Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On December 21, 2020, Melissa Reiff notified The Container Store Group, Inc. (the “Company”) of her retirement as President and Chief Executive Officer of the Company, effective February 1, 2021 (the “Effective Date”). On December 21, 2020, the Company’s Board of Directors (the “Board”) appointed Satish Malhotra to succeed Ms. Reiff as President and Chief Executive Officer, effective on the Effective Date. In addition, on December 21, 2020, the Board elected Mr. Malhotra as a Class III director of the Company, effective on the Effective Date.
Ms. Reiff has agreed to continue as an employee of the Company to provide transition services to Mr. Malhotra and the Company through the expiration of her employment agreement on March 1, 2021. Ms. Reiff’s employment agreement will otherwise remain in effect while her employment continues. In accordance with her agreement, Ms. Reiff will continue to serve as Chairwoman of the Company’s Board until the conclusion of the Company’s annual meeting of shareholders to be held in 2021.
Satish Malhotra, 45, has served in a variety of key leadership roles with increasing responsibility at Sephora since November 1999, ultimately progressing to Chief Operating Officer from 2016 to 2019 and to Chief Retail and Operating Officer from 2019 until his departure. In his latest role, Mr. Malhotra was responsible for supporting Sephora’s growth by expanding the in-store client experience and services, increasing points of distribution and building scalable infrastructures. Mr. Malhotra received his Bachelor of Science in Business Administration from the Haas School of Business at the University of California, Berkeley. Mr. Malhotra also holds an inactive Certified Public Accountant’s license from the State of California. The Company believes Mr. Malhotra is qualified to serve on the Board due to his extensive leadership experience in the retail industry and his operational expertise, including in the areas of in-store experience, store development, technology, supply chain and finance.
In connection with Mr. Malhotra’s appointment as the Company’s President and Chief Executive Officer, the Company has entered into an employment agreement with Mr. Malhotra (the “Employment Agreement”). The Employment Agreement provides that Mr. Malhotra will serve as President and Chief Executive Officer for a term commencing on February 1, 2021 and ending on February 1, 2026, unless earlier terminated as provided in the agreement. The Company has agreed to pay Mr. Malhotra an annual base salary of $875,000, subject to review annually for possible increase. Beginning with the Company’s 2021 fiscal year, the Employment Agreement also provides for an annual cash performance-based bonus with a target of 130% of annual base salary and a maximum of 200% of annual base salary. Mr. Malhotra will not receive additional compensation for his service on the Board.
The Company has also agreed to pay Mr. Malhotra a lump sum cash signing bonus of $1,000,000 and provide him relocation benefits for expenses incurred to relocate Mr. Malhotra’s primary residence to the Dallas-Fort Worth Metropolitan Area. In addition, the Employment Agreement provides for an initial grant of restricted shares under the Company’s Amended and Restated 2013 Incentive Award Plan with an aggregate value of $500,000. The actual number of shares granted will be determined by dividing $500,000 by the average closing price of a share of common stock of the Company over the 30 trading days preceding December 21, 2020. The restricted shares will vest as to one-third of the restricted shares on each of the first through third anniversaries of February 1, 2021, subject to Mr. Malhotra’s continued employment through each applicable vesting date.
The Employment Agreement provides certain severance benefits upon termination by us without “Cause” or by Mr. Malhotra for “Good Reason” (as each such term is defined in the Employment Agreement). Upon a termination of employment by us without Cause or by Mr. Malhotra for Good Reason (each, a “Qualifying Termination”), he would be eligible to receive cash severance equal to two times the sum of (a) his annual base salary and (b) (i) if the date of the Qualifying Termination is during the first six months of a fiscal year, his annual bonus received in respect of the prior fiscal year or (ii) if the date of the Qualifying Termination is in the last six months of a fiscal year, the amount of the annual bonus that is accrued through the date of the Qualifying Termination for purposes of the Company’s financial statements in accordance with generally accepted accounting principles. Upon a Qualifying Termination, Mr. Malhotra is also entitled to (a) pro-rata vesting of any of his then-unvested equity awards that are, at the time of termination (i) subject solely to time-based vesting and (ii) scheduled to vest on the next scheduled time-vesting date, with such pro-ration being calculated based on the number of days worked since grant or the most recent time-vesting date, as
