Gavin Darby, who led the Mr Kipling cake company from 2013 to the end of January this year, drew investor flak for failing to revive the business after rebuffing a takeover approach from U.S. food maker McCormick & Co Inc.
The company's shares have lost nearly a third of their value since McCormick abandoned its approach in April 2016.
Almost 41 percent of Premier shareholders in July backed an attempt led by activist hedge fund Oasis Management to oust Darby. In November, Darby agreed to step down, but said it didn't have anything to do with the shareholder revolt.
Darby will be paid 863,557 pounds for his 12 months' notice period, covering his salary, contractual benefits and pension supplement, the company said. Darby will also be given 30,000 pounds for advisory services and legal fees.
In addition, he will get 638,291 shares, worth about 238,401 pounds, based on Thursday's close of 37.35 pence.
The company said it was meeting its legal obligations under the terms of Gavin's contract, but declined to comment further.
Oasis Management was not immediately available for a comment.
Shares of the company were little changed at 36.90 pence at 1000 GMT.
(Reporting by Arathy S Nair and Sangameswaran S in Bengaluru; Editing by Elaine Hardcastle)