Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are a party to legal proceedings, whether arising in the ordinary course of business or otherwise. The disclosure under the headings “Lawsuit by Former CEO in Connection with Termination” and “Putative Class Action Lawsuit” set forth in Note 18 to the consolidated financial statements included in Item 8 of the Annual Report on Form 10-K for the fiscal year ended January 1, 2023 is incorporated by reference herein.
In the lawsuit by the former CEO, Mr. Gould has filed a motion for reconsideration of the Court’s grant of summary judgment in favor of the Company on Mr. Gould’s breach of contract claim. That motion for reconsideration is currently pending with the Court. In addition, the Court has scheduled a trial on the Company’s counterclaim against Mr. Gould for breach of fiduciary duty beginning September 12, 2023. The Company believes Mr. Gould’s lawsuit is without merit and intends to defend vigorously against it.
In the putative class action, the parties have reached a preliminary agreement to settle the lawsuit for $7.5 million, subject to Court approval of the settlement. The Company expects the settlement amount to be paid by its insurers. The Company has accrued both the $7.5 million loss contingency as well as the expected insurance recovery in the consolidated condensed balance sheet as of April 2, 2023.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended January 1, 2023.
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