The split between an executive and the Minnesota public company he helped to start has grown more contentious over a dispute on how much his restricted stock is worth.
Tim Michaels, the former chief executive and chief operating officer of Plymouth-based Fresh Vine Wine, sued his former employer on May 27.
The dispute centers around lock-up agreements to 251,851 restricted stock units granted to Michaels shortly before Fresh Vine Wine's initial public stock offering in December.
Michaels — a Gustavus Adolphus College grad who has had a 25-year career advising companies including at consulting firms Grant Thornton and PwC Consulting — was the chief executive of Fresh Vine Wine from 2019 to September, when he became chief operating officer.
Fresh Vine Wine's owners include Hollywood celebrities Nina Dobrev and Julianne Hough, and Minnesota entrepreneur Damian Novak, the company's executive chair and co-founder. They produce wines including chardonnay, pinot noir and cabernet sauvignon through a contract manufacturer in California but have warehouse space and offices in Minnesota.
Fresh Vine Wine completed its IPO on Dec. 13, raising $22 million after pricing its shares at $10.
It is common in IPOs that officers of the company going public have lock-up agreements that prevent them from immediately selling their shares and thus diluting the offering. Lock-ups typically last six months.
On Feb. 7, according the lawsuit, Michaels was fired from the company and on Feb. 24, signed a separation agreement in which he was given a $160,000 lump sum cash payment and $15,000 for legal fees.
Chris Boline, an attorney with Minneapolis-based Felhaber Larson representing Michaels, declined to comment on the case. A spokesperson for Fresh Vine Wine said via e-mail the company does not comment on pending litigation.
A filing with the SEC shows that in the separation agreement both sides agreed they would amend Michaels' restricted stock agreement allowing him not to surrender his 251,851 shares and that vesting of those shares would accelerate.
The underwriter of the offering agreed to waive the lock-up agreement as did Fresh Vine Wine, according to the lawsuit. But when shares were released to Michaels from the company's transfer agent, they came with a note stating the shares were subject to a lock-up agreement through Friday.
The lawsuit states that sometime between March 7 and March 15 Fresh Vine Wine changed positions on removing the lock-ups and then hired an outside law firm to settle the matter.
Since the IPO, Fresh Vine Wine shares are off about 70% from the IPO date and on Tuesday closed at $3.06 a share. On Feb. 24, when the parties signed the separation agreement, shares of Fresh Vine Wine closed at $4.40 a share.
On May 27, Michaels sued the company for breach of contract, breach of good faith and fair dealing over his ability to sell his restricted shares. The lawsuit contends that, from the timeline of events and the share price of Fresh Vine Wine, Michaels could have sold his shares at a higher price. if found, precise damages will be determined at a later date.
