The following table summarizes information with respect to holdings of stock options and stock awards by the Named Executive OfficersNEOs as of July 29, 2017.30, 2022. This table includes unexercised and unvested stock options, unvested time-based vesting restricted stock unitsRSUs and unvested performance-based vesting restricted stock units.PSUs. Each equity grant is shown separately for each Named Executive Officer,NEO, except that incentive stock options and non-qualified stock options granted on the same date with the same material terms, including exercise price, vesting period and expiration date, are combined.
The information below describes and quantifies the compensation that would become payable to each of our Named Executive Officers under the then-existing plans and arrangementsNEOs if the Named Executive Officer'sNEO’s employment had terminated on July 29, 2017,30, 2022, given the Named Executive Officer'sNEO’s compensation and service levels as of such date and, if applicable, based on our closing stock price on that date. These benefits are in addition to benefits generally available to salaried employees. Due to the number of factors that affect the nature and amount of any benefits provided upon the events discussed below, any actual amounts paid or distributed may be different. Factors that could affect these amounts include the timing during the year of any such event and our stock price at the time of such event.
The Audit Committee has considered whether the provision of the non-audit services described above by KPMG LLP is compatible with maintaining auditor independence and determined that KPMG LLP'sLLP’s provision of non-audit services did not compromise its independence as our independent registered public accounting firm.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
PROPOSALProposal 3—ADVISORY APPROVAL OF OUR EXECUTIVE COMPENSATIONAdvisory Approval of Our Executive Compensation
As described in EXECUTIVE COMPENSATION—Compensation Discussion and Analysis, the Compensation Committee's goal in settingWe made several enhancements to our executive compensation isprogram after our 2021 Annual Meeting, informed by engagement with several of our stockholders, and, as a result, we received a 92.6% Say on Pay at our last annual meeting. During our 2022 engagement discussions, our stockholders were complimentary of our responsiveness and our compensation program in light of the changes made in fiscal 2022. We continue to providehave a strong executive compensation program that attracts individualswe believe is appropriate and effective in aligning the interests of our executives with the skills necessary for us to achievethose of our business plan, motivates our executive talent, rewards those individuals fairly over time for performance that enhances stockholder value and retains those individuals who continue to perform at or above the levels that are deemed necessary to ensure our success.stockholders. Our compensation program is also designed to reinforce a sense of ownership in our company,Company and foster an entrepreneurial spirit. Our program drives urgency with respect to meeting deadlinesdelivering significant value; and overall entrepreneurial spirit and to link rewards,alignment of compensation incentives, including both short-termshort- and longer termlong-term awards, as well as cash and non-cash awards, to measurable pre-established corporate and individual performance metrics established bymetrics. We believe we have developed a compensation program designed to deliver our Fuel the Compensation Committee. In applying these principles, we seek to integrate compensation with our short- and long-termFuture strategic plansobjectives and to align theour executives’ interests with those of our executives with the long-term interests of our stockholders.
Our compensation programs are designed so that they maintain a pay-for-performance incentive program but do not include compensation mix overly weighted toward annual incentives, highly leveraged short-term incentives, uncapped or "all or nothing" bonus payouts or unreasonable performance goals. Our cash and equity incentive programs include several design features that reduceincludes the likelihood of excessive risk-taking, including the use of reasonably obtainable and balanced performance metrics, maximum payouts at levels deemed appropriate, a carefully considered "peer group" to ensure our compensation practices are measured and appropriately competitive, and significant weighting towards long-term incentives that promote longer-term goals and reward sustainable stock, financial and operating performance, especially when combined with our executive stock ownership guidelines. Additionally, our executive compensation recoupment policy allows us to recover bonus payments and certain equity awards under certain circumstances, and compliance and ethical behaviors are factors considered in all performance and bonus assessments.following:
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| ü | No employment agreements with any of our NEOs and clearly outlined terms for treatment of compensation upon termination of employment. |
| ü | Equity grants are weighted more heavily toward performance, with 60% PSUs and 40% RSUs (compared to 50%/50% in prior years). |
| ü | STI plan includes a revenue metric, which, balanced with the existing adjusted EBITDA metric, aligns with our strategy to grow sales profitably. |
| ü | LTI plan no longer includes a leverage metric, given significant progress on this metric in recent years toward our long-term goal. Adjusted EPS and adjusted ROIC incentivize prudent capital investments in our business that aligns with an increase in stockholder value. |
| ü | Maintain disciplined equity grant practices. |
StockholdersYou are urged to read the Compensation Discussion and Analysis, which discusses how our compensation policies and procedures implement our compensation objectives and philosophies, as well as the table under EXECUTIVE COMPENSATION TABLES—“Executive Compensation Tables—Summary Compensation Table—Fiscal Years 2015-20172020-2022” and other related compensation tables and narrative disclosure, which describe the compensation of our Named Executive OfficersNEOs in fiscal 2017.2022.
The Compensation Committee and the Board believe that the policies and procedures articulated in the Compensation Discussion and Analysis are effective in aligning the interests of our executives with those of our stockholders and incentivizing performance that supports our short- and long-term strategic objectives, and that the compensation of the Named Executive OfficersNEOs in fiscal 20172022 reflects and supports these compensation policies and procedures.
As required by Section 14A of the Exchange Act and as a matter of good corporate governance, stockholders will be asked at the annual meetingAnnual Meeting to approve the following advisory resolution:
RESOLVED, that the compensation paid to the Company'sCompany’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion is hereby APPROVED.
This advisory vote, commonly referred to as a "say-on-pay"“say-on-pay” advisory vote, is non-binding on the Board. Although non-binding, the Board and the Compensation Committee will review the voting results and take them into consideration when making future decisions regarding our executive compensation programs. The Board has adopted, and stockholders have approved, a policy of providing for annual advisory votes by stockholders on executive compensation. The next such vote will occur at the 2018 Annual Meetingnext annual meeting.
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| The Board unanimously recommends that stockholders vote “FOR” the advisory approval of our executive compensation. Proxies received by the Board will be voted “FOR” the proposal unless a contrary choice is specified in the proxy. |
The Board unanimously recommends that stockholders vote “FOR” the advisory approvalProposal 4—Approval of our executive compensation. Proxies received by the Board will be voted “FOR” the proposal unless a contrary choice is specified in the proxy.
PROPOSAL 4—APPROVAL OF THE AMENDMENT AND RESTATEMENT OF THE UNITED NATURAL FOODS, INC. AMENDED AND RESTATED 2012 EQUITY INCENTIVE PLAN
Background
Amendments Proposed.Our Board of Directors has adopted, effective as of October 27, 2017, and recommends that you approve the United Natural Foods, Inc. Second Amended and Restated 2012 Equity Incentive Plan (the “Second Amended and Restated Equity Incentive Plan”). The United Natural Foods, Inc. 2012 Equity Incentive Plan (the "Original Plan") was initially approved by our stockholders on December 12, 2012 at our 2012 annual meeting of stockholders and was subsequently amended and restated on December 16, 2015 at our 2015 annual meeting of stockholders (the "Original Amended and Restated Plan"). The key revisions to the Original Amended and Restated Plan as reflected in the Second Amended and Restated 2020 Equity Incentive Plan
Background
On November 17, 2022, our Board approved the Second Amended and Restated 2020 Equity Incentive Plan are as follows:
(Second Amended and Restated Plan) to (i) increase the number of shares available for issuance under the Original Amended and Restated 2020 Equity Incentive Plan by 2,500,000 shares, all of which shares may be issued as full value awards;
add specific provisions to5,000,000 shares; (ii) update the Original Amended and Restated Plan providing that while dividends or dividend equivalent rights may accrue or be paid into escrowlimitation on shares of restricted stock and restricted share units prior to the vesting of such awards, a participant will forfeit any dividends (or dividend equivalent rights) paid on such awards that do not thereafter vest; and
extend the minimum one-year vesting period required under the Original Amended and Restated Plan with respect to certainnon-employee director awards to all awards underinclude a cap on total director compensation (including cash compensation) and set that cap at $800,000 per year (iii) remove the restrictive covenants language from the Second Amended and Restated Plan and include it in each award agreement; (iv) extend the term of the plan from seven years to 10 years; (v) require the execution of a release in connection with the vesting of any shares as a result of a separation from service without cause (as defined in the plan); and (vi) certain other clarifying and conforming changes. The 2020 Equity Incentive Plan was originally approved by stockholders in December 2019, and an amendment thereto was approved by stockholders on January 12, 2021. The Board believes that equity compensation is an essential component of our corporate strategy and recommends that you vote to approve the Second Amended and Restated Plan.
The Second Amended and Restated Plan permits the grant of incentive and non-qualified stock options, stock appreciation rights (SARs), restricted shares, RSUs, performance awards, and other stock-based awards to current or prospective officers, employees, directors and consultants. The Second Amended and Restated Plan includes terms and conditions that reflect governance best practices, including, among other things, double trigger change in control provisions; minimum vesting provisions; prohibitions on repricing; provision for treatment upon death, disability, retirement and certain separation of service events; provisions regarding performance-based awards; no liberal share recycling; and limits on grant amounts to outside directors and per participant limits.
Best Practices
As further described below in “Summary of the Second Amended and Restated 2020 Equity Incentive Plan”, the Second Amended and Restated Plan includes terms and conditions that reflect best practices in governance and compensation:
•Grants under the plan are subject to our recoupment policy and stock ownership guidelines as in effect from time to time (including any changes that may be implemented to comply with an exceptionlisting requirements). Awards are not transferable (other than upon death);
•Change in control provisions are “double trigger” (requiring both a change in control and a termination of employment), with a market-standard definition of change in control;
•The plan specifically describes the treatment of awards upon death, disability, retirement and certain separation events, thus limiting the need for exercise of administrative discretion and, in the case of retirement, maintaining incentives to thisfocus the executives that are nearing retirement (a time of heightened risk for short-term initiatives), on long-term performance;
•The plan contains a one-year minimum vesting requirement, with exceptions for death, disability and change in control;
•The minimum vesting requirement does not apply with respect to awards representing no more than 5% of the share reserve;
•The plan prohibits repricing of options and SARs;
•The plan includes detailed provisions for performance awards, which generally terminate upon termination of employment (other than terminations upon death, disability and retirement);
•The plan does not contain “liberal share recycling” provisions (shares surrendered upon payment of the option exercise price or used to pay tax withholding on any award are not added back to the number of shares reservedthat are available for awards, and any SARs that are settled in shares will be deemed to use the full amount of shares underlying the award);
•The plan contains limits on grant amounts and total compensation to outside directors and per participant award limits; and
•Dividends (if any) payable on unvested awards are not available until the award has vested.
Shares Available and Outstanding Awards
As of November 14, 2022, there were 59,902,801 shares of our common stock outstanding, with a closing price of $45.29 per share. As of such date, we had outstanding awards under the Amended and Restated 2020 Equity Incentive Plan and the Company’s prior equity incentive plan (the Amended and Restated 2012 Equity Incentive Plan, or Prior Plan), and we had
outstanding replacement awards made to Supervalu employees to replace awards denominated in shares of Supervalu when we acquired Supervalu in October 2018. The table below shows the shares available for issuance under the Second Amended and Restated Equity Incentive Plan.
NASDAQ rules require us to obtain stockholder approval of material amendments to equity compensation plans, such as the increase in shares availablePlan or reserved for issuance under the Original Amended and Restated Plan.
Available Shares and Outstanding Awards. As of October 16, 2017, assuming 100% of outstanding full value, time-based vesting awards vest and all full value, performance-based vesting awards vest at target level performance, 758,735 shares were available for future grant under the Original Amended and Restated Plan (with only 115,345 of such shares available for issuance as full value awards).
The following table displays the number of full value awards and stock options outstanding as of the last day of each of the Company’s most recently completed three fiscal years and as of October 16, 2017 as well as additional information with respect to the average exercise price and remaining term for stock options, along with the shares available for issuance under the Original Plan and the Original Amended and Restated Plan as of such dates and the total number of the Company’s shares then outstanding:November 14, 2022:
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| Fiscal Year | Options Outstanding | Weighted Average Exercise Price of Stock Options | Weighted Average Remaining Term (years) | Full Value Awards Outstanding | Shares Available for Issuance | Common Shares Outstanding |
| 2015 | 444,516 | $46.97 | 6.1 | 621,232 | 761,493 | 50,096,308 |
| 2016 | 343,629 | $49.13 | 5.8 | 733,797 | 2,354,570 | 50,383,397 |
| 2017 | 328,689 | $49.52 | 5.0 | 1,270,111 | 1,389,248 | 50,622,148 |
| Current | 130,457 | $62.28 | 6.9 | 1,694,848 | 758,735 | 50,921,462 |
| New Shares | | | | | 2,500,000 | |
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(1)Types of Shares | As reported in the Company’s Annual Report on Form 10-K or proxy statement for the applicable fiscal year. |
| Number of Shares |
(2)Available for New Grants under the Amended and Restated 2020 Equity Incentive Plan | Includes 361,3901,580,981 Shares |
| Shares Underlying Existing Awards Granted under the Amended and Restated 2020 Equity Incentive Plan | 2,334,781 shares that could be issued if currently outstanding performance units are earnedunder time-vesting “full value” awards (restricted shares and settled inrestricted stock units) 2,045,796 performance-vesting restricted stock awards (at maximum levels of performance)(1) |
| Shares Underlying the Prior Plan | Options to purchase 68,605 shares (with a weighted average price of the Company’s common stock at target level$65.95 per share and weighted average remaining term of performance. For more information regarding these performance units, see “Executive Compensation - Compensation Discussion1.3 years |
| Supervalu Replacement Options | Replacement options to purchase 357,481 shares (with a weighted average price of $51.22 and Analysis - Long-term Equity Based Incentive Program” and “Executive Compensation - Compensation Discussion and Analysis - Fiscal 2018 Compensation Changes.”average remaining term of 1.7 years |
| Total Shares Available for Grant or Underlying Existing Awards | 6,387,644 |
Grant Practices.(1)The following table sets forth information related to stock optionsperformance units consist of awards granted in October 2020, 2021 and restricted share units (excluding performance shares and performance units) granted by the Company under the Company's equity plans and2022, which will vest or be forfeited in fiscal years 2015, 2016 and 2017:
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| | | Shares Subject to Options | | Restricted Share Units |
| Fiscal Year | | Granted | Forfeited | | Granted | Forfeited |
| 2015 | | 76,940 | — | | 310,230 | 77,369 |
| 2016 | | 33,030 | 34,102 | | 470,428 | 116,232 |
| 2017 | | — | 3,430 | | 704,840 | 98,434 |
| Total | | 109,970 | 37,532 | | 1,485,498 | 292,035 |
From July 30, 2017 through October 16, 2017, the Company granted 561,800 restricted stock units with time-based vesting and 42,684 previously awarded time-based vesting restricted stock units were forfeited.
In addition to time-based vesting restricted stock units, the Company has granted performance-based vesting restricted stock units in each of the last three fiscal years, which were allocated as follows:
Performance units for each of our senior executives with performance criteria tied to our adjusted ROIC and adjusted EBITDA (and for the award made during fiscal 2017 to our covered officers (as defined under Section 162(m) of the Code), our diluted EPS) for fiscal years following the fiscal year in which the award was granted and that also allowed for more or less units to be earned based on the performance of our stock price as compared to a group of comparable companies or the S&P Mid Cap 400 Index for the two-year performance period.
Performance units for our Chief Executive Officer with performance criteria tied to our adjusted ROIC and adjusted EBITDA (and for the award made during fiscal 2017 to our covered officers (as defined under Section 162(m) of the Code), our diluted EPS) for the fiscal year in which the award was granted that also allowed for more or less units to be earned based on the performance of our stock price as compared to the S&P Mid Cap 400 Index for the one-year performance period. As described under "Compensation Discussion and Analysis- Fiscal 2018 Compensation Changes" elsewhere in this proxy statement, beginning in September 2017, the Compensation Committee determined to eliminate these one-year performance units from our Chief Executive Officer's equity awards.
A special performance unit award to certain executives in September 2016 with performance criteria tied to our adjusted ROIC and adjusted EBITDA, (and for the award made to our covered officers (as defined under Section 162(m) of the Code), diluted EPS) for the fiscal year in which the award was granted that also allowed for more or less units to be earned based on the performance of our stock price as compared the S&P Mid Cap 400 Index for the one-year performance period, which awards replaced two-year performance period awards granted to our executive officers in September 2015 that were forfeited.
A special performance unit retention award to our Chief Operating Officer in October 2016 with performance criteria tied to our diluted EPS, net sales, and adjusted EBITDA that vests in tranches based on three separate performance periods; (i) fiscal 2017, (ii) fiscal 2018, and (iii) the cumulative two-year period ending July 28, 2018.
A special performance unit retention award to our Chief Executive Officer in October 2016 with performance criteria tied to our diluted EPS, net sales, and adjusted EBITDA that vests in tranches based on four separate performance periods; (i) fiscal 2017, (ii) fiscal 2018, (iii) fiscal 2019, and (iv) the cumulative three-year period ending August 3, 2019.
The following table sets forth information related to the performance-based vesting restricted stock unit awards with two-year performance periods granted under the Original Plan and the Original Amended and Restated Plan in each of fiscal years 2015, 2016, and 2017 and the portion of those awards that vested or was forfeited following completion of the applicable performance period:
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| Grant Date | Performance Period | Performance Awards Granted at Target Level of Performance (# of shares) | Performance Awards Vested (# of shares) | Performance Awards Forfeited (as a % of total award) |
| September 19, 2014 | August 3, 2014 - July 30, 2016 | 49,205 (1) | — | 100% |
| September 17, 2015 | August 2, 2015 - July 29, 2017 | 72,090 | — | 100% |
| September 21, 2016 | August 1, 2016 - July 28, 2018 | 99,790 | N/A (2)(3) | N/A (2)(3) |
| October 27, 2016 | July 30, 2017 - July 28, 2018 | 67,500 | N/A (2)(4) | N/A (2)(4) |
| October 27, 2016 | July 29, 2018 - August 3, 2019 | 50,000 | N/A (2)(4) | N/A (2)(4) |
| October 27, 2016 | August 1, 2016 - July 28, 2018 | 10,000 | N/A (2)(4) | N/A (2)(4) |
| October 27, 2016 | August 1, 2016 - August 3, 2019 | 25,000 | N/A (2)(4) | N/A (2)(4) |
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(1) | Performance awards were denominated in dollars at grant and the number of shares was calculated using the stock price on the grant date. |
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(2) | The performance period for these awards are still in process. Accordingly, the Company cannot calculate the number of shares that will be issued if the units vest. |
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(3) | The recipient may be entitled to earn up to 200% of the target level award based on outstanding Company performance, plus an additional 10% based on the Company's stock price performance over the two-year performance period as compared to the S&P Mid Cap 400 Index. |
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(4) | The recipient may be entitled to earn up to 120% of the target level award based on outstanding Company performance. |
The following table sets forth information related to the performance-based vesting restricted stock unit awards granted under the Original Plan and the Original Amended and Restated Plan (with one-year performance periods in each of fiscal years 2015, 2016, and 2017 and the portion of those awards that vested or were forfeited following completion of the applicable one-year performance period:
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| Grant Date | Performance Period | Performance Awards Granted at Target Level of Performance (# of shares) | Performance Awards Vested (# of shares) | Performance Awards Forfeited (as a % of total award) |
| September 19, 2014 | August 3, 2014 - August 1, 2015 | 23,238 | — | 100% |
| September 17, 2015 | August 2, 2015 - July 30, 2016 | 29,115 | — | 100% |
| September 21, 2016 (1) | July 31, 2016 - July 29, 2017 | 77,452 | 77,838 | None |
| October 27, 2016 (2) | July 31, 2016 - July 29, 2017 | 67,500 | 72,558 | None |
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(1) | On September 21, 2016, 77,452 performance units were granted to certain of our executive officers at target levels of performance (with vesting of more or less units possible based on actual performance) and the performance of the Company's stock price when compared to the S&P Mid Cap 400 Index) measured against certain adjusted EBITDA, adjusted ROIC and for our covered officers (as defined in Section 162(m) of the Code) diluted EPS performance targets for fiscal 2017. Based upon the performance against the applicable performance targets, 77,838 of these performance units vested on September 26, 2017 and were converted into a like number of shares of Company common stock. |
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(2) | On October 27, 2016, 67,500 performance units were granted to our Chief Executive Officer and Chief Operating Officer at target levels of performance (with vesting of more or less units possible based on actual performance) measured against certain diluted EPS, net sales and adjusted EBITDA targets. Based upon the performance against the applicable performance targets, 72,558 of these performance units vested on September 26, 2017, 49,213 of which were converted into a like number of shares of Company common stock that were issued to these individuals on September 26, 2017 and 23,345 of which were converted into a like number of shares of Company stock, that will not actually be paid to our Chief Executive Officer until the termination of his employment, or, if earlier, upon consummation of a change in control of the Company. |
In addition to the above-described performance units, from July 30, 2017 through October 16, 2017, the Company granted 109,100 performance units (at target level of performance) withcompany performance metrics tied to our adjusted ROIC, adjusted EBITDA,pre-established financial metrics over three-year performance periods (fiscal 2021-2023, fiscal 2022-2024 and for our covered officers (as defined in Section 162(m)fiscal 2023-2025, respectively). The number of the Code), diluted EPS for fiscal 2019, whichshares issued upon vesting may be adjusted upwardhigher or downwardlower than target depending on our performance during the relevant measurement period, subject to further adjustment based on Relative TSR. For more information about these performance awards, see “Executive Compensation-Compensation Discussion and Analysis-Long Term Equity-Based Incentive Program”.
For more information concerning the Company's actual performance and on how our common stock price performs relative togrants made by the S&P Mid Cap 400 Index over the two-year performance period.
There have been no performance units grantedCompany in fiscal 2018,2020 through October 16, 2017, that have a performance period that is less than one full fiscal year.2022, see “Historical Grants and Share Usage” below.
In determiningWe are asking stockholders to adoptapprove the Second Amended and Restated Plan, so that we can effectively maintain the vital equity component of our compensation program going forward. Our equity compensation program, which furthers our executive compensation philosophy, provides our executives and non-executive employees with an incentive to deliver our long-term strategic objectives. In addition, we believe these awards allow us to attract, retain and reward key employees and directors and to align the interests of our employees with those of our stockholders over the long term.
Our Board recognizes the impact of dilution on stockholders and believes that it has prudently managed equity awards, giving proper consideration to the dilutive impact of stock awards on stockholder equity. Recently, our Board approved a share repurchase program, which will give us the opportunity to partially offset dilution. Our Compensation Committee reviews benchmark data in setting equity compensation levels and believes that grant amounts to our executive officers and other employees are sufficiently competitive to attract and retain top talent while remaining consistent with market levels of equity compensation.
Total dilution after giving effect to the proposed amendment would be 19.0%. We calculated our dilution rate as the sum of grants outstanding and shares available for future awards (numerator) divided by basic common shares outstanding, in each case as of November 14, 2022.
Our total number of outstanding shares is significantly lower than that of other companies of similar size, as measured by revenues. In fact, as of the end of fiscal 2022, our outstanding share count was approximately 43% of the median number of the outstanding shares most recently reported of the Comparator Group of wholesale distribution companies with similar revenues that we use for benchmarking executive compensation. Assuming a normalized number of outstanding shares given the industry benchmarks just described, our total dilution would be 6.2%. Unless we can offer comparable packages of equity compensation, we will be at a disadvantage when competing for executive talent with companies with operations similar to ours in size and complexity, and we will be required to replace the equity award mix with cash-based incentives, which may not represent the same level of alignment with the interests of stockholders as equity awards. As our stock price has increased, we have maintained disciplined equity grant practices, which is evidenced by the normalized dilution discussed above and a 79% decrease in shares granted from fiscal 2020 to fiscal 2022. Further, we do not sell shares withheld to cover taxes, and do not recycle these as available shares. Accordingly, actual dilution upon vesting of outstanding awards is less than reflected above.
The 1,580,981 shares remaining available under the Amended and Restated 2020 Equity Incentive Plan and recommend the Second Amended and Restated Equity Incentive Plan for stockholder approval, the Board considered various factors, including the following:
As of October 16, 2017, assuming all outstanding performance share units vest at 100% of target performance, approximately 758,735 shares remain available for grant under the Original Amended and Restated Plan with 118,247 “full-value” awards available for issuance. Based on historical usage, the current share price of our common stock and expected practices (including the Compensation Committee's recent practice ofmay not granting stock options as part of our equity incentive program), and noting that future circumstances may require the Companybe sufficient to make changesallow us to its expected practices, the Company estimates that the existing shares available for grant as full value awards under the Original Amended and Restated Plan would be sufficientcontinue to make equity grants (and settle previously issued performance-based equity awards)to our employees and directors. If stockholders do not approve this request for onlyadditional authorized shares, our ability to grant new equity-based compensation, and thus attract and retain valuable employees, would be significantly diminished, and retention of key employees is vital to achieving our business strategy. We believe that it is in the remainderbest interests of fiscal 2018.
If the Second Amended and Restated Equity Incentive Plan is approved, the Company would have 2,500,000 additional shares authorizedour stockholders for issuance for future awards under the plan, with all of them available for issuance as full value awards.
The additional sharesour leadership to be authorized for grant under the Second Amendedstockholders and Restated Equity Incentive Plan wouldto be dilutive to stockholders by 5.4% based on the outstandingcompensated in shares as of October 16, 2017.
Based on historical usage and current share price of our common stock,stock. We strive to align our executive compensation packages to market, with the Company estimatesresult that the additional 2,500,000 shares to be authorized for grant under the Second Amended and Restated Equity Incentive Plan, if approved by the Company’s stockholders, should be sufficient for the Company to make equity grants for approximately the next 3 years, assuming the Company continues to grant awards consistent with its historical usage (excluding one-time, special awards) and expected practices, and noting that future circumstances may require us to make changes toa significant
portion of our expected practices.
The Company’s stock price performance and certain special retention awards that we deemed importantexecutive officers’ total pay opportunities are in order to retain and align key talent with our long-term strategy were not contemplated at the time of stockholder approvalequity-based incentives: 60% of the Original Amendedtotal opportunity for our CEO, and Restated Plan causedan average of 52% for our other NEOs. We generally grant equity awards to employees at and above the Company to usedirector level, because the shares reserved for issuance underperformance of employees at that level and above has the Original Amended and Restated Plan more quickly than the Board had anticipated at the time the Original Amended and Restated Plan was submitted to the Company’s stockholders for their approval.
The Compensation Committee’s decision to transition away from the use of stock options as a partmost direct impact on achievement of the Company’s corelong-term strategic goals. Grants to associates other than executive officers represented 69% of the total equity dollars in fiscal 2022. To continue our long-term incentive program, has caused a significant number ofif we do not have sufficient shares remaining available, for issuancewe may be required to issue cash-based awards which, as mentioned above, would be less favorable to stockholders. For information about grants made under the Original Amendedour equity plans, see “Historical Grants and Restated Plan to likely go unused as stock options are not expected to be used in a meaningful amount in the foreseeable future.
Summary of the Second Amended and Restated 2020 Equity Incentive Plan
The following summary of the material terms of the Second Amended and Restated Equity Incentive Plan is qualified in its entirety by reference to the complete text of the Second Amended and Restated Equity Incentive Plan, as proposed to be amended, as set forth in AppendixAnnex A to this proxy statement. You should read the complete text of the Second Amended and Restated Equity Incentive Plan for more details regarding the operation of the Second Amended and Restated Equity Incentive Plan.
PurposePlan. Capitalized terms used but not defined in this section shall have the meaning ascribed to such term in the Second Amended and Restated Plan.
Purpose
The purpose of the Second Amended and Restated Equity Incentive Plan is to promote our interests and those of our stockholders by attracting and retaining key officers, employees, directors and consultants; motivating such individuals by means of performance-related incentives to achieve long-range performance goals; enabling such individuals to participate in our long-term growth and financial success; encouraging ownership of our stock by such individuals; and linking their compensation to our long-term interests and those of our stockholders.
Administration.
The Second Amended and Restated Equity Incentive Plan willmust be administered by a committee composed of at least two "non-employee“non-employee directors,"” within the meaning of Section 16 of the Exchange Act, and Rule 16b-3l 6b-3 thereunder, each of whom will be an "outside director" for purposes of Section 162(m) of the Code and "independent"“independent” within the meaning of NASDAQthe NYSE listing rulesstandards and the rules and regulations of the SEC. The Board has appointed the full Compensation Committee to serve as the administrator of the Second Amended and Restated Equity Incentive Plan. The Compensation Committee will determinedetermines eligibility for and designatedesignates participants of the Second Amended and Restated Equity Incentive Plan, determinePlan; determines the
type and amountnumber of awards to be granted, determinegranted; determines the timing, terms and conditions of any award,award; and makemakes other determinations as provided in the Second Amended and Restated Equity Incentive Plan. All decisions and interpretations made by the Compensation Committee with respect to the Second Amended and Restated Equity Incentive Plan will be binding on us and participants. Subject to certain limitations under the Second Amended and Restated Equity Incentive Plan, the Compensation Committee may delegate its authority to our officers or managers to grant, modify or cancel awards, other than with respect to participants who are subject to Section 16 of the Exchange Act.Act; any resolution delegating such authority shall specify the maximum amount that may be granted under such delegated authority.
Prohibition on Repricing without Stockholder Approval
. The Second Amended and Restated Equity Incentive Plan provides that, without the approval of our stockholders, the Compensation Committee may not lower the option price of a stock option after it is granted, lower the grant price of a SAR after it is granted, cancel a stock option in exchange for a replacement stock option or SAR with a lower exercise price or grant price when the option price exceeds the fair market value of the underlying shares (other than in certain limited situations involving a changeChange in control) and grant substitute options atControl), cancel a SAR in exchange for a replacement stock option or SAR with a lower optionexercise price than the canceled option, cancel a SARor grant price when the grant price exceeds the fair market value of the underlying shares (other than in certain limited situations involving a changeChange in control) and grant substitute SARs with a lower grant price than the canceled SARs, Control), or take any action with respect to a stock option or SAR that would be treated as a repricing under the rules and regulations of the principal securities exchange on which shares of our common stock are traded.
Minimum Vesting Period
. Except for Substitute Awards, as determined by the Compensation Committee following the grant of an Award in connection with the death, disability or retirement(as defined in Section 409A of the Code) of the Participant, or in the event of a Change in Control or Separation from Service without Cause, Awards granted hereunder shall have a Vesting Period of not less than one (1) year from the date of grant; grant; provided, that the Compensation Committee under the Second Amended and Restated Plan has the discretion to waive this requirement with respect to an Award at the time of granting such Award so long as the total number of Shares that are issued under this Plan pursuant to Awards having an originally stated Vesting Period of less than one year from the date of grant (or, in the case of vesting of Performance Awards or other Awards the vesting of which is subject to the achievement of performance-based objectives, over a period of less than one year measured from the commencement of the period over which performance is evaluated) shall not exceed 5% of the Share Reserve.share reserve.
Eligible Participants
. Any current or prospective officer, employee, director or consultant of ours or one of our subsidiaries is eligible to be designated as a participant by the Compensation Committee. Committee. However, the granting, vesting and exercise of an award to a prospective employee, director or consultant are conditioned upon such individual attaining such status. status. The Board must approve awards to directors thatwho are not also employees of ours. ours. As of October 16, 2017, November 14, 2022, approximately 223526 employees 6and 10 non-employee directors and an indeterminate numberof consultants would behave been eligible to participate in the Second Amended and Restated Equity Incentive Plan.Plan if such plan was effective.
Shares Subject to the Second Amended and Restated 2020 Equity Incentive Plan
. The maximum number of shares of our common stock that may be issued pursuant to awards under the Second Amended and Restated Equity Incentive Plan following its approval by the stockholders shall not exceed the sum of (i) 2,500,000 Shares,is expected to be 11,030,163 shares(Authorized Shares). This represents 5,000,000 additional shares, plus (ii) 758,735, the number of shares remaining available for grant under the Original Amended and Restatedexisting Plan as of the end of2023 annual meeting, including shares that are expected to be forfeited and returned to the day that the Second Amended and Restated Equity Incentiveexisting Plan was approved by the Board. As described above, although 758,735 shares remained available for issuance under the Original Amended and Restated Plan as of October 16, 2017, only 118,247 of these shares remain available for issuance as full-value awards and a portion of those sharessuch time. The actual number may be required to be issued in settlement of performance-based vesting restricted stock unit awards outstanding but unvested as ofhigher or lower depending on actual grants and forfeitures made after the date hereof. record date.The maximum number of new awards that we may issue as restricted shares or , restricted share units (i.e.or performance share units (i.e., full-value awards) ifis equal to the Second Amended and Restated Equity Incentive Plan is 2,618,247 plus any earlier awardsnumber of full-value awards issued under the Original Plan or the Original Amended and Restated Plan that expire, terminate, are settled in cash, are forfeited or canceled for any reason without the delivery of shares. Authorized Shares. The maximum number of shares with respect to which incentive stock options may be granted under the Second Amended and Restated Equity Incentive Plan is 250,000. 1,000,000. Each share issued pursuant to an award will reduce the share reserve by one share. share. If any award granted under the Second Amended and Restated Equity Incentive Plan, the Original Plan or the Original Amended and RestatedPrior Plan expires, terminates, is settled in cash (in whole or in part, including, except with respect to shares utilized to cover tax withholding) or otherwise is forfeited or canceled for any reason without the delivery of shares, the shares no longer subject to such award will again be available for awards under the Second Amended and Restated Equity Incentive Plan. Plan. Notwithstanding the foregoing, if a stock option or SAR is exercised, in whole or in part, by tender or withholding of shares or if our tax withholding obligation for any award under the Second Amended and Restated Equity Incentive Plan is satisfied by the tender or withholding shares, the number of shares deemed to have been issued under the Second Amended and Restated Equity Incentive Plan will be the number of shares that were subject to the award or portion thereof and not the net number of shares actually issued. issued. SARs to be settled in shares will be counted in full against the number of shares reserved regardless of the number of shares issued in settlement of the SAR. The number of shares subject to the Second Amended and Restated Equity Incentive Plan may be adjusted in the event of certain changes in our capital structure.structure.
Per Participant Limitations
Limitations on Awards to Covered Employees. With respect to any individual who was in the prior year or is reasonably expected to be in the current year a "covered employee" within the meaning of Section 162(m) of the Code, theThe maximum number of shares in respect of which stock optionsoption and SARs (taken together)that may be granted in any fiscal yearto a participant under the Second Amended and Restated Equity Incentive Plan for any fiscal year is 150,000, the900,000. The grant date maximum numbervalue of restricted shares in respect of which all, RSUs and performance awards denominated in shares that may be granted in any fiscal year under the Second Amended and Restated Equity Incentive Plan is 125,000, and the maximum amount of all performance awards that are settled in cash and that may be grantedto one individual in any fiscal year under the Second Amended and
Restated Equity Incentive Plan is $2,500,000. The individual "covered employee"$10,000,000. These limitations are cumulative; that is, cumulative. In other words, to the extent that shares of common stock or cash for which awards are permitted to be granted to sucha participant during a fiscal year are not covered by an award to such participant in that fiscal year (such shortfall, the “Shortfall Amount”), the number of shares of common stock (or amount of cash, as the case may be) available for awards to such participant will automatically increase in the subsequent fiscal years during the term of the Second Amended and Restated Equity Incentive Plan until used.the earlier of the time the Shortfall Amount has been granted to the participant, or the end of the third fiscal year following the year to which such Shortfall Amount relates (determined on a “first-in-first-out”basis). The aggregate grant date fair value of equity grants to any non-employee director in any calendar year plus the total cash compensation paid to such director for services rendered for such calendar year may not exceed $800,000.
Terms and Conditions of Awards
. The Second Amended and Restated Equity Incentive Plan permits the grant of stock options, SARs, restricted shares, restricted share units, performance awards (including performance shares and performance units), and other stock-based awards. awards. Stock options granted under the Second Amended and Restated Equity Incentive Plan may be either incentive stock options complying with Section 422 of the Code or nonqualified stock options. options. Incentive stock options may be granted only to employees. employees. All other awards may be granted to current or prospective officers, employees, directors and consultants. consultants. All awards under the Second Amended and Restated Equity Incentive Plan must be evidenced by an award agreement that may specifyspecifying the terms and conditions of the award and any rules applicable thereto.thereto.
Stock Options. A stock option represents the right to purchase a specified number of shares during a specified period of up to ten years. years. The award agreement will set forth the number of shares subject to the stock options, the option price, and the conditions and limitations applicable to the exercise of the stock options as determined by the Compensation Committee. Committee. The option price of stock options may not be less than the fair market value on the date that such stock options are deemed to be granted under the Second Amended and Restated Equity Incentive Plan. Plan. With respect to incentive stock options, the terms and conditions of such stock options will be subject to and comply with Section 422 of the Code. Code. To the extent that the aggregate fair market value (determined at the time the incentive stock option is granted) of the shares with respect to which all incentive stock options are exercisable for the first time by an employee during any calendar year exceeds $100,000, $100,000, or if and to the extent stock options fail to qualify as incentive stock options for any other reason, such stock options will constitute non-qualified stock options. options. Incentive stock
options may not be granted to any individual who, at the time of grant owns stock possessing more than 10% of the total combined voting power of all of our outstanding common stock or any of our subsidiaries, unless the exercise price is not less than 110% 110% of the fair market value of the common stock on the date of the grant and the exercise of such option is prohibited by its terms after the expiration of five years from the date of grant of such option.option.
SARsSARs. Unless otherwise set forth in the award agreement, award agreement, SARs represent the right to receive anan amount of cash equal, or shares of common stock having a value equal, to the increase in the fair market valuevalue of a specified number of shares between the grant date of the SARs and the date on which they are exercised. are exercised. The award agreement will set forth the number of shares subject to the award, the grant price, and the conditions and limitations applicable to the exercise of the SARs as determined by the Compensation Committee. Committee. The grant price of SARs may not be less than the fair market value on the date that such SARs are deemed to be granted under the Second Amended and Restated Equity Incentive Plan.Plan.
RestrictedRestricted Shares. The award agreement for restricted shares will set forth the number of shares subject to the award, the period during which, and the conditions under which, the restricted shares may be forfeited to us, and the other terms and conditions of the award. award. Restricted shares may not be sold, transferred, or otherwise encumbered or disposed of until the expiration of the restricted period and the fulfillment of any other conditions to the award. award. The award agreement will set forth a period of time during which the participant must remain in the continuous employment (or other service-providing capacity) for the forfeiture and transfer restrictions to lapse.lapse. If provided in the award agreement, an award will continue to vest and be exercisable after retirement. Unless otherwise provided in the award agreement, the participant receiving restricted shares will have the right to vote such shares and receive dividends, but any dividends paid on unvested shares of restricted stock will be escrowed and not paid to the participant until the shares of restricted stock on which the dividends were paid vest, and the participant will forfeit any dividends paid on restricted shares that are later forfeited by the participant. At the end of the restricted period and provided that any other restrictive conditions of the award are met, a stock certificate will be delivered to the participant free of the restricted stock legend (or restrictions on book-entry shares will be removed).
RestrictedRestricted Share Units. Each restricted share unitRSU will have a value equal to the fair market value of a share on the date such restricted share units are deemed to beRSU granted under the Second Amended and Restated Equity Incentive Plan. Restricted share unitsPlan. RSUs may be paid in cash, shares, other securities or property (as determined by the Compensation Committee) upon the lapse of restrictions applicable to the award and otherwise in accordance with the award agreement. Restricted share unitsRSUs will be subject to transfer restrictions similar to those of restricted shares, except that no shares are awarded to a participant who is granted restricted share unitsRSUs on the date of grant, and such participant will have no rights of a stockholder with respect to the restricted share unitsRSUs until the restrictions set forth in the award agreement lapse. lapse. The award agreement for restricted share unitsRSUs will set forth the number of shares subject to the award, the period during which, and the conditions under which, the restricted shares unitsRSUs may be forfeited to us, and the other terms and conditions of the award. award. The award agreement will set forth a period of time during which the participant must remain in the continuous employment (or other service-providing capacity) for the forfeiture and transfer restrictions to lapse. lapse. The award agreement may also set forth performance or other conditions (including, but not limited to, performance goals based on the criteria listed in the Second Amended and Restated Equity Incentive Plan) that will subject the shares to forfeiture and transfer restrictions. The award agreement will specify whether restricted share units entitle the participant to dividend equivalent rights at the time of payment of dividends to our stockholders, but such dividend equivalentrestrictions
rights shall not be payable to the participant until fulfillment of any restrictive condition set forth in the applicable award agreement and only dividend equivalent rights with respect to restricted share units for which the restrictive conditions shall not be fulfilled shall be forfeited by the participant. . Unless otherwise determined by the Compensation Committee or as provided in the award agreement, all of the restricted share unitsRSUs (and any dividend equivalent rights with respect thereto) will terminate unless the participant remains in continuous employment for the entire restricted period and unless the other restrictive conditions of the award are met.
Performance AwardsAward. . The Compensation Committee may grant performance awards, which will consist of a right that is denominated in cash or shares (including but not limited to restricted shares and restricted share units), valued, as determined by the Compensation Committee, in accordance with the achievement of such performance goals during such performance periods as the Compensation Committee may establish, and payable at such time and in such form as the Compensation Committee shall determine. determines. Subject to the terms of the Second Amended and Restated Equity Incentive Plan and any applicable award agreement, the Compensation Committee will determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any performance award and the amount and kind of any payment or transfer to be made pursuant to any performance award, and may amend specific provisions of the performance award; award; however, any such amendment may not adversely affect existing performance awards made within a performance period commencing prior to implementation of the amendment. Performance awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with the procedures established by the Compensation Committee, on a deferred basis. Except as otherwise determined by the Compensation Committee at or after grant, separationbasis. Separation from service prior to the end of any performance period, other than for reasons of death, disability, retirement or disability, separation from service without cause (as defined in the Second Amended and Restated Plan), will result in the forfeiture of the performance award, and no payments will be made.made. If provided in the applicable award agreement or in accordance with any determination of the Compensation Committee, performance awards granted in the year in which retirement occurs will be pro-rated to reflect the length of service during the applicable performance period prior to retirement. Notwithstanding the foregoing, the Compensation Committee may, in its discretion, waive any performance goals and/or other terms and conditions relating to a performance award.
Awards that are granted as performance-based awards
The Compensation Committee must, in writing, select the performance goal(s) applicable to "covered officers" within the meaning of Section 162(m) ofperformance period, establish the Codevarious targets and that are intendedbonus amounts which may be earned for such performance period, and specify the relationship between performance goals and targets and the amounts to be "performance-based compensation" withinearned for such performance period. Following the meaningcompletion of Section 162(m) of the Code will be based upon the attainment ofeach performance targets related to one or more performance goals selected by period, the Compensation Committee from amongmust certify in writing whether the following: earnings beforeapplicable performance targets have been achieved and the amounts, if any one, payable for such performance period. The Compensation Committee may adjust the amount of cash or morenumber of the following: interest, taxes, depreciation, amortization and/or stock compensation; net sales; operating (or gross) income or profit; pretax income before allocation of corporate overhead and/or bonus; operating efficiencies; operating income as a percentage of net sales; return on equity, assets, capital, capital employed or investment; after tax operating income; net income; earnings or book value per share; financial ratios; cash flow(s); total sales or revenues or sales or revenues per employee; capital expenditures as a percentage of net sales; total operating expenses, or some component or combination of components of total operating expenses, as a percentage of net sales; stock price or total stockholder return, including any comparisons with stock market indices; appreciation in or maintenance of the price of the common stock or any of our publicly-traded securities; dividends; debt or cost reduction; comparisons withshares payable to take into account additional factors that it might deem relevant affecting performance metrics of peer companies; comparisons of our stock price performance to the stock price performance of peer companies; strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, meeting or reducing budgeted expenditures, attaining division, group or corporate financial goals, meeting business expansion goals (including, without limitation, developmental, strategic or manufacturing milestones of products or projects in development, execution of contracts with current or prospective customers and development of business expansion strategies) and meeting goals relating to acquisitions, joint ventures or collaborations or divestitures; economic value-added models; or any combination thereof. Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, our past performance or the past performance of any of our subsidiaries, operating units, business segments or divisions and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, stockholders' equity and/or shares outstanding, or to assets or net assets. .
The Compensation Committee may appropriately adjust any evaluation of performance under the foregoing criteria to exclude any of the following events that occurs during a performance period:period: (i) asset impairments or write-downs;write-downs, (ii) litigation or claim judgments or settlements;settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results;results, (iv) accruals for reorganization and restructuring programs;programs, (v) any termsitems that are unusual in nature or infrequently occurring (within the meaning of applicable accounting standards) and/or described in management's discussion and analysis of financial condition and results of operations appearing in ourthe Company's annual report to stockholders on Form 10-K for the applicable year;year, (vi) the effect of adverse federal, governmental or regulatory action, or delays in federal, governmental or regulatory action; oraction; (vii) any other event either not directly related to our operations or not within the reasonable control of our management.management; and (viii) any other event, condition or circumstance for which the Compensation Committee determines that an adjustment would be appropriate based on Compensation Committee guidelines, prior practice or other considerations.
Other Stock-Based AwardsOth. er Stock-Based Awards. The Compensation Committee may grant stock-based awards other than stock options, SARs, restricted shares restricted share units, , RSUsand performance awards. Such other stock-based awards will consist of an award of shares or an award denominated or payable in, or valued in whole or part by reference to, shares, and will have terms determined by the Compensation Committee to be consistent with the purposes of the Second Amended and Restated Equity Incentive Plan.
Separation from Service
. The Compensation Committee will determine the terms and conditions that will apply to any award upon a participant'sparticipant’s separation from service and may provide such terms and conditions in the award agreement or in such rules and regulations as it may prescribe. Unless provided in the award agreement, awards will fully vest on death or disability. Unless otherwise provided in the Second Amended and Restated Equity Incentive Plan
, an award agreement or by a contractualwritten employment or similar agreement between us and a participant, if a participant'sparticipant’s employment with or service to us terminates before the restrictions imposed on the award lapse, the performance goals have been satisfied or the award otherwise vests, such award will be forfeited.
Change in Controlforfeited. UnlessExcept as otherwise provided by the Compensation Committee, in an award agreement or by a contractualwritten employment agreement or similar agreement between us and a participant, if within twelve months after we obtain actual knowledge that a changeparticipant’s employment terminates prior to a Change in controlControl (as defined in the Second Amended and Restated Equity Incentive Plan) has occurred, a participant's employment with or service to us is terminated , for any reason allother than death or disability, the vesting of any unvested award will not be triggered by such termination of employment or service. Notwithstanding the foregoing, termination of employment or service without Cause or for Good Reason that takes place within four (4) months prior to a Change in Control and that is made at the behest of the acquirer or in contemplation of such Change in Control will be treated as if such termination of employment or service took place after such Change in Control provided that the change in control actually occurs.
In the case of an employee participant who is not a party to an employment agreement or separate agreement which is governing the treatment of equity awards, the following treatment will apply with respect to awards (subject to the exercise of committee discretion). Upon a qualifying Separation from Service without Cause (as defined in the Second Amended and Restated Plan), a prorated portion of outstanding awards of RSUs shall vest upon such separation and a prorated portion of outstanding PSUs shall continue to vest subject to actual performance. The remainder of RSUs and PSUs not vesting in accordance with the terms of the Second Amended and Restated Plan will be forfeited. Pursuant to the Second Amended and Restated Plan, the Compensation Committee has authority to make determinations as to the timing, conditions and acceleration of vesting of equity awards granted, including in regard to any separation of service. Additionally, such prorated vesting is subject to the participant’s execution and non-revocation of release.
The Second Amended and Restated Plan permits awards to continue to vest in retirement (defined as a termination of active employment after the participant will vest, become immediately exercisablehas attained 59 years of age and payable and haveprovided ten (10) years of service), if so provided in the award agreement. Performance awards granted in the year in which retirement takes place are pro-rated to reflect the length of the participant’s service during the applicable performance period prior to retirement. As a matter of policy, the Company expects all restrictions lifted. award agreements under the Plan to include provisions allowing for vesting through retirement.
Change in Control
In the event of a changeChange in control, Control, the successor or purchasing entity may, without the consent of any participant, either assume or continue our rights and obligations under any award outstanding immediately prior to the changeChange in controlControl or substitute for any such outstanding award a substantially equivalent award with respect to the successor'ssuccessor’s or purchasing entity'sentity's stock. The Compensation Committee may in its discretion and without the consent of any participant, determine that, upon the occurrence of a changeChange in control, Control, each or any award or a portion thereof outstanding immediately prior to the changeChange in control
Control and not previously exercised or settled will be canceled in exchange for a payment with respect to each vested share subject to such award in cash, shares, shares of a corporation or other business entity a party to the changeChange in control, Control, or other property which, in any such case, will be in an amount having a fair market value equal to the fair market value of the consideration to be paid per share in the changeChange in control, Control, reduced by the exercise or purchase price per share, if any, under such award. award.
Unless otherwise expressly provided in the award agreement, an employment agreement or other written agreement between us and a participant, or the definitive transaction agreement governing such Change in Control, in the event of a Change in Control in which the acquiror does assume or continue outstanding awards upon the Change in Control, if a participant’s employment with or service to us is terminated involuntarily for any reason other than Cause (as defined in the Second Amended and Restated Plan), or a participant terminates his or her employment or service for Good Reason (as defined in the Second Amended and Restated Plan) within twelve (12) months of such Change in Control: (a) stock options and SARs will become fully vested as of the termination date, and exercisable no later than 30 days following such termination date (or such other date permitted by Section 409A of the Code); (b) restricted shares and RSUs will become fully vested as of such termination date, and will be delivered no later than 30 days following such termination date; and (c) any then-in-progress performance awards will become fully vested at target performance levels as of such termination date, and will be delivered no later than 30 days following such termination date. Any outstanding performance awards relating to performance periods ending prior to the termination date which have been earned but not paid will become immediately payable.
Unless otherwise expressly provided in the award agreement, an employment agreement or similar written agreement with us, or the definitive transaction agreement governing such Change in Control, in the event of a Change in Control in which the acquiror does not assume or continue outstanding awards upon the Change in Control, all outstanding awards that are not assumed or continued will be treated as follows (to the extent permitted by Section 409A of the Code): (a) stock options and stock appreciation rights will become fully vested and exercisable as of date and time immediately prior to the Change in Control; (b) restricted shares and RSUs will become fully vested as of the date and time immediately prior to the Change in Control and shall settle immediately following the Change in Control; and (c) unless otherwise determined by the Compensation Committee, any performance awards relating to performance periods that have not ended as of the date of a Change in Control will automatically vest and become payable at the target level of performance.
Transferability of Awards
. Except as otherwise permitted in an award agreement or by the Compensation Committee, awards under the Second Amended and Restated Equity Incentive Plan are not transferable other than by a participant's will or the laws of descent and distribution.distribution.
Term and Amendment
. No new awardsawards may be granted under the Second Amended and Restated Equity Incentive Plan after the tenth anniversary of its adoption by the Board, October 27, 2017. effective date, which shall be January 10, 2023, subject to approval of our stockholders. The Board may amend, alter, suspend, discontinue or terminate the Second Amended and Restated Equity Incentive Plan at any time; time; however, no amendment, alteration, suspension, discontinuation or termination may be made without stockholder approval if approval is necessary to comply with any tax or regulatory requirement for which or with which the Board deems it necessary or desirable to comply.comply.
Agreement to the restrictive covenants that shall be set forth in the applicable award agreement under the Second Amended and Restated Plan, including confidentiality, non-competition, non-solicitation and cooperation, is a condition to receipt of an award. The Committee may waive any conditions or rights under, amend the terms of or alter, suspend, discontinue, cancel or terminate any award granted (including retroactively) provided that any such action does not materially or adversely affect the rights of the participant without his or her consent.
Certain Federal Income Tax Consequences
The following is a brief summary of certain Federal income tax laws in effect on the date hereof with applicability to the Second Amended and Restated Equity Incentive Plan. Plan. This summary is not intended to be exhaustive and the exact tax consequences to any participant will depend on his or her particular circumstances and other factors. factors. The Second Amended and Restated Equity Incentive Plan participants are encouraged to consult their own tax advisors with respect to any state tax consequences or particular federal tax implications of awards granted under the Second Amended and Restated Equity Incentive Plan. Plan. The Second Amended and Restated Equity Incentive Plan is not intended to be qualified under Section 401(a)40l(a) of the Code.Code.
Stock Options
Stock Options. A participant will not recognize income, and we will not be entitled to take a deduction, upon the grant of stock options. options. Upon exercising a non-qualified option, the participant generally will recognize ordinary income equal to the difference between the exercise price and fair market value of the shares acquired on the date of exercise, and we will be
entitled to a deduction for the same amount. Any ordinary income of the participant will be subject to tax withholding by us. us. We generally will have no tax consequence in connection with the later disposition of shares acquired pursuant to non-qualified stock options. options. A participant generally will not recognize income, and we will not be entitled to take a deduction, upon the exercise of an incentive stock option (except that the alternative minimum tax may apply). If shares acquired upon the exercise of an incentive stock option are held for the longer of two years from the grant date of the stock options and more than one year after the date they were exercised, the difference between the sale price and the exercise price generally will be taxed as long-term capital gain or loss, and we will not be entitled to any deduction. deduction. We generally will have no tax consequence in connection with the later disposition of shares acquired pursuant to incentive stock options if such holdings periods are met. If the participant does not satisfy these holding periods, then the participant will recognize ordinary income equal to the excess of the lesser of the amount realized upon such disposition and the fair market value of such shares on the date of exercise, over the exercise price, and we should be entitled to take a corresponding deduction.deduction.
SARs
SARs. A participant will not recognize income, and we will not be entitled to take a deduction, upon the grant of SARs. SARs. Upon exercising a SAR, the participant generally will recognize ordinary income in the amount by which the fair market value of the shares on the date of exercise exceeds the SAR exercise price, if any, and we will be entitled to a deduction for the same amount. Any ordinary income of the participant will be subject to tax withholding by us. us. Any additional gain or loss recognized upon the later disposition of the shares will be capital gain or loss, which may be long- or short-term capital gain or loss depending on the holding period. period. We generally will have no tax consequence in connection with the later disposition of shares acquired pursuant to a SAR.
Restricted Shares
. The award of restricted shares will not result in taxable income to the participant, and we will not be entitled to take a deduction, at the time of grant unless the participant makes an election under Section 83(b) of the Code to be
taxed at such time. time. If such election is not made, upon the lapse of the restrictions upon restricted shares, the participant will recognize ordinary income in the amount equal to the fair market value of the shares at the time the restricted shares vest (less any amount paid for the shares), and we will be entitled to a deduction for the same amount.
Prior to the lapse of the restrictions on restricted shares, any dividends received on such shares will be treated as ordinary income to the participant.participant. If an effective election under Section 83(b) of the Code is made within 30 days after receipt of restricted shares, , the participant will recognize ordinary income in the year that the restricted shares are awarded in an amount equal to the fair market value of the shares on the date of such awardaward determined as if the restricted shares were not subject to restrictions, and we will be entitled to a deduction for the same amount. If the election is made, the participant will not recognize income at the time that the restrictions actually lapse. lapse. Any dividends received after the election is made generally will constitute qualified dividend income. income. If the restricted shares subject to the election are subsequently forfeited, the participant will not be entitled to a deduction or tax refund. refund. Any ordinary income of the participant will be subject to tax withholding by us. us. We generally will have no tax consequence in connection with the later disposition of shares acquired pursuant to vested restricted shares.shares.
Restricted Share Units
. With respect to a grant of restricted share units, RSUs, the participant will recognize ordinary income on the amountamount of cash (for units payable in cash) or the fair market value of the common stock (for units settled in stock) at the time such payments are made availableavailable to the participantparticipant under the terms of the restricted share unitRSU award, and we will be entitled to a deduction for the same amount. The participant also is subject to capital gainsgains treatment on the subsequent sale of any shares acquired through the vestingsettlement of restricted share units.the RSU. For this purpose, the participant's basis in the common stock is his or her fair market valuevalue at the time the restricted share units become vestedRSUs are settled (unless delivery of the shares has been validlyvalidly deferred). Any ordinary income of the participantparticipant will be subject to tax withholding by us. us. We generally will have no tax consequence in connection with the later disposition of shares acquired pursuant to restricted share units.RSU. A Section 83(b) election is not available with respect to RSUs.
Performance Awards
. A participant will not recognize income, and we will not be entitled to take a deduction, upon the grant of performance awards unless the participant makes an effective election under Section 83(b) of the Code to be taxed at the time of the grant. A Section 83(b) election may not be availableavailable with respect to certain forms of performance awards. awards (e.g., those denominated as units). With respect to performance awardsawards settled in shares participants, a participant will recognize ordinary income equal to the fair market value of the shares received as the performance goals are met and such awardsawards vest or are settled (depending on the type of the award), less any amount paidamount paid by the participant for the performance awards. awards. With respect to performance awards settled in cash participants, participants will recognize ordinary income in such amount at the time the performance goals are attained, and the payments are made available to the participant. Any additional gain or loss recognized upon the later disposition of shares acquired upon the vesting of performance awards will be capital gaingain or loss, which may be long- or short-term capital gain or loss depending on the holding period. period. Unless a participant makes aan effective Section 83(b) election, the participant's
participant’s basis in the stock will be its fair market value at the time the performance goals are met and the performance awards become vested. vested or, if applicable, upon settlement of performance share units. We generally will have no tax consequence in connection with the later disposition of shares acquired pursuant to a performance award.award.
Section 162(m). Section 162(m) of the Code generally disallows a public company's tax deduction for compensation paid in excess of $1.0 million in any tax year to its chief executive officer and certain other most highly compensated executives. However, compensation that qualifies as "performance-based compensation" is excluded from this $1.0 million deduction limit and therefore remains fully deductible by the company that pays it. We generally intend that, except as otherwise determined by the Compensation Committee, performance awards and stock options granted with an exercise price at least equal to 100% of the fair market value of the underlying shares of common stock at the date of grant to employees the Compensation Committee expects to be named executive officers at the time a deduction arises in connection with such awards, will qualify as "performance-based compensation" so that these awards will not be subject to the Section 162(m) deduction limitations. The Compensation Committee will not necessarily limit executive compensation to amounts deductible under Section 162(m) of the Code, however, if such limitation is not in the best interests of us and our stockholders and the Compensation Committee may take actions that could cause compensation that was otherwise intended to qualify as “performance-based compensation” to no longer so qualify if it determines that doing so is in our best interests.Substitute Payments
Substitute Payments. Substitute payments for dividends made to participants with respect toupon the vesting of restricted shares or certain performance awards payable in our stock will be taxed as ordinary income to the participant until the shares vest. . After vesting, dividend payments may be qualified dividend income subject to a current maximum federal capital gains tax rate of 15%treatment provided that the stockholder meets certain other requirements with respect to those shares. shares. If a participant makes aan effective Section 83(b) election with respect to restricted shares or certain eligible performance awards, these payments may be qualified dividend income, provided that the other requirements are met. We recommend that participants consult with their tax advisors to determine whether such dividends are qualified dividend income.income.
Section 409A
. Section 409A of the Code provides generally generally that nonqualified deferred compensation that does not meet certaincertain requirements will subject the recipients of such compensationcompensation to accelerated taxation, accelerated taxation, enhanced underpayment interest andand an additional twenty percent tax. tax. Although we intend to administeradminister the Second Amended and Restated Equity Incentive Plan soso that awards awards will be exempt from, or will comply with, the requirementsrequirements of Section 409A of the Code, we do not warrant that any awardaward under the Second Amended and Restated Equity Incentive Plan will qualify will qualify for favorable favorable tax treatment under SectionSection 409A
of the the Code or any other provision of federal state, local, state, local or foreign law. foreign law. We will not be be liable to any any participant for any tax, interest, or penalties that such participant might owe as a resultresult of the grant, the grant, holding, vesting, exercise, or paymentpayment of any awardany award under the Second Amended and Restated Equity Incentive Plan.Plan.
New Plan Benefits
The Second Amended and Restated Plan does not provide for set benefits or amounts of awards, and we have not approved any awards that are conditioned on stockholder approval of the increase in available shares under the Second Amended and Restated Plan. Any future awards awards granted to eligible participants participants under the Second Amended and Restated Equity Incentive Plan will be subjectsubject to the discretion of the Compensation Committee and, therefore, the Compensation Committee and, therefore, thetotal number of awards thatthat will be grantedgranted under the Second Amended and Restated Equity Incentive PlanPlan is not determinable at this time.time.
Historical Grants and Share Usage
The following table displays the number of full value awards (restricted share units and performance share units) and stock options outstanding as of the last day of each of the Company’s most recently completed three fiscal years and as of November 14, 2022 as well as additional information with respect to the average exercise price and remaining term for stock options, along with the shares available for issuance under the Amended and Restated 2020 Equity Incentive or the Prior Plan as of such dates and the total number of the Company’s shares then outstanding:
| | | | | | | | | | | | | | | | | | | | |
| Fiscal Year | Options Outstanding (1) | Weighted Average Exercise Price of Stock Options | Weighted Average Remaining Term (years) | Full Value Awards Outstanding(2) | Shares Available for Issuance | Common Shares Outstanding |
| 2020 | 1,130,073 | $46.46 | 4.4 | 7,416,649 | 2,865,124 | 54,603,757 |
| 2021 | 764,310 | $49.02 | 2.2 | 6,891,764 | 3,932,349 | 56,284,144 |
| 2022 | 487,116 | $54.11 | 1.6 | 5,029,114 | 2,862,679 | 58,308,537 |
| 11/14/2022 | 426,086 | $53.59 | 1.7 | 3,473,351 | 1,580,981 | 59,902,801 |
(1)Fiscal 2020, fiscal 2021, fiscal 2022 and November 14, 2022 include 932,309, 601,662, 361,481 and 357,481 of Supervalu replacement options, respectively.
(2)Fiscal 2020 and fiscal 2021 include 301,717 and 50,514 of replacement awards issued in connection with the Supervalu acquisition, respectively, which we settled in cash upon vesting.
The following table sets forth information related to stock options and RSUs (excluding performance shares and performance units) granted by the Company under the Amended and Restated 2020 Equity Incentive Plan and the Prior Plan and forfeited in fiscal years 2020, 2021, 2022 and through November 14, 2022 for fiscal 2023:
| | | | | | | | | | | | | | |
| Fiscal Year | Option Shares Granted | Option Shares Forfeited(1) | Restricted Share Units Granted (2) | Restricted Share Units Forfeited |
| 2020 | — | 429,225 | 5,081,497 | 385,481 |
| 2021 | — | 312,461 | 2,128,307 | 350,870 |
| 2022 | — | 65,986 | 945,991 | 258,434 |
| 11/14/2022 | — | 57,030 | 1,166,283 | 63,636 |
| Total | — | 864,702 | 9,322,078 | 1,058,421 |
(1)Excludes options cancelled upon expiration of exercise period.
(2)Number of RSUs granted decreased 81% from fiscal 2020 to fiscal 2022.
The following table sets forth information related to the PSU awards granted under the Amended and Restated 2020 Equity Incentive Plan, as applicable, in fiscal 2020, 2021 and 2022, and through November 14, 2022 for fiscal 2023, and the portion of those awards that vested or were forfeited following completion of the applicable performance period (if such performance period has ended):
| | | | | | | | | | | | | | |
| Grant Date | Performance Period | Performance Awards Granted at Target Level of Performance (# of shares)(1) | Performance Awards Vested (# of shares)(2) | Performance Awards Forfeited (as a % of total award)(1)(2) |
| 12/19/2019 | Fiscal 2020 – 2022 | 977,860 | 955,511 | 2% |
| 10/12/2020 | Fiscal 2021 – 2023 | 545,054 | - | - |
| 10/12/2021 | Fiscal 2022 – 2024 | 297,588 | - | - |
| 10/6/2022 | Fiscal 2023 – 2025 | 363,040 | - | - |
(1)Excludes awards forfeited prior to vesting due to separation of service; Number of PSUs granted decreased 70% from fiscal 2020 to fiscal 2022.
(2)The performance periods for the awards granted on October 12, 2020, October 12, 2021 and October 6, 2022 are not completed.
| | | | | | | | | | | | | | |
| The Board unanimously recommends that stockholders vote “FOR” the approval of the Second Amended and Restated 2020 Equity Incentive Plan. Proxies received by the Board will be voted “FOR” the proposal unless a contrary choice is specified in the proxy. |
Other Matters
Stock Ownership of Certain Beneficial Owners and Management
This table includes information regarding the amount of our common stock beneficially owned as of November 14, 2022 by (i) each of our directors, (ii) each of our executive officers named in the “Executive Compensation Tables—Summary Compensation Table—Fiscal Years 2020-2022,” (iii) all of our current directors and executive officers as a vote “FOR” Proposal 4group and (iv) each person or entity known to approve theus to own more than 5% of our outstanding common stock.
| | | | | | | | | | | | | | |
Name and Address of Beneficial Owner(1) | | Number of Shares Beneficially Owned(2)(3) | | Percentage
Ownership |
| Directors and Named Executive Officers: | | | | |
J. Alexander Miller Douglas(4) | | 15,683 | | | ** |
| Eric F. Artz | | 50,872 | | | ** |
| Ann Torre Bates | | 11,470 | | | ** |
| Gloria R. Boyland | | 6,099 | | | ** |
| Denise M. Clark | | 57,824 | | | ** |
| Daphne J. Dufresne | | 47,542 | | | ** |
Michael S. Funk(5) | | 67,270 | | | ** |
| Shamim Mohammad | | — | | | ** |
| James L. Muehlbauer | | 72,340 | | | ** |
| Peter A. Roy | | 73,595 | | | ** |
| Jack Stahl | | 38,776 | | | ** |
| Eric A. Dorne | | 74,875 | | | ** |
| John W. Howard | | 84,083 | | | ** |
Jill E. Sutton(6) | | 18,642 | | | ** |
Michael C. Stigers(7) | | 125,449 | | | |
| Christopher P. Testa | | 114,916 | | | ** |
Steven L. Spinner(8) | | 169,965 | | | ** |
All current directors and executive officers, as a group (18 persons)(9) | | 823,022 | | | 1.4 | % |
| Other Stockholders: | | | | |
BlackRock, Inc.(10) | | 8,816,181 | | | 14.7 | % |
The Vanguard Group(11) | | 6,567,828 | | | 11.0 | % |
Dimensional Fund Advisors LP(12) | | 3,896,345 | | | 6.5 | % |
Kiltearn Partners LLP(13) | | 3,047,034 | | | 5.1 | % |
** Less than 1%
(1)The address for each listed director and executive officer is c/o United Natural Foods, Inc. Second Amended, 313 Iron Horse Way, Providence, Rhode Island 02908. The address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. The address for The Vanguard Group, Inc. is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355. The address for Dimensional Fund Advisors LP is 6300 Bee Cave Road, Building One, Austin, Texas 78746. The address for Kiltearn Partners LLP, Kiltearn Limited and Restated 2012 Equity Incentive Plan. Proxies received by the Board will be voted “FOR” the proposal unless a contrary choiceMurdoch Murchison is specified in the proxy.Exchange Place 3, 3 Semple Street, Edinburgh, United Kingdom EH3 8BL.
Securities Authorized for Issuance Under Equity Compensation Plans
The following table provides certain information with respect to equity awards under our equity compensation plans as of July 29, 2017.
|
| | | | | | | | | | | |
| Plan Category | | Number of securities to be issued upon exercise of outstanding options, warrants and rights | | Weighted-average exercise price of outstanding options | | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in the second column) | |
| Plans approved by stockholders | | 1,598,800 |
| (1) | $ | 49.52 |
| (1) | 1,389,248 |
| (2) |
| Plans not approved by stockholders | | 69,549 |
| (3) | — |
| (3) | — |
| |
| Total | | 1,668,349 |
| | $ | 49.52 |
| | 1,389,248 |
| |
| |
(1) | Includes 944,997 restricted stock units under the Original Plan and the Original Amended and Restated Plan, 252,290 performance-based vesting restricted stock units under the Original Plan and the Original Amended and Restated Plan and 130,457 stock options under the Original Plan and the Original Amended and Restated Plan, 72,824 restricted stock units under the 2004 Plan, 80,070 stock options under the 2004 Plan and 118,162 stock options under the 2002 Plan. Restricted stock units and performance stock units do not have an exercise price because their value is dependent upon continued employment over a period of time or the achievement of certain performance goals, and are to be settled for shares of common stock. Accordingly, they have been disregarded for purposes of computing the weighted-average exercise price. |
| |
(2) | All shares were available for issuance under the Original Plan and the Original Amended and Restated Plan. The Original Plan and the Original Amended and Restated Plan authorizes grants in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units or a combination thereof but includes limits on the number of awards that may be issued in the form of restricted shares or units. (2)The number of shares remaining available for future issuances assumes that, with respect to outstanding performance-based restricted stock units, the vesting criteria will be achieved at the target level. |
| |
(3) | Consists of phantom stock units outstanding under the United Natural Foods Inc. Deferred Compensation Plan. See note 11 "Retirement Plans" to our Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for the year ended July 29, 2017 for more information. Phantom stock units do not have an exercise price because the units may be settled only for shares of common stock on a one-for-one basis at a future date as outlined in the plan. |
PROPOSAL 5—ADVISORY APPROVAL OF THE FREQUENCY OF ADVISORY APPROVALS OF OUR EXECUTIVE COMPENSATION
In Proposal 3, stockholders are being asked to cast a non-binding advisory vote with respect to the compensation of the Company’s named executive officers. This advisory vote is typically referred to as a “say-on-pay” vote. In this Proposal 5, the Board of Directors is also asking stockholders to cast a non-binding advisory vote on how frequently say-on-pay votes should be held in the future.
Every six years, the Company’s stockholders have the opportunity to advise the Board of Directors as to how frequently the Company should seek an advisory vote on the compensation of the Company’s named executive officers. Section 14A of the Securities Exchange Act of 1934, as amended, requires that the stockholders vote for a frequency of every one year, every two years, every three years, or you may abstain from voting.
Stockholders last had the opportunity to vote on the frequency of the advisory votes on the compensation of the Company’s named executive officers in 2011, and stockholders voted in favor of an annual vote. In response to the stockholder vote, the Board of Directors adopted an annual “say-on-pay” vote for the past six years. Stockholders have the opportunity to vote on this matter again at the annual meeting.
This advisory vote, commonly referred to as a “say-on-frequency” advisory vote, is non-binding on the Board. Although non-binding, the Board of Directors will review the voting results and take them into consideration when making future decisions regarding the frequency with which it will submit the advisory approval of the compensation of our named executive officers to a vote of stockholders.
The frequency that receives the greatest level of support from our stockholders, represented by the shares present in person or by proxy and entitled to vote on the matter, will be approved.
The Board unanimously recommends that stockholders vote for ONE YEAR as the frequency of the advisory (non-binding) vote to approve named executive officer compensation. Proxies received by the Board will be voted for ONE YEAR unless a contrary choice is specified in the proxy.
PROPOSAL 6—STOCKHOLDER PROPOSAL REGARDING STOCKHOLDER APPROVAL OF CERTAIN FUTURE SEVERANCE AGREEMENTS
We have been advised that the Teamsters General Fund of the International Brotherhood of Teamsters, 25 Louisiana Avenue, NW, Washington, DC 20001, beneficial owner of no less than 185 shares of common stock intends to presentbeneficially owned by each stockholder is determined under SEC rules, and the following proposalinformation is not necessarily indicative of beneficial ownership for consideration at the annual meeting. The proponent’s resolution and supporting statement are quoted verbatim below. We are not responsible for the content of the proponent’s proposal or supporting statement.
Proponent’s Proposal and Supporting Statement
RESOLVED: That the shareholders of United Natural Foods, Inc. (“the Company”) urge the Board of Directors to seek shareholder approval of future severance agreements with senior executives that provide benefits in an amount exceeding 2.99 times the sum of the executives’ base salary plus bonus.
“Future severance agreements” include employment agreements containing severance provisions, special retirement provisions and agreements renewing, modifying or extending existing agreements.
“Benefits” include lump-sum cash payments (including payments in lieu of medical andany other benefits); the payment ofpurpose. Under such rules, beneficial ownership includes any “gross-up” tax liability; the estimated present value of special retirement provisions; any stock or option awards that are awarded under any severance agreement; any prior stock or option awardsshares as to which a person has sole or shared voting power or investment power and also any shares which a person has the executive’s access is accelerated underright to acquire within 60 days after November 14, 2022, through the severance agreement; fringe benefits; and consulting fees (including reimbursable expenses) to be paid tovesting and/or exercise of any equity award or other right. The inclusion herein of such shares, however, does not constitute an admission that the executive.
SUPPORTING STATEMENT
We believe that requiring shareholder ratification of “golden parachute” severance packages with a total cost exceeding 2.99 times an executive’s base salary plus bonus will provide valuable feedback, encourage restraint, and strengthen the hand of the Board’s compensation committee.
According to the Summary of Potential Payments Upon Termination or Change in Control on page 50 of the Company’s 2016 Proxy Statement, if therenamed stockholder is a changedirect or indirect beneficial owner of control and termination, the CEO will receive three times the sum of his base salary. If there had been a change of control and termination on July 30, 2016, the CEO would have received a cash severance of $3.9 million upon termination, in addition to payments for equity awards and other benefits. In the CEO’s case, he would receive a total of $6.2 million in a change in control and termination scenario.
If you agree with us that the Company should seek shareholder ratification of severance packages with a total cost exceeding 2.99 times an executive’s base salary plus bonus, then please vote for this proposal.
The Company’s Statement in Opposition to Proposal 6
The Board, with input from the relevant committees of the Board, has carefully considered the proposal submitted by the Teamsters General Fund of the International Brotherhood of Teamsters and believes that its adoption is notsuch shares. Unless otherwise indicated, each person named in the best interests of the Company or its stockholders. For the reasons discussed below, the Board opposes this stockholder proposaltable has sole voting power and unanimously recommends that stockholders vote “AGAINST” the stockholder proposal.
The Company’s current cash severance agreements are largely consistentinvestment power (or shares such power with the proposal. While the proposal addresses future severance agreements, we believe that the Company’s current severance arrangements with its senior executive officers (pursuant to which only one executive is entitled to a slightly higher payout of cash severance than the limit proposed in the stockholder proposal) demonstrate that the proposal is unnecessary in regards to cash severance payments. In particular, Mr. Spinner’s employment agreement, which the Company entered into in October 2016, provides that if Mr. Spinner’s employment is terminated by the Company without cause or by Mr. Spinner for good reason, he is entitled to receive a cash severance payment equal to two times his annual base salary and two times his target cash incentive award for the year in which his employment is terminated together with a pro rata payout of the cash incentive payment he would have been entitled to receive for the year in which his employment was terminated based on the Company’s actual performance. Similarly, pursuant to severance agreements entered into with the Company’s other senior executive officers, the executives are entitled to receive cash severance payments in amounts equal to the executive’s annual base salary if such executive’s employment is terminated by the Company without cause or by the executive for good reason.
For termination scenarios similar to those that trigger payments as described in the preceding paragraph and which occur within twelve months following a change in control of the Company, the cash severance amounts payable to the Company’s senior
executive officers under employment agreements, in the case of Mr. Spinner, and change in control agreements for the other senior executives, are equal to such executive’s annual base salary and target cash incentive award for the year in which the executive’s employment is terminated times a multiplier (ranging from 1.5 to 3). Only four executives have a multiplier greater than 1.5 and only Mr. Spinner, whose multiplier is 3, has a multiplier greater than 2.99. In addition, in such termination scenarios following a change in control, the senior executives are entitled to receive a pro rata payout of the cash incentive payment the executive would have been entitled to receive for the year in which his or her employment was terminated based on the Company’s actual performance. While in certain circumstances these payments of a prorated portion of the current year’s cash incentive plan payout opportunity may exceed the cap in the proposal when combined with the cash severance payments also payable to the executive, the Company believes such payments are appropriate because these payments are paid only for the portion of the year that the employee worked for the Company and are based on the Company’s actual performance in that year.
Therefore, the Company believes that its current cash severance arrangements with its senior executive officers are largely consistent with the proposal. For the reasons described below, the Company does not believe a cap on the value of any accelerated equity awards is appropriate.
The proposal would impose inflexible competitive disadvantages on the Company’s ability to attract and retain senior executive leadership. The Board believes that stockholder interests are best protected by providing flexibility to the Compensation Committee, which is comprised of independent directors, regarding whether, and how, to offer severance benefits to executives including benefits payable in connection with or following a change in control. Such determinations are based on an assessment of the needs of the Company, the competition for talent, advice from an independent compensation consultant and other relevant factors, including the constantly changing structure of compensation and retention programs in the marketplace. We believe that it is appropriate to provide our key executive officers with severance protections upon certain types of termination events, such as by the Company without cause, by the executive for good reason or in connection with a change in control, in order to support our compensation objective of attracting and retaining highly qualified executives. Furthermore, in the context of potential change in control situations, the Company’s equity-based awards (which are granted pursuant to plans approved by the Company’s stockholders) incentivize our senior executive officers, who may otherwise be primarily concerned about the potential termination of their employment, to remain objective, avoid conflicts of interest and stay focused on executing a strategic change that maximizes stockholder value by strengthening the alignment of their interests with those of the Company and its stockholders. By restricting the use of this important compensation tool, implementation of the proposal could materially hamper the Company’s ability to attract and retain the highest quality and most talented senior executive team.
Subjecting severance agreements to stockholder votes would impair the Company’s recruitment of highly qualified executives. Calling a special meeting of stockholders to obtain prior approval of a severance arrangement that would provide benefits in excess of the proposal’s cap would be expensive and impractical and could severely disadvantage the Company’s ability to recruit highly qualified executives. Top candidates, when informed that the terms of their compensation arrangements first require stockholder approval, would likely be unwilling to wait for such approval and may instead seek employment elsewhere, including at one of the Company’s competitors who do not face similar restrictions on their ability to offer severance protection. Even if the severance arrangement could instead be ratified by stockholders after the fact, as the proposal suggests, the potential for stockholders to reject the severance arrangement—potentially many months after entering into an agreement—would likely result in the promised severance benefits being viewed by a potential candidate as too uncertain to merit serious consideration. Delay and uncertainty would be injected into the hiring process, disadvantaging the Company in its efforts to recruit and retain the best available executive talent. Given these risks, the Board believes that the interests of stockholders are best served by providing flexibility to the Compensation Committee, which consists solely of independent directors (and which receives guidance and advice from an independent compensation consultant), to design severance packages for potential executive candidates.
Implementation of the proposal could force the Company to fundamentally change its executive compensation program by severely limiting the use of equity-based awards. The Company’s executive compensation program is comprised of three primary elements - base salary, annual cash incentive plan opportunity and long-term equity-based awards, which in recent years have been split between time-based vesting restricted stock units and performance-based vesting restricted stock units. In Mr. Spinner’s case, historically over sixty percent of his annual compensation at target level performance has been awarded in the form of equity-based awards. For our other senior executive officers, equity-based compensation typically makes up between 40% and 50% of their total target compensation opportunity for a year. Much of our senior executive officers’ equity-based compensation vests over multiple years of service, with a significant percentage of these executive’s annual awards typically vesting based on Company performance.
Because a significant percentage of the Company’s senior executive officers’ compensation is equity-based, it would not be practical simply to avoid stockholder approval by entering into severance arrangements for amounts less than the proposal’s 2.99x cap because the benefits covered by the proposal include not only cash severance but also the value of equity awards that are accelerated upon a severance event. The primary effect of the proposal, if adopted by the Company, would be to limit the
Company’s ability to accelerate the vesting of equity under future change of control agreements or equity awards. The Company structured Mr. Spinner’s employment agreement and its other senior executive officers’ change of control agreements, which are guided by the Company’s governance practices and policies (e.g., “double trigger” change of control provisions, no tax gross-ups), to be well-aligned with those of the Company’s peers. Mr. Spinner’s employment agreement and the Company’s other senior executive officers’ change of control agreements provide for acceleration of the vesting of equity under a “double trigger” change of control provision—the occurrence of a change in control and a certain types of terminations within a specified period following such change in control, and, in Mr. Spinner’s case, if he is terminated by the Company without cause or he terminates his employment for good reason, in either case prior to a change in control. Under the Original Amended and Restated Plan, which was approved by the Company’s stockholders, as noted below, the Company’s equity awards may accelerate in the Compensation Committee’s discretion upon a change of control and automatically accelerate, absent the Compensation Committee determining otherwise, upon the termination of an employee’s employment within twelve months following a change in control.
The Board believes that its current practice of using the acceleration of vesting of equity awards in certain circumstances is appropriate and in the best interest of the Company and its stockholders as it is consistent with the practices of numerous publicly traded companies, including many of those with whom we compete for talent and against whom we evaluate our performance. In practice, the proposal would severely restrict the Company’s ability to issue such awards, because including the value of accelerated equity awards with other fixed severance payments would very likely exceed the proposal’s cap. In order to implement the proposal and remain competitive in attracting and retaining highly qualified executives, we believe that we may need to fundamentally restructure the Company’s executive compensation program to either significantly reduce the role of equity-based awards or remove vesting requirements for such equity-based pay. The Company’s equity-based awards, including the allocation of annual grants between time-based vesting and performance-based vesting awards, as well as the awards’ vesting requirements, support the achievement of our business strategies and goals in a manner that is consistent with the pay-for-performance philosophy favored by the Board and the Compensation Committee and aid in the motivation and retention of our executive leadership.
Stockholders endorse the Company’s compensation program. The compensation of our named executive officers was approved by holders of approximately 97% and 93% of the votes cast at the two most recent annual meetings of stockholders, respectively. In addition, approximately 90% of the holders of votes cast approved the amendment and restatement of the Company’s Original Amended and Restated Plan in 2015, which plan includes as a component thereof a provision that provides for the accelerated vesting of equity-based awards in the event that an employee’s employment ends within twelve months following a change in control. The Company’s stockholders have repeatedly endorsed the Company’s compensation program by wide margins. Moreover, the Board believes that our stockholders have had, and will continue to have, the opportunity to provide holistic feedback on our compensation practices. The Company holds annual votes on the Company’s executive compensation program. SEC rules further require separate approval of golden parachute compensation agreements or understandings payable to named executive officers in connection with a sale, merger or related transaction. The Company also provides other avenues of communication to the Company’s management and Board. These avenues of communication, along with the annual say-on-pay votes, are the most effective method of providing stockholders with a voice in the Company’s executive compensation program. Requiring additional stockholder approval of specific elements of the Company’s compensation program is unlikely to provide stockholders with more effective input and carries the risk of jeopardizing the Company’s ability to attract and retain highly qualified candidates.
The broad and unclear language of the proposal could impact a variety of payments to senior executives. The proposal is extraordinarily broad and unclear, purporting to address “severance” payments. A careful reading of the proposal, however, shows that the proposal as written actually impacts much more. Because the payments covered by the proposal do not exclude retirement plan payments, deferred compensation plans, disability benefits, death benefits and other benefits payable at retirement or termination for any other reason, whether or not they were earned and vested prior to the executive’s termination of employment, all of these may be captured by the proposal. Because these amounts could be aggregated in determining whether the payments exceeded the limits of the proposal, it could have the effect of prohibiting payments that are made in connection with a retirement or other termination, whether the amounts were previously earned and vested including, for example, the payment of a death benefit or vested retirement plan payments.Moreover, the Company already has a formal policy under which it may not enter into new or amended agreements which provide for “gross ups” for excise tax obligations payable by the Company’s executives upon termination of employment following a change in control. The proposal is also unclearspouse) with respect to the scope of individuals it purports to cover, as “senior executive” is not a group identified by the proponent or the Company.
The Board unanimously recommends that stockholders vote “AGAINST” this stockholder proposal. Proxies received by the Board will be voted “AGAINST” the proposal unless a contrary choice is specified in the proxy.
PROPOSAL 7—STOCKHOLDER PROPOSAL REGARDING A DECREASE TO THE OWNERSHIP THRESHOLD FOR STOCKHOLDERS TO CALL A SPECIAL STOCKHOLDER MEETING
We have been advised that James McRitchie and Myra K. Young, 9295 Yorkship Court, Elk Grove, California 95758, beneficial owners of no less than 300all shares of common stock acting through their designated agent, John Chevedden, 2215 Nelson Ave., No. 205, Redondo Beach, California 90278, intend to presentlisted as owned by such person.
(3)The shares of common stock shown in the table include the following proposal for consideration atnumbers of shares that are issuable upon the annual meeting. The proponents’ resolutionexercise of stock options and supporting statementthat are quoted verbatim below. We are not responsible for the content of the proponents' proposal or supporting statement.
Proponent’s Proposalexercisable within 60 days after November 14, 2022: Mr. Dorne—8,910; Mr. Testa—7,310; and Supporting Statement
ITEM 7 - Special Shareholder Meetings
RESOLVED:
Mr. Stigers—23,427. All directors and executive officers as a group—39,647.
The shareholdersshares of United Natural Foods Inc. (UNFI) ('Company') hereby request that the Board of Directors take the steps necessary to amend our bylaws and each appropriate governing document to give holderscommon stock shown in the aggregatetable do not include any shares issuable pursuant to restricted stock units, as no restricted stock units will vest within 60 days after November 14, 2022.
(4)Includes 600 shares held by Mr. Douglas’s spouse.
(5)Includes 100 shares held by a minor child.
(6)Ms. Sutton left the Company in December 2021. The number of our outstanding common stockshares is based on information disclosed in Ms. Sutton’s director and officer questionnaire, which she completed in August 2022, and the power to callCompany’s record of PSUs that vested and were delivered on October 6, 2022.
(7)Includes 10,000 shares held by a special shareowner meeting. This proposal does not impact our board's current power to call a special meeting.revocable family trust.
SUPPORTING STATEMENT:
Delaware law allows 10% of company shares to call a special meeting. A shareholder right to call a special meeting is a way to bring an important matter to the attention of both management(8)Mr. Spinner retired from his position as CEO and shareholders outside the annual meeting cycle. This is important because there could be 15-months between annual meetings.
A shareholder right to act by written consent and to call a special meeting are two complimentary ways to bring an important matter to the attention of both management and shareholders outside the annual meeting cycle. Both are associated with increased governance quality and shareholder value. Our Company offers no right of shareholders to act by written consent. Additionally, the relative dependency on sales to Whole Foods Market leaves our Company more vulnerable to possible changes.
Currently, more than 70% of the companies in the S&P 500 have adopted company bylaws, articles of incorporation, or charter provisions to allow shareholders to call a special meeting.
This proposal topic won more than 50% support at The Western Union Company and Ryder Systems, Inc., in 2017. It may be possible to adopt this proposal by simply incorporating text similar to the following into our governing documents:
"Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the ChairmanChair of the Board or the President,effective August 9, 2021. The number of shares is based on information disclosed in Mr. Spinner’s director and shall be called by the Chairman of the Board or President or Secretary upon the orderofficer questionnaire, which he completed in writing of a majority of or by resolution of the Board of Directors, or at the request in writing of stockholders owning 15% of the entire capital stock of the Corporation issued and outstanding and entitled to vote."
We urge the Board to join the mainstream of major U.S. companies and establish a right for shareholders owning 15% of our outstanding common stock to call a special meeting.
Please vote for: Special Shareowner Meetings - Proposal 7
The Company’s Statement in Opposition to Proposal 7
The BoardAugust 2022, and the NominatingCompany’s record of PSUs that vested and Governance Committee have carefully considered the proposal submitted by James McRitchiewere delivered on October 6, 2022.
(9)Excludes Mr. Dorne, Mr. Spinner and Myra K. Young and believe that its adoption isMs. Sutton, as at they were not in the best interestsofficers of the Company or its stockholders. For the reasons discussed below, the Board opposes this stockholder proposal and unanimously recommends that stockholders vote “AGAINST” the stockholder proposal.as of November 22, 2022.
Our stockholders already have(10)Beneficial ownership information based solely on a meaningful right to call a special meeting. Our bylaws currently provide that stockholders holding 25% or more of our outstanding stock may call a special meeting. After careful consideration, our Board presented, and shareholders approved, implementing this special meeting right in 2014. The Board continues to believe that this special meeting
bylaw provision is the appropriate mechanism for shareholders to call a special meeting in the event of an extraordinary matter that cannot wait until the next annual meeting.
Special meetings require significant expenses and resources. Because our stockholders also have the right to propose business for consideration at our annual meeting of stockholders, the Board believes that special meetings should only be called to consider extraordinary events that are of interest to a broad base of our stockholders and that cannot be delayed until our next annual meeting of stockholders. The Board believes that the 15% ownership threshold called for in the Proposal is unduly low and could result in stockholders who have not garnered significant support from other stockholders disrupting the Company by calling special meetings of stockholders to consider proposals that may not be supported by other stockholders and that are not viewed by the Board as being in the best interest of all stockholders. For every special meeting, we must incur significant expenses including legal, printing and mailing expenses, as well as other costs normally associated with holding a stockholder meeting. Moreover, organizing and preparing for a special meeting requires significant attention from our directors, officers and other employees, diverting their focus from performing their primary functions of overseeing and operating our business in the best interest of all of our stockholders.
The current threshold strikes the right balance. The Board believes that a 25% threshold strikes an appropriate balance between enhancing stockholder rights and protecting against the risk that a small minority of stockholders could trigger the expense and distraction of a special meeting that is not in the best interest of our stockholders as a whole. If the proposal were adopted, a small minority of stockholders—potentially with narrow, short-term interests-could call special meetings to pursue matters that have little likelihood of success and that as much as 85% of our stockholders do not view as requiring immediate attention, without regard to how the costs and other burdens might impact the Company’s future success or the interests of the vast majority of stockholders. Moreover, the Board believes the Company’s 25% ownership threshold is among the most common thresholds among large public companies who offer stockholders the right to call a special meeting and certain of the Company’s institutional stockholders have in the past expressed support for a 25% ownership threshold to be able to request a special meeting of stockholders.
The Company has strong corporate governance practices, ample avenues of communication between the Company and its stockholders and a record of accountability. The Company’s current corporate governance practices reflect the Board’s dedication to being responsive and accountable to stockholders. The Company solicits and values stockholder discussion and input on corporate governance matters and takes every step possible to ensure that such input is received in the ordinary course. Our investor relations and finance teams maintain open and direct lines of communication with our stockholders, and we have been responsive to stockholder feedback received in the past. Together, management and the Board regularly assess and refine the Company’s corporate governance policies and procedures to take into account evolving best practices and to address feedback provided by stockholders and other stakeholders. In addition to the Board’s adoption of the Company’s special meeting bylaw provision, the Company has implemented numerous other corporate governance measures to ensure the Board remains accountable to stockholders and to provide stockholders with greater influence on the nomination and election of directors and the ability to directly communicate their views to the Board. For example:
Each member of the Board is elected annually to a one-year term;
Each director must be elected by a majority vote in an uncontested election, and any director who fails to receive the required number of votes for re-election must tender his or her written resignation to the Board;
Schedule 13G/A majority of the Company’s directors are independent;
The Board has designated an independent director to serve as the Board’s "Lead Independent Director" to coordinate the activities of the other independent members of the Board;
Stockholders are able to recommend director candidates to the Nominating and Governance Committee (as described further under “Director Nominees Recommended by Stockholders” beginning on page 15);
The Company has adopted, and enhanced, a proxy access bylaw, which permits a stockholder, or a group of up to 20 stockholders, owning continuously for at least three years shares of our stock representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees, provided that the stockholder(s) and the nominee(s) satisfy the requirements in our Bylaws;
The Board values stockholder discussion and input and provides channels for stockholders to communicate directly with members of the Board (as described further under “Communication with the Board of Directors” beginning on page 15); and
The Company has eliminated all super majority voting provisions from its certificate of incorporation and Bylaws.
In summary, the Board’s actions confirm its strong commitment to best governance practices and responsiveness to the Company’s stockholders. Moreover, the Board has adopted a special meeting bylaw provision that the Board believes serves the
best interests of the Company and its stockholders. Accordingly, the Board believes that adoption of the stockholder proposal is not necessary or appropriate.
The Board unanimously recommends that stockholders vote “AGAINST” this stockholder proposal. Proxies received by the Board will be voted “AGAINST” the proposal unless a contrary choice is specified in the proxy.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers and holders of more than 10% of our common stock ("Reporting Persons") to filefiled with the SEC initial reportson February 7, 2022 by BlackRock, Inc. BlackRock, Inc. reported sole voting power with respect to 8,647,556 shares and sole dispositive power with respect to 8,816,181 shares. Includes shares beneficially owned by BlackRock Life Limited, BlackRock Advisors, LLC, Aperio Group, LLC, BlackRock (Netherlands) B.V., BlackRock Fund Advisors, BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Japan Co., Ltd., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock Fund Managers Ltd. BlackRock Fund Advisors beneficially owns 5% or greater of the outstanding shares reported on the Schedule 13G.
(11)Beneficial ownership and reports of changes in ownership of common stock and other equity securities. To our knowledge,information based solely on reviewa Schedule 13G/A filed with the SEC on February 10, 2022 by The Vanguard Group. The Vanguard Group reported shared voting power with respect to 57,316 shares, sole dispositive power with respect to 6,469,247 shares and shared dispositive power with respect to 98,581 shares.
(12)Beneficial ownership information based solely on a Schedule 13G/A filed with the SEC on February 8, 2022 by Dimensional Fund Advisors LP. Dimensional Fund Advisors LP reported sole voting power with respect to 3,820,729 shares and sole dispositive power with respect to 3,896,345 shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of copiesthe Investment Advisors Act of 1940, furnishes investment advice to four investment companies registered under the Investment Company Act of 1940, and serves as investment manager or sub-adviser to certain other commingled funds, group trusts and separate accounts (such investment companies, trusts and accounts, collectively referred to as the “Funds”). In certain cases, subsidiaries of Dimensional Fund Advisors LP may act as an adviser or sub-adviser to certain Funds. In its role as investment advisor, sub-adviser and/or manager, Dimensional Fund Advisors LP or its subsidiaries (collectively, "Dimensional") may possess voting and/or investment power over the securities of the Issuer that are owned by the Funds, and may be deemed to be the beneficial owner of the shares of the Issuer held by the Funds. However, all securities reported in this schedule are owned by the Funds. Dimensional disclaims beneficial ownership of such reports furnishedsecurities.
(13)Beneficial ownership information based solely on a Schedule 13G/A jointly filed with the SEC on February 10, 2022 by Kiltearn Partners LLP, Kiltearn Limited and Murdoch Murchison. Kiltearn Partners LLP, Kiltearn Limited and Murdoch Murchison each reported shared voting power and shared dispositive power with respect to us during the fiscal year ended July 29, 2017, all Section 16(a) filing requirements applicable to the Reporting Persons were complied with.
3,047,034 shares.
Stockholder Proposals and Director Nominations for the 2018Next Annual Meeting of Stockholders
Stockholder Proposal
Any proposal that a stockholder wishes to be considered for inclusion in our proxy statement for the 2018 Annual Meetingnext annual meeting of Stockholders must be submitted to our corporate secretary, Joseph J. Traficanti,Corporate Secretary at 313 Iron Horse Way, Providence, Rhode Island 02908, no later than the close of business on July 6, 2018.25, 2023. We strongly encourage stockholders interested in submitting a proposal to contact legal counsel with regard to the detailed requirements of applicable securities laws. Submitting a stockholder proposal does not guarantee that we will include it in our proxy statement.
Proxy Access Nominee
We have also adopted a proxy access right that permits a stockholder, or a group of up to 20 stockholders, owning continuously for at least three years shares of our stock representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees, provided that the stockholder(s) and the nominee(s) satisfy the requirements in our Bylaws. Under ourFourth Amended and Restated Bylaws to be considered timely, compliant(the Bylaws). For the next annual meeting of stockholders, notice of proxy access director nominations for the 2018 Annual Meeting of Stockholders must be submitted to the Corporate Secretary at the address specified above no earlier than June 6, 201825, 2023 and no later than July 6, 2018; provided, however, that if (A) the annual meeting is not within 30 days before25, 2023.
Advanced Notice Provisions for Proposal or after the anniversary date of the preceding year’s meeting, or (B) no annual meeting was held during the preceding year, to be timely the stockholder notice must be received no later than 90 days prior to such annual meeting or, if later, the tenth day after the day on which notice of the date of the meeting was mailed or public disclosure of the date of such meeting is first made, whichever occurs first.Nominee
Our Bylaws also establish an advance notice procedure with regard to stockholder proposals and director nominations. If a stockholder wishes to present a proposal before the 2018 Annual Meetingnext annual meeting of Stockholders,stockholders or to nominate a director for election, but does not wish (or is not entitled) to have the proposal or director nomination considered for inclusion in our proxy statement, such stockholder must give written notice to our corporate secretaryCorporate Secretary at the address noted above. Our corporate secretaryabove, which notice must receive such notice not lessbe received by our Corporate Secretary no earlier than 90 days nor moreAugust 13, 2023 and no later than 120 days prior to the 2018 Annual Meeting of Stockholders.September 12, 2023. The stockholder'sstockholder’s submission must include certain specified information concerning the proposal or director nominee and the stockholder, including such stockholder'sstockholder’s ownership of our common stock, as described in more detail in our Bylaws. As we will not entertain any proposals at the annual meeting that do not meet these requirements, we strongly encourage stockholders to seek advice from legal counsel before submitting a proposal.
THE BOARD HOPES THAT STOCKHOLDERS WILL ATTEND THE ANNUAL MEETING IN PERSON OR ON THE INTERNET THROUGH A VIRTUAL WEB CONFERENCE. REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO VOTE VIA THE INTERNET, BY TELEPHONE, OR BY COMPLETING, SIGNING, DATING AND RETURNING THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE TO ENSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING. STOCKHOLDERS OF RECORD, OR BENEFICIAL STOCKHOLDERS NAMED AS PROXIES BY THEIR STOCKHOLDERS OF RECORD, WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND CAST THEIR VOTES DURING THE MEETING OR ELECTRONICALLY OVER THE INTERNET THROUGH THE VIRTUAL ANNUAL MEETING.
See “Proposal 1—Election of Directors—Stockholder Director Recommendations and Proxy Access” for further information on the requirements in our Bylaws related to proxy access and our advance notice procedures.
By OrderUniversal Proxy Rules
In addition to satisfying the foregoing requirements under our Bylaws, to comply with the universal proxy rules, stockholders who intend to solicit proxies in support of director nominees other than the Company’s nominees must provide notice that sets forth the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended, which notice must be postmarked or transmitted electronically to UNFI at its principal executive offices no later than 60 calendar days prior to the anniversary date of the Annual Meeting (for the 2023 Annual Meeting (to be held in calendar year 2024), no later than November 11, 2023). However, if the date of the 2023 Annual Meeting is changed by more than 30 calendar days from such anniversary date, then notice must be provided by the later of 60 calendar days prior to the date of the 2023 Annual Meeting or the 10th calendar day following the day on which public announcement of the date of the 2023 Annual Meeting is first made by the Company.
Information About the Meeting
Record Date and Share Ownership
Only stockholders of record on our books at the close of business on Monday, November 14, 2022 (the Record Date) will be entitled to vote at the Annual Meeting and any adjournments or postponements of the Annual Meeting. As of the close of business on November 14, 2022, we had 59,902,801 shares of common stock outstanding. Each share of common stock entitles the record holder to one vote on each matter to be voted upon at the Annual Meeting. Copies of the Notice of Annual Meeting of Stockholders, this proxy statement, the proxy card and our Annual Report to Stockholders for the fiscal year ended July 30, 2022, were first made available to stockholders of record as of the Record Date on or about November 14, 2022. The Board is making these materials available to you on the Internet or, upon your request, is delivering printed versions of these materials to you without charge by mail. On or about November 22, 2022, we mailed to all stockholders of record as of the Record Date the Notice of Proxy Availability, which contains instructions on how to access these materials and vote. Stockholders of record who have previously elected to receive a full set of proxy materials in hard copy will receive such materials in lieu of the Notice of Proxy Availability.
We will, upon written request of any stockholder, furnish without charge a copy of our Annual Report on Form 10-K for the fiscal year ended July 30, 2022, as filed with the SEC, without exhibits. Please address all such requests to United Natural Foods, Inc., 11840 Valley View Road, Eden Prairie, MN 55344, Attn: Investor Relations or via email to InvestorRelations@unfi.com. Exhibits will be provided upon written request and payment of an appropriate processing fee.
Submitting and Revoking Your Proxy
If you complete and submit a proxy, the persons named as proxies will vote the shares represented by your proxy in accordance with your instructions. If you submit a proxy but do not complete the voting instructions, the persons named as proxies will vote the shares represented by your proxy as follows:
FOR the election of Eric F. Artz, Ann Torre Bates, Gloria R. Boyland, Denise M. Clark, J. Alexander Miller Douglas, Daphne J. Dufresne, Michael S. Funk, Shamim Mohammad, James L. Muehlbauer, Peter A. Roy and Jack Stahl as directors to serve until the next annual meeting of stockholders (Proposal 1);
FOR the ratification of the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending July 29, 2023 (Proposal 2);
FOR the approval, on an advisory basis, of our executive compensation (Proposal 3); and
FOR the approval of our amended and restated equity incentive plan (Proposal 4).
If other matters come before the Annual Meeting, the persons named as proxies will vote on such matters in accordance with their best judgment. We have not received notice of other matters that may properly be presented at the Annual Meeting.
You may revoke or revise your proxy at any time before it is exercised by (1) delivering to us a signed proxy card with a date later than your previously delivered proxy, (2) voting via the Internet while attending the virtual Annual Meeting, (3) granting a subsequent proxy through the Internet or telephone, or (4) sending a written revocation to our corporate secretary at 313 Iron Horse Way, Providence, Rhode Island 02908. Attendance at the Annual Meeting virtually through the Internet will not itself be deemed to revoke your proxy unless you vote via the Internet while attending the Annual Meeting. Your latest dated proxy card or telephone or Internet proxy at the time of the meeting is the one that is counted.
How to Vote
For Proposal 1, you may vote “FOR” or “AGAINST” each of the nominees to the Board. You may also abstain from voting “FOR” or “AGAINST” any nominee. For Proposals 2, 3 and 4 you may vote “FOR” or “AGAINST” or abstain from voting.
Stockholders of Record
If you are a stockholder of record, there are four ways to vote:
•by completing, signing, dating and returning your proxy card by mail, if you request a paper copy of the proxy materials;
•by making a toll-free telephone call within the United States or Canada using a touch-tone telephone to the toll-free number provided on your Notice of Proxy Availability;
•by voting on the Internet before the meeting; or
•by voting on the Internet during the meeting.
To vote on the Internet before the meeting, go to the website address indicated on your Notice of Proxy Availability to complete an electronic proxy card prior to the Annual Meeting. You will be asked to provide the 16-digit control number from the Notice of Proxy Availability. You may also vote on the Internet while attending the meeting virtually through the Internet.
If you plan to vote by telephone or Internet in advance of the meeting, your vote must be received by 11:59 p.m., Eastern Standard Time, on January 9, 2023 to be counted. Internet voting during the Annual Meeting is also permissible through the virtual web meeting hosted at www.virtualshareholdermeeting.com/unfi2023. If you wish to vote at the Annual Meeting while attending virtually, you must have your 16-digit control number from your Notice of Proxy Availability.
Street Name Holders
If you hold your shares of common stock in a stock brokerage account or through a bank or other nominee, you are considered to be the beneficial owner of shares held in “street name.” If you hold your shares in street name, these proxy materials will be forwarded to you by your broker, bank or other nominee and you should follow the voting instructions provided by your broker, bank or other nominee. However, the organization that holds your shares is considered the stockholder of record for purposes of voting at the Annual Meeting. You may not vote directly any shares you beneficially own that are held in street name; however, as the beneficial owner of the shares, you have the right to direct your broker, bank or other nominee on how to vote your shares. You may complete and return a voting instruction card to your broker, bank or other nominee. Please check your Notice of Proxy Availability or contact your bank, broker or other nominee for more information. If you hold your shares in street name and wish to vote while attending the virtual Annual Meeting, you must have your 16-digit control number from your Notice of Proxy Availability.
We provide Internet proxy voting to allow you to vote your shares online both before and during the meeting, with procedures designed to confirm the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.
Broker Non-Votes and Proxy Solicitation
If you do not provide your broker instructions on how to vote your shares on non-discretionary items, a “broker non-vote” will occur. Proposals 1, 3 and 4 are non-discretionary items for which your broker will not be able to vote your shares without your instructions. Proposal 2 (ratification of the selection of KPMG LLP) is a discretionary item, and your broker may vote your shares in its discretion even without voting instructions from you. In the case of a broker non-vote, your shares would be included in the number of shares considered present at the meeting for the purpose of determining whether there is a quorum but will not otherwise have any effect on the outcome of the vote on Proposals 1, 3 and 4.
In addition to solicitations by mail and the Internet, our directors, officers and employees may, without additional remuneration, solicit proxies by telephone, facsimile and personal interviews. In addition, we have retained Saratoga Proxy Consulting, LLC, to assist in the solicitation of proxies for a fee of $15,000 plus associated costs and expenses. We will request brokerage houses, banks, and nominees to forward copies of the proxy materials to those persons for whom they hold shares and request instructions for voting the proxies. We will reimburse such brokerage houses, banks and other nominees for their reasonable expenses in connection with this distribution.
Quorum
Presence by attendance through the virtual Annual Meeting, or by proxy, of a majority of the shares of common stock outstanding at the close of business on the Record Date and entitled to vote at the Annual Meeting will be required for a quorum at the meeting. Shares of common stock present by attendance through the virtual Annual Meeting or represented by proxy (including shares that abstain or do not vote with respect to one or more of the matters presented for stockholder approval) will be counted for purposes of determining whether a quorum exists at the Annual Meeting.
Votes Required
Proposal 1 (election of a total of eleven nominees as directors) is an uncontested director election. In uncontested elections, our Bylaws require that each nominee be elected by a majority of votes cast with respect to such nominee. Therefore, a director will be elected if the number of shares voted “FOR” the director exceeds the number of shares voted “AGAINST” the director. Since each nominee is already a director, our Bylaws require any nominee who does not receive the affirmative vote of at least a majority of the votes cast to offer to tender his or her resignation to the Board. The Nominating and Governance Committee of the Board of Directors,
Steven L. Spinner
Chairwill make a recommendation to the Board on whether to accept or reject the director’s resignation, or whether other action should be taken. The Board will act on such recommendation within 90 days from the date of the Board, Presidentcertification of the election results. Abstentions and Chief Executive Officerbroker non-votes will have no effect on this item because they are not considered votes cast.
For each of Proposal 2 (ratification of the selection of KPMG LLP), Proposal 3 (advisory approval of our executive compensation) and Proposal 4 (approval of the Second Amended and Restated 2020 Equity Incentive Plan), the affirmative vote of a majority of votes cast on the proposal is necessary for approval. Abstentions (in the case of Proposals 2, 3 and 4) and broker non-votes (in the case of Proposal 3 and 4) will have no effect on the results because they are not considered votes cast.
Attending the Annual Meeting
We will be hosting a fully virtual Annual Meeting, as we have done for several years, live via the Internet. There will be no in-person meeting. We believe that hosting the Annual Meeting via the Internet encourages greater attendance and participation, including from investors who could not otherwise travel to attend our meeting, by providing virtual access and the ability to submit questions to be answered by Management or directors online during and prior to the Annual Meeting. In addition, this format eliminates certain costs associated with holding an in-person meeting.
A summary of the information you need to attend the Annual Meeting online is provided below:
•Any stockholder as of the Record Date can attend the Annual Meeting virtually through the Internet at www.virtualshareholdermeeting.com/unfi2023.
•Meeting starts at 4:00 p.m. Eastern Standard Time, with log-in at 3:45 p.m. on Tuesday, January 10, 2023.
•If attending the Annual Meeting virtually through the Internet, please have your 16-digit control number provided on your Notice of Proxy Availability to enter the Annual Meeting.
•If you hold your shares in street name and wish to vote while attending the virtual Annual Meeting, you must have your 16-digit control number from your Notice of Proxy Availability.
•Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/unfi2023.
•Stockholders may vote and, subject to any rules of conduct posted on the Annual Meeting website, submit questions while attending the Annual Meeting through the Internet. If your question is properly submitted during the relevant portion of the meeting agenda, we will do our best to respond to your question during the live webcast as time permits. We may consolidate answers to similar questions and will prioritize questions from stockholders who identify themselves by name. We will post responses to questions that we do not have sufficient time to answer during the meeting on our website.
•If we experience technical difficulties during the meeting (e.g., a temporary or prolonged power outage), we will determine whether the meeting can be promptly reconvened (if the technical difficulty is temporary) or whether the meeting will need to be reconvened on a later day (if the technical difficulty is more prolonged). In either of these situations, we will promptly notify stockholders of the decision via www.virtualshareholdermeeting.com/unfi2023. If you encounter technical difficulties accessing our meeting or asking questions during the meeting, a support line will be available on the login page of the virtual meeting website.
•Webcast replay of the Annual Meeting will be available at www.virtualshareholdermeeting.com/unfi2023 until January 10, 2024.
Before the meeting, you may post any questions to be answered at the meeting at www.proxyvote.com. You may also ask questions during the meeting, as described above.
Householding
We have adopted a procedure for stockholders whose shares are held in street name called “householding,” pursuant to which stockholders of record who have the same address and the same last name will receive only one Notice of Proxy Availability each and, as applicable, one set of any additional proxy materials that are delivered, unless one or more of these stockholders notifies us that they wish to continue receiving multiple copies. This procedure provides extra convenience for stockholders and a cost savings for us. Currently, we are not providing householding to stockholders of record.
If at any time you no longer wish to participate in householding and would prefer to receive a separate Notice of Proxy Availability and, as applicable, any additional proxy materials that are delivered, or if your shares are held in street name and you are receiving multiple copies of our Notice of Proxy Availability and, as applicable, any additional proxy materials that are delivered and wish to receive only one, please notify your bank, broker or other nominee. We will promptly deliver, upon oral or written request, a separate copy of the proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies for the current year or future years should be directed to our Investor Relations Department at (952) 828-4144 or United Natural Foods, Inc., 11840 Valley View Road, Eden Prairie, MN 55344, Attn: Investor Relations.
Stockholders who participate in householding will continue to receive separate control numbers for use in voting their shares, and, if requested, separate proxy cards.
| | | | | | | | | | | | | | |
| The Board hopes that stockholders will attend the Annual Meeting on the Internet through a virtual web conference. Regardless of whether you plan to attend the Annual Meeting, you are urged to vote via the Internet, by telephone, or by completing, signing, dating and returning the enclosed proxy card as soon as possible so that your shares are represented at the Annual Meeting. Stockholders of record, or beneficial stockholders named as proxies by their stockholders of record, who attend the Annual Meeting may revoke their proxies and cast their votes electronically over the Internet through the virtual Annual Meeting. |
| | | | | |
| By Order of the Board of Directors, |
| |
| | | | | |
| Jack Stahl |
| Independent Chair of the Board |
November 3, 2017
22, 2022
Annex A
SECOND AMENDED AND RESTATED UNITED NATURAL FOODS, INC.
SECOND AMENDED AND RESTATED
20122020 EQUITY INCENTIVE PLAN
(EFFECTIVE AS OF JANUARY 10, 2023)
|
| | | | |
| TABLE OF CONTENTS |
| TABLE OF CONTENTS | A-2 |
| Section 1. Purpose | A-3 |
| Section 2. Definitions | A-3 |
| Section 3. Administration | A-7 |
| Section 4. Shares Available for Awards | A-7A-9 |
| Section 5. Eligibility | A-8A-10 |
| Section 6. Stock Options and Stock Appreciation Rights | A-8A-11 |
| Section 7. Restricted Shares and Restricted Share Units | A-10A-13 |
| Section 8. Performance Awards | A-12A-15 |
| Section 9. Other Stock-Based Awards | A-12A-16 |
| Section 10. Non-Employee Director and Outside Director Awards | A-12A-16 |
Section 11. Provisions Applicable to Covered Officers and Performance Awards | A-13 |
Section 12. Separation from Service | A-15 |
Section 13. Change in Control | A-15 |
Section 14. Amendment and Termination | A-16 |
Section 15. General Provisions | A-17 |
Section 16.12. Change in Control | A-20 |
| Section 13. Amendment and Termination | A-22 |
| Section 14. General Provisions | A-22 |
| Section 15. Term of The Plan | A-19A-25 |
SECOND AMENDED AND RESTATED UNITED NATURAL FOODS, INC.
SECOND AMENDED AND RESTATED
20122020 EQUITY INCENTIVE PLAN
(EFFECTIVE AS OF JANUARY 10, 2023)
Section 1. History and Purpose.
Purpose.
This plan shall be known as the “TheThe United Natural Foods, Inc. Second Amended and Restated 20122020 Equity Incentive Plan”Plan (the “Plan”“Plan”). The purpose of the Plan is was established by United Natural Foods, Inc. (the “Company”) to promote the interests of United Natural Foods, Inc. (the “Company”)Company and its stockholders by fulfilling one or more of the following objectives: (i) attracting and retaining key officers, employees and directors of, and consultants to, the Company and its Subsidiaries and Affiliates;Subsidiaries; (ii) motivating such individuals by means of performance-related incentives to achieve long-rangelong-term performance goals; (iii) enabling such individuals to participate in the long-term growth and financial success of the Company; (iv) encouraging ownership of stock in the Company by such individuals; and (v) linkingaligning their compensation towith the long-term interests of the Company and its stockholders. With respectThe Plan has been amended from time to any awards granted undertime and the following provisions constitute an amendment and restatement of the Plan that are intendedas in effect immediately prior to comply with the requirements of “performance-based compensation” under Section 162(m) of the Code, the Plan shall be interpreted in a manner consistent with such requirements.
Effective Date.
Section 2. Definitions.
As used in the Plan, the following terms shall have the meanings set forth below:
2.1 ““Affiliate”Acquiror” has the meaning provided in Section 12.1.
2.2 “Affiliate” means (i) any entity that, directly or indirectly, is controlled by the Company, (ii) any entity in which the Company has a significant equity interest, (iii) an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act; and (iv) any entity in which the Company has at least twenty percent (20%) of the combined voting power of the entity’s outstanding voting securities, in each case as designated by the Board as being a participating employer in the Plan.
2.22.3 ““Award”Award” means any Option, Stock Appreciation Right, Restricted Share Award, Restricted Share Unit, Performance Award, or Other Stock-Based Award granted under the Plan, whether singly, in combination or in tandem, to a Participant by the Committee (or the Board) pursuant to such terms, conditions, restrictions and/or limitations, if any, as the Committee (or the Board) may establish.establish, or any similar award under the Prior Plan.
2.32.4 ““Award Agreement”Agreement” means any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant.
2.42.5 ““Board”Board” means the Board of Directors of the Company.
2.52.6 “Cause” means, unless otherwise defined in the applicable Award Agreement, (i) conviction of the Participant under applicable law of a(A) any felony or (B) any misdemeanor involving moral turpitude; (ii) unauthorized acts intended to result in the Participant’s personal enrichment at the material expense of the Company or aany Subsidiary or Affiliate;Affiliate or their reputation; (iii) any violation of the Participant’s duties or responsibility’sresponsibilities to the Company or a Subsidiary or Affiliate which constitutes willful misconduct or dereliction of duty. For purposesduty; or (iv) material breach of the covenants described in Section 14.8 of this definition, no act, or failure to act, on the Participant’s part shall be considered “willful” unless done, or omitted to be done, by the Participant not in good faith and without reasonable belief that the Participant’s action or omission was in the best interestPlan.
2.62.7 ““Change in Control”Control” means, unless otherwise provided in the applicable Award Agreement, the happening of one of the following:
(a)any "person"“person”, including a “group” (as such term isterms are used in Sections 13(d) and 14(d) of the Exchange Act), other than a trustee or other fiduciary holding securities ofAct, but excluding the Company, under anany of its Affiliates, or any employee benefit plan maintained byof the Company or any corporation owned, directlyof its Affiliates) is or indirectly, by the Company's stockholders in substantially the same proportions as their ownership of the Company's stock, becomes the "beneficial owner"“beneficial owner” (as defined in Rule 13d-313(d)(3) under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or morethe greater of the total combined voting power of the Company's then-outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders and which the Board does not recommend such stockholders to accept;
(b)a majority of directors, whose election or nomination for election is not approved by a majority of the members of the Incumbent Board then serving as members of the Board, are elected within any single 24-month period to serve on the Board; or
(c)consummation of:
(i) a merger, consolidation or reorganization involving the Company, unless:
(A) the stockholders of the Company, immediately before the merger, consolidation or reorganization, own, directly or indirectly immediately following such merger, consolidation or reorganization, at least 75% of the combined voting power of the outstanding voting securities of the corporation resulting from such merger, consolidation or reorganization in substantially the same proportion as their ownership of the voting securities immediately before such merger, consolidation or reorganization;
(B) individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such merger, consolidation or reorganization constitute at least a majority of the board of directors of the surviving corporation immediately following such merger, consolidation or reorganization; and
(C) no person (other than (I) the Company or any Subsidiary thereof, (II) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, any Subsidiary thereof, or the surviving corporation, or (III) any person who, immediately prior to such merger, consolidation or reorganization, had beneficial ownership of securities representing 25%30% or more of the combined voting power of the Company's then-outstanding securities) has beneficial ownershipCompany’s then outstanding securities;
(b) the stockholders of securitiesthe Company shall approve a definitive agreement and a transaction is consummated (1) for the merger or other business combination of the Company with or into another corporation if (A) a majority of the directors of the surviving corporation were not directors of the Company immediately followingprior to the effective date of such merger consolidation or reorganization representing 25% or more(B) the stockholders of the Company immediately prior to the effective date of such merger own less than 60% of the combined voting power ofin the surviving corporation's then outstanding voting securities;
(ii) a complete liquidationsecurities in such surviving corporation or dissolution of the Company; or
(iii) an agreement(2) for the sale or other disposition of all or substantially all of the assets of the Company to any person (other than a transfer to a Subsidiary).Company;
For purposes(c) the purchase of 30% or more of the definition of Change in Control, “Incumbent Board” means those persons who either (A) have been memberscombined voting power of the Board sinceCompany’s then outstanding securities pursuant to any tender or exchange offer made by any “person”, including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Effective DateExchange Act), other than the Company, any of its Affiliates, or (B) are new directors whose election by the Board or nomination for election by the stockholdersany employee benefit plan of the Company was approved by a voteor any of its Affiliates; or
(d) the disposal of any line of business representing at least three-fourths15% of the members ofCompany’s consolidated net sales for the Board then in office who either were directors described in clause (A) hereof or whose election or nomination for election was previously so approved,then-most recently completed fiscal year; provided, however, that an individual whose election or nomination for election is approved as a result of either an actual or threatened election contest or proxy contest, including by reason of any agreement intended to avoid or settle any election contest or proxy contest, willsuch disposal shall only be deemed not to have been so approveda “Change in Control” for purposesParticipants primarily employed in the line of this definition.business disposed of.
Notwithstanding the foregoing, unless otherwise provided in the applicable Award Agreement, and solely for the purpose of determining the timingcase of any payments pursuant to any AwardsAward that is subject to Section 409A of the Code, a Change in Control shall meanmust also constitute a “changechange in control event within the ownershipmeaning of the Company,” a “change in the effective control of the Company,” or a “change in the ownership of a substantial portion of the assets of the Company” as such terms are defined in Section 1.409A-3(i)(5) of the Treasury Regulations.
409A.
2.7
2.8 ““Code”Code” means the Internal Revenue Code of 1986, as amended from time to time.
2.82.9 ““Committee”Committee” means a committee of the Board composed of not less than two Non-Employee Directors, each of whom shall be (i) a “non-employee director” for purposes of Exchange Act Section 16 and Rule 16b-3 thereunder (ii) an “outside director” for purposes of Section 162(m), and (iii)(ii) “independent” within the meaning of the listing standards of the NasdaqNew York Stock MarketExchange and the rules and regulations of the SEC.
2.92.10 ““Consultant”Company” means United Natural Foods, Inc., a Delaware corporation, and its successors and assigns.
2.11 “Consultant” means any consultant to the Company or its Subsidiaries or Affiliates.Subsidiaries.
2.102.12 ““Covered Officer”Director means at any date (i) any individual who, with respect to the previous taxable year of the Company, was a “covered employee” of the Company within the meaning of Section 162(m); provided, however, that the term “Covered Officer” shall not include any such individual who is designated by the Committee, in its discretion, at the time of any Award or at any subsequent time, as reasonably expected not to be such a “covered employee” with respect to the taxable year of the Company in which the applicable Award will be paid or vested, and (ii) any individual who is designated by the Committee, in its discretion, at the time of any Award or at any subsequent time, as reasonably expected to be such a “covered employee” with respect to the taxable year of the Company in which any applicable Award will be paid or vested.
2.11“Director”” means a member of the Board.
2.122.12A ““Disability”Director Limit” has the meaning provided in Section 10.3 of the Plan.
2.13 “Disability” means, unless otherwise defined in the applicable Award Agreement, a disability that would qualify as a total and permanent disability under the Company’s then current long-term disability plan. With respect to Awards subject to Section 409A of the Code, unless otherwise defined in the applicable Award Agreement, the term “Disability” shall have the meaning set forth in Section 409A of the Code.
2.13“Early Retirement” means, unless otherwise provided in the applicable Award Agreement, retirement of a Participant with the express consent of the Committee at or before the time of such retirement, from active employment with the Company and any Subsidiary or Affiliate prior to age 65, in accordance with any applicable early retirement policy of the Company then in effect or as may be approved by the Committee.
2.14 ““Effective Date”Date” has the meaning provided in Section 16.115.1 of the Plan.
2.15 ““Employee”Employee” means a current or prospective officer or employee of the Company or of any Subsidiary or Affiliate.Subsidiary.
2.16 ““Exchange Act”Act” means the Securities Exchange Act of 1934, as amended from time to time.
2.17 ““Fair Market Value”Value” with respect to the Shares, means, for purposes of a grant of an Award as of any date, (i) the reported closing sales price of the Shares on the NasdaqNew York Stock Market,Exchange, or any other such market or exchange as is the principal trading market for the Shares, on such date, or in the absence of reported sales on such date, the closing sales price on the immediately preceding date on which sales were reported or (ii) in the event there is no public market for the Shares on such date, the fair market value as determined, in good faith and by the reasonable application of a reasonable valuation method (as applicable), by the Committee in its sole discretion, and for purposes of a sale of a Share as of any date, the actual sales price on that date.
2.18 RESERVED.
2.18
“Full Value Award Cap” has the meaning provided in Section 4.1 of the Plan.
2.19“Good Reason” means, unless otherwise provided in an Award Agreement, the occurrence of any one or more of the following without the Participant’s express written consent: (i) the assignment of duties to a Participant following a Change in Control that are materially adversely inconsistent with the Participant’s duties immediately prior to a Change in Control, and failure to rescind such assignment within thirty (30) days of receipt of notice from the Participant; (ii) a material reduction in a Participant’s title, authority or reporting status following a Change in Control as compared to such title, authority or reporting status immediately prior to a Change in Control, (iii) the Company’s requirement that a relocation of the office at which the Participant is to perform the majority of his or her duties following a Change in Control to a locationrelocate more than fifty (50)(50 miles from the location at whichParticipant’s place of employment prior to the Participant performed such duties prior to the Change in Control; (iv) a material reduction in the Participant’s base salary as in effect immediately prior to a Change in Control or the failure of the Company to pay or cause to be paid any compensation or benefits when due, and failure to restore such annual base salary or make such payments within five (5) days of receipt of notice from the Participant; or (v) the failure to include the Participant in any new employee benefit plans proposedestablished by the Company for similarly-situated executives or a material reduction in the Participant’sEmployee’s level of participation in any existingbenefit plans of any type;the Company in which the Employee participated immediately prior to the Change in Control provided that a reduction or elimination of such plans with respect to all similarly-situated executives or a Company-wide reduction or elimination of such plans shall not constitute “Good Reason” for purposes of this Plan.Plan; or (vi) the failure of the Company to obtain a satisfactory agreement from the Acquiror to assume and perform the Award Agreement; provided that, in each case, (A) within sixty (60) days of the initial occurrence of the specified event the Participant has given the Company or any successor to the Company at least thirty (30) days to cure the Good Reason, (B) the Company or any such successor has not cured the Good Reason within the thirty (30) day period and (C) the Participant resigns within ninety (90) days from the initial occurrence of the event giving rise to the Good Reason.
2.20 ““Grant Price”Price” means the price established at the time of grant of an SAR pursuant to Section 6 hereof used to determine whether there is any payment due upon exercise of the SAR.
2.21 ““Incentive Stock Option”Option” means an option to purchase Shares from the Company that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.thereto, or a similar Award under the Prior Plan.
2.22 ““Non-Employee Director”Director” means a member of the Board who is not an officer or employee of the Company or any Subsidiary or Affiliate.Subsidiary.
2.23 ““Non-Qualified Stock Option”Option” means an option to purchase Shares from the Company that is granted under Sections 6 or 10 of the Plan and is not intended to be an Incentive Stock Option.Option, or a similar Award under the Prior Plan.
2.24 “Normal RetirementOption” means, unless otherwise defined in the applicable Award Agreement, retirement of a Participant from active employment with the Company or any of its Subsidiaries or Affiliates on or after such Participant’s 65th birthday.
2.25“Option” means an Incentive Stock Option or a Non-Qualified Stock Option.
2.262.25 ““Option Price”Price” means the purchase price payable to purchase one Share upon the exercise of an Option.
2.272.26 ““Other Stock-Based Award” Award” means any Award granted under Sections 9 or 10 of the Plan or the Prior Plan. For purposes of determining the number of Awards granted hereunder in relation to the Full Value Award Cap set forth in Section 4.1 hereof, anAn Other Stock-Based Award that is not settled in cash shall be treated as a Restricted Share Award if the amounts payable thereunder will be determined by reference to the full value of a Share.Award.
2.282.27 ““Outside Director”Director” means, with respect to the grant of an Award, a member of the Board then serving on the Committee.
2.292.28 ““Participant”Participant” means any Employee, Director, Consultant or other person who receives an Award under the Plan.
2.302.29 ““Performance Award”Award” means any Award granted under Section 8 of the Plan or a similar Award under the Prior Plan. For purposes of determining the number of Awards granted hereunder in relation to the Full Value Award Cap set forth in Section 4.1 hereof, aA Performance Award that is not settled in cash shall be treated as a Restricted Share Award if the amounts payable thereunder will be determined by reference to the full value of a Share.Award.
2.312.30 ““Person”Person” means any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.
2.30A “Prior Effective Date” means December 18, 2019.
2.31 “Prior Plan” means the United Natural Foods, Inc. Second Amended and Restated 2012 Equity Incentive Plan.
2.32 “Relocation” has the meaning provided in Section 11.3 hereof.
2.33 “Restricted Share”Share” means any Share granted under Sections 7 to 10 of the Plan, or solely for the purposes of Section 4.1, a similar Award under the Prior Plan.
2.332.34 ““Restricted Share Unit”Unit” means any unit granted under Sections 7 to 10 of the Plan, or solely for the purposes of Section 4.1, a similar Award under the Prior Plan.
2.34“Retirement” means Normal or Early Retirement.
2.35 ““SEC”Retirement” means the termination of the Participant’s employment with the Company and all of its Subsidiaries and Affiliates on or after the date on which both of the following have occurred: (i) the Participant has attained 59 years of age and (ii) the Participant has provided ten (10) years of service to ’s employment with the Company or any of its Subsidiaries or Affiliates. Years of service will be calculated as full years since the Participant’s most recent “hire date” or “rehire date,” which shall mean the applicable date on file for the Participant in the Company’s human resources books and records, determined in the Company’s sole discretion.
2.36 “SEC” means the Securities and Exchange Commission or any successor thereto.
2.362.37 ““Section 16”16” means Section 16 of the Exchange Act and the rules promulgated thereunder and any successor provision thereto as in effect from time to time.
2.38 RESERVED.
2.37“Section 162(m)” means Section 162(m) of the Code and the regulations promulgated thereunder and any successor provision thereto as in effect from time to time.
2.382.39 ““Separation from Service”Service” or ““Separates from Service”Service” shall have the meaning ascribed to such term pursuant to Section 409A of the Code and the regulations promulgated thereunder. In the event an Award is not subject to Section 409A of the Code, the term “Separation from Service” or “Separates from Service” shall mean the termination of employment or service with the Company, the Subsidiaries and the Affiliates.
2.392.40 ““Shares”Separation from Service without Cause” has the meaning provided in Section 11.3 hereof.
2.41 “Share Reserve” has the meaning set forth in Section 4.1 hereof.
2.42 “Shares” means shares of the common stock, par value $0.01 per share, of the Company, or any security into which such shares may be converted by reason of any event of the type referred to in Sections 4.2,, 13.3, 12.1, and 14.3.13.3.
2.402.43 ““Share Reserve”Specified Employee has the meaning set forth in Section 4.1 hereof.
2.41“Specified Employee”” has the meaning ascribed to such term pursuant to Section 409A of the Code and the regulations promulgated thereunder.
2.422.44 ““Stock Appreciation Right” Right” or ““SAR”SAR” means a stock appreciation right granted under Sections 6,, 8 or 10 of the Plan, or a similar Award under the Prior Plan, that entitles the holder to receive, with respect to each Share encompassed bysubject to the exercise of such SAR the amount determined by the Committee and specified in an Award Agreement. InIf the absence of such a determination,Award Agreement fails to specify the amount to be received by the holder, the holder shall be entitled to receive, with respect to each Share encompassed by the exercise of such SAR, the excess of the Fair Market Valuefair market value of such Share on the date of exercise over the Grant Price.
2.432.45 ““Subsidiary”Subsidiary” means any Person (other than the Company) of which 50% or more of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company.
2.442.46 ““Substitute Awards”Awards” means Awards granted solely in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or any Subsidiary or with which the Company or a Subsidiary combines.
2.452.47 ““Vesting Period”Period” means the period of time specified by the Committee during which vesting restrictions for an Award are applicable.
Section 3. Administration.
3.1Authority of Committee. Committee. The Plan shall be administered by a Committee, which shall be appointed by and serve at the pleasure of the Board; provided, however, with respect to Awards to Outside Directors, all references in the Plan to the Committee shall be deemed to be references to the Board. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full and final power and authority in its discretion (and in accordance with Section 409A of the Code with respect to Awards subject thereto) to: (i)
(a) designate Participants; (ii)
(b) determine eligibility for participation in the Plan and decide all questions concerning eligibility for and the amount of Awards under the Plan; (iii)
(c) determine the type or types of Awards to be granted to a Participant; (iv)
(d) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with Awards; (v)
(e) determine the timing, terms, and conditions, including performance objectives, as applicable, and any adjustments thereto, of any Award; (vi)
(f) accelerate the time at which all or any part of an Award may be vested, settled or exercised; (vii)
(g) determine whether, to what extent, and under what circumstances Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended; (viii)
(h) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee; (ix)
(i) grant Awards as an alternative to, or as the form of payment for grants or rights earned or payable under, other bonus or compensation plans, arrangements or policies of the Company or a Subsidiary or Affiliate; (x)
(j) grant Substitute Awards on such terms and conditions as the Committee may prescribe, subject to compliance with the Incentive Stock Option rules under Section 422 of the Code and the nonqualified deferred compensation rules under Section 409A of the Code, where applicable; (xi)
(k) make all determinations under the Plan concerning any Participant’s Separation from Service, with the Company or a Subsidiary or Affiliate, including whether such separation occurs by reason of Cause, Good Reason, Disability, Retirement, or in connection with a Change in ControlRetirement, and whether a leave of absence constitutes a Separation from Service; (xii)
(l) make all determinations under the Plan, including by setting a policy, concerning the treatment of a leave of absence that the Committee determines not to constitute a Separation from Service;
(m) conclusively interpret and administer the Plan, any Award Agreement and any instrument or agreement relating to the Plan or an Award made under the Plan; (xiii)
(n) except to the extent otherwise prohibited by the Plan, including Section 6.2, of the Plan, amend or modify the terms of any Award at or after grant with the consent of the holder of the Award, or in the case of an amendment or modification that is to the Participant’s benefit, without the consent of the holder of the Award; (xiv)
(o) establish, amend, suspend or waive such policies, processes, rules and regulations and, if desired, appoint such agents as it shall deem appropriate for the proper administration of the Plan; (xv)
(p) adopt special guidelines and provisions for Persons who are residing in, employed in or subject to the taxes of any domestic or foreign jurisdiction to comply with applicable tax and securities laws of such domestic or foreign jurisdiction; and (xvi)
(q) correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any agreement related thereto orthereto; and
(r) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan, subject to the exclusive authority of the Board under Section 1413 hereunder to amend or terminate the Plan.
3.2 Committee Discretion Binding. Binding. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company, any Subsidiary or Affiliate, any Participant and any holder or beneficiary of any Award. The Committee shall have no obligation to treat Participants or eligible Participants uniformly, and the Committee may make determinations
under the Plan selectively among Participants who receive, or Employees or Directors who are eligible to receive, Awards (whether or not such Participants or eligible Employees or Directors are similarly situated). A Participant or other holder of an Award may contest a decision or action by the Committee with respect to such person or Award only on the grounds that such decision or action was arbitrary or capricious or was unlawful, and any review of such decision or action shall be limited to determining whether the Committee’s decision or action was arbitrary or capricious or was unlawful.unlawful
3.3 Delegation. Delegation. Subject to the terms of the Plan and applicable law, the Committee may delegate to one or more officers or managers of the Company or of any Subsidiary or Affiliate, or to a Committee of such officers, or managers, the authority, subject to such terms and limitations as the Committee shall determine, to grant Awards to or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend or terminate Awards held by Participants who are not officers or directors of the Company for purposes of Exchange Act Section 16 or who are otherwise not subject to such Section 16. Any resolution delegating authority to grant Awards shall specify the maximum number of Shares underlying Awards that may be granted pursuant to such delegated authority.
3.4 No Liability. Liability. No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the Plan or any Award granted hereunder.
Section 4. Shares Available for Awards.
4.1 Shares Available. Available; Assumption of Prior Plan Awards. Subject to adjustment under Section 4.3 and the provisions of Section 4.2 below, the maximum aggregate number of Shares reserved and available for distribution under the Plan shall not exceed the sum of (i) 2,500,00011,030,1631Shares, plus (ii) the number of shares available for grant under the Plan as of the end of the day that is the effective date of the amendment and restatement of this Plan (such aggregate amount, the "“Share Reserve"”). Awards made under the Prior Plan were assumed as of the Prior Effective Date. The number of Shares with respect to which Incentive Stock Options may be granted under this Plan shall be no more than 250,000. Subject to the application of the last sentence of this Section 4.1, the
maximum number of Awards that the Company may issue from the Share Reserve as Restricted Stock Awards and Restricted Stock Unit Awards shall be 2,500,000 (the “Full Value Award Cap”).1,000,000. If any Award granted under this Plan or the Prior Plan (whether before or after the Effective Date of this Plan) shall expire, terminate, be settled in cash or otherwise be forfeited or canceled for any reason without the delivery of Shares, then the Shares covered by such Award, or to which such Award relates, or the number of Shares otherwise counted against the Share Reserve, to the extent of any such forfeiture, termination, settlement, expiration or cancellation, shall be added back to the Share Reserve. The Committee may make such other determinations regarding the counting of Shares issued pursuant to this Plan or the Prior Plan as it deems necessary or advisable, provided that such determinations shall be permitted by law. Notwithstanding the foregoing, if an Option or SAR is exercised, in whole or in part, by tender or withholding of Shares, or if the Company’s tax withholding obligation for any Award (including Awards granted prior to the Effective Date) is satisfied by the tender or withholding Shares, the number of Shares deemed to have been issued under the Plan for purposes of the limitation set forth in this Section 4.1 shall be the number of Shares that were subject to the Award or portion thereof, and not the net number of Shares actually issued, and any SARs to be settled in Shares shall be counted in full against the number of Shares available for issuance under the Plan, regardless of the number of Shares issued upon the settlement of the SAR. Any
4.2 Per Participant Limitations. The maximum number of Shares in respect of which Options and SARs may be granted to a Participant during any fiscal year under the Plan is 900,000. The maximum value of Restricted Share Awards, Restricted Share Unit Awards and Performance Awards denominated in Shares that again becomemay be granted to any Participant during any fiscal year under the Plan is $10,000,000, excluding, for this purpose, the value of any dividends or dividend equivalents payable in accordance with the Plan on any Award. The value of such Awards shall be based on the grant date fair value. For Performance Awards denominated in Shares, the value shall be the grant date fair value of the target number of Shares. For Performance Awards that are denominated in cash, the maximum value that may be granted to any Participant during any fiscal year under the Plan is $10,000,000. The individual Participant limitations set forth in this Section 4.2 shall be cumulative; that is, to the extent that Shares or cash for which Awards are permitted to be granted to a Participant during a fiscal year are not covered by an Award to such Participant in that fiscal year (such shortfall, the “Shortfall Amount”), the number of Shares (or amount of cash, as the case may be) available for Awards to
1 5,000,000 additional shares, plus the number of shares remaining available for grant pursuantunder the existing Plan as of the 2023 annual meeting, including shares that are expected to this Section shall be added backforfeited and returned to the Full Value Award Cap ifexisting Plan by such time.
such Participant shall automatically increase in the original Awardsubsequent fiscal years during the term of the Plan until the earlier of the time the Shortfall Amount has been granted to the Participant, or the end of the third fiscal year following the year to which such Shares wasShortfall Amount relates (determined on a Restricted Stock Award or Restricted Stock Unit Award (or treated as such hereunder)“first-in-first-out” basis).
4.24.3 Adjustments.Adjustments. Without limiting the Committee’s discretion as provided in Section 1312 hereof, if there shall occur any change in the capital structure of the Company by reason of any extraordinary dividend or other distribution (whether in the form of cash, Shares, other securities or other property, and other than a normal cash dividend), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other corporate transaction or event having an effect similar to the foregoing, affects the Shares, then the Committee shall, in an equitable and proportionate manner as determined by the Committee (and, as applicable, in such manner as is consistent with Sections 162(m), 422 and 409A of the Code and the regulations thereunder) either: , take action as provided in clauses (i), (ii) or (iii) of this Section 4.3, as follows:
(i) adjust any or all of (1) the aggregate number of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards (or any particular type of Awards) may be granted under the Plan, includingin the Full Value Award Cap;aggregate or on a per Participant basis,; (2) the number of Shares or other securities of the Company (or number and kind of other securities or property) subject to outstanding Awards under the Plan, provided that the number of Shares subject to any Award shall always be a whole number; (3) the grant or exercise price with respect to any Award under the Plan, and (4) the limits on the number of Shares or Awards that may be granted to Participants under the Plan in any calendar year; period;
(ii) provide for an equivalent award in respect of securities of the Acquiror or surviving entity of any merger, consolidation or other transaction or event having a similar effect; or
(iii) make provision for a cash payment to the holder of an outstanding Award.
Any such adjustments to outstanding Awards shall be effected in a manner that precludes the material enlargement or dilution of rights and benefits under such Awards.
4.34.4 Substitute Awards.Awards. Any Shares issued by the Company as Substitute Awards in connection with the assumption or substitution of outstanding grants from any acquired corporation shall not reduce the Shares available for Awards under the PlanShare Reserve to the extent that the rules and regulations of any stock exchange or other trading market on which the Shares are listed or traded provide an exemption from shareholder approval for assumption, substitution, conversion, adjustment, or replacement of outstanding awards in connection with mergers, acquisitions, or other corporate combinations.
4.44.5 Sources of Shares Deliverable under Awards. Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of issued Shares which have been reacquired by the Company.
Section 5. Eligibility.
Eligibility.
Any current or prospective Employee, Director or Consultant shall be eligible to be designated a Participant; provided, however, that Outside Directors shall only be eligible to receive Awards granted consistent with Section 10, provided further that the and Awards to Non-Employee Directors shall be subject to Section 10.3. The granting, vesting and exercise of an Award to a prospective Employee, Director or Consultant areshall be conditioned upon such individual attaining such status.
Section 6. Stock Options and Stock Appreciation Rights.
6.1 Grant. Grant. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Options and SARs shall be granted, the number of Shares subject to each Award, the Option Price or Grant Price and the conditions and limitations applicable to the exercise of each Option and SAR. An Option may be granted with or without a related SAR. An SAR may be granted with or without a related Option. The grant of an Option or SAR shall occur when the Committee by resolution, written consent or other appropriate action determines to grant such Option or SAR for a particular number of Shares to a particular Participant at a particular Option Price or Grant Price, as the case may be, or such later date as the Committee shall specify in such resolution, written consent or other appropriate action. The Committee shall have the
authority to grant Incentive Stock Options and to grant Non-Qualified Stock Options.Options; provided, however, that an Option will be deemed to be a Non-Qualified Stock Option unless it is specifically designated by the Committee as an Incentive Stock Option (and/or to the extent that it does not otherwise satisfy the requirements for an Incentive Stock Option). In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with Section 422 of the Code, as from time to time amended, and any regulations implementing such statute.Code. An Employee who has been granted an Option under the Plan may be granted additional Options under the Plan if the Committee shall so determine; provided, however, that to the extent the aggregate Fair Market Valuefair market value (determined at the time the Incentive Stock Option is granted) of the Shares with respect to which all Incentive Stock Options are exercisable for the first time by an Employee during any calendar year (under all plans described in Section 422(d) of the Code of the Employee’s employer corporation and its parent and Subsidiaries) exceeds $100,000, or if and to the extent the Options fail to qualify as Incentive Stock Options for any other reason, such Options shall constitute Non-Qualified Stock Options. No dividends or dividend equivalents shall be paid or accrue on any Option.
6.2 Price. Price. The Committee in its sole discretion shall establish the Option Price at the time each Option is granted and the Grant Price at the time each SAR is granted. Except in the case of Substitute Awards, the Option Price of an Option may not be less than the Fair Market Value of a Share on the date such Option is deemed to have been granted, pursuant to Section 6.1, and the Grant Price of an SAR may not be less than the Fair Market Value of a Share on the date such SAR is deemed to have been granted pursuant to Section 6.1.granted. In the case of Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4.24.3 hereof in the form of Options or SARs, such grants shall have an Option Price (or Grant Price) per Share that is intended to maintain the economic value of the Award that was replaced or adjusted as determined by the Committee.Committee determined in a manner that conforms to Section 409A of the Code and other applicable law. Notwithstanding the foregoing and except as permitted by the provisions of Section 4.24.3 hereof, neither the Board nor the Committee shall not have the powerauthority to (i) lower the Option Price of an Option after it is granted, (ii) lower the Grant Price of an SAR after it is granted, (iii) cancel an Option when the Option Price exceeds the Fair Market Value of the underlying Shares in exchange for the grant of a replacement Option or SAR with a lower Option Price or Grant Price (as applicable) or cash or another Award (other than in connection with a Change in Control or a Substitute Award) and grant substitute Options with a lower Option Price than the cancelled Options,, (iv) cancel an SAR when the Grant Price exceeds the Fair Market Value of the underlying Shares in exchange for the grant of a replacement SAR or Option with a lower Grant Price of Option Price (as applicable) or cash or another Award (other than in connection with a Change in Control or a Substitute Award), or (v)take any other action with respect to an Option or SAR that would be treated as a repricing under the rules and regulations of the principal securities exchange on which the Shares are traded, in each case without the approval of the Company’s stockholders.
6.3 Term. Term. Subject to the Committee’s authority under Section 3.1 and the provisions of Section 6.6, hereof, each Option and SAR and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the Award Agreement. The Committee shall be under no duty to provide terms of like duration for Options or SARs granted under the Plan. Notwithstanding the foregoing, but subject to Section 6.4(a) hereof, no Option or SAR shall be exercisable after the expiration of ten (10) years from the date such Option or SAR was granted.
6.4 Exercise.Exercise.
(a) Each Option and SAR shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee shall have full and complete authority to determine whether an Option or SAR will be exercisable in full at any time or from time to time during the term of the Option or SAR, or to provide for the exercise thereof in such installments, upon the occurrence of such events and at such times during the term of the Option or SAR as the Committee may determine. The Committee may provide, at or after the grant, that the period of time over which an Option, other than an Incentive Stock Option, or SAR may be exercised shall be automatically extended if on the scheduled expiration of such Award, the Participant’s exercise of such Award would violate applicable securities law; provided, however, that during the extended exercise period the Option or SAR may only be exercised to the extent such Award was exercisable in accordance with its terms immediately prior to such scheduled expiration date; provided further, however, that such extended exercise period shall end not later than thirty (30) days after the exercise of such Option or SAR first would no longer violate such laws.
(b) The Committee may impose such conditions with respect to the exercise of Options or SARs, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or advisable.
(c) An Option or SAR may be exercised in whole or in part at any time, with respect to whole Shares only, within the period permitted thereunder for the exercise thereof, and shall be exercised by written notice of intent to exercise the Option or SAR, delivered to the Company at its principal office, and payment in full to the Company at the direction of the Committee of the amount of the Option Price for the number of Shares with respect to which the Option is then being exercised. Notwithstanding the foregoing, an Award Agreement may provide, or be amended to provide, that if on the last day of the term of an Option or SAR the Fair Market Value of one Share exceeds the Option Price or Grant Price, as applicable, of such Award by an amount as may be determined by the Committee, the Participant has not exercised the Option or SAR and the Option or SAR has not otherwise expired, the Option or SAR shall be deemed to have been exercised by the Participant on such day with payment of the Option Price made by withholding Shares
otherwise issuable in connection with the exercise of the Option. In such event, the Company shall deliver to the Participant the number of Shares for which the Option was deemed exercised, less the number of Shares required to be withheld for the payment of the total purchase price and required withholding taxes, and any fractional Share shall be settled in cash; and in the case of an SAR, the net number of Shares that the Participant would have received had the Participant actually exercised such SAR on such date.
(d) Payment of the Option Price shall be made in (i) cash or cash equivalents, (ii) at the discretion of the Committee, by transfer, either actually or by attestation, to the Company of unencumbered Shares previously acquired by the Participant, valued at the Fair Market Valuefair market value of such Shares on the date of exercise (or next succeeding trading date, if the date of exercise is not a trading date), together with any applicable withholding taxes (which taxes may be satisfied in accordance with Section 15.614.6 of the Plan), such transfer to be upon such terms and conditions as determined by the Committee, (iii) by a combination of (i) or (ii), or (iv) by any other method approved or accepted by the Committee in its sole discretion, including, if the Committee so determines, (x) a cashless (broker-assisted) exercise that complies with applicable laws or (y) withholding Shares (net-exercise) otherwise deliverable to the Participant pursuant to the Option having an aggregate Fair Market Valuefair market value at the time of exercise equal to the total Option Price together with any applicable withholding taxes (which taxes may be satisfied in accordance with Section 15.6)14.6). Until the optioneeParticipant (or other Person exercising the Option) has been issued the Shares subject to such exercise, he or she shall possess no rights as a stockholder with respect to such Shares. The Company reserves, at any and all times in the Company’s sole discretion, the right to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a method set forth in subsection (iv) above, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.
(e) At the Committee’s discretion, the amount payable as a result of the exercise of an SAR may be settled in cash, Shares or a combination of cash and Shares. A fractional Share shall not be deliverable upon the exercise of a SAR but a cash payment will be made in lieu thereof.
6.5 Separation from Service.Service. Except as otherwise provided in the applicable Award Agreement, an Option or SAR may be exercised only to the extent that it is then exercisable, and if at all times during the period beginning with the effective date of granting such Award (or if later, the date on which the Participant first became an Employee, Director or Consultant) and ending on the date of exercise of such Award the Participant is an Employee, Non-Employee Director or Consultant, and shall terminate immediately upon a Separation from Service by the Participant. Notwithstanding the foregoing provisions of this Section 6.5 to the contrary, the Committee may determine in its discretion that an Option or SAR may be exercised following any such Separation from Service, whether or not exercisable at the time of such separation; provided, however, that in no event may an Option or SAR be exercised after the expiration date of such Award specified in the applicable Award Agreement, except as provided in Section 6.4(a). If provided in the applicable Award Agreement or in accordance with any determination of the Committee at or after grant, an Award shall continue to vest and be exercisable after Retirement.
6.6 Ten Percent Stock Rule.Notwithstanding any other provisions in the Plan, if at the time an Incentive Stock Option is otherwise to be granted pursuant to the Plan, the optionee or rights holderemployee owns directly or indirectly (within the meaning of Section 424(d) of the Code) Shares of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or its parent or Subsidiary or Affiliate corporations (within the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee or rights holderEmployee pursuant to the Plan shall satisfy the requirement of Section 422(c)(5) of the Code, and the Option Price shall be not less than one hundred ten percent (110%) of the Fair Market Value of the Shares, of the Company, and such Incentive Stock Option by its terms shall not be exercisable after the expiration of five (5) years from the date such Option is granted.
Section 7. Restricted Shares and Restricted Share Units.
7.1 Grant.Grant.
(a) Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Restricted Shares and Restricted Share Units shall be granted, the number of Restricted Shares and/or the number of Restricted Share Units to be granted to each Participant, the duration of the period during which, and the conditions under which, the Restricted Shares and Restricted Share Units may be forfeited to the Company, and the other terms and conditions of such Awards. The Restricted Share and Restricted Share Unit Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the terms and conditions provided hereunder and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan.
(b) Each Restricted Share Award and Restricted Share Unit Award made under the Plan shall be for such number of Shares as shall be determined by the Committee and set forth in the Award Agreement containing the terms of such Restricted Share Award or Restricted Share Unit Award. Such agreement shall set forth a period of time during which the Participant receiving such Award must remain in the continuous employment (or other service-providing capacity) of the Company in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the Shares covered by the Restricted Share or Restricted Share Unit Award. As provided in this Plan, in an applicable Award Agreement or in accordance with any determination of the Committee at or after grant, an Award shall continue to vest and be exercisable after Retirement and may vest in part upon Separation from Service without Cause. The Award Agreement may also, in the discretion of the Committee, set forth performance or other conditions (including, but not limited to, performance goals based on the criteria listed in Section 11) that will subject the Shares to forfeiture and transfer restrictions.restrictions (whether in addition to or separately from any service-based requirement). The Committee may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding Restricted Share and Restricted Share Unit Awards.
7.2 Delivery of Shares and Transfer Restrictions.Restrictions.
(a) At the time a Restricted Share Award is granted, a certificate representing the number of Shares awarded thereunder shall be registered in the name of the Participant receiving such Award. Such certificate shall be held by the Company or any custodian appointed by the Company for the account of the Participant receiving such Award subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may determine. The foregoing to the contrary notwithstanding, the Committee may, in its discretion, provide that a Participant’s ownership of Restricted Shares prior to the lapse of any transfer restrictions or any other applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e.(i.e., a computerized or manual entry) in the records of the Company or its designated agent in the name of the Participant who has received such Award, and confirmation and account statements sent to the Participant with respect to such book-entry Shares may bear the restrictive legend referenced in the preceding sentence. Such records of the Company or such agent shall, absent manifest error, be binding on all Participants who receive Restricted Share Awards evidenced in such manner. The holding of Restricted Shares by the Company or such an escrow holder, or the use of book entries to evidence the ownership of Restricted Shares, in accordance with this Section 7.2(a), shall not affect the rights of Participants as owners of the Restricted Shares awarded to them, nor affect the restrictions applicable to such shares under the Award Agreement or the Plan, including the transfer restrictions.
(b) Unless otherwise provided in the applicable Award Agreement, the Participant receiving an Award of Restricted Shares shall have all rights of a stockholder with respect to the Restricted Shares, including the right to receive dividends and the right to vote such Shares, subject to the following restrictions: (i) the Participant shall not be entitled to delivery of the stock certificate until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the Award Agreement with respect to such Shares; (ii) none of the Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions; (iii) dividends payable on Restricted Shares for which the forfeiture restrictions have not yet lapsed shall be held in escrow and shall not be payable to the Participant until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the Award Agreement with respect to such Restricted Shares and any dividends paid with respect to Restricted Shares for which the restricted period shall not expire or for which any other restrictive conditions shall not be fulfilled shall be forfeited by the Participant; and (iv) except as otherwise set forth in this Plan, the applicable Award Agreement, or as otherwise determined by the Committee at or after grant, all of the Shares shall be forfeited and all rights of the Participant to such Shares shall terminate, without further obligation on the part of the Company, unless the Participant remains in the continuous employment or service of the Company for the entire restricted period in relation to which such Shares were granted and unless any other restrictive conditions relating to the Restricted Share Award are met. Restricted Share Units (and any dividend equivalent rights with respect thereto) shall be subject to similar transfer (and payment) restrictions as
Restricted Share Awards, except that no Shares are actually awarded to a Participant who is granted Restricted Share Units on the date of grant, and such Participant shall have no rights of a stockholder (including the right to receive dividends) with respect to such Restricted Share Units until the restrictions set forth in the applicable Award Agreement have lapsed.
7.3 Termination of Restrictions. Restrictions. At the end of the restricted period and provided that any other restrictive conditions of the Restricted Share Award are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in the Award Agreement relating to the Restricted Share Award or in the Plan shall lapse as to the Restricted Shares subject thereto, and a stock certificate for the appropriate number of Shares, free of the restrictions and restricted stock legend, shall be delivered to the Participant or the Participant’s beneficiary or estate, as the case may be (or, in the case of book-entry Shares, such restrictions and restricted stock legend shall be removed from the confirmation and account statements delivered to the Participant or the Participant’s beneficiary or estate, as the case may be, in book-entry form). The Company shall have the right to repurchase Restricted Shares at their original issuance price or other stated or formula price (or to require forfeiture of such Shares if issued
at no cost) in the event that conditions specified in the Award Agreement with respect to such Restricted Shares are not satisfied prior to the end of the applicable restricted period.
7.4 Payment of Restricted Share Units. Units. Each Share subject to a Restricted Share Unit shall have a value equal to the Fair Market Valuefair market value of a Share. Restricted Share Units may be paid in cash, Shares, other securities or other property, as determined in the sole discretion of the Committee, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement. The applicable Award Agreement shall specify whether a Participant will be entitled to receive dividend equivalent rights in respect of Restricted Share Units at the time of any payment of dividends to stockholders on Shares. If the applicable Award Agreement specifies that a Participant will be entitled to dividend equivalent rights, the amount of any such dividend equivalent right (i) shall equal the amount that would be payable to the Participant as a stockholder in respect of a number of Shares equal to the number of vestedShares then subject to the Restricted Share Units then credited to the Participant, (ii) shall not be payable to the Participant until the fulfillment of any restrictive conditions set forth in the Award Agreement with respect to such Restricted Share Units and any dividends equivalent rights with respect to Restricted Share Units for which the restrictive conditions shall not be fulfilled shall be forfeited by the Participant, and (iii) shall otherwise be payable in accordance with Section 409A of the Code with regard to Awards subject thereto. Except as otherwise determined by the Committee at or after grant, Restricted Share Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of, andof. Except as otherwise determined by the Committee at or after grant, or as provided in this Plan or the applicable Award Agreement, all Restricted Share Units and all rights of the grantee to such Restricted Share Units (and any dividend equivalents with respect thereto) shall terminate, without further obligation on the part of the Company, unless the Participant remains in continuous employment or service of the Company for the entire restricted period in relation to which such Restricted Share Units were granted and unless any other restrictive conditions relating to the Restricted Share Unit Award are met.
Section 8. Performance Awards.
8.1 Grant. Grant. The Committee shall have sole and complete authority to determine the Participants who shall receive a Performance Award, which shall consist of a right that is (i) denominated in cash or Shares (including but not limited to Restricted Shares and Restricted Share Units), (ii) valued, as determined by the Committee, in accordance with the achievement of such performance goals during such performance periods as the Committee shall establish, and (iii) payable at such time and in such form as the Committee shall determine.
8.2 Terms and Conditions. Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award and the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and may amend specific provisions of the Performance Award; provided, however, that such amendment may not adversely affect existing Performance Awards made within a performance period commencing prior to implementation of the amendment.
8.3 Payment of Performance Awards. Awards. Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with the procedures established by the Committee, on a deferred basis. Except as otherwise determined by the Committee at or after grant, Separation from Service prior to the end of any performance period, other than for reasons of death, Disability, or Disability,Retirement or Separation from Service without Cause, will result in the forfeiture of the Performance Award, and no payments will be made. As set forth in accordance with the terms of this Plan, the applicable Award Agreement, or in accordance with any determination of the Committee at or after grant, Performance Awards shall continue to vest after Retirement or Separation from Service without Cause, but Performance Awards granted in the year in which Retirement occurs and Performance Awards held by a Participant upon a Separation from Service without Cause shall be pro-rated to reflect the length of the Participant’s service during the applicable performance period prior to such Retirement or Separation from Service without Cause. Notwithstanding the foregoing, the Committee may in its discretion, waive any performance goals and/or other terms and conditions relating to a Performance Award. A Participant’s rights to any Performance Award may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of in any manner, except by will or the laws of descent and distribution, and/or except as the Committee may determine at or after grant.
8.4 Establishment of Performance Criteria. In the case of grants of Performance Awards, the Committee shall, in writing, (1) select the performance goal or goals applicable to the performance period, (2) establish the various targets and bonus amounts which may be earned for such performance period, and (3) specify the relationship between performance goals and targets and the amounts to be earned by each Participant for such performance period. The Committee shall make such determination within 90 days after the commencement of the performance period, unless the Committee determines that it is necessary or appropriate to extend the time for determining the performance criteria. Following the completion of each performance period, the Committee shall certify in writing (which may be set forth in the minutes of the Committee) whether the applicable performance targets have been achieved and the amounts, if any, payable for such performance period. In determining the amount earned by a Participant for a given performance period, the Committee shall have the right to adjust the amount of cash or number of Shares payable at a given level of performance to take into account additional factors that the Committee may deem relevant in its sole discretion to the assessment of individual or corporate performance for the performance period.
8.5 Adjustment of Performance Criteria. The Committee may appropriately adjust any evaluation of performance to exclude any of the following events that occurs during a performance period: (i) asset impairments or write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, (v) any items that are unusual in nature or infrequently occurring (within the meaning of applicable accounting standards or otherwise in the reasonable determination of the Committee) and/or described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, (vi) the effect of adverse federal, governmental or regulatory action, or delays in federal, governmental or regulatory action; (vii) any other event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; and (viii) any other event, condition or circumstance for which the Committee determines that an adjustment would be appropriate based on Committee guidelines, prior practice or other considerations.
Section 9. Other Stock-Based Awards.
The Committee shall have the authority to determine the Participants who shall receive an Other Stock-Based Award, which shall consist of any right that is (i) not an Award described in Sections 6, and 7 or 8 above and (ii) an Award of Shares or an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares (including, without limitation, securities convertible into Shares), as deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock-Based Award.
Section 10. Non-Employee Director and Outside Director Awards.
10.1 Non-Employee Director Awards. The Board may provide that all or a portion of a Non-Employee Director’s annual retainer, meeting fees and/or other awards or compensation as determined by the Board, be payable (either automatically or at the election of a Non-Employee Director) in the form of Non-Qualified Stock Options, Restricted Shares, Restricted Share Units and/or Other Stock-Based Awards, including, subject to Section 15.17,14.17, unrestricted Shares. The Board shall determine the
terms and conditions of any such Awards, including the terms and conditions which shall apply upon a termination of the Non-Employee Director’s serviceSeparation from Service as a member of the Board, and shall have full power and authority in its discretion to administer such Awards, subject to the terms of the Plan and applicable law.
10.2 Outside Director Awards. The Board may also grant Awards to Outside Directors pursuant to the terms of the Plan, including any Award described in Sections 6,, 7 and 9 above. With respect to such Awards, all references in the Plan to the Committee shall be deemed to be references to the Board.
10.3 Equity Limits to Directors. Notwithstanding anything in the Plan to the contrary, the maximum numberaggregate grant date fair value (computed as of Shares subject tothe date of grant in accordance with applicable financial accounting rules) of all Awards granted during any 12-month period to any Non-Employee Director during any single calendar year, plus the total cash compensation paid to such director for services rendered for such calendar year, shall not exceed $400,000 in total value (calculating the value of any such Awards based on the grant date fair value of such Awards for financial reporting purposes and excluding, for this purpose, the value of any dividends or dividend equivalents paid in accordance with the Plan on certain Awards)$800,000 (the "“Director Limit"”). The Board may not, without the approval of the stockholders, increase; and further provided that the Director Limit.
Section 11. Provisions ApplicableLimit for any Non-Employee Director shall be determined without regard to Covered Officers and Performance Awards.
11.1 Performance-based Compensation. Notwithstanding anything in the Planamounts paid to the contrary, unless the Committee determines thatNon-Employee Director for any period in which such individual was an employee or consultant (other than grants of awards paid for service in their capacity as a Performance Award to be grantedNon-Employee Director), and any severance and other payments such as consulting fees paid to a Covered Officer should not qualify as “performance-based compensation”Non-Employee Director for purposes of Section 162(m), Performance Awards grantedsuch individual’s prior or current service to Covered Officers shall be subject to the terms and provisions of this Section 11.
11.2 Performance-based Compensation. The Committee may grant Performance Awards to Covered Officers based solely upon the attainment of performance targets related to one or more performance goals selected by the Committee from among the goals specified below. For the purposes of this Section 11, performance goals shall be limited to one or more of the following Company, Subsidiary, operating unit, business segment or division financial performance measures:
(a) earnings before any one or more of the following: interest, taxes, depreciation, amortization and/or stock compensation;
(b) net sales;
(c) operating (or gross) income or profit;
(d) pretax income before allocation of corporate overhead and/or bonus;
(e) operating efficiencies;
(f) operating income as a percentage of net sales;
(g) return on equity, assets, capital, capital employed or investment;
(h) after tax operating income;
(i) net income;
(j) earnings or book value per Share;
(k) financial ratios;
(l) cash flow(s);
(m) total sales or revenues or sales or revenues per employee;
(n) capital expenditures as a percentage of net sales;
(o) total operating expenses, or some component or combination of components of total operating expenses, as a percentage of net sales;
(p) stock price or total stockholder return, including any comparisons with stock market indices;
(q) appreciation in or maintenance of the price of the common stock or any publicly-traded securities of the Company;
(r) dividends;
(s) debt or cost reduction;
(t) comparisons with performance metrics of peer companies;
(u) comparisons of Company stock price performance to the stock price performance of peer companies;
(v) strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, meeting or reducing budgeted expenditures, attaining division, group or corporate financial goals, meeting business expansion goals (including, without limitation, developmental, strategic or manufacturing milestones of products or projects in development, execution of contracts with current or prospective customers and development of business expansion strategies) and meeting goals relating to acquisitions, joint ventures or collaborations or divestitures;
(w) economic value-added models; or
(x) any combination thereof.
Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company or any Subsidiary, operating unit, business segmentAffiliate other than serving as a director shall not be taken into account in applying the Director Limit. For the avoidance of doubt, any compensation that is deferred shall be counted toward this limit for the year in which it was first earned, and not when paid or divisionsettled if later.
10.4 Post-Service Vesting. If a Non-Employee Director ceases to serve as a director for any reason, other than an involuntary removal during the pendency of a term as director, any Award made to such Non-Employee Director may continue to vest if so provided in the Award Agreement or in accordance with any determination of the Company and/Board at or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, stockholders’ equity and/or Shares outstanding, or to assets or net assets. The Committee may appropriately adjust any evaluation of performance under criteria set forth in this Section 11.2 to exclude any of the following events that occurs during a performance period: (i) asset impairments or write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, (v) any items that are unusual in nature or infrequently occurring (within the meaning of applicable accounting standards) and/or described in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, (vi) the effect of adverse federal, governmental or regulatory action, or delays in federal, governmental or regulatory action or (vii) any other event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management; provided that the Committee commits to make any such adjustments within the 90 day period set forth in Section 11.4.after grant.
11.3
Section 8 is 125,000; (b) the maximum amount of all Performance Awards that are settled in cash and that may be granted in any fiscal year under Section 8 is $2,500,000; and (c) the maximum number of all Shares in respect of which Options or SARs (taken together) may be granted in any fiscal year under the Plan is 150,000. The individual Covered Officer limitations set forth in this Section 11.3 shall be cumulative; that is, to the extent that Shares or cash for which Awards are permitted to be granted to a Participant during a fiscal year are not covered by an Award to such Participant in that fiscal year (such shortfall, the “Shortfall Amount”), the number of Shares (or amount of cash, as the case may be) available for Awards to such Participant shall automatically increase in the subsequent fiscal years during the term of the Plan until the earlier of the time the Shortfall Amount has been granted to the Participant, or the end of the third fiscal year following the year to which such Shortfall Amount relates (determined on a “first-in-first-out” basis).
11.4 Establishment of Performance Criteria. In the case of grants of Performance Awards with respect to which compliance with Section 162(m) is intended, no later than 90 days following the commencement of each performance period (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (1) select the performance goal or goals applicable to the performance period, (2) establish the various targets and bonus amounts which may be earned for such performance period, and (3) specify the relationship between performance goals and targets and the amounts to be earned by each Covered Officer for such performance period. Following the completion of each performance period, the Committee shall certify in writing (which may be set forth in the minutes of the Committee) whether the applicable performance targets have been achieved and the amounts, if any, payable to Covered Officers for such performance period. In determining the amount earned by a Covered Officer for a given performance period, subject to any applicable Award Agreement, the Committee shall have the right to reduce (but not increase) the amount payable at a given level of performance to take into account additional
factors that the Committee may deem relevant in its sole discretion to the assessment of individual or corporate performance for the performance period.
11.5 Conformance with Section 162(m). Unless otherwise expressly stated in the relevant Award Agreement, each Performance Award granted to a Covered Officer under the Plan is intended to be performance-based compensation within the meaning of Section 162(m). Accordingly, unless otherwise determined by the Committee, if any provision of the Plan or any Award Agreement relating to such an Award does not comply or is inconsistent with Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee discretion to increase the amount of compensation otherwise payable to a Covered Officer in connection with any such Award upon the attainment of the performance criteria established by the Committee.
Section 12. 11. Separation from Service.
12.111.1 Impact on Awards.AwardsThe. Except as provided in Section 11.2 of this Plan, the Committee shall have the full power and authority to determine the terms and conditions that shall apply to any Award upon a Separation from Service, with the Company, its Subsidiaries and Affiliates, including a separationSeparation from the CompanyService with or without Cause, by a Participant voluntarily, including for Good Reason, or by reason of death, Disability, Early Retirement or Normal Retirement, and may provide such terms and conditions in the Award Agreement or in such rules and regulations as it may prescribe. Unless otherwise provided in the Award Agreement, Awards shall fully vest on death or Disability.
12.211.2 Forfeiture of Awards.Performance Awards on Separation from Service; No Acceleration of Vesting. Unless otherwise provided in (i) this Plan or (ii) an Award Agreement or a written employment or similar agreement between the Company or a Subsidiary and a Participant, if a Participant’s Separation from Service occurs before the restrictions imposed on the Award lapse, the performance goals have been satisfied or the Award otherwise vests, such Award shall be forfeited. Except as otherwise provided in this Plan, an Award Agreement or by a contractualwritten employment agreement or similar agreement between the Company or a Subsidiary and a Participant, if a Participant’s employment with or service to the Company or a Subsidiary terminates before the restrictions imposed on the Award lapse, the performance goals have been satisfied or the Award otherwise vests, such Award shall be forfeited.
Section 13. Change in Control.
13.1 Certain Terminations. Unless otherwise provided by the Committee, or in an Award Agreement or by a contractual agreement between the Company or a Subsidiary and a Participant, if, within twelve months after the Company obtains actual knowledge thatprior to a Change in Control, has occurred,for any reason other than death or Disability, the vesting of any unvested Award shall not be triggered by such Separation from Service. Notwithstanding the foregoing, a Separation from Service without Cause or for Good Reason that takes place within four (4) months prior to a Change in Control and that is made at the behest of an Acquiror or in contemplation of such Change in Control shall be treated as if such Separation From Service took place after such Change in Control, if such Change in Control actually occurs.
11.3 Separation from Service without Cause.
(a) The provisions of this Section 11.3 shall apply with respect to Participants who are Employees but are not party to an employment agreement or separate written agreement with the Company governing equity treatment upon Separation from Service.
(b) With respect to Restricted Share Units, provided that a Participant signs and does not revoke a release of claims, as more fully described in Section 11.3(g), upon the date such release becomes irrevocable (the “Release Finalization Date”),:
(i) any Restricted Share Units that were scheduled to vest within 365 days from the date of Separation from Service without Cause and were granted more than 365 days preceding the date of Separation from Service without Cause, shall vest effective as of the Release Finalization Date;
(ii) the RSU Separation Pro-Rated Number (as defined below) of Restricted Share Units that were scheduled to vest within 365 days from the date of Separation from Service without Cause, and were granted less than 365 days prior to the date of Separation from Service without Cause, shall vest effective as of the Release Finalization Date; and
(iii) any remaining time-vesting Restricted Share Units not vesting as provided herein shall be forfeited effective as of the date of Separation from Service without Cause.
The “RSU Separation Pro-Rated Number” for time-vesting Restricted Share Units shall be the product of (A) the total number of time-vesting Restricted Share Units granted under the Award Agreement less than 365 days prior to the date of Separation from Service without Cause and (B) the quotient of (1) the number of days from the grant date of such award to the date of Separation from Service without Cause and (2) 365.
(c) With respect to performance-based Restricted Share Units, provided that a Participant signs and does not revoke a release of claims, as more fully described in Section 11.3(g), upon the Release Finalization Date:
(i) the PSU Separation Pro-Rated Number (as defined below) of performance-based Restricted Share Units shall continue to vest, on the same terms that such performance-based Restricted Share Units would have vested had the Participant remained an Employee, but without the requirement of continued employment, provided, however, that if the vesting date under such terms is earlier than the Release Finalization Date, the performance-based Restricted Share Units shall vest on the Release Finalization Date; and
(ii) any remaining performance-based Restricted Share Units not vesting as provided herein above shall be forfeited effective as of the date of Separation from Service without Cause.
The “PSU Separation Pro-Rated Number” for performance-based Restricted Share Units shall be the product of (A) the total number of performance-based Restricted Share Units and (B) the quotient of (1) the number of days beginning on the first day
of the performance period and ending on the date of Separation from Service without Cause, and (2) the total number of days in the performance period (for example 1,095 days for a three-year performance period).
(d) With respect to Other Stock-based Awards, as contemplated by Section 9 of this Plan, the Committee shall have the authority to determine the terms and conditions of any such Other Stock-Based Award, including without limitation, the treatment of such awards upon a Participant’s employmentRetirement or Separation from Service without Cause at the time of grant of such Other Stock-Based Awards.
(e) A “Separation from Service without Cause” shall mean a Separation from Service that meets the following criteria:
(i) The Company provides written notice to the Participant that the Separation from Service results from one or more of the following:
(A) Workforce reduction or reorganization;
(B) A significant reduction in job responsibilities, accountabilities or authorities;
(C) A determination by the Company that the Participant’s qualifications, experience or abilities, are not sufficient to meet the demands and requirements of the job consistently at the nature and level expected for the title, role, authority, or position;
(D) a material reduction equal to ten percent (10%) or more in the Participant’s total target compensation (including base, bonus and equity) (other than as a result of an across-the-board reduction affecting substantially all Employees with similar authority, status, or servicejob title); or
(E) the Participant’s job being relocated to a location that is more than 50 miles from the Participant’s then current job location (“Relocation”) and the Participant declines Relocation;
(ii) at the time of the Separation from Service, the Participant has been actively at work (or on an approved leave of absence) during the six-month period immediately preceding the date of the Separation from Service and continues working through the date designated by the Company as the Participant’s Separation from Service date or any earlier date that is designated by the Company as the Participant’s release from duty date;
(iii) the Separation from Service is not for “Cause” as defined in this Plan;
(iv) the Separation from Service does not qualify as Retirement;
(v) the Company has not determined that the Separation from Service was for failure to meet the performance requirements of the Participant’s position, including violations of the UNFI Code of Conduct and/or UNFI stated values or commitments, as documented in written performance feedback previously provided to the Participant;
(vi) except as otherwise determined by the Authorized Officers (as defined below), the Participant has not accepted another position with (or to perform work for) the Company or a Subsidiary or Affiliate (or(whether as an associate, consultant, or agent) following the Separation from Service;
(vii) except as otherwise determined by the Authorized Officers, if the Participant was employed at a business unit of the Company that was sold or otherwise transferred to a new employer, (A) the Participant has not, within 120 days following such sale or other transfer, accepted a position of employment from the new employer at such business unit, or received an offer of a position from the new employer that does not require Relocation and with base pay that is not less than the Participant’s then current rate of base pay, even if the Participant has not accepted such offer, and (B) the Participant’s position with such business unit has not been continued immediately following the closing of that transaction by operation of law or otherwise. For purposes of this subparagraph (vii), “business unit” shall mean any subunit of their successors)the Company as defined at the discretion of the Company (by way of example, a subsidiary, district, region, or cost center may be “business units” under this subparagraph);
(viii) except as otherwise determined by the Authorized Officers, if the Participant’s job at a facility is involuntarily terminated because the Company ceases operations at that facility, but another employer commences operations at that facility, and, prior to such Separation from Service, (A) that other employer has not offered the Participant a position at that facility with base pay that is not less than the Participant’s current base pay from the Company, even if the Participant does not accept such offer, and (B) the Participant has not accepted any position with that other employer;
(ix) except as otherwise determined by the Authorized Officers, if the Company has outsourced the Participant’s job function, the Participant has not accepted any position with the outsource vendor and the outsource vendor has not offered the Participant a position that does not require Relocation and with base pay that is not less than the Participant’s current base pay, even if the Participant has not accepted such offer; and
(x) except as otherwise determined by the Authorized Officers, the Participant has not failed to return Company property on or before the Participant’s last day of work.
(f) The determination by any two of the Chief Executive Officer, Chief Human Resources Officer, or Chief Legal Officer (the “Authorized Officers”) of the Company that a Separation from Service constitutes a Separation from Service without Cause for any reason, all outstanding Awardspurposes of the foregoing shall constitute a final determination of such Participantstatus for purposes of the vesting provisions described herein with no further action required by the Committee; the decisions of such two officers, taken together shall vest, become immediately exercisablebe recorded and payableretained with the books and have all restrictions lifted.records relative to equity awards of the Company.
13.2 Accelerated Vesting.(g) To receive the vesting treatment described in this section 11.3, Participants must sign and not revoke a release of claims and such other agreements as may be requested by the Company. Any release of claims must be in the form and manner prescribed by the Company. The Committee may (indecision whether any other agreements, including but not limited to restrictive covenants, are included shall be made in the discretion of the Company. To the extent any Award vesting in accordance with this Section 11.3 is subject to Section 409A of the Code, and the period for the Participant to consider and/or revoke a release of claims spans two calendar years, then the extent applicable),settlement/payment of Shares pursuant to that Award shall in its discretion, provide in any Award Agreement, or,all cases occur in the eventsecond calendar year.
Section 12. Change in Control, may take such actions as it deems appropriate to provide, for the acceleration of the exercisability, vesting and/or settlement in connection with such Change in Control of each or any outstanding Award or portion thereof and Shares acquired pursuant thereto upon such conditions (if any), including termination of the Participant’s service prior to, upon, or following such Change in Control, to such extent as the Committee shall determine. In the event of a Change of Control, and without the consent of any Participant, the Committee may, in its discretion, provide that for a period of at least fifteen (15) days prior to the Change in Control, any Options or Stock Appreciation Rights shall be exercisable as to all Shares subject thereto and that upon the occurrence of the Change in Control, such Stock Options or Stock Appreciation Rights shall terminate and be of no further force and effect.Control.
13.312.1 Assumption, Continuation or Substitution. Substitution. In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the "“Acquiror"”), may (in accordance with Section 409A, to the extent applicable), without the consent of any Participant, either assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable; provided, that in the event of such an assumption, the Acquiror must grant the rights set forth in Section 13.112.2 of this Plan to the Participant in respect of such assumed Awards. For purposes of this Section, if so determined by the Committee, in its discretion, an Award denominated in Shares shall be deemed assumed if, following the Change in Control, the Award (as adjusted, if applicable, pursuant to Section 4.24.3 hereof) confers the right to receive, subject to theany vesting or other terms and conditions of the Plan and the applicable Award Agreement, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of StockShare on the effective date of the Change in Control was entitled; provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each Share subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Valuefair market value to the per share consideration received by holders of Shares pursuant to the Change in Control.
13.412.2 Vesting of Assumed or Continued Awards. Unless otherwise expressly provided in (i) the Award Agreement, (ii) an employment agreement or other written agreement with the Company or a Subsidiary and a Participant, or (iii) the definitive transaction agreement governing such Change in Control, in the event of a Change in Control in which the Acquiror does assume or continue outstanding Awards upon the Change in Control, if the Participant’s employment with or service to the Company or a Subsidiary (or any of their successors) is terminated involuntarily for any reason other than Cause, or a Participant terminates his or her employment or service for Good Reason, within twelve (12) months of such Change in Control:
(a) Stock Options and Stock Appreciation Rights shall become fully vested as of the Participant’s Separation from Service, and exercisable no later than 30 days following such Separation from Service termination date;
(b) Restricted Shares and Restricted Share Units shall become fully vested as of such Separation from Service, and shall be delivered no later than 30 days following such Separation from Service (or such other date permitted by Section 409A of the Code); and
(c) Any then-in-progress Performance Awards shall become fully vested at target performance levels as of such Separation from Service, and shall be delivered no later than 30 days following such Separation from Service (or such other date permitted by Section 409A of the Code). Any outstanding Performance Awards relating to performance periods ending prior to the Separation from Service which have been earned but not paid shall become immediately payable (unless otherwise required to be paid on a different date pursuant to Section 409A of the Code).
12.3 No Assumption or Continuation of Awards. Unless otherwise expressly provided in (i) the Award Agreement, (ii) an employment agreement or similar written agreement with the Company or a Subsidiary, or (iii) the definitive transaction agreement governing such Change in Control, in the event of a Change in Control in which the Acquiror does not assume or continue outstanding Awards upon the Change in Control, all outstanding Awards that are not assumed or continued shall be treated as follows (to the extent permitted by Section 409A of the Code):
(a) Stock Options and Stock Appreciation Rights shall become fully vested and exercisable as of date and time immediately prior to the Change in Control;
(b) Restricted Shares and Restricted Share Units shall become fully vested as of the date and time immediately prior to the Change in Control and shall settle immediately following the Change in Control (or such other date permitted by Section 409A of the Code); and
(c) Unless otherwise determined by the Committee pursuant to Section 12.5, to the extent permitted by Section 409A of the Code, any Performance Awards relating to performance periods that will not have ended as of the date of a Change in Control shall automatically vest and become payable at the target level of performance. Any outstanding Performance Awards relating to performance periods ending prior to the Change in Control date which have been earned but not paid shall become immediately payable.
12.4 Cash-Out of Awards. TheNotwithstanding Sections 12.2 and 12.3, the Committee may (in accordance with Section 409A, to the extent applicable), in its discretion at or after grant and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award or a portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested Share including pursuant to Section 13.2 subject to such Award, whether vested or unvested, in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Valuefair market value equal to the Fair Market Valuefair market value of the consideration to be paid per Share in the Change in Control, reduced by the exercise or purchase price per share, if any, under such Award (which payment may, for the avoidance of doubt, be $0, in the event the per share exercise or purchase price of an Award is greater than the per share consideration in connection with the Change in Control). In the event such determination is made by the Committee, the amount of such payment (reduced by applicable withholding taxes, if any), if any, shall be paid to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and may be paid in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
13.512.5 Performance Awards.Awards. The Committee may (in accordance with Section 409A, to the extent applicable), in its discretion at or after grant, provide that in the event of a Change in Control, (i) any outstanding Performance Awards relating to performance periods ending prior to the Change in Control which have been earned but not paid shall become immediately payable, (ii) all then-in-progress performance periods for Performance Awards that are outstanding shall end, and either (A) any or all Participants shall be deemed to have earned an award equal to the relevant target award
opportunity for the performance period in question, or (B) at the Committee’s discretion, the Committee shall determine the extent to which performance criteria have been met with respect to each such Performance Award, if at all, but not above target, and (iii) the Company shall cause to be paid to each Participant such partial or full Performance Awards, in cash, Shares or other property as determined by the Committee, within thirty (30) days of such Change in Control, based on the Change in Control consideration, which amount may be zero if applicable. In the absence of such a determination, any Performance Awards relating to performance periods that will not have ended as of the date of a Change in Control shall be terminated and canceled for no further consideration.
Section 14. 13. Amendment and Termination.
14.113.1 Amendments to the Plan. Plan. The Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time (and in accordance with Section 409A of the Code with regard to Awards subject thereto); provided that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement for which or with which the Board deems it necessary or desirable to comply.
14.213.2 Amendments to Awards. Awards. Subject to the restrictions of the Plan, including Section 6.2, hereof, the Committee may waive any conditions or rights under, amend any terms of or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively in time (and in accordance with Section 409A of the Code with regard to Awards subject thereto); provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary.beneficiary (other than to the extent necessary to conform to Section 409A).
14.313.3 Adjustments of Awards upon the Occurrence of Certain Unusual or Nonrecurring Events. Events. The Committee is hereby authorized to make equitable and proportionate adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (and shall make such adjustments for the events described in Section 4.2 hereof) affecting the Company or any Subsidiary or Affiliate, or the financial statements of the Company or any Subsidiary or Affiliate, or of changes in applicable laws, regulations or accounting principles.
14.413.4 Foreign Employees.Employees. In order to facilitate the making of any Award or combination of Awards under the Plan, the Committee may provide for such special terms for Awards to Participants who are foreign nationals or who are employed by the Company or any Subsidiary outside of the United States of America as the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Moreover, the Committee may approve such supplements to or amendments, restatements or alternative versions of the Plan as it may consider necessary or appropriate for such purposes, without thereby affecting the terms of the Plan as in effect for any other purpose, and the Corporate Secretary or other appropriate officer of the Company may certify any such document as having been approved and adopted in the same manner as the Plan. No such special terms, supplements, amendments or restatements, however, shall include any provisions that are inconsistent with the terms of the Plan as then in effect unless the Plan could have been amended to eliminate such inconsistency without further approval by the shareholders of the Company.
Section 14. General Provisions.
Section 15. General Provisions.
15.114.1 Limited Transferability of Awards. Awards. Except as otherwise provided in the Plan, an Award Agreement or by the Committee at or after grant, no Award shall be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant, except by will or the laws of descent and distribution. No transfer of an Award by will or by laws of descent and distribution shall be effective to bind the Company unless the Company shall have been furnished with written notice thereof and an authenticated copy of the will and/or such other evidence as the Committee may deem necessary or appropriate to establish the validity of the transfer. No transfer of an Award for value shall be permitted under the Plan.
15.214.2 Dividend Equivalents. Equivalents. In the sole and complete discretion of the Committee, but subject to any conditions set forth in this Plan, an Award (other than an Option or SAR) may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities or other property, on a current or deferred basis. All dividend or dividend equivalents which are not paid currently may, atbut only when the Committee’s discretion, accrue interest, or be reinvested into additional Shares.related Award vests. In the case of dividends or dividend equivalents credited in connection with Performance Awards , such amounts shall be subject to the same restrictions as apply to dividends or dividend equivalents payable with respect to the applicable Performance Award type (such as Restricted Shares or Restricted Share Units). The total number of Shares available for grant under Section 4 shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as Performance Awards.until payment thereof. Notwithstanding the foregoing, with respect to an Award subject to Section 409A of the Code, the payment, deferral or crediting of any dividends or dividend equivalents shall conform to the requirements of Section 409A of the Code and such requirements shall be specified in writing.
15.3.14.3 Compliance with Section 409A of the Code. Code. No Award (or modification thereof) shall provide for deferral of compensation that does not comply with Section 409A of the Code unless the Committee, at the time of grant, specifically provides that the Award is not intended to comply with Section 409A of the Code. Notwithstanding any provision of this Plan to the contrary, if one or more of the payments or benefits received or to be received by a Participant pursuant to an Award would cause the Participant to incur any additional tax or interest under Section 409A of the Code, the Committee may reform such provision to maintain to the maximum extent practicable the original intent of the applicable provision without violating the provisions of Section 409A of the Code. In addition, if a Participant is a Specified Employee at the time of his or her
Separation from Service, to the extent necessary to avoid the imposition of taxes under Section 409A, any payments with respect to any Award subject to Section 409A of the Code to which the Participant would otherwise be entitled by reason of such Separation from Service shall be made on the date that is six months after the Participant’s Separation from Service (or, if earlier, the date of the Participant’s death). Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local or foreign law. The Company shall not be liable to any Participant for any tax, interest, or penalties that Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.
15.414.4 No Rights to Awards. Awards. No Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each Participant.
15.514.5 Share Certificates. Certificates. All certificates for Shares or other securities of the Company or any Subsidiary or Affiliate delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the SEC or any state securities commission or regulatory authority, any stock exchange or other market upon which such Shares or other securities are then listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.
15.614.6 TaxWithholding. Withholding. A Participant may be required to pay to the Company or any Subsidiary or Affiliate, and the Company or any Subsidiary or Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan, or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding or other tax-related obligations in respect of an Award, its exercise or any other transaction involving an Award, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes. The Committee may provide for additional cash payments to holders of Options to defray or offset any tax arising from the grant, vesting, exercise or payment of any Award. Without limiting the generality of the foregoing, the Committee may in its discretion permit a Participant to satisfy or arrange to satisfy, in whole or in part, the tax obligations incident to an Award by: (a) electing to have the Company withhold Shares or other property otherwise deliverable to such Participant pursuant to the Award (provided, however, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy required federal, state local and foreign withholding obligations using the maximum statutory withholding rates for federal, state, local and/or foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income) and/or (b)
tendering to the Company Shares owned by such Participant (or by such Participant and his or her spouse jointly) and purchased or held for the requisite period of time, if any, as may be required to avoid the Company’s or the Affiliates’Subsidiaries’ or Subsidiaries’Affiliates’ incurring an adverse accounting charge, based, in each case, on the Fair Market Valuefair market value of the Shares on the payment date as determined by the Committee. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.
15.7
14.7 Award Agreements. Agreements. Each Award hereunder shall be evidenced by an Award Agreement that shall be delivered (including, but not limited to, through an online equity incentive plan management portal) to the Participant and may specify the terms and conditions of the Award and any rules applicable thereto. In the event of a conflict between the terms of the Plan and any Award Agreement, the terms of the Plan shall prevail. The Committee shall, subject to applicable law, determine the date an Award is deemed to be granted. The Committee or, except to the extent prohibited under applicable law, its delegate(s) may establish the terms of agreements or other documents evidencing Awards under this Plan and may, but need not, require as a condition to any such agreement’s or document’s effectiveness that such agreement or document be executed by the Participant, including by electronic signature or other electronic indication of acceptance, and that such Participant agree to such further terms and conditions as specified in such agreement or document. The grant of an Award under this Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in this Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the agreement or other document evidencing such Award.
15.814.8 Restrictive Covenants. Each Award Agreement shall include, or be deemed to include, restrictive covenants as determined by the Committee or its delegate and each Participant shall agree to adhere to such covenants as a condition to receipt of an Award.
14.9 Other Compensation Arrangements. Arrangements. Nothing contained in the Plan shall prevent the Company or any Subsidiary or Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of Options, Restricted Shares, Restricted Share Units, Other Stock-Based Awards or other types of Awards provided for hereunder. No payment under the Plan shall be taken into account in determining any benefits under any pension, retirement,
savings, profit sharing, group insurance, welfare or benefit plan of the Company or any Subsidiary or Affiliate unless provided otherwise in such other plan.
15.914.10 No Right to Employment. Employment or Other Service. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ or other service of the Company or any Subsidiary or Affiliate. Further, the Company or a Subsidiary or Affiliate may at any time dismiss a Participant from employment or service, free from any liability or any claim under the Plan, unless otherwise expressly provided in an Award Agreement.
15.1014.11 No Rights as Stockholder. Stockholder. Subject to the provisions of the Plan and the applicable Award Agreement, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until such person has become a holder of such Shares. Notwithstanding the foregoing, in connection with each grant of Restricted Shares hereunder, the applicable Award Agreement shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Shares.
15.1114.12 Governing Law. Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Delaware without giving effect to conflicts of laws principles.
15.1214.13 Severability. Severability. If any provision of the Plan or any Award is, or becomes, or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.
15.1314.14 Other Laws. Laws. The Company will not be obligated to issue, deliver or transfer any Shares pursuant to the Plan or to remove restrictions from Shares previously delivered pursuant to the Plan until: (a) all conditions of the applicable Award Agreement have been met or removed to the satisfaction of the Committee; (b) all other legal matters, including receipt of consent or approval of any regulatory body and compliance with any state or federal securities or other law, in connection with the issuance and delivery of such Shares have been satisfied; (c) the Participant or holder or beneficiary of the Shares or Award has executed and delivered to the Company such representations or agreements as the Committee may consider appropriate to satisfy the requirements of any state or federal securities or other law; and (d) such issuance would not entitle the Company to recover amounts under Section 16(b) of the Exchange Act from such Participant or holder or beneficiary of the Shares or Award. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel necessary to the lawful issuance of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue the Shares as to which such requisite authority shall not have been obtained.
15.1414.15 No Trust or Fund Created. Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Subsidiary or Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Subsidiary or Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Subsidiary or Affiliate.Subsidiary.
15.1514.16 No Fractional Shares. Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other propertyany obligation to deliver fractional Shares shall be paid or transferred in lieudeemed fully satisfied by the delivery of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.the next lower number of whole Shares.
15.1614.17 ClawbackClawback; Cancellation of Awards. Each Award granted to a Participant under the Plan shall be subject to forfeiture or repayment pursuant to the terms of any applicable compensation recovery policy adopted by the Company as in effect from time to time, including any such policy that may be adopted or amended to comply with the Dodd-Frank Wall Street Reform and Consumer Protection Act or any rules or regulations issued by the SEC or the NasdaqNew York Stock Market.Exchange. In addition, the Committee or the Board may cancel unpaid Awards held by a Participant from whom the Committee or the Board would be entitled to recover compensation under any compensation recovery policy then in effect.
15.1714.18 Minimum Vesting Requirements.Requirements. Except for Substitute Awards, as determined by the Committee following the grant of an Award in connection with the death disability or retirementDisability of the Participant, or in the event of a Change in Control or a Separation from Service without Cause, Awards granted hereunder shall have a Vesting Period of not less than one (1) year from the date of grant; provided, that the Committee has the discretion to waive this requirement with respect to an Award at the time of granting such Award so long as the total number of Shares that are issued under this Plan pursuant to Awards having an originally stated Vesting Period of less than one year from the date of grant (or, in the case of vesting of Performance Awards or other Awards the vesting of which is subject to the achievement of performance-based
objectives, over a period of less than one year measured from the commencement of the period over which performance is evaluated) shall not exceed 5% of the Share Reserve.
15.1814.19 Headings. Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.
Section 16. 15. Term of The Plan.
16.115.1 Effective Date. Date. The Plan, as amended and restated as set forth herein, shall be effective and will amend and restate the previously effective plan, upon the date that it is adopted by the Board (the “Effective Date”), subject to the approval of the Planapproved by the Company’s stockholders at a meeting duly held in accordance with applicable law within twelve (12) months following the Effective Date. Upon such approval of the Plan, all Awards granted under the Plan on or after the (the “Effective Date shall be fully effective as if such approval had occurred on the Effective Date.”). If the Plan is not approved as set forth in this section, this amendment and restatement of the Plan will not become effective and any Awards granted under the Plan following the Effective Date shall be nullsubject to the terms of the Plan as in effect prior to the amendment and void and of no effect.restatement.
16.215.2 Expiration Date. Date. No new Awards shall be granted under the Plan after the tenth (10th) anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award or to waive any conditions or rights under any such Award shall, continue after the tenth (10th) anniversary of the Effective Date.
A-25
Annex B
This proxy statement refers to the non-GAAP financial measure of Adjusted EBITDA, Adjusted ROIC (return on invested capital), Adjusted EPS (earnings per diluted share), and Adjusted EBITDA leverage ratio. These metrics are used by the Company in evaluating our performance for purposes of our executive compensation program. We believe the non-GAAP financial measure provides investors with useful supplemental information about the performance of our business and insight into the metrics we use for executive compensation purposes.
Non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and therefore may not be comparable with calculations of similar measures for other companies. Management does not intend these items to be considered in isolation or as a substitute for the related GAAP measure.
Capitalized terms used in the notes to this table but not defined in this proxy statement are used as defined in the notes to the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 30, 2022 (the Annual Report), to which you should refer for further information.
Reconciliation of net income from continuing operations and income from discontinued operations, net of tax to Adjusted EBITDA (unaudited)
(in millions)
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended
July 30, 2022
(52 weeks) | | Fiscal Year Ended
July 31, 2021
(52 weeks) | | Fiscal Year Ended
August 1, 2020
(52 weeks) |
| Net income (loss) from continuing operations | | $ | 254 | | | $ | 149 | | | $ | (251) | |
| Adjustments to continuing operations net income (loss): | | | | | | |
| Less net income attributable to noncontrolling interests | | (6) | | | (6) | | | (5) | |
Net periodic benefit income, excluding service cost(1) | | (40) | | | (85) | | | (39) | |
| Interest expense, net | | 155 | | | 204 | | | 192 | |
| Other, net | | (2) | | | (8) | | | (4) | |
Provision (benefit) for income taxes(2) | | 56 | | | 34 | | | (91) | |
| Depreciation and amortization | | 285 | | | 285 | | | 282 | |
| Share-based compensation | | 43 | | | 49 | | | 34 | |
Goodwill impairment charges(3) | | — | | | — | | | 425 | |
LIFO charge(4) | | 158 | | | 24 | | | 18 | |
Restructuring, acquisition and integration related expenses(5) | | 21 | | | 56 | | | 87 | |
(Gain) loss on sale of assets(6) | | (87) | | | (4) | | | 18 | |
Multiemployer pension plan withdrawal (benefit) charges(7) | | (8) | | | 63 | | | — | |
Notes receivable charges(8) | | — | | | — | | | 13 | |
Legal reserve charge, net of settlement income(9) | | — | | | — | | | 1 | |
Other retail expense(10) | | — | | | 5 | | | $ | 1 | |
| Adjusted EBITDA of continuing operations | | 829 | | | 766 | | | 681 | |
Adjusted EBITDA of discontinued operations(11) | | — | | | 4 | | | 10 | |
| Adjusted EBITDA | | $ | 829 | | | $ | 770 | | | $ | 691 | |
| | | | | | |
Income (loss) from discontinued operations, net of tax(11) | | $ | — | | | $ | 6 | | | $ | (18) | |
| Adjustments to discontinued operations net income (loss): | | | | | | |
| Benefit for income taxes | | — | | | (1) | | | (5) | |
Restructuring, store closure and other charges, net(12) | | — | | | (1) | | | 33 | |
Adjusted EBITDA of discontinued operations(11) | | $ | — | | | $ | 4 | | | $ | 10 | |
(1)Fiscal 2021 includes a postretirement settlement gain of $17 million associated with the termination of remaining corporate plans. Fiscal 2020 includes a lump sum defined pension plan settlement expense of $11 million.
(2)Fiscal 2020 includes the tax benefit from the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which includes the impact of tax loss carrybacks to 35% tax years allowed under the CARES Act.
(3)Fiscal 2020 primarily reflects a goodwill impairment charge attributable to a reorganization of our reporting units and a sustained decrease in market capitalization and enterprise value of the Company, resulting in a decline in the estimated fair value of the U.S. Wholesale reporting unit. In addition, this charge includes a goodwill finalization charge attributable to the SUPERVALU acquisition and an asset impairment charge.
(4)During fiscal 2022, the Company revised its definition of Adjusted EBITDA to exclude the impact of the non-cash LIFO charge. Prior periods have been revised to conform to the current year presentation.
(5)Fiscal 2022 and fiscal 2021 primarily reflects costs associated with advisory and transformational activities to position our business for further value-creation. In addition, fiscal 2021 includes costs associated with distribution center consolidations. Fiscal 2020 primarily reflects Shoppers asset impairment charges, closed property and distribution center impairment charges and costs, and administrative fees associated with integration activities. Refer to Note 4—Restructuring, Acquisition and Integration Related Expenses in Part II, Item 8 of the Annual Report on Form 10-K for additional information.
(6)Fiscal 2022 primarily reflects the gain on sale of our Riverside, California distribution center in the third quarter of fiscal 2022. Fiscal 2020 primarily reflects a $50 million accumulated depreciation and amortization charge related to the requirement to move Retail from discontinued operations to continuing operations, partially offset by $32 million of gains on the sale of distribution centers and other assets.
(7)Fiscal 2022 reflects an adjustment to multiemployer withdrawal charge estimates. Fiscal 2021 includes charges related to withdrawal liabilities from three Retail multiemployer pension plans.
(8)Reflects reserves and charges for notes receivable issued by the SUPERVALU business prior to its acquisition to finance the purchase of stores by its customers.
(9)Reflects a charge to settle a legal proceeding and income received to settle a separate legal proceeding.
(10)Reflects expenses associated with event-specific damages to certain retail stores.
(11)We believe the inclusion of discontinued operations results within Adjusted EBITDA provides investors a meaningful measure of total performance.
(12)Amounts represent store closure charges and costs, operational wind-down and inventory charges, and asset impairment charges related to discontinued operations. Fiscal 2021 also reflects income related to a severance benefit amount.
Adjusted EBITDA is a non-GAAP performance metric. We define Adjusted EBITDA as a consolidated measure inclusive of continuing and discontinued operations results, which we reconcile by adding Net income (loss) from continuing operations, less Net income attributable to noncontrolling interests, plus Non-operating income and expenses, including Net periodic benefit income, excluding service cost, Interest expense, net and Other, net, plus Provision (benefit) for income taxes and Depreciation and amortization all calculated in accordance with GAAP, plus adjustments for Share-based compensation, non cash LIFO charge or benefit, Restructuring, acquisition and integration related expenses, Goodwill impairment charges, (Gain) loss on sale of assets, certain legal charges and gains, certain other non-cash charges or other items, as determined by management, plus Adjusted EBITDA of discontinued operations calculated in a manner consistent with the results of continuing operations, outlined above.
Reconciliation of Non-GAAP Financial Measures—Adjusted Return on Invested Capital
(in millions, except percentages)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fiscal 2022 As Reported (1) | | LIFO Charge(2) | | Restructuring, Acquisition and Integration Related Expenses(3) | | Gain on Sale of Assets(4) | | Pension Income | | Multiemployer Pension Plan Withdrawal Benefit(5) | | Adjust Invested Capital to Averages(6) | | Fiscal 2022 As Adjusted |
| Operating income (loss) | | $ | 423 | | | $ | 158 | | | $ | 21 | | | $ | (87) | | | $ | 40 | | | $ | (8) | | | $ | — | | | $ | 547 | |
Effective tax rate(7) | | 26.1 | % | | 26.1 | % | | 26.1 | % | | 26.1 | % | | 26.1 | % | | 26.1 | % | | 26.1 | % | | 26.1 | % |
| Tax on operating Income | | (111) | | | (41) | | | (6) | | | 23 | | | (10) | | | 2 | | | — | | | $ | (143) | |
| Net operating profit after tax | | $ | 312 | | | $ | 117 | | | $ | 15 | | | $ | (64) | | | $ | 30 | | | $ | (6) | | | $ | — | | | $ | 404 | |
| | | | | | | | | | | | | | | | |
| Total debt and finance lease obligations | | $ | 2,159 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 131 | | | 2,290 | |
| Total stockholder’s equity | | 1,792 | | | — | | | — | | | — | | | — | | | — | | | (139) | | | 1,653 | |
| Total invested capital | | $ | 3,951 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | (8) | | | $ | 3,943 | |
| | | | | | | | | | | | | | | | |
| Return on invested capital | | 7.9 | % | | | | | | | | | | | | | | 10.2 | % |
(1)All “As Reported” financial data below is shown as it was filed within our Annual Report on Form 10-K for the fiscal year ended July 30, 2022.
(2)During fiscal 2022, the Company revised its definition of Adjusted ROIC to exclude the impact of the non-cash LIFO charge.
(3)Primarily reflects costs associated with advisory and transformational activities to position our business for further value-creation. Refer to Note 4—Restructuring, Acquisition and Integration Related Expenses in Part II, Item 8 of the Annual Report on Form 10-K for additional information.
(4)Primarily reflects the gain on sale of our Riverside, California distribution center in the third quarter of fiscal 2022.
(5)Reflects an adjustment to previously multiemployer withdrawal charge estimates.
(6)Calculated based on total debt and equity utilizing the average of fiscal 2021 and fiscal 2022 ending balances.
(7)The adjusted effective tax rate is calculated based on adjusted net income before tax, and its impact reflects the exclusion of changes to uncertain tax positions, valuation allowances, tax impacts related to the exercise of share-based compensation awards and discrete GAAP tax items which could impact the comparability of the operational effective tax rate.
Adjusted ROIC is a non-GAAP performance metric.
We define adjusted ROIC as Adjusted EBITDA (as publicly disclosed, plus or minus any other one-time adjustments made by management), less Depreciation & Amortization expense, excluding the impact of pension income/expense, plus Other income, less Stock-based comp expense,
1.Tax-effected by our adjusted tax rate,
2.Divided by the average invested capital balance, comprised of the sum of
a.The average quarter-ending debt (face value) balances, and
b.The average quarter-ending book value of equity balances
Reconciliation of Net income (loss) per Diluted Common Share to Adjusted Net income per Diluted Common Share
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended
July 30, 2022
(52 weeks) | | Fiscal Year Ended
July 31, 2021
(52 weeks) | | Fiscal Year Ended
August 1, 2020
(52 weeks) |
| Net income (loss) attributable to UNFI per diluted common share | | $ | 4.07 | | | $ | 2.48 | | | $ | (5.10) | |
Goodwill impairment charges(1) | | — | | | — | | | 7.91 | |
Restructuring, acquisition, and integration related expenses(2) | | 0.34 | | | 0.93 | | | 1.62 | |
(Gain) loss on sale of assets(3) | | (1.42) | | | (0.06) | | | 0.32 | |
LIFO charge(4) | | 2.59 | | | 0.41 | | | 0.33 | |
Benefit plan settlement (gain) charges(5) | | — | | | (0.28) | | | 0.21 | |
Surplus property depreciation and interest expense(6) | | 0.05 | | | 0.05 | | | 0.15 | |
Multiemployer pension plan withdrawal (benefit) charges(7) | | (0.13) | | | 1.05 | | | — | |
Notes receivable charges(8) | | — | | | — | | | 0.23 | |
Loss on debt extinguishment(9) | | 0.10 | | | 0.51 | | | — | |
Legal reserve charge, net of settlement income(10) | | — | | | — | | | 0.02 | |
Other retail expense(11) | | — | | | 0.06 | | | 0.03 | |
Discontinued operations store closures and other charges, net(12) | | — | | | (0.07) | | | 0.63 | |
Tax impact of adjustments and adjusted effective tax rate(13) | | (0.77) | | | (0.90) | | | (2.99) | |
| Impact of diluted shares | | — | | | — | | | (0.09) | |
Adjusted net income per diluted common share (Retail in Discontinued Operations)(14) | | 4.83 | | | 4.18 | | | 3.27 | |
Depreciation and amortization adjustment(15) | | — | | | — | | | (0.31) | |
| Adjusted net income per diluted common share (Retail in Continuing Operations) | | $ | 4.83 | | | $ | 4.18 | | | $ | 2.96 | |
(1)Primarily reflects a goodwill impairment charge attributable to a reorganization of our reporting units and a sustained decrease in market capitalization and enterprise value of the Company, resulting in a decline in the estimated fair value of the U.S. Wholesale reporting unit. In addition, this charge includes a goodwill finalization charge attributable to the SUPERVALU acquisition and an asset impairment charge.
(2)Primarily reflects costs associated with advisory and transformational activities to position our business for further value-creation. Refer to Note 4—Restructuring, Acquisition and Integration Related Expenses in Part II, Item 8 of the Annual Report on Form 10-K for additional information.
(3)Fiscal 2022 primarily reflects the gain on sale of our Riverside, California distribution center in the third quarter. Fiscal 2020 primarily reflects a $50 million accumulated depreciation and amortization charge related to the requirement to move Retail from discontinued operations to continuing operations, partially offset by $34 million of gains on the sale of distribution centers and other assets.
(4)During fiscal 2022, the Company revised its definition of Adjusted EPS to exclude the impact of the non-cash LIFO charge. Prior periods have been revised to conform to the current year presentation.
(5)Fiscal 2021 includes an other postretirement settlement gain of $17 million associated with the termination of remaining corporate plans. Fiscal 2020 includes a lump sum defined benefit pension plan settlement expense of $11 million associated with the acceleration of a portion of the accumulated unrecognized actuarial loss as a result of the lump sum settlement payments.
(6)Reflects surplus, non-operating property depreciation and interest expense, including accelerated depreciation related to a location on which we recognized a gain that is included in Restructuring, acquisition and integration related expenses.
(7)Fiscal 2022 reflects an adjustment to multiemployer withdrawal charge estimates. Fiscal 2021 includes charges related to withdrawal liabilities from three Retail multiemployer pension plans.
(8)Reflects reserves and charges for notes receivable issued by the SUPERVALU business prior to its acquisition to finance the purchase of stores by its customers.
(9)Reflects non-cash charges related to the acceleration of unamortized debt issuance costs from debt prepayments.
(10)Reflects a charge to settle a legal proceeding and income received to settle a separate legal proceeding.
(11)Reflects expenses associated with event-specific damages to certain retail stores.
(12)Amounts represent store closure charges and costs, operational wind-down and inventory charges, and asset impairment charges related to discontinued operations. Fiscal 2021 also reflects the impact of a severance benefit amount.
(13)Represents the tax effect of the pre-tax adjustments using an adjusted effective tax rate. The adjusted effective tax rate is calculated based on adjusted net income before tax, and its impact reflects the exclusion of changes to uncertain tax positions, valuation allowances, tax impacts related to the exercise of share-based compensation awards and discrete GAAP tax items which could impact the comparability of the operational effective tax rate. The Company believes using this adjusted effective tax rate will provide better consistency across the interim reporting periods since each of these discrete items can cause volatility in the GAAP tax rate that is not indicative of the true operations of the Company. By providing this non-GAAP measure, management intends to provide investors with a meaningful, consistent comparison of the Company’s effective tax rate on ongoing operations.
(14)The computation of diluted earnings per share is calculated using diluted weighted average shares outstanding, which includes the net effect of dilutive stock awards.
(15)In fiscal 2020 the Company recorded a pre-tax charge of $50.0 million related to the change in presentation of Retail to continuing operations. This charge was calculated under GAAP as the depreciation and amortization expense that would have been recognized had Retail been included in continuing operations for the full time period since the SUPERVALU acquisition date. This adjustment attributes the pro rata amount of the non-cash charge recognized in the fourth quarter of fiscal 2020 to the applicable time periods in which it would have been recognized had Retail been included within continuing operations since the acquisition date. UNFI believes the inclusion of this adjustment is a useful indicator of performance to both management and investors, as it provides a relative comparison to how UNFI’s results of operations will be reported on an ongoing basis.
Calculation of Net Debt to Adjusted EBITDA leverage ratio
(in millions, except ratios)
| | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year Ended
July 30, 2022
(52 weeks) | | Fiscal Year Ended
July 31, 2021
(52 weeks) | | Fiscal Year Ended
August 1, 2020
(52 weeks) |
| Current portion of long-term debt and finance lease liabilities | | $ | 27 | | | $ | 120 | | | $ | 83 | |
| Long-term debt | | 2,109 | | | 2,175 | | | 2,427 | |
| Long-term finance lease liabilities | | 23 | | | 35 | | | 143 | |
| Less: Cash and cash equivalents | | (44) | | | (41) | | | (47) | |
| Net carrying value of debt and finance lease liabilities | | 2,115 | | | 2,289 | | | 2,606 | |
Adjusted EBITDA(1) | | $ | 829 | | | $ | 770 | | | $ | 691 | |
| Adjusted EBITDA leverage ratio | | 2.6 | x | | 3.0 | x | | 3.8 | x |
(1)During fiscal 2022, the Company revised its definition of Adjusted EBITDA to exclude the impact of the non-cash LIFO charge. Prior periods have been revised to conform to the current year presentation.
Letter from Our Independent Chair of the Board
Letter from Our CEO
