SECURITIES AND EXCHANGE COMMISSION
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November 5, 2019
DEAR FELLOW STOCKHOLDER:
Thank you for your investment in United Natural Foods, Inc. and
Letter from Our Independent Chair of the trust youBoard
Dear Fellow Stockholders,
I have placed inbeen honored to serve as the Independent Chair of our Board of Directorsover the last year as we have begun to execute against our Fuel the Future strategy and have built on our strong foundation to position our Company for future growth. We continue to elevate and execute our programs and policies related to good corporate governance practices, including our robust board refreshment efforts, our environmental, social and governance (ESG) initiatives, human capital management matters, and our commitment to diversity and inclusion. For the fifth consecutive year, we have engaged with our investors to hear their feedback and respond in a manner that allows us to deliver for our associates and stockholders.
Board Evaluation and Refreshment. We are committed to maintaining a diverse Board with relevant skills and experience to oversee our Company’s long-term success.Fiscal 2019 Highlights and Supervalu Acquisition
Fiscal 2019 was a transformative year for UNFI. We completed the acquisition of SUPERVALU INC. in the first quarter of fiscal 2019, which accelerated our “Build Out the Store” strategy and transformed UNFI into North America’s premier grocery wholesaler. The new UNFI now provides an unmatched selection of products and services, greater scale, and enhanced technologies designed to enable allstrategy. After thoughtful evaluation of our customersBoard composition and with the help of a third-party recruiter, we appointed Shamim Mohammad to our Board in February 2022. We believe that Mr. Mohammad’s experience in strategic leadership and development of forward-thinking technology solutions make him a valuable addition to our Board. Part of our Board’s commitment to strong oversight is a robust Board and Committee evaluation process. In fiscal 2022, we engaged a third party to facilitate that process, something we do every two to three years to ensure we get a fresh perspective and objective feedback.
Better For All. Our 2021 Better for All Report, issued in March of 2022, expanded on our six impact focus areas to provide a more in-depth look at our direct and indirect impacts across our value chain. This approach better competereflects how our long-term, ambitious ESG goals align with our operations and succeedstrategy.We are also extremely proud that in April 2022 our emissions reduction targets were validated by the Science Based Targets initiative, and we are excited to have launched our Climate Action Hub to foster engagement with our suppliers on these important issues.
Stockholder Engagement and Commitment to Good Governance. We continue to be committed to engaging with, and responding to feedback from, you, our stockholders. This summer we conducted our fifth annual stockholder engagement program. We are happy to report that once again we spoke with holders of over 50% of our outstanding common shares across a dynamic and ever-changing retail environment. Integrationbroad spectrum of matters. These sessions provide us the two companies continues,opportunity to discuss a wide variety of topics with our stockholders, and we have realized synergies quicker thanmade several enhancements to our executive compensation and governance programs over the years as a result of these conversations. For example, in fiscal 2022, we expected.In Julyseparated the role of 2019, we held our first National Expo since the Supervalu acquisition, which provided an opportunity for 6,000 customersCEO and suppliers to get a first-hand viewChair of the vast array of products and services we now offer. As we continue to integrateBoard, revised our systems and processes, optimize our distribution center operations, and educate customers on our expanded offerings, we are excited about where we are going.
Our Continued Commitment to Sustainability
Throughout this transformation, our commitment to doing things the right way remains steadfast. We have been committed to incorporating environmentally sustainable and socially responsible practices into our business activities from our roots.
More recently, in fiscal 2019 we combined our existing charitable foundation with Supervalu’s foundation, to create a single platform for our philanthropy grants. The combined foundations awarded over $1.0 million to 69 organizations in 2019. We expect to release a Corporate Responsibility Report in the coming months, which will include more details on how we serve our communities, employees, and the environment.
Enhancement of Our Corporate Governance Practices
In fiscal 2019, we continued our objective to strengthen our corporate governance practices. We made revisions and enhancements to a number of our corporate policies and processes affecting our Board and executive officers, including a robust Board evaluation and refreshment process, which resulted in two new independent directors appointed to our Board; enhancements to the Stock Ownership Guidelines to require a higher level of stock ownership andPrinciples to include senior employees;a diverse slate requirement for all director appointments and furtherrotational guidelines for leadership positions, and made several design changes to our executive incentive compensation programprograms. As a matter of good governance, we also recently updated our stock ownership guidelines to exclude unexercised in-the-money options and unearned performance awards in responseownership calculations and, in October 2022, updated our Code of Conduct to stockholder feedbackalign statements and provisions with our Company values and mission and our commitment to diversity and inclusion, safety and ESG matters.
On behalf of the entire Board of Directors, I would like to thank you for your continued investment and trust as we deliver long-term value for our customers and for you, our stockholders.
| | | | | |
| Sincerely, |
| |
| Jack Stahl |
| Independent Chair |
Letter from Our CEODear Stockholders,
This past year as CEO of UNFI has been both productive and rewarding. During a year of significant industry and economic uncertainty, we produced strong results through our commitment to delivering value for our customers, suppliers and associates, while supporting our communities and our planet. We added seasoned executives to our leadership team who I'm confident will help us enhance our capabilities and improve our end-to-end execution. I am honored to lead this strong, diverse and focused team.
Fuel the Future. We completed our first year of our Fuel the Future strategy, and are laser focused on creating value for our customers, suppliers and associates, while contributing to our communities. We want to be a value-additive partner to our customers, leverage our insights to create value for our suppliers and attract, retain and develop talent, while simultaneously contributing to our communities and achieving our ESG goals. I believe we have made important progress on these areas in fiscal 2022, and I am excited and energized for what’s next.
A Focus on our investorPeople. We recognize that our associates are critical to supporting our values and achieving our strategic vision. To that end, we are focused on associate engagement, meetings.empowerment and safety to foster innovation and bring best-in-class solutions to our customers and suppliers in an ever-changing retail landscape. We have implemented policies and procedures that focus on associate wellbeing, and we remain committed to creating a diverse and inclusive environment to drive accountability and results. We're extremely focused on enhancing engagement with our associates across the Company, and we achieved progress on this front in fiscal 2022 as our associate engagement scores improved during the year. We launched innovative new programs to provide, among other things, flexibility with scheduling and pay frequency, improved career development and education assistance programs, and wellness offerings. We also added two new diversity and inclusion goals to further our commitment to providing a dynamic and rewarding work environment for all of our associates.
I encourage youam extremely proud of the hard work and resiliency demonstrated by our teams in a challenging operating environment, and I believe we are well positioned to review this proxy statement,continue to improve our execution and to vote your shares promptly. Instructionsdrive high value for voting your shares are set out in the proxy statement.our customers, suppliers, associates and our stockholders. On behalf of our Board of Directors, and everyone at UNFI, thank you for your continued support of ourthis great Company.
| Sincerely,
| | | | |
| Sincerely, |
| Steven L. Spinner, |
| | | | | |
| Chairman of the Board and
Sandy Douglas
|
| Chief Executive Officer |
| |
| Please vote. Stockholders may vote through the Internet, by telephone or by mail. Please refer to your proxy card or the notice of proxy availability distributed to you on or about November 22, 2022 for information on how to vote through the Internet, by telephone or by mail. |
PLEASE VOTE. STOCKHOLDERS MAY VOTE THROUGH THE INTERNET, BY TELEPHONE OR BY MAIL. PLEASE REFER TO YOUR PROXY CARD OR THE NOTICE OF PROXY AVAILABILITY DISTRIBUTED TO YOU ON OR ABOUT NOVEMBER 5, 2019 FOR INFORMATION ON HOW TO VOTE THROUGH THE INTERNET, BY TELEPHONE OR BY MAIL.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Meeting Information
Wednesday, December 18, 2019,
Tuesday, January 10, 2023, 4:00 p.m. EST, with log-in at 3:45 p.m. EST.
You may attend theour annual meeting viaof stockholders in January 2023 (Annual Meeting) through the Internet through aby virtual web conference at www.virtualshareholdermeeting.com/unfi2019.unfi2023. The meeting will be a virtual-only meeting.meeting, consistent with prior years. We believe the virtual meeting allows greater access for stockholders to participate in the meeting, hear from Management and ask questions than an in-person meeting in one geographic location.
Items to be Voted
On | 1. | The election of ten nominees as directors to serve until the 2020 annual meeting of stockholders. |
on1.The election of eleven nominees as directors to serve until the next annual meeting of stockholders.
| 2. | The ratification of the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending August 1, 2020. |
2.The ratification of the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending July 29, 2023.
| 3. | The approval, on an advisory basis, of our executive compensation. |
3.The approval, on an advisory basis, of our executive compensation.
| 4. | The approval of the 2020 Equity Incentive Plan. |
4.The approval of the Second Amended and Restated 2020 Equity Incentive Plan.
| 5. | Consideration of such other matters as may properly come before the meeting or any adjournments or postponements thereof. |
5.Consideration of such other matters as may properly come before the meeting or any adjournments or postponements thereof.
Only stockholders of record on our books at the close of business on Monday,
October 21, 2019,November 14, 2022, will be entitled to vote at the
annual meetingAnnual Meeting and any adjournments or postponements of the
annual meeting.Annual Meeting.
Your vote is important. If you do not attend the
annual meeting,Annual Meeting, we encourage you to vote your shares
viathrough the Internet, by telephone or by completing, dating, signing and promptly returning your proxy card to us in the envelope provided. The proxy materials provide you with details on how to vote by these three methods. If you decide to attend the
annual meetingAnnual Meeting through the Internet, you may revoke your proxy and cast your vote during the meeting.
In accordance with rules approved by the Securities and Exchange Commission, we furnish proxy materials to our stockholders over the Internet. On or about November 5, 2019,22, 2022, we mailed to all stockholders of record as of the close of business on October 21, 2019,November 14, 2022, a notice containing instructions on how to access our Annual Report to Stockholders, which contains our audited consolidated financial statements for the fiscal year ended August 3, 2019;July 30, 2022; our proxy statement; proxy card; and other items of interest to stockholders on the Internet website indicated in our notice, at www.proxyvote.com, as well as instructions on how to vote your shares of common stock in connection with the annual meeting.Annual Meeting. That notice also provided instructions on how you can request a paper copy of our proxy materials and Annual Report to Stockholders if you desire. | | | | | |
| By Order of the Board of Directors, |
| Mahrukh Hussain, Esq. |
| |
| General Counsel and Corporate Secretary November 22, 2022 |
Table of
Directors,
Jill E. Sutton, Esq.
Chief Legal Officer, General Counsel and Corporate Secretary
November 5, 2019
Contents TABLE OF CONTENTS
Forward Looking Statements
This proxy statement contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ from our expectations, estimates and projections, and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “might” and“might,” “continues,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expectations with respect to our future performance and the drivers of that performance, including with respect to the impacts of our acquisition of SUPERVALU INC., and our ongoing integration efforts.performance. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Most of these factors are outside our control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) risks associated with increased leverage in connection withour dependence on principal customers; (2) the consummationrelatively low margins of our business, which are sensitive to inflationary and deflationary pressures; (3) the impact and duration of the acquisition of Supervalu; (2)COVID-19 pandemic; (4) our ability to recognize theoperate, and rely on third parties to operate, reliable and secure technology systems; (5) labor and other workforce shortages and challenges; (6) our ability to realize anticipated benefits of our acquisitionstrategic initiatives, including any acquisitions; (7) the addition or loss of significant customers or material changes to our relationships with these customers; (8) our sensitivity to general economic conditions including inflation, changes in disposable income levels and dispositions, including the acquisition of Supervalu, which may be affected by, among other things, increased competition in our industryconsumer spending trends; and the ability of the combined company to grow and manage growth profitably and retain key employees; and (3)(9) other risks and uncertainties identified in our filings with the Securities and Exchange Commission (“SEC”)(SEC). More information about other potential factors that could affect our business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 3, 2019July 30, 2022 filed with the SEC.
PROXY STATEMENT SUMMARY
Proxy Statement Summary
For the Annual Meeting of Stockholders,
December 18, 2019VOTING MATTERS
January 10, 2023
Voting Matters
| | | | | | | | | | | | | | |
| Proposal | | Board Recommendation | | Page |
Proposal 1—Election of Directors | Board
Recommendation
| FOR | | |
Proposal 1—Election of Directors | FOR
| |
Proposal 2—2—Ratification of Independent Auditor
| | FOR | | |
Proposal 3—3—Say on Pay Resolution | | FOR | | |
Proposal 4—4—Approval of the Second Amended and Restated 2020 Equity Incentive Plan | | FOR | | |
BOARD OF DIRECTORS
Director Nominees
Our business and affairs are managed under the direction of the Board of
Directors.Directors (the Board). The Board currently consists of
eleven (11) Directors, ten (10)
directors, eight (8) of whom are independent.
Information about our directorsDirectors and the committeesCommittees on which they serve is set forth below. Each directorDirector serves a one-year term and has been nominated for re-election.
Name
| Age
|
| | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Director
Since | Audit
| Compensation
Audit |
| Compensation | | Nominating
and
Governance |
Eric F. Artz
Independent | 51
| Oct 2016 2015 | —
| — | —
| ü | | ü |
Ann Torre Bates
Independent | | Oct 2013 | | CHAIR | | — | | — |
61Gloria R. Boyland
Independent | Oct 2013
| Jan 2021 | —
| ü | | — | | ü |
Denise M. Clark
Independent | | Feb 2013 | | — | | — | | CHAIR |
61J. Alexander (Sandy) Miller Douglas
Chief Executive Officer | Feb 2013
| —
Aug 2021 | —
| — | | — | | — |
Daphne J. Dufresne
Independent | 47
| Oct 2016 | —
| — | | CHAIR | | — |
Michael S. Funk
Co-Founder Independent | | Feb 1996 | | — | | — | | — |
65Shamim Mohammad
Independent | | Feb 19962022 | —
| —
ü | | — | | — |
James P. Heffernan
L. Muehlbauer Independent | 73
| Mar 2000
Apr 2019 | | ü | —
|
James Muehlbauer
Independent
| 58
ü | April 2019
| | — | |
Peter A. Roy
Lead Independent Director | 63
| JuneJun 2007
| —
| — | |
Steven L. Spinner
Chairman and Chief Executive Officer
| 59
ü | Sept 2008
| —
| —
| —
ü |
Jack Stahl
Independent Chair | 66
| JuneJun 2019
| | ü | | — | | — |
Year in Review
Fuel the Future in Action
UNFI is a leading distributor of grocery and non-food products, and support services provider to retailers in the United States and Canada. We believe we are uniquely positioned to provide the broadest array of products and services to customers throughout North America. Through our Fuel the Future strategy, we are building a food ecosystem that is better for all by delivering great food, more choices and fresh thinking for our customers and suppliers. Our Fuel the Future strategy consists of six pillars: Fulfill Power in Scale, Unlock the Customer Experience, Taste the Future, UNFI Pride, Retail Optimized and Earn Results.
We are executing our strategy through four focus areas:
•Customers: Utilizing our scale, insights and innovative offerings to develop a differentiated value proposition that helps our customers grow and gain share.
•Suppliers: Strengthening our capabilities, especially those driven by technology, to deliver value creating programs to our suppliers.
•Associates: Building a culture that inspires pride and enables associates to do their best work.
•Communities: Supporting our communities and the planet through our wide-ranging and ambitious ESG initiatives.
ESG - Better For All
— | | | | | | | | | | | | | | |
•Advanced on our Better for All ESG agenda, which includes long-term goals meant to make the world, our communities and our people better •Science-based emissions reduction targets addressing scopes 1, 2 and 3 emissions validated by the Science Based Targets initiative •Launched Climate Action Hub to foster collaboration across our supply chain on ESG issues •Enhanced ESG disclosure and made information increasingly accessible through the release of our 2021 Better for All Report •Added two new goals to further our diversity and inclusion initiatives •Achieved LEED Gold certification for a California distribution center •ESG matters overseen by Nominating and Governance Committee; supported by ESG Executive Committee |
Board Refreshment and Expansion of Executive Leadership Team
| | | | | | | | | | | | | | |
•Appointed Sandy Douglas as CEO and member of the Board •Separated our Chair and CEO roles and appointed Jack Stahl as Independent Chair •Appointed Shamim Mohammad to the Board in February 2022 and to the Audit Committee in June 2022 •Created two new executive leadership roles to add capabilities to achieve our strategic initiatives: ◦Chief Strategy and Transformation Officer ◦Chief Corporate Affairs Officer •Hired a new General Counsel and Corporate Secretary |
Governance Updates
| | | | | | | | | | | | | | |
•Updated our Corporate Governance Principles to add a diverse slate requirement and rotational guidelines for Board and Committee leadership positions, and to reflect our shift to an Independent Chair leadership structure •Revised our stock ownership guidelines in March 2022 for Directors and executive officers to exclude unexercised in-the-money options and unearned performance awards in ownership calculations •Hired a third-party facilitator to conduct our fiscal 2022 Board evaluations •Effective in October 2022, amended our Code of Conduct to reflect recent updates to certain policies, including our Company values and mission, diversity and inclusion, safety and social and environmental matters •Updated our Social Media Policy to align with our diversity and inclusion commitments |
Board Refreshment
| | | | | | | | | | | | | | |
| Assess | è | Identify | è | Evaluate and Recommend |
|
•Review desired skills against our current strategy and Board composition •Consider our Director eligibility guidelines, including independence and diversity considerations •Create a director candidate profile | | Denotes•Third-party recruiter identifies potential candidates
•Any director slate must include diverse candidates •Stockholders have ability to present candidates to our Board for consideration | | •Nominating and Governance Committee Chairreviews skills, qualifications, diversity, independence and potential conflicts •Candidates meet with full Board •Nominating and Governance Committee recommends selected candidates to full Board |
| | | | |
 ê 5 new directors (4 Independent) appointed over the last 5 years (including 2 in fiscal 2022) |
We are committed to actively refreshing our Board and each Committee to maintain a mix of short-, medium- and long-tenured directors, which we believe promotes strong Board governance. We also proactively manage potential vacancies due to retirement. The Board engages a top tier third-party recruiter to identify and recommend diverse candidates that will complement the existing skill set and qualifications of our current Board, our strategic vision and our corporate values. TABLE OF CONTENTS
EightIn February 2022, upon the recommendation of ten directors are independent
Annual electionsour third-party recruiter, the Board appointed Shamim Mohammad to serve as a Director. Mr. Mohammad is currently a member of directorsthe Audit Committee. His appointment adds significant experience in strategic leadership and majority voting policy
Recent updatesdevelopment of forward-thinking technology solutions to charters and policies to enhance governance processes
Lead Independent Director, duties outlined in Governance Principles, recently rotated to another independent director
Strongour Board. The addition of Mr. Mohammad furthers our commitment to ongoing Board diversityrefreshment, resulting in the addition of five Directors (four independent) over the last five years.
2022 Stockholder Outreach
No poison pill | | | | | | | | | | | | | | |
| Met with holders of over 50% of our stock | | Fifth consecutive year
of robust engagement | | Formal Engagement Policy |
ShareholdersWe engaged with 25% ownership may call a special meeting
Fully independent Audit, Compensationholders of over 50% of our outstanding stock again this year. In these meetings, we discussed significant Company updates, such as our refined strategy under an expanded leadership team; our corporate governance, including Board refreshment and NominatingBoard oversight; our commitments to human capital management and Governance Committees
Recently enhanced stock ownership guidelines for directors, executivesdiversity and additional senior officers
Comprehensive Boardinclusion; our ESG programs and committee self-evaluations;initiatives, including our third-party facilitated for 2019
Active stockholder engagement for two consecutive years
Proxy access in Bylaws
Delaware forum selection clause
EXECUTIVE COMPENSATION HIGHLIGHTS
WHAT WE DO
Annualvalidated climate targets and long-term incentiveprogress on ESG goals; our supply chain engagement; and our executive compensation. Investors were complimentary of the changes made to our executive compensation aligned with our financial performance
Independent compensation consultant with pre-approval policy
Double-trigger change in control severance benefits
Change in control agreements adjusted to market multiples and cover only executive officers and small group of other officers with pre-existing agreements
Employment agreements with Steven Spinner (CEO), and Sean Griffin (COO), include post-termination non-compete and non-solicitation clauses, as well as revised severance and change in control severance terms
Severance agreements with other officers limited to 1x multiple and to three-year terms (from unlimited terms), prorated bonus, and cover only executive officers and a small group of other officers with pre-existing agreement in exchange for non-compete and non-solicitation covenants
Clawback policy, recently reviewed and strengthened
Long-term performance targets for performance-based equityprogram in fiscal 20202022 in response to stockholder feedback and our demonstrated responsiveness to stockholder feedback overall. We also generally seek investor feedback about how we can further enhance our good governance principles. Overall, the feedback we received was positive and Management provided a summary of comments received to the Board for discussion.
Pre-established financial performance targets; adjustments | | | | | | | | | | | | | | |
| Responsive Actions to Feedback |
| | | | |
| Revised several components of Executive Compensation Program | | Enhanced disclosure | | Strengthened governance policies |
See “Corporate Governance—Stockholder Engagement” and “Executive Compensation—Compensation Discussion and Analysis—Say on Pay Vote, Investor Engagement and Responsive Action” for more discussion of actions we have taken in response to performance targets and conditions must meet pre-established guidelines for committee considerationour conversations with stockholders.
Vesting through qualifying retirement on equity awards, proration in year of retirement to match service period
Require employment and post-employment covenants (including non-compete, non-solicitation and assignment of intellectual property) for executive officers and all equity and bonus participants
WHAT WE DON’T DO
No uncapped incentive compensation opportunities
No change in control agreements expected to be extended beyond executive officers and existing group of other officers
No severance agreements expected to be extended beyond executive officers and existing group of other officers
No gross-ups on severance or change in control payments
No hedging or pledging
No excessive perquisites
No supplemental retirement benefits
No acceleration of equity awards expected for executive officers
No one-time equity awards planned
TABLE OF CONTENTS
HOW TO VOTE:
Phone
| | | | | | | | | | | |
| ü | Ten of eleven directors are independent; Mixed tenure with three Directors added since January 2021 | ü | Board oversight of ESG; Launched Climate Action Hub and Science-based targets validated |
| | | |
| ü | Active stockholder engagement five consecutive years - strong responsiveness to executive compensation feedback | ü | Strong risk oversight at Board and committee level, including regular review of Enterprise Risk Management (ERM) |
| | | |
| ü | Recently enhanced stock ownership guidelines for directors, executive officers and additional senior officers | ü | Robust Board refreshment process - five new Directors in last five years |
| ü | Strong Executive Compensation Policies: •Fully independent Compensation Committee •Long-term incentive compensation capped and aligned with predetermined financial metrics •Strong responsiveness to stockholder feedback reflected by high Say On Pay support •No gross ups or excessive perquisites •Robust Stock Ownership Guidelines and Recoupment Policy |
How to Vote: | | | | | | | | | | | |
| Phone | Internet before meeting | Mail | During the meeting |
1-800-690-6903 | www.proxyvote.com | Vote Processing
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How to attend and ask questions at the meeting:
HOW TO ATTEND AND ASK QUESTIONS IN THE MEETING:
•Attend the annual meetingAnnual Meeting online, including to vote and/or to submit questions at www.virtualshareholdermeeting.com/unfi2019unfi2023
•The annual meetingAnnual Meeting will begin at approximately 4:00 p.m. EST with log-in(log-in at 3:45 p.m. EST) on Wednesday, December 18, 2019Tuesday, January 10, 2023
•You may submit pre-meeting questions for the meeting in advance at www.proxyvote.com
•You may submit live questions during the meeting at www.virtualshareholdermeeting.com/unfi2019unfi2023
| | | | | | | | | | | | | | |
For more information about voting and attending the meeting, see “Information About the Meeting,” beginning on page 75. |
For more information about voting and attending the meeting, see “Information About the Meeting,” beginning on page
TABLE OF CONTENTS
CORPORATE GOVERNANCE
Governance Highlights
We are committed to best practices in corporate
governance as are appropriate and in the best long-term interest of our Company.governance. Some of our key corporate governance
practicesprograms are summarized below, with further information provided
inthroughout this proxy statement.
Independent Oversight
Eight•Independent Board Chair and annual review of optimal leadership structure with guidelines for Board leadership rotation
•Ten out of teneleven director nominees are independent
Independent Lead Director with clearly defined and robust responsibilities; Lead Independent Director is selected by independent directors
•Regular executive sessions of independent directors at Board and Committee meetings
•100% independent Board Committees, with strong Committee mandates and rotating leadership terms
•Comprehensive Board oversight of strategy development and execution
•Active Board oversight of the Company’s strategycompliance and risk management, including regular review of enterprise risk management (ERM)
•Board and Committees may hire outside advisors independent of managementManagement
•Board oversight of ESG and political contributions policies and commitments through Nominating and Governance Committee
•Board oversight of human capital management through Compensation Committee
Board Skills and Qualifications
•Regular Board refreshment and mix ofmixed tenure of directors, with two new directors added in 2019 in connection with comprehensive review process
•Diverse backgrounds, ages, experiences and skill sets,qualifications, with a view to making changes as needed to continue to add value and meet our evolving strategic needs of UNFI
•Diverse gender, race, ethnicity, sexual orientation and ethnicityveteran status, with further commitment to Board diversity demonstrated through formal adoption of diverse slate requirement
Several directors have deep•Deep industry expertise
•Annual Board and Committee self-evaluations, and individual director performance reviews, all facilitatedconducted by a third party for 2019-2020third-party in fiscal 2022
•Mandatory director retirement age of 75
•Orientation program for new directors and ongoing director education programs for all directors
•Limitations on other board memberships
positions; Directors and executive officers must notify the Chair of the Nominating and Governance Committee and the CEO of potential appointments in advance for review by the case of any change in principal occupation or business association, and before accepting any new commitments involving other businesses, non-profit entities or governmental unitsCommittee
Good Governance Practices
Recent•Annual comprehensive review of governance policies leading to the following updates in 2022:
◦In October 2022, amended our Code of Conduct to reflect recent updates to certain policies, including our Company values and mission, diversity and inclusion, safety and social and environmental matters
◦Corporate Governance Principles amended to require a diverse initial pool of director candidates, reflect separation of Chair and CEO roles, and provide for rotational guidelines for Board and Committee charters, begunleadership positions
◦Director and executive stock ownership policies requiring meaningful levels of ownership, revised in September 2018fiscal 2022 to exclude vested options and continuingunvested performance-based restricted stock units
◦Social Media Policy updated to align with our diversity and inclusion commitments
◦Hired a third-party facilitator to conduct our fiscal 2022 Board evaluations
◦ESG matters overseen by Nominating and Governance Committee, supported by our ESG Executive Committee
▪Launched Climate Action Hub to facilitate engagement across our supply chain on climate matters
▪Implemented a policy to present a diverse candidate slate for all employee roles that are director-level and above
•Human capital management
◦Compensation Committee oversight of human capital management matters with a focus on associate wellbeing across a variety of measures
◦Offer associates several benefit programs, including:
▪Comprehensive health and welfare benefit programs
▪No-cost wellness program
▪Paid time off, including parental paid leave
▪Employee assistance program
▪401(k) plan
▪Back-up childcare program
▪Recently strengthened employee education assistance program
◦Include human capital management and diversity and inclusion as neededkey elements of our people first strategy
◦Added two new ESG goals in fiscal 2022 to updateenhance our diversity and integrate governance practicesinclusion initiatives
◦Continued focus on associate engagement, empowerment and safety to allow for innovation and best-in-class solutions for our customers and suppliers
◦Elevated our safety lead to SVP role to further enhance our focus on the combined companysafety of our associates
Restrictions•Prohibition on hedging or pledging of Company stock by directors and executive officers
Recoupment (“clawback”) policy for executives included in the event of a financial restatement or inaccurate performance metrics, which was strengthened and expanded in October 2018 to include an inimical conduct clause
Director and executive stock ownership policies requiring meaningful levels of ownership, expanded to include more senior officersguidelines and more stringent requirements in October 2018insider trading policy
Recently revised and strengthened•Strong policies restricting trading by insiders, including adoption of discussion-based pre-clearancepreclearance process
Long-standing commitment to sustainability and corporate social responsibility, now under direct•Ongoing Board oversight of the Nominatingrobust data and Governance Committee and the Chief Executive Officer (“CEO”)
cyber security programs
Stockholder engagement initiatives undertaken for general business and for governance policies and practices, including executive compensation, with permanent outreach program established as of the summer of 2018 - 2019Rights
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Stockholder Protections
•Annual election of all directors
•Majority vote and director resignation policy for directors in uncontested elections
•Bylaws provide proxy access right for stockholders (3% ownership threshold continuously held for 3 years/2 director nominees or 20% of the Board/20 stockholder aggregation limit)
•Stockholder rightsright to call special meeting forby stockholders owning at least 25% of the outstanding shares
•One class of shares, with each share entitled to one vote
•No poison pill
We maintain a corporate governance pagesection on our corporate UNFI website that includes key information about our corporate governance initiatives and our Code of Conduct. The corporate governance pageinformation can be found at www.unfi.com, by clicking on “Investors—Overview” and then on “Governance”. listed under “Investors” at the bottom of our website. Copies of our Corporate Governance Principles, our Code of Conduct, our Social and Environmental Policy and the charters for each of the Board’s Committees can be found on our website. WeDuring fiscal 2022, we revised and updated each of these documentsour Corporate Governance Principles and in fiscal 2019 and (in the case of the Compensation Committee charter and theOctober 2022, we amended our Code of Conduct) fiscal 2020,Conduct, each in connection with our ongoing comprehensive review of our governance practices. Information contained on our website is not incorporated by reference in this proxy statement or considered to be part of this document.
Our Corporate Governance Principles require a majority of the members of the Board to be independent directors as such term is defined in the New York Stock Exchange
(“NYSE”)(NYSE) listing standards. The Board, upon the recommendation of the Nominating and Governance Committee, has determined that
eightten of its
teneleven current members are independent. Our
eightten independent directors are Eric F. Artz, Ann Torre Bates,
Gloria R. Boyland, Denise M. Clark, Daphne J. Dufresne,
Michael S. Funk, Shamim Mohammad, James
P. Heffernan, JamesL. Muehlbauer, Peter A. Roy and Jack Stahl.
Michael S.Sandy Douglas is our CEO. Mr. Funk
one of our co-founders,previously was not an independent director because he was an employee
of the Company until
January 1, 2019shortly after the Company’s acquisition of SUPERVALU INC. (Supervalu) in 2018. The Board’s 2022 determination of Mr. Funk’s independence in accordance with NYSE standards was made in light of it being more than three years since he has been an employee of the Company. In addition, the Board recognized that since Mr. Funk’s service as CEO of the Company from October 2005 to September 2008, the Company’s strategic initiatives and
Steven L. Spinnerleadership team have changed significantly. The current leadership team is
our employee and CEO, and therefore they are not
the same team that operated the Company under Mr. Funk’s leadership. Taking all of these factors into account, the Board determined that Mr. Funk is an independent
directors.director.
Our Corporate Governance Principles and the charter for each of the Board’s standing Committees—the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee—require all members of such Committees to be independent within the meaning of the NYSE listing standards and the SEC’s rules. The charter of the Audit Committee
also requires each of its members to meet the definition of independence under Section 10A of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)Exchange Act), and the SEC’s rules thereunder. The charter of the Compensation Committee requires each of its members to be a non-employee director within the meaning of Rule 16b-3 under the Exchange Act.
Lead
Independent
DirectorChair
The Lead Independent DirectorChair is elected annually by the independent directorsDirectors of the Board. In September 2019,2022, the independent directorsDirectors appointed Mr. RoyStahl to serve as the Board’s Lead Independent Director.Chair for a second term. In accordance with our Corporate Governance Principles, the LeadBoard must elect an Independent Director must be independent.Chair annually and will consider rotation of the Independent Chair every three to five years based on the best interests of the Company at that time. The Lead Independent DirectorChair is responsible for coordinating the activities of the other independent directorsDirectors and for performing such other duties and responsibilities as the Board may determine from time to time, which are set forth in our Corporate Governance Principles, including:
•Providing leadership of the Board;
•Serving as aprincipal liaison between the independent directorsDirectors and senior Management, and particularly the Chair and CEO;
•Providing input to the Board and the Nominating and Governance Committee on the membership of various committees;
•Advising and assisting the chairs of the Board’s committeesCommittees in fulfilling such individuals’individual’s roles and responsibilities;
Advising the Chair of the Board as to•Suggesting an appropriate schedule of and agenda for the Board’s meetings and including the Board’s and CEO’s input into the agenda for the Board’s meetings;
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•Leading the independent directorsDirectors in their role in the annual evaluation of the performance of the CEO, providing any feedback to the Chair of the Nominating and Governance Committee and overseeing actions to address the outcomes of such evaluations;
•Overseeing the process for CEO succession;
Consultingsuccession in coordination with the Chair of the Board regardingNominating and Governance Committee;
•Determining the retention of advisors and consultants who report directly to the Board;
Acting as the chair of•Chairing regular and special Board meetings when the Chair is unable to preside; and shareholder meetings; and
•Presiding at meetings in executive session.
Calling meetings of, developing agendas for, and serving as chair of the executive sessions of the Board’s independent directors.
A description of the duties of the Lead Independent DirectorChair is included in the Corporate Governance Principles, a copy of which can be found in the governance“Governance” section of our website at www.unfi.com.
Board Leadership Structure
As of August 2021, our Board is led by an Independent Chair, Mr. Stahl. Upon the appointment of Mr. Douglas as CEO, the Board determined that the positions of CEO and Chair should be separated and that the two roles, with separate and delineated accountabilities, were most appropriate for the Company at that time. In making this decision, the Board also considered the input of certain stockholders reflecting a desire for the separation of the Chair and CEO roles. The Board is currently led byreevaluated this structure in September 2022, and determined that a separate CEO and Chair best serves the Chair of the Board, Mr. Spinner,Company and by the Lead Independent Director, Mr. Roy. its stockholders at this time.
Our Corporate Governance Principles do not require the Chair of the Board to be independent and do not specify whether the positions of Chair of the Board and the CEO must be separated. The Board
will regularly
considersconsider the appropriate leadership structure for the Company
at any given time and has
concludeddetermined that the Company and its stockholders are best served by the Board retaining discretion to determine whether the same individual should serve as both CEO and Chair,
of the Board, or whether the roles should be separated. The Board believes that it is important to retain the flexibility to make this determination at any point in time based on what it believes will provide the best leadership structure for the Company,
based onin light of the
prevailing facts and circumstances at such time.
In September 2019, the Board chose to appoint a new Lead Independent Director to lead the Board with Mr. Spinner. Previously, James P. Heffernan had served as Lead Independent Director.The Board believes that having Mr. Spinner serve as both Chairman and CEO, coupled with strong independent director leadership, including the Lead Independent Director, is the most appropriate leadership structure for the Company at this time, for several reasons. Having a single person fulfill the roles
Table of Chair and CEO promotes decisive leadership, establishes clear accountability and enhances our ability to communicate with a single and consistent voice to stockholders, employees and other stakeholders. Together with our Lead Independent Director and in consultation with the chairs of the Board’s various standing committees, Mr. Spinner is well-positioned to set the Board’s agenda and provide leadership as to the strategic, compliance, and risk matters subject to the Board’s oversight. With over 30 years of operational and leadership experience with distributors of food and non-food products, Mr. Spinner has exceptional industry knowledge, which the Board believes is critical for the chair of a board of a company in an evolving industry, one that has undergone significant change in particular over the past eight years. The Board also noted Mr. Spinner’s strong performance as a leader. Mr. Spinner has most recently brought his industry knowledge and leadership skills to bear in integrating the business of Supervalu with our Company. At present, the Board believes that combining the roles of Chair and CEO, along with having a Lead Independent Director vested with key duties and responsibilities (as discussed above) and the Board’s standing committees consisting of and being chaired by independent directors (as discussed below), provides a formal structure for strong independent oversight of our management team. We plan to continue to examine our corporate governance policies and leadership structures on an ongoing basis so that they continue to meet our Company’s evolving needs.Contents
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| Full Board |
The Board has overall responsibility for risk oversight. The Board exercises its oversight responsibilities with respect to strategic, operational and competitive risks, as well as risks related to the succession planning of our CEO and other members of senior Management. The Board has delegated responsibility for the oversight of certain risks to its Committees. All Committees report to the planning for succession of our CEO and other members of senior management. The Board has delegated responsibility for the oversight of certain risks to its committees. The Audit Committee and full Board receive management’s quarterly Enterprise Risk Management and Risk Committee reports and the Audit Committee discusses significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures with management, the Company’s internal audit department and our independent auditor. The Compensation Committee is responsible for developing and maintaining compensation policies and programs that do not encourage our executives to take unnecessary and excessive risks that could threaten our long-term value. The Nominating and Governance Committee oversees our compliance and environmental, social and governance programs. Other committees address risk on an ad hoc basis, as appropriate. All committees report to the fullTABLE OF CONTENTS
Board as appropriate, including when a matter rises to the level of a material or enterprise-level risk. Certain risks are overseen by the full Board directly, such as strategic, cyber, other operational and macro-environment risks. |
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| Audit Committee | | Compensation Committee | | Nominating & Governance Committee |
| The Audit Committee and full Board receive Management’s quarterly ERM report and the Audit Committee discusses significant financial risk exposures and the steps Management has taken to monitor, control and report such exposures with Management, the Company’s internal audit department and our independent auditor. | | The Compensation Committee is responsible for developing and maintaining compensation policies and programs that are aligned with pay for performance, stockholder interests and the other elements of the executive compensation philosophy developed and maintained by the Committee. Embedded in this philosophy and foundational to these programs is that they mitigate any unnecessary and excessive risks in our compensation plans and programs that could threaten our long-term value. For more discussion of risk considerations in our compensation programs, see “Executive Compensation—Compensation Discussion and Analysis—Compensation Risk Assessment.” | | The Nominating and Governance Committee oversees our compliance programs, including those under our Chief Compliance Officer, who reports to our General Counsel, and our ESG programs. This Committee also participates extensively in our ERM and compliance programs generally, actively considering assessment and mitigation for risks that do not fall within the purview of the Audit Committee or the Compensation Committee, as well as overseeing other risks that fall within the matters covered by its charter. |
Committees may address other risks on an ad hoc basis, as appropriate. We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing our
Company.Compensation Risk
Our Compensation Committee charter requiresCompany, allowing the Compensation Committeeconsideration of key risks to assess, on an annual basis, whetherbe allocated across Committees so that sufficient time, attention and expertise are directed to the Company’s compensation policies and practices encouragerespective risks the Company’s executive officers or other key employees to take unnecessary and excessive risks that could threaten the value of the Company. The Compensation Committee believes that our compensation policies do not encourage the taking of unnecessary and excessive risks. Our compensation and governance practices are designed to align the interests of our executive officers with the interests of stockholders and the achievement of the Company’s performance objectives. For example:
A substantial portion of our executive officers’ compensation is “at risk,” including compensation paid in the form of common stock;Company faces.
Total executive officer compensation is substantially weighted to long-term equity half of which is tied to longer-term performance targets (and we recently extended these targets from two- to three-year targets;
The short-term bonus program has established performance metrics (adjusted EBITDA and adjusted EPS) that are long-term growth drivers;
We set a maximum level of compensation; there is no uncapped compensation for our executive officers in any element of executive compensation;
Our executive officers are required to maintain certain levels of stock ownership, which are tested each year based on the then-current stock price of our common stock;
Our executive officers are subject to restrictions on hedging and pledging shares of Company common stock; and
Performance-based compensation is subject to recoupment in the event of a restatement of the Company’s financial statements or a material inaccuracy in the performance metrics used to measure performance-based compensation.
Anti-Hedging and Insider Trading Policies
Our Stock Ownership Guidelinesstock ownership guidelines and our Policy Regarding Trading in Company Securities (“Insider(Insider Trading Policy”)Policy) include prohibitions against speculative trading activities in relation to Company securities. Senior employees, including executive officers and non-employee directors, are strictly prohibited from entering into any transaction that would operate as a hedge against their stock ownership position of stock or that would hedge against the financial effect of their building up stock ownership to reach the requirements set forth in our Stock Ownership Guidelines.stock ownership guidelines. Under our Insider Trading Policy, directors, certain employees (including executive officers) and other individuals with access to material non-public information about the Company are prohibited from engaging in transactions in Company securities during blackout periods (other than in accordance with a pre-approved Rule 10b5-1 trading plan), and such persons are required to pre-clearpreclear (through discussion) any transactions in Company securities with a member of our securities department. legal department who is trained in these conversations. Certain insiders who have been identified as regularly having access to material nonpublic information are restricted to trading during quarterly open window periods, and then may trade only after preclearance.Under our policy governing 10b5-1 trading plans, we permit all directors and employees, including executive officers, to enter into 10b5-1 plans.plans during an open window period when they are not in possession of material nonpublic information. All plans must have a 30-day “cooling-off” period between entering into a plan and the start of trading under that plan, and no plan may be shorter than six months or longer than 18 months.
Committees of the Board of Directors
The Board currently has three standing committees: the Compensation Committee, the Audit Committee and the Nominating and Governance Committee. Upon recommendation of the Nominating and Governance Committee, the full Board appoints members of each committee. Each committee is responsible for appointing its chair.
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Compensation Committee.The Compensation Committee establishes or approves all policies and procedures related to our human resources function with respect to our executive officers, including employee compensation, incentive programs, and the 401(k) Plan, and administers our stock incentive plans. Additionally, this committeeCommittee evaluates and establishes the respective compensation of our executive officers on an individual basis, including our CEO and Chief Financial Officer (“CFO”).(CFO), and recommends compensation of our CEO for approval by the Board. The Compensation Committee also reviews the compensation of certain other members of our senior management team and recommends to the Board the compensation for our non-employee directors. For a description of the role of the Compensation Committee, its consultants and managementManagement in setting executive compensation, please see “EXECUTIVE COMPENSATION—Executive Compensation—Compensation Discussion and Analysis—Analysis—How We Make Decisions Regarding Executive Pay.” The Compensation Committee also approves our compensation discussion and analysis included in our annual proxy statements. The Compensation Committee oversees our leadership development and management succession planning (although the Nominating and Governance Committee oversees the CEO succession planning process), as well as our diversity initiatives.
Additionally, the Compensation Committee oversees human capital management matters, including reviewing and overseeing key diversity and inclusion initiatives and Human Resources policies and practices.
The agenda for meetings of the Compensation Committee is determined by its Chair with the assistance of our CEO, CFO, Chief Human Resources Officer
(“CHRO”)(CHRO) and General Counsel and Secretary. Compensation Committee meetings are regularly attended by the
Chairman of the Board and CEO, the CFO, the CHRO and the General
Counsel.Counsel and Secretary. At certain meetings during fiscal
2019,2022, including each of its regular meetings, the Compensation Committee met in executive session. The Compensation Committee’s Chair reports the
committee’sCommittee’s recommendations on
CEO executive compensation to the Board, which sets the CEO’s compensation, and reports its determinations on other executive compensation to the Board. Independent advisors and our finance, human resources, benefits and legal departments support the Compensation Committee in its duties and may be delegated authority to fulfill certain administrative duties regarding the compensation programs. The Compensation Committee has authority under its charter to retain, approve fees for (and, as may be necessary or advisable, change or terminate) a compensation consultant, legal counsel or other advisor as it deems necessary to assist in the fulfillment of its responsibilities. The Compensation Committee annually evaluates the independence of its consultants,
and assesses their performance
and establishes annual scope of work and fees for the consultants pursuant to a pre-approval policy.
The Compensation Committee engages Frederic W. Cook & Co. (FW Cook) as its compensation consultant.
The Compensation Committee’s charter is available on our website, www.unfi.com. The charter was most recently amended in
September 2019.March 2021. The Compensation Committee held
sixfour meetings during fiscal
2019.2022. The current members of the Compensation Committee are
Messrs. Heffernan (chair), Artz and Stahl, and Ms. Dufresne
(chair) and Messrs. Artz, Muehlbauer and Roy, each of whom is an independent director under the SEC
rules and NYSE
ruleslisting standards applicable to compensation committee members.
Audit Committee.Committee
The Audit Committee is responsible for monitoring the integrity of our financial reporting process and systems of
disclosure controls and internal controls
and compliance regarding finance and accounting;over financial reporting; monitoring the independence and performance of our independent registered public accounting firm; and overseeing our internal audit department. Among the Audit Committee’s duties are to review the results and scope of the audit and other services provided by our independent registered public accounting firm.
The Audit Committee is also responsible for overseeing the finance and accounting matters regarding related party transactions under our Related Party Transaction Policy and certain compliance matters under our Code of Conduct.
The Audit Committee’s charter is available on our website, www.unfi.com. The charter was most recently amended in
October 2018.March 2021. The Audit Committee held
eightfour meetings during fiscal
2019.2022. The current members of the Audit Committee are
Ms.Mses. Bates (chair) and
Boyland and Messrs.
Heffernan,Mohammad, Muehlbauer and Stahl, each of whom is an independent director under SEC rules and the NYSE listing standards applicable to audit committee members. The Board has determined that
all members of the Audit Committee are financially literate, and Ms. Bates
and Messrs. Heffernan, Muehlbauer and Stahl areis an audit committee financial
experts,expert, as defined by the rules and regulations of the SEC.
Nominating and Governance Committee.Committee
The Nominating and Governance Committee is responsible for developing, reviewing and recommending to the Board for adoption our Corporate Governance Principles; identifying and nominating candidates for election to the Board; assessing and making recommendations to the Board regarding the size and composition of the
Board; making recommendations to the Board
andregarding the size, composition, scope of authority, responsibilities and reporting obligations of each of the Board’s
committees;Committees; assisting the Board in
conductingfacilitating performance reviews of the Board and its
committeesCommittees and members;
oversight of our ESG programs; oversight of our CEO succession planning process; and other duties and responsibilities. The Nominating and Governance Committee is also responsible for reviewing related party transactions under our Related Party Transaction Policy and oversees certain compliance matters under our Code of Conduct that are not related to finance or accounting (which are overseen by the Audit Committee)
., and provides oversight of general risk and compliance areas not falling under the Audit Committee or Compensation Committee. Additionally, the Nominating and Governance Committee oversees our political
contributions, policies and commitments. Our Political Activities and Government Relations Policy, together with our Code of Conduct, provide for oversight of political contributions, including that any corporate contributions must be reviewed and approved in writing by our General Counsel, be in compliance with applicable law and be properly disclosed.
For information regarding the director nomination process undertaken by the Nominating and Governance Committee, please refer to “PROPOSAL 1—ELECTION OF DIRECTORS—Proposal 1—Election of Directors—Nomination of Directors.” TABLE OF CONTENTS
The Nominating and Governance Committee’s charter is available on our website, www.unfi.com. The charter was most recently amended in October 2018.March 2021. The Nominating and Governance Committee held sixfour meetings during fiscal 2019.2022. The current members of the Nominating and Governance Committee are Mmes.Mses. Clark (chair) and DufresneBoyland and Messrs. RoyArtz and Muehlbauer,Roy, each of whom is an independent director.
director under SEC rules and NYSE listing standards.
During fiscal
2019,2022, the Board met
11seven times and following
manyeach of the Board’s
regularly scheduled quarterly meetings, the
independentnon-employee directors met in executive session without the presence of
management (including meetings conducted by telephone conference).Management. All directors attended at least 75% of the aggregate
number of meetings of the Board and of the committees on which they served. We encourage each member of the Board to attend our annual
meetingsmeeting of stockholders. All
ten of our directors
standing for re-election who were directors at that time attended
the 2019our last annual meeting. Mr. Mohammad was appointed after our annual meeting
through the virtual annual meeting.of stockholders.
Stockholder engagement is an important and regular part of the Company’s strategy
to make sureso that the Board and
managementManagement are aware of and respond to stockholder input on a broad spectrum of business and governance matters.
EachMembers of
management,Management, including our
Lead Independent Director,General Counsel and
the ChairSecretary, CHRO, head of Investor Relations, and head of our
Compensation CommitteeSustainability and Social Impact team, as primary participants, have
participatedengaged in discussions with stockholders as part of our efforts to gain an understanding of stockholder views.
Directors are generally available to participate in our engagement meetings upon request from stockholders, and this year Mr. Stahl, our Independent Chair, joined an investor call. For the
secondfifth consecutive year, the Company reached out to a
greater numbersignificant percentage of
investorsits stockholders, and we met with holders representing more than
in past years. Management50% of our outstanding shares. The Company has found its outreach efforts
in 2018 and 2019over the past five years to be very helpful in understanding our investors’ perspectives on various business and governance matters and intends to maintain ongoing discussions with a large number of investors each year.
Additionally, members of our ESG team engaged in ESG-focused meetings with certain investors, upon request.
Topics of discussion included business performance; our refined strategy under an expanded leadership team; our corporate governance, specificallyincluding Board refreshment and Board leadership structure, updates regardingoversight; our commitments to human capital management and diversity and inclusion; our ESG programs and initiatives, including our third-party validated climate targets and progress on ESG goals; our supply chain engagement; and our executive compensation. Investors were complimentary of the acquisition and integration of Supervalu, components ofchanges made to our executive compensation of which many investors mentioned the improvements madeprogram in fiscal 2022 in response to stockholder feedback and our demonstrated responsiveness to stockholder feedback overall.
After our engagement discussions, Management provides the feedback received from our stockholders to the Board. Since the beginning of 2021, we have taken the following governance actions directly responsive to our stockholder engagement lastconversations:
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| WHAT WE HEARD | | WHAT WE DID |
| | |
| Include reputational harm as a clawback trigger | → | Enhanced our recoupment policy to include misconduct and reputational harm and provide for forfeiture of incentive compensation in certain cases of misconduct resulting in financial harm and to require disclosure in certain circumstances |
| | |
| Disclose metrics of Board composition and individual diversity | → | Included Board composition metrics in our proxy statement disclosure and, beginning this year, individual diversity metrics in our Director skills matrix |
| | |
| Separate role of CEO and Chair | → | Upon appointing a new CEO, we separated the role of CEO and Chair of the Board and appointed an Independent Chair |
| | |
| Enhance HCM disclosure | → | Added disclosure in our proxy statement about programs offered to employees for recruiting, engagement and career development |
| | |
| Expand ESG disclosure | → | Expanded ESG disclosure in our proxy statement, ESG Report and through the launch of our Better for All campaign |
| | |
| Continue Board evaluation and refreshment | → | Continuously evaluate our Board and refreshment efforts (added four new independent directors in last five years, including one in 2022) |
| | |
| Disclose EEO-1 Report | → | In addition to the diversity disclosures in our Better for All Report, we intend to disclose our EEO-1 report beginning with our 2023 filing |
See “Executive Compensation—Compensation Discussion and our sustainabilityAnalysis—Say on Pay Vote, Investor Engagement and philanthropy programs. Stockholders were supportiveResponsive Action” for a discussion of our effortsactions we took in response to strengthen our existing corporate governance policies and were pleased with our effortsconversations regarding Board refreshment.executive compensation.
Board Evaluation and Refreshment
Our Board regularly evaluates its performance and composition, assessing individual director’s skills, qualifications and experience to align the overall Board composition to best meet the needs of the Company’s evolving long-term business strategy. Each year, the Board assesses theundertakes a thorough Board and Committee evaluation process, including peer feedback on individual directors, to be nominated at the annual meeting.using a comprehensive set of questionnaires requesting quantitative and qualitative input from directors. The Board uses a skills matrix to assess the different contributions, background and experience of each director.director with those sought-after skills. In 2022, the Board engaged a third-party to conduct the Board and Committee assessment, working with the Chair of the Nominating and Governance Committee. The Nominating and Governance Committee also considers any additional skills, qualifications and experience that may be needed to meet the evolving strategic needs of the Company. The Nominating and Governance Committee is committed to considering a facilitated, third-party assessment every two to three years.
The Committee considers prospective candidates and identifies appropriate individuals for the Board’s further consideration. The Nominating and Governance Committee also assesses the proper mix of skills and expertise for directors serving on the Board’s committees. The Board is highly skilled and qualified, and committed to the Company’s success, as indicated by the high attendance rate and robust discussion and debate that occurs during each Board and committee meeting.
In
September 2019,early fiscal 2022, upon the
appointment of Mr. Douglas as our new CEO and board member, the Board, upon the recommendation of the Nominating and Governance Committee, appointed Mr. Stahl as Independent Chair of the Board and Mr. Roy stepped down as Lead Independent Director. Additionally, Ms. Dufresne was appointed as Chair of the Compensation Committee. Further, in fiscal 2022, our Board, upon the recommendation of the Nominating and Governance Committee, revised the composition of the
AuditCompensation Committee and
Compensation Committees.the Nominating and Governance Committee. The current composition of each committee is disclosed above.
With the acquisition of Supervalu,
In fiscal 2022, the Board considered the appropriate size of the Board and determined that it should be expanded to add individuals with varying skills, qualifications and experience. After a thorough Board evaluation process, which included engaging a third-party to conduct interviews and surveys of each Board member, working with a third-party consulting firm, the Nominating and Governance Committee successfully identified two candidates possessing the desired mix of expertise and background to complement the Board’s then-existingconsidered additional skills and experience that would be desirable in light of our strategy and focused on adding a director with strategic leadership and information technology experience. TheAt the recommendation of our third-party search firm, the Board appointed James Muehlbauer in April 2019 and Jack Stahl in June 2019Shamim Mohammad to serve as directors of the Board in recognitionFebruary 2022. Mr. Mohammad is also a member of their extensive financial and strategic backgrounds, as well as executive leadership experience. Each of them was appointed to the Audit Committee, while Mr. Muehlbauer also serves on the NominatingCommittee.
Board Tenure
We aim to maintain a mix of short-, medium- and Governance Committee and Mr. Stahl also serves on the Compensation Committee. In September 2019, thelong-tenured directors, which we believe promotes strong Board appointed Mr. Roy as Lead Independent Director to further its efforts of rotation of key governance.
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| Average Director Tenure is 7.7 years |
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| 5 Directors | | 4 Directors | | 2 Directors |
| | | | | | | | | | | | |
| 0 - 4 years | | 5 - 9 years | | 10+ years |
Board
leadership roles and appointed a new Chair of the Nominating and Governance Committee, Ms. Clark.The Board has three directors who have served for more than 10 years, in addition to our CEO, while the remaining directors have served for six or fewer years, with two new directors as of 2019. The overall average tenure of theDiversity
Our Board is
under eight years. TABLE OF CONTENTS
While the Board does not have a formal diversity policy, the Board is in fact diverse in gender and ethnic background, as well as having a broad range of experience. Three outThe Nominating and Governance Committee charter provides for the consideration of ten directorsdiversity, including gender, race, ethnicity, sexual orientation and veteran status, when considering Board candidates. As provided below, our Director skills matrix now includes individual diversity metrics as requested by our stockholders. In fiscal 2022, the Board amended our Corporate Governance Principles to formally require the initial pool of director candidates for any director search to include qualified diverse candidates to further support our commitment to a diverse and qualified Board.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 4 | | | 3 | | | 1 | | | |
| are female | | identify as a Racially or Ethnically Diverse | | identifies as LGBTQ+ |
| |
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Summary of Board Skills, Experiences and Qualifications
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| Skills, Experiences and Qualifications | Director |
| Artz | Bates | Boyland | Clark | Douglas | Dufresne | Funk | Mohammad | Muehlbauer | Roy | Stahl |
| Significant experience in business, education, the professions or public service | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü |
| Commitment to areas aligned with the Company’s public interest commitments | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü |
| Service as an executive officer for another public company | ü | ü | | | ü | | | ü | ü | ü | ü |
| Experience in the Company’s industry | | | | | ü | ü | ü | | | ü | |
| Experience with risk oversight | ü | ü | ü | ü | ü | ü | ü | ü | ü | | ü |
| Experience with stockholder engagement | | ü | | | ü | ü | ü | | ü | ü | ü |
| Information technology experience | | ü | ü | ü | | | | ü | | | |
| Experience in leadership development | | ü | | ü | ü | ü | ü | ü | ü | ü | ü |
| Experience with mergers and acquisitions | | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü |
| eCommerce experience | | | | ü | ü | | | ü | | | |
| Supply chain management experience | ü | | ü | | ü | | ü | | ü | ü | ü |
| Consumer products/retail experience | ü | | | ü | ü | | | ü | ü | | ü |
| Senior operations management/CEO | ü | ü | | | ü | | ü | | | ü | ü |
| Strategic thinking, planning and execution | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü | ü |
| Operating financial expertise (CFO) | ü | ü | | | | | | | ü | | ü |
| Senior operations experience in industry or adjacent industry | | | | | ü | | ü | | | ü | ü |
| Large-scale transformation/innovation experience | | | ü | ü | ü | ü | | ü | ü | | ü |
| Diversity | | Female | Female
Racially Diverse | Female
LGBTQ+
Veteran | | Female
Racially Diverse | | Ethnically Diverse | | | |
Environmental, Social and Governance Practices
At UNFI, we are
female. Our youngest director is 47committed to being good stewards of our planet, our communities and our
oldest director is 73. The Board is highly committedpeople through tangible action. We seek to
lead by example on social and environmental issues of critical important to society and strive to be a force for positive change in the
Company, as indicated by the high attendance rate for each Board and committee meeting held during fiscal 2019 and prior years.Sustainability
The Company has long been committed to incorporating environmentally sustainable and socially responsible practices into its business operations.food system. This commitment is described in our Social and Environmental Responsibility Policy, which was most recently updated in September 2020 and is available on our website, www.unfi.com. Under its charter, ourOur Nominating and Governance Committee has direct oversight of our policies and strategies addressing environmental, social and governmentalESG matters, including sustainability, corporate social responsibility and political contributions, and is responsible for reporting to the Board on such matters at least annually.
Food waste is a key concern The ESG Executive Committee, an executive steering committee formed in 2020 to oversee implementation of our ESG initiatives, provides executive sponsorship for our business.ESG strategy and goals. We also developed emissions reduction targets, which were validated by the Science Based Targets initiative in April 2022.
In March 2022, we issued our 11th annual report on our social and environmental impacts, and the first update to our Better for All plan, which seeks to build a food system that is better for our people, our communities and our world. The Better for All Report, available on our website, www.betterforall.unfi.com, expands upon the six impact focus areas announced last
year to provide a more in-depth look at our direct and indirect impacts at multiple points along our value chain. Our key focus areas now include Diversity and Inclusion, Responsible Procurement, Community Development, Governance, Associate Safety and WellBeing, Climate Action, Waste Reduction, Customer Health and Safety and Energy Efficiency. Our Better for All Report highlights our progress toward achieving our ESG goals and references Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) standards and Task Force on Climate Related Financial Disclosures (TCFD). The GRI and SASB tables are available on our website. The Better for All Report and its disclosures are not incorporated by reference into this proxy statement.
| | | | | | | | | | | | | | |
| Our “Better for All” Report takes a more holistic view of the Company’s value chain and demonstrates accountability for the critical role we play, given our position and scale, to drive change across the food industry. Our plan includes expanding and enhancing our policies and practices related to climate change, waste reduction, food access, safety and wellbeing and diversity and inclusion. |
We’re on a mission to make the world a better place, not just for one, but for all. Our key highlights and achievements toward attaining our ambitious long-term goals include the following:
| | | | | | | | | | | | | | |
| Governance |
•Board receives regular ESG updates. •Added two new goals in furtherance of our diversity and inclusion strategic plan. •Launched ‘Missions’ platform to promote awareness of our goals and actively promote associate engagement of our ESG programs. |
| | | | | | | | | | | | | | |
| Upstream |
•Climate targets covering scopes 1, 2 and 3 validated by the Science Based Targets initiative in April 2022. •Launched the UNFI Climate Action Hub, providing tools and resources to our suppliers to help innovate and scale climate solutions across the food system. •Revamped supplier diversity program and hired a new Manager of Supplier Diversity in April 2022. |
| | | | | | | | | | | | | | |
| Operations |
•Elevated lead safety to SVP role to further enhance our focus on the safety of our associates. •Achieved LEED® Gold certification for Riverside, CA distribution center. •Received a score of 100 on the Human Rights Campaign Foundation’s 2022 Corporate Equality Index and a score of 100 against the Disability Index. •Established Diversity Council and launched six associate-led Belonging and Innovation Groups |
| | | | | | | | | | | | | | |
| Downstream |
•Launched UNFI Food Equity Project, a program of the UNFI Foundation, which aims to invest in community-led solutions that create more equitable access to fresh, healthy food. •Expansion of relationship with Too Good to Go, an innovative food waste reduction app and the largest business-to-consumer marketplace for surplus food. |
Human Capital Management
A major part of our ESG initiatives and key element of our UNFI Pride strategic pillar is creating a diverse and inclusive workplace. Our employees are critical to supporting our values and achieving our strategic vision. We are focused on associate engagement, empowerment and safety to foster innovation and bring best-in-class solutions to our customers and suppliers in an ever-changing retail landscape, including new ways of work scheduling and productivity investments. Our Compensation Committee oversees human capital management matters with a focus on associate wellbeing across a variety of measures.
We discuss our dedication to human capital management, including disclosure of certain diversity metrics, in our 2021 Better for All Report, which can be found on our ESG website, www.betterforall.unfi.com. More information regarding human capital management may be found in our recently filed Annual Report on Form 10-K.
Diversity and Inclusion
We pledge to promote equity, celebrate diversity, dismantle systemic racism and support justice and inclusion for all. Our Board is diverse in gender and ethnic background, as well as having a broad range of experience. Four out of eleven directors are female, with two members identifying as African American, one member identifying as Asian American, one member identifying as LGBTQ+ and one member identifying as a veteran. We recognize that innovation thrives when there is unity and respect for diverse backgrounds and perspectives. Additionally, we aim to foster a culture of belonging, equity and empathy through open dialogues, educational opportunities and by honoring the experiences and special events that speak to our associates’ many identities. Over the last three years, we are actively working on the following initiatives to promote our pledge of creating an equitable, diverse and inclusive environment for all:
| | | | | | | | | | | | | | |
•Ongoing member of CEO Action for diversity and inclusion. •Launched six Belonging and Innovation Groups for associates. •Adopted a diverse slate requirement for director candidates in September 2021 to further support diversity among our Board. •Built a diversity and inclusion team and created a diversity and inclusion strategy, including: ◦Hiring a Vice President of Diversity and Inclusion; ◦Establishing a diversity council which has taken an active role in advocating for and celebrating diversity; ◦Providing helpful diversity and inclusion information on our associate platforms, including diversity and inclusion training; and ◦Implementing a policy to present a diverse candidate slate for all director and above roles. •Matched associate donations to organizations fighting for racial justice and reform, including the NAACP Legal Defense and Educational Fund and the American Civil Liberties Union (ACLU) Foundation. •Included discussion of gender, ethnicity, tenure and generation statistics into our year-end performance review discussions for leaders to mitigate against unconscious bias. |
Developing Talent
Attracting and retaining talent is one of our top priorities. Our goal is to differentiate ourselves in the market by offering unprecedented flexibility to associates. To reduce turnover, we have
an emphasized focus on and commitment to our associates, their experiences and their engagement. As a result, in fiscal 2022 our associate engagement scores improved over the prior year. We are committed to
reporting annually onthe continued support and development of our
food waste diversion efforts, beginningassociates and provide access to robust leadership development programming, role-based training and other career development opportunities at every stage of an associate’s tenure. Designed to enhance the leadership capabilities of our people, the Emerge program for front-line leaders and the Evolve program for our mid-level managers invite participants from all departments to come together to learn and practice their management skills and identify opportunities to lead more effectively. The Elevate program for director-level and above associates, as well as the Operations Leadership Academy for leaders in
2020, including certain estimated information onour distribution centers, work to solidify our talent pipeline and promote the
amountsuccess of
food sent to landfills or cycled through other waste diversion methods, and an estimate of greenhouse gas emissions avoided through our waste diversion programs. This information will be extrapolated through various auditing and testing procedures undertaken by the
Company in 2019.organization’s future leaders. In addition, we partner with key groups within the organization, such as Sales and Risk & Safety, to develop role-based training to drive greater productivity and safety. We also offer associates additional learning and career development opportunities that extend from skills-based training deployed electronically through our BetterU learning system, to mentorship programs and career development discussions and beyond. We also provide flex-shift and quarterly performance check-ins.
Compensation and Benefits
Our compensation and benefits programs are commencingdesigned to promote a reviewculture of wellbeing and recognize our associates for their outstanding achievements and dedication to serving our customers and keeping them safe during even the most challenging of times. We are committed to offering market competitive pay programs which reward high levels of performance, and behaviors that challenge convention and drive company success. Our short-term incentive programs model the Company’s financial goals and are intended to align our eligible associates’ rewards with our financial success. Long-term incentives, including restricted stock units and performance awards, are designed to attract and retain innovative leaders and align their financial interests with those of our sustainability programsstockholders and other stakeholders. As part of our commitment to determine whererecognize our associates’ “whole self” – health, finances and overall wellbeing – we have opportunitiesoffer the following benefits to make enhancements that will drive greater valueeligible associates:
| | | | | | | | | | | | | | |
•Comprehensive health and welfare benefit program providing a variety of medical, dental and vision options •Revamped employee education assistance program to provide for prepayment rather than reimbursement benefit and to no longer require that the program be related to the associate’s position at UNFI •Voluntary benefits like long-term disability and optional life insurance •No-cost wellness program •Paid time off programs, including parental paid leave •Employee assistance program •401(k) plan •Back-up childcare program |
Creating a Safe Environment
Safety is at the
communitiesforefront of everything we
serve and our broader business.do. We
expectcontinue to
complete this review in 2020.We expect to release our 2019 Corporate Responsibility Report in the coming months, which will include more details on how we serve our communities, employees, and the environment. When issued, the report will be availablefocus on the “Sustainability” sectionsafety of our website.
associates, customers and communities with enhanced sanitation and increased safety measures. We also have invested in several initiatives, including the development and implementation of a new safety brand and pledge, Every Moment Matters, that is designed to foster a caring culture. We have implemented interactive and proven training programs, which were rolled out across our network, and include ergonomic experts and interactive training. In fiscal 2022, we created a new role and hired a new Senior Vice President, overseeing occupational and food safety. We also cultivate a culture of openness to foster an emotionally safe environment and continue to strive for zero workplace injuries.
10
Proposal 1—Election of DirectorsTABLE OF CONTENTS
PROPOSAL 1—ELECTION OF DIRECTORS
Directors and Nominees for Director
The Board currently consists of
teneleven directors, each of whose terms will expire at the
2019 annual meeting.Mmes.Annual Meeting.
Mses. Bates,
Boyland, Clark and Dufresne and Messrs. Artz,
Douglas, Funk,
Heffernan,Mohammad, Muehlbauer, Roy
Spinner and Stahl have been nominated to stand for election as directors at the
2019 annual meeting,Annual Meeting to hold office until the
next annual meeting of stockholders
to be held in 2020 and until their successors are
duly elected and qualified. Each nominee has indicated his or her willingness to continue to serve if elected by our stockholders. If any nominee should be unable to serve, the person acting under the proxy may vote the proxy for a substitute nominee. We have no reason to believe any of the nominees will be unable to serve if elected.
We have
describedincluded below information concerning the business experience and qualifications, and the age as of
October 21, 2019,November 14, 2022, of each of our director nominees.
| | | | | | | | | | | | | | |
| The Board unanimously recommends that stockholders vote “FOR” each of the director nominees. Proxies received by the Board will be voted “FOR” each of the nominees unless a contrary choice is specified in the proxy. |
Nominees for Election as Directors for a Term Expiring at the
director nominees. Proxies received by the Board will be voted “FOR” each of the nominees unless a contrary choice is specified in the proxy.NOMINEES FOR ELECTION AS DIRECTORS FOR A TERM EXPIRING IN 2020
Eric F. Artz, age 51, has served as a member of the Board since October 2015. Next Annual Meeting
| | |
|
| Eric F. Artz |
| Age: 55 |
| Board Member since October 2015 |
| Compensation Committee Member |
| Nominating & Governance Committee Member |
Mr. Artz
is a member ofpreviously served on the Compensation
Committee.Committee from December 2015 to September 2020. Mr. Artz has served as President and Chief Executive Officer,
and member ofas well as on the board of directors, of Recreational Equipment, Inc.
(“REI”)(REI), an American retail and outdoor recreation services corporation, since May 2019. He served as Executive Vice President and Chief Operating Officer of REI from August 2014 to May 2019. In addition to this role, Mr. Artz also served as Executive Vice President, Chief Financial Officer and Treasurer of REI from May 2012 to December 2015. Prior to REI, Mr. Artz served as Chief Financial Officer for Urban Outfitters, Inc. from February 2010 to April 2012. From August 1992 until January 2010, Mr. Artz served in various positions of increasing responsibility at VF Corporation.
Skills and Qualifications: Mr. Artz’s professional experience brings valuable knowledge and insight to our Board. The Board values his experience as a Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, which provides him with valuable knowledge and insight regarding operations of retailers as well as the background and experience in overseeing the audits of financial statements, communicating with independent auditors and assisting with the general oversight of accounting and financial reporting processes.Ann Torre Bates, age 61, has served as a member of the Board since October 2013. Ms. Bates serves as the Chair of the Audit Committee.
| | |
|
|
| Ann Torre Bates |
| Age: 64 |
| Board Member since October 2013 |
| Chair of the Audit Committee |
Ms. Bates has served as a member of the board of directors of Ares Capital Corporation since 2010 and currently chairs its Audit Committee. Since September 2022, Ms. Bates has served as a director and member of the audit committee of Ares
Strategic Income Fund. She held a directorship at Allied Capital Corporation until it was acquired by Ares Capital Corporation in 2010. Ms. Bates also serves as director or trustee of 17 investment companies in the Franklin Templeton Group of mutual
funds.funds, and sits on those audit committees. Ms. Bates was a strategic and financial consultant from 1997 to 2012. From 1995 to 1997, Ms. Bates served as Executive Vice President, Chief Financial Officer and Treasurer of NHP, Inc., a national real estate services firm. Ms. Bates previously served as a member of the board of directors of Navient Corporation from April 2014 to August 2016, and she served on the board of directors of Navient’s predecessor, SLM Corporations, from 1997 to 2014.
Skills and Qualifications: Ms. Bates’ professional experience and service on other boards brings valuable knowledge and insight to our Board. The Board values her experience serving on audit committees, which providethe Board believes her service on other audit committees provides her with the background and experience in overseeing the audits of financial statements, communicating with independent auditors and assisting with the general oversight of accounting and financial reporting processes.Denise M. Clark, age 61, has
| | |
|
| Gloria R. Boyland |
| Age: 62 |
| Board Member since January 2021 |
| Audit Committee Member |
| Nominating & Governance Committee Member |
Ms. Boyland is a retired senior executive of the FedEx Corporation, where she served as Corporate Vice President, Operations and Service Support (beginning in 2015). Ms. Boyland led advanced operations technology initiatives, electro mobility, network and fleet automation, service quality and customer experience improvements, and new service offerings for the company. Prior to her tenure at FedEx, Ms. Boyland held leadership positions in various functions at GE Capital Corporation, including Six Sigma Quality, mergers and acquisitions and acquisition integration. She also practiced for eight years as a commercial transactions and investment attorney at GE. Ms. Boyland currently serves on the boards of directors of Vontier Corporation and Memphis Brooks Museum of Art, and previously served as a member of the Board since February 2013.boards of Chesapeake Energy Corporation and UMRF Ventures, Inc. In 2016, Ms. Clark serves asBoyland was appointed to the Chair of the Nominating and Governance Committee. Since October 2018,U.S. DOT Advisory Committee on Automation in Transportation. Ms. Clark hasBoyland also served as a memberstrategic advisor of the Board of Directors of Caesers Entertainment CorporationAurora Technologies, LLC.
Skills and also serves asQualifications:Ms. Boyland’s extensive experience leading operational transformation at global companies and customer service, coupled with her leading-edge, future-focused logistics and supply chain knowledge, make her a member of its Compensation Committee. valuable addition to our Board.
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|
| Denise M. Clark |
| Age: 64 |
| Board Member since February 2013 |
| Chair of the Nominating & Governance Committee |
Ms. Clark served as Senior Vice President and Global Chief Information Officer for The Estée Lauder Companies Inc. from November 2012 until her retirement in March 2017. Prior to that role, Ms. Clark served as Senior Vice President and Chief Information Officer for Hasbro Inc. from October 2007 to November 2012. Ms. Clark also served at Mattel, Inc., where she was Global Chief Technology Officer and later Chief Information Officer for the Fisher Price brand between January 2000 and February 2007. Ms. Clark’s
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previous experience includes two other consumer goods companies, Warner Music Group, formerly a division of Time Warner Inc., and Apple Inc. Ms. Clark has over 20 years of experience in the delivery of enterprise resource planning, digital platforms and innovative business transformation initiatives.
Ms. Clark previously served as a director of Six Flags Entertainment Corporation from August 2021 to August 2022 and as a member of the board of directors of Caesars Entertainment Corporation and as chair of its compensation committee from October 2018 to July 2020.
Skills and Qualifications: Ms. Clark’s extensive background, particularly her expertise involving information technology and transformation initiatives, allows her to provide the Board valuable guidance on our strategic initiatives, especially as it relates to information technology solutions.Daphne J. Dufresne, age 47,
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| J. Alexander Miller Douglas |
| Age: 61 |
| Board Member since August 2021 |
| UNFI Chief Executive Officer |
Mr. Douglas, was appointed as our CEO in August 2021 and most recently served as the Chief Executive Officer of Staples, Inc., an office retail company, from April 2018 to June 2021, which included leading that company’s business-to-business distribution platform. Prior to Staples, Mr. Douglas served as President of Coca-Cola North America until February 2018, where he led the $10 billion revenue business, encompassing all aspects of its consumer and business-to-business operations. During Mr. Douglas’ 30-year tenure at Coca-Cola, he also served as Global Chief Customer Officer, and held a variety of positions across sales and marketing. Mr. Douglas began his career at The Procter & Gamble Company in sales and sales management positions. Since May 2020, Mr. Douglas has served as a member of the board of directors of Wawa Inc., a leading convenience retailer in the Eastern United States.
Skills and Qualifications: Mr. Douglas’s experience at large public companies, including his extensive experiences leading consumer and business-to-business-to-consumer distribution operations, brings valuable insight to the Board since October 2016. beyond the knowledge and insight he brings from being our Chief Executive Officer.
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|
| Daphne J. Dufresne |
| Age: 50 |
| Board Member since October 2016 |
| Chair of the Compensation Committee |
Ms. Dufresne
is a member ofserved on the
Compensation Committee and Nominating and Governance
Committee.Committee until September 2021. Ms. Dufresne has been a Managing Partner of GenNx360 Capital Partners,
a venture capital firm that specializes in acquisition, buyouts, and turnaround of underperforming businesses, since January 2017. Ms. Dufresne was previously a Managing Director of RLJ Equity Partners, a private equity fund, from December 2005 to June 2016. Ms. Dufresne participated in building the RLJ investment team, raising capital to fund its operations and constructing a partnership with The Carlyle Group, a global private equity firm. Prior to that role, Ms. Dufresne was a Venture Partner during 2005 with Parish Capital Advisors, an investment fund for emerging and experienced institutional investors and a Principal from 1999 to 2005 at Weston Presidio Capital, a private equity organization. She also served as Associate Director in 1997 in the Bank of
Scotland’sScotland's Structured Finance Group. Ms. Dufresne has been a director of Condor Hospitality Trust, Inc. since June 2015, and was appointed chair in May 2019.
Skills and Qualifications:Ms. Dufresne’s professional experience, including her role as an equity investor for over 23 years, brings valuable knowledge and insight to our Board. Ms. Dufresne is very familiar with conducting due diligence, negotiating purchase and sale agreements and leading the board during these processes. She possesses experience in owning and managing enterprises like our Company and is familiar with corporate finance, strategic business planning activity and general issues involving various types of stockholders.
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| Michael S. Funk |
| Age: 68 |
| Board Member since February 1996 |
Mr. Funk
age 65, has been a member of the Board since February 1996 and served as Chair of the Board from January 2003 to December 2003, and again from September 2008 to December 2016. Mr. Funk served as our President and Chief Executive Officer from October 2005 to September 2008. Mr. Funk also served as Vice Chair of the Board from February 1996 until December 2002, as our Chief Executive Officer from December 1999 until December 2002 and as our President from October 1996 until December 1999.
Until January 1, 2019, Mr. Funk served as an executive advisor to us. From its inception in July 1976 until April 2001, Mr. Funk served as President of Mountain People’s Warehouse, Inc., now known as United Natural Foods West, Inc., one of our wholly-owned subsidiaries.
Skills and Qualifications:Mr. Funk’s extensive knowledge of our industry and our historical operations, as well asthrough his past service as our Chief Executive Officer brings to the Board valuable insight into the core operations of our Company and a deepstrong understanding of the natural and organic products distribution business. His deep institutional knowledge of all operational aspects of our business resulting from his long-term involvement with our Companyand industry is valuable to the Board.James P. Heffernan, age 73,
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|
| Shamim Mohammad |
| Age: 53 |
| Board Member since February 2022 |
| Audit Committee Member |
Mr. Mohammad currently serves as Executive Vice President and Chief Information and Technology Officer of CarMax Inc., the largest used car retailer in the United States, third largest wholesaler of used cars in the United States and a leading auto finance company, a position he has held since April 2021. He has held various senior technology roles of increasing responsibility since 2012. Prior to joining CarMax, Mr. Mohammad held information technology leadership roles at BJ’s Wholesale Club Inc., Blockbuster, Inc. and TravelClick, Inc. In 2020, MIT Sloan selected Mr. Mohammad as the recipient of the CIO Leadership Award, which recognizes CIOs who lead their organizations to deliver exemplary levels of business value through the innovative use of technology. Mr. Mohammad is a registered CPA.
Skills and Qualifications: Mr. Mohammad has strong financial oversight experience and brings with him a wealth of financial expertise. Mr. Mohammad’s proven track record in strategic leadership, development of forward-thinking technology solutions and business transformation make him a valuable addition to our Board.
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|
| James L. Muehlbauer |
| Age: 61 |
| Board Member since April 2019 |
| Audit Committee Member |
| Compensation Committee Member |
Mr. Muehlbauer previously served as a member of the
Board since March 2000. Mr. Heffernan serves as Chair of the Compensation Committee and as a member of the Audit Committee, and until September 2019, served as the Lead Independent Director. Mr. Heffernan has served as a Director of Jason Industries, Inc. since August 2013 and served as a Director of Command Security Corp. from October 2010 until February 2019. Mr. Heffernan previously served as Vice Chairman and Trustee of the New York Racing Association from November 1998 until 2012, a member of the Board of Directors of Solutia, Inc. from February 2008 until July 2012, and a member of the Board of Directors of Columbia Gas System, Inc. from January 1993 until November 2000.Mr. Heffernan’s overall professional experience, together with his other board service, has provided him with the background and experience of board processes, function, compensation practices and oversight of management that are valuable to the Board.
James Muehlbauer, age 58, has served as a member of the Board of Directors since April 2019. Mr. Muehlbauer serves as a member of the Audit Committee and Nominating and Governance Committee.Committee from May 2019 to September 2020. Mr. Muehlbauer served as the Executive Vice President, Chief Financial and Administrative Officer for The Valspar
Corporation from 2013 to 2017. Prior to that role, Mr. Muehlbauer served as Executive Vice President and Chief Financial Officer of Best Buy Co., Inc. from 2007 to 2013.
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Skills and Qualifications:Mr. Muehlbauer’s extensive finance, commercial and leadership experience with complex, multinational organizations provide him with background and experience in strategic planning, financial oversight, and large-scale business transformations. Mr. Muehlbauer’s knowledge and experience in broad strategic transitions and large-scale integration efforts are a valuable addition to our Board.
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|
| Peter A. Roy |
| Age: 66 |
| Board Member since June 2007 |
| Compensation Committee Member |
| Nominating & Governance Committee Member |
Mr. Roy
age 63, has served
as a member of the Board since June 2007 and as the Lead Independent Director
since September 2019. Mr. Roy is a member of the
Nominating and Governance Committee.Board from September 2019 until August 2021. Mr. Roy is an entrepreneur and since 1999,
Mr. Roy has
beenserved as a strategic advisor to North Castle Partners, a
small cap consumer private equity
firm. In connection with his role as a strategic advisor to North Castle Partners,firm focused on healthy living and aging investments. Mr. Roy
served on the boards of Avalon Natural Products, Inc., Naked Juice Companyhas worked with many iconic brands such as Stonyfield Farms and
Applegate Farms.Applegate. From 1993 to 1998, Mr. Roy served as President of Whole Foods Market, Inc. and, for five years prior to that, served as President of that
company’scompany's West Coast Region.
Since April 2021, Mr. Roy serves on the board of Thrive Acquisition Corp.
Skills and Qualifications:Mr. Roy’s experience as the President of Whole Foods Market, Inc. allows him to provide the Board essential insight and guidance into the day-to-day operations of natural and organic products retailers, including our largest customer. In addition, his experience in the healthy lifestyle industry provides valuable insights and helps the Board maintain its focus on our core values, including our sustainability goals.Steven L. Spinner, age 59, has
| | |
| Jack Stahl |
| Age: 69 |
| Board Member since June 2019 |
| Independent Chair |
| Audit Committee Member |
Mr. Stahl previously served
as Chairman of the Board since December 2016 and as our Chief Executive Officer and as a member of the
Board since September 2008. He also served as our President from September 2008 until August 2018. Prior to joining the Company in September 2008, Mr. Spinner served as a directorCompensation Committee and as
Chief Executive OfficerChair of
Performance Food Group Company (“PFG”) from October 2006 to May 2008, when PFG was acquired by affiliates of The Blackstone Group and Wellspring Capital Management. Mr. Spinner previously had served as PFG’s President and Chief Operating Officer beginning in May 2005. Mr. Spinner served as PFG’s Senior Vice President and Chief Executive Officer—Broadline Division from February 2002 to May 2005 and as PFG’s Broadline Division President from August 2001 to February 2002. Mr. Spinner has served as a Director of ArcBest Corporation, a holding company of businesses providing integrated logistics solution, since July 2011 and as its Lead Independent Director since April 2016.Mr. Spinner’s extensive experience of over 30 years in the wholesale food distribution business, including having held executive management positions with major distribution businesses in the United States, brings valuable insight to the Board beyond the knowledge and insight he brings from being our President and Chief Executive Officer.
Jack Stahl, age 66, has served as a member of our Board since June 2019. Mr. Stahl serves on the Compensation Committee and the Audit Committee.from September 2020 to August 2021. Mr. Stahl has served as a member of the Board and the Lead Director of Catalent, Inc., a contract manufacturing and development company for drugs, biologics and consumer health products since August 2014. Mr. Stahl served as President and Chief Executive Officer of Revlon Inc., a multinational cosmetics, skin care, fragrance and personal care company, from 2002 until his retirement in 2006. Prior to joining Revlon, Mr. Stahl served as President and Chief Operating Officer of The Coca-Cola Company from 2000 to 2001, after previously serving in various management positions of increasing responsibility, including Chief Financial Officer, during a tenure with Coca-Cola which began in 1979. Today, Mr. Stahl also serves on the Board of Advantage Solutions LLC, a leading provider of technology-enabled sales and marketing business solutions, and on the U.S. board of advisors of CVC Capital, a private equity firm. Additionally, he formerly served on the Boardsboards of Advantage Solutions LLC, Schering Plough Corporation, Dr Pepper Snapple Group, Saks, Inc., Coty Inc. and Ahold Delhaize, and was chairman of the board of managers of New Avon LLC.
Skills and Qualifications:Mr. Stahl has extensive leadership and significant Board experience. Mr. Stahl has a long-term record of profit and value driving performance in both stable and turnaround operating environments; and significant experience with complex, large, and dynamic organizations. At The Coca-Cola Company and Revlon, he gained significant skills and general management experience in building brands, maximizing customer relationships, and reducing costs.
Majority Vote Standard for Election of Directors
Our Bylaws provide for a majority voting standard for the election of directors in an uncontested election. If the number of nominees exceeds the number of directors to be elected in an election (a contested election), directors will be elected by a plurality standard. When the number of nominees does not exceed the number of directors to be elected (an uncontested election), however, as is the case
atfor this
year’s Annual Meeting, our
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Bylaws require each of the directors to be elected by a majority of the votes cast (that is, the number of shares voted “for” a director must exceed the number of shares voted “against” that director). If a nominee who is serving as a director is not elected at the annual meeting,Annual Meeting, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under our Bylaws, any director who fails to be elected must offer to tender his or her resignation to the Board. The Nominating and Governance Committee would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Nominating and Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who offers to tender his or her resignation will not participate in the Board’s decision or the Nominating and Governance Committee’s deliberations (if the director is a member of that committee). All nominees for election as directors at the 2019 annual meetingAnnual Meeting are currently serving on the Board.
The Nominating and Governance Committee reviews the qualifications of every person recommended as a nominee to the Board, including
frompotential nominees recommended by our third-party
firms,recruiting firm, to determine whether the recommended nominees are qualified to serve on the Board. The Nominating and Governance Committee has adopted standards by which it identifies nominees and determines if nominees are qualified to serve on the Board.
Additionally, in September 2021, the Board revised the Corporate Governance Principles to expressly state that any initial list of candidates for a new director appointment shall include qualified diverse candidates. The Nominating and Governance Committee evaluates recommended nominees in accordance with the following criteria:
| • | Personal characteristics. The Nominating and Governance Committee considers the personal characteristics of each nominee, including the nominee’s integrity, accountability, ability to make informed judgments, financial literacy, professionalism and willingness to meaningfully contribute to the Board (including by possessing the ability to communicate persuasively and address difficult issues). In addition, the Nominating and Governance Committee evaluates whether the nominee’s previous experience reflects a willingness to establish and meet high standards of performance, both for him or herself and for others. |
•Personal Characteristics. The Nominating and Governance Committee considers the personal characteristics of each nominee, including the nominee’s integrity, accountability, ability to make informed judgments, financial literacy, professionalism and willingness to meaningfully contribute to the Board (including by possessing the ability to communicate persuasively and address difficult issues). In addition, the Nominating and Governance Committee evaluates whether the nominee’s previous experience reflects a willingness to establish and meet high standards of performance, both for him or herself and for others.
| • | Core Competencies. The Nominating and Governance Committee considers whether the nominee’s knowledge and experience would contribute to the Board possessing certain core competencies. The Nominating and Governance Committee believes that the Board, as a whole, should possess competencies in accounting and finance, business judgment, management best practices, senior leadership, crisis response, industry knowledge, strategy and vision, and broad-scale transition and transformation. |
•Core Competencies.The Nominating and Governance Committee considers whether the nominee’s knowledge and experience would contribute to the Board possessing certain core competencies. The Nominating and Governance Committee believes that the Board, as a whole, should possess competencies in accounting and finance, business judgment, management best practices, senior leadership, crisis response, industry knowledge, strategy and vision, and broad-scale transition and transformation, and it periodically reassesses the specific skill sets that are needed by the Board.
| • | Board Independence. The Nominating and Governance Committee considers whether the nominee would qualify as “independent” under SEC rules and the NYSE listing standards. |
•Board Independence. The Nominating and Governance Committee considers whether the nominee would qualify as “independent” under SEC rules and the NYSE listing standards.
| • | Director Commitment. The Nominating and Governance Committee expects that each of our directors will prepare for and actively participate in meetings of the Board and its committees, provide advice and counsel to our management, develop a broad knowledge of our business and industry and, with respect to an incumbent director, maintain the expertise that led the Nominating and Governance Committee to initially select the director as a nominee. The Nominating and Governance Committee evaluates each nominee on his or her ability to provide this level of commitment if elected to the Board. |
•Director Commitment. The Nominating and Governance Committee expects that each of our directors will prepare for and actively participate in meetings of the Board and its committees, provide advice and counsel to our Management, develop a broad knowledge of our business and industry and, with respect to an incumbent director, substantially maintain the expertise that led the Nominating and Governance Committee to initially select the director as a nominee. The Nominating and Governance Committee evaluates each nominee on his or her ability to provide this level of commitment if elected to the Board.
| • | Additional Considerations. Each nominee also is evaluated based on the overall needs of the Board and the diversity of experience he or she can bring to the Board, whether in terms of specialized knowledge, skills or expertise. Although we do not have a formal policy regarding the consideration of diversity in identifying director nominees, the Nominating and Governance Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee our businesses and add value to strategic plans and initiatives. |
•Additional Considerations.Each nominee also is evaluated based on the overall needs of the Board and the diversity of experience he or she can bring to the Board, whether in terms of specialized knowledge, skills or expertise. Our Nominating and Governance Committee charter provides for the consideration of gender, race and ethnic diversity when considering Board candidates, and the Committee is committed to maintaining a diverse Board. The Nominating and Governance Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee our businesses and add value to strategic plans and initiatives.
Following this evaluation, the Nominating and Governance Committee will ultimately make recommendations for membership on the Board and review such recommendations with the Board, which will decide whether to invite or appoint the candidate to be a nominee for election to the Board.
Stockholder Director Recommendations and Proxy Access
Stockholder Director Recommendations.Recommendations
The Nominating and Governance Committee evaluates nominees recommended by stockholders on the same basis as nominees recommended by any other sources, including determining whether the candidate is qualified to serve on the Board based on the qualitative standards described above. To behave a nominee considered by the Nominating and Governance Committee, a stockholder who wishes to recommend a director nominee must follow the procedures in our Bylaws related to director nominations described under “OTHER MATTERS—Other Matters—Stockholder Proposals for the 2020Next Annual Meeting of Stockholders.” Written notice must be delivered or sent by first class U.S. mail addressed to Corporate Secretary, United Natural Foods, Inc., 313 Iron Horse Way, Providence, RI 02908.
Proxy Access.Access
We have also adopted a proxy access provision in our Bylaws 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), the nominee(s), and the notice satisfy the requirements in our Bylaws. The number of potential proxy access nominees nominated by all eligible stockholders shall not exceed the greater of (A) two or (B) 20% of the directors then in office. Under our Bylaws, to be timely, notice of proxy access director nominations must be received by our Corporate Secretary at the address specified above no earlier than 150 days and no later than 120 days prior to the first anniversary of the date the Company mailed its proxy statement for the preceding year’s annual meeting; provided, however, that if (A) the annual meeting is not within 30 days before or after the anniversary date of the preceding year’s annual meeting, or (B) no annual meeting was held during the preceding year, to be timely the stockholder notice must be received no later than 120 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 the annual meeting is first made, whichever occurs first.
Communication with the Board of Directors
Our stockholders
Anyone who would like to communicate with, or otherwise make his or her concerns known directly to, the Board may communicate directly with the Board.do so. All communications should be in written form and directed to our Corporate Secretary, United Natural Foods, Inc., 313 Iron Horse Way, Providence, RI 02908, who will forward such communications to the appropriate party. All correspondence will be compiled and summarized by the Corporate Secretary and periodically submitted to the Board, individual directors or individual directors.Management, as appropriate. The Corporate Secretary may also forward certain correspondence elsewhere within the Company for review by a subject matter expert and for a response, as appropriate.
Director Compensation
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DIRECTOR COMPENSATION
The Board and the Compensation Committee review and determine compensation for our non-employee directors, based in part on a review of the annual Director Compensation Survey prepared by the National Association of Corporate Directors and other reputable sources, as well as with the input from the Compensation Committee’s independent consultant, Semler Brossy Consulting Group, LLC (“Semler Brossy”).based on benchmarking of comparable peer company director compensation. The Compensation Committee and the Board believe that we should fairly compensate non-employee directors for work required in a company of our size and scope and that our compensation program for non-employee directors should align the non-employee directors’ interests with thebe designed to drive long-term interest ofvalue creation for our stockholders. Our non-employee director stock ownership guidelines, which are discussed in greater detail below, are also designedrequire directors to alignhold a substantial amount of our stock during their tenure as directors, thereby directly aligning the interests of our non-employee directors with those of our stockholders. Mr. Spinner, our former CEO, did not, and Mr. Douglas, our current CEO, does not, receive separate compensation for his service on the Board, including in his capacity as Chair of theour Board.
Non-Employee Director Compensation
The components of our non-employee director compensation are annual cash retainers and awards of time-based restricted stock units (“RSUs”).(RSUs), which will vest one-year from the date of grant of the award. Each non-employee director is also reimbursed for direct expenses (e.g. travel, hotel, and meals) incurred in connection with his or her attendance at meetings of the Board and its committees. Effective in calendar 2019, we put in place a new director compensation program, described below.
In
addition, in February 2019,September 2021, the Compensation Committee
approvedamended the Director compensation to reflect the shift to an Independent Chair-based leadership structure. After reviewing the Independent Chair compensation for our peer companies and certain
policies regardingother benchmark data, the
proration of director compensation. A new director who is appointed between meetings will receive their first member retainer at the next quarterly period after their appointment,Compensation Committee recommended, and
such retainer will be increased by a prorated amount based on the number of days of service by the director prior to the quarter after their appointment, over the total number of days of the relevant period between Board meetings in which their service began. They will also receive the Board
approved, an additional annual cash retainer for the Independent Chair. Further, in December 2021, the Compensation Committee, after reviewing certain benchmarking information and
committee chair retainer, if applicable, paid in
advance for service from the first quarter after their appointment through the next quarterly period. Accordingly, Messrs. Muehlbauer and Stahl received prorated compensation for their services onconsideration of when the Board
last approved an increase, recommended, and
certain committees beginningthe Board approved, an increase in
April 2019 and June 2019, respectively.Effectivethe annual cash retainer for calendar 2019, eachnon-employee directors of $10,000. Accordingly, non-employee director received the following compensation (as applicable):
is as follows:•Annual cash retainer of:
| ○ | $90,000 for serving as a director; |
| ○ | $30,000 for serving as the chair of the Audit Committee; |
| ○ | $20,000 for serving as chair of the Compensation Committee; and |
| ○ | $15,000 for serving as chair of the Nominating and Governance Committee. |
◦$100,000 for serving as a director;
◦$100,000 for serving as Independent Chair;
◦$30,000 for serving as the chair of the Audit Committee;
◦$20,000 for serving as chair of the Compensation Committee; and
◦$20,000 for serving as chair of the Nominating and Governance Committee.
•Annual equity grants of RSUs having a value, based on the stock price on the date of grant, of (without duplication):$162,000 for serving as a director.
| ○ | $162,000 for serving as a director; and |
| ○ | an additional $50,000 for serving as Lead Independent Director. |
In calendar year 2018, our directors received aggregate annual and quarterly cash retainers of $56,000 and an equity grant of $162,000. In addition, chairs ofAdditionally, in September 2021, the Compensation Committee and Nominating and Governance Committee received an additional $8,000 annual cash retainer, the chairBoard approved payments to certain of the AuditCompany’s Directors for chair and member service on the CEO Succession Planning Committee received an additional $15,000 annual cash retainer and an additional equity awardto reflect the special nature of $28,000,the Committee and the Lead Independent Director received an additional $22,000 annual cash retainertime and an additional equity award of $236,000. With respect to equity awards to non-employee directors in fiscal 2019, one half of the annual grant vested immediately, and the remaining half vested on the six-month anniversary of the date of grant. Beginning in fiscal 2020, equity awards to non-employee directors will vest one-year from the date of approval of the award.
Compensation of Mr. Funk
Mr. Funk, our former Chair of the Board, and former President and CEO, servedeffort involved, as an executive advisor to us until January 1, 2019. Mr. Funk received cash compensation for his service as an executive advisor. Until
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January 1, 2019, Mr. Funk did not receive cash compensation for his service as a director. Until January 1, 2019, we paid him a base salary and provided him with the health and welfare benefits and other employee benefits generally available to our executives. Mr. Funk’s base salary during fiscal 2019 was $134,100. In addition, Mr. Funk received equity-based compensation for his service as a director. During fiscal 2019, Mr. Funk received an equity grant of RSUs having a value of $365,000, or 11,820 RSUs, of which one half vested immediately and the remaining half vested on the six-month anniversary of the date of grant. Beginning in calendar year 2019, Mr. Funk is no longer an employee of the Company and since January 1, 2019, he receives compensation onlyfollows: $25,000 for service as a non-employee directorchair, $10,000 for service as a member on the same termsCommittee and $20,000 for continuing members. In addition, the Compensation Committee and Board determined that additional payments of $10,000 for one Board member, and $15,000 for another Board member, should be made given the extended service, time and effort expended by these two individuals in their capacities as Board members on the other non-employee directors.
Deferred Compensation
Our non-employee directors were eligible to participate in the United Natural Foods, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) until it was frozen in February 2019,nearly year-long CEO succession and prior to being frozen with respect to new deferrals in January 2007, the United Natural Foods, Inc. Deferred Stock Plan (the “Deferred Stock Plan”, collectively, the “Deferral Plans”). For a description of the Deferral Plans, please see “EXECUTIVE COMPENSATION TABLES—Nonqualified Deferred Compensation—Fiscal 2019.”
search process.
Director Compensation Table—Fiscal
20192022
The following table summarizes compensation provided to
our former Chair of the Board (Mr. Funk) and each individual who served as a non-employee director during fiscal
2019.2022.
Table of ContentsDIRECTOR COMPENSATIONName | Fees Earned
or Paid in
Cash
($)(1) | Stock
Awards
($)(2) | Option
Awards
($)(3) | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings
($)(4) | All Other
Compensation
($) | Total
($) |
Eric F. Artz | $ | 81,500 | | $ | 162,000 | | | — | | | — | | | — | | $ | 243,500 | |
Ann Torre Bates | $ | 107,750 | | $ | 190,000 | | | — | | | — | | | — | | $ | 297,750 | |
Denise M. Clark | $ | 81,500 | | $ | 162,000 | | | — | | $ | 271 | | | — | | $ | 243,771 | |
Daphne J. Dufresne | $ | 81,500 | | $ | 162,000 | | | — | | $ | 1,907 | | | — | | $ | 245,407 | |
Michael S. Funk | $ | 67,500 | | $ | 365,000 | | | — | | | — | | $ | 57,250 | (5) | $ | 489,750 | |
James P. Heffernan | $ | 104,000 | | $ | 236,000 | | | — | | | — | | | — | | $ | 340,000 | |
James Muehlbauer(6) | $ | 39,808 | | | — | | | — | | | — | | | — | | $ | 39,808 | |
Peter A. Roy | $ | 94,750 | | $ | 162,000 | | | — | | | — | | | — | | $ | 256,750 | |
Jack Stahl(7) | $ | 23,984 | | | — | | | — | | | — | | | — | | $ | 23,984 | |
Director Compensation | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name | | Fees Earned or Paid in Cash ($)(1) | | Stock Awards ($)(2) | | Option Awards ($)(3) | | Total ($) |
| Eric F. Artz | | 98,322 | | | 162,000 | | | — | | | 260,322 | |
| Ann Torre Bates | | 128,322 | | | 162,000 | | | — | | | 290,322 | |
Gloria R. Boyland(4) | | 108,322 | | | 282,279 | | | — | | | 390,601 | |
Denise M. Clark(5) | | 158,322 | | | 162,000 | | | — | | | 320,322 | |
| Daphne J. Dufresne | | 121,202 | | | 162,000 | | | — | | | 283,202 | |
Michael S. Funk(5) | | 118,322 | | | 162,000 | | | — | | | 280,322 | |
Shamim Mohammad(6) | | 65,833 | | | — | | | — | | | 65,833 | |
James L. Muehlbauer(5) | | 108,322 | | | 162,000 | | | — | | | 270,322 | |
Peter A. Roy(5) | | 108,322 | | | 162,000 | | | — | | | 270,322 | |
Jack Stahl(5) | | 219,844 | | | 162,000 | | | — | | | 381,844 | |
(1)This column shows the amount of cash compensation earned in fiscal 2022 for service on the Board and its committees.
(2)The amounts contained in this column represent the grant date fair value for the RSUs granted in fiscal 2022 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Stock Compensation (ASC 718). The grant date fair value for RSUs is calculated based on the closing price of our common stock on the NYSE on the date of grant.
(3)As of July 30, 2022, no directors held options to purchase shares of common stock. As of July 30, 2022, each director held 3,500 unvested RSUs, other than Ms. Boyland, who held 6,099 unvested RSUs and Mr. Mohammad, who was not a member of our Board at the time of the fiscal 2022 annual grant, and therefore did not receive a grant in fiscal 2022.
(4)Ms. Boyland was appointed to the Board in January 2021. Accordingly, this grant amount is reflective of proration of the annual equity award for Ms. Boyland’s service as a director for the service period prior to the grant date. Additionally, Ms. Boyland received a payment of $10,000 for her service as a member on the ad hoc CEO Succession Planning Committee, which was approved and paid during the first quarter of fiscal 2022.
(5)Includes the following additional compensation for services on the ad hoc CEO Succession Planning Committee, which was approved and paid in the first quarter of fiscal 2022: Ms. Clark received a payment of $40,000 for her service as a member and chair of the Committee, Mr. Funk received a payment of $20,000 for his service as a member of the Committee, and Messrs. Muehlbauer, Roy and Stahl received payments of $10,000 of their service as members of the Committee.
(6)Mr. Mohammad joined the Board in February 2022 and did not receive a grant of equity for fiscal 2022.
| (1) | This column shows the amount of cash compensation earned in fiscal 2019 for service on the Board and its committees. |
| (2) | The amounts contained in this column represent the grant date fair value for the RSUs (including those which are not yet vested) granted in fiscal 2019 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Stock Compensation (“ASC 718”). The grant date fair value for RSUs is calculated using the intrinsic value method based on the closing price of our common stock on the NASDAQ Stock Market on the date of grant. At August 3, 2019, no director other than Mr. Spinner had any unvested RSUs outstanding. |
| (3) | As of August 3, 2019, the directors held options to purchase the following number of shares of common stock: Mr. Artz—none; Ms. Bates—none; Ms. Clark—none; Ms. Dufresne—none; Mr. Funk—7,000 shares; Mr. Heffernan—7,980 shares; Mr. Muehlbauer—none; Mr. Roy—7,980 shares; and Mr. Stahl—none. |
| (4) | As of August 3, 2019, two of our non-employee directors, Ms. Clark and Mr. Heffernan, had elected to defer RSUs under the Deferred Compensation Plan. Deferred shares are valued at the current market price of our common stock, and therefore have no above market or preferential earnings. As of August 3, 2019, Ms. Dufresne elected to defer a portion of her director fees paid in cash under the Deferred Compensation Plan prior to it being frozen. For fiscal 2019, Ms. Dufresne deferred $13,000 of her fees payable in cash. See “EXECUTIVE COMPENSATION TABLES—Nonqualified Deferred Compensation—Fiscal 2019” for a description of how the portion of directors’ fees payable in cash earn interest. |
| (5) | Represents Mr. Funk’s wages in connection with his employment through January 1, 2019, as described above. |
| (6) | James Muehlbauer joined the Board in April 2019. |
| (7) | Jack Stahl joined the Board in August 2019. |
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Stock Ownership Guidelines
All non-employee directors are required to hold shares of our stock in an amount that is determined in accordance with the requirements of our stock ownership guidelines. The guidelines provide that each of our non-employee directors must acquire and hold shares of our common stock valued at
threefive times the annual cash retainer, not including supplemental retainers for committee leadership. Our stock ownership guidelines require that each new non-employee director is expected to comply with the policy by the end of the fifth year after he or she becomes a member of the Board. Compliance with the guidelines is tested once per year for as long as the director serves on the Board.
When calculating whether a director owns a sufficient number of shares under these guidelines, shares owned in a deferred compensation plan are included in the number of shares owned. Vested and unvested restricted stock and RSUs are also included
but unvestedin ownership. In March 2022, we updated our stock
options do not count. Vestedownership guidelines to exclude vested stock options and stock appreciation rights
countin calculating compliance. Pursuant to
the extent of their net value after deduction for the exercise price.our stock ownership guidelines and insider trading policy, Directors are not allowed to hedge their interests in the stock
held pursuant toheld. Given the
guidelines. In October 2018, we amended the guidelines for directors to exclude vested stock options to the extent that they do not exceed the net value after deduction for the exercise price; we also added an explicit prohibition against hedging of the interest required to meet the guidelines. Each of Messrs. Funk and Roy held more than 100% of the applicable guideline as of August 3, 2019. Our other directors were below the guidelines as of August 3, 2019, because thesustained decline in our stock price
affectedat the
value of the shares they hold. They are nevertheless deemed to be in compliance as of that date as their ownership fell below the applicable requirements due solely to a decline in the stock price. If the reduction in our stock price is sustained at a level specified in our stock ownership guidelines for 18 months, the
five-year accumulation period
willwas reset for our directors
as of August 1, 2020, in accordance with the terms of the guidelines, and they will be required to accumulate
more shares to reach the required ownership
level.Compensation Committee Interlocks and Insider Participation
The current memberslevel by the end of the Compensation Committee are Ms. Bates and Messrs. Artz, Heffernan, and Stahl. All membersthat accumulation period. As of the Compensation Committee are independent within the meaning of the NYSE listing standards and no member is an employee or former employee of the Company. During fiscal 2019, no member of the Compensation Committee had any relationship requiring disclosure under “Certain Relationships and Related Transactions” below. During fiscal 2019, noneJuly 30, 2022, each of our executive officers served as a director or a member of the compensation committee (or other committee serving an equivalent function) of any other entity, for which one of whose executive officers served as a director on the Board or as a member of the Compensation Committee.
directors was in compliance.
Certain Relationships and Related Transactions
Review and Approval of Related Party Transactions
Pursuant to our Related Party Transaction Policy, our Nominating and Governance Committee reviews all transactions in which the Company or any of its subsidiaries is a participant if a “related party” will have a direct or indirect material interest and the amount involved or expected to be involved in any fiscal year exceeds $120,000. The transaction will not be approved unless, after a consideration of all relevant circumstances, the Committee determines that the transaction is in the best interests of the Company. The Nominating and Governance Committee reports any transaction that has been approved to the Audit Committee and the full Board. For purposes of this policy, “related parties” include our directors, nominees for director,
executive officers, greater than 5% beneficial owners, any of their immediate family members (as defined in the policy, which includes additional family members beyond the SEC’s related person disclosure rules) or any entity in which they have a material interest. Among the factors that must be considered
in making the determination of whether the transaction is appropriate are: the nature of the related party’s interest in the transaction; the material terms of the transaction, including whether the terms of the transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party; the significance of the transaction to the related party and the Company; whether the transaction would impair the judgment of a director or executive officer to act in the best interests of the Company; compliance with applicable law; and any other factors deemed appropriate by our Nominating and Governance Committee. As required under SEC regulations, transactions
between us and any related personinvolving amounts in excess of $120,000 in which
the amount involved exceeds $120,000we are a participant and
as to which a related person has a direct or indirect material interest are disclosed in this proxy statement.
Each of our executive officers, directors and nominees for director is required to complete and deliver to us an annual questionnaire that includes, among other things, a request for information relating to any transactions
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in which (i) any executive officer, director, nominee, beneficial owner or any of their respective immediate family members or affiliates, on the one hand, and (ii) the Company or any of its subsidiaries, on the other hand, participates. We review the responses to these questionnaires as part of our process for determining whether disclosure is required to be made under the SEC’s related person disclosure rules.
Transactions with Related Persons
We employed Hilary Spinner-Jacobs as a Sales Manager for the New York City and Long Island territories until March 2019. Ms. Spinner-Jacobs is the sister Based on such responses, there are no related person transactions to report.
Audit Committee Report
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AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors consists solely of independent directors, as defined by the NYSE listing standards and Section 10A of the Exchange Act and SEC rules thereunder, and it operates under a written charter adopted by the Board of Directors.Board. The composition of the Audit Committee, the attributes of its members and its responsibilities, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter on an annual basis. A copy of the Audit Committee’s current charter can be found in the Investors section of our website, www.unfi.com. The Board has determined that all members of the Audit Committee members qualifyare financially literate and Ms. Bates qualifies as an “audit committee financial experts”expert” within the meaning of SEC regulations and have accounting and related financial management expertise in accordance with the NYSE listing standards.
regulations.
The Audit Committee has prepared the following report on its activities with respect to the audited consolidated financial statements for the fiscal year ended
August 3, 2019July 30, 2022 (for purposes of this report, the “audited financial statements” or “consolidated financial statements”). The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other of our filings under the Securities Act of 1933, as amended (the
“Securities Act”)Securities Act) or the Exchange Act, except to the extent we specifically incorporate this report by reference in the specified filing.
As part of its
specificdelineated duties, the Audit Committee reviews the Company’s financial reporting process on behalf of the
Board of Directors;Board; reviews the financial information issued to stockholders and others, including a discussion of the quality, and
not only the acceptability, of our accounting principles, the reasonableness of significant judgments, and the clarity of discussions in the financial statements; and monitors our systems of internal control over financial reporting and the audit process. Management is responsible for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles, and disclosure controls and procedures designed to
ensuredrive compliance with accounting standards and applicable laws and regulations. Management also is responsible for objectively reviewing and evaluating the adequacy, effectiveness and quality of our own systems of internal control over financial reporting. Our independent registered public accounting firm, KPMG LLP, is responsible for performing an independent integrated audit of the consolidated financial statements and the effectiveness of internal control over financial reporting and expressing an opinion as to whether the consolidated financial statements conform with accounting principles generally accepted in the United States
(“GAAP”)(GAAP) and as to whether the Company maintained effective internal control over financial reporting.
The Audit Committee has met and held discussions with
managementManagement and KPMG LLP. In our discussions,
managementManagement has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in conformity with GAAP. The Audit Committee has reviewed and discussed the audited financial statements with
managementManagement and KPMG LLP. The Audit Committee meets with our internal auditors and KPMG LLP, with and without
managementManagement present, to discuss the results of their examinations, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
The Audit Committee held
eightfour formal meetings in fiscal
2019.2022. The Audit Committee discussed with KPMG LLP all matters required to be discussed in accordance with auditing standards, including the statement on Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees.
KPMG LLP has also provided to the Committee the written disclosures and the letter required by the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee has considered and discussed with KPMG LLP the firm’s independence and the compatibility of any non-audit services provided by the firm with its independence.
Based on the Audit Committee’s review of the audited financial statements and the review and discussions noted above, the Audit Committee recommended that the Board of Directors include the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended August 3, 2019,July 30, 2022, for filing with the SEC.
| | | | | | | | |
| | Ann Torre Bates, Chair
|
| | Gloria R. Boyland |
| | Shamim Mohammad |
| | James P. Heffernan
JamesL. Muehlbauer
|
| | Jack Stahl |
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Executive Officers of the Company
Our executive officers are elected on an annual basis and serve at the discretion of our Board of Directors.Board. Our executive officers and their ages as of October 21, 2019November 14, 2022 are listed below.below:
Name
| Age
| Position
| | | | | | | | | | | | |
Steven L. Spinner
Name | 59
| Age | | Position |
| J. Alexander (Sandy) Miller Douglas | | 61 | | Chief Executive Officer and Board Chairman |
John W. Howard | 50
| Interim 53
| | Chief Financial Officer |
Sean F. Griffin
Danielle Benedict | 60
| 50 | | Chief ExecutiveHuman Resources Officer of SUPERVALU INC. and UNFI |
| Eric A. Dorne | | 62 | | Chief Operating Officer (retired effective October 29, 2022) |
Danielle Benedict
Matthew Echols | 47
| 50 | | Chief Human ResourceCorporate Affairs Officer |
Eric A. Dorne
Mahrukh Hussain | 59
| Chief Administrative Officer and Chief Information Officer
|
Paul S. Green
50 | 56
| Chief Supply Chain Officer
|
David W. Johnson
| 48
| Controller and Chief Accounting Officer
|
Jill E. Sutton
| 48
| Chief Legal Officer, General Counsel and Corporate Secretary
|
Louis Martin | | 52 | | Chief Strategy and Transformation Officer |
| Michael C. Stigers | | 64 | | Chief Executive Officer, Cub |
| | | | |
| Christopher P. Testa | 49
| 52 | | President and Chief Marketing Officer |
| | | | |
DescribedWe have included below is information concerning the business experience and qualifications of each of our executive officers, except Mr. SpinnerDouglas whose business experience and qualifications are described above in the section “Proposal 1—Election of Directors.”
John W. Howard was appointed Chief Financial Officer in February 2020. Mr. Howard previously served as our Interim Chief Financial Officer infrom August 2019.2019 to February 2020. Mr. Howard joined us in July 2019 as Senior Vice President, Finance. Prior to that, Mr. Howard served as Interim Chief Financial Officer for Prime Therapeutics from July 2018 to May 2019. From August 2014 to July 2017, Mr. Howard was Vice President, Corporate Finance for Valspar Corporation leading the global accounting, tax, treasury, regional CFOs and corporate financial planning and analysis. Prior to that, Mr. Howard held a number of finance and tax roles at Celanese Corporation and Reichhold, Inc. Mr. Howard began his career as a tax consultant with Arthur Anderson and PricewaterhouseCoopers.Sean F. Griffin was appointed Chief Operating Officer in April 2019. He became the Chief Executive Officer Mr. Howard holds a Bachelor of SUPERVALU INC. upon the acquisitionScience and Master of Supervalu by our Company. Prior to the acquisitionAccounting, Tax, both from University of Supervalu, Mr. Griffin served as our Chief Operating Officer from September 2014 until August 2018, as our Senior Vice President, Group President from June 2012 to September 2014 and as our Senior Vice President, National Distribution from January 2010 to June 2012. Prior to joining us, Mr. Griffin was East Region Broadline President of PFG. Previously he served as President of PFG in Springfield, MA from 2003 until 2008. He began his career with Sysco Corporation in 1986 and has held various leadership positions in the foodservice distribution industry with U.S. Foodservice, Alliant Foodservice and Sysco Corporation.
Virginia.
Danielle Benedict was appointed as our Chief Human Resource Officer in September 2017. Ms. Benedict previously served as our Senior Vice President, Human Resources from May 2016 to September 2017 and as our National Vice President, Human Resources from August 2014 to May 2016 and Director, Compensation & Benefits from April 2013 to August 2014. Prior to joining us, Ms. Benedict was Vice President, Human Resources & Leadership Development at Clean Harbors Environmental Services from 2007 to 2013. She began her career with Dunkin Brands, Inc. in 1999. Since September 2022, Ms. Benedict serves on the board of The Food Project, a non-profit organization.
Eric A. Dornehasserved as our Chief Operating Officer from March 2020 until his retirement on October 29, 2022. He also served as our Chief Administrative Officer and Chief Information Officer sincefrom September 2016.2016 to March 2020. Mr. Dorne previously served as our Senior Vice President, Chief Information Officer from September 2011 to September 2016. Prior to joining us, Mr. Dorne was Senior Vice President and Chief Information Officer for The Great Atlantic & Pacific Tea Company, Inc., the parent company of the A&P, Pathmark, SuperFresh, Food Emporium and Waldbaum’s supermarket chains located in the Eastern United States from January 2011 to August 2011, and Vice President and Chief Information Officer from 2005 to 2011. In his more than 30 years at The Great Atlantic & Pacific Tea Company, Mr. Dorne held various executive positions including Vice President of Enterprise IT Application Management and Development, Vice President of Store Operations Systems and Director of Retail Support Services.Paul S. Green
Matthew Echols has served as our Chief Supply ChainCorporate Affairs Officer since August 2018.March 2022. Prior to joining us, Mr. Green previouslyEchols served as ourGlobal Vice President Pacific Region from August 2016 to August 2018,for Public Affairs, Communications and Sustainability at The Coca-Cola Company. Mr. Echols held several positions during his 24 years at Coca-Cola including Senior Vice President Operationsof Public Affairs, Communications and Sustainability for North America from June 20142015 to August 2016,2019, and Vice President, Operations from May 2010 to June 2014. Prior to2019-2021 a similar role in Asia Pacific based in Singapore. Before joining Coca-Cola, Mr. Echols worked on Capitol Hill for several members of the U.S. Congress. He holds a master’s degree in marketing communications from Johns Hopkins University’s Carey Business School, where he currently serves on the Dean’s Advisory Board, and a bachelor’s degree from the University of West Georgia. TABLE OF CONTENTS
us, Mr. Green was Vice President of Sales for PFG-Springfield, MA from 2008 until 2010 and Vice President of Operations for PFG-Springfield, MA from 2005 until 2008. Mr. Green held various other leadership positions in his ten years at PFG. He began his career with Fleming Foods and held several positions over 16 years.
David W. JohnsonMahrukh Hussain has served as our Controller and Chief Accounting Officer since October 2018. Prior to our acquisition of Supervalu, Mr. Johnson served as Vice President, Controller of Supervalu since April 2013 and was appointed Chief Accounting Officer of Supervalu in April 2018, after previously serving as Interim Chief Accounting Officer of Supervalu since July 2017. From 2012-2013, Mr. Johnson served as Supervalu’s Vice President, Assistant Controller and as its Senior Director, Assistant Controller from 2011 to 2012.
Jill E. Sutton has served as our Chief Legal Officer, General Counsel and Corporate Secretary since October 2018. From May 2018 to October 2018, she served as our Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary.2022. Prior to joining us, Ms. Sutton was DeputyHussain served as Senior Vice President, Chief Commercial and Privacy Officer for McDonald’s Corporation since January 2022. During her tenure with McDonald’s, Ms. Hussain held a range of legal positions with increasing responsibility. She served as the Interim Global General Counsel and Corporate Secretary from October 2020 until April 2021. From July
2013 through October 2020, Ms. Hussain served as McDonald’s U.S. General Counsel; from May 2011 through May 2013 she served as the Europe General Counsel; from February 2009 through May 2011 she served as the Central Division General Counsel; and from December 2000 through February 2009 she served as Managing Counsel/Senior Counsel/Counsel U.S. Real Estate Practice Groups. Prior to working with McDonald’s, she was an Associate at General Motorsthe law firm of Schwartz, Cooper, Greenberger, and Krauss and served one year as a judicial clerk for Justice Rita Garman. Ms. Hussain holds a bachelor’s degree in Political Science from 2015the University of Chicago and a J.D. from the University of Illinois at Urbana-Champaign.
Louis Martin has served as our Chief Strategy and Transformation Officer since March 2022. Prior to 2018joining us, Mr. Martin served as President of the Global Walmart Customer Team at The Coca-Cola Company since April 2016. Mr. Martin held several positions during his 15 years at Coca-Cola including Senior Vice President of System Evolution for Coca-Cola North America (May 2014-April 2016). Prior to working with Coca-Cola, Mr. Martin was with McKinsey & Company and previously with E.D. & F. Man, a British Sugar Trade House. He holds a Bachelor’s degree in English from Princeton University as well as an MBA in Finance and Management from the Stern School of Business at New York University.
Michael C. Stigers has served as the Chief Executive Officer, Cub and Executive Vice President General Counselof UNFI since 2019. Previously, he served as Executive Vice President of UNFI Fresh and Corporate SecretaryCEO of Cub Foods, Minnesota’s largest retail grocery chain, since November 2018. Prior to its acquisition by UNFI, Mr. Stigers served as Supervalu’s Executive Vice President of Wholesale Supply Chain Services and Logistics since 2016. Mr. Stigers prior experience included serving as President of Shaw’s / Star Markets; Regional Vice President of Sterilox Fresh, a food safety company; and Chief Operating Officer of PW Supermarkets. Mr. Stigers began his grocery career as a part-time courtesy clerk at Tim Hortons, Inc. from 2012 to 2015. From 2006-2012, Ms. Sutton held various leadership rolesSafeway and has been active in several trade associations, including the California Grocers Association, past president of increasing accountability in the legal department at Tim Hortons, Inc.Western Association of Food Chains, and immediate past Chair of National Grocers Association.
Christopher P. Testa has served as our President, United Natural Foods, Inc. since August 1, 2018. In April 2019, he also became Chief Marketing Officer.March 2020, Mr. Testa assumed additional oversight of supplier services, professional services, our Brands+ business, and our Canadian business. From August 2016 to August 2018, he served as our President, Atlantic Region. Mr. Testa previously served as President, Woodstock Farms Manufacturing, from September 2012 to August 2016 and President, Blue Marble Brands, from August 2009 until August 2016. Mr. Testa served as Vice President of Marketing for Cadbury Schweppes Americas Beverages from 2002 to 2005 and as CEO of Wild Waters, Inc. from 2005 to 2009.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
In this section, we describe the principles, policies and practices that form the basis for our executive compensation program and how they were applied to our Named Executive Officers (NEOs) in fiscal 2019,2022, as well as changes we have made or expect to make for fiscal 2020.2023. For purposes of this Compensation Discussion and Analysis, the following individuals were our Named Executive OfficersNEOs for fiscal 2019:2022:
•Chief Executive Officer (J. Alexander (Sandy) Miller Douglas);
•Chief Financial Officer (John W. Howard);
•Chief Operating Officer (Eric A. Dorne);
•Chief Executive Officer, Cub (Michael C. Stigers);
•President (Christopher P. Testa);
•Former Chief Executive Officer and Board Chairman (Steven L. Spinner); and
(Former) Chief Financial Officer (Michael P. Zechmeister);
Chief Executive Officer of SUPERVALU INC. and UNFI Chief Operating Officer (Sean F. Griffin);
•Former Chief Legal Officer, General Counsel and Corporate Secretary (Jill E. Sutton); and.
President and Chief Marketing Officer (Christopher P. Testa).
Mr. Zechmeister resigned from his position as our Chief Financial Officer effective August 23, 2019. John W. Howard has been appointed Interim Chief Financial Officer until a permanent Chief Financial Officer is named.
Pursuant to the Compensation Philosophy adopted by our Compensation Committee, ourOur compensation policies and programs are designed to support the achievement of our strategic business plans by motivating, retaining and attracting exceptional talent.talent to develop and execute our key objectives. Our ability to compete effectively in the marketplace depends on the knowledge, capabilities and integrity of our leaders. Our compensation programs help create a high-performance, outcome-driven and principled culture by holding leaders accountable for delivering results, developing our employees and exemplifying our core values. In addition, we believe our compensation policies and programs for leaders and employees are appropriately balanced reinforceand incentivize the achievement of short- and long-term results, and therefore drive behavior that is aligned with our businessoverall objectives of drivingdelivering long-term growth and shareholder value.
stockholder value for UNFI.
In
October 2018, we completed the transformational acquisition of Supervalu which greatly expanded the size and complexity of our operations and required our executive officers to take on new and significantly greater levels of responsibility. For example, we now operate more than 60 distribution centers and warehouses, have more than 19,000 employees, offer approximately 250,000 stock keeping units (SKUs), and serve approximately 30,000 unique customer locations. The challenges of integrating the Supervalu business makes it critical for us to continue to be able to attract, retain and appropriately incentivize talented leadership.In 2018 and fiscal 2019,2022, we adopted further changes in our executive compensation policies to reflect best practices.practices and in response to stockholder input. We proactively sought out the views of our shareholdersstockholders through our shareholderannual stockholder engagement program and have adopted changes that responded to their concerns. Westockholder feedback. As further described below, we continue to value and respond to the input we receivepreferred practices and guidelines of our stockholders on executive compensation, including the feedback received in our engagement conversations.
Business and Performance Highlights
UNFI is a leading distributor of grocery and non-food products, and support services provider to retailers in the United States and Canada. We believe we are uniquely positioned to provide the broadest array of products and services to customers throughout North America. We are a coast-to-coast distributor with customers in all 50 states as
further described below.Executive Compensation Programwell as all ten provinces in Canada, making us a desirable partner for retailers and consumer product manufacturers. We believe our total product assortment and service offerings are unmatched by our wholesale competitors. We plan to continue to pursue new business opportunities with independent retailers that operate diverse formats, regional and national chains, as well as international customers with wide-ranging needs.
Fiscal 2022 was another strong year for UNFI as we continued to leverage our scale and extensive customer offering to deliver full-year results that were at, or above, our initial expectations. We appointed a new CEO, Sandy Douglas, early in the year, and during the year, added several new executive roles focused on driving our Fuel the Future strategy and the six underlying pillars that we believe will drive growth in the years to come. We continued to put the safety and welfare of our associates at the forefront of everything we do. We also issued our 2021 ESG Report that includes an update on our progress against our ambitious goals meant to make the world, our communities, and our people better.
Key Business Highlights
Our executive compensation program is designed to align our executive compensation with long-term stockholder interests and incorporates the following best practices:
from Fiscal 2022 WHAT WE DO:
| WHAT WE DON'T DO:
| |
• Our Named Executive Officer pay is aligned with
financial performance, with variable pay
constituting between 69% - 85%Net sales of Named
Executive Officer compensationapproximately $29 billion; 7.3% growth from the prior year. •Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) of $829 million; 7.7% growth from the prior year. (See Annex B for reconciliation of adjusted EBITDA to the most comparable GAAP metric). •Net debt reduction of $174 million in fiscal 2019.
2022. • We grant incentive compensation based on
rigorous performance conditionsMr. Douglas added several new strategic executive roles to support execution of our strategy, which is designed to make our customers stronger, our supply chain better, and peer
group comparisons.
our food solutions more inspired. | • No uncapped incentive opportunities
Opened and commenced operations at our new Allentown, PA distribution center. • No changeDisclosed the addition of two new goals aimed at enhancing our diversity and inclusion initiatives in control agreements expectedour 2021 Better for All Report and reported progress of our other human capital management initiatives around wellness, financial wellbeing and flexibility. •Science-based emissions reduction targets validated by the Science Based Targets initiative. •Elevated our safety lead to be
extended beyond key executive officers andSVP role in our effort of continued focus on the
existing group
• No severance agreements expected to be extended
beyond existing group
safety of our associates. |
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WHAT WE DO:
| WHAT WE DON'T DO:
|
• Incentive awards are tied 100% to pre-established
financial goals; adjustments to performance
targets and conditions must meet pre-established
guidelines for committee consideration.
• Our Compensation Committee utilizes the services
of an independent compensation consultant who
provides recommendations on CEO and other
Named Executive Officers pay.
• Our change in control severance benefits are
double-trigger.
• Change in control agreements are set at market
multiples and cover only executive officers and
small group of officers under pre-existing
agreements.
• Employment agreements with Steven Spinner
and Sean Griffin include post-termination
non-competes and non-solicitation clauses,
as well as severance and change in control
severance terms.
• Severance agreements for other executives are
limited to 1 × multiple and prorated bonus and
to three-year terms (from unlimited terms) and
cover only executive officers and a small group
of officers under pre-existing agreements in
exchange for non-compete and non-solicitation
covenants.
• We have a policy for recoupment of
performance-based compensation applicable to
our Named Executive Officers and other senior
officers, which we most recently enhanced in
October 2018.
• We have robust stock ownership guidelines (that
we strengthened in November 2018) for Named
Executive Officers and our other officers.
• Equity awards continue to vest through qualifying
retirement, with proration in year of retirement to
match service period.
• We require employment and post-employment
covenants (including non-compete,
non-solicitation and assignment of
intellectual property) for executive officers
and all equity and bonus participants.
| • No tax gross-ups of severance or change in
control payments
• No hedging or short sales of our stock; no
pledging
• No excessive perquisites
• No supplemental retirement benefits
• No guaranteed bonuses
• No incentives that motivate excessive risk-taking
• No acceleration of equity awards expected for
executive officers
• No one-time equity awards planned
|
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Performance Highlights and Supervalu Acquisition
Fiscal 2019 was an historicNote: During fiscal 2022, the Company revised its definition of Adjusted EBITDA to exclude the impact of non-cash LIFO charges or benefits. Prior periods have been revised to conform to the current year for our company as we completed the acquisition of Supervalu on October 22, 2018 and began our transformation into North America’s premier wholesale distributor. By the end of fiscal 2019, we had combined our natural and conventional businesses, operating with a single executive leadership team. We are nearly complete with our Pacific Northwest distribution center consolidation whereby we will operate out of two distribution centers compared to five previously, a move which will provide significant operating benefits. We realized significant cost synergies, which were partially reinvested into the business. In early fiscal 2020, we successfully created a four-region operating structure with a sales organization aligned in a similar fashion and consolidated to leverage cross-selling opportunities. We believe these changes will advance the execution of our long-term strategic and growth objectives.
Key Highlights from fiscal 2019:
The Supervalu acquisition, completed in October 2018, was a transformative event, greatly increasing the Company’s size and scope of operations.presentation.
Net sales of approximately $21.4 billion, excluding net sales from discontinued operations.
Adjusted EBITDA of $562 million in fiscal 2019. See Annex B for reconciliation to the most comparable GAAP metric.
Generated an estimated $70 million in cost synergies in fiscal 2019 compared to January 2019 outlook of more than $36 million.
Maintained focus on debt reduction; paid down $353 million of outstanding net debt subsequent to the Supervalu acquisition.
Hosted National Expo, which brought together 6,000 customers and suppliers.
Robust sales pipeline; cross selling opportunities for 250,000 unique SKUs.
Say on Pay Vote, and Investor Engagement
and Responsive Action
Our annual say-on-pay vote is one of our opportunities to receive feedback from stockholdersunderstand stockholder perspectives regarding our executive compensation program. Prior to 2017, we consistently received strong stockholder support for our executive compensation for our Named Executive Officers, averaging more than 95% approval for compensation in fiscal years 2014 through 2016. At our 2017 annual meeting, approximately 66% voted against our proposal. Our Board and Compensation Committee took this matter very seriously and made changes to our compensation program as discussed in last year’s Proxy Statement. We are happy to report, that at our annual meeting of stockholders in December 2018,January 2022, we submitted a proposal to our stockholders to approve, on an advisory basis, our executive compensation for our Named Executive Officers for fiscal 2018,NEOs, and over 91%92.6% of our stockholders voted for that proposal.proposal, as compared to 60.2% in January 2021, which we believe reflects our responsiveness to the feedback we heard through engagement in connection with and following our January 2021 annual meeting. In response to that feedback, we made several changes to our compensation program for fiscal 2022, as described below.
In fiscal 2022, we conducted our fifth annual stockholder outreach program, and we met with stockholders representing more than 50% of our outstanding common stock over the summer of 2022. In addition to regular communication withdiscussing our stockholders aboutSay on Pay results and our business results,executive compensation program generally, we welcomeshared relevant information and solicited feedback from our stockholders on our executive compensation programs and corporate governance practices, including through an established, ongoing stockholder engagement program.recent changes, our business priorities, our Fuel the Future strategy and our robust ESG program, including our Better for All campaign. See “C
orporate Governance—Stockholder Engagement” for discussions of governance actions we took in response to these conversations. In fiscal 2019,recent years, we have made furtherseveral changes to our executive compensation programs in response to our investor engagement activities. Overall, the investors we met with viewed the changes we have made to our compensation program and governance program and practices positively, which is reflected in our 92.6% favorable vote at our 2022 annual meeting. Based on the feedback we heard with respect to our Say on Pay vote results at our last annual meeting, we believe the results were driven by our demonstrated responsiveness to stockholder feedback on our program and practices following our 2021 annual meeting, which include the following changes:
| | | | | |
| WHAT WE HEARD | WHAT WE DID |
| Viewed special severance arrangements with departing executive officers entered into in fiscal 2020 as problematic | →We have entered into severance agreements with limited terms (three years) and other policies and programs that specify the benefits payable to executive officers upon a separation of employment, which have been fully disclosed to our stockholders |
→ Did not enter into an employment agreement with our new CEO, whose terms and conditions of employment generally align with those in place for our other executive officers and plan participants, except as specifically disclosed with respect to retirement years of service and multiples for severance and change in control payments |
→ No employment agreements, and no intention of entering into any special employment agreements, with any of our NEOs |
| |
| Preference for performance-based, at-risk compensation | → Beginning in fiscal 2022, equity grants are more heavily weighted to performance at 60% performance-based restricted stock units (PSUs) and 40% RSUs (compared to 50%/50% in prior years) |
| |
| Add second metric to short-term incentive (STI) plan aligned to strategic priorities | → Added Net Sales metric to STI plan, which, balanced with the existing adjusted EBITDA metric, aligns with our strategy to grow sales profitably |
| |
| Continue to align long-term incentive plan metrics with strategic priorities | → Removed leverage metric given significant progress on this metric in recent years and long-term nature of the target, reweighted adjusted EPS and adjusted ROIC metrics |
| |
| Consider the addition of ESG-related metrics in compensation programs | → Evaluating and tracking various ESG-related metrics to better understand our data and identify appropriate metrics |
| |
| Consideration of the dilutive impact of equity awards | → We are mindful of the effect of our comparatively low number of outstanding shares on the dilutive impact of our equity awards |
→ As our stock price has increased, we have maintained disciplined grant practices reflective of market practices, resulting in decreasing dilution year-over-year. See “Executive Compensation Tables - Securities Authorized for Issuance under our Equity Compensation Plans” for more information. |
→ In September 2022, our Board approved a share buyback program that will provide an opportunity to help offset dilution. |
Other Actions Responsive to Stockholder Feedback in Recent Years
We regularly review our compensation program to align with best practices and to confirm that our program supports our pay for performance philosophy. We have a history of listening and responding to feedback from our stockholders, and we intend to continue our stockholder outreach activities to implement additional changesunderstand investor perspectives and incorporate that direct input into our program. Below are some of the other compensation actions we have implemented in recent years in response to what we have heard. Investors we spokeperspectives shared with at the endus by our stockholders:
| | | | | | | | | | | | | | |
•Strengthened our recoupment policy to permit the Board to require forfeiture of incentive compensation in the event of certain misconduct causing reputational harm, and to provide for reporting of any required recoupment or forfeiture thereunder in certain circumstances; |
•Tied all payouts under the short-term incentive plan to pre-established financial goals that are aligned with strategic initiatives - for fiscal 2022, this was adjusted EBITDA and Net Sales to support a balanced approach of growing both top and bottom line results; |
•Revised payout levels at threshold and maximum of 50% and 150%, respectively, (previously 200% maximum) for annual cash incentive plan to limit potential maximum payments; |
•Aligned long-term incentive awards to market by extending to a 3-year cliff-vesting for performance share units, or PSUs, and reducing to a 3-year ratable annual vesting for time-based restricted share units, or RSUs; |
reduced the multiples in our change in control and severance agreements, clarified the definition of change in control and limited the number of executives who are covered by these arrangements, | | | | | | | | | | | | | | |
•Implemented a new stock plan in 2020 that includes the addition of robust restrictive covenants, payment of dividends only upon vesting, one-year minimum vesting period and better defined death, disability and retirement treatment to create a uniform approach for equity participants; |
•Aligned pay programs competitively, both internally and externally with the market; |
•Use of tally sheets (showing all forms of compensation for each officer) and measurements of internal pay equity; |
•Aligned metrics in the long-term incentive program to key strategic priorities; for grants in fiscal 2022, that included adjusted EPS and adjusted ROIC, which we believe were the most important drivers of the Company’s long-term success; |
•Removed duplicative performance metric from STI and LTI plans; |
•Enhanced disclosures of compensation program and pay-for-performance, including the “why” for each component; |
•Reduced payment multiples in change in control and severance agreements, limited the number of executives covered, and limited agreements to established terms, which we intend to maintain going forward; and |
•Amended equity award agreements for all participants, including executives, to provide for the continuous vesting of awards in retirement, to keep executives focused on long-term performance through their retirement date and limit the need for discretion. |
expanded the length of the performance period for performance-based equity grants from one year to two years (for grants made in fiscal 2019) and to three years (for grants made in fiscal 2020);
implemented the use of tally sheets (showing all forms of compensation for each officer) and measurements of internal pay equity, beginning in fiscal 2019 and expanding the use of these tools and measurements into fiscal 2020;
removed subjective personal goals from our annual cash incentive program and tied all payouts under this program to pre-established financial goals; and
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implemented a provision for equity awards to continue vesting in retirement, limiting the use of discretion by the Compensation Committee on a case-by-case basis.
Executive Compensation Program Philosophy
Under our executive compensation philosophy adopted by our Compensation Committee, our executive compensation program is designed to:
Attract and retain individuals with the skills and who will enact the culture necessary for us to achieve our business plan;
| | | | | | | | | | | |
Our executive compensation program is designed to:
| | ü | Attract and retain individuals with the skills to develop and execute the strategy and advance the culture necessary for us to achieve long-term growth; |
| ü | Maintain a strong pay for performance work environment; |
| ü | Motivate our executives and align their interests with those of our stockholders by delivering more at-risk pay for senior executives; |
| ü | Reward our executives fairly over time for performance that enhances stockholder value; |
| ü | Emphasize consistent and sustainable top- and bottom-line growth; and |
| ü | Avoid incentives encouraging excessive risk taking. |
Maintain a strong pay for performance work environment;
Motivate and align executives’ interests with those of our stockholders by delivering more at-risk pay at higher levels;
Reward our executives fairly over time for performance that enhances stockholder value;
Emphasize consistent and sustainable top and bottom-line growth; and
Not encourage excessive risk taking.
Our executive compensation program is also designed to reinforce a sense of ownership in the Company urgency with respect to meeting deadlines and overall entrepreneurial spirit. The program links rewards, including both short- and long-term awards, as well as cash and non-cash awards, to measurable corporate performance metrics established by the Compensation Committee.
Committee designed to incentivize actions to execute and achieve the objectives of our long-term strategy.
The program measures achievement of corporate financial goals. These goals support our short- and long-term business strategies and are aligned with the interests of our stockholders. By aligning all executives to corporate financial goals, we encourage a shared focus and collaborative work toward strong, long-term operating performance. In addition, our executive compensation program is designed to balance our growth strategies with a managed approach to risk tolerance. Our compensation programs provide assurances of stability and a focus on the long term,
together with an insistence onupon a solid foundation that requires personal
accountability, integrity and compliance.
Executive Compensation Program Highlights
Our executive compensation program is designed to align our executive compensation with long-term stockholder interests and incorporates the following best practices:
| | | | | |
| WHAT WE DO |
| ü | Our NEO pay is aligned with financial performance, with variable, performance-based pay constituting 71% - 84% of NEO compensation at target in fiscal 2022 |
| ü | We grant incentive compensation based on rigorous performance conditions and peer group comparisons |
| ü | Performance-based incentive awards are tied 100% to pre-established financial goals; any adjustments to performance targets and conditions impacting payouts are considered by the Compensation Committee in accordance with pre-established guidelines |
| ü | Our Compensation Committee utilizes the services of an independent compensation consultant; engaged a new consultant in fiscal 2021 after comprehensive search process |
| ü | Our change in control severance benefits are double-trigger and provide for market multiples of 2 to 2.5 (CEO only) and cover only executive officers and small groups of officers under pre-existing agreements |
| ü | Severance agreements for executives other than CEO are limited to 1x multiple of base and bonus and to three-year terms (compared to prior unlimited terms) and cover only executive officers and a small group of officers under pre-existing agreements in exchange for non-compete and no solicitation covenants |
| | | | | |
| ü | We have a policy for recoupment of performance-based compensation applicable to our NEOs and other senior officers, which we most recently enhanced in fiscal 2021 to permit the Board to require forfeiture of incentive compensation in the event of misconduct causing reputational harm |
| ü | We have robust stock ownership guidelines (that we strengthened in fiscal 2022) for NEOs and certain other officers |
| ü | Equity awards continue to vest through qualifying retirement, with proration of awards granted in year of retirement to match service period |
| ü | We require employment and post-employment covenants (including non-compete, non-solicitation and assignment of intellectual property) for executive officers and all equity and bonus participants |
| | | | | |
| WHAT WE DON’T DO |
| û | No employment agreements with any executive officers (including CEO) |
| û | No uncapped incentive opportunities |
| û | No change in control agreements are expected to be extended beyond key executive officers and the existing group |
| û | No severance agreements are expected to be extended beyond existing group and are time-bound |
| û | No tax gross-ups of severance or change in control payments |
| û | No hedging or short sales of our stock; no pledging |
| û | No excessive perquisites |
| û | No supplemental retirement benefits |
| û | No guaranteed bonuses |
| û | No incentives that motivate excessive risk-taking |
| û | No acceleration of equity awards expected for executive officers |
How We Make Decisions Regarding Executive Pay
The Compensation Committee,
managementManagement and the Compensation Committee’s independent compensation consultant,
(which was Semler Brossy for purposes of fiscal 2019 compensation)Frederic W. Cook and Co. (FW Cook), each play a role in designing our executive compensation program and determining performance levels and associated payouts. We also look at market data and take into consideration stockholder
concernsviews about executive compensation expressed in our stockholder engagement process, as described above.
Role of the Compensation Committee
The Compensation Committee is responsible for establishing, implementing and monitoring our executive compensation program and its adherence to our compensation philosophy. The Compensation Committee approves the performance thresholds and our executive officers’ individualthe financial and strategic performance metrics applicable to executive officers under our annual cash incentive plan as described in “Components of ourOur Executive Compensation Program for Fiscal 2019—2022—Performance-Based Annual Cash Incentive Compensation” and sets performance metrics applicable to the performance-based component of our long-term equity incentive plan as described in “Components of ourOur Executive Compensation Program for Fiscal 2019—Long-term2022—Long-Term Equity-Based Incentive Program”. The Compensation Committee is responsible for approving our employment policies and agreements affectingimpacting executive officers. The Compensation Committee also evaluates actual corporate and individual performance against the established goals and determines appropriate levels of compensation for our executives. The Compensation Committee makes all decisions with respect to, and approves, compensation for our executive officers, including base salary, annual cash incentive, long-term equity incentive, and benefits, providedexcept that the compensation of our CEO is further reviewed and ratifiedapproved by the independent members of our Board. As part of the compensation approval process for our executive officers,
other than our CEO, the Compensation Committee considers the views and recommendations of
management,Management, particularly our CEO.
For our CEO, we have established an annual performance evaluation process, which includes a self-assessment by the CEO and a formal performance assessment by the full Board consisting of both quantitative and qualitative assessments, which is considered in setting the CEO’s annual compensation. In setting the
nature, type and level of compensation for all of our executive officers, the Compensation Committee considers the recommendation of its independent compensation consultant as described in greater detail below.
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Our CEO and Chairman and CHRO provide the Compensation Committee with an assessment of our corporate performance, market pay practices, and the performance of our executive officers and make recommendations for the compensation of our other executive officers based on this assessment, including recommendations for pay mix and the nature of performance metrics that best support our business objectives. Additionally, our CEO, and Chairman, CHRO and CFO discuss with the Compensation Committee management’sManagement’s internal projections with respect to a variety of performance metrics and operationsoperational goals for future fiscal years on which performance-based compensation will be based. The Chief Legal Officer, General Counsel and Corporate Secretary advises on the
foregoing matters and provides guidance on governance principles and practices, investor perspectives and regulatory trends and analyses in the context of executive compensation determinations.
No executive officer makes any decision on any element of his or her own compensation, and our
Chief Executive Officer and ChairmanCEO does not participate in deliberations regarding his compensation, which is recommended by the Compensation Committee to the full
Board.Board and considered and determined by the full Board in conjunction with the CEO’s performance evaluation in executive session.
Role of Independent Compensation Consultant
Late in fiscal 2021, following a thorough review process, the Compensation Committee selected FW Cook as its independent compensation consultant. The Compensation Committee selected and directly retained
Semler Brossy as its compensation consultant during fiscal 2019FW Cook to provide independent, third-party advice and expertise on all aspects of executive compensation and related corporate governance matters, including designing and establishing our executive compensation program for fiscal
2019 and fiscal 2020. Semler Brossy2022. FW Cook provided input and guidance related to our
fiscal 2019 and fiscal 2020 incentive plan design, reviewed our Compensation Discussion and Analysis and associated disclosures, and summarized and provided
perspectiveperspectives on market developments related to executive compensation, including regulatory requirements and related disclosures.
Semler BrossyFW Cook only provides services to the Compensation Committee. It does not provide any services to
management.Management. The Compensation Committee assessed the independence of
Semler BrossyFW Cook pursuant to SEC and NYSE rules, as described below, and concluded that no conflict of interest exists that would prevent
Semler BrossyFW Cook from serving as an independent consultant to the Compensation Committee.
In the future, the Compensation Committee may retain other similar consultants. As mentioned above, the Compensation Committee analyzed whether the work of
Semler BrossyFW Cook as its compensation consultant raises any conflict of interest, taking into consideration the following factors: (i)
Semler BrossyFW Cook does not provide any other services to the Company; (ii) the amount of fees the Company paid to
Semler BrossyFW Cook represents less than
2%1% of
Semler Brossy’sFW Cook’s total revenues; (iii)
Semler BrossyFW Cook maintains policies and procedures designed to prevent conflicts of interest; (iv)
Semler BrossyFW Cook does not have any business or personal relationship with
anany executive officer of the Company; (v) neither
Semler BrossyFW Cook nor any member of its consulting team directly owns any stock of the Company; and (vi)
Semler BrossyFW Cook’s consulting team for UNFI does not have any known business or personal relationship with any member of the Committee. The Committee determined, based on its analysis of the above factors, that the work of
Semler BrossyFW Cook and the individual compensation advisors employed by
Semler BrossyFW Cook as compensation consultant to the Committee does not create any conflict of interest. The Committee will continue to monitor the independence of its compensation consultant on an annual basis.
The Compensation Committee also annually evaluates the independence, performance, scope of work and fees, and other key elements of this relationship under a pre-approval policy pursuant to which fees are ultimately approved. In the future, the Compensation Committee may retain other similar consultants.
Compensation Risk Assessment
Our Compensation Committee charter requires the Compensation Committee to assess, on an annual basis, whether the Company’s compensation policies and practices encourage the Company’s executive officers or other key employees to take unnecessary and excessive risks that could threaten the value of the Company. The Compensation Committee believes that our compensation policies do not encourage the taking of unnecessary and excessive risks. Our compensation and governance practices are designed to align the interests of our executive officers with the interests of stockholders and the achievement of the Company’s strategic objectives. For example:
•A substantial portion of our executive officers’ compensation is “at risk,” including compensation paid in the form of common stock;
•Total executive officer compensation is substantially weighted to long-term equity, 60% of which is performance-based and tied to long-term, strategic performance targets;
•The short-term bonus program has established performance metrics (adjusted EBITDA and Net Sales for fiscal 2022) that reduces risk and supports the Fuel the Future strategy with a focus on bottom- and top-line growth;
•We set a maximum level of compensation; there is no uncapped compensation for our executive officers in any element of executive compensation;
•Our executive officers are required to maintain certain levels of stock ownership, which are tested each year based on the then-current price of our common stock;
•Our executive officers are prohibited from hedging and pledging shares of Company common stock;
•The Compensation Committee periodically reviews and oversees key diversity and inclusion initiatives and Human Resources policies and practices, including those related to overall business performance and the relationship of such performance to executive officer compensation, including as relating to recruiting, learning and talent development programs; and
•All performance-based compensation is subject to our robust recoupment policy. In the event of a restatement of the Company’s financial statements or a material inaccuracy in the performance metrics used to measure
performance-based compensation, such performance-based compensation is subject to recoupment. Additionally, performance-based compensation may be forfeited in the case of misconduct in violation of law or Company policy, including through failure of an executive’s oversight responsibilities, that results in material financial or reputational harm to the Company.
Competitive Marketplace Assessment
In making compensation decisions, the Compensation Committee periodically, generally once per annumannually in August or September, reviews theall elements of total compensation packages for our executive officers compared to those in likesimilar positions with substantially similar responsibilities at “peer” organizations, i.e. those that areorganizations with similar characteristics to our company.Company generally (Comparator Group). Due to the nature of our business, there are ongoing challenges in developing an appropriate mix of companies to include in our Comparator Group, including that few of our direct peers are publicly traded, the complex nature of our business, and the structure of our Management team and their responsibilities. In addition to compensation levels,developing our Comparator Group, we include companies in the Compensation Committee also reviews program designs, including an assessment of pay vehicles and performance metrics, a Mercer general industry survey and other information provided by Semler Brossy. In selecting appropriate data, the Compensation Committee considered general industrysame or similar industries, companies with revenue between $10comparable revenues, firms with similar business models, and $25 billion. The market midpoint among these general industry companies is defined as the average of the 25th and 50th percentiles to account for the low-margin nature of the food distribution business relative to general industry companies. The Compensation Committee also reviews data from food and distribution-related businesses. The market midpoint for the food and distribution-related companies is set at the 50th percentile. which we would consider recruiting talent.
In setting compensation for
fiscal 2019, the Compensation Committee considered the general industry data described above.TABLE OF CONTENTS
In making decisions in September and October 2018 concerning compensationNEOs for fiscal year 2019,2022, the Compensation Committee also considered Willis Towers Watson Retail/Wholesale survey data for companies in the retail/wholesale distribution sector with revenues comparable to ours, in addition to the companies in the table below, the Comparator Group. There were no changes to this group from a select mixprior year, other than the two mergers highlighted in the table. The Committee believes this group of companies, together with consideration of the foodindustry survey data referenced above, provides a meaningful perspective of current pay practices and distribution-related companies of similar size and facing similar business conditions to the combined business of UNFI and Supervalu, with a median revenue of $17.6 billion. In settinglevels, as well as overall compensation for Named Executive Officers for fiscal 2019, the Compensation Committee considered general industry data and a comparator group consisting of Sysco Corporation, Tech Data Corporation, Arrow Electronics, Inc., US Foods Holding Corp., Synnex Corporation, Avnet, Inc., Performance Food Group Company, CDW Corp., Supervalu, Henry Schein, Inc., Core-Mark Holding Co., Inc., Pilgrim’s Pride Corporation and SpartanNash Company. We were positioned near the 75th percentile of our peer group with respect to revenue. In making decisions concerning Mr. Griffin’s employment agreement and compensation, the Compensation Committee also examined data for the most highly paid and second most highly paid executives at Sysco Corporation, Synnex Corp., W.W. Grainger, Inc., Staples, Inc., SpartanNash Company, Office Depot, Inc., Tech Data Corporation, CDW Corp., Wesco International, Inc. and Core-Mark Holding Co., Inc.
trends.
| | | | | | | | | | | |
| Food- and Distribution-Related Companies of Comparable Size |
|
| Company | GICS Sub-Industry | Revenue
($ in millions) | Market Value
($ in millions) |
| Arrow Electronics | Technology Distributors | 36,063 | 8,464 |
| Avnet | Technology Distributors | 24,311 | 4,676 |
| C.H. Robinson Worldwide | Air Freight and Logistics | 26,380 | 13,714 |
| CDW Corporation | Technology Distributors | 22,932 | 24,528 |
| Core-Mark Holding Company | Distributors | N/A - Acquired by Performance Food Group September 1, 2021 |
| Genuine Parts Company | Distributors | 20,519 | 21,621 |
| Henry Schein, Inc. | Health Care Distributors | 12,718 | 10,883 |
| Performance Food Group Company | Food Distributors | 47,194 | 7,705 |
| Pilgrim's Pride Corporation | Packaged Foods and Meats | 16,738 | 7,499 |
| SpartanNash Company | Food Distributors | 9,204 | 1,167 |
| Sysco Corporation | Food Distributors | 68,636 | 43,254 |
TD SYNNEX Corporation (1) | Technology Distributors | 51,558 | 9,625 |
| US Foods Holding Corp. | Food Distributors | 32,154 | 7,053 |
| Summary Statistics (n=13) | | | |
| 75th Percentile | | 38,846 | 15,691 |
| Median | | 25,346 | 9,045 |
| 25th Percentile | | 19,574 | 7,388 |
| | | |
| United Natural Foods, Inc. | Food Distributors | 28,928 | 2,478 |
| Percentile Rank | | 59P | 3P |
| Source: S&P CapIQ. Peer Total Revenue = trailing 12 months; Market Value as of July 31, 2022. |
| (1) SYNNEX completed a merger with Tech Data on September 1, 2021, creating an entity named TD SYNNEX. |
Market data is only one factor that the Compensation Committee considers when making determinations regarding executive compensation. Other factors considered include individual performance, internal
pay equity, scope of responsibilities, tenure, criticality of the position and executive retention concerns, and the need to recruit new officers. The Compensation Committee does not target a specific positioning versus the market for each role and takes into account all the above factors in determining the competitiveness of our compensation.
Components of
ourOur Executive Compensation Program for Fiscal
20192022
Our executive compensation philosophy is reflected in the principal elements of our executive compensation program. The four key components of our executive compensation program in fiscal 20192022 and how each component supports our compensation philosophy are set forth in the table below.
Component
| How it Supports our Compensation Philosophy
| | | | | | | |
Component | | How It Supports Our Compensation Philosophy |
| | |
| Base Salary | → | Provides competitive level of compensation to attract and retain top talent |
Performance-based annual cash incentive | → | At-risk, variable pay to motivate our executives to achieve short-term (annual) business objectives within appropriate risk parameters |
Long-term equity-based incentiveequity awards in the form of time-based vesting restricted stock units, or RSUs, and performance-based vesting restricted stock units, or PSUs | → | At-risk, variable pay that motivates our executives to focus on multiyearmulti-year operational performance and increasing stockholder value; also a long-term retention tool |
Other compensation and benefits, including minimal perquisites and participation in benefit plans generally available to all of our employees, such as the 401(k) Plan. Plan | → | Assist in attracting and retaining top talent by providing competitive benefits, with minimal perquisites |
Pay Mix
When setting
or recommending target total compensation for fiscal
20192022 for the
Named Executive Officers other than our CEO,NEOs, the Compensation Committee determined that total target compensation should be weighted toward variable, at-risk pay, and a significant percentage should consist of equity-based compensation. We believe this approach appropriately aligns executive compensation with financial results and provides a balance between managing risk and incentivizing our
managementManagement team to create short- and long-term stockholder value by achieving pre-established
financial performance objectives directly tied to achievement of our strategic
performance objectives.priorities. The Compensation Committee determined that a separate pay structure for our CEO is necessary to deliver competitive pay
and thatwhile even more heavily weighting at-risk incentives within the
weighting of the design slightly more towards incentive compensation was most appropriate.design. The charts below illustrate the mix of pay elements for
20192022 at target for our CEO
(85%(84% at-risk pay) and the average for our other NEOs,
(75%excluding the two former NEOs, (76% at-risk pay).
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Base Salary
For
As described above, for fiscal 2019, each of our Named Executive Officers assumed broader management responsibilities due to the merger with Supervalu, and the increase in their base salaries not only reflects those additional responsibilities, but also is commensurate with base salaries of executives with similar roles in the peer group discussed above. For fiscal 2019,2022, the Compensation Committee considered data from the general industry groupWillis Towers Watson Retail/Wholesale survey as well as proxy statement data from the Comparator Group for the second-highest paid executive and a mix of food and distribution-related companies of similar size and facing similar business conditions to the combined business of UNFI and Supervalu, each as described above.CFO roles. Base salaries were generally targeted at the median of comparator companies similar to UNFI, which is represented bythese data sources taking into account other factors mentioned above. Mr. Douglas’ salary was set early in the range betweenfiscal year upon his hire and was aligned with market midpoint for the 25th and 50th percentile of general industry information.Comparator Group. Given Mr. Spinner’s anticipated retirement, he did not receive any increase to his pay. There was no increase to Mr. Stigers base salary in fiscal 2022 as it is in the middle of market midpoints for both the general industry and the comparator groups. Similarly, in the case ofwell aligned with survey data. For Messrs. Zechmeister, Griffin,Howard, Dorne, Testa and Ms. Sutton, the competitive market assessment determined that their base salaries were below market for an employee executive
performing comparable duties, and their increase is indicative ofsalary increases reflect our attempt to close this gap. gap with modest merit increases while also recognizing their outstanding performance during the year.
Set forth below are the fiscal
20182021 and fiscal
20192022 base salaries for the
Named Executive OfficersNEOs and the percentage change between periods.
Named Executive Officer | Fiscal 2018
Base Salary(1) | Fiscal 2019
Base Salary(1) | Percentage
Change |
Steven L. Spinner | $ | 946,000 | | $ | 1,200,000 | | | 27 | % |
Michael P. Zechmeister | $ | 493,538 | | $ | 675,000 | | | 37 | % |
Sean F. Griffin | $ | 588,500 | | $ | 930,000 | | | 58 | % |
Jill E. Sutton | $ | 400,000 | | $ | 465,000 | | | 16 | % |
Christopher P. Testa | $ | 325,000 | | $ | 450,000 | | | 38 | % |
| | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Fiscal 2021 Base Salary(1) | | Fiscal 2022 Base Salary (2) | | Percentage
Change |
| Sandy Douglas | | $ | — | | | $ | 1,050,000 | | | n/a |
| John W. Howard | | $ | 625,000 | | | $ | 675,000 | | | 8 | % |
| Eric A. Dorne | | $ | 750,000 | | | $ | 787,500 | | | 5 | % |
| Michael C. Stigers | | $ | 575,000 | | | $ | 575,000 | | | — | % |
| Christopher P. Testa | | $ | 750,000 | | | $ | 810,000 | | | 8 | % |
| Steven L. Spinner | | $ | 1,200,000 | | | $ | 1,200,000 | | | — | % |
| Jill E. Sutton | | $ | 580,000 | | | $ | 614,800 | | | 6 | % |
(1)Reflects annual rate at the end of fiscal 2021.
(2)Reflects changes made by the Compensation Committee during its annual review, effective October 31, 2021.
| (1) | For each Named Executive Officer, other than Messrs. Spinner and Griffin, fiscal 2019 base salaries were effective for the first pay period in October 2018 and for Messrs. Spinner and Griffin became effective October 22, 2018, the effective date of the merger with Supervalu. |
Performance-Based Annual Cash Incentive Compensation
Performance Metrics. Metrics
The Compensation Committee is responsible for setting the minimum, target and
maximum or “stretch” performance levels (objectives
tothat must be achieved) and related payout levels from $0 to maximum payout for our performance-based
annual cash incentive compensation discussed below. Receipt of this compensation is contingent upon satisfaction of
these corporate-wide metrics established by the Compensation
Committee. The factors considered in setting this target compensation for fiscal 2019 were focused on fewer metrics givenCommittee at the
merger with Supervalu, so that everyone was focused and aligned on key financial metrics tied to our long-term strategy. For our CEO & CFO these metrics originally included adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”) and adjusted earnings per diluted share (“adjusted EPS”). For the other NEOs, the only metric was adjusted EBITDA. We believe using adjusted EBITDA as a performance metric focuses our executive officers on growth in core operational performance and rewards all officers for achievement of this important driver of overall financial performance.TABLE OF CONTENTS
Adjusted EBITDA is a non-GAAP performance metric that we further adjust in setting performance compensation. Earnings per diluted share (EPS) is a GAAP metric that we adjust in setting compensation, with the result that adjusted EPS is also a non-GAAP metric.
Adjusted EBITDA for purposes as the annual cash incentive compensation plan represents net income (loss) from continuing operations before non-operating expenses (such as interest expense, interest income and other expenses), depreciation, amortization, share-based compensation, non-controlling interests, and the provision for income taxes, plus or minus certain other non-cash charges.
Adjusted EPS for purposesbeginning of the annual cash incentive plan consists of earnings per diluted share, adjusted for the impact of restructuring, acquisition and integration related expenses, goodwill and asset impairment charges, loss on debt extinguishment, interest expense on senior notes, inventory fair value adjustment, legal settlement income, net of reserve adjustments, discontinued operations store closure charges and costs, net and the tax impact of adjustments.performance period.
The Compensation Committee retains the ability to adjust targets in certain circumstances, including in the event that unbudgeted or unforeseen events would materially impact achievementa metric, such that it is not reflective of actual underlying operating performance against the objectivesthat it was designed to achieve.assess. In making any such adjustment, consistent with established guidelines that allow for consistency in consideration from year to year, the Compensation Committee reviews, among other things, the original target and the budget upon which the target was based, whether the events giving rise to a potential adjustment had been entered intooccurred or beenwere contemplated at the time the performance targets were established, and whether these factors arewere related to our core operating performance.performance and the impact of any change in accounting or financial policy or methodology. After consideration of these factors, the Compensation Committee may determine to make adjustments to metrics or payouts where, absent such adjustment, the payout would not, in the Compensation Committee’s determination, be reflective of actualthe level of operating performance driven by the executive officers.
In fiscal 2022, we revised our definition of adjusted EBITDA and Adjusted EPS to exclude the impact of the non-cash charge or benefit resulting from the last-in, first out (LIFO) accounting methodology on most of our inventory. This change was made to better reflect the operating performance of the business, since the LIFO charge has created significant non-cash volatility due to high inflation, which is out of Executives’ control. This change is also consistent with how most of our peers treat LIFO charges or benefits in their reported results. When targets were set for outstanding short- and long-term incentive program, modest LIFO charges were assumed. In fiscal 2022, concurrently with the reporting change, the Compensation Committee aligned the definitions of adjusted EBITDA, Adjusted EPS, ROIC and Leverage for outstanding awards under our short- and long-term incentive plans and increased the targets to reflect the expectations for business growth at the time the targets were set absent the impact of the budgeted non-cash LIFO charge. These changes better align with how we communicate results externally to our stockholders, since the impact of LIFO is not indicative of our underlying business performance.
Performance-Based Annual Cash Incentive Compensation
Performance Metrics. For fiscal 2022 annual cash incentive compensation, the Compensation Committee selected adjusted EBITDA, a key metric tied to our long-term business performance as well as the addition of Net Sales to drive top-line growth in support of the Fuel the Future strategy. We believe using adjusted EBITDA and Net Sales as performance metrics focuses our executive officers on growth in core operational performance and rewards all officers for achievement of this important driver of overall financial performance while also growing market share through scale and customer experience. For information on how we calculate adjusted EBITDA, a non-GAAP measure, and a reconciliation of adjusted EBITDA to net income, see Annex B.
Performance-Based Annual Cash Incentive Targets (Potential Payouts).For our Named Executive Officers,NEOs, the annual cash award targets, or potential payouts, for fiscal 20192022 at variousthreshold, target and stretch Company-wide performance levels were set as percentages of base salary earned, and prorated if applicable to changes in base salary over the fiscal year, as follows: | Applicable Targets as % of
Fiscal 2019 Salary |
Named Executive Officer | Threshold | Target | Stretch |
Steven L. Spinner | | 52.50 | % | | 150 | % | | 300 | % |
Michael P. Zechmeister | | 26.25 | % | | 75 | % | | 150 | % |
Sean F. Griffin | | 43.75 | % | | 125 | % | | 250 | % |
Jill E. Sutton | | 26.25 | % | | 75 | % | | 150 | % |
Christopher P. Testa | | 26.25 | % | | 75 | % | | 150 | % |
| | | | | | | | | | | | | | | | | | | | |
| | Applicable Targets as % of Fiscal 2022 Salary |
| Named Executive Officer | | Threshold (50%) | | Target
(100%) | | Stretch
(150%) |
| Sandy Douglas | | 75.0 | % | | 150.0 | % | | 225.0 | % |
| John W. Howard | | 50.0 | % | | 100.0 | % | | 150.0 | % |
| Eric A. Dorne | | 50.0 | % | | 100.0 | % | | 150.0 | % |
| Michael C. Stigers | | 37.5 | % | | 75.0 | % | | 112.5 | % |
| Christopher P. Testa | | 50.0 | % | | 100.0 | % | | 150.0 | % |
Steven L. Spinner (1) | | | | n/a | | |
| Jill E. Sutton | | 42.5 | % | | 85.0 | % | | 127.5 | % |
(1)Mr. Spinner was not eligible for a bonus in fiscal 2022 per his agreement and retirement on August 8, 2021.
For example, if the Company achieved its targets at the threshold level, Mr. Spinner’s potentialDouglas’ cash incentive would be an amount equal to 52.5%75% of his base salary; at target level, he would potentially receive a cash incentive in an amount equal to 150% of his base salary; and at the stretch level he would potentially receive an award equal to 300%225% of his base salary. The actual payout would also depend,depends, however, on whether the Company met the threshold performance level. If performance were below the threshold level, there would be no payout.
Performance Target. In addition, payout could be adjusted at the discretion of the Compensation Committee based on such factors as it deemed appropriate.The bonus opportunities described above reflect the increased responsibilities of the individual officers following the Supervalu acquisition and alignment with market. For fiscal 2019, Mr. Spinner’s target was increased from 100% to 150% of base salary, Mr. Griffin’s target was increased from 75% to 125% of base salary, Ms. Sutton’s target was increased from 50% to 75% of base salary and each of Messrs. Testa and Zechmeister’s target remained unchanged at 75%.
Performance Targets. In initially setting the performance targets for fiscal 2019,2022, the Compensation Committee reviewed historical levels of performance, of each of legacy UNFI and Supervalu, expected initiatives in connection with ongoing transformation and productivity initiatives, a desire to support our growth and long-term operating results, the integration of the combined company,competitive environment and the competitive environment.heightened uncertainty given the ongoing COVID-19 pandemic and labor market challenges. In establishing the intended degree of difficulty of the payout levelslevel for each performance metric,adjusted EBITDA, the Compensation Committee set the performance targets at levels that required successful implementation of corporate operating objectives for meaningful payouts to occur. The Compensation Committee believed that the initial targets related to “threshold” performance were achievable in light of budgeted expectations, but the payouts for “target” performance and
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“stretch” “stretch” performance each required significant improvement over the prior year’s comparable performance, after taking into account the impact of important Company-specific initiatives designed to support our growth and enhance our long-term operating results, including significant integration efforts. We believe that one of the best indicators of how difficult a performance metric was to achieve is reflected in what level of payout the executive actually received with respect to the metric.
The following is a breakdown of the original financial goals applied to each of the Named Executive Officers and the weighting of those metrics. These metrics provide a balanced performance-measurement framework that captures both earnings and profitability.
| Performance Measures |
Named Executive Officer | Adjusted
EBITDA | Adjusted
EPS |
Steven L. Spinner | | 50 | % | | 50 | % |
Michael P. Zechmeister | | 50 | % | | 50 | % |
Sean F. Griffin | | 100 | % | | — | |
Jill E. Sutton | | 100 | % | | — | |
Christopher P. Testa | | 100 | % | | — | |
In contrast to prior years, to promote a shared focus by all executives on improving the core operating performance of the Company, annual incentive compensation for all Named Executive Officers, other than the CEO and the CFO, were weighted 100% to adjusted EBITDA. Personal and subjective goals, which in previous years had factored in the CEO’s annual incentive compensation, were no longer considered. Adjusted EPS was originally a component of the bonus potential for the CEO and the CFO to reflect their responsibility for Company performance beyond the level of internal operating improvements. As discussed in more detail below, the Compensation Committee determined that adjusted EPS would have resulted in a payout that was not in line with performance and exercised negative discretion with respect to Mr. Spinner’s payout.
Initial Establishment of Performance Targets. The performance targets tied to corporate-level financial goals selected by the Compensation Committee for the Named Executive Officers for fiscal 2019 were set in February 2019 at the following amounts:
Performance Measures | Threshold | Target | Stretch | Threshold
Payout | Target
Payout | Stretch
Payout |
Adjusted EBITDA in $000’s | $ | 578,600 | | $ | 657,500 | | $ | 736,400 | | | 35 | % | | 100 | % | | 200 | % |
Adjusted EPS | $ | 1.58 | | $ | 1.79 | | $ | 2.00 | | | 35 | % | | 100 | % | | 200 | % |
Determination of Performance-Based Annual Cash Incentive Plan Payouts. Annual cash incentive plan goals for NEOs for fiscal 2022 were set by the Compensation Committee at the following amounts for Messrs. Douglas, Howard, Dorne and Testa and Ms. Sutton:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Performance Measure | Weight | | Threshold | | Target | | Stretch | | Threshold Payout | | Target Payout | | Stretch Payout |
Adjusted EBITDA in $000’s | 75 | % | | $ | 688,390 | | | $ | 809,871 | | | $ | 931,351 | | | 50 | % | | 100 | % | | 150 | % |
Net Sales in $000’s | 25 | % | | $ | 26,931,515 | | | $ | 28,053,661 | | | $ | 29,175,808 | | | 50 | % | | 100 | % | | 150 | % |
For Mr. Stigers, his annual cash incentive included total Company Adjusted EBITDA plus Retail Net Sales and Retail Adjusted EBITDA to drive performance in his specific business unit metrics:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Performance Measure | Weight | | Threshold | | Target | | Stretch | | Threshold Payout | | Target Payout | | Stretch Payout |
Adjusted EBITDA in $000’s | 15 | % | | $ | 688,390 | | | $ | 809,871 | | | $ | 931,351 | | | 50 | % | | 100 | % | | 150 | % |
Retail Net Sales in $000’s | 25 | % | | $ | 2,357,596 | | | $ | 2,455,830 | | | $ | 2,554,063 | | | 50 | % | | 100 | % | | 150 | % |
Retail Adjusted EBITDA in $000’s | 60 | % | | $ | 78,633 | | | $ | 92,509 | | | $ | 106,386 | | | 50 | % | | 100 | % | | 150 | % |
In September
2019,2022, the Compensation Committee reviewed with
managementManagement our
anticipated financial results for fiscal
2019 and certain proposed adjustments to adjusted EBITDA and adjusted EPS described below. The Compensation Committee approved the proposed adjustments and determined the levels at which adjusted EBITDA and adjusted EPS had been achieved as set forth below:Performance Metric | Target | Actual | Payout as a Percentage
of Target |
Adjusted EBITDA in $000’s | $ | 657,500 | | $ | 588,900 | (1) | | 43.49 | % |
Adjusted EPS | $ | 1.79 | | $ | 2.51 | (2) | | 200 | % |
| (1) | The Compensation Committee approved adjustments resulting in a net positive impact of $26 million to adjusted EBITDA performance related to (i) a LIFO charge related to the legacy UNFI business, (ii) unbudgeted rental costs from Supervalu sale-leaseback properties, (iii) the derecognition of amortizing gains from sale-leaseback transactions as a result of purchase accounting, (iv) incremental pre-operational rent expense and (v) incremental expense related to these compensation adjustments. The Compensation Committee believed it was appropriate to adjust for the impact of these items in light of the fact that the events giving rise to these items had not been entered into or had not been contemplated at the time the performance targets were established and these factors were unrelated to our core operating performance. As a result, our adjusted EBITDA of $562.5 million, as reported in the Company’s Annual Report on Form 10-K for the year ended August 3, 2019, was adjusted upward to $588.9 million for purposes of annual cash incentive program performance determinations. See Annex B for a reconciliation to the most comparable GAAP metric. |
| (2) | Adjusted EPS for purposes of our annual cash incentive program was favorably impacted by $0.43 as compared to our results reported in a press release issued on October 1, 2019 due to adjustments related to the items described in (i)-(iv) in footnote 1 to this table. See Annex B for a reconciliation to the most comparable GAAP metric. |
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The Compensation Committee has the discretion to reduce the payout of annual incentive compensation to any Named Executive Officer. Adjusted EPS for purposes of determining performance was positively impacted by an $80 million purchase accounting adjustment, which, as shown above, would have resulted in a payout of 200% with respect to that metric and a blended 121.74% total payout to Mr. Spinner.2022. The Compensation Committee determined the level of achievement against each of the metrics as set forth below.
For Messrs. Douglas, Howard, Dorne and Testa and Ms. Sutton, final payouts were based on the following metrics:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Metric (in millions) | Weight | Target | | Actual | | Performance as a Percentage of Target | | Weighted Payout |
| Adjusted EBITDA | 75 | % | $ | 810 | | | $ | 829 | | (1) | 102 | % | | 80.8 | % |
| Net Sales | 25 | % | $ | 28,054 | | | $ | 28,928 | | | 103 | % | | 34.7 | % |
(1)See Annex B for a reconciliation to the most comparable GAAP metric
For Mr. Stigers, his final payout is based on the following metrics:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Performance Metric (in millions) | Weight | Target | | Actual | | Performance as a Percentage of Target | | Weighted Payout |
| Adjusted EBITDA | 15 | % | $ | 810 | | | $ | 829 | | (1) | 102 | % | | 16.2 | % |
| Retail Net Sales | 25 | % | $ | 2,456 | | | $ | 2,468 | | | 100 | % | | 26.4 | % |
| Retail Adjusted EBITDA | 60 | % | $ | 93 | | | $ | 98 | | | 105 | % | | 70.8 | % |
(1)See Annex B for a reconciliation to the most comparable GAAP metric.
The Company exceeded its adjusted EBITDA, Retail Adjusted EBITDA, Net Sales and Retail Net Sales targets for fiscal 2022. The payout amounts below were linearly interpolated for results between target and maximum or “stretch” performance, which resulted in a 115.54% payout as a percent of target for Messrs. Douglas, Howard, Dorne and Testa and Ms. Sutton and a 113.40% payout as a percentage of target for Mr. Stigers. The payout amounts reflect performance in fiscal 2022 that such a payoutexceeded the established performance objective, demonstrating the effectiveness of our pay for performance incentive plans.
| | | | | | | | | | | | | | |
| | Performance-Based Annual Incentive |
| Named Executive Officer | | Target | | Actual |
| Sandy Douglas | | $ | 1,544,712 | | | $ | 1,784,744 | |
| John W. Howard | | $ | 662,500 | | | $ | 765,446 | |
| Eric A. Dorne | | $ | 778,125 | | | $ | 899,038 | |
| Michael C. Stigers | | $ | 431,250 | | | $ | 489,046 | |
| Christopher P. Testa | | $ | 795,000 | | | $ | 918,535 | |
Steven L. Spinner (1) | | $ | — | | | $ | — | |
Jill E. Sutton (2) | | $ | 183,548 | | | $ | 212,069 | |
(1)Mr. Spinner was not eligible for a bonus in linefiscal 2022 per his agreement and exercised negative discretion with respect to the payout of Mr. Spinner’s 2019 cash incentive payment. For internal equity purposes, the Committee determined to base Mr. Spinner’s payoutretirement on the achievement and level for adjusted EBITDA, whichAugust 8, 2021.
(2)Ms. Sutton’s target was 43.49%. Payments of the bonus amount were made in a lump sum to each Named Executive Officer as described in the table below following the filing of our Annual Reportprorated based on Form 10-K for the year ended August 3, 2019. The amount in the table below reflects Mr. Spinner’s actual payout. Mr. Zechmeister resigned prior to the bonus payout date and therefore forfeited any potential bonus payout. | Performance-Based
Annual Incentive | Actual Performance-
Based Incentive
Payment | Performance-
Based Incentive
Payment |
Named Executive Officer | Target | Actual | As a Percentage
of Base Salary | As a Percentage
of Target |
Steven L. Spinner | $ | 1,746,692 | | $ | 759,556 | | | 65 | % | | 43 | % |
Michael P. Zechmeister | $ | 489,419 | | $ | 0 | | | 0 | % | | 0 | % |
Sean F. Griffin | $ | 1,086,346 | | $ | 472,452 | | | 54 | % | | 43 | % |
Jill E. Sutton | $ | 344,207 | | $ | 149,696 | | | 33 | % | | 43 | % |
Christopher P. Testa | $ | 343,991 | | $ | 149,601 | | | 33 | % | | 43 | % |
Long-termLong-Term Equity-Based Incentive Program
2019
2022 Grant of Time-VestingTime- and PerformancePerformance-Based Vesting Restricted Stock Units.Our long-term equity-based incentive program in fiscal 20192022 for our Named Executive OfficersNEOs consisted of RSUs and PSUs. Approximately 50%40% of the aggregate grant date fair value of these units awarded to Named Executive OfficersNEOs represented RSUs that vest ratably over three years and 50%60% were PSUs.PSUs that cliff-vest at the end of a three-year performance period.
The Compensation Committee considered stockholder feedback, as well as recommendations from its advisor, FW Cook, to adjust the long-term incentive (LTI) program for fiscal 2022 to better align with best practice. First, LTI awards are now a fixed dollar value rather than a percent of base salary, which no longer results in automatic LTI increases when base salary adjustments are made. Second, the mix of awards is now more heavily weighted to PSUs at 60%, with RSUs at 40%, and maximum payout aligned with peers at 200%. The Committee believes that a mix of time- and performance-based vesting restricted stock units provides a Named Executive OfficerNEO with an incentive to improve our stock price performance and a direct alignment with stockholders’ interests, as well as a continuing stake in our long-term success. In addition, becauseLastly, the time-based equity awards vest ratably over four years, andCommittee simplified the performance units vestPSU program to only two years frommetrics after the dateremoval of grant, if earned, we believe these awards provide strong retention incentives for the executives to remain employees of ours overLeverage metric given the long term. significant progress the Company has made in paying down debt.
As
described below,stated above, in fiscal
2020, we made further changes to our program based on investor feedback to align vesting periods to three years.In fiscal 2019,2022, the Compensation Committee determined the target grant date fair value of equity awards for our compensation program was to be based on percentages of the recipient’s then base salary dependent on the eligible employee’s position within the Company.a fixed value that will be benchmarked annually and used as a lever to align executives overall target direct compensation and/or reward executives for outstanding performance. Other LTI award recipients were already receiving a fixed dollar value by level. For our Named Executive Officers,NEOs, the percentagesfiscal 2022 grant values were:
Steven L. Spinner:
| | 425
| %
| | |
| Named Executive Officer | Target Annual LTI $ |
Michael P. Zechmeister:Sandy Douglas (1)
| $5,900,000 |
| John W. Howard | 200
$1,500,000 |
| Eric A. Dorne | %
$1,800,000 |
| Michael C. Stigers | $1,000,000 |
| Christopher P. Testa | $1,800,000 |
Sean F. Griffin:Steven L. Spinner (2)
| | 250
| %
n/a |
Jill E. Sutton:Sutton (3) | | 150
| %
|
Christopher P. Testa:
| | 200
| %
$1,000,000 |
(1)Includes one-time inducement award to join the Company valued at $2,000,0000 and issued 60% in PSUs and 40% in RSUs.
(2)Mr. Spinner was not eligible for an LTI grant in fiscal 2022 per his agreement and retirement on August 8, 2021.
(3)Ms. Sutton’s target is shown in full, but upon her qualifying termination on December 10, 2021, she forfeited a pro rata amount of her award.
These grants were made in
September and December whenOctober 2021, following approval by the Compensation
Committee also approved changes to our executive officers’ annual base salaries and equity incentive targets, after the Supervalu acquisition.Committee.
Performance-Metrics for Performance Units. PSUs granted in fiscal 2019 (September 2018) have2022 (October 2021) are subject to two equally-weightedmetrics that the Compensation Committee believes are critical to our long-term strategy. The performance criteria:criteria and weighting of these PSUs are as follows: fiscal 2019-20202022-2024 adjusted EBITDAEPS growth, weighted at 75%; and fiscal 2019-20202024 adjusted return on invested capital (adjusted ROIC), weighted at 25%, as described below.
Adjusted EPS Growth. At the end of 3 years, adjusted EPS growth is based on the average achievement against the 3-year performance goals and metrics. Adjusted EPS growth rate targets are set at the time of grant for each year as a targeted rate of growth applied to the prior-year actual adjusted EPS. This design is intended to keep Management engaged throughout the three-year cycle even if there is under-performance in one year; or, conversely, if the maximum growth is achieved in one year, Management must still meet predetermined growth rate goals in subsequent years. For example, if our executives were to significantly outperform relative to the year-one adjusted EPS growth target, they must still achieve the predetermined growth rate targets in the second and third years to attain an above-target payout because the contribution of the first year to total payout is effectively capped. If our target were a cumulative three-year growth target, maximum payout could be achieved with one year of significant out performance. The Compensation Committee believes that including an adjusted EPS metric aligns executives’ interest with long-term stockholder interests.
Fiscal 2024 Adjusted ROIC for purposes of the long-term incentive plan represents. Adjusted ROIC is defined as net adjusted operating profit after income taxes, divided by the sum of totalthe average outstanding debt (including finance lease obligations) and average stockholders’ equity, plus or minus certain adjustments falling into categories approved by the Compensation Committee. Pursuant to the terms of the Company’s Equity Incentive Plan, the Compensation Committee may adjust performance criteria for certain enumerated events that are not directly related to the operations of the Company or within reasonable control of management. The Compensation Committee believes these metrics encourage a focus by our management team TABLE OF CONTENTS
on improving core operational performance andthis metric, which is set at the grant date, drives long-term value creation. Targets were based on projections for both fiscal years, taking into accountby emphasizing prudent investments and effective capital management over the Supervalu acquisition in the first quarter of fiscal 2019. The applicable Named Executive Officers are eligible to earn between 0% and 200% of their targeted award, depending on ourfull 3-year performance during the relevant measurement period. Adjusted EBITDA and adjusted ROIC must meet a minimum threshold level of performance for any payout to occur (shown below).
In addition to the performance criteria tied to
adjusted EBITDA and adjusted ROIC,the two financial metrics described above, the Compensation Committee approved
the abilitya feature pursuant to
adjustwhich the number of units that will vest
will be adjusted upward or downward by up to 10% depending on how our common stock price performs relative to the S&P Mid Cap 400 Index
(“Relative TSR”)(Relative TSR) over the
two-yearthree-year performance period ending on the close of fiscal
2020.Performance Measures | Weight | Threshold | Achievement
to Target | Stretch | Threshold
Payout | Target
Payout | Stretch
Payout |
Fiscal 2020 Adjusted EBITDA | | 50 | % | | 88 | % | | 100 | % | | 112 | % | | 35 | % | | 100 | % | | 200 | % |
Fiscal 2020 Adjusted ROIC | | 50 | % | | 88 | % | | 100 | % | | 112 | % | | 35 | % | | 100 | % | | 200 | % |
The performance metrics underlying these performance units were established by the Compensation Committee believes this design focuses our Management team on improving core operational performance and long-term value creation. Targets were based on our business planning process with target level of performance established at levels that were, at the time of the grant, consistent with our internally preparedlong-term projections with significant improvements over those projections required to achieve above-target payoutsfor all three fiscal years, taking into account investments in growth opportunities and a threshold level of adjusted EBITDA and/or adjusted ROIC established below which none of the performance units would be earned.
Prior Long-term Equity-Based Incentive Program, Results & Payouts
Fiscal 2018 Executive Two-Year LTIP. The performance-based restricted stock units granted in fiscal 2018 (September 2017) have two metrics: fiscal 2019 adjusted EBITDA, calculatedongoing uncertainty in the same manner as the metrics for the annual cash incentive plan, and fiscal 2019 adjusted ROIC, calculated as described above.macro-environment. The applicable Named Executive Officers wereNEOs are eligible to earn between 0% and 200% of their targeted award, depending on our performance during the relevant measurement periodperiod. Each metric must meet a minimum threshold level of performance for any payout to occur with respect to five levelsthat metric (shown below). The table below does not include the actual forward targets. We generally do not disclose forward-looking goals for our long-term incentive plan because we do not consistently provide long-range guidance on all metrics and it is competitively sensitive information. We disclose performance goals for our incentive programs in full after completion of the performance forperiod.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Performance Measures | | Weight | | Threshold | | Target | | Stretch | | Threshold Payout(1) | | Target Payout(1) | | Stretch Payout(1) |
| Fiscal 2022-2024 Adjusted EPS Growth | | 75 | % | | 70 | % | | 100 | % | | 130 | % | | 50 | % | | 100 | % | | 200 | % |
| Fiscal 2024 Adjusted ROIC | | 25 | % | | 90 | % | | 100 | % | | 110 | % | | 50 | % | | 100 | % | | 200 | % |
(1)Aggregate payout subject to 10% adjustment based on Relative TSR.
Prior Long-Term Equity-Based Incentive Program, Results and Payouts
Fiscal 2020-2022. The PSUs granted in fiscal 2020 (October 2019) have three weighted metrics: fiscal 2020 to 2022 adjusted EBITDA andEPS growth (60%), fiscal 2022 adjusted ROIC respectively. (20%), and fiscal 2022 Leverage, or Net Debt/Adjusted EBITDA (20%). The applicable NEOs were eligible to earn between 50% and 150% of their targeted award, depending on our performance during the relevant measurement period across the threshold, target and maximum levels below. Adjusted EBITDA, adjusted ROIC and Leverage are non-GAAP metrics. A reconciliation to the nearest GAAP metrics is provided in Annex B.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Performance Measure | Weight | | Threshold | | Target | | Stretch | | Threshold Payout | | Target Payout | | Stretch Payout |
| Fiscal 2020-2022 Adjusted EPS Growth | 60% | | 42%
84%
84% | | F20 60%
F21 120%
F22 120% | | 78%
156%
156% | | 50% | | 100% | | 150% |
| Fiscal 2022 Adjusted ROIC | 20% | | 4.78% | | 5.31% | | 5.84% | | 50% | | 100% | | 150% |
| Fiscal 2022 Leverage (Net Debt/Adj. EBITDA) | 20% | | 4.30x | | 3.91x | | 3.52x | | 50% | | 100% | | 150% |
In addition to the performance criteria tied to adjusted
EBITDAEPS growth, adjusted ROIC and
adjusted ROIC,Leverage, the grants included
the abilitya provision for
the Compensation Committee to adjustadjustment of the number of units that will vest upward or downward by up to 10% depending on the Relative TSR over the
two-yearthree-year performance period. The number of units that will vest is adjusted up or down proportionally by up to 10% based on the number of basis points difference between our performance and the performance of the S&P Mid Cap 400 Index.
In September
2019,2022, the Compensation Committee reviewed performance against the
two-yearthree-year performance period ending in fiscal
2019. The original adjusted EBITDA2022 with the following results, performance to target
was $368 million and
adjusted ROIC was 7.55%. Targets were increased to account for the impactfinal weighted payout of
the Supervalu acquisition and to require a “makeup” for fiscal 2018 underperformance. Performance ranges between threshold and maximum levels remained at the originally approved payout curves.Based on the matrix below, payout was 5.3% due to adjusted EBITDA results of $588.9 million, which reflects the adjustments described above, below threshold, and adjusted ROIC of 4.21%90%. See Annex B for reconciliation to the most comparable GAAP metric.
| FY19 Adj. EBITDA (000’s) |
| | < $625,986 | $644,239 | $662,490 | $680,742 | > $698,993 |
FY19 Adj.
ROIC
| > 4.6721% | 100% | 125% | 150% | 175% | 200% |
4.5460% | 75% | 100% | 125% | 150% | 175% |
4.4200% | 50% | 75% | 100% | 125% | 150% |
4.3020% | 25% | 50% | 75% | 100% | 125% |
< 4.1841% | 0% | 25% | 50% | 75% | 100% |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Performance Metric | Weight | Target | | Actual | | Performance as a Percentage of Target | | Weighted Payout |
| Fiscal 2020-2022 Adjusted EPS Growth | 60% | F20 60%
F21 120%
F22 120% | | F20 121%
F21 48%
F22 16% | | 201%
40%
13% | | 30.0% |
| Fiscal 2022 Adjusted ROIC | 20% | 5.31% | | 10.2% | | 193% | | 30.0% |
| Fiscal 2022 Leverage (Net Debt/Adj. EBITDA) | 20% | 3.91x | | 2.6x | | 153% | | 30.0% |
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The number of earned PSUs was then adjusted downwardupward by 10% as a result of application of the Relative TSR modifier.modifier, which was 37,362 basis points, for a final payout of 99%. The table below shows the number of shares earned compared to target.
Executive(1) | Shares at
Target | Metric
Payout % | Shares at Metric
Payout | Final Shares After -10% TSR
Modifier |
Steven L. Spinner | | 37,730 | | | 5.3 | % | | 1,999 | | | 1,799 | |
Michael Zechmeister | | 11,610 | | | — | | | — | | | — | |
Sean F. Griffin | | 13,840 | | | 5.3 | % | | 733 | | | 659 | |
Christopher P. Testa | | 5,380 | | | 5.3 | % | | 285 | | | 256 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Shares at Target | | Metric Payout % | | Shares at Metric Payout | | Final Shares After +10% TSR Modifier |
| Sandy Douglas | | n/a | | | | 0 | | 0 |
| John W. Howard | | 18,820 | | 90.0 | % | | 16,938 | | 18,631 |
| Eric A. Dorne | | 47,051 | | 90.0 | % | | 42,346 | | 46,580 |
| Michael C. Stigers | | 54,109 | | 90.0 | % | | 48,698 | | 53,567 |
| Christopher P. Testa | | 56,461 | | 90.0 | % | | 50,815 | | 55,896 |
| Steven L. Spinner | | 319,949 | | 90.0 | % | | 287,954 | | 316,749 |
Jill E. Sutton(1) | | 34,452 | | 90.0 | % | | 31,007 | | 34,107 |
(1)Ms. Sutton’s target shares were prorated for her time served in the 3-year performance period, given her qualifying termination in December 2021.
The payouts under the 2020 PSUs reflect our executive compensation program’s pay for performance structure. Despite exceeding the adjusted EPS maximum growth target in fiscal 2020, the Company did not meet the predetermined threshold adjusted EPS growth performance over fiscal 2020 actual performance in fiscal 2021 or 2022, which demonstrates that consistent financial performance over the performance period is required to achieve the robust targets set by our Compensation Committee. The adjusted ROIC and Leverage metrics exceeded stretch performance expectations resulting in a higher payout for those metrics.
| (1) | Mr. Zechmeister forfeited all his unvested stock awards upon his resignation in August 2019. Ms. Sutton was not an employee at the time these awards were granted. |
Fiscal 2017 CEO Awards (Fiscal 2019 Component & Cumulative 3-Year)
In fiscal 2017 (October 2016), the Compensation Committee approved a special PSU award for Mr. Spinner to align his compensation with our Company’s long-term success during a critical period
Table of our Company’s strategic efforts. Mr. Spinner’s award totaled 150,000 units at target level of performance with vesting for 50,000 units annually at target level performance based 50% each on the Company’s net sales and adjusted EBITDA for each of fiscal 2017, 2018 and 2019 and 25,000 units at target level performance based on our cumulative adjusted EBITDA for the three-year period inclusive of fiscal 2017, 2018 and 2019.In September 2019, the Compensation Committee reviewed performance against the targets for the fiscal 2019 net sales and adjusted EBITDA, as well as the cumulative performance of adjusted EBITDA for fiscal 2017 through 2019. Below are the targets, threshold and actual results and related payouts for these awards.
Fiscal 2017 and fiscal 2018 components have paid out at 96.7% and 107.5% of target, respectively. The table below represents fiscal 2019 and cumulative three-year targets and results only.
The original fiscal 2019 targets for net sales and adjusted EBITDA were $10,050 million and $353 million, respectively. The original three-year cumulative target for adjusted EBITDA was $1,010 million. Following the Supervalu transaction, the Committee revised the targets upward to reflect the acquisition and avoid a payout level that was not reflective of operational performance. At the same time, the Committee removed the GAAP EPS gateway metrics for each period as it was originally included because it was not reflective of operational performance of the newly combined company and in light of the number of adjustments to GAAP EPS that were likely as a result of the Supervalu acquisition.
(Metric in 000’s except per share and % data)
Metric | Weight | Threshold | Target | Maximum | Actual | Achievement | Metric
Payout
% | Weighted
Payout
% |
Fiscal 2019
Net Sales | | 50 | % | $ | 21,345,793 | | $ | 22,737,175 | | $ | 23,419,290 | | $ | 23,468,197 | (1) | | 103.2 | % | | 120.0 | % | | 60.0 | % |
Fiscal 2019 adjusted EBITDA | | 50 | % | $ | 491,311 | | $ | 637,168 | | $ | 656,283 | | $ | 588,900 | (2) | | 92.4 | % | | 93.4 | % | | 46.7 | % |
| (1) | Includes approximately $2 billion of net sales from discontinued operations. |
| (2) | The Compensation Committee approved adjustments resulting in a net positive impact of $26 million to adjusted EBITDA performance related to (i) a LIFO charge related to the legacy UNFI business, (ii) unbudgeted rental costs from Supervalu sale-leaseback properties, (iii) the derecognition of amortizing gains from sale-leaseback transactions as a result of purchase accounting, (iv) incremental pre-operational rent expense and (v) incremental expense related to these compensation adjustments. The Compensation Committee believed it was appropriate to adjust for the impact of these items in light of the fact that the events giving rise to these items had not been entered into or had not been contemplated at the time the performance targets were established and these factors were unrelated to our core operating performance. As a result, our adjusted EBITDA of $562.5 million, as reported in the Company’s Annual Report on Form 10-K for the year ended August 3, 2019, was adjusted upward to $588.9 million for purposes of annual cash incentive program performance determinations. See Annex B for a reconciliation to the most comparable GAAP metric.
|
(Metric in 000’s except per share and % data)
Metric | Weight | Threshold | Metric Target | Maximum | Actual | Achievement | Payout
% |
3-year adjusted EBITDA | | 100 | % | $ | 1,016,067 | | $ | 1,294,531 | | $ | 1,333,140 | | $ | 1,252,299(1 | ) | | 96.7 | % | | 96.97 | % |
| (1) | Reflects the sum of fiscal 2017, 2018 and 2019 compensation adjusted EBITDA. |
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As a result of the above achievements, Mr. Spinner earned 53,345 and 24,243 shares with respect to the fiscal 2019 metrics and cumulative 3-year metrics, respectively.
Other Compensation and Benefits
The
Named Executive OfficersNEOs are eligible for the same level and
offeringtype of benefits that we make available to other employees, including our 401(k) plan, health care plan, life insurance plans,
and other welfare benefit
programs. In addition to the standard benefits offered to all employees, the Named Executive Officers were eligible to participate in the Deferral Plans prior to such plans being frozen. Forprograms and equity treatment upon retirement or a
description of the Deferral Plans, see “EXECUTIVE COMPENSATION TABLES—Nonqualified Deferred Compensation—Fiscal 2019.” below.separation from service event. We do not have any defined benefit pension plans available to our
Named Executive Officers. The Deferral Plans were frozen in February 2019 and are expected to be paid out in early 2020.NEOs.
Additional Benefits. We provide certain Named Executive OfficersNEOs with additional benefits that we believe are reasonable and consistent with our overall executive compensation program. The costs of these benefits constitute only a small portion of each Named Executive Officer’sNEO’s total compensation and includes, for certain Named Executive Officers, contributions to our defined contribution plan, the payment of premiums for life insurance, housing and automobile allowances,have included items such as relocation expenses and, for our former CEO, commuting air and travel reimbursement.reimbursement or security detail. We offer perquisites and other benefits that we believe to be competitive with benefits offered by companies with whom we compete for talent for purposes of recruitment and retention.Retirement. Under In September 2022, the Company’s stock incentive planCommittee approved a perquisite for senior vice presidents and historicallyabove to pay for tax preparation fees beginning in its award agreements with executives, an executive who retired would generally forfeit his or her award if it had not yet vested. In2023 in recognition of increased tax reporting obligations due to business travel.
Retirement. To recognize significant years of service to the second quarter of fiscal 2019, after reviewing retirement provisionsCompany and practices for the treatment of equity awards at comparable companies, the Compensation Committee determined to change the terms of its long-term compensation awards to accommodate executivesincentivize employees who might consider retiring and to better assure that their awards provided an incentive to work forremain focused on the long-term best interests of the Company regardless of their personal retirement plans. Accordingly,plans, which could otherwise create bias toward short-term performance, the Committee determinedhas established a retirement policy that time-vestingprovides that time-based RSUs will continue to vest during retirement on the same terms as they would if the executive had not retired, but without the requirement that they remain employed. PSUs will be treated similarly on retirement, but subject to actual performance at the time when achievement of performance objectives isare measured. In addition, an executive’s equity awards granted in the year of retirement will be prorated to reflect the service period prior to the date of retirement. Retirement vestingQualified retirement is only available to employeesdefined as retirement by an employee who has reached age 59 or older and who voluntarily terminate employment afterhas achieved at least 10 years of service to the Company. This policy applies to all participants, provided that, as described below, our CEO will be eligible for retirement treatment upon achievement of six years of service to the Company.
Components of Our Executive Compensation Program for Fiscal 2020In September 2019, to further align executive pay to market and recognize the larger scope of responsibilities of our executives following the Supervalu acquisition, our2023
Our Compensation Committee
determinedmade the following changes to base salary for the
Named Executive Officers,NEOs, effective
November 3, 2019:Named Executive Officer | Fiscal 2019
Base Salary | Fiscal 2020
Base Salary | % Change |
Steven L. Spinner | $ | 1,200,000 | | $ | 1,200,000 | | | 0 | % |
Sean F. Griffin | $ | 930,000 | | $ | 930,000 | | | 0 | % |
Jill E. Sutton | $ | 465,000 | | $ | 510,000 | | | 10 | % |
Christopher P. Testa | $ | 450,000 | | $ | 550,000 | | | 22 | % |
October 30, 2022.
| | | | | | | | | | | | | | | | | | | | |
| Named Executive Officer | | Fiscal 2022 Base Salary (1) | | Fiscal 2023 Base Salary(2) | | % Change |
| Sandy Douglas | | $ | 1,050,000 | | | $ | 1,050,000 | | | — | % |
| John W. Howard | | $ | 675,000 | | | $ | 722,250 | | | 7 | % |
| Eric A. Dorne | | $ | 787,500 | | | $ | 787,500 | | | — | % |
| Michael C. Stigers | | $ | 575,000 | | | $ | 598,000 | | | 4 | % |
| Christopher P. Testa | | $ | 810,000 | | | $ | 810,000 | | | — | % |
(1)Reflects annual rate as of the end of fiscal 2022. 35
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The Compensation Committee determined to make no changes to target levels as a percent of base salary for ourMr. Stigers annual cash incentive plan target for fiscal 2023 was increased to 85% of his base salary to align internally with other officers and long-term incentive plan. According, fiscal 2020 targets remain unchanged and are as set forth below.
Named Executive Officer | Fiscal 2020
Annual Cash
Incentive Plan
Target (as a
percent of Base
Salary) | % Change
from fiscal
2019 | Fiscal 2020
Long-Term
Incentive Plan
Target (as a
percent of
Base Salary) | % Change
from fiscal
2019 |
Steven L. Spinner | | 150 | % | | 0 | % | | 425 | % | | 0 | % |
Sean F. Griffin | | 125 | % | | 0 | % | | 250 | % | | 0 | % |
Jill E. Sutton | | 75 | % | | 0 | % | | 150 | % | | 0 | % |
Christopher P. Testa | | 75 | % | | 0 | % | | 200 | % | | 0 | % |
Otherin recognition of his accomplishments this past year. There were no other changes to fiscal 2020 compensation program.
In September and October 2019, the Compensationannual incentive targets. The Committee reviewed our executive compensation program, including feedback received through our stockholder engagement program in the last two years. The Compensation Committee made the followingdid approve changes to our plan design.
Aligned long-term incentive awards to market by moving to 3-year cliff-vesting from 2-years for PSUs.
Moved to 3-year ratable annual vesting from 4-year ratable annual vesting for time-based restricted share units, or RSUs.
Revised payout levels at threshold and maximum for annual cash incentive compensation to 50% and 150%, respectively, from 35% and 200%, respectively, to limit potential maximum payments, and further align our program to market practice at both the threshold and maximum payout.
Aligned all executives, including the CEO, to adjusted EBITDA as the single metric for the annual cash incentive program to support a unified focus on driving growth in core operational performance by our executive officers and reward all officers for achievement of this most important driver of overall financial performance. The Compensation Committee also believes that using adjusted EBITDA as the sole metric in the annual cash incentive plan is appropriate particularly since, as discussed below, it was removed as a metric in the long-term incentive plan targets for certain NEOs. The fiscal 2023 award amounts reflect increases based on the results of benchmarking, recognition of accomplishments in fiscal 2022 and/or increased responsibilities of our executive officers as we continue to avoid duplication,grow the business and execute against our Fuel the Future strategy. For Mr. Douglas, this is in recognition of his strong leadership and continued focus on expanding and strengthening the executive team to drive results, in addition to maintaining comparable total compensation that is aligned with market. For Mr. Howard this included, among other things, his accomplishments regarding debt and leverage reduction, capital structure foundation and revolving credit facility refinancing.
| | | | | | | | | | | |
| Named Executive Officer | Target Fiscal 2022 LTI $ | Target Fiscal 2023 LTI $ | % Change |
| Sandy Douglas | $3,900,000 | $5,000,000 | 28.2 | % |
| John W. Howard | $1,500,000 | $1,800,000 | 20.0 | % |
| Eric A. Dorne | $1,800,000 | $1,800,000 | — | % |
| Michael C. Stigers | $1,000,000 | $1,000,000 | — | % |
| Christopher P. Testa | $1,800,000 | $1,800,000 | — | % |
As a reminder, the Committee took several actions in fiscal 2022, which reduced the percentageincorporates investor feedback in connection with last year’s meeting and during our annual engagement:
| | | | | | | | | | | | | | |
•Added a second metric to our short-term incentive plan. We believe the addition of a revenue metric (weighted at 25%) along with adjusted EBITDA (weighted at 75%) creates a balance between top- and bottom- line growth and aligning incentives with our Fuel the Future strategy to grow sales profitably; •Adjusted the design of long-term incentive awards to have a heavier weighting of performance-based awards; mix in fiscal 2022 will now be 60% PSUs and 40% RSUs (from 50%/50%); in connection with this change, the Committee also aligned maximum payout with market and peers at 200% (from 150%); •Simplified the long-term incentive plan PSUs for FY22-FY24 by removing the Leverage metric and re-weighting the remaining two metrics, adjusted EPS Growth and adjusted ROIC; and •Reduced change in control multiple for our CEO to 2.5x from prior CEO’s 2.99x. |
Revised the metrics in the long-term incentive program to base awards on adjusted EPS (60% of the award potential), adjusted ROIC (20% of the award potential, and leverage ratio (net debt to adjusted EBITDA) (20% of the award potential). The Compensation Committee believes that including an adjusted EPS metric aligns executives’ interest with long-term shareholder interests, while adjusted ROIC creates a focus on long-term value creation through prudent investment and effective capital management, and the leverage ratio metric supports a focus on our stated commitments to paydown our outstanding debt. The Compensation Committee believes that the combination of these metrics will motivate our executives toward achieving targets that are necessary to improve operational performance, manage capital effectively, and ultimately grow our shareholder value over the long term, while avoiding excessive risk taking.
Employment Agreements with Messrs. Spinner and Griffin,Consulting, Retention, Severance Agreements and Change in Control Agreements
Employment
Consulting Agreement with
Steven L. SpinnerWe are a party to an employment agreement with Eric A. Dorne
Mr.
Spinner which was entered into in October 2016, and amended and restated on November 5, 2018 (as amended and restated, the “Spinner Employment Agreement”).The initial term of the Spinner Employment Agreement is through December 31, 2020 and may be renewed for one year by mutual consent of the parties. Under the agreement, Mr. Spinner will receive an annual base salary of $1,200,000 and will be eligible to participate in the Company’s annual cash and long-term incentive plans with a target annual bonus opportunity of 150% ofDorne retired from his annual base salary and target annual equity opportunity of 425% of his annual base salary, respectively.
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Upon a termination by the Company without Cause (as defined in the Spinner Employment Agreement), resignation by Mr. Spinner for Good Reason (as defined in the Spinner Employment Agreement) or if the Company does not offer to renew the initial term and Mr. Spinner’s employment terminates thereafter for any reason (except for Cause), subject to the effectiveness of a release in favorposition as Chief Operation Officer of the Company, Mr. Spinner will receive (a) 200% of his then current base salary, (b) 200% of his current-year annual cash incentive payments based on target performance and (c) the pro-rated portion of the current-year annual cash incentive payments he would have been owed for the fiscal year in which his employment was terminated based on the Company’s actual results when measured against the performance metrics applicable to Mr. Spinner for that period. Severance also would include payments to Mr. Spinner of $35,000 that he could use to pay for medical benefits for himself and his dependents following termination. In addition, if Mr. Spinner were terminated without Cause or Mr. Spinner voluntarily terminated his employment for Good Reason, any stock options awarded to Mr. Spinner and not vested and exercisable on or prior to the date of Mr. Spinner’s termination that would otherwise have become vested and exercisable on or prior to the first anniversary of the date of Mr. Spinner’s termination, and any shares of restricted stock (including RSUs settled in shares of common stock) and performance-based vesting equity awards (including PSUs settled in shares of common stock) granted to Mr. Spinner that would have had any restrictions thereon removed or vested on or prior to the first anniversary of the date of Mr. Spinner’s termination, would, in each case, have any restrictions thereon removed or become vested, as the case may be, with such restrictions with respect to any performance-based vesting equity awards to be removed on that number of awards as Mr. Spinner would have earned based on performance at the greater of target or actual levels of performance for the current year (but only if any gateway performance metrics applicable to the awards are achieved).
If Mr. Spinner’s employment is terminated without Cause or Mr. Spinner voluntarily terminates his employment for Good Reason during the two-year period following a Change in Control (each as defined in the Spinner Employment Agreement), in lieu of the non-Change in Control severance payments and benefits, and subject to the effectiveness of a release in favor of the Company, Mr. Spinner will receive (a) 2.99 times his then current base salary, (b) 2.99 times the current-year annual cash incentive payments based on target performance and (c) the pro-rated portion of the current-year annual cash incentive payments he would have been owed for the fiscal year in which his employment was terminated based on the Company’s actual results when measured against the performance metrics applicable to Mr. Spinner for that period.effective October 29, 2022. The Company would be required to make payments toand Mr. Spinner of $105,000 that he may use to pay for medical benefits for himself and his dependents following termination. In addition, any and all unvested and unexercised stock options, restricted stock, restricted stock units and performance-based vesting equity awards granted to Mr. Spinner would be treated in accordance with the applicable award agreements evidencing such equity-based awards and any applicable election forms related thereto. The Spinner Employment Agreement contemplates that if any payments or benefits otherwise payable to Mr. Spinner constitute “parachute payments” within the meaning of Section 280G of the Code and are subject to the excise tax imposed by Section 4999 of the Code, then such payments and benefits will either be (x) delivered in full, or (y) delivered as to such lesser extent that would result in no portion of such payments and benefits being subject to such excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account applicable taxes and the excise tax imposed by Section 4999 of the Code, results in the receipt by Mr. Spinner on an after-tax basis, of the greatest amount of benefits.
Under the Spinner Employment Agreement, upon a termination of employment due to retirement (defined as a voluntary termination of employment on or after the date he has attained fifty-nine (59) years of age and has provided ten (10) years of service to the Company), Mr. Spinner’s outstanding equity awards will vest in full with performance determined, as applicable, based on actual performance for the year of termination; provided, however, that awards granted in the year of retirement will be prorated to reflect Mr. Spinner’s service period prior to retirement.
Receipt of any severance payments or benefits is conditioned upon Mr. Spinner’s release of claims against the Company and its officers and directors.
In addition, the Spinner Employment Agreement contains provisions governing the nondisclosure and nonuse of confidential information of the Company, provisions requiring the assignment of certain intellectual property rights to the Company, and non-competition and non-solicitation restrictive covenants which remain in existence for one year or, in the event of termination for “Cause” or without “Good Reason”, two years following Mr. Spinner’s termination.
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Finally, the Spinner Employment Agreement provides that the Company may seek recoupment for incentive compensation in any of the circumstances covered by the Company’s recently amended recoupment policy or any violation of the covenants in the Spinner Employment Agreement relating to non-competition or non-solicitation, nondisclosure and nonuse of confidential information.
Employment Agreement with Sean F. Griffin
On November 5, 2018, the CompanyDorne entered into an employmenta consulting agreement with Sean F. Griffin (the “Griffin Employment Agreement”), pursuant to which Mr. Griffin will serve as Chief Executive OfficerDorne has agreed to provide no more than 16 hours per month of SUPERVALU INC.,consulting services for up to 12 months at a subsidiaryrate of the Company, which became effective, as to compensation arrangements, on October 22, 2018.
The initial term of the Griffin Employment Agreement is through October 22, 2021 and automatically renews for one-year periods thereafter unless either party gives proper notice of nonrenewal. Under the agreement, Mr. Griffin will receive an annual base salary of $930,000 and will be eligible to participate in the Company’s annual cash and long-term incentive plans with a target annual bonus opportunity of 125% of his annual base salary and a target annual equity opportunity of 250% of his annual base salary, respectively.
Upon a termination by the Company without Cause (as defined in the Griffin Employment Agreement) or resignation by Mr. Griffin for Good Reason (as defined in the Griffin Employment Agreement, which definition includes, in addition to customary provisions, the failure by the Company to appoint Mr. Griffin as its CEO), and subject to the effectiveness of a release in favor of the Company, Mr. Griffin will receive: (a) 1.0 times the sum of (i) base salary and (ii) target annual bonus; (b) a pro-rated annual cash bonus for the year of termination based on actual performance; (c) a cash payment of $35,000 for medical benefits; and (d) one additional year of vesting for all outstanding equity awards, with performance determined, as applicable, based on the greater of target and actual performance for the fiscal year in which the termination takes place.
If such a termination without Cause or resignation for Good Reason takes place during the two-year period following a Change in Control (as defined in the Griffin Employment Agreement), in lieu of the severance described above, and subject to the effectiveness of a release in favor of the Company, Mr. Griffin will receive: (a) 2.50 times the sum of (i) base salary and (ii) target annual bonus; (b) a pro-rated annual cash bonus for the year of termination based on actual performance; (c) a cash payment of $105,000 for medical benefits; and (d) all outstanding awards will vest in full with performance determined, as applicable, based on target performance. In addition, any and all unvested and unexercised stock options, restricted stock, restricted stock units and performance-based vesting equity awards granted to Mr. Griffin would be treated in accordance with the applicable award agreements evidencing such equity-based awards and any applicable election forms related thereto. The Griffin Employment Agreement contemplates that if any payments or benefits otherwise payable to Mr. Griffin constitute “parachute payments” within the meaning of Section 280G of the Code and are subject to the excise tax imposed by Section 4999 of the Code, then such payments and benefits will either be (x) delivered in full, or (y) delivered as to such lesser extent that would result in no portion of such payments and benefits being subject to such excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account applicable taxes and the excise tax imposed by Section 4999 of the Code, results in the receipt by Mr. Griffin on an after-tax basis, of the greatest amount of benefits.
Upon a termination of employment due to retirement (as defined in the Griffin Employment Agreement), Mr. Griffin’s outstanding equity awards will vest in full with performance determined, as applicable, based on actual performance for the year of termination; provided, however, that awards granted in the year of retirement will be prorated to reflect Mr. Griffin’s service period prior to Retirement.
Like the Spinner Employment Agreement, receipt of any severance payments or benefits is conditioned upon Mr. Griffin’s release of claims against the Company and its officers and directors.
In addition, as in the case of the Spinner Employment Agreement, the Griffin Employment Agreement contains provisions governing the nondisclosure and nonuse of confidential information of the Company, provisions requiring the assignment of certain intellectual property rights to the Company, and non-competition and non-solicitation restrictive covenants which remain in existence for one year or, in the event of termination for “Cause” or without “Good Reason”, two years following Mr. Spinner��s termination.
Finally, like the Spinner Employment Agreement, the Griffin Employment Agreement provides that the Company may seek recoupment for incentive compensation in any of the circumstances covered by the
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Company’s recently amended recoupment policy or any violation of the covenants in the Spinner Employment Agreement relating to non-competition or non-solicitation, nondisclosure and nonuse of confidential information.
Severance Agreements and Change in Control Agreements
We are currently
As of July 30, 2022, we were a party to severance agreements and change in control agreements with each of
Mr. TestaMessrs. Douglas, Howard, Dorne and
Ms. Sutton.Testa. The capitalized terms “Cause,” “Good Reason” and “Change in Control” in this section are used as defined in those agreements. The Compensation Committee believes that the protections afforded in these severance
agreements and change in control agreements are reasonable and are an important element in retaining our executive officers.
We amended the severance and change in control agreements on November 5, 2018, as described below.Each of the severance agreements includes confidentiality,non-solicitation, non-competition and intellectual property assignment provisions, which apply during the employment period and continue for a one-year period following termination of employment for any reason.
On September 21, 2022, the Compensation Committee approved an updated form of severance agreement with each of the current NEOs (other than the CEO, whose severance agreement was executed in August 2021). The updated severance agreements were effective on October 23, 2022 and expire on the third anniversary of that effective date, subject to extension by mutual agreement of the company and the individual executive officer. In addition to the terms described below, the updated severance agreements provide for the payment of an amount equal to such executive’s target bonus upon a qualifying termination, and revised restrictive covenant provisions, including to clarify the provisions and definitions regarding competitors, competition and the restricted period.
The change in control agreements also include
confidentiality,non-solicitation and non-competition
provisions, which apply during the employment period and continue for a two-year period, and intellectual property assignment provisions, which apply during the employment period and continue for a
two-year period following a termination of employment that occurs within two years after a Change in Control. Under the prior change in control agreements, the confidentiality and non-competition provisions applied during the employment period and during a one-year period, following a termination of employment that occurs
in contemplation of or within
one year oftwo years after a Change in Control.
The severance and change in control agreements also contain confidentiality provisions that are not subject to a term. None of our executives is a party to an agreement providing for “gross up” payments for excise taxes imposed upon termination following a change in control.
The severance agreements were amended to include a three-year term from the effective date (October 23, 2019, after giving effect to the amendments described below). Prior to November 5, 2018, the severance arrangements with executive officers other than Mr. Spinner did not contain an expiration date.
Outside the context of a Change in Control, if we terminate any of the executive officers party to these agreements for any reason other than Cause, death, or disability or such executive resigns for Good Reason, we would be required to pay to the executive (i) the executive’s base salary, as in effect as of the termination date of employment for a period of one year following termination of employment, and (ii) make a cash payment in the amount of $35,000 to such individual that may be used by the executive to pay for post-termination medical benefits. Effective October 23, 2019, we further amended the severance agreements to provide for payment of a prorated portion of incentive compensation earned based on the number of days of service in the year of termination of employment, in exchange for an updated list of competitors in the restrictive covenants included in the severance agreements.
Any benefits to be paid upon a changeChange in controlControl under the change in control agreements are “double trigger,” which requires both a Change in Control and a termination of a Named Executive Officerthe executive’s employment in contemplation of or within two years of the date of the Change in Control, either by us for a reason other than Cause, death or disability or a resignation by the executive for Good Reason within two years of the date of the Change in Control. Under the change in control agreements, if either a termination of the executive for a reason other than Cause, death or disability or his resignation for Good Reason within two year of the date of a Change in Control, the executive would be entitled to receive a lump sum payment equal to (i) a multiple of his or her base salary (multiple of 2 times in the case of Mr. Testa and Ms. Sutton), as in effect at that time of his termination of employment, (ii) a multiple of the executive’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated (1.5 times in the case of Mr. Testa and Ms. Sutton), and (iii) the prorated portion of the executive’s current-year annual cash incentive payments they would have been owed for the fiscal year in which his employment was terminated based on the Company’s actual results when measured against the performance metrics applicable to them for that performance period.
Under the change in control agreements, we will also be required to make a cash payment in the amount of $105,000 to such individual that may be used by the individual to pay for post-termination medicalReason.
The key benefits for himself and his dependents. In addition, any and all unvested and unexercised stock options, restricted stock, restricted stock units and performance-based vesting equity awards granted to the Named Executive Officer will become fully vested, including performance awards, which shall vest at target level of performance unless a greater level of vesting is provided for in the applicable award agreement.these agreements are summarized below:
| | | | | | | | | | | |
| Executive | Benefit or Payment (1) | Severance (2) | Change in Control (2) |
| CEO | Base Multiple | 2X, continued pay | 2.5X, lump sum |
| Bonus Multiple | 2X target $, lump sum | 2.5X target $, lump sum |
| Prorated Bonus | Yes, prorated and based on actual performance | Yes, prorated and based on actual performance |
| Medical Benefits | $70,000 lump sum | $87,500 lump sum |
| Other Executives | Base Multiple | 1X, continued pay | 2X, lump sum |
| Bonus Multiple | None(3) | 2X target $, lump sum |
| Prorated Bonus | Yes, prorated and based on actual performance | Yes, prorated and based on actual performance |
| Medical Benefits | $35,000 lump sum | $105,000 lump sum payment |
(1) The provision of allany such benefits will be subject to any restrictions under applicable law, including under Section 409A of the Code. Internal Revenue Code of 1986, as amended from time to time (Code).
(2) The treatment of equity awards upon separation is governed by the terms of the 2020 Equity Incentive Plan and respective award
agreements.
(3) At the Committee’s September 2022 meeting, it approved an updated form of severance agreement, effective October 23, 2022, which provides for a payment equal to one time such executive’s target bonus payment based in part on benchmarking data provided by its independent compensation consultant.
In establishing the multiples of base salary and bonus that a terminated executive would be entitled to receive following
his termination without Cause or for Good Reason following a Change in Control, the Compensation Committee
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considered the need to be able to competitively recruit and retain talented executive officers who often-timesoften times seek protection against the possibility that they might be terminated without Cause or be forced to resign for Good Reason following a Change in Control, (eachwhile taking into account the views of our stockholders on appropriate multiples.
Mr. Stigers is party to a Transition Agreement entered into originally on October 22, 2018, between Supervalu and United Natural Foods, Inc., at the time of the acquisition. The agreement was amended on March 27, 2019 then on May 12, 2020 and finally on March 9, 2021. The final amendment extends his ability to exercise Good Reason to July 31, 2023 by providing at least 9 months’ notice. This agreement provides for his original Change in Control benefits signed in December of 2015 at Supervalu. Benefits include a 2X base and target bonus payment paid in lump sum, plus a prorated bonus earned based on actual performance, outplacement services up to $25,000 and continued medical, dental and life insurance for up to 18 months.
Upon Ms. Sutton’s qualifying termination, the Committee and the Board agreed to additional severance benefits equal to six months of her base salary and 1.5x her annual bonus, at target. The Committee believed the payments to Ms. Sutton to be reasonable, market competitive, reflective of Ms. Sutton’s contributions to the Company, as definedwell as necessary for a smooth transition through the Company’s organizational restructuring of areas that were previously under her oversight. Ms. Sutton received benefits payments as explained in the applicable agreement)table below in “Potential Payments Upon Termination or Change-in-Control”.
Other Programs, Policies and Considerations
Recoupment (Clawback) Policy
We have adoptedin place a recoupment policy applicable to our executive officers, including our Named Executive Officers,NEOs, other principal officers and certain key employees or former employees designated by the Board or our Chief Executive Officer.CEO. Under the policy, if the Company’s financial statements are required to be restated for any reason, except when due to a change in accounting policy that has a retroactive effect, the Board will review all performance-based compensation awarded or earned for all periods materially affected by such restatement. In addition, the Board will review all performance-based compensation awarded or earned that is based on performance metrics that appear to be materially inaccurate or affected in any way by fraud, regardless of whether a restatement of the Company’s financial statements is required. If
The policy provides that the Board may, to the extent permitted by applicable law, seek the following actions with respect to compensation:
•After conducting the review described above, the Board may seek recoupment from the persons covered by the policy for the extent of such performance-based compensation as it deems appropriate if it determines that that:
◦the payment of such performance-based compensation was predicated upon the achievement of certain financial statement results that were subsequently corrected, or upon material inaccuracy or fraud, and a lower incentive payment or award would been made based upon the restated financial results or corrected performance metrics, then the Board will, to the extent permitted by applicable law, seek recoupment from the persons covered by the policy for the extent of such performance-based compensation as it deems appropriate, after a review of all relevant facts and circumstances.If the Board determines that metrics; or
◦a person covered by the policy has engaged in conduct that will cause damage to the Company or is inimical or in any manner contrary to the best interests of the Company, and if the conduct resulted in a material inaccuracy in the Company’s financial statements or performance metrics which affects such person’s compensation.
•The Board may also require forfeiture of incentive compensation thenin the case of misconduct in violation of law or Company policy, including through failure of an executive’s oversight responsibilities, that results in material financial or reputational harm to the Company.
The policy was also amended in fiscal 2021 to require disclosure in the event the Board
may require reimbursement of performance-based compensationseeks recoupment or forfeiture pursuant to the recoupment policy, provided that,
is greater than wouldamong other things, the related facts and circumstances giving rise to the recovery have been
paid or awarded if calculated based on accurate financial statements or performance metrics.Prior to October 2018, our recoupment policy covered only Named Executive Officers and applied only in the limited eventpublicly disclosed.
Section 304 of the Sarbanes-Oxley Act of 2002
(SOX) requires the recovery of incentive awards from our Chief Executive Officer and Chief Financial Officer if we are required to restate our financials due to material noncompliance with any financial reporting
requirementsrequirement as a result of misconduct.
Additionally, in October 2022, the SEC adopted final rules requiring the securities exchanges to adopt listing standards regarding recovery of incentive compensation, which listing standards may require the Board to update our recoupment policy. The Board is aware of the requirements under SOX and the updated SEC regulations and will consider each in addition to the current recoupment policy in contemplation of any clawbacks. The Board intends to make any necessary updates to the recoupment policy upon finalization of the required listing standards by NYSE.
Stock Ownership Guidelines
The Compensation Committee believes stock ownership guidelines are a key vehicle for aligning the interests of managementManagement and our stockholders. A meaningful ownership stake by our officers demonstrates to our stockholders a strong commitment to our success. Accordingly, the Board has adopted stock ownership guidelines that require our executive officers to hold shares of our common stock having an aggregate market value from time to time which equals or exceeds three times their base salary, and in the case of Mr. Spinner, six times his base salary. below multiples:
| | | | | |
| Associates Subject to Guidelines | Multiple of Base Salary |
| Chief Executive Officer (CEO) | 6X |
| Other Executive Officers | 3X |
| Other Senior Officers (SVPs and above) | 1X |
Each
executivecovered officer is expected to comply with the policy by the fifth year after he or she became subject to the guidelines. Compliance with the guidelines is tested once per year for as long as the officer is employed by the Company. When calculating whether an officer owns a sufficient number of shares under these guidelines,
shares owned in the 401(k) Plan and deferred compensation plans are included in the number of shares owned. Vestedvested and unvested restricted stock and restricted stock units are
also included, butincluded. Starting in fiscal 2021, the Compensation Committee strengthened this policy to provide that only 50% of the value of an executive officer’s unvested
restricted stock
options do not count. Vestedunits will count towards ownership, to further align leaders with stockholders and tie their interests to long-term stock price appreciation. Further, in fiscal 2022, the Committee amended the policy to provide that vested stock options and stock appreciation rights
count to the extent of their net value after deduction for the exercise price.will not be counted in determining compliance. Officers are not allowed to hedge their interests in the stock held pursuant to the guidelines.
In October 2018, we amended the guidelines for officers to exclude vested stock options to the extent that they do not exceed the net value after deduction for the exercise price; we also added an explicit prohibition against hedging of the interest required to meet the guidelines. At the same time, we extended the guidelines to cover officers below the executive officer level, who must hold common stock havingTABLE OF CONTENTS
an aggregate market value equal to his or her base salary and have a five-year period (commencing in 2020) in which to meet the requirements. Our guidelines provide that, once in compliance, an officer shall be deemed to remain in compliance despite a subsequent reduction in stock price that may otherwise cause non-compliance. Each of our executive officers, other than Ms. Sutton, who is still inGiven the accumulation period, were below the guidelines as of August 3, 2019 because thesustained decline in our stock price affectedat the value of the shares they hold. They are deemed to be in compliance as of that date as their ownership fell below the applicable requirements due solely to a decline in the stock price. If the reduction in our stock price is sustained at a level specified in our stock ownership guidelines for 18 months, the five-year accumulation period willwas reset foras of the end of fiscal 2020. Each of our executive officers and they will be required to accumulate more shares to reach the required ownership level.
was in compliance as of July 30, 2022.
Hedging and Insider Trading Policy
Our Insider Trading Policy prohibits our Directors and certain employees, including executive officers, from engaging in certain speculative transactions in our equity securities, including short sales, hedging transactions and pledging our stock as security.
Tax Deductibility of Compensation
When it reviews compensation matters, the Compensation Committee considers, among other matters, the anticipated tax and accounting treatment of payments and benefits with respect to us and, when relevant, to the executive. Section 162(m) of the Code imposes an annual deduction limit of $1 million on the amount of compensation paid to each of the Chief Executive Officer and certain other Named Executive Officers.NEOs. Prior to the effectiveness of the Tax Cuts and Jobs Act, this deduction limit did not apply to compensation that qualified as “performance-based compensation” (as defined in Section 162(m)). The Tax Cuts and Jobs Act eliminated the qualified “performance-based compensation” exemption from Section 162(m), subject to an exception for compensation paid pursuant to a written binding contract that was in effect on November 2, 2017 and has not been modified in any material respect after such date. The Compensation Committee also approved, and may continue to approve, compensation that exceeds the $1 million limitation and is non-deductible (e.g., service-based restricted stock units, non-performance-based cash payments, onboarding grants for new hires or performance-based compensation that exceeds certain limits in our stock incentive plan).non-deductible. While accounting and tax treatment are relevant issues to consider, the Compensation Committee believes that stockholder interests are best served by not restricting flexibility in designing compensation programs, even though such programs may result in non-deductible compensation expenses for tax purposes.
REPORT OF THE COMPENSATION COMMITTEE
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management.Management. Based on our review and discussion with management,Management, we have recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form 10-K for the fiscal year ended August 3, 2019.
July 30, 2022. | James P. Heffernan, Chair
| | | | | | | |
| | Daphne J. Dufresne, Chair |
| | Eric F. Artz |
| Daphne J. Dufresne
| James L. Muehlbauer |
| Jack Stahl
| Peter A. Roy |
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EXECUTIVE COMPENSATION TABLES
Summary Compensation Table—Fiscal Years 2017-2019
2020-2022
The following table sets forth for each of the Named Executive Officers:NEOs for each fiscal year indicated: (i) the dollar value of base salary, retention bonuses and non-equity incentive compensation earned during the fiscal year indicated;earned; (ii) the aggregate grant date fair value related to all equity-based awards made to the Named Executive Officer for the fiscal year indicated;NEO; (iii) non-qualified deferred compensation earnings, during the fiscal year where applicable; (iv) all other compensation for the fiscal year indicated;compensation; and (v) the dollar value of total compensation forcompensation.
Summary Compensation Table
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | | Year | | Salary | | Bonus | | Stock Awards(1) | | Option
Awards | | Non-Equity Incentive Plan Compensation(2) | | Change in Pension Value and Nonqualified Deferred Compensation Earnings(3) | | All Other Compensation(4) | | Total |
Sandy Douglas(8) | | 2022 | | $1,029,808 | | — | | | $5,899,913 | | — | | | $1,784,744 | | — | | | $7,827 | | $8,722,292 |
| Chief Executive Officer | | 2021 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| 2020 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| John W. Howard | | 2022 | | 662,500 | | | — | | | 1,499,935 | | | — | | | 765,446 | | | — | | | 10,250 | | | 2,938,131 | |
| Chief Financial Officer | | 2021 | | 618,750 | | | — | | | 1,199,989 | | | — | | | 717,453 | | | — | | | 9,923 | | | 2,546,115 | |
| 2020 | | 567,308 | | | — | | | 849,987 | | | — | | | 794,985 | | | — | | | 9,577 | | | 2,221,857 | |
| Eric A. Dorne | | 2022 | | 778,125 | | | — | | | 1,799,968 | | | — | | | 899,038 | | | — | | | 10,075 | | | 3,487,206 | |
| Chief Operating Officer | | 2021 | | 750,000 | | | — | | | 1,499,969 | | | — | | | 869,640 | | | — | | | 7,742 | | | 3,127,351 | |
| 2020 | | 614,808 | | | — | | | 749,993 | | | — | | | 752,274 | | | — | | | 8,767 | | | 2,125,842 | |
Michael C. Stigers(8) | | 2022 | | 575,000 | | | — | | | 999,972 | | | — | | | 489,046 | | | — | | | 9,952 | | | 2,073,970 | |
| Chief Executive Officer, Cub | | 2021 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| 2020 | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Christopher P. Testa | | 2022 | | 795,000 | | | 675,000 | | (5) | 1,799,968 | | | — | | | 918,535 | | | — | | | 10,250 | | | 4,198,753 | |
| President | | 2021 | | 750,000 | | | — | | | 1,499,969 | | | — | | | 869,640 | | | — | | | 9,750 | | | 3,129,359 | |
| 2020 | | 605,769 | | | — | | | 899,988 | | | — | | | 742,774 | | | 266 | | | 10,942 | | | 2,259,739 | |
| Steven L. Spinner | | 2022 | | 267,276 | | — | | | — | | | — | | | — | | | — | | | 6,044,738 | (6) | 6,312,014 |
| Former Chief Executive Officer and Chairman | | 2021 | | 1,200,000 | | — | | | 5,099,971 | | — | | | 2,087,136 | | — | | | 16,258 | | 8,403,365 |
| 2020 | | 1,200,000 | | — | | | 5,099,987 | | — | | | 2,522,394 | | 12,612 | | 29,175 | | 8,864,168 |
| Jill E. Sutton | | 2022 | | 215,938 | | | — | | | 999,972 | | | — | | | 212,069 | | | — | | | 1,139,214 | | (7) | 2,567,193 | |
| Former Chief Legal Officer, General Counsel and Secretary | | 2021 | | 562,500 | | | — | | | 1,264,970 | | | — | | | 539,612 | | | — | | | 8,608 | | | 2,375,690 | |
| 2020 | | 498,750 | | | — | | | 697,487 | | | — | | | 524,185 | | | — | | | 8,631 | | | 1,729,053 | |
(1)Amounts shown represent the grant date fair value of awards of RSUs and PSUs at the target level as computed under ASC 718 granted during the fiscal year indicated. For PSUs, grant date fair value is calculated based on the probable outcome of the performance result (i.e., target level of performance) for each of the performance periods, excluding the effect of estimated forfeitures. These amounts do not necessarily reflect the actual amounts that were paid to, or may be realized by, the NEO for any of the fiscal years reflected. Refer to footnotes 1 and 13 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended July 30, 2022 for a discussion of the relevant assumptions used to determine the grant date fair value of these awards. The grant date fair value of PSUs awarded to Mr. Douglas in fiscal 2022, assuming stretch, or maximum, level performance, was $4,679,926 (annual grant) and $2,399,988 (inducement grant), respectively. The grant date fair value of PSUs awarded to Mr. Howard in fiscal 2022, 2021 and 2020, assuming stretch, or maximum, level performance, was $1,799,922, $899,992 and $224,993, respectively. The grant date fair value of PSUs awarded to Mr. Dorne in fiscal 2022, 2021 and 2020, assuming stretch, or maximum, level performance, was $2,159,980, $1,124,968 and $562,495, respectively. The grant date fair value of PSUs awarded to Mr. Stigers in fiscal 2022, assuming stretch, or maximum, level performance, was $1,199,948. The grant date fair value of PSUs awarded to Mr. Testa in fiscal 2022, 2021 and 2020, assuming stretch, or maximum, level performance, was $2,159,980, $1,124,968 and $674,991, respectively. The grant date fair value of PSUs awarded to Mr. Spinner in fiscal 2021 and fiscal 2020, assuming stretch, or maximum, level performance, was $3,824,978 and $3,824,990, respectively. He was not eligible for a fiscal 2022 award. The grant date fair value of PSUs awarded to Ms. Sutton in fiscal 2022, 2021 and 2020, assuming stretch, or maximum, level performance, was $1,199,948, $1,073,727 and $523,115, respectively; Ms Sutton’s amounts reflect full grant value prior to proration upon her qualifying termination in December 2021.
(2)Amounts shown for fiscal 2022 reflect payments made in fiscal 2023 under our annual cash incentive plan related to fiscal 2022 performance. Amounts shown for fiscal 2021 and 2020 reflect payments under our annual cash incentive plan for those fiscal years in fiscal 2022 and fiscal 2021, respectively. For a discussion regarding the annual cash incentive plan, see “Executive Compensation
SUMMARY COMPENSATION TABLE
Name and Principal
Position | Year | Salary | Bonus(1) | Stock
Awards(2) | Option
Awards | Non-Equity
Incentive Plan
Compensation(3) | Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings(4) | All Other
Compensation | Total |
Steven L. Spinner
Chief Executive
Officer and Chairman
| | 2019 | | $ | 1,164,462 | | $ | — | | $ | 5,099,897 | | | — | | $ | 759,556 | | $ | 13,154 | | $ | 63,793 | (5) | $ | 7,100,862 | |
| 2018 | | | 942,385 | | | — | | | 2,998,780 | | | — | | | 1,013,300 | | | 49,025 | | | 114,932 | | | 5,118,422 | |
| 2017 | | | 919,039 | | | 1,250,000 | | | 10,656,191 | | | — | | | 998,060 | | | 69,811 | | | 103,646 | | | 13,996,747 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Michael P. Zechmeister(6)
(Former) Chief Financial
Officer
| | 2019 | | | 652,559 | | | — | | | 1,350,006 | | | — | | | — | | | 3,201 | | | 11,382 | (7) | | 2,017,148 | |
| 2018 | | | 488,571 | | | — | | | 922,762 | | | — | | | 320,717 | | | 12,209 | | | 13,818 | | | 1,758,077 | |
| 2017 | | | 459,519 | | | — | | | 3,075,068 | | | — | | | 374,272 | | | 8,541 | | | 54,819 | | | 3,972,219 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Sean F. Griffin
Chief Operating Officer,
Chief Executive Officer SUPERVALU
| | 2019 | | | 869,077 | | | — | | | 2,325,009 | | | — | | | 472,452 | | | 44,937 | | | 32,507 | (8) | | 3,743,982 | |
| 2018 | | | 582,577 | | | — | | | 1,100,004 | | | — | | | 325,081 | | | 79,936 | | | 5,594 | | | 2,093,192 | |
| 2017 | | | 542,308 | | | — | | | 3,079,970 | | | — | | | 422,753 | | | 65,905 | | | 8,260 | | | 4,119,196 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Jill E. Sutton(9)
Chief Legal Officer,
General Counsel and
Secretary
| | 2019 | | | 458,942 | | | 40,000 | | | 697,674 | | | — | | | 149,696 | | | — | | | 157,277 | (10) | | 1,503,589 | |
| 2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| 2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
Christopher P. Testa(9)
President, Chief
Marketing Officer
| | 2019 | | | 458,654 | | | — | | | 899,923 | | | — | | | 149,601 | | | — | | | 11,683 | (7) | | 1,519,861 | |
| 2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| 2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
—Compensation Discussion and Analysis—Components of our Executive Compensation Program for Fiscal 2022—Performance-Based Annual Cash Incentive Compensation.”
| (1) | In October 2016, the Compensation Committee approved the payment of $1,250,000 in cash to Mr. Spinner in connection with his entering into an employment agreement with the Company. This payment was made to Mr. Spinner in recognition of the successful execution of the Company’s acquisition and “building out the store” strategies in fiscal 2016 along with Mr. Spinner’s commitment to remain with the Company through the term of his employment agreement and expanded non-competition covenants and time periods contained in his employment agreement. |
| (2) | Amounts shown represent the grant date fair value of awards of time-based vesting restricted stock units and performance units at the target level, as computed under ASC 718 granted during the fiscal year indicated. For performance units, grant date fair value is calculated based on the probable outcome of the performance result (i.e., target level of performance) for each of the performance periods, excluding the effect of estimated forfeitures. These amounts do not necessarily reflect the actual amounts that were paid to, or may be realized by, the Named Executive Officer for any of the fiscal years reflected. Refer to footnotes 1 and 13 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended August 3, 2019 for a discussion of the relevant assumptions used to determine the grant date fair value of these awards. The grant date fair value of awards of performance units to Mr. Spinner in fiscal 2019, 2018 and 2017, assuming stretch, or maximum, level performance, were $5,099,675 $2,998,780 and $13,978,644, respectively. The grant date fair value of awards of performance units to Mr. Zechmeister in fiscal 2019, 2018 and 2017, assuming stretch, or maximum, level performance, were $1,349,874, $922,763 and $1,293,750, respectively. The grant date fair value of awards of performance units to Mr. Griffin in fiscal 2019, 2018 and 2017, assuming stretch, or maximum, level performance, were $2,325,009, $1,100,003 and $3,650,023, respectively. The grant date fair value of awards of performance units to Ms. Sutton in fiscal 2019, assuming stretch, or maximum, level performance, was $697,733. The grant date fair value of awards of performance units to Mr. Testa in fiscal 2019, assuming stretch, or maximum, level performance, was $899,676. |
| (3) | Amounts shown for fiscal 2019 reflect payments made in fiscal 2020 under our annual cash incentive plan related to fiscal 2019 performance. For a discussion regarding the annual cash incentive plan, see “EXECUTIVE COMPENSATION—Compensation Discussion and Analysis—Components of our Executive Compensation Program for Fiscal 2019—Performance-Based Annual Cash Incentive Compensation.” |
| (4) | Amounts reported in this column represent earnings on deferred compensation that exceed 120% of the federal applicable long-term rate, which was 2.50%. These amounts, as well as all other earnings on deferred compensation of the Named Executive Officers in fiscal 2019, are included in the table included under Nonqualified Deferred Compensation—Fiscal 2019 under the column “Aggregate Earnings in Last Fiscal Year.” |
(3)The Deferred Compensation Plan and the Deferred Stock Plan were frozen in 2019 and paid out in fiscal 2020.
(4)Represents our contributions to 401(k) accounts to Messrs. Douglas, Howard, Dorne, Stigers and Testa.(5)Represents a retention payment under an agreement entered into on March 10, 2021 during the CEO search and transition process, and particularly in recognition of Mr. Testa’s important internal and external relationships. 43
(6)Represents Mr. Spinner’s 2x base salary and bonus multiple plus COBRA payments per his employment agreement upon retirement ($6,035,000), our contributions to a 401(k) account ($508) and earned paid time off days ($9,230) for which payment was due upon retirement.TABLE OF CONTENTS
| (5) | Represents a housing and automobile allowance ($38,922), income recognized upon the usage of shares to cover tax withholding obligations on vesting of the deferred portion of a fiscal 2017 performance award ($7,448), our contributions to a 401(k) account ($10,945), and commuting expenses ($6,478). Mr. Spinner travels extensively for business between our multiple offices. The amounts included herein reflect travel to our corporate office in Providence, Rhode Island form his office in Pennsylvania. In early fiscal 2019, we discontinued provided housing allowance to Mr. Spinner. |
| (6) | Mr. Zechmeister resigned from the Company as of August 23, 2019. |
| (7) | Represents our contributions to a 401(k) account. |
| (8) | Represents corporate housing allowance ($26,784) and our contributions to a 401(k) account ($5,723). |
| (9) | Ms. Sutton and Mr. Testa were not NEOs prior to the 2019 fiscal year and, accordingly, compensation information in prior years is not provided. |
| (10) | Represents relocation expenses ($100,000), a gross up from the preceding benefit ($45,831) and our contributions to a 401(k) account ($11,446). |
(8)Messrs. Douglas and Stigers were not NEOs in fiscal 2021 or fiscal 2020. Accordingly, compensation information for those years is not provided.Grants of Plan-Based Awards in Fiscal 2022 GRANTS OF PLAN-BASED AWARDS IN FISCAL 2019
The following table reflects the equity-based awards approved by the Compensation Committee on September 22, 2021 and granted by the Company in fiscal 2019:
| | Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1) | Estimated Future Payouts
Under Equity Incentive
Plan Awards(2) | | | | |
Name | Grant Date | Threshold
($) | Target
($) | Maximum
($) | Threshold
(#) | Target
(#) | Maximum
(#) | All
Other
Stock
Awards;
Number of
Shares of
Stock or
Units
(#)(3) | All Other
Option
Awards;
Number of
Securities
Underlying
Options
(#) | Exercise
Price of
Option
Awards
($/share) | Grant Date
Fair Value
of Stock and
Option
Awards
($)(4) |
Steven L. Spinner | | 9/25/2018 | | | — | | | — | | | — | | | 17,259 | | | 49,310 | | | 98,620 | | | — | | | — | | | — | | | 1,655,337 | |
| 12/11/2018 | | | — | | | — | | | — | | | 23,575 | | | 67,357 | | | 134,714 | | | — | | | — | | | — | | | 894,501 | |
| 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 53,630 | | | — | | | — | | | 1,655,558 | |
| 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 67,357 | | | — | | | — | | | 894,501 | |
| N/A | | | 611,342 | | | 1,746,692 | | | 3,493,384 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Michael P. Zechmeister | | 9/25/2018 | | | — | | | — | | | — | | | 5,145 | | | 14,700 | | | 29,400 | | | — | | | — | | | — | | | 493,479 | |
| 12/11/2018 | | | — | | | — | | | — | | | 4,782 | | | 13,664 | | | 27,328 | | | — | | | — | | | — | | | 181,458 | |
| 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 15,990 | | | — | | | — | | | 493,611 | |
| 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 13,664 | | | — | | | — | | | 181,458 | |
| N/A | | | 171,297 | | | 489,419 | | | 978,838 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Sean F. Griffin | | 12/11/2018 | | | — | | | — | | | — | | | 30,638 | | | 87,538 | | | 175,076 | | | — | | | — | | | — | | | 1,162,505 | |
| 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 87,538 | | | — | | | — | | | 1,162,505 | |
| N/A | | | 380,221 | | | 1,086,346 | | | 2,172,692 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Jill E. Sutton | | 9/25/2018 | | | — | | | — | | | — | | | 3,129 | | | 8,940 | | | 17,880 | | | — | | | — | | | — | | | 300,116 | |
| 12/11/2018 | | | — | | | — | | | — | | | 1,285 | | | 3,671 | | | 7,342 | | | — | | | — | | | — | | | 48,751 | |
| 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,720 | | | — | | | — | | | 300,056 | |
| 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,671 | | | — | | | — | | | 48,751 | |
| N/A | | | 120,472 | | | 344,207 | | | 688,414 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Christopher P. Testa | | 9/25/2018 | | | — | | | — | | | — | | | 4,690 | | | 13,400 | | | 26,800 | | | — | | | — | | | — | | | 449,838 | |
| 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 14,580 | | | — | | | — | | | 450,085 | |
| N/A | | | 120,397 | | | 343,991 | | | 687,982 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | | | | |
| Name | Grant Date | Threshold ($) | Target
($) | Maximum
($) | Threshold
(#) | Target
(#) | | Maximum
(#) | | All Other Stock Awards (#)(3) | | All Other Option Awards (#) | Exercise Price of Option Awards ($/sh) | Grant Date Fair Value of Stock and Option Awards ($)(4) |
| Sandy Douglas | 10/12/2021 | — | | — | | — | | 25,280 | | 50,561 | | | 101,122 | | | — | | | — | | — | | 2,339,963 | |
| 10/12/2021 | — | | — | | — | | 12,964 | | 25,929 | | (5) | 51,858 | | | — | | | — | | — | | 1,199,994 | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | 33,707 | | | — | | — | | 1,559,960 | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | 17,286 | | (5) | — | | — | | 799,996 | |
| N/A | 772,356 | | 1,544,712 | | 2,317,067 | | — | | — | | | — | | | — | | | — | | — | | — | |
| John W. Howard | 10/12/2021 | — | | — | | — | | 9,723 | | 19,446 | | | 38,892 | | | — | | | — | | — | | 899,961 | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | 12,964 | | | — | | — | | 599,974 | |
| N/A | 331,250 | | 662,500 | | 993,750 | | — | | — | | | — | | | — | | | — | | — | | — | |
| Eric A. Dorne | 10/12/2021 | — | | — | | — | | 11,668 | | 23,336 | | | 46,672 | | | — | | | — | | — | | 1,079,990 | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | 15,557 | | | — | | — | | 719,978 | |
| N/A | 389,062 | | 778,125 | | 1,167,187 | | — | | — | | | — | | | — | | | — | | — | | — | |
| Michael C. Stigers | 10/12/2021 | — | | — | | — | | 6,482 | | 12,964 | | | 25,928 | | | — | | | — | | — | | 599,974 | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | 8,643 | | | — | | — | | 399,998 | |
| N/A | 215,625 | | 431,250 | | 646,875 | | — | | — | | | — | | | — | | | — | | — | | — | |
| Christopher P. Testa | 10/12/2021 | — | | — | | — | | 11,668 | | 23,336 | | | 46,672 | | | — | | | — | | — | | 1,079,990 | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | 15,557 | | | — | | — | | 719,978 | |
| N/A | 397,500 | | 795,000 | | 1,192,500 | | — | | — | | | — | | | — | | | — | | — | | — | |
Steven L. Spinner (6) | 10/12/2021 | — | | — | | — | | — | | — | | | — | | | — | | | — | | — | | — | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | — | | | — | | — | | — | |
| N/A | — | | — | | — | | — | | — | | | — | | | — | | | — | | — | | — | |
| Jill E. Sutton | 10/12/2021 | — | | — | | — | | 6,482 | | 12,964 | | | 25,928 | | | — | | | — | | — | | 599,974 | |
| 10/12/2021 | — | | — | | — | | — | | — | | | — | | | 8,643 | | | — | | — | | 399,998 | |
| N/A | 91,774 | | 183,548 | | 275,322 | | — | | — | | | — | | | — | | | — | | — | | — | |
(1)This column shows separately the possible payouts to the NEOs under our annual cash incentive plan for the fiscal year ended July 30, 2022 for “threshold”, “target” and “maximum” performance. Actual amounts paid for these incentives are reflected in the table included under “Summary Compensation Table—Fiscal Years 2020-2022” under the column “Non-Equity Incentive Plan Compensation.”
(2)These awards were granted on October 12, 2021 under the Amended and Restated 2020 Equity Incentive Plan and represent the number of PSUs that may be earned over a three-year performance period at “threshold,” “target” and “maximum” levels of performance. Vesting of these PSUs is linked to our attaining certain levels of adjusted EPS growth for each year during fiscal 2022 through 2024, and adjusted ROIC for fiscal 2024. In addition, the number of PSUs earned may be increased or decreased by up to 10% based on our Relative TSR for the three-year performance period. At the conclusion of the three-year performance period, the PSUs may vest based on our results of these financial metrics. The PSUs earned by each NEO will be settled in the same number of shares. These PSUsare described in more detail in “Executive Compensation—Compensation Discussion and Analysis—
| (1) | This column shows separately the possible payouts to the Named Executive Officers under our annual cash incentive plan for the fiscal year ended August 3, 2019 for “threshold”, “target” and “maximum” performance. Actual amounts paid for these incentives are reflected in the table included under “Summary Compensation Table—Fiscal Years 2017-2019” under the column “Non-Equity Incentive Plan Compensation.” |
| (2) | These awards that were granted on September 25, 2018 and December 11, 2018 under the 2012 stock incentive plan represent the number of performance units that may be earned with a two-year performance period at “threshold,” “target” and “maximum” levels of performance. Vesting of these performance units is linked to our attaining certain levels of adjusted ROIC and adjusted EBITDA for fiscal 2020. In addition, the amount of performance units that may be earned may be increased or decreased by the Compensation Committee by up to 10% based on our Relative TSR for the two-year performance period. At the conclusion of the two-year performance period, the performance units may vest based on our adjusted ROIC and adjusted EBITDA for fiscal 2020. The performance units earned by the Named Executive Officer will be settled in a like number of shares. These performance units are described in more detail in “EXECUTIVE COMPENSATION—Compensation Discussion and Analysis—Components of Our Executive Compensation Program for Fiscal 2019—Long-term Equity-Based Incentive Program—Performance-Based Vesting Restricted Stock Units.” |
Components of Our Executive Compensation Program for Fiscal 2022—Long-term Equity-Based Incentive Program—2022 Grant of Time- and Performance-Based Vesting Restricted Stock Units.”
| (3) | Represents time-based vesting restricted stock units granted in fiscal 2019 to the Named Executive Officers. The December 11, 2018 grant is the incremental value based on any pay or target long-term incentive award changes related to the Supervalu acquisition. The RSUs will vest in four equal installments beginning on September 25, 2019 for both awards. |
(3)Represents RSUs granted in fiscal 2022 to each of the NEOs. The RSUs vest in three equal annual installments beginning on October 12, 2022.
| (4) | For grants during fiscal 2019, the amount shown with respect to each award represents the grant date fair value of the award calculated using the assumptions described in footnotes (2) and (3) of the table included under “Summary Compensation Table—Fiscal Years 2017-2019.” The grant date fair value of performance units was calculated based on the probable outcome of the performance result (i.e., target level of performance) for each of the performance periods, excluding the effect of estimated forfeitures. |
(4)For grants during fiscal 2022, the amount shown with respect to each award represents the grant date fair value of the award calculated using the assumptions described in footnote (1) of the table included under “Summary Compensation Table—Fiscal Years 2020-2022.” The grant date fair value of PSUs was calculated based on the probable outcome of the performance result (i.e., target level of performance) for each of the performance periods, excluding the effect of estimated forfeitures.
(5)Represents an inducement award granted to Mr. Douglas upon hire consisting of 60% PSUs and 40% RSUs. At the conclusion of the three-year performance period, the PSUs may vest based on our results of the financial metrics described above in footnote 2. These PSUs are described in more detail in “Executive Compensation—Compensation Discussion and Analysis—Components of Our Executive Compensation Program for Fiscal 2022—Long-term Equity-Based Incentive Program—2022 Grant of Time- and Performance-Based Vesting Restricted Stock Units.” The RSUs vest in three equal annual installments beginning on October 12, 2022.
(6)Mr. Spinner was not eligible for a payout under our annual cash incentive plan or long-term incentive grants due to his retirement in early fiscal 2022
TABLE OF CONTENTS
Outstanding Equity Awards at Fiscal 20192022 Year-End
The following table summarizes information with respect to holdings of stock options and stock awards by the
Named Executive OfficersNEOs as of
August 3, 2019.July 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.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
| | Option Awards | Stock Awards |
Name | Grant
Date | Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable | Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable | Option
Exercise
Price ($) | Option
Expiration
Date | Number of
Shares or
Units
of Stock
That Have Not
Vested (#)(1) | Market Value
of Shares or
Units
of Stock
That Have Not
Vested ($)(2) | Equity
Incentive
Plan Awards:
Number of
Unearned
Shares, Units
or Other Rights
That Have Not
Vested (#)(3) | Equity
Incentive
Plan Awards:
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested ($)(4) |
Steven L. Spinner | | 9/11/2009 | | | 12,311 | | | — | | | 24.30 | | | 9/11/2019 | | | — | | | — | | | — | | | — | |
| | 9/10/2010 | | | 17,760 | | | — | | | 33.90 | | | 9/10/2020 | | | — | | | — | | | — | | | — | |
| | 9/12/2011 | | | 17,150 | | | — | | | 37.82 | | | 9/12/2021 | | | — | | | — | | | — | | | — | |
| | 9/13/2012 | | | 23,160 | | | — | | | 58.98 | | | 9/13/2022 | | | — | | | — | | | — | | | — | |
| | 9/16/2013 | | | 13,130 | | | — | | | 67.48 | | | 9/16/2023 | | | — | | | — | | | — | | | — | |
| | 9/19/2014 | | | 14,770 | | | — | | | 64.55 | | | 9/19/2024 | | | — | | | — | | | — | | | — | |
| | 9/17/2015 | | | — | | | — | | | — | | | — | | | 6,980 | | | 58,772 | | | — | | | — | |
| | 9/15/2016 | | | — | | | — | | | — | | | — | | | 9,240 | | | 77,801 | | | — | | | — | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | 15,090 | | | 127,058 | | | — | | | — | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | 53,630 | | | 451,565 | | | — | | | — | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | 67,357 | | | 567,146 | | | — | | | — | |
| | 10/27/2016 | | | — | | | — | | | — | | | — | | | — | | | — | | | 60,000 | | | 505,200 | |
| | 10/27/2016 | | | — | | | — | | | — | | | — | | | — | | | — | | | 25,000 | | | 210,500 | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | 9,433 | | | 79,422 | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 17,259 | | | 145,317 | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 23,575 | | | 198,501 | |
| | Totals: | | | 98,281 | | | — | | | — | | | — | | | 152,297 | | | 1,282,341 | | | 135,266 | | | 1,138,939 | |
Michael P. Zechmeister | | 9/17/2015 | | | 24,773 | | | 8,257 | | | 51.52 | | | 9/17/2025 | | | — | | | — | | | — | | | — | |
| | 9/17/2015 | | | — | | | — | | | — | | | — | | | 7,352 | | | 61,904 | | | — | | | — | |
| | 9/15/2016 | | | — | | | — | | | — | | | — | | | 50,000 | | | 421,000 | | | — | | | — | |
| | 9/15/2016 | | | — | | | — | | | — | | | — | | | 5,690 | | | 47,910 | | | — | | | — | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | 8,707 | | | 73,313 | | | — | | | — | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | 15,990 | | | 134,636 | | | — | | | — | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | 13,664 | | | 115,051 | | | — | | | — | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | 2,903 | | | 24,439 | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 5,145 | | | 43,321 | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,782 | | | 40,268 | |
| | Totals: | | | 24,773 | | | 8,257 | | | — | | | — | | | 101,403 | | | 853,813 | | | 12,830 | | | 108,028 | |
Sean F. Griffin | | 9/12/2011 | | | 1,760 | | | — | | | 37.82 | | | 9/12/2021 | | | — | | | — | | | — | | | — | |
| | 9/13/2012 | | | 11,750 | | | — | | | 58.98 | | | 9/13/2022 | | | — | | | — | | | — | | | — | |
| | 9/16/2013 | | | 6,530 | | | — | | | 67.48 | | | 9/16/2023 | | | — | | | — | | | — | | | — | |
| | 9/19/2014 | | | 6,380 | | | — | | | 64.55 | | | 9/19/2024 | | | — | | | — | | | — | | | — | |
| | 9/17/2015 | | | — | | | — | | | — | | | — | | | 3,738 | | | 31,474 | | | — | | | — | |
| | 9/15/2016 | | | — | | | — | | | — | | | — | | | 6,320 | | | 53,214 | | | — | | | — | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | 10,380 | | | 87,400 | | | — | | | — | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | 87,538 | | | 737,070 | | | — | | | — | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,460 | | | 29,133 | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 30,368 | | | 257,974 | |
— | | Totals: | | | 26,420 | | | — | | | — | | | — | | | 107,976 | | | 909,158 | | | 34,098 | | | 287,108 | |
Jill E. Sutton | | 5/14/2018 | | | — | | | — | | | — | | | — | | | 13,717 | | | 115,497 | | | — | | | — | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | 9,720 | | | 81,842 | | | — | | | — | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | 3,671 | | | 30,910 | | | — | | | — | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,129 | | | 26,346 | |
| | 12/11/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,285 | | | 10,818 | |
| | Totals: | | | — | | | — | | | — | | | — | | | 27,108 | | | 228,249 | | | 4,414 | | | 37,165 | |
Christopher P. Testa | | 9/10/2010 | | | 4,310 | | | — | | | 33.90 | | | 9/10/2020 | | | — | | | — | | | — | | | — | |
| | 9/12/2011 | | | 4,370 | | | — | | | 37.82 | | | 9/12/2021 | | | — | | | — | | | — | | | — | |
| | 9/13/2012 | | | 4,100 | | | — | | | 58.98 | | | 9/13/2022 | | | — | | | — | | | — | | | — | |
| | 9/16/2013 | | | 3,510 | | | — | | | 67.48 | | | 9/16/2023 | | | — | | | — | | | — | | | — | |
| | 9/19/2014 | | | 3,800 | | | — | | | 64.55 | | | 9/19/2024 | | | — | | | — | | | — | | | — | |
| | 9/17/2015 | | | — | | | — | | | — | | | — | | | 900 | | | 7,578 | | | — | | | — | |
| | 9/15/2016 | | | — | | | — | | | — | | | — | | | 27,700 | | | 233,234 | | | — | | | — | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | 4,035 | | | 33,975 | | | — | | | — | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | 14,580 | | | 122,764 | | | — | | | — | |
| | 9/15/2017 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,345 | | | 11,325 | |
| | 9/25/2018 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,690 | | | 39,490 | |
| | Totals: | | | 20,090 | | | — | | | — | | | — | | | 47,215 | | | 397,550 | | | 6,035 | | | 50,815 | |
| (1) | On September 15, 2016, Mr. Zechmeister was granted four-year cliff vest time-based vesting restricted stock units of 50,000 units. All other awards vested or will vest in four equal annual installments beginning on the first anniversary of the date of grant. Mr. Zechmeister forfeited all his unvested awards upon his resignation in August 2019. |
Outstanding Equity Awards at Fiscal Year-End | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Option Awards | | Stock Awards |
| Name | | Grant Date | | Number of Securities Underlying Unexercised Options
(#)
Exercisable | | Number of Securities Underlying Unexercised Options
(#)
Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) |
| Sandy Douglas | | 10/12/2021 | | — | | | — | | | — | | | — | | | 33,707 | | | 1,432,885 | | | — | | | — | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | 17,286 | | | 734,828 | | | — | | | — | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | 101,122 | | | 4,298,696 | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | 51,858 | | | 2,204,484 | |
| Totals: | | — | | | — | | | — | | | — | | | 50,993 | | | 2,167,713 | | | 152,980 | | | 6,503,180 | |
| John W. Howard | | 10/4/2019 | | — | | | — | | | — | | | — | | | 73,825 | | (5) | 3,138,301 | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | 6,274 | | | 266,708 | | | — | | | — | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | 23,028 | | | 978,920 | | | — | | | — | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | 12,964 | | | 551,100 | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 18,820 | | | 800,038 | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 51,813 | | | 2,202,571 | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | 38,892 | | | 1,653,299 | |
| Totals: | | — | | | — | | | — | | | — | | | 116,091 | | | 4,935,029 | | | 109,525 | | | 4,655,908 | |
| Eric A. Dorne | | 9/13/2012 | | 7,700 | | | — | | | 58.98 | | | 9/13/2022 | | — | | | — | | | — | | | — | |
| 9/16/2013 | | 4,280 | | | — | | | 67.48 | | | 9/16/2023 | | — | | | — | | | — | | | — | |
| 9/19/2014 | | 4,630 | | | — | | | 64.55 | | | 9/19/2024 | | — | | | — | | | — | | | — | |
| 9/25/2018 | | — | | | — | | | — | | | — | | | 2,582 | | | 109,761 | | | — | | | — | |
| 12/11/2018 | | — | | | — | | | — | | | — | | | 1,059 | | | 45,018 | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | 15,684 | | | 666,727 | | | — | | | — | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | 28,785 | | | 1,223,650 | | | — | | | — | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | 15,557 | | | 661,328 | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 47,051 | | | 2,000,138 | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 64,765 | | | 2,753,160 | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | 46,672 | | | 1,984,027 | |
| Totals: | | 16,610 | | | — | | | — | | | — | | | 63,667 | | | 2,706,484 | | | 158,488 | | | 6,737,325 | |
| Michael C. Stigers | | 5/16/2014 | | 15,377 | | | — | | | 48.58 | | | 5/16/2024 | | — | | | — | | | — | | | — | |
| 4/30/2015 | | 8,050 | | | — | | | 56.94 | | | 4/30/2025 | | — | | | — | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | 31,253 | | | 1,328,565 | | | — | | | — | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | 16,552 | | | 703,626 | | | — | | | — | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | 8,643 | | | 367,414 | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 54,109 | | | 2,300,174 | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 37,240 | | | 1,583,072 | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | 25,928 | | | 1,102,199 | |
| Totals: | | 23,427 | | | — | | | — | | | — | | | 56,448 | | | 2,399,605 | | | 117,277 | | | 4,985,445 | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | |
| | | | Option Awards | | Stock Awards |
| Name | | Grant Date | | Number of Securities Underlying Unexercised Options
(#)
Exercisable | | Number of Securities Underlying Unexercised Options
(#)
Unexercisable | | Option Exercise Price ($) | | Option Expiration Date | | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | Market Value of Shares or Units of Stock That Have Not Vested ($)(2) | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(4) |
| Christopher P. Testa | | 9/13/2012 | | 4,100 | | | — | | | 58.98 | | | 9/13/2022 | | — | | | — | | | — | | | — | |
| 9/16/2013 | | 3,510 | | | — | | | 67.48 | | | 9/16/2023 | | — | | | — | | | — | | | — | |
| 9/19/2014 | | 3,800 | | | — | | | 64.55 | | | 9/19/2024 | | — | | | — | | | — | | | — | |
| 9/25/2018 | | — | | | — | | | — | | | — | | | 3,645 | | | 154,949 | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | 18,821 | | | 800,081 | | | — | | | — | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | 28,785 | | | 1,223,650 | | | — | | | — | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | 15,557 | | | 661,328 | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 56,461 | | | 2,400,157 | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 64,765 | | | 2,753,160 | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | 46,672 | | | 1,984,027 | |
| Totals: | | 11,410 | | | — | | | — | | | — | | | 66,808 | | | 2,840,008 | | | 167,898 | | | 7,137,344 | |
| Steven L. Spinner | | 9/13/2012 | | 23,160 | | | — | | | 58.98 | | | 9/13/2022 | | — | | | — | | | — | | | — | |
| 9/16/2013 | | 13,130 | | | — | | | 67.48 | | | 9/16/2023 | | — | | | — | | | — | | | — | |
| 9/19/2014 | | 14,770 | | | — | | | 64.55 | | | 9/19/2024 | | — | | | — | | | — | | | — | |
| 12/19/2019 | | — | | | — | | | | | | | — | | | — | | | 319,949 | | | 13,601,032 | |
| 10/12/2020 | | — | | | — | | | | | | | — | | | — | | | 220,206 | | | 9,360,957 | |
| Totals: | | 51,060 | | | — | | | — | | | — | | | — | | | — | | | 540,155 | | | 22,961,989 | |
| Jill E. Sutton | | 12/19/2019 | | — | | | — | | | — | | | — | | | — | | | — | | | 34,452 | | | 1,464,555 | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 13,060 | | | 555,181 | |
| 10/12/2020 | | — | | | — | | | — | | | — | | | — | | | — | | | 14,985 | | | 637,012 | |
| 10/12/2021 | | — | | | — | | | — | | | — | | | — | | | — | | | 3,092 | | | 131,441 | |
| Totals: | | — | | | — | | | — | | | — | | | — | | | — | | | 65,589 | | | 2,788,189 | |
(1)All awards granted through 2018 vest in four equal annual installments beginning on the first anniversary of the date of grant. All awards granted in 2019 or later vest in three equal annual installments beginning on the date set forth in the applicable award agreement.
(2)Market value reflects the number of unvested RSUs multiplied by $42.51 per share, the closing price of our common stock on the NYSE on July 29, 2022, the last business day of fiscal year 2022.
(3)Represents the number of shares that may be issued pursuant to PSUs at the applicable level of performance. The PSUs granted in 2019 are shown at target performance, while the PSUs granted in 2020 & 2021 are shown at maximum performance.
(4)Market value reflects the number of shares that may be issued pursuant to the applicable level of performance, multiplied by $42.51 per share, the closing price of our common stock on the NYSE on July 29, 2022, the last business day of fiscal year 2022.
(5)Mr. Howard’s sign-on grant awarded on October 4, 2019 cliff vested on the third anniversary of the date of grant.
TABLE OF CONTENTS
| (2) | Market value reflects the number of unvested restricted stock units multiplied by $8.42 per share, the closing price of our common stock on the NYSE on August 2, 2019, the last business day of fiscal 2019. |
| (3) | Represents the number of shares that may be issued pursuant to performance units at the applicable level of performance utilizing the closing price of our common stock on the NYSE on August 2, 2019, the last business day of fiscal 2019. Mr. Spinner’s first award granted in 2016 is shown at maximum performance while the second award is shown at target based on the probable outcome of performance at the end of the fiscal year. Messrs. Spinner, Zechmeister, Griffin and Testa’s awards granted in 2017 and 2018 are shown at threshold performance. Ms. Sutton’s awards granted in 2018 are shown at threshold performance. |
| (4) | Market value reflects the number of shares that may be issued pursuant to the applicable level of performance, multiplied by $8.42 per share, the closing price of our common stock on the NYSE on August 2, 2019, the last business day of fiscal 2019. |
Option Exercises and Stock Vested—Fiscal 2019
2022
The following table summarizes information for the
Named Executive OfficersNEOs concerning exercise of stock options and vesting of RSUs and PSUs during the fiscal year ended
August 2, 2019,July 30, 2022, including
the (i)
the number of shares of stock underlying options exercised in fiscal
2019;2022; (ii)
the aggregate dollar value realized upon such exercises of stock options utilizing the actual sales price for same-day sale transactions and the closing price for any exercise and hold transactions; (iii)
the number of shares of stock received from the vesting of RSUs during fiscal
20192022 and
any PSUs earned based on fiscal
20192022 performance; and (iv)
the aggregate dollar value realized upon the vesting of such RSUs and PSUs.
OPTION EXERCISES AND STOCK VESTED
| Option Awards | Stock Awards |
Name | Number of Shares
Acquired on
Exercise (#) | Value
Realized on
Exercise ($) | Number of Shares
Acquired on
Vesting (#)(1) | Value
Realized on
Vesting ($)(2) |
Steven L. Spinner | — | — | | 77,879 | (3) | | 1,585,653 | (3) |
Michael P. Zechmeister | — | — | | 13,101 | | | 444,056 | |
Sean F. Griffin | — | — | | 5,103 | (4) | | 154,773 | (4) |
Jill E. Sutton | — | — | | 4,573 | | | 52,727 | |
Christopher P. Testa | — | — | | 4,636 | (5) | | 149,357 | (5) |
Option Exercises and Stock Vested
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Option Awards | | Stock Awards | |
| Name | | Number of Shares Acquired on Exercise (#) | | Value Realized on Exercise ($) | | Number of Shares Acquired on Vesting (#)(1) | | Value Realized on Vesting ($)(2) | |
| Sandy Douglas | | — | | | — | | | — | | | — | | |
| John Howard | | — | | | — | | | 36,418 | | (4) | 1,489,015 | | (4) |
| Eric A. Dorne | | — | | | — | | | 82,108 | | (5) | 3,258,496 | | (5) |
| Michael C. Stigers | | 35,157 | | | 448,765 | | (3) | 93,094 | | (6) | 5,403,361 | | (6) |
| Christopher P. Testa | | — | | | — | | | 94,098 | | (7) | 3,719,460 | | (7) |
| Steven L. Spinner | | — | | | — | | | 829,671 | | (8) | 32,575,723 | | (8) |
| Jill E. Sutton | | — | | | — | | | 89,691 | | (9) | 3,828,589 | | (9) |
(1)In connection with the vesting of RSUs and PSUs, our NEOs surrendered shares of stock to cover withholding taxes, which reduced the actual value received upon vesting. The number of shares surrendered but included in this table is as follows: Mr. Howard—14,855; Mr. Dorne—31,902; Mr. Stigers—42,466; Mr. Testa—40,149; Mr. Spinner—377,551; and Ms. Sutton—39,264.
(2)Represents the product of the number of shares or shares underlying units vested and the closing price of our common stock on the NYSE on the vesting date.
(3)Represents the cash proceeds received by Mr. Stigers as a result of the exercise of 35,157 vested stock options.
(4)Mr. Howard was awarded PSUs during fiscal 2020, of which 18,631 PSUs were earned for the three-year performance period ended July 30, 2022 and the like number of shares of our common stock issued in settlement of these units in fiscal 2023 are included herein.
(5)Mr. Dorne was awarded PSUs during fiscal 2020, of which 46,580 PSUs were earned for the three-year performance period ended July 30, 2022 and the like number of shares of our common stock issued in settlement of these units in fiscal 2023 are included herein.
(6)Mr. Stigers was awarded PSUs during fiscal 2020, of which 53,567 PSUs were earned for the three-year performance period ended July 30, 2022 and the like number of shares of our common stock issued in settlement of these units in fiscal 2023 are included herein. Mr. Stigers had a converted cash-settled award that settled at a fixed $32.50 per share value from the Supervalu acquisition. There were no shares received as a result of the vesting but the value is included herein.
(7)Mr. Testa was awarded PSUs during fiscal 2020, of which 55,896 PSUs were earned for the three-year performance period ended July 30, 2022 and the like number of shares of our common stock issued in settlement of these units in fiscal 2023 are included herein.
(8)Mr. Spinner was awarded PSUs during fiscal 2020, of which 316,749 PSUs were earned for the three-year performance period ended July 30, 2022 and the like number of shares of our common stock issued in settlement of these units in fiscal 2023 are included herein. Also includes Mr. Spinner's distribution of deferred shares for PSUs that were deferred until his retirement.
(9)Ms. Sutton was awarded PSUs during fiscal 2020, of which 34,107 prorated PSUs were earned for the three-year performance period ended July 30, 2022 and the like number of shares of our common stock issued in settlement of these units in fiscal 2023 are included herein
| (1) | In connection with the vesting of RSUs and PSUs, our Named Executive Officers surrendered shares of stock to cover withholding taxes, which reduced the actual value received upon vesting. The number of shares surrendered but included in this table was: Mr. Spinner—35,314; Mr. Zechmeister—3,976; Mr. Griffin—1,720; Ms. Sutton—1,368; and Mr. Testa—1,979. |
| (2) | Represents the product of the number of shares or shares underlying units vested and the closing price of our common stock on the NASDAQ Stock Market or NYSE, as applicable, on the vesting date. |
| (3) | Mr. Spinner was awarded performance units during fiscal 2017, of which 1,799 performance units vested for the two-year performance period ended August 3, 2019, 26,673 shares vested for the three-year performance period ended August 3, 2019, and 12,122 shares vested for the three-year performance period ended August 3, 2019 and the like number of shares of our common stock issued in settlement of these units are included herein. Amounts exclude 26,672 shares ($217,910) and 12,121 shares ($99,029) of performance units which are to be distributed at a future date based on the terms of his award agreement, which shares to be issued in settlement of those units are also not included herein. |
| (4) | Mr. Griffin was awarded performance units during fiscal 2017, of which 659 performance units vested for the two-year performance period ended August 3, 2019 and the like number of shares of our common stock issued in settlement of these units are included herein. Additionally, Mr. Griffin has elected to defer a percentage of the shares issued upon vesting of his September 19, 2014, September 17, 2015, September 15, 2016 and September 15, 2017 RSU awards. The value herein excludes the resulting deferral of 7,235 shares ($244,338). For each portion of these stock awards that vests but is deferred, the proportionate number of shares are allocated to Mr. Griffin’s balance in the Deferred Stock Plan. See the table under “Nonqualified Deferred Compensation—Fiscal 2019.” |
| (5) | Mr. Testa was awarded performance units during fiscal 2017, of which 256 performance shares vested for the two-year performance period ended August 3, 2019 and the like number of shares of our common stock issued in settlement of these units are included herein. |
Pension Benefits
We do not maintain any defined benefit pension
plans. Supervalu previously maintained certain defined benefit pension plans. Those plans
were frozen prior to our acquisition of Supervalu and none of our executive officers participated in such plans.for NEOs.
Nonqualified Deferred Compensation—Fiscal
20192022
Until February 2019, our executive officers and directors were eligible to participate in
the Deferred Compensation Plana deferred compensation plan and
the Deferred Stock Plan. The Deferral Plansa deferred stock plan. These deferral plans were terminated in February 2019
and amounts therein
will bewere distributed in
earlyMarch 2020.
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The Deferral Plans were established to provide participants with the opportunity to defer the receipt of all or a portion of their compensation. The purpose of the Deferral Plans was to allow executives and non-employee directors to defer compensation to a non-qualified retirement plan that, in the case of our employees, were in amounts greater than the amount permitted to be deferred under our 401(k) Plan. Under the Deferral Plans, only the payment of the compensation earned by the participant was deferred and Therefore, there is no deferral of the expense in our financial statements relatednothing to the participants’ earnings. We record the related compensation expense in the year in which the compensation is earned by the participants.
Under the Deferred Compensation Plan, participants could elect to defer a minimum of $0 and a maximum of 90% of base salary and 100% of bonuses, commissions, and effective January 1, 2007, share unit awards, earned by the participantsreport for the calendar year. Under the Deferred Compensation Plan, participants could elect to defer between 0% and 100% of their restricted stock awards. From January 1, 2009 to December 31, 2010, participants’ cash-derived deferrals under the Deferred Compensation Plan earned interest at the 5-year certificate of deposit annual yield taken from the Wall Street Journal Market Data Center (as captured on the first and last business date of each calendar quarter and averaged) plus 3% credited and compounded quarterly. Effective January 1, 2011, participants may elect to allocate their cash-derived deferrals to certain measurement funds which track the performance of actual mutual funds and are treated as deemed investments. The earnings that would have been received if such actual investment had been made are credited to the participants’ accounts in proportion to their hypothetical investments. The value of equity-based awards deferred under the Deferred Compensation and Deferred Stock Plans are based upon the performance of our common stock.
A participant in our Deferral Plans who terminates his or her employment with us due to retirement will be paid his or her Deferral Plan balances in a lump sum or in installments based on the participant’s elections over a pre-determined period of time. A participant who terminates his or her employment with us due to disability (as defined in each of the Deferral Plans) will be paid his or her balances in a lump sum within 60 days after such participant is determined to have become disabled. Beneficiaries of a participant who dies before a complete payout of his or her Deferral Plan balances will receive a lump sum payment within 60 days after the Compensation Committee is provided with proof of death of such participant. A participant who terminates his or her employment with us for any other reason will receive payment of his or her Deferral Plan balances in a lump sum, within 60 days after either (a) the six-month anniversary of the date on which such participant’s employment with us terminates, if such participant is a “key employee” under the Deferral Plans or (b) the date on which such participant’s employment with us terminates, for all other participants.
The following table summarizes information regarding the non-qualified deferred compensation of the Named Executive Officers in fiscal 2019, including deferrals of salaries, performance-based cash incentive compensation, and restricted stock unit compensation earned.
NONQUALIFIED DEFERRED COMPENSATION
Name | Type of Deferral | Executive
Contributions in
Last Fiscal
Year(1) | Registrant
Contributions in
Last Fiscal
Year | Aggregate
Earnings in
Last Fiscal
Year(2)(3) | Aggregate
Withdrawals/
Distributions | Aggregate
Balance at
Last Fiscal
Year End(4) |
Steven L. Spinner | Cash Compensation | $ | — | | $ | — | | $ | 57,902 | | $ | — | | $ | 1,520,575 | |
| Deferred Stock | | — | | | — | | | (195,731 | ) | | — | | | 68,413 | |
Michael P. Zechmeister | Cash Compensation | | — | | | — | | | 8,400 | | | — | | | 177,495 | |
| Deferred Stock | | — | | | — | | | — | | | — | | | — | |
Sean F. Griffin | Cash Compensation | | 125,388 | | | — | | | 89,071 | | | — | | | 1,578,349 | |
| Deferred Stock | | 244,338 | | | — | | | (431,859 | ) | | — | | | 147,755 | |
Jill E. Sutton | Cash Compensation | | — | | | — | | | — | | | — | | | — | |
| Deferred Stock | | — | | | — | | | — | | | — | | | — | |
Christopher P. Testa | Cash Compensation | | 94 | | | — | | | 492 | | | — | | | 17,743 | |
| Deferred Stock | | — | | | — | | | — | | | — | | | — | |
| (1) | Amounts reported as “Deferred Compensation” in this column are reported as compensation in the “Salary” and “Non-Equity Incentive Compensation” columns for fiscal 2019 of the table under “Summary Compensation Table—Fiscal Years 2017-2019.” |
| (2) | Participants’ non-equity deferrals under the Deferred Compensation Plan earned investment returns based on the performance of certain measurement funds as allocated by the participants. Any amounts reflected in the “Aggregate Earnings in Last Fiscal Year” column for non-equity awards that had preferential earnings (in excess of 120% of the August 2019 “compounded annually” federal long-term rate) have been reported as compensation in the “Nonqualified Deferred Compensation Earnings” column in the table under “Summary Compensation Table—Fiscal Years 2017-2019.” |
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| (3) | The value of equity-based awards deferred under the Deferral Plans is based upon the performance of our common stock. For restricted stock and restricted stock units, earnings or losses are calculated as follows: (i) number of vested shares deferred in fiscal 2019 valued at the change in the closing stock price from the date of vesting to the end of fiscal 2019, plus (ii) the number of vested shares that were deferred prior to fiscal 2019, valued by the change in the closing stock price on the first day of fiscal 2019 to the last day of fiscal 2019. None of the amounts reflected in the “Aggregate Earnings in Last Fiscal Year” column for equity awards have been reported as compensation in the table under Summary Compensation Table—Fiscal Years 2017-2019 as a result of the fact that above-market or preferential earnings are not possible in connection with these items. |
| (4) | This column includes the following amounts that previously have been reported as non-equity compensation in fiscal 2018 and fiscal 2017 in the table under “Summary Compensation Table—Fiscal Years 2017-2019” and summary compensation tables for prior fiscal years, combined: Mr. Spinner—$170,912; Mr. Zechmeister—$116,251 and Mr. Griffin—$636,750. |
CEO Pay Ratio
SEC rules require us to disclose the total annual compensation of
Steven L. Spinner,Sandy Douglas, our CEO
for fiscal 2022, to the median of the total annual compensation of all employees other than Mr.
Spinner,Douglas, as well as the ratio of such amounts to each other (referred to as the “CEO pay ratio”).
We chose to use Mr. Douglas as he was the primary executive officer in that role at the time we identified our median employee. Total compensation for Mr.
SpinnerDouglas and our median employee is calculated in accordance with SEC rules applicable to the Summary Compensation Table. We calculated this information for the twelve (12) months ended
August 3, 2019.July 30, 2022. For such period, Mr.
Spinner’sDouglas’ total compensation was
$7,100,862,$8,722,292, based on information disclosed in the Summary Compensation Table. However, given Mr. Douglas’ hire date was in fiscal week two, we have annualized his salary and 401k match, for an adjusted total of $8,742,796 . Based on the adjusted total compensation for the CEO and our median employee’s total compensation
was $50,848, andof $59,523, the ratio of Mr.
Spinner’sDouglas’s total compensation to the median employee’s total compensation was
140147 to 1.
To identify the median employee, we obtained payroll data for all active employees (full-time, part-time, active and seasonal) as of June
29, 2019,11, 2022, utilizing cash compensation as our consistently applied compensation measure.
This date was moved up two weeks from last year’s date purely for administrative ease purposes and has no material impact on the process. Canadian wages were converted to U.S. dollars using an average annual exchange rate for the 12 months ended June 29,
2019.2022. Earnings for permanent employees who did not work for the entire year (i.e., new hires) were annualized. The wages of temporary employees were not annualized.
Potential Payments Upon Termination or Change-in-Control
On November 5, 2018, we amended the change in control agreements and severance agreements and entered into new employment agreements with Messrs. Spinner and Griffin.
The information below describes and quantifies the compensation that would become payable to each of our
Named Executive Officers under the new plans and arrangementsNEOs if the
Named Executive Officer’sNEO’s employment had terminated on
August 3, 2019,July 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.
If
onean associate, including any of
the Named Executive Officersour NEOs, were to die or become disabled,
target bonus would be paid, any unvested restricted stock units would become immediately vested (with performance units vesting at target levels of performance), and any unexercisable stock options would be cancelled and forfeited. Any vested stock options exercisable at the time of death or disability would be exercisable at any time on or before the earlier to occur of the date that is one year after such
cessationseparation or the grant’s expiration date.
Mr. Zechmeister’s severance and change in control agreements terminated when he resigned as of August 23, 2019, and he is not entitled to continuing benefits.
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For a description of termination provisions in the severance and change in control agreements, see “EXECUTIVE COMPENSATION—Executive Compensation—Compensation Discussion and Analysis—Analysis—Employment, Agreements with Messrs. Spinner and Griffin, Severance Agreements and Change in Control Agreements.” In addition, the Amended and Restated 2020 Equity Incentive Plan and award agreements for long-term equity-based incentivesequity incentive awards also address some of these circumstances. The following table describes the potential payments as of August 3, 2019July 30, 2022 upon termination of the Named Executive Officers. This table excludes potentialNEOs. For Mr. Spinner, the values represent his severance payments relatedowed per his Employment Agreement that were triggered upon his retirement in fiscal 2022 and any other payments and stock vestings earned during the year. Similarly, Ms. Sutton’s values represent the actual payments made upon her departure in fiscal 2022.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Payments Upon Termination | Separation from Service Without Cause, including Resignation for Good Reason(1) | | Termination without Cause not qualifying as a Separation from Service without Cause(1) | | Termination Without Cause or Resignation for Good Reason following Change in Control(2) | | Termination as a result of Death or Disability | | Retirement | | Termination for Cause, or Resignation for Other Than Good Reason |
| Sandy Douglas | | | | | | | | | | | |
| Cash Severance Pay | $ | 7,034,744 | | (3) | $ | 7,034,744 | | (3) | $ | 8,347,244 | | (4) | $ | 1,544,712 | | (5) | $ | — | | | $ | — | |
| Medical Benefits | 70,000 | | (6) | 70,000 | | (6) | 87,500 | | (6) | — | | | — | | | — | |
| Acceleration of Stock Options | — | | | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Awards | 1,651,018 | | (7) | — | | | 5,419,302 | | (8) | 5,419,302 | | (8) | — | | | — | |
| Total | $ | 8,755,762 | | | $ | 7,104,744 | | | $ | 13,854,046 | | | $ | 6,964,014 | | | $ | — | | | $ | — | |
| John W. Howard | | | | | | | | | | | |
| Cash Severance Pay | $ | 1,440,446 | | (9) | $ | 1,440,446 | | (9) | $ | 3,465,446 | | (10) | $ | 662,500 | | (5) | $ | — | | | $ | — | |
| Medical Benefits | 35,000 | | (6) | 35,000 | | (6) | 105,000 | | (6) | — | | | — | | | — | |
| Acceleration of Stock Options | — | | | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Awards | 6,092,661 | | (7) | — | | | 8,030,096 | | (8) | 8,030,096 | | (8) | — | | | — | |
| Total | $ | 7,568,107 | | | $ | 1,475,446 | | | $ | 11,600,542 | | | $ | 8,692,596 | | | $ | — | | | $ | — | |
| Eric A. Dorne | | | | | | | | | | | |
| Cash Severance Pay | $ | 1,686,538 | | (9) | $ | 1,686,538 | | (9) | $ | 4,049,038 | | (10) | $ | 778,125 | | (5) | $ | — | | | $ | — | |
| Medical Benefits | 35,000 | | (6) | 35,000 | | (6) | 105,000 | | (6) | — | | | — | | | — | |
| Acceleration of Stock Options | — | | | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Awards | 7,198,813 | | (7) | — | | | 7,534,090 | | (8) | 7,534,090 | | (8) | 7,198,813 | | (7) | — | |
| Total | $ | 8,920,351 | | | $ | 1,721,538 | | | $ | 11,688,128 | | | $ | 8,312,215 | | | $ | 7,198,813 | | | $ | — | |
| Michael C. Stigers | | | | | | | | | | | |
| Cash Severance Pay | $ | 2,526,546 | | (11) | $ | 2,526,546 | | (11) | $ | 2,526,546 | | (11) | $ | 431,250 | | (5) | $ | — | | | $ | — | |
| Medical Benefits | — | | | — | | | 105,000 | | (6) | — | | | — | | | — | |
| Acceleration of Stock Options | — | | | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Awards | 6,119,995 | | (7) | — | | | 6,306,273 | | (8) | 6,306,273 | | (8) | 6,119,995 | | (7) | — | |
| Total | $ | 8,646,541 | | | $ | 2,526,546 | | | $ | 8,937,819 | | | $ | 6,737,523 | | | $ | 6,119,995 | | | $ | — | |
| Christopher P. Testa | | | | | | | | | | | |
| Cash Severance Pay | $ | 1,728,535 | | (9) | $ | 1,728,535 | | (9) | $ | 4,158,535 | | (10) | $ | 795,000 | | (5) | $ | — | | | $ | — | |
| Medical Benefits | 35,000 | | (6) | 35,000 | | (6) | 105,000 | | (6) | — | | | — | | | — | |
| Acceleration of Stock Options | — | | | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Awards | 5,693,704 | | (7) | — | | | 8,067,633 | | (8) | 8,067,633 | | (8) | — | | | — | |
| Total | $ | 7,457,239 | | | $ | 1,763,535 | | | $ | 12,331,168 | | | $ | 8,862,633 | | | $ | — | | | $ | — | |
Steven L. Spinner (3) | | | | | | | | | | | |
| Cash Severance Pay | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 6,000,000 | | (12) | $ | — | |
| Medical Benefits | — | | | — | | | — | | | — | | | 35,000 | | (6) | — | |
| Acceleration of Stock Options | — | | | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Awards | — | | | — | | | — | | | — | | | 33,532,483 | | (13) | — | |
| Total | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 39,567,483 | | | $ | — | |
| Jill E. Sutton | | | | | | | | | | | |
| Cash Severance Pay | $ | 1,918,139 | | (14) | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| Medical Benefits | 35,000 | | (6) | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Options | — | | | — | | | — | | | — | | | — | | | — | |
| Acceleration of Stock Awards | 3,427,666 | | (7) | — | | | — | | | — | | | — | | | — | |
| Total | $ | 5,380,805 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | |
(1)The Amended and Restated 2020 Equity Incentive Plan provides for certain prorated or partial vesting of shares upon Separation from Service without Cause (as defined in the Amended and Restated 2020 Equity Incentive Plan). The severance agreements provide for cash severance benefits only, including for certain terminations without Cause that do not qualify as a Separation from Service without Cause under the Amended and Restated 2020 Equity Incentive Plan.
(2)Amounts presented in this column assume that the NEO is terminated without Cause or resigns for Good Reason in contemplation of or within two years following a Change in Control (each as defined in the NEO’s applicable change in control agreement).
(3)Amount represents the sum of (i) 2 times the CEO’s target base salary as of July 30, 2022, (ii) 2 times the CEO’s annual cash incentive payment based on target performance for the fiscal year in which the executive is terminated and (iii) the amount of the CEO’s annual cash incentive payment that he would have earned during the fiscal year in which the executive was terminated.
(4)Amount represents the sum of (i) 2.5 times the CEO’s base salary as of July 30, 2022, (ii) 2.5 times the CEO’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated, and (iii) the amount of the CEO’s annual cash incentive payment he would have earned during the fiscal year in which his employment was terminated
(5)Represents the target bonus opportunity paid upon death or disability.
(6)Represents the amount that the Company would be required to our Deferral Plans,pay in lieu of post-termination medical benefits for the executive and the executive’s dependents.
(7)Amount represents the intrinsic value of each share that will vest upon a Separation from Service without Cause, which reflects shares underlying RSUs expected to vest within 365 days of the separation date (prorated with respect to any awards granted within 365 days of the separation date) and a prorated portion of unearned PSUs that are describedoutstanding on July 30, 2022, which vest on an accelerated basis following the relevant termination date (as defined in more detail in “Nonqualified Deferred Compensation—Fiscal 2019.”Payments Upon Termination | Employee
Resignation for
Good Reason or
Termination
Without Cause | Termination without
Cause or
Resignation for
Good Reason
following
Change in Control(1) | Termination
as a result of
Death or
Disability | Retirement | Termination for
Cause or
Resignation for
Other Than
Good Reason |
Steven L. Spinner
| | | | | | | | | | | | | | | |
Cash Severance Pay | $ | 6,000,000 | (2) | $ | 9,729,556 | (3) | $ | — | | $ | — | | $ | — | |
Medical Benefits | | 35,000 | (4) | | 105,000 | (4) | | — | | | — | | | — | |
Acceleration of Stock Options | | — | | | — | | | — | | | — | | | — | |
Acceleration of Stock Awards | | 3,213,863 | (5) | | 3,213,863 | (5) | | 3,213,863 | (5) | | 3,213,863 | (5) | | — | |
Total | $ | 9,248,863 | | $ | 13,048,419 | | $ | 3,213,863 | | $ | 3,213,863 | | | — | |
Michael P. Zechmeister
| | | | | | | | | | | | | | | |
Cash Severance Pay | $ | 675,000 | (6) | $ | 2,953,125 | (7) | $ | — | | $ | — | | $ | — | |
Medical Benefits | | 35,000 | (4) | | 105,000 | (4) | | — | | | — | | | — | |
Acceleration of Stock Options | | — | | | — | | | — | | | — | | | — | |
Acceleration of Stock Awards | | — | | | 1,190,394 | (5) | | 1,190,394 | (5) | | — | | | — | |
Total | $ | 710,000 | | $ | 4,248,519 | | $ | 1,190,394 | | | — | | $ | — | |
Sean F. Griffin
| | | | | | | | | | | | | | | |
Cash Severance Pay | $ | 2,092,500 | (8) | $ | 5,703,702 | (7) | $ | — | | $ | — | | $ | — | |
Medical Benefits | | 35,000 | (4) | | 105,000 | (4) | | — | | | — | | | — | |
Acceleration of Stock Options | | — | | | — | | | — | | | — | | | — | |
Acceleration of Stock Awards | | — | | | 1,762,761 | (5) | | 1,190,394 | (5) | | — | | | — | |
Total | $ | 2,127,500 | | $ | 7,571,463 | | $ | 1,190,394 | | | — | | $ | — | |
Jill E. Sutton
| | | | | | | | | | | | | | | |
Cash Severance Pay | $ | 465,000 | (6) | $ | 1,777,196 | (9) | $ | — | | $ | — | | $ | — | |
Medical Benefits | | 35,000 | (4) | | 105,000 | (4) | | — | | | — | | | — | |
Acceleration of Stock Options | | — | | | — | | | — | | | — | | | — | |
Acceleration of Stock Awards | | — | | | 334,434 | (5) | | 334,434 | (5) | | — | | | — | |
Total | $ | 500,000 | | $ | 2,216,630 | | $ | 334,434 | | | — | | $ | — | |
Christopher P. Testa
| | | | | | | | | | | | | | | |
Cash Severance Pay | $ | 450,000 | (6) | $ | 1,724,601 | (9) | $ | — | | $ | — | | $ | — | |
Medical Benefits | | 35,000 | (4) | | 105,000 | (4) | | — | | | — | | | — | |
Acceleration of Stock Options | | — | | | — | | | — | | | — | | | — | |
Acceleration of Stock Awards | | — | | | 555,678 | | | 555,678 | | | — | | | — | |
Total | $ | 485,000 | | $ | 2,385,279 | | $ | 555,678 | | | — | | $ | — | |
| (1) | Amounts presented in this column assume that the Named Executive Officer is terminated without Cause or resigns for Good Reason within two years following a Change in Control (each as defined in the Named Executive Officer’s applicable employment agreement or change in control agreement). |
| (2) | Amount represents the sum of (i) 2 times the Named Executive Officer’s base salary as of August 3, 2019 at the assumed termination date, and (ii) 2 times the Named Executive Officer’s annual cash incentive payments based on target performance for the fiscal year in which the executive was terminated. |
| (3) | Amount represents the sum of (i) 2.99 times the Named Executive Officer’s base salary as of August 3, 2019 at the assumed termination date, (ii) 2.99 times the Named Executive Officer’s annual cash incentive payments based on target performance for the fiscal year in which he is terminated, and (iii) the amount of the Named Executive Officer’s annual cash incentive payment that he would have earned during the fiscal year in which his employment was terminated. |
| (4) | Represents the amount that the Company would be required to pay in lieu of post-termination medical benefits for the executive and the executive’s dependents. |
| (5) | Amount represents the intrinsic value of each unvested stock option, share of restricted stock, RSU or unearned PSU outstanding on August 3, 2019, and which vests on an accelerated basis following the relevant termination event (as defined in the 2012 Equity Plan), |
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the 2012 Equity Incentive Plan or the Amended and Restated 2020 Equity Incentive Plan, as applicable), with unearned performance unitsPSUs vesting based on the “target” level of performance. These amounts are calculated by multiplying (i) the aggregate number of equity awards which vest on an accelerated basis by (ii) the amount by which $8.42$42.51 per share, the closing price of our common stock on the NYSE on August 2, 2019, theJuly 29, 2022 (the last business day of fiscal 2019, exceeds2022). See “Compensation Discussion and Analysis—Components of Executive Compensation Program for Fiscal 2022—Other Compensation and Benefits” for more information.
(8)Amount represents the exerciseintrinsic value of each share underlying a RSU or unearned PSU outstanding on July 30, 2022, and which vests on an accelerated basis following the relevant termination date (as defined in the 2012 Equity Incentive Plan or the Amended and Restated 2020 Equity Incentive Plan, as applicable), with unearned PSUs vesting based on the “target” level of performance. These amounts are calculated by multiplying (i) the aggregate number of equity awards which vest on an accelerated basis by (ii) $42.51 per share, the closing price payableof our common stock on the NYSE on July 29, 2022 (the last business day of fiscal 2022).
(9)Amount represents the sum of (i) the NEO’s base salary, as in effect as of July 30, 2022 and (ii) the prorated portion of the amount of the NEO’s annual cash incentive payment that the executive would have earned during the fiscal year in which the executive’s employment was terminated. Amounts in the table reflect a full year bonus amount due to the assumption of a termination at year end. If an executive were terminated during the fiscal year, this amount would be prorated.
(10)Amount represents the sum of (i) 2 times the NEO’s base salary as of July 30, 2022, (ii) 2 times the NEO’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated, and (iii) the amount of the NEO’s annual cash incentive payment he or she would have earned during the fiscal year in which his or her employment was terminated.
(11)Per Mr. Stigers Transition Agreement last amended on March 9, 2021, amount represents the sum of (i) 2 times the NEO’s base salary as of July 30, 2022 (the assumed termination date), (ii) 2 times the NEO’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated, and (iii) the amount of the NEO’s annual cash incentive payment he would have earned during the fiscal year in which his employment was terminated. Cash Severance also includes $25,000 in outplacement services per award, if any. | (6) | Amount represents continuation of the Named Executive Officer’s base salary as of August 3, 2019 for one year following the assumed date of termination but does not include any earned but unpaid cash incentive payment as of the assumed termination date. |
his agreement. (12)Per Mr. Spinner’s Employment Agreement, the amount represents the sum of (i) 2 times Mr. Spinner’s base salary as of July 30, 2022, and (ii) 2 times his annual cash incentive payments based on target performance for the fiscal year in which the executive was terminated, and (iii) the amount of the annual cash incentive payment, which was $0 as he was not eligible due to his pending retirement.
| (7) | Amount represents the sum of (i) 2.5 times the Named Executive Officer’s base salary as of August 3, 2019 at the assumed termination date, (ii) 2.5 times the Named Executive Officer’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated, and (iii) the amount of the Named Executive Officer’s annual cash incentive payment that he would have earned during the fiscal year in which his employment was terminated. |
(13)Per Mr. Spinner’s Employment Agreement, represents the intrinsic value of each share underlying a RSU or unearned PSU outstanding on July 30, 2022, with unearned PSUs vesting on an accelerated basis based on the “target” level of performance, plus Mr. Spinner's distribution of deferred shares for PSUs that were deferred until his retirement. These amounts are calculated by multiplying (i) the aggregate number of equity awards which vest on an accelerated basis by (ii) $42.51 per share, the closing price of our common stock on the NYSE on July 29, 2022 (the last business day of fiscal 2022).
| (8) | Amount represents the sum of (i) 1 times the Named Executive Officer’s base salary as of August 3, 2019 at the assumed termination date, and (ii) 1 times the Named Executive Officer’s annual cash incentive payments based on target performance for the fiscal year in which the executive was terminated. |
(14)Upon Ms. Sutton’s departure, the Committee and the Board agreed to extend base salary payments to Ms. Sutton for an additional six months (to 1.5 times in total) and to pay Ms. Sutton an additional severance amount equal to 1.5 times her annual bonus, at target, included herein, plus the prorated portion of her bonus earned in fiscal 2022.
| (9) | Amount represents the sum of (i) 2 times the Named Executive Officer’s base salary as of August 3, 2019 at the assumed termination date, (ii) 2 times the Named Executive Officer’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated, and (iii) the amount of the Named Executive Officer’s annual cash incentive payment that he or she would have earned during the fiscal year in which his or her employment was terminated. |
Securities Authorized for Issuance Under Equity Compensation PlansTABLE OF CONTENTS
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 August 3, 2019.
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 | | 5,015,446 | (1) | $ | 43.06 | (1) | | 1,472,441 | (2) |
Plans not approved by stockholders | | 86,529 | (3) | | — | (3) | | — | |
Total | | 5,101,975 | | $ | 43.06 | | | 1,472,441 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Plans 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 | | 5,409,338 | | (1) | $ | 54.11 | | (1) | 2,862,679 | | (2) |
| Plans not approved by stockholders | | 106,892 | | (3) | — | | | — | | |
| Total | | 5,516,230 | | | $ | 54.11 | | | 2,862,679 | | |
(1)Includes 361,481 stock options constituting replacement options issued in connection with our acquisition of Supervalu, 3,281,035 RSUs under the Amended and Restated 2020 Equity Incentive Plan, 68,255 stock options under the 2012 Plan, 57,380 stock options under the United Natural Foods, Inc. Amended and Restated 2004 Equity Incentive Plan, and 1,748,079 PSUs under the Amended and Restated 2020 Equity Incentive Plan. RSUs and PSUs 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 Amended and Restated 2020 Equity Incentive Plan. The Amended and Restated 2020 Equity Incentive 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. The number of shares remaining available for future issuances assumes that, with respect to outstanding PSUs, the vesting criteria will be achieved at the target level.
(3)Includes shares to be issued pursuant to inducement grants of RSUs and PSUs granted to 5 new hires between December 11, 2020 and March 11, 2022.
| (1) | Includes 914,051 RSUs under the SVU Replacement Awards, 1,520,812 stock options under the SVU Replacement Options, 1,999,136 RSUs under the 2012 Plan, 105,075 stock options under the 2012 Plan, 66,200 stock options under the 2004 Plan, 77,150 stock options under the 2002 Plan, and 333,022 under the 2019 Long-Term Incentive Plan. RSUs and PSUs 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 2012 Plan. The 2012 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. The number of shares remaining available for future issuances assumes that, with respect to outstanding PSUs, 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, which reflect immaterial obligations to the Company as of August 3, 2019. 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. |
TABLE OF CONTENTS
Proposal 2—Ratification of Independent Registered Public Accounting FirmPROPOSAL 2—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board, upon the recommendation of the Audit Committee, has selected KPMG LLP as our independent registered public accounting firm for the fiscal year ending August 1, 2020,July 29, 2023, subject to ratification by stockholders at the annual meeting.Annual Meeting. Stockholder ratification of the selection of KPMG LLP as our independent registered public accounting firm is not required by law or otherwise. However, the Board is submitting the selection of KPMG LLP to stockholders for ratification as a matter of good corporate governance. If stockholders do not ratify the selection of KPMG LLP, the Board will consider whether to appoint KPMG LLP despite the stockholder vote or to select another independent registered public accounting firm for fiscal 20212023 and possibly future years.
Representatives of KPMG LLP, which served as our independent registered public accounting firm for the fiscal year ended,
August 3, 2019,July 30, 2022, will be present at the
annual meetingAnnual Meeting to respond to appropriate questions and to make such statements as they may desire.
The Board unanimously recommends that stockholders vote “FOR” ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal 2020. 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” ratification of the selection of KPMG LLP as our independent registered public accounting firm for fiscal 2023. Proxies received by the Board will be voted “FOR” the proposal unless a contrary choice is specified in the proxy. |
In addition to retaining KPMG LLP to audit our financial statements for fiscal
2019,2022, we engaged the firm from time to time during the year to perform other services. The following table sets forth the aggregate fees billed by KPMG LLP in connection with services rendered during the last two fiscal years.
Fee Category | Fiscal 2019 | Fiscal 2018 |
Audit Fees | $ | 6,738,183 | | $ | 2,204,732 | |
Audit-Related Fees | | 77,393 | | | 847,000 | |
Tax Fees | | 764,480 | | | 239,000 | |
All Other Fees | | 1,780 | | | 1,780 | |
| $ | 7,581,836 | | $ | 3,292,512 | |
| | | | | | | | | | | | | | |
| Fee Category | | Fiscal 2022 | | Fiscal 2021 |
| Audit Fees | | $ | 4,694,554 | | | $ | 4,725,996 | |
| Audit-Related Fees | | — | | | 32,663 | |
| Tax Fees | | 704,000 | | | 752,838 | |
| All Other Fees | | 8,125 | | | — | |
| | $ | 5,406,679 | | | $ | 5,511,497 | |
Audit Fees consists consist of fees billed for professional services rendered in connection with the audit of our annual financial statements, including fees related to KPMG LLP’s assessment of internal control over financial reporting, the review of the interim financial statements included in quarterly reports and services that are normally provided by KPMG LLP in connection with statutory and regulatory filings or engagements.
Audit-Related Fees consists consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” For fiscal 2019,2021, these services includeprimarily related to fees associated with employee benefit plan audits. For fiscal 2018, these services include employee benefit plan audits, attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. Fiscal 2018 audit-related fees also include diligence fees related to the acquisition of Supervalu and advisory fees related to our adoption of ASU No. 2014-09, Revenue from Contracts with Customers (topic 606).
Tax Fees consists consist of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal and state tax compliance, cost segregation studies, tax audit defense and mergers and acquisitions.
All Other Fees consists consist of fees for services other than the services reported above. For fiscal 2019 and 2018, these fees include a subscription to KPMG LLP’s online accounting research tool. We discontinued use of this tool during fiscal 2019.
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’s provision of non-audit services did not compromise its independence as our independent registered public accounting firm.
TABLE OF CONTENTS
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services
Our Audit Committee has adopted a written Pre-Approval Policy, under which the Audit Committee pre-approves all audit and permissible non-audit services provided by KPMG LLP. These services may include audit services, audit-related services, tax services and other related services. Pre-approval is generally provided for up to twelve months and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. KPMG LLP and managementManagement are required to report periodically report to the Audit Committee regarding the extent of services provided by KPMG LLP in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. Under the Pre-Approval Policy, the Audit Committee has delegated pre-approval authority (subject to certain exceptions and dollar limits) to the chair of the Audit Committee who shall report any pre-approval decisions to the Audit Committee for ratification at its next scheduled meeting. During fiscal 2019,2022, all services provided to us by KPMG LLP were pre-approved either by the Audit Committee or the chairperson of the Audit Committee acting pursuant to delegated authority in accordance with the Pre-Approval Policy.
PROPOSAL 3—ADVISORY 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 executive talentwe believe is appropriate and effective in aligning the interests of our executives with the skills and experience necessary for us to achievethose of our business plan; motivates and 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 drive our success.stockholders. Our compensation program is also designed to reinforce a sense of ownership in our 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-andshort- and long-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, 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 confirm that our compensation practices are measured and appropriately competitive against comparable companies, 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.
Stockholdersfollowing:
| | | | | | | | | | | | | | |
| 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. |
You 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 2017-2019”2020-2022” and other related compensation tables and narrative disclosure, which describe the compensation of our Named Executive OfficersNEOs in fiscal 2019.2022.
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
20192022 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’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” 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 2020 Annual Meetingnext annual meeting.
| | | | | | | | | | | | | | |
| 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. |
Proposal 4—Approval of 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. TABLE OF CONTENTS
PROPOSAL 4—APPROVAL OF OUR 2020 EQUITY INCENTIVE PLAN
Background
Our Board of Directors has adopted, effective as of September 26, 2019,Second Amended and recommends that you approve the United Natural Foods, Inc.Restated 2020 Equity Incentive Plan (the “2020
Background
On November 17, 2022, our Board approved the Second Amended and Restated 2020 Equity Incentive Plan”).Plan (Second Amended and Restated Plan) to (i) increase the number of shares available for issuance under the Amended and Restated 2020 Equity Incentive Plan by 5,000,000 shares; (ii) update the limitation on non-employee director awards to include 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 will become effective when it iswas originally approved by stockholders.stockholders in December 2019, and an amendment thereto was approved by stockholders on January 12, 2021. The 2020 EquityBoard 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
will permitpermits the grant of incentive and non-qualified stock options, stock appreciation rights
(“SARs”)(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 listing 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 focus 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 that 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 Plan or reserved for issuance under outstanding awards as of November 14, 2022:
| | | | | |
| Types of Shares | Number of Shares |
| Available for New Grants under the Amended and Restated 2020 Equity Incentive Plan | 1,580,981 Shares |
| Shares Underlying Existing Awards Granted under the Amended and Restated 2020 Equity Incentive Plan | 2,334,781 shares under time-vesting “full value” awards (restricted shares and restricted 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 $65.95 per share and weighted average remaining term of 1.3 years |
| Supervalu Replacement Options | Replacement options to purchase 357,481 shares (with a weighted average price of $51.22 and average remaining term of 1.7 years |
| Total Shares Available for Grant or Underlying Existing Awards | 6,387,644 |
(1)The performance units consist of awards granted in October 2020, 2021 and 2022, which will vest or be forfeited based on company performance metrics tied to pre-established financial metrics over three-year performance periods (fiscal 2021-2023, fiscal 2022-2024 and fiscal 2023-2025, respectively). The number of shares issued upon vesting may be higher or lower 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 grants made by the Company in fiscal 2020 through fiscal 2022, see “Historical Grants and Share Usage” below.
We are asking stockholders to approve the
2020 Equity IncentiveSecond Amended and Restated Plan,
toso that we can effectively maintain
ourthe vital equity
compensation program, which is a vital component of our
executive compensation
program.program going forward. Our equity compensation program, which furthers our executive compensation
philosophy.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 existing plan does not authorizeBoard 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 sufficientshare 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 may not be sufficient to allow us to continue to make equity grants to our employees and directors.
In addition, we seek to update our current plan to include restrictive covenants and certain other terms and conditions that reflect governance best practices and the larger scale participation as a result of the Supervalu acquisition. These changes include, among other things, aligning to double trigger change in control provisions, provision for treatment upon death, disability and retirement, and the addition of restrictive covenants. The plan maintains other governance features, such as provisions regarding performance-based awards, no liberal share recycling, limits on grant amounts to outside directors and per participant limits and grants remain subject to our clawback policy and stock ownership guidelines.We need additional shares to maintain our compensation program for executives and non-executive employees for fiscal 2020, which awards are subject to approval of this plan. We need additional shares primarily because of (i) the significant increase in the number of participants in our plan as a result of the Supervalu acquisition and (ii) the decline in our stock price since the beginning of fiscal 2019. We are requesting sufficient shares to execute this program in fiscal 2020. If westockholders do not receive approval of the 2020 Equity Incentive Plan, weapprove this request for additional authorized shares, our ability to grant new equity-based compensation, and thus attract and retain valuable employees, would be requiredsignificantly diminished, and retention of key employees is vital to makeachieving our fiscal 2020 incentive payments in cash in order to retain and continue to motivate our employees.business strategy. We do not believe that making additional cash incentive paymentsit is in our best interests or in the best interests of our stockholders.stockholders for our leadership to be stockholders and to be compensated in shares of our common stock. We strive to align our executive compensation packages to market, with the result that a significant
portion of our executive officers’ total pay opportunities are committedin equity-based incentives: 60% of the total opportunity for our CEO, and an average of 52% for our other NEOs. We generally grant equity awards to maintaining a disciplined compensationemployees at and above the director level, because the performance of employees at that level and above has the most direct impact on achievement of the Company’s long-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, and, accordingly, are seekingif we do not have sufficient shares necessary for the fiscal 2020 equity awards. We expectavailable, we may be required to request stockholder approval again next year for fiscal 2021 equity awards.issue cash-based awards which, as mentioned above, would be less favorable to stockholders. For information about grants made under the existing plan,our equity plans, see “—Shares Available Historical Grants and Outstanding Awards”Share Usage”, and for information about grants made subject to approvalbelow.
Summary of the
Second Amended and Restated 2020 Equity Incentive Plan
see “—New Plan Benefits”, below.Summary of the 2020 Equity Incentive Plan
The following summary of the material terms of the 2020 Equity IncentiveSecond Amended and Restated Plan is qualified in its entirety by reference to the complete text of the 2020 Equity IncentiveSecond Amended and Restated Plan, as proposed to be amended, as set forth in Annex A to this proxy statement. You should read the complete text of the 2020 Equity IncentiveSecond Amended and Restated Plan for more details regarding the operation of the 2020 Equity Incentive Plan. Second Amended and Restated Plan. Capitalized terms used but not defined in this section shall have the meaning ascribed to such term in the 2020 Equity IncentiveSecond Amended and Restated Plan.Purpose.
Purpose
The purpose of the
2020 Equity IncentiveSecond Amended and Restated 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.
Administration
The
2020 Equity IncentiveSecond Amended and Restated Plan
willmust be administered by a committee composed of at least two “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 “independent” within the meaning of the NYSE listing standards and the rules and regulations of the SEC. The Board has appointed the
full Compensation Committee to serve as the administrator of the
2020 Equity IncentiveSecond Amended and Restated Plan. The Compensation Committee
will determinedetermines eligibility for and
designateTABLE OF CONTENTS
designates participants of the 2020 Equity Incentive Plan, determineSecond Amended and Restated Plan; determines the type and number of awards to be granted, determinegranted; determines the timing, terms and conditions of any award,award; and makemakes other determinations as provided in the 2020 Equity IncentiveSecond Amended and Restated Plan. All decisions and interpretations made by the Compensation Committee with respect to the 2020 Equity IncentiveSecond Amended and Restated Plan will be binding on us and participants. Subject to certain limitations under the 2020 Equity IncentiveSecond Amended and Restated Plan, the Compensation Committee may delegate its authority to our officers to grant, modify or cancel awards, other than with respect to participants who are subject to Section 16 of the Exchange 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.Approval
The 2020 Equity IncentiveSecond Amended and Restated 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 Change in Control) and grant substitute options at, 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.Period
Except for Substitute Awards, as determined by the Compensation Committee following the grant of an Award in connection with the death, disability (as defined in Section 409A of the Internal Revenue Code of 1986, as amended from time to time)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.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 21, 2019, November 14, 2022, approximately 500526 employees 9and 10 non-employee directors and an indeterminate number of consultants would behave been eligible to participate in the 2020 Equity Incentive Plan.Second Amended and Restated Plan if such plan was effective
. Shares Subject to the Second Amended and Restated 2020 Equity Incentive Plan.Plan
The maximum number of shares of our common stock that may be issued pursuant to awards under the 2020 Equity IncentiveSecond Amended and Restated Plan following its approval by the stockholders shall not exceed the sum of 7,200,000is expected to be 11,030,163 shares(Authorized Shares). This represents 5,000,000 additional shares, plus the number of Sharesshares remaining available for grant under the United Natural Foods, Inc. Second Amendedexisting Plan as of the 2023 annual meeting, including shares that are expected to be forfeited and Restated 2012 Equity Incentivereturned to the existing Plan (the “Prior Plan”), which is assumed underby such time. The actual number may be higher or lower depending on actual grants and forfeitures made after the Plan. record date.The maximum number of awards that we may issue as restricted shares or , restricted share units (i.e.or performance share units (i.e., full-value awards) is 7,200,000. equal to the number of Authorized Shares. The maximum number of shares with respect to which incentive stock options may be granted under the 2020 Equity IncentiveSecond Amended and Restated Plan is 1,000,000. 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 2020 Equity IncentiveSecond Amended and Restated Plan or the Prior 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 2020 Equity Incentive Plan. Second Amended and Restated 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 2020 Equity IncentiveSecond Amended and Restated Plan is satisfied by the tender or withholding shares, the number of shares deemed to have been issued under the 2020 Equity IncentiveSecond Amended and Restated 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 2020 Equity IncentiveSecond Amended and Restated Plan may be adjusted in the event of certain changes in our capital structure.structure
. Per Participant Limitations.Limitations
The maximum number of shares in respect of which stock option and SARs that may be granted to a participant under the 2020 Equity IncentiveSecond Amended and Restated Plan for any fiscal year is 900,000. 900,000. The grant date maximum value TABLE OF CONTENTS
of restricted shares, RSUs and performance awards denominated in shares that may be granted under the 2020 Equity IncentiveSecond Amended and Restated Plan to one individual in any fiscal year is $10,000,000. Those$10,000,000. These limitations shall be cumulative. are cumulative. In other words, 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 shallwill 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). EquityThe 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 $400,000 in value as of the date of grant.
$800,000.
Terms and Conditions of Awards.Awards
The 2020 Equity IncentiveSecond Amended and Restated 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 2020 Equity IncentiveSecond Amended and Restated 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 2020 Equity IncentiveSecond Amended and Restated 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.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 2020 Equity Incentive Plan. Second Amended and Restated 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.SARs.option
. SARs. 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 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 2020 Equity Incentive Plan.Restricted Shares.Second Amended and Restated Plan
. Restricted 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 shallwill 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). TABLE OF CONTENTS
RestrictedRestricted Share Units.Units. Each RSU will have a value equal to the fair market value of a share on the date such RSUs are deemed to beRSU granted under the 2020 Equity Incentive Plan. Second Amended and Restated Plan. 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. RSUs will be subject to transfer restrictions similar to those of restricted shares, except that no shares are awarded to a participant who is granted RSUs on the date of grant, and such participant will have no rights of a stockholder with respect to the RSUs until the restrictions set forth in the award agreement lapse. lapse. The award agreement for RSUs will set forth the number of shares subject to the award, the period during which, and the conditions under which, the RSUs 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 2020 Equity IncentiveSecond Amended and Restated Plan) that will subject the shares to forfeiture and transfer restrictions. restrictions. Unless otherwise determined by the Compensation Committee or as provided in the award agreement, all of the RSUs (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 Award.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 2020 Equity IncentiveSecond Amended and Restated 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. basis. Separation from service prior to the end of any performance period, other than for reasons of death, disability, retirement or retirement, 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 shallwill 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.
The Compensation Committee shall,must, in writing, select the performance goal(s) applicable to the performance period, establish the various targets and bonus amounts which may be earned for such performance period, and specify the relationship between performance goals and targets and the amounts to be earned for such performance period. period. Following the completion of each performance period, the Compensation Committee shallmust certify in writing whether the applicable performance targets have been achieved and the amounts, if any, payable for such performance period. period. The Compensation Committee may adjust the amount of cash or number of shares payable to take into account additional factors that it might deem relevant affecting performance.performance
. The Compensation Committee may appropriately adjust any evaluation of performance to exclude any of the following events that occurs during a performance period: 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 and/or described in management’smanagement's discussion and analysis of financial condition and results of operations appearing in the Company’sCompany's annual report to stockholders on Form 10-K for the applicable year, (vi) the effect of adverse federal, governmental or regulatory action, or delays in federal, governmental or regulatory action; action; (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.considerations. TABLE OF CONTENTS
Other Stock-Based Awards.Other Stock-Based Awards. The Compensation Committee may grant stock-based awards other than stock options, SARs, restricted shares, 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 2020 Equity IncentiveSecond Amended and Restated Plan.
Separation from Service.Service
The Compensation Committee will determine the terms and conditions that will apply to any award upon a participant’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 shallwill fully vest on death or disability. disability. Unless otherwise provided in the 2020 Equity IncentiveSecond Amended and Restated Plan, an award agreement separate compensation policy or plan, or a written employment or similar agreement between us and a participant, if a participant’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. forfeited. Except as otherwise provided in an award agreement separate compensation policy or plan, or a written employment agreement or similar agreement between us and a participant, if a participant’s employment terminates prior to a Change in Control (as defined in the 2020 Equity IncentiveSecond Amended and Restated Plan), for any reason other than death or disability, the vesting of any unvested award shallwill not be triggered by such termination of employment or service. 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 shallwill be treated as if such termination of employment or service took place after such Change in Control.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 has attained 59 years of age and provided 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 award agreements under the Plan to include provisions allowing for vesting through retirement.
Change in Control.Control
In the event of a Change in 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’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 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 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 Change in 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 causeCause (as defined in the 2020 Equity IncentiveSecond Amended and Restated Plan), or a participant terminates his or her employment or service for good reasonGood Reason (as defined in the 2020 Equity IncentiveSecond Amended and Restated Plan) within twelve (12) months of such Change in Control: (a) stock options and SARs shallwill become fully vested as of the termination date, and exercisable no later than 30 days following such termination date; date (or such other date permitted by Section 409A of the Code); (b) restricted shares and RSUs shallwill become fully vested as of such termination date, and shallwill be delivered no later than 30 days following such termination date; date; and (c) any then-in-progress performance awards shallwill become fully vested at target performance levels as of such termination date, and shallwill be delivered no later than 30 days following such termination date. date. Any outstanding performance awards relating to performance periods ending prior to the termination date which have been earned but not paid shallwill become immediately payable.payable
. Unless otherwise expressly provided in the awardaward 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 shallwill be treated as follows (to the extent permitted by Section 409A of the Code): (a) stock options and stock appreciation rights shallwill become fully vested and exercisable as of date and time immediately prior to the Change in Control; Control; (b) restricted shares and RSUs shallwill become fully vested as of the date and time immediately prior to the Change in Control and shall TABLE OF CONTENTS
settle immediately following the Change in Control; Control; and (c) unless otherwise determined by the Compensation Committee, any performance awardsawards relating to performance periods that willhave not have ended as of the date of a Change in Control shallwill automatically vest and become payable at the target level of performance.
performance.
Transferability of Awards.Awards
Except as otherwise permitted in an award agreement or by the Compensation Committee, awards under the 2020 Equity IncentiveSecond Amended and Restated Plan are not transferable other than by a participant’sparticipant's will or the laws of descent and distribution.distribution
. Term and Amendment.Amendment
No new awardsawards may be granted 2020 Equity Incentiveunder the Second Amended and Restated Plan after the seventhtenth anniversary of its adoption by the Board on September 26, 2019. effective date, which shall be January 10, 2023, subject to approval of our stockholders. The Board may amend, alter, suspend, discontinue or terminate the 2020 Equity IncentiveSecond Amended and Restated 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
. Restrictive Covenants.Covenants
Agreement to the restrictive covenants (asthat shall be set forth in the 2020 Equity Incentive Plan)applicable award agreement under the Second Amended and Restated Plan, including confidentiality, non-competition, non-solicitation and cooperation shall be, is a condition to receipt of an award.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 2020 Equity Incentive Plan. Second Amended and Restated 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 2020 Equity IncentiveSecond Amended and Restated 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 2020 Equity Incentive Plan. Second Amended and Restated Plan. The 2020 Equity IncentiveSecond Amended and Restated Plan is not intended to be qualified under Section 401(a)40l(a) of the Code.Code
. Stock Options.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.SARs.deduction
. 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.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. TABLE OF CONTENTS
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.Units
With respect to a grant of 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 RSU 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 the RSU. For this purpose, the participant’sparticipant's basis in the common stock is his or her fair market valuevalue at the time the RSUs become vestedare 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 RSU. A Section 83(b) election is not available with respect to RSUs.
Performance Awards.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 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
. Substitute Payments. 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 federal capital gains tax 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.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 2020 Equity IncentiveSecond Amended and Restated 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 2020 Equity IncentiveSecond Amended and Restated 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, holding, vesting, exercise, or payment of any award under the Second Amended and Restated 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 grant, holding, vesting, exercise, or payment of any award underincrease in available shares under the 2020 Equity Incentive Plan. TABLE OF CONTENTS
NewSecond Amended and Restated Plan Benefits
Information about grants made under the 2020 Equity Incentive Plan, subject to shareholder approval, is set forth in the following New Plan Benefits table. . Any future awards awards granted to eligible participants participants under the 2020 Equity IncentiveSecond Amended and Restated Plan will be subjectsubject to the discretion of the the Compensation Committee Committee and therefore, , therefore, the total number of awards thatthat will be grantedgranted under the 2020 Equity Incentive PlanSecond Amended and Restated Plan is not determinable at this time.
NEW PLAN BENEFITS
2020 Executive Incentive Plan
Name and Position | Dollar Value $ | Number of Units |
Stephen L. Spinner.. | $ | 5,100,000 | | | | * |
Sean F. Griffin | $ | 2,325,000 | | | | * |
Jill E. Sutton | $ | 697,500 | | | | * |
Christopher Testa | $ | 900,000 | | | | * |
All executive officers as a group. | $ | 11,580,325 | | | | * |
All non-executive directors as a group | $ | 1,626,060 | | | | * |
All non-executive officer employees as a group. | $ | 33,321,347 | | | | * |
Historical Grants and Share Usage
| * | The number of units underlying each award will be determined using the closing price of our common stock on December 19, 2019, the grant date for each award, as reported on the NYSE. |
SHARES AVAILABLE AND OUTSTANDING AWARDS
The followingfollowing table displays displays the number of full value awardsawards (restricted share units and performance share units) and stock options outstanding outstanding as of the last day day of each of the Company’sthe Company’s most recently completed three three fiscal yearsyears and asas of October 21, 2019 asNovember 14, 2022 as well asas additional information with respect to the average exerciseexercise price and remainingremaining term for stock options, options, along with the shares availableshares available for issuanceissuance under the Amended and Restated 2020 Equity Incentive or the Prior Plan as of such dates and the totaltotal number of the Company’sCompany’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(1) | Shares
Available for
Issuance | Common
Shares
Outstanding |
2017 | | 328,689 | | $ | 49.52 | | | 5.0 | | | 1,270,111 | | | 1,389,248 | | | 50,553,989 | |
2018 | | 291,677 | | | 52.46 | | | 4.4 | | | 1,344,602 | | | 2,676,949 | | | 50,300,380 | |
2019 | | 248,425 | | | 51.27 | | | 3.3 | | | 1,973,272 | | | 1,472,441 | | | 52,749,549 | |
October 21, 2019 | | 222,537 | | | 53.40 | | | 3.3 | | | 1,284,482 | | | 1,566,057 | | | 53,319,185 | |
then outstanding:
| (1) | Excludes Supervalu replacement options and awards issued in connection with the Supervalu acquisition. |
| | | | | | | | | | | | | | | | | | | | |
| 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. 62
(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.TABLE OF CONTENTS
The The following table setstable sets forth information relatedinformation related to stock options stock options and RSUs (excluding performance shares andperformance shares and performance units) grantedgranted by the Company underCompany under the Company’s equity plansAmended and Restated 2020 Equity Incentive Plan and the Prior Plan and forfeited in fiscal years 2017, 2018 and 2019:
Fiscal Year | Option Shares
Granted | Option Shares
Forfeited(1) | Restricted Share
Units Granted(2) | Restricted Share
Units Forfeited |
2017 | | — | | | 2,572 | | | 704,840 | | | 98,434 | |
2018 | | — | | | — | | | 600,684 | | | 113,943 | |
2019 | | — | | | 1,420 | | | 1,318,428 | | | 335,884 | |
Total | | — | | | 3,992 | | | 2,623,952 | | | 548,261 | |
| (1) | Excludes options cancelled upon expiration of exercise period. |
| (2) | Excludes Supervalu replacement awards issued in connection with the Supervalu acquisition. |
| | | | | | | | | | | | | | |
| 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 |
The following table sets
(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 relatedinformation related to the PSU awards granted under the Priorthe Amended and Restated 2020 Equity Incentive Plan, as applicable, in fiscal 2017, 2018fiscal 2020, 2021 and 2019, 2022, and the through November 14, 2022 for fiscal 2023, and the portion of those awards those awards that vestedvested or were forfeited following were forfeited following completion of the applicable performance 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 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) |
October 27, 2016 | Fiscal 2017 – 2019 | | 397,242 | | | 339,490 | | | 15 | % |
September 15, 2017 | Fiscal 2018 – 2019 | | 79,760 | | | 3,799 | | | 95 | % |
September 25, 2018 | Fiscal 2019 – 2020 | | 126,930 | | | — | | | — | |
December 11, 2018 | Fiscal 2019 – 2020 | | 170,358 | | | — | | | — | |
periods for the awards granted on October 12, 2020, October 12, 2021 and October 6, 2022 are not completed.
| (1) | Excludes awards forfeited prior to vesting due to separation | | | | | | | | | | | | |
The Board unanimously recommends that stockholders vote “FOR” the approval of service.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. |
| (2) | The performance period for the awards granted on September 25, 2018 and December 11, 2018 is not completed. |
71
The Board unanimously recommends that stockholders vote “FOR” the approval of the United Natural Foods, Inc. 2020 Equity Incentive Plan. Proxies received by the Board will be voted “FOR” the proposal unless a contrary choice is specified in the proxy.
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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 October 21, 2019November 14, 2022 by (i) each of our directors, (ii) each of our executive officers named in the “EXECUTIVE COMPENSATION TABLES—Executive Compensation Tables—Summary Compensation Table—Table—Fiscal Years 2017-20192020-2022,” (iii) all of our current directors and executive officers as a group and (iv) each person or entity known to us 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:
| | | | | | |
Steven L. Spinner | | 405,952 | | | | ** |
Eric F. Artz | | 17,720 | | | | ** |
Ann Torre Bates | | 17,970 | | | | ** |
Denise M. Clark | | 24,672 | | | | ** |
Daphne J. Dufresne | | 14,390 | | | | ** |
Michael S. Funk | | 67,793 | | | | ** |
James P. Heffernan | | 37,516 | | | | ** |
James Muehlbauer | | 30,000 | | | | ** |
Peter A. Roy | | 57,134 | | | | ** |
Jack Stahl | | — | | | | ** |
Sean F. Griffin | | 114,548 | | | | ** |
Michael P. Zechmeister(4) | | 41,403 | | | | ** |
Jill E. Sutton | | 5,536 | | | | ** |
Christopher P. Testa | | 38,933 | | | | ** |
All current directors and executive officers, as a group (19 persons) | | 935,915 | | | 1.8 | % |
Other Stockholders:
| | | | | | |
BlackRock, Inc.(5) | | 7,523,058 | | | 14.1 | % |
The Vanguard Group, Inc.(6) | | 5,370,149 | | | 10.1 | % |
Dimensional Fund Advisors LP(7) | | 4,203,347 | | | 7.9 | % |
Kiltearn Limited(8) | | 5,728,490 | | | 10.7 | % |
| | | | | | | | | | | | | | |
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., 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 Murdoch Murchison is Exchange Place 3, 3 Semple Street, Edinburgh, United Kingdom EH3 8BL.
(2)The number of shares of common stock beneficially owned by each stockholder is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power and also any shares which a person has the right to acquire within 60 days after November 14, 2022, through the vesting and/or exercise of any equity award or other right. The inclusion herein of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each person named in the table has sole voting power and investment power (or shares such power with his or her spouse) with respect to all shares of common stock listed as owned by such person.
| (1) | The address for each listed director and executive officer is c/o United Natural Foods, Inc., 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 Building One, 6300 Bee Cave Road, Austin, Texas 78746. The address for Murdoch Murchison, Kiltearn Limited and Kiltearn Partners LLP is Exchange Place 3, 3 Semple Street, Edinburgh, United Kingdom EH3 8BL. |
(3)The shares of common stock shown in the table include the following numbers of shares that are issuable upon the exercise of stock options and that are exercisable within 60 days after November 14, 2022: Mr. Dorne—8,910; Mr. Testa—7,310; and Mr. Stigers—23,427. All directors and executive officers as a group—39,647.
| (2) | The number of shares of common stock beneficially owned by each stockholder is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power and also any shares which a person has the right to acquire within 60 days after October 21, 2019, through the vesting and/or exercise of any equity award or other right. The inclusion herein of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each person named in the table has sole voting power and investment power (or shares such power with his or her spouse) with respect to all shares of common stock listed as owned by such person. |
| (3) | The shares of common stock shown in the table include the following numbers of shares that are issuable upon the exercise of stock options and that are exercisable within 60 days after October 21, 2019: Mr. Spinner—98,281; Mr. Funk—7,000; Mr. Heffernan—7,980; Mr. Roy—7,980; Mr. Griffin—26,420; Mr. Zechmeister—24,773; Mr. Testa—20,090; all directors and executive officers as a group—214,286. |
The shares of common stock shown in the table do not include any shares issuable pursuant to restricted stock units, as no restricted stock units will vest within 60 days after October 21, 2019.
TheNovember 14, 2022.
(4)Includes 600 shares of common stock shown in the table include the following numbers of shares that are issuable pursuant to phantom stock in our Deferred Compensation and Deferred Stock Plans (the “Deferral Plans”) and which a person has the right to receive within 60 days after October 21, 2019: Mr. Spinner—8,125; Ms. Clark—15,940; Mr. Heffernan—18,756; Mr. Griffin—24,452; all directors and executive officers as a group—67,273.The shares of common stock shown in the table include the following numbers of shares that are allocated to the individual’s account under our 401(k) Plan’s Stock Fund: Mr. Spinner—651; Mr. Funk—4,227; Mr. Griffin—1,622; Mr. Testa - 271; all directors and executive officers as a group—8,798.
The shares of common stock shown in the table include 87,295 vested performance units 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 shares is based on information disclosed in Ms. Sutton’s director and officer questionnaire, which she completed in August 2022, and the Company’s record of PSUs that vested and were delivered on October 6, 2022.
(7)Includes 10,000 shares held by a revocable family trust.
(8)Mr. Spinner retired from his position as CEO and Chair of the Board effective August 9, 2021. The number of shares is based on information disclosed in Mr. Spinner’s director and officer questionnaire, which he completed in August 2022, and the Company’s record of PSUs that vested and were delivered on October 6, 2022.
(9)Excludes Mr. Dorne, Mr. Spinner and Ms. Sutton, as at they were not officers of the Company as of November 22, 2022.
(10)Beneficial ownership information based solely on a Schedule 13G/A filed with the SEC on 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 information based solely on a 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 the 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 not payable untilowned by the terminationFunds, and may be deemed to be the beneficial owner of Mr. Spinner’s employmentthe 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 securities.
(13)Beneficial ownership information based solely on a Schedule 13G/A jointly filed with the Company, or if earlier, immediately priorSEC 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 consummation of a change in control of the Company. TABLE OF CONTENTS
| (4) | Mr. Zechmeister resigned from his position effective August 23, 2019. The number of shares is based on information disclosed in a Form 4 filed by Mr. Zechmeister on September 26, 2018. |
| (5) | Beneficial ownership information based solely on a Schedule 13G filed with the SEC on January 31, 2019 by BlackRock, Inc. BlackRock, Inc. reported sole voting power with respect to 7,349,616 shares and sole dispositive power with respect to 7,523,058 shares. Includes shares beneficially owned by Blackrock Life Limited, Blackrock Advisors, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock Investment Management (Australia) Limited, BlackRock (Netherlands) B.V., Blackrock Fund Advisors, BlackRock Asset Management Ireland Limited, BlackRock Institutional Trust Company, National Association, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, and BlackRock Investment Management, LLC. Blackrock Fund Advisors beneficially owns 5% or greater of the outstanding shares reported on the Schedule 13G. |
| (6) | Beneficial ownership information based solely on a Schedule 13G filed with the SEC on February 11, 2019 by The Vanguard Group, Inc. The Vanguard Group, Inc. reported sole voting power with respect to 51,444 shares, shared voting power with respect to 5,893 shares, sole dispositive power with respect to 5,318,466 shares and shared dispositive power with respect to 51,683 shares. Vanguard Fiduciary Trust Company (“VFTC”), a wholly-owned subsidiary of The Vanguard Group, Inc., reported beneficial ownership of 45,790 shares as a result of VFTC’s serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd. (“VIA”), a wholly-owned subsidiary of The Vanguard Group, Inc., reported beneficial ownership of 11,547 shares as a result of VIA’s serving as investment manager of Australian investment offerings. |
| (7) | Beneficial ownership information based solely on a Schedule 13G filed with the SEC on February 8, 2019 by Dimensional Fund Advisors LP. Dimensional Fund Advisors LP reported sole voting power with respect to 4,119,150 shares and sole dispositive power with respect to 4,203,347 shares. Dimensional Fund Advisors LP, an investment adviser registered under Section 203 of the 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 Company that are owned by the Funds and may be deemed to be the beneficial owner of the shares held by the Funds. However, all securities reported are owned by the Funds. Dimensional disclaims beneficial ownership of such securities. |
| (8) | Beneficial ownership information based solely on a Schedule 13G jointly filed with the SEC on April 8, 2019 by Murdoch Murchison, Kiltearn Limited and Kiltearn Partners LLP. Murdoch Murchison, Kiltearn Limited and Kiltearn Partners LLP each reported shared voting power with respect to 5,728,490 shares and shared dispositive power with respect to 5,728,490 shares. |
Stockholder Proposals and Director Nominations for the 2020Next Annual Meeting of Stockholders
Stockholder Proposal
Any proposal that a stockholder wishes to be considered for inclusion in our proxy statement for the
2020 Annual Meetingnext annual meeting of Stockholders must be submitted to our Corporate Secretary at 313 Iron Horse Way, Providence, Rhode Island 02908, no later than the close of business on July
8, 2020.25, 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.Fourth Amended and Restated Bylaws (the Bylaws). For the
2020 Annual Meetingnext annual meeting of
Stockholders,stockholders, notice of proxy access director nominations must be submitted to the Corporate Secretary at the address specified above no earlier than June
8, 202025, 2023 and no later than July
8, 2020.25, 2023.
Advanced Notice Provisions for Proposal or 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
2020 Annual Meetingnext annual meeting of
Stockholdersstockholders 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 Secretary at the address noted above, which notice must be received by our Corporate Secretary no earlier than
July 21, 2020August 13, 2023 and no later than
August 20, 2020.September 12, 2023. The stockholder’s submission must include certain specified information concerning the proposal or director nominee and the stockholder, including such stockholder’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.
See “PROPOSAL 1—Proposal 1—Election of Directors—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.
Universal 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
INFORMATION ABOUT THE MEETING
Record Date and Share Ownership
Only stockholders of record on our books at the close of business on
Tuesday, October 21, 2019Monday, November 14, 2022 (the
“Record Date”)Record Date) will be entitled to vote at the
annual meetingAnnual Meeting and any adjournments or postponements of the
annual meeting.Annual Meeting. As of the close of business on
October 21, 2019,November 14, 2022, we had
53,319,18559,902,801 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.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
August 3, 2019,July 30, 2022, were first made available to stockholders of record as of the Record Date on or about November
5, 2019.14, 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
5, 2019,22, 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 August 3, 2019,July 30, 2022, as filed with the SEC, without exhibits. Please address all such requests to the attention of Investor Relations, United Natural Foods, Inc., 313 Iron Horse Way, Providence, Rhode Island 0290811840 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 P. Heffernan, JamesL. Muehlbauer, Peter A. Roy and Jack Stahl and Steven L. Spinner as directors to serve until the 2020next 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 August 1, 2020July 29, 2023 (Proposal 2);
FOR the approval, on an advisory basis, of our executive compensation (Proposal 3); and
FOR the approval of our 2020 Equity Incentive Planamended and restated equity incentive plan (Proposal 4). If other matters come before the
annual meeting,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.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,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 meetingAnnual Meeting virtually through the Internet will not itself be deemed to revoke your proxy unless you vote via the Internet while attending the
virtual annual meeting.Annual Meeting. Your latest dated proxy card or telephone or Internet proxy at the time of the meeting is the one that is counted.
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: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;
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•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.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 December 17, 2019January 9, 2023 to be counted. Internet voting during the annual meetingAnnual Meeting is also permissible through the virtual web meeting hosted at www.virtualshareholdermeeting.com/unfi2019.unfi2023. If you wish to vote at the annual meetingAnnual Meeting while attending through the virtual annual meeting,virtually, you must have your 16-digit control number from your Notice of Proxy Availability.
Street Name Holders: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“street name.” If you hold your shares in street name, these proxy materials
were beingwill 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,Annual Meeting, you must have your 16-digit control number from your Notice of Proxy Availability.
Holders Through the 401(k) Plan: If you hold your shares through the 401(k) Plan’s Stock Fund, you will receive a separate voting instructions card which will serve as a voting instruction for Fidelity Management Trust Company (“Fidelity”), the trustee of the 401(k) Plan. You must submit your voting instructions to Fidelity by 11:59 p.m. Eastern Standard Time on December 16, 2019 to allow time to receive your voting instructions. If Fidelity does not receive voting instructions for your shares, it will not vote your shares.
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
Innisfree M&A Incorporated,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.
Presence by attendance through the virtual
annual meeting,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 meetingTABLE OF CONTENTS
Annual Meeting will be required for a quorum at the meeting. Shares of common stock present by attendance through the virtual annual meetingAnnual 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.
Annual Meeting.
Proposal 1 (election of a total of
teneleven nominees as directors) is an uncontested director election. In uncontested elections, our
Fourth Amended and Restated Bylaws
(the “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 will 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 certification of the election results. Abstentions and broker 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
the 2019a fully virtual Annual Meeting,
of Stockholdersas we have done for several years, live via the Internet. There will be no in-person meeting. We believe that hosting the
annual meetingAnnual 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
managementManagement or directors online during and prior to the
annual meeting.Annual Meeting. In addition, this format eliminates certain costs associated with holding an in-person meeting.
This view is supported by the positive feedback we received on hosting our 2018 Annual Meeting of Stockholders via the Internet.A summary of the information you need to attend the annual meetingAnnual Meeting online is provided below:
•Any stockholder as of the Record Date can attend the annual meetingAnnual Meeting virtually through the Internet at www.virtualshareholdermeeting.com/unfi2019.unfi2023.
•Meeting starts at 4:00 p.m. Eastern Standard Time, with log-in at 3:45 p.m. on Wednesday, December 18, 2019.Tuesday, January 10, 2023.
•If attending the annual meetingAnnual Meeting virtually through the Internet, please have your 16-digit control number provided on your Notice of Proxy Availability to enter the annual meeting.Annual Meeting.
•If you hold your shares in street name and wish to vote while attending the virtual annual meeting,Annual Meeting, you must have your 16-digit control number from your Notice of Proxy Availability.
Stockholders may vote and, subject to any rules of the meeting, submit questions while attending the annual meeting through the Internet.
•Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/unfi2019.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 meetingAnnual Meeting will be available at www.virtualshareholdermeeting.com/unfi2019 unfi2023 until December 18, 2020.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.
We have adopted a procedure for stockholders whose shares are held in street name called
“householding,“householding,” pursuant to which stockholders of record who have the same address and the same last name will receive only
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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
(401) 528-8634(952) 828-4144 or
313 Iron Horse Way, Providence, Rhode Island 02908.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 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 ELECTRONICALLY OVER THE INTERNET THROUGH THE VIRTUAL ANNUAL MEETING.
| | | | | | | | | | | | | | |
| 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, |
| |
| | | | | |
| Steven L. Spinner
Jack Stahl |
| Independent Chair of the Board and
Chief Executive Officer |
November 5, 2019
22, 2022
SECOND AMENDED AND RESTATED UNITED NATURAL FOODS, INC.
2020 EQUITY INCENTIVE PLAN
(EFFECTIVE AS OF JANUARY 10, 2023)
| | | | | |
| | | | TABLE OF CONTENTS |
| TABLE OF CONTENTS | | | | A-2 |
| A-3 |
| Section 2. Definitions | A-3 |
| Section 3. Administration | A-7 |
| Section 4. | | | | A-9 |
| Eligibility | | | | A-10 |
| Rights | | | A-11 |
| Units | | | A-13 |
| Performance Awards | | | | A-15 |
| Awards | | | A-16 |
| Awards | | | A-16 |
| Service | | | A-17 |
| Control | | | A-20 |
| Termination | | | A-22 |
| General Provisions | | | | A-22 |
| | | | A-25 |
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SECOND AMENDED AND RESTATED UNITED NATURAL FOODS, INC.
2020 EQUITY INCENTIVE PLAN
(EFFECTIVE AS OF JANUARY 10, 2023)
Section 1.
History and Purpose.
This plan shall be known as the “The
The United Natural Foods, Inc. 2020 Equity Incentive Plan”Plan (the “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 objectivesobjectives: (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-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) aligning their compensation with the long-term interests of the Company and its stockholders. The Plan has been amended from time to time and the following provisions constitute an amendment and restatement of the Plan as in effect immediately prior to the Effective Date.
As used in the Plan, the following terms shall have the meanings set forth below:
2.1 “Acquiror”Acquiror” has the meaning provided in Section 12.1.12.1.
2.2 “Affiliate”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.
2.3 “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, or any similar award under the Prior Plan.
2.4 “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.
2.5 “Board”Board” means the Board of Directors of the Company.
2.6 “Cause”Cause” means, unless otherwise defined in the applicable Award Agreement, (i) conviction of the Participant under applicable law of (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 any Subsidiary or Affiliate or their reputation; (iii) any violation of the Participant’s duties or responsibilities to the Company or a Subsidiary or Affiliate which constitutes willful misconduct or dereliction of duty; or (iv) material breach of the covenants described in Section 14.8 of this Plan.
2.7 “Change in Control”Control” means, unless otherwise provided in the applicable Award Agreement, the happening of one of the following:
(a) any “person”, including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company, any of its Affiliates, or any employee benefit plan of the Company or any of its Affiliates) is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Company representing the greater of 30% or more of the combined voting power of the Company’s then outstanding securities;
(b) the stockholders of the 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 prior to the effective date of such merger or (B) the stockholders of the Company immediately prior to the effective date of such merger own less than 60% of the combined voting power in the then outstanding securities in such surviving corporation or (2) for the sale or other disposition of all or substantially all of the assets of the Company;
(c) the purchase of 30% or more of the combined voting power of the Company’s then outstanding securities pursuant to any tender or exchange offer made by any “person”, including a “group” (as such
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terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any of its Affiliates, or any employee benefit plan of the Company or any of its Affiliates; or
(d) the disposal of any line of business representing at least 15% of the Company’s consolidated net sales for the then-most recently completed fiscal year; provided, however, that such disposal shall only be deemed a “Change in Control” for Participants primarily employed in the line of business disposed of.
Notwithstanding the foregoing, in the case of
who ceaseany Award that is subject to
be employed bySection 409A of the
Company followingCode, a Change in Control must also constitute a change in control event within the
disposition.meaning of Section 409A.
2.8 “Code”Code” means the Internal Revenue Code of 1986, as amended from time to time.
2.9 “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 and (ii) “independent” within the meaning of the listing standards of the New York Stock Exchange and the rules and regulations of the SEC.
2.10 “Company”Company” means United Natural Foods, Inc., a Delaware corporation, and its successors and assigns.
2.11 “Consultant”Consultant” means any consultant to the Company or its Subsidiaries or Affiliates.Subsidiaries.
2.12 “Director”Director” means a member of the Board.
2.12A “Director Limit” has the meaning provided in Section 10.3 of the Plan.
2.13 “Disability”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.
2.14 “Effective Date”Date” has the meaning provided in Section 15.1 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 New York Stock 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
“Full Value Award Cap” has the meaning provided in Section 4.1 of the Plan.RESERVED.
2.19 “Good Reason”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 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 Participant relocate more than fifty (50 miles from the Participant’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; (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; 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 TABLE OF CONTENTS
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, 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, or a similar Award under the Prior Plan.
2.24 “Option”Option” means an Incentive Stock Option or a Non-Qualified Stock Option.
2.25 “Option Price”Price” means the purchase price payable to purchase one Share upon the exercise of an Option.
2.26 “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.
2.27 “Outside Director”Director” means, with respect to the grant of an Award, a member of the Board then serving on the Committee.
2.28 “Participant”Participant” means any Employee, Director, Consultant or other person who receives an Award under the Plan.
2.29 “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.
2.30 “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.2.33
2.34 “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
2.35 “Retirement”Retirement” means retirementthe termination of a Participant from activethe Participant’s employment with the Company or anyand all of its Subsidiaries orand Affiliates on or after the date on which both of the following have occurred: (i) the Participant’sParticipant has attained 59th birthday years of age and (ii) the tenth anniversaryParticipant has provided ten (10) years of the Participant’sservice to ’s employment with the Company or any of its Subsidiaries or Affiliates.2.35 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”SEC” means the Securities and Exchange Commission or any successor thereto.2.36
2.37 “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.
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2.37 2.39 “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.
2.38 “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.
2.39 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.
2.40 “Separation from Service without Cause” has the meaning provided in Section 11.3 hereof.
2.41 “Share Reserve”Reserve” has the meaning set forth in Section 4.1 hereof.2.40
2.42 “Shares”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,, 12.1,, and 13.3.2.41 13.3.
2.43 “Specified Employee”Employee” has the meaning ascribed to such term pursuant to Section 409A of the Code and the regulations promulgated thereunder.2.42
2.44 “Stock Appreciation 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. If the 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.2.43
2.45 “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.2.44
2.46 “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.2.45
2.47 “Vesting Period”Period” means the period of time specified by the Committee during which vesting restrictions for an Award are applicable.
Section 3. Administration.
3.1 Authority 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 power and authority in its discretion (and in accordance with Section 409A of the Code with respect to Awards subject thereto) to:
(a) designate Participants;
(b) determine eligibility for participation in the Plan and decide all questions concerning eligibility for and the amount of Awards under the Plan;
(c) determine the type or types of Awards to be granted to a Participant;
(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;
(e) determine the timing, terms, and conditions, including performance objectives, as applicable, and any adjustments thereto, of any Award;
(f) accelerate the time at which all or any part of an Award may be vested, settled or exercised;
(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;
(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;
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(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;
(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;
(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, or Retirement, and whether a leave of absence constitutes a Separation from Service;
(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;
(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;
(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;
(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;
(q) correct any defect, supply any omission, or reconcile any inconsistency in the Plan or in any agreement related thereto; 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 13 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 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 of the Company or to a Committee of such officers, 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 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. TABLE OF CONTENTS
Section 4. Shares Available for Awards
Awards.
4.1 Shares Available; Assumption of Prior Plan Awards.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) 7,200,00011,030,1631 Shares, plus (ii) the number of shares available for grant under the Prior Plan as of the Effective Date (such aggregate amount, the “Share Reserve”). Awards made under the Prior Plan are herebywere 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 1,000,000. Subject to the application of the last sentence of this Section 4.1, the maximum number of Awards that the Company may issue under this Plan from the Share Reserve as Restricted Share Awards and Restricted Share Unit Awards shall be 7,200,000 (the “Full Value Award Cap”). 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 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 Shares that again become available for grant pursuant to this Section 4.1 shall be added back to the Full Value Award Cap if the original Award of such Shares was a Restricted Share Award or Restricted Share Unit Award (or treated as such hereunder).
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 may 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 under the existing Plan as of the 2023 annual meeting, including shares that are expected to be forfeited and returned to the existing Plan by such time.
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).
4.3 Adjustments.Adjustments. Without limiting the Committee’s discretion as provided in Section 12 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, 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), 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, in the aggregate or on a per Participant basis,
including the Full Value Award Cap;; (2) the number of Shares or other securities of the Company (or number and kind of
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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.
4.4 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.
4.5 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.
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 and Awards to Non-Employee Directors shall be subject to
Section 10.3.10.3. The
granting, vesting and exercise of an Award to a prospective Employee, Director or Consultant shall 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 hereof, 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 such Section 6.1.granted. In the case of Substitute Awards or Awards granted in connection with an adjustment provided for in Section 4.3 TABLE OF CONTENTS
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 4.3 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.
(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
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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 14.6 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 14.6)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.
(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
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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. IfAs provided in thethis 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 eexercisableexercisable after Retirement.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 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., 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 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 TABLE OF CONTENTS
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. 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. Separation from Service prior to the end of any performance period, other than for reasons of death, Disability, or (to the extent provided below) Retirement or Separation from Service without Cause, will result in the forfeiture of the Performance Award, and no payments will be made. If providedAs 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 Retirement.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 TABLE OF CONTENTS
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. 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,, 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.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 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.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.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$800,000 (the “Director Limit”); and excluding, for this purpose, the value of any dividends or dividend equivalents paid in accordance with the Plan on certain Awards) (the “Director Limit”). The Board may not, without the approval of the stockholders, increasefurther provided that the Director Limit for any Non-Employee Director shall be determined without regard to amounts paid to the Non-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 Non-Employee Director), and any severance and other payments such as consulting fees paid to a Non-Employee Director for such individual’s prior or current service to the Company or any Affiliate 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 settled if later. TABLE OF CONTENTS
10.4 Post-Service Vesting. If a Non-Employee Director cesesceases 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 Board at or after grant.
Section 11. Separation from Service.
11.1 Impact on Awards.Awards. 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 and 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, or 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.
11.2 Forfeiture of Performance Awards on Separation from Service; No Acceleration of Vesting.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 employment with or service to the Company or a Subsidiary or Affiliate terminatesSeparation 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 a written 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 prior to a Change in Control, for any reason other than death or Disability, the vesting of any unvested Award shall not be triggered by such termination of employment or service.Separation from Service. Notwithstanding the foregoing, termination of employmenta 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 termination of employmentSeparation 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 Retirement 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 job 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 (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 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 purposes of the foregoing shall constitute a final determination of such status 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 be recorded and retained with the books and records relative to equity awards of the Company.
(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 decision 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 settlement/payment of Shares pursuant to that Award shall in all cases occur in the second calendar year.
Section 12. Change in Control.
12.1 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 12.2 of this Plan to the Participant in respect of such assumed Awards. For purposes of this Section, an Award denominated in Shares shall be deemed assumed if, following the Change in Control, the Award (as adjusted, if applicable, pursuant to Section 4.3 hereof) confers the right to receive, subject to any 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 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.
12.2 Vesting of Assumed or Continued Awards.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
termination date,Participant’s Separation from Service, and exercisable no later than 30 days following such
Separation from Service termination date;
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(b) Restricted Shares and Restricted Share Units shall become fully vested as of such termination date,Separation from Service, and shall be delivered no later than 30 days following such termination date;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
termination date,Separation from Service, and shall be delivered no later than 30 days following such
termination date.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
termination dateSeparation from Service which have been earned but not paid shall become immediately
payable.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;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.Awards. Notwithstanding 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 Share 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.
12.5 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 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.
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Section 13. Amendment and Termination.
13.1 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.
13.2 Amendments to 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).
13.3 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.
13.4 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.
14.1 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.
14.2 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, but only when the 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 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.
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 TABLE OF CONTENTS
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.
14.4 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.
14.5 Share Certificates.Certificates. All certificates for Shares or other securities 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.
14.6 Tax Withholding.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 Subsidiaries’ or 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.
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 TABLE OF CONTENTS
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.
14.8 Restrictive Covenants. Covenants. Each Award Agreement shall include, or be deemed to include, the followingrestrictive covenants (in the words set forth below or with such modifications as may be approveddetermined by the Committee)Committee or its delegate and each Participant shall agree to adhere to such covenants as a condition to receipt of an Award:(a) The Participant shall not disclose or reveal to any unauthorized person or knowingly use for the Participant’s own benefit or another person or entity’s benefit, any trade secret or other confidential information relating to the Company, or to any of the businesses operated by it, including, without limitation, any customer lists, customer needs, price and performance information, processes, specifications, hardware, software, devices, supply sources and characteristics, business opportunities, potential business interests, marketing, promotional pricing and financing techniques, or other information relating to the business of the Company, and the Participant confirms that such information (including all copies of or notes regarding such confidential information) constitutes the exclusive property of the Company and must be returned to the Company upon the termination of the Participant’s employment. Such restrictions shall not apply to information which is (i) generally available in the industry, or (ii) disclosed through no fault of the Participant or (iii) required to be disclosed pursuant to applicable law or regulation or the order of a governmental or regulatory body (provided that the Company is given reasonable notice of any such required disclosure). The Participant agrees that the Participant will return to the Company upon request, but in any event upon termination of employment, any physical embodiment of any confidential information and/or any summaries containing any confidential information, in whole in part, in any media. For the avoidance of doubt, nothing in this Agreement prohibits the Participant from reporting possible violations of federal law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities and Exchange Commission, the Congress, and any Inspector General, or making other disclosures that are protected under the whistleblower provisions of applicable law or regulation. The Participant does not need the prior authorization of the Company to make any such reports or disclosures, and the Participant is not required to notify the Company that the Participant has made such reports or disclosure.
The Participant acknowledges and agrees that the Company has provided the Participant with written notice below that the Defend Trade Secrets Act, 18 U.S.C. § 1833(b), provides an immunity for the disclosure of a trade secret to report suspected violations of law and/or in an anti-retaliation lawsuit, as follows:
(1) IMMUNITY. — An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that —
(A) is made —
(i) in confidence to a Federal, State or local government official, either directly or indirectly, or to an attorney; and
(ii) solely for the purpose of reporting or investigating a suspected violation of law; or
(B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
(2) USE OF TRADE SECRET INFORMATION IN ANTI-RETALIATION LAWSUIT. — An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual —
(A) files any document containing the trade secret under seal; and
(B) does not disclose the trade secret, except pursuant to court order.
(b) Except with the prior written consent of the Company’s Chief Legal Officer or Chief Human Resources Officer (or their designee), during the period commencing on the date of grant and ending on the first anniversary of the termination of the Participant’s employment for any reason with the Company or any Subsidiary or Affiliate (the “Restricted Period”), the Participant shall not engage, directly or indirectly
Award. TABLE OF CONTENTS
(which includes, without limitation, owning, managing, operating, controlling, being employed by, giving financial assistance to, participating in or being connected in any material way with any person or entity), anywhere in the United States, in any activities with any company which is a direct competitor of the Company and any other company that conducts any business for which the Participant is uniquely qualified to serve as a member of senior management as a result of his or her service to the Company. By way of illustration, direct competitors of the Company include, but are not limited two, the following companies: KeHe Distributors, LLC, DPI Specialty Foods, Lipari Foods, C&S Wholesale Grocers, Inc., Sysco Corporation, Performance Food Group Company, US Foods Holding Corp., SpartanNash Company, Associated Grocers, Inc., Associated Wholesale Grocers, Inc., URM Stores, Inc. and Bozzuto’s Inc. (or any subsidiary or affiliated entity of the foregoing companies) or any other company or group of companies that may be specified in an Award Agreement approved by the Board or the Committee with respect to (i) the Company’s activities on the date of grant and/or (ii) any activities which the Company becomes involved in during the Participant’s term of employment; provided, however, that the Participant’s ownership as a passive investor of less than five percent (5%) of the issued and outstanding stock of a publicly held corporation so engaged, shall not by itself be deemed to constitute such competition.
(c) Further, during such Restricted Period, the Participant shall not solicit or otherwise act to induce any of the Company’s vendors, customers or employees to cease or limit any relationship or otherwise take action that might be disadvantageous to the Company or otherwise disturb such party’s relationship with the Company.
(d) The Participant acknowledges that the Participant will treat as for the Company’s sole benefit, and fully and promptly disclose and assign to the Company without additional compensation, all ideas, information, discoveries, inventions and improvements which are based upon or related to any confidential information protected under subsection (a), and which are made, conceived or reduced to practice by the Participant during the Participant’s period of employment by the Company or any Subsidiary and within one (1) year after termination thereof. The provisions of this subsection (d) shall apply whether such ideas, discoveries, inventions, improvements or knowledge are conceived, made or gained by the Participant alone or with others, whether during or after usual working hours, either on or off the job, directly or indirectly related to the Company’s business interests (including potential business interests), and whether or not within the realm of the Participant’s duties.
(e) The Participant shall, upon request of the Company, but at no expense to the Participant, at any time during or after employment by the Company, sign all instruments and documents and cooperate in such other acts reasonably required to protect rights to the ideas, discoveries, inventions, improvements and knowledge referred to above, including applying for, obtaining and enforcing patents and copyrights thereon in any and all countries.
(f) During the Restricted Period, upon reasonable request of the Company, the Participant shall cooperate in any internal or external investigation, litigation or any dispute relating to any matter in which he or she was involved during his or her employment with the Company; provided, however, that the Participant shall not be obligated to spend time and/or travel in connection with such cooperation to the extent that it would unreasonably interfere with the Participant’s other commitments and obligations. The Company shall reimburse the Participant for all expenses the Participant reasonably incurs in so cooperating.
(g) Before accepting employment with any other person, organization or entity while employed by the Company and during the Restricted Period, the Participant will inform such person, organization or entity of the restrictions contained herein. The Participant further consents to notification by the Company to the Participant’s subsequent employer or other third party of the Participant’s obligations under this Agreement.
(h) The Participant recognizes that the possible restrictions on the Participant’s activities which may occur as a result of the Participant’s performance of the Participant’s obligations under subsections (a) and (b) hereof are required for the reasonable protection of the Company and its investments, and the Participant expressly acknowledges that such restrictions are fair and reasonable for that purpose. The Participant acknowledges that money damages would not be an adequate or sufficient remedy for any breach of subsections (a) and (b), and that in the event of a breach or threatened breach of subsections (a) and (b), the Company, in addition to other rights and remedies existing in its favor, shall be entitled, as a matter of right, to injunctive relief, including specific performance, from a court of competent jurisdiction in order to
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enforce, or prevent any violations of, the provisions of subsections (a) and (b). The terms of this subsection (g) shall not prevent the Company from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages from the Participant. If any of the provisions hereof are held to be in any respect an unreasonable restriction upon the Participant, then they shall be deemed to extend only over the maximum period of time, geographic area, and/or range of activities as to which they may be enforceable. The Participant expressly agrees that all payments and benefits due the Participant under the Award Agreement shall be subject to the Participant’s compliance with the provisions set forth in subsections (a) and (b).
(i) Except with respect to any shorter term as expressly provided herein, this these provisions shall survive the expiration or earlier termination of the Participant’s relationship with the Company for a period of ten (10) years.
14.9Other 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.
14.10 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.
14.11 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.
14.12 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.
14.13 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.
14.14 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. TABLE OF CONTENTS
14.15 No Trust or Fund 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 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.
14.16 No Fractional Shares.Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and any obligation to deliver fractional Shares shall be deemed fully satisfied by the delivery of the next lower number of whole Shares.
14.17 Clawback; Cancellation of Awards.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 New York Stock 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.
14.18 Minimum Vesting Requirements.Requirements. Except for Substitute Awards, as determined by the Committee following the grant of an Award in connection with the death or Disability 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.
14.19 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 15. Term of The Plan.
15.1 Effective Date.Date. The Plan, as amended and restated as set forth herein, shall be effective 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.
15.2 Expiration Date.Date. No new Awards shall be granted under the Plan after the seventh (7tenth (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 seventh (7tenth (10th) anniversary of the Effective Date.
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Reconciliation of Non-GAAP
Performance Metrics
This proxy statement refers to the non-GAAP financial
measuresmeasure of
adjustedAdjusted EBITDA,
adjustedAdjusted ROIC (return on invested capital)
and adjusted, 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
thesethe non-GAAP financial
measures providemeasure provides investors with useful supplemental information about the performance of our business and
(in the case of adjusted ROIC) how effectively we deploy capital, as well as providing 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 (Loss)net income from continuing operations and
Incomeincome from discontinued operations,
net of tax to Adjusted EBITDA (unaudited)
(in
thousands) | Fiscal Year Ended
August 3, 2019
(53 weeks) |
Net loss from continuing operations(1) | $ | (350,683 | ) |
Adjustments to continuing operations net loss:
| | | |
Total other expense, net | | 144,280 | |
Benefit for income taxes | | (84,609 | ) |
Depreciation and amortization | | 246,825 | |
Share-based compensation | | 38,879 | |
Restructuring, acquisition, and integration related expenses(1) | | 153,539 | |
Goodwill and asset impairment charges(2) | | 292,770 | |
Inventory fair value adjustment(3) | | 10,463 | |
Legal settlement income, net of reserve adjustment(4) | | (1,390 | ) |
Adjusted EBITDA of discontinued operations | | 112,410 | |
Adjusted EBITDA | $ | 562,484 | |
LIFO charge related to the legacy UNFI business(5) | | 15,006 | |
Unbudgeted rental costs from Supervalu sale-leaseback properties(5) | | 6,000 | |
Derecognition of amortizing gains from sale-leaseback transactions(5) | | 5,000 | |
Incremental pre-operational rent expense(5) | | 2,078 | |
Incremental expense related to compensation adjustments(5) | | (1,668 | ) |
Compensation Adjusted EBITDA | $ | 588,900 | |
| | | |
Income from discontinued operations, net of tax(1) | $ | 65,800 | |
Adjustments to discontinued operations net income:
| | | |
Less net income attributable to noncontrolling interests | | (107 | ) |
Total other expense, net | | 2,378 | |
Provision for income taxes | | 21,840 | |
Other expense | | 860 | |
Share-based compensation | | 1,616 | |
Restructuring, store closure and other charges, net(6) | | 20,023 | |
Adjusted EBITDA of discontinued operations | $ | 112,410 | |
| | | | | | | | | | | | | | | | | | | | |
| | 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) | Primarily reflects expenses resulting from the acquisition of Supervalu, including severance costs, store closure charges, and acquisition and integration expenses. Refer to Note 5—Restructuring, Acquisition and Integration Related Expenses in Part II, Item 8 of the Annual Report on Form 10-K for the year ended August 3, 2019 for additional information. |
| (2) | Fiscal 2019 reflects a goodwill impairment charge attributable to the Supervalu acquisition. Refer to Note 7—Goodwill and Intangible Assets in Part II, Item 8 of the Annual Report on Form 10-K for the year ended August 3, 2019 for additional information. |
(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.
| (3) | Reflects a non-cash charge related to the step-up of acquired Supervalu inventory from purchase accounting. |
(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.
| (4) | Reflects income received to settle a legal proceeding and a charge related to our assessment of legal proceedings, which are more fully described in Note 18—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of the Annual Report on Form 10-K for the year ended August 3, 2019. |
(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.
| (5) | Compensation Committee approved upward adjustments to adjusted EBITDA for performance purposes. |
(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.
| (6) | Amounts represent store closure charges and costs, and an inventory charges related to discontinued operations, net of the effect of fees received from credit card companies related to a settlement. |
(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.
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Reconciliation of Non-GAAP Financial Measures—Adjusted Return on Invested Capital
($ in 000s) | Fiscal 2019
As
Reported(1) | Goodwill
and asset
impairment
charges(2) | Restructuring,
acquisition
and
integration
related
expenses(3) | Inventory
Fair
Value
Adjustment(4) | Legal
Settlement
Income,
Net of
Reserve
Adjustment(5) | Operating
Income
from
Discontinued
Operations(6) | Restructuring,
Store
Closure
and Other
Charges,
Net from
Disc.
Ops.(7) | Other
Operating
Income
Adjustments(8) | Depreciation
and
Amortization
Purchase
Accounting
Adjustment | Make-up
for Fiscal
2018
under
performance
and
other(9) | Pension
and
Other
Income(10) | Adjust
Invested
Capital to
Quarterly
Averages | Fiscal 2019
As
Adjusted |
Operating
Income | $ | (291,012 | ) | $ | 292,770 | | $ | 153,539 | | $ | 10,463 | | $ | (1,390 | ) | $ | 90,018 | | $ | 20,023 | | $ | 32,700 | | $ | (80,500 | ) | $ | 8,990 | | $ | 37,491 | | $ | — | | $ | 273,092 | |
Effective Tax
Rate | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % | | 21.12 | % |
Tax on Operating Income | | (61,462 | ) | | 61,833 | | | 32,427 | | | 2,210 | | | (294 | ) | | 19,012 | | | 4,229 | | | 6,906 | | | (17,002 | ) | | 1,899 | | | 7,918 | | | — | | | 57,677 | |
Net Operating Profit After Tax | $ | (229,550 | ) | $ | 230,937 | | $ | 121,112 | | $ | 8,253 | | $ | (1,096 | ) | $ | 71,006 | | $ | 15,794 | | $ | 25,794 | | $ | (63,498 | ) | $ | 7,091 | | $ | 29,573 | | $ | — | | $ | 215,415 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Total Debt and Capital Lease obligations | $ | 3,039,361 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | (65,806 | ) | $ | — | | $ | — | | $ | 322,016 | | $ | 3,295,571 | |
Total
Stockholders’
Equity | | 1,510,934 | | | 303,200 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 7,696 | | | 1,821,830 | |
Total Invested Capital | $ | 4,550,295 | | $ | 303,200 | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | (65,806 | ) | $ | — | | $ | — | | $ | 329,712 | | $ | 5,117,401 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Return on
Invested Capital | | (5.04 | )% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 4.21 | % |
| (1) | All “As Reported” financial data below is shown as it was filed in the Annual Report on Form 10-K for the year ended August 3, 2019. |
| (2) | Reflects a goodwill impairment charge attributable to the Supervalu acquisition. Refer to Note 7—Goodwill and Intangible Assets in Part II, Item 8 of the Annual Report on Form 10-K for additional information. |
| (3) | Primarily reflects expenses resulting from the acquisition of Supervalu, including severance costs, store closure charges, and acquisition and integration expenses. Refer to Note 5—Restructuring, Acquisition and Integration Related Expenses in Part II, Item 8 of the Annual Report on Form 10-K for additional information. |
| (4) | Reflects a non-cash charge related to the step-up of acquired Supervalu inventory from purchase accounting. |
| (5) | Reflects income received to settle a legal proceeding and a charge related to our assessment of legal proceedings, which are more fully described in Note 18—Commitments, Contingencies and Off-Balance Sheet Arrangements in Part II, Item 8 of the Annual Report on Form 10-K. |
| (6) | Operating income reported within Note 19—Discontinued Operations in Part II, Item 8 of the Annual Report on Form 10-K. |
| (7) | Amounts represent store closure charges and costs, and an inventory charges related to discontinued operations, net of the effect of fees received from credit card companies related to a settlement. |
| (8) | Reflects Compensation Committee approved adjustments to adjusted EBITDA performance and a pro forma adjustment to annualize acquired Supervalu operating income including adjustments for transition service agreement revenue and other adjustments described above. |
| (9) | Reflects a discretionary Compensation Committee adjustment to reduce the payout of annual incentive compensation to any Named Executive Officer. Adjusted EPS for purposes of determining performance was positively impacted by purchase accounting. |
| (10) | Reflects non-cash net periodic pension income and other non-operational investment income included within Other, net. |
(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 | % |
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Reconciliation of GAAP Earnings Per Diluted Common Share to Adjusted Earnings per Diluted Common Share
| Fiscal Year Ended
August 3, 2019
(53 weeks) |
Net loss attributable to UNFI per diluted common share(1) | $ | (5.56 | ) |
Restructuring, acquisition, and integration related expenses(2) | | 2.99 | |
Goodwill and asset impairment charges(3) | | 5.70 | |
Loss on debt extinguishment(4) | | 0.06 | |
Interest expense on senior notes(5) | | 0.06 | |
Inventory fair value adjustment(6) | | 0.20 | |
Legal settlement income, net of reserve adjustment(7) | | (0.03 | ) |
Discontinued operations store closures and other charges, net(8) | | 0.44 | |
Tax impact of adjustments(9) | | (1.78 | ) |
Adjusted EPS(10) | $ | 2.08 | |
LIFO charge related to the legacy UNFI business | | 0.29 | |
Unbudgeted rental costs from Supervalu sale-leaseback properties | | 0.12 | |
Derecognition of amortizing gains from sale-leaseback transactions | | 0.10 | |
Incremental pre-operational rent expense | | 0.04 | |
Tax impact of adjustments | | (0.12 | ) |
Compensation Adjusted EPS | $ | 2.51 | |
(Totals may not add due to rounding)
| (1) | Reflects the positive impact of an approximately $80 million purchase accounting adjustment. |
| (2) | Primarily reflects expenses resulting from the acquisition of Supervalu, including severance costs, store closure charges, and acquisition and integration expenses. |
| (3) | Reflects a goodwill impairment charge and the related adjustment attributable to the Supervalu acquisition. |
| (4) | Reflects non-cash charges related to the acceleration of unamortized debt issuance costs due to term loan prepayments and extinguishment charges from the Company’s term loan, which was in place prior to the acquisition of Supervalu. |
| (5) | Interest expense recorded in connection with the redemption of acquired Supervalu senior notes. |
| (6) | Non-cash charge related to the step-up in inventory values from purchase accounting. |
| (7) | Reflects income received to settle a legal proceeding and a charge related to our assessment of legal proceedings. |
| (8) | Amounts represent store closure charges and an inventory fair value adjustment related to discontinued operations, net of the effect of fees received from credit card companies related to a settlement. |
| (9) | Represents the tax effect of the adjustments. |
| (10) | The computation of adjusted diluted earnings per share is calculated using diluted weighted average shares outstanding, which includes the net effect of dilutive stock awards. |
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY E86188-P28916 For Against Abstain UNITED NATURAL FOODS, INC. 313 IRON HORSE WAY PROVIDENCE, RI 02908 SCAN TO VIEW MATERIALS & VOTE VOTE BY INTERNET Before The Meetin-g G o to www.proxyvote.com or scan the QR Barcode above Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. Eastern Time on December 17, 2019 for shares held directly and by 11:59 P.M. Eastern Time on December 16, 2019 for shares held in a Plan. Have your proxy card in hand when you access the website and follow the instructions to obtain your records and to create an electronic voting instruction form. During The Meetin g- Go to www.virtualshareholdermeeting.com/unfi2019 You may attend the Meeting on December 18, 2019 on the Internet at the website above and vote during the Meeting. Have available the information that(1)All “As Reported” financial data below is printed in the boxmarked by the arrow on the Notice regarding availability of Proxy Materials separately sent to you and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. Eastern Time on December 17, 2019 for shares held directly and by 11:59 P.M. Eastern Time on December 16, 2019 for shares held in a Plan. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. Mark, sign and date your proxy card and returnshown as it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Please sign exactly as your name(s) appear(s) hereon. When shares are held by joint owners, both should sign. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. NOTE: Also includes authorization to vote on any other matters that may properly come before themeeting or any adjournment or postponement thereof. 1b. Ann Torre Bates 1a. Eric F. Artz 1e. Michael S. Funk 1c. Denise M. Clark 1d. Daphne J. Dufresne 1h. Peter A. Roy 1i. Steven L. Spinner 1j. Jack Stahl 2. Ratification of the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending August 1, 2020. 3. To approve, on an advisory basis, our executive compensation. 4. To approve the United Natural Foods, Inc. 2020 Equity Incentive Plan. 1f. James P. Heffernan 1g. James L. Muehlbauer 1. Election of ten nominees as directors to serve until the 2020 annual meeting of stockholders. UNITED NATURAL FOODS, INC. The Board of Directors recommends you vote FOR each of the following nominees and FOR proposals 2, 3 and 4: ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain ! ! !
TABLE OF CONTENTS
E86189-P28916 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement and the 2019 Annual Report to Stockholders, which containswas filed within our Annual Report on Form 10-K are available at www.proxyvote.com. 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 stockholder(s) hereby appoint(s)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 Steven L. Spinnerthese 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 Jill E. Sutton as proxies, each withamortization expense that would have been recognized had Retail been included in continuing operations for the powerfull 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 appoint his/her substitute, and hereby authorize(s) Steven L. Spinner and Jill E. Sutton to represent and to vote, as designated on the reverse sideapplicable 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 proxy card, alladjustment 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 shares of common stock of UNITED NATURAL FOODS, INC. thatnon-cash LIFO charge. Prior periods have been revised to conform to the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held on Wednesday, December 18, 2019 at 4:00 PM Eastern Standard Time on the Internet through a virtual web conference at www.virtualshareholdermeeting.com/unfi2019. THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED AS INDICATED. IF NO CONTRARY INDICATION IS MADE, THE PROXY WILL BE VOTED IN FAVOR OF ELECTING THE TEN NOMINEES TO THE BOARD OF DIRECTORS, FOR EACH OF PROPOSALS 2, 3 AND 4, AND IN ACCORDANCE WITH THE JUDGMENT OF THE PERSONS NAMED AS PROXIES HEREIN, ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING. UNITED NATURAL FOODS, INC. Annual Meeting of Stockholders December 18, 2019, 4:00 PM EST This proxy is solicited by the Board of Directors Continued and to be marked, signed and dated on reverse sidecurrent year presentation.
