0       0  
    6/26/2015       7,694       15,386       76.30       6/26/2025       0       0       0       0  
    6/27/2016       0       0       0             0       0       5,980       431,696  
    6/27/2016       0       0       0             3,990       288,038       0       0  
    6/27/2016       0       19,520       98.28       6/27/2026       0       0       0       0  

 

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Table of Contents
          Option Awards     Stock Awards  

Name

  Grant
Date
    Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
    Number of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)(a)
    Option
Exercise
Price  ($)
    Option
Expiration
Date
    Number
of Shares
or Units of
Stock That

Have Not
Vested (#)(b)
    Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
    Equity Plan
Number of
Unearned
Shares,
Other  Rights
That Have
Vested (#)(c)
    Equity
Plan Awards:
Market Value
Unearned
Shares, Units,
Other Rights
That Have
Vested ($)
 

Thomas E. O’Neill

    6/27/2008       36,100       0       24.06       6/27/2018       0       0       0       0  
    6/28/2010       13,650       0       46.47       6/28/2020       0       0       0       0  
    6/27/2011       12,400       0       54.90       6/27/2021       0       0       0       0  
    6/27/2012       15,580       0       61.41       6/27/2022       0       0       0       0  
    6/27/2013       14,730       0       65.97       6/27/2023       0       0       0       0  
    6/27/2014       0       0       0             0       0       10,120       730,563  
    6/27/2014       0       0       0             1,127       81,358       0       0  
    6/27/2014       10,480       5,240       79.89       6/27/2024       0       0       0       0  
    6/26/2015       0       0       0             0       0       5,270       380,441  
    6/26/2015       0       0       0             2,340       168,925       0       0  
    6/26/2015       5,770       11,540       76.30       6/26/2025       0       0       0       0  
    6/27/2016       0       0       0             0       0       4,870       351,565  
    6/27/2016       0       0       0             3,250       234,618       0       0  
    6/27/2016       0       15,900       98.28       6/27/2026       0       0       0       0  

Rachel R. Bishop

    6/27/2014       0       0       0             0       0       5,620       405,708  
    6/27/2014       0       0       0             627       45,263       0       0  
    6/27/2014       5,820       2,910       79.89       6/27/2024       0       0       0       0  
    6/26/2015       0       0       0             0       0       2,930       211,517  
    6/26/2015       0       0       0             1,360       98,178       0       0  
    6/26/2015       3,207       6,413       76.30       6/26/2025       0       0       0       0  
    3/31/2016       0       0       0             5,000       360,950       0       0  
    6/27/2016       0       0       0             0       0       2,660       192,025  
    6/27/2016       0       0       0             1,770       127,776       0       0  
    6/27/2016       0       8,670       98.28       6/27/2026       0       0       0       0  

Erik T. Kahler

    6/27/2007       5,700       0       26.48       6/27/2017       0       0       0       0  
    6/27/2008       14,100       0       24.06       6/27/2018       0       0       0       0  
    6/28/2010       8,400       0       46.47       6/28/2020       0       0       0       0  
    6/27/2011       7,600       0       54.90       6/27/2021       0       0       0       0  
    6/27/2012       9,550       0       61.41       6/27/2022       0       0       0       0  
    6/27/2013       9,030       0       65.97       6/27/2023       0       0       0       0  
    6/27/2014       0       0       0             0       0       5,520       398,489  
    6/27/2014       0       0       0             613       44,252       0       0  
    6/27/2014       5,707       2,853       79.89       6/27/2024       0       0       0       0  
    6/26/2015       0       0       0             0       0       2,870       207,185  
    6/26/2015       0       0       0             1,273       91,898       0       0  
    6/26/2015       3,140       6,280       76.30       6/26/2025       0       0       0       0  
    3/31/2016       0       0       0             4,000       288,760       0       0  
    6/27/2016       0       0       0             0       0       2,660       192,025  
    6/27/2016       0       0       0             1,770       127,776       0       0  
    6/27/2016       0       8,670       98.28       6/27/2026       0       0       0       0  

 

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(a) The option awards for each NEO will vest annually in three approximately equal tranches, beginning on the anniversary date of the grant, as listed in the table.

 

(b) Restricted stock units vest annually in three approximately equal tranches, beginning on the anniversary date of the grant, as listed in the table.

 

(c) Performance units vest on the third anniversary of the grant date as listed in the table. Based on current performance levels, performance units granted in 2014 are reported at maximum levels. Performance units granted in 2015 and 2016 are reported at target based on current performance levels. The payout can be from 0% to 200% of the award based on achievement of the performance criteria.

 

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Table of Contents

2016 Option Exercises and Stock Vested

 

      Option Awards      Stock Awards  

Name

   Number of Shares
Acquired on Exercise
(#)
    Value Realized
on Exercise
($)
     Number of Shares
Acquired on Vesting
(#)
    Value Realized
on Vesting
($)
 

Sam K. Reed

     0       0        5,854 (a)      569,770  
     0       0        5,003 (b)      491,695  
     0       0        5,287 (c)      519,606  
     0       0        30,888 (d)      3,035,673  

Dennis F. Riordan

     0       0        1,560 (a)      151,835  
     0       0        1,376 (b)      135,233  
     0       0        1,410 (c)      138,575  
     0       0        8,240 (d)      809,827  

Thomas E. O’Neill

     0       0        1,170 (a)      113,876  
     0       0        1,126 (b)      110,663  
     0       0        1,127 (c)      110,762  
     0       0        6,593 (d)      647,960  

Rachel R. Bishop

     0       0        680 (a)      66,184  
     0       0        3,890 (b)      369,122  
     0       0        626 (b)      61,523  

Erik T. Kahler

     0       0        637 (a)      61,999  
     0       0        613 (b)      60,246  
     0       0        690 (c)      67,813  
     0       0        4,035 (d)      396,560  
     17,100 (e)      1,171,692        0       0  

Christopher D. Sliva

     0       0        1,430 (a)      139,182  
     0       0        1,250 (b)      122,850  
     0       0        1,270 (c)      124,816  
     0       0        7,410 (d)      728,255  
     13,635 (f)      222,180        0       0  

 

(a) Represents the vesting of the first of three tranches of restricted stock unit awards granted in 2015.

 

(b) Represents the vesting of the second of three tranches of restricted stock units awards granted in 2014.

 

(c) Represents the vesting of the third of three tranches of restricted stock unit awards granted in 2013.

 

(d) Represents the vesting of performance units granted in 2013, with performance period ending December 31, 2015. Awards vested on June 27, 2016.

 

(e) Represents stock options that were granted on June 27, 2007.

 

(f) Represents stock options that were granted on July 27, 2012.

 

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Table of Contents

2016 Non-Qualified Deferred Compensation

 

Name

   Executive
Contributions
in Last FY
($)
     Registrant
Contributions
in Last FY
($)
     Aggregate
Earnings (Loss)
in Last FY
($)(a)
     Aggregate
Withdrawals/
Distributions
($)
     Aggregate
Balance at
Last FYE
($)
 

Sam K. Reed

     0        0        118,442        0        2,117,763  

Matthew J. Foulston

     0        0        0        0        0  

Dennis F. Riordan

     0        0        0        0        0  

Thomas E. O’Neill

     0        0        0        0        0  

Rachel Bishop

     0        0        8,824        0        123,498  

Erik T. Kahler

     0        0        0        0        0  

Christopher D. Sliva

     0        0        0        0        0  

 

(a) Amounts in this column are not included in the 2016 Summary Compensation Table of this Proxy Statement.

The 2016 Non-Qualified Deferred Compensation Table presents amounts previously deferred under our Deferred Compensation Plan. Participants may defer up to 100% of their base salary and annual incentive plan payments under the Deferred Compensation Plan. Deferred amounts are credited with earnings or losses based on the return of mutual funds selected by the executive, which the executive may change at any time. We do not make contributions to participants’ accounts under the Deferred Compensation Plan, except to the extent that employees in the plan have their Company matching contributions in the 401(k) plan limited as a result of participating in the Deferred Compensation Plan. Distributions are made in either a lump sum or an annuity as chosen by the executive at the time of the deferral.

The earnings on Mr. Reed’s and Ms. Bishop’s Deferred Compensation Plan accounts were measured by reference to a portfolio of publicly available mutual funds chosen by Mr. Reed and Ms. Bishop in advance and administered by an outside third party. As presented above, Mr. Reed’s 2016 annualized gain was approximately 5.9%. Ms. Bishop’s 2016 gain was approximately 7.7%. Messrs. Riordan, Foulston, O’Neill and Sliva do not participate in the Deferred Compensation Plan.

Potential Payments Upon Termination Or Change In Control

As noted on page 37 of this Proxy Statement, we have entered into employment agreements with all of our NEOs, except for Ms. Bishop and Mr. Kahler who are covered under the Severance Plan. As discussed on page 37 under “Management Changes,” Mr. Sliva is no longer an employee. The employment agreements and Severance Plan provide for payments of certain benefits, as described below, upon the termination. The NEOs rights upon termination of his/her employment depend upon the circumstance of the termination. Central to an understanding of the rights of each NEO under the agreements is an understanding of the definitions of “Cause” and “Good Reason” that are used in the employment agreements and Severance Plan. For purposes of the employment agreements and Severance Plan:

 

   

We have Cause to terminate the NEO if the NEO has engaged in any of a list of specified activities, including refusing to perform duties consistent with the scope and nature of his position, committing an act materially detrimental to the financial condition and/or goodwill of us or our subsidiaries, commission of a felony or other actions specified in the definition.

 

   

The NEO is said to have Good Reason to terminate his employment and thereby gain access to the benefits described below if we assign the NEO duties that are materially inconsistent with his position, reduce his compensation, call for relocation, or take certain other actions specified in the definition.

The employment agreements and Severance Plan require, as a precondition to the receipt of these payments, that the NEOs sign a standard form of release in which the NEO waives all claims that the NEO might have against us and certain associated individuals and entities. The NEOs’ employment agreements and Severance Plan also include non-compete and non-solicit provisions that would apply for a period of one year following the NEO’s termination of employment, and confidentiality provisions that would apply for an unlimited period of time following the NEO’s termination of employment.

 

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The employment agreement for each NEO and Severance Plan specifies the payment to each individual in each of the following situations:

 

   

Involuntary termination without cause or resignation with Good Reason

 

   

Retirement

 

   

Death or disability

 

   

Termination without Cause or with Good Reason after change-in-control

Meridian has reviewed the existing change-in-control severance provisions of our NEOs’ employment agreements and Severance Plan relative to the current practices of our Compensation Comparator Group and has found our practices to be within the norms of the group.

Employment Agreements/Severance Plan

In the event of an involuntary termination of the NEO without Cause, or resignation by the NEO for Good Reason, the NEO will receive two times his base salary and target bonus (three times in the case of Mr. Reed and one times in the case of Ms. Bishop and Mr. Kahler), and continuation of all health and welfare benefits for three years (two years in the case of Mr. O’Neill and one year in the case of Ms. Bishop and Mr. Kahler).

In the event of an involuntary termination of the employee without Cause, or resignation by the employee for Good Reason within a 24 month period immediately following a change-in-control of the Company, the NEO will receive three times the amount of his base salary and target bonus (two times in the case of Ms. Bishop and Mr. Kahler), and continuation of all health and welfare benefits for three years (two years in the case of Ms. Bishop and Mr. Kahler). The employment agreements and Severance Plan do not provide a “gross-up” payment from the Company to the extent covered individuals incur excise taxes under Section 4999 of the Code.

In the event of death, disability or retirement, the NEO will receive no additional severance payments. In the event of disability, NEOs (with the exception of Ms. Bishop and Mr. Kahler) receive continuation of health and welfare benefits for three years (two years in the case of Mr. O’Neill). The Severance Plan does not provide health and welfare benefits in the event of disability.

TreeHouse Foods, Inc. Equity and Incentive Plan

The Company has issued equity awards to our NEOs that are subject to the terms and conditions of the Equity and Incentive Plan.

In the event of an involuntary termination of the NEO without cause, or resignation by the NEO for Good Reason, no unvested options shall become vested or exercisable, nor will unvested restricted stock or restricted stock units vest. For performance unit awards, the NEO shall receive accrued awards plus a pro rata portion of the award (based on the number of full calendar months served during the performance period divided by the length of the performance period) that would have accrued for the performance period in which the NEO was terminated without Cause by the Company.

In the event of a change-in-control, unvested stock options will become fully vested; the restrictions on the restricted stock and restricted stock units will lapse. For performance units, they will be cancelled in exchange for a payment equal to the value that would have been payable had each performance unit been deemed equal to 100% (or such greater or lesser percentage as determined by the Compensation Committee) of its initially established dollar value.

In the event of death or disability unvested options will become fully vested, and upon death, disability or retirement, a pro rata portion of the restricted stock and restricted stock units that would be eligible for lapse of restrictions on the next anniversary date of the grant will lapse. All unvested stock options, restricted stock and restricted stock unit awards will be forfeited for any other reason of termination. For the performance units, the NEO shall receive accrued awards plus a pro rata portion of the award (based on number of full calendar months served during the performance period divided by the length of the performance period) that would have accrued for the performance period in which the NEO was terminated due to death, disability, or retirement.

 

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TreeHouse Foods, Inc. Annual Incentive Plan

In the event of an involuntary termination of the NEO without cause, or resignation by the NEO for Good Reason, no portion of the Annual Incentive Award will be received by the NEO.

In the event of death, disability or retirement, the NEO will receive a pro rata portion of the Annual Incentive Award (based on the number of full calendar months served during the performance period divided by the length of the performance period).

In the event of an involuntary termination without cause or resignation for good reason following a change in control, the NEO will receive a pro rata portion of the Annual Incentive Award (based on the number of full calendar months served during the performance period divided by the length of the performance period).

In the event of a change in control without termination, no portion of the Annual Incentive Award will be received by the NEO.

The following tables illustrate the payouts to each NEO under each of the various separation and change in control situations. A table for Mr. Sliva is not presented due to his voluntary departure from the Company in November 2016. The tables assume that the events took place on the last business day of the fiscal year, December 30, 2016.

Name of Participant: Sam K. Reed

 

     Involuntary
Termination
without
Cause or
Resignation
for Good
Reason
($)
     Retirement
($)
     Disability
or Death
($)
     Involuntary
Termination
without
Cause or
Resignation
for Good

Reason
Following
Change in
Control
($)
     Change in
Control
Without
Termination
($)
 

Severance

     7,346,430        0        0        7,346,430        0  

Interest on Severance

     32,692        0        0        32,692        0  

Pro-rated Annual Incentives

     0        1,384,110        1,384,110        1,384,110        0  

Stock Options

     0        0        0        0        0  

Restricted Stock Units

     0        594,365        594,365        2,421,253        2,421,253  

Performance Units

     2,120,281        2,120,281        2,120,281        5,348,557        5,348,557  

Welfare Benefits

     44,054        0        44,054        44,054        0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Aggregate Payments

     9,543,457        4,098,756        4,142,810        16,577,096        7,769,810  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Name of Participant: Matthew J. Foulston

 

     Involuntary
Termination
without
Cause or
Resignation
for Good
Reason
($)
     Retirement
($)
     Disability
or Death
($)
     Involuntary
Termination
without

Cause or
Resignation
for Good

Reason
Following
Change in
Control
($)
     Change in
Control
Without
Termination
($)
 

Severance

     2,166,000        0        0        2,615,323        0  

Interest on Severance

     14,458        0        0        14,458        0  

Pro-rated Annual Incentives

     0        513,000        513,000        513,000        0  

Stock Options

     0        0        0        0        0  

Restricted Stock Units

     0        0        0        0        0  

Performance Units

     0        0        0        0        0  

Welfare Benefits

     42,573        0        42,573        42,573        0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Aggregate Payments

     2,223,031        513,000        555,573        3,185,354                    0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Name of Participant: Dennis F. Riordan

 

     Involuntary
Termination
Without
Cause or
Resignation
for Good
Reason
($)
     Retirement
($)
     Disability
or Death
($)
     Involuntary
Termination
without
Cause or
Resignation
for Good
Reason
Following
Change in
Control
($)
     Change in
Control
Without
Termination
($)
 

Severance

     2,660,000        0        0        3,990,000        0  

Interest on Severance

     17,756        0        0        17,756        0  

Pro-rated Annual Incentives

     0        665,000        665,000        665,000        0  

Stock Options

     0        0        0        0        0  

Restricted Stock Units

     0        154,006        154,006        612,653        612,653  

Performance Units

     568,369        568,369        568,369        1,385,326        1,385,326  

Welfare Benefits

     40,086        0        40,086        40,086        0  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Aggregate Payments

     3,286,211        1,387,375        1,427,461        6,710,821        1,997,979  
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

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Table of Contents

Name of Participant: Thomas E. O’Neill

 

     Involuntary
Termination
Without
Cause or
Resignation
for Good
Reason
($)
     Retirement
($)
     Disability
or Death
($)
     Involuntary
Termination
without
Cause or
Resignation
for Good
Reason
Following
Change in
Control
($)
     Change in
Control
Without
Termination
($)
 

Severance

     2,071,000        0        0        3,106,500        0  

Interest on Severance

     13,824        0        0        13,824        0  

Pro-rated Annual Incentives

     0        490,500        490,500        490,500        0  

Stock Options

     0        0        0        0