TABLE OF CONTENTSUNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
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Grocery Outlet Holding Corp.
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Grocery Outlet Holding Corp.
5650 Hollis Street
Emeryville, CA 94608
April 24, 2020![[MISSING IMAGE: lg_groceryoutletpn.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/lg_groceryoutletpn.jpg)
Dear Fellow Stockholders,
Thank you for your support of Grocery Outlet Stockholder:
It is my pleasure toOutlet. On behalf of the entire Board of Directors, we invite you to attend the 2022 Annual Meeting of Stockholders of Grocery Outlet Holding Corp. at 1:11:00 p.m.a.m. Pacific Daylight Time on Monday, June 8, 2020. The6, 2022.
It is our privilege to be entrusted with the leadership of Grocery Outlet, serving as stewards of your capital and working to develop strategies and drive operations to maximize long-term value. Fiscal year 2021 was our second full year as a public company, and one that presented many challenges, including the surges of COVID-19 variants, pandemic-related labor shortages, inflationary pressures and global supply chain disruptions. Due to these difficult macroeconomic conditions, and on the back of very strong COVID-related results in 2020, our top- and bottom-line performance in 2021 was below both our long-term growth algorithm and our historical track record of double digit annual growth in Net Sales and Adjusted EBITDA(1)over the prior decade. From 2019 to 2021, we grew Net Sales and Adjusted EBITDA at 9.7% and 8.6% on a compounded basis, respectively.
Despite our disappointing financial results, we are pleased with our operational performance and progress that we made on our growth initiatives.
•
We leveraged our unique and flexible buying model, strong vendor relationships and differentiated independent operator model to deliver the unbeatable deals and exciting treasure hunt experience that our customers love.
•
We expanded our store base with the opening of 35 net new stores, representing close to 10% unit growth.
•
We embarked on several new initiatives to expand our customer reach and engagement, including piloting e-commerce and strategically expanding our product assortment.
We are confident that the strength of our differentiated model, combined with our strategic initiatives position us well for long-term growth. We are grateful to all of our entrepreneurial Independent Operators (“IOs”) and their employees for the dedication and commitment that they showed each and every day throughout a difficult year.
Proposed Fundamental Changes to Our Governance At the 2022 Annual Meeting will be a virtual meeting of stockholders. You will be ableStockholders to attend the Annual Meeting, vote your shares electronically and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/GO2020. Stockholders will be able to listen, vote, and submit questions from their home or any locationInitiate Implementation of Our Roadmap
In early 2021, Grocery Outlet engaged in conversations with internet connectivity. To participate in the meeting, you must have the sixteen-digit number that is shown on your Notice of Internet Availability or on your proxy card if you elected to receive proxy materials by mail. The following pages contain the formal Notice of the Annual Meeting and our Proxy Statement.
At this year’s Annual Meeting, you will be asked to elect as directors the four nominees named in the attached Proxy Statement, ratify the selection of Deloitte and Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 2, 2021, cast an advisory (non-binding) vote approving the Company’s named executive officer compensation and cast an advisory (non-binding) vote on the frequency of future advisory votes to approve executive compensation.
We have elected to provide access to proxy materialsstockholders representing over the Internet under the Securities and Exchange Commission’s “notice and access” rules to reduce the environmental impact and cost54% of our Annual Meeting. However, if you preferthen issued and outstanding shares. We both personally participated in these calls.
We took feedback received during this engagement process and formulated a roadmap to receive paper copies ofenhance our proxy materials, please follow the instructions includedcorporate governance. Our governance roadmap, which is described in the Notice of Internet Availability.
Your vote is important. Please mark, sign, date, and returnmore detail in the accompanying proxy card or voting instruction formstatement, sets forth a phased process that enables us to thoughtfully transition our governance practices from a private-equity controlled company to an independent public company with a diverse stockholder base. Notably, in early 2022, our Board and Nominating and Corporate Governance Committee took the following actions:
•
We adopted a director resignation policy that provides for the contingent resignation of a director who receives more “withheld” votes than “for” votes at an uncontested director election, as well as the process of the Nominating and Corporate Governance Committee and the Board to consider such resignation offer and to publicly disclose the Board’s decision on whether to accept such offer.
•
We approved, and have submitted proposals in the postage-paid envelope or instructaccompanying proxy statement for stockholder approval, to (i) eliminate certain supermajority voting provisions from our Certificate of Incorporation and (ii) fully declassify the Board by 2026.
•
We amended our Amended and Restated Bylaws to (i) eliminate supermajority provisions to amend our bylaws and (ii) implement a majority voting standard for directors in uncontested elections and a plurality voting standard in contested elections (effective for and after our 2023 annual meeting of stockholders).
We greatly appreciate the input we received from stockholders that helped us shape this plan, and we respectfully request your vote in accordance with our Board’s recommendations for the 2022 Annual Meeting of Stockholders.
Sustainability and Corporate Responsibility at Grocery Outlet
At Grocery Outlet, our historical growth has been powered by telephone or viaour unique business model in which sustainability is at the internetheart of our culture, strategy and operations. Our opportunistic sourcing capability and flexible supply chain allow us to procure product that would otherwise go to waste. We empower our IOs to curate their assortments and offer these products at deep value to their local customers. We believe that building long-term, win-win partnerships with our communities and our suppliers is essential to our business model and future growth. Moreover, we recognize that reducing waste and enhancing the productive use of resources is intrinsically tied to our operational excellence. And hence, true to our mission of Touching Lives for the Better, we believe that sustainable business practices are essential to the creation of long-term value at Grocery Outlet.
During our stockholder outreach, we also received valuable stockholder feedback related to environmental and social matters. During such engagement, we consistently heard that our stakeholders appreciated the environmental and social attributes that are embedded within our model and that they looked forward to receiving a formal report describing metrics material to our business. Following those conversations, we created a sustainability working group consisting of representatives from various Grocery Outlet departments as well as external advisors. Our objective is to how you would like your shares voted. Instructionsidentify and assess additional ESG factors that are included on the proxy cardmaterial to our business, develop strategies to support our ESG goals, and voting instruction form.formalize our disclosures to demonstrate progress. To that end, we plan to conduct a materiality assessment and gap analysis in 2022 and publish our first sustainability report in 2023.
On behalf of our boardGrocery Outlet’s Board of directors,Directors and the management team, we would likepledge to thankcontinue to work as your fiduciaries to enable the sustainability and success of Grocery Outlet’s long-term strategies. Thank you for your continued interest and investment in Grocery Outlet.support.
| | Sincerely, | | | | |
| | | | | Sincerely,![[MISSING IMAGE: sg_ericjlindbergjr-bwlr.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/sg_ericjlindbergjr-bwlr.jpg) | |
| | Erik D. Ragatz | | | Eric J. Lindberg, Jr. | |
| | Chairman of the Board | | | |
| | | Eric Lindberg, Jr.
|
| | | Chief Executive Officer | |
Notice of Annual Meeting of Stockholders
To be held on Monday, June 8, 20206, 2022
1:11:00 p.m.a.m. Pacific Daylight Time
www.virtualshareholdermeeting.com/GO2020GO2022
To the Stockholders of Grocery Outlet Holding Corp.:
Notice is hereby given that the 20202022 Annual Meeting of Stockholders (the “Annual“2022 Annual Meeting”) of Grocery Outlet Holding Corp. (the “Company”) will be on Monday, June 8, 2020,6, 2022, at 1:11:00 p.m.a.m. Pacific Daylight Time online through a live webcast at www.virtualshareholdermeeting.com/GO2020GO2022. At the 2022 Annual Meeting, Stockholdersstockholders will be asked:
1.
| To elect the four Class I directors named in our Proxy Statement to hold office until the 2023 annual meeting of stockholders and until their respective successors have been duly elected and qualified; |
2.
| To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the current fiscal year ending January 2, 2021; |
3.
| To hold an advisory (non-binding) vote to approve the Company’s named executive officer compensation; |
4.
| To hold an advisory (non-binding) vote on whether the frequency of the stockholder vote on our executive compensation should be every one, two or three years; and |
5.
| To transact such other business as may properly come before the Annual Meeting or any adjournments or postponements thereof. |
1.
To elect the three Class III directors named in the accompanying proxy statement to hold office until the 2025 annual meeting of stockholders and until their respective successors have been duly elected and qualified, or until such director’s earlier resignation, retirement or other termination of service;
2.
To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022;
3.
To hold an advisory (non-binding) vote to approve the Company’s named executive officer compensation;
4.
To approve amendments to our Amended and Restated Certificate of Incorporation to (i) eliminate applicable supermajority voting requirements and (ii) make certain other changes to remove obsolete language;
5.
To approve an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board of Directors by 2026; and
6.
To transact such other business as may properly come before the 2022 Annual Meeting or any adjournment or postponement thereof.
The accompanying proxy statement describes each of these items of business in detail.
Only stockholders of record as of April 13, 202011, 2022 will be entitled to attend and vote at the 2022 Annual Meeting and any adjournmentsadjournment or postponementspostponement thereof. There will not be a physical location for the 2022 Annual Meeting and you will not be able to attend the meeting in person. We have designed the virtual format of the 2022 Annual Meeting to provide stockholders substantially the same rights and opportunities to participate as they would have at an in-person meeting.
Your vote is important. To be sure your vote counts and assure a quorum, please promptly vote sign, date and returnover the enclosed proxy card, or if you prefer, please follow the instructions on the enclosed proxy card for voting by internetInternet or by telephone or by mail as described in the accompanying proxy statement, whether or not you plan to participate in the 2022 Annual Meeting via live webcast. If your common stock is held in the name of your broker, bank or other nominee you will need to follow the instructions provided to you by the institution that holds your common stock to instruct them how to vote your shares.
| | | By order of the board of directors,
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| | | |
| | | Pamela B. Burke
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| | | Chief Administrative Officer,
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| | | General Counsel & Secretary
|
By order of the Board of Directors,
Pamela B. Burke
Chief Stores Officer,
Interim General Counsel & Secretary
Emeryville, California
April 24, 2020
This Proxy Statement and accompanying proxy card are first being made available on or about April 24, 2020.22, 2022
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE 2022 ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8, 2020:6, 2022:
| | | Our official Notice of the 2022 Annual Meeting of Stockholders, Proxy Statement and 2021 Annual Report, including our Form 10-K for fiscal year 2021, are available electronically at www.proxyvote.com | | |
Our official Notice of Annual Meeting of Stockholders, Proxy Statement and 2019 Annual Report, including our Form 10-K for fiscal year 2019, are available electronically at https://investors.groceryoutlet.com/financial-information/sec-filings
TABLE OF CONTENTS
As used herein, “Grocery Outlet,” the “Company,” “we,” “us,” “our” or “our business” refers to Grocery Outlet Holding Corp. (collectively with its wholly owned subsidiaries), except as expressly indicated or the context otherwise requires.
PROXY VOTING METHODS
If at the close of business on April 13, 2020, you were a stockholder of record or held shares through a broker or bank, you may vote your shares by proxy at the Annual Meeting. If you were a stockholder of record, you may vote your shares over the Internet, by telephone or by mail, or you may vote via webcast during the Annual Meeting. You may also revoke your proxy at the times and in the manners described in the General Information section of this Proxy Statement. For shares held through a broker, bank or other nominee, you may submit voting instructions to your broker, bank or other nominee. Please refer to information from your broker, bank or other nominee on how to submit voting instructions.
If you are a stockholder of record, your vote must be received by 11:59 p.m., Pacific Daylight Time, on June 7, 2020 to be counted. If you hold shares through a broker, bank or other nominee, please refer to information from your bank, broker or nominee for voting instructions.
To vote by proxy if you are a stockholder of record:
BY INTERNET
• | Go to the website www.proxyvote.com and follow the instructions, 24 hours a day, seven days a week.
|
You will need the 16-digit number included on your proxy card to obtain your records and to create an electronic voting instruction form.
From a touch-tone telephone, dial 1-800-690-6903 and follow the recorded instructions, 24 hours a day, seven days a week.
You will need the 16-digit number included on your proxy card in order to vote by telephone.
BY MAIL
Mark your selections on the proxy card.
Date and sign your name exactly as it appears on your proxy card.
Mail the proxy card in the enclosed postage-paid envelope provided to you.
To reduce the environmental impact and the administrative and postage costs of the Annual Meeting, we encourage stockholders to vote via the Internet or by telephone, both of which are available 24 hours a day, seven days a week, until 11:59 p.m. Pacific Daylight Time on June 7, 2020. Stockholders may revoke their proxies at the times and in the manners described on page 1 of this proxy statement.We operate
“Adjusted EBITDA” referred to in preceding letter to stockholders, is a non-GAAP financial measure, which excludes the impact of certain special items. For supplemental information about this number and a reconciliation of adjusted EBITDA to net income computed in accordance with GAAP see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—GAAP to Non-GAAP Reconciliations” included in our Annual Report on a fiscal calendar widely used byForm 10-K for the retail industry that results in a given fiscal year consisting of a 52- or 53-week period ending on the Saturday closest to December 31st each year. References to “fiscal year 2019” or “fiscal 2019” refer to the period from December 30, 2018 to December 28, 2019, which is of a 52-week fiscal year. References to “fiscal year 2018” or “fiscal 2018” refer to the period from December 31, 2017 to December 29, 2018, which was a 52-week fiscal year. References to “fiscal year 2017” or “fiscal 2017” refer to the period fromended January 1, 2017 to December 30, 2017, which was a 52-week fiscal year.2022.
This summary highlights information contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider and you should read the entire Proxy Statement and our Annual Report on Form 10-K for the fiscal year ended December 28, 2019 (our “AnnualJanuary 1, 2022 (“Fiscal Year 2021”) (the “2021 Annual Report”) before voting. A copy of our 2021 Annual Report, including financial statements and operating performance, is being sent simultaneously with this Proxy Statement to each stockholder who requested paper copies of these materials and will also be available at www.proxyvote.com.www.proxyvote.com.
ANNUAL MEETING OF STOCKHOLDERSAs used in this proxy statement, unless the context otherwise requires, references to “Grocery Outlet,” the “Company,” “we,” “us,” “our” or “our business” refers to Grocery Outlet Holding Corp. (collectively with its wholly owned subsidiaries), except as expressly indicated or the context otherwise requires.The information available on or through our website is not part of this Proxy Statement.
The accompanying proxy statement and proxy card are first being made available on or about April 22, 2022.
2022 Annual Meeting of Stockholders
Time and Date
1:
| | Date: | | | June 6, 2022 | | |
| | | Time: | | | 11:00 p.ma.m. Pacific Daylight Time June 8, 2020 | | |
| | | Location: | | | Via webcast at www.virtualshareholdermeeting.com/GO2022 | | | Record Date
April 13, 2020
|
| | | Record Date: | | | April 11, 2022 | | |
Place
www.virtualshareholdermeeting.com/GO2020
| | Voting: | | | Number of Common Shares Eligible to Vote at the MeetingStockholders as of the Record Date
90,006,592
record date are entitled to vote. Each share of common stock is entitled to one vote. | | |
To participate in the 2022 Annual Meeting of Stockholders (including any postponement or adjournment thereof), you must have the sixteen-digit number that is shown on your Notice of Internet Availability or on your proxy card if(if you elected to receive proxy materials by mail.mail).
SUMMARY VOTING MATTERSProposals and Voting Recommendations
| | PROPOSAL | | | BOARD RECOMMENDATION | | | PAGE | |
| | Matter1
Election of Class III directors | | | Board Recommendation
| | | Page Reference
(for more detail)
|
Election of Directors
| | | FOR each director nominee | | | | |
| | 2
Ratification of Independent Registered Public Accounting Firmappointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal year 2022 | | | FOR | | | | |
| | 3
Advisory (non-binding) vote to approve the Company’sour Named Executive Officer compensation | | | FOR | | | | |
| | 4
Amendments to our Amended and Restated Certificate of Incorporation to (i) eliminate applicable supermajority voting requirements; and (ii) make certain other changes to remove obsolete language | | | FOR | | | | |
| | 5
Amendment to our Amended and Restated Certificate of Incorporation to declassify our Board of Directors by 2026 | | | FOR | | | | |
| | Page | | | 1 | | | Grocery Outlet 2022 Proxy Statement | | | FOR | |
Voting Methods
You can vote in one of four ways:
✓
Visit www.proxyvote.com to vote VIA THE INTERNET
✓
Call 1-800-690-6903 to vote BY TELEPHONE
✓
If you received a printed copy of the proxy materials, sign, date and return your proxy card or voting instruction form in the prepaid enclosed envelope to vote BY MAIL
✓
Attend the virtual meeting to vote DURING THE MEETING
To reduce our administrative and postage costs and the environmental impact of our 2022 Annual Meeting, we encourage stockholders to vote via the Internet or by telephone, both of which are available 24 hours a day, seven days a week, until 11:59 p.m. Eastern Time on June 5, 2022. Stockholders may revoke their proxies at the time and in the manner described on page 79 of this Proxy Statement. If your shares are held in “street name” through a bank, broker or other holder of record, you will receive voting instructions from the holder of record that you must follow in order for your shares to be voted. If you wish to vote in person at the meeting, you must obtain a legal proxy from the bank, broker or other holder of record that holds your shares.
About Grocery Outlet Holding Corp.
Based in Emeryville, California, Grocery Outlet is a high-growth, extreme value retailer of quality, name-brand consumables and fresh products sold through a network of independently operated stores. Grocery Outlet has more than 410 stores in California, Washington, Oregon, Pennsylvania, Idaho, Nevada and New Jersey.
Fiscal Year 2021 Highlights
Fiscal Year 2021 was our second full year as a public company, and one that presented many challenges including the pandemic and global supply chain issues. Due to these challenging macroeconomic conditions, and on the back of very strong COVID-related results in the fiscal year ending January 2, 2021 (“Fiscal Year 2020”), our top- and bottom-line performance in Fiscal Year 2021 was below our long-term growth algorithm and our historical track record of double-digit annual growth in Net Sales and Adjusted EBITDA(2)over the prior decade. From fiscal year 2019 to fiscal year 2021, we grew Net Sales and Adjusted EBITDA(2) at 9.7% and 8.6% on a compounded basis, respectively.
Despite our disappointing financial results, we are pleased with our operational performance and progress we made on our growth initiatives. We leveraged our unique and flexible business model to deliver the unbeatable deals and exciting treasure hunt experience that our customers love. While the pandemic continued to fluctuate in severity, we were able to opportunistically secure various products originally targeted for other industries that would have otherwise gone to waste. We expanded our store base with the opening of 35 net new stores in 2021, representing close to 10% unit growth. In addition, we embarked on several new initiatives to expand our customer reach and engagement, including piloting e-commerce and strategically expanding our product assortment.
Our independent operators continued to deliver exceptional values and the WOW! shopping experience to their local communities. While the past year presented our IOs with unprecedented challenges, they rose to the occasion in order to serve their customers and we continued to invest in systems and process improvements to support them.
We realigned our organizational structure to streamline and strengthen corporate resources available to our independent operators, while continuing to support local decision-making and independence. To lead this effort, in late 2021 we took action to promote Pamela B. Burke, our then Chief Administrative Officer, General Counsel and Secretary, to the newly created position of Chief Stores Officer (which was effective on January 1, 2022).
| | Page | | | 2 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Our Fiscal Year 2021 results reflect solid execution during a challenging environment while continuing to scale our business in support of our long-term growth objectives. Financial highlights from the Fiscal Year 2021 include:
| | Net Sales $3.08 Billion(1) | | | | Comparable Store Sales -6.0% (+6.6% on a two-year stacked basis) | |
| | Advisory (non-binding) vote on whether the frequencyNet Income
$62.3 Million
$0.63 Diluted EPS | | | | 415 Stores at Fiscal Year End 35 Net New Stores Opened | |
| | Adjusted Net Income(2) $89.9 Million
$0.90 Adjusted Diluted EPS(2) | | | | Adjusted EBITDA(2) $198.5 Million | |
(1)
Net Sales decreased 1.8% and were roughly flat versus the prior year after adjusting for the 53rd week in Fiscal 2020.
(2)
Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures, which exclude the impact of certain special items. For supplemental information about these numbers and a reconciliation of adjusted EBITDA and non-GAAP adjusted net income to net income computed in accordance with GAAP see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—GAAP to Non-GAAP Reconciliations” included in our Annual Report on Form 10-K for the fiscal year ended January 1, 2022.
Except where noted, each of the above comparisons is based on a 52-week Fiscal Year 2021 versus a 53-week Fiscal Year 2020. For more complete information regarding our 2021 performance, please review our 2021 Annual Report.
Stockholder Engagement
Our Board and management value the opportunity to engage with our stockholders to better understand and focus on the priorities that matter most to them, and to foster consistent and constructive dialogue. Throughout the year, our Investor Relations team and leaders of our business engage with our stockholders to seek their input, to remain well-informed regarding their perspectives and help increase their understanding of our business and industry. The feedback received from our stakeholder outreach efforts is communicated to and considered by the Board, and our engagement activities have produced valuable feedback that helps inform our decisions and our strategy, where appropriate.
Following the distribution of equity owned by our former controlling stockholder in 2020, we did not have a single stockholder beneficially holding over 11% of the outstanding shares of our common stock as of the end of Fiscal Year 2020. This change in concentration of stockholders presented an ideal opportunity for our directors and members of senior management to proactively initiate investor outreach efforts through requested meetings with stockholders. From these requests, during the first quarter of 2021 we were able to engage with stockholders representing over 54% of our issued and outstanding shares (the “Q1 2021 Stockholder Engagement”).
| | | As part of the stockholder voteQ1 2021 Stockholder Engagement, we solicited feedback from stockholders regarding their views on our executive compensation should be every one, two or three yearsgovernance, sustainability and various other matters integral to the Company, including human capital management, Board composition and diversity, and other ESG topics. Key impacts of such engagement are noted throughout this Proxy Statement. | | |
| | Page | | | 3 | | | Grocery Outlet 2022 Proxy Statement | | | Once every year | |
Governance
CLASS III DIRECTOR NOMINEES AS OF RECORD DATE
The Board has nominated each of the three Class III directors listed below to be elected at the 2022 Annual Meeting for three-year terms.
| | NAME | | | AGE | | | POSITION | |
| | Carey F. Jaros | | | 44 | | | Director
Member of the Audit and Risk Committee | |
| | Eric J. Lindberg, Jr. | | | 51 | | | Chief Executive Officer | |
| | Norman S. Matthews | | | 89 | | | Director
Member of the Compensation Committee
Member of the Nominating and Corporate Governance Committee | |
•
Ms. Jaros, an independent director since September 2020, serves as President and Chief Executive Officer and a member of the board of directors of GOJO Industries, Inc., a global manufacturer of hand hygiene and surface disinfecting products and the maker of PURELL® brand Hand Sanitizer. As a sitting CEO, Ms. Jaros brings perspective on a broad range of management topics and also contributes her knowledge of retail and consumer products. She has substantial experience developing corporate strategy, assessing emerging industry trends as well as optimizing business operations. Ms. Jaros has been identified by our Board as an audit committee financial expert.
•
Mr. Lindberg, a director since January 2006, has served as our Chief Executive Officer since January 2019. Previously, from January 2006 to December 2018, Mr. Lindberg served as our Co-Chief Executive Officer, and he has served in various positions with the Company since 1996. As our Chief Executive Officer, Mr. Lindberg brings to our Board significant senior leadership, and his detailed knowledge of our operations, finances, strategies and industry garnered over his 25-year tenure with us makes him well qualified to serve as our Chief Executive Officer and as member of the Board.
•
Mr. Matthews, an independent director since 2014, served in various senior management positions for Federated Department Stores from 1978 to 1988, including most recently as President from 1987 to 1988. Mr. Matthews has extensive knowledge of the retail industry and strategic marketing and sales and corporate governance practices from his years as a senior executive and member of the boards of directors of several public companies (including two other current public company boards).
| | Page | | | 4 | | | Grocery Outlet 2022 Proxy Statement | | | | |
BOARD NOMINEES
The following table provides summary information about each director nominee.GOVERNANCE PRINCIPLES
Set forth below are certain of our key governance principles:
| | WHAT WE DO | | | WHAT WE DON’T DO | |
| | ✓
Independent, non-Executive Chairman of Board | | | No dual classes of common stock | |
| | ✓
Strong director independence, with fully independent Committees and a substantially independent Board | | | No poison pill | |
| | ✓
Since IPO, significant Board refreshment and enhanced Board diversity | | | No director overboarding | |
| | ✓
Comprehensive Board and Committee evaluation process | | | Committee Membership*![[MISSING IMAGE: tm229979d2-icon_wedontdopn.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/tm229979d2-icon_wedontdopn.jpg) No hedging or pledging | |
| | Name, Age✓
Regular executive sessions of independent directors | | |
| | ✓
Plurality plus resignation policy for uncontested director elections, with majority voting standard effective as of 2023 annual meeting of stockholders | | |
| | ✓
Significant Board and Committee oversight of strategy and risk | | |
| | ✓
Our Nominating and Corporate Governance Committee is overseeing our ESG strategy and process | | |
| | | In addition to the Board’s recent adoption of a majority voting standard effective in 2023, the Board has submitted proposals for the 2022 Annual Meeting for stockholders to approve amendments to our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to: •
Eliminate certain supermajority voting provisions •
Declassify the Board by 2026 | | |
| | Page | | | 5 | | | Grocery Outlet 2022 Proxy Statement | | | Director | |
Compensation of our Named Executive Officers
KEY ELEMENTS OF FISCAL YEAR 2021 COMPENSATION
Substantially consistent with Fiscal Year 2020, the key elements of our NEO pay mix in Fiscal Year 2021 consisted of:
•
Base salary
•
The AIP, an annual performance-based cash bonus, generally based on our achievement of adjusted EBITDA and comparable store sales performance goals
•
Long-term equity incentives, consisting of time-vesting restricted stock units (“RSUs”) and performance-vesting stock units (“PSUs”)
◦
The Committee set the mix of long-term equity incentive value as 70% PSUs and 30% RSUs for our Chief Executive Officer and 60% PSUs and 40% RSUs for the other Named Executive Officers, thereby making a substantial portion of their compensation performance-based
◦
PSUs were based on our achievement of revenue and adjusted EBITDA growth goals, equally weighted, over a three-year performance period
In line with our compensation philosophy that a significant portion of our executive pay be tied to company performance:
•
approximately 83% of our Chief Executive Officer’s and 75% of our other NEO’s target total compensation is variablewith value ultimately tied to the achievement of objective corporate goals or stock price performance
•
approximately 64% of our Chief Executive Officer’s and 52% of our other NEO’s target total compensation is performance-based through the achievement of objective corporate goals
The charts below illustrate the target mix of pay (excluding benefits and perquisites) for our CEO and other NEOs for Fiscal Year 2021.
FISCAL YEAR 2021 DETERMINATIONS AND PERFORMANCE
| | BASE SALARY | | | AIP | | | EQUITY | |
| | ✓
since Reasonable merit base salary increases | | | Class✓
No change to target bonus opportunity as % of base salary ✓
Based on our performance, no AIP awards were earned or paid to any of our Named Executive Officers in Fiscal Year 2021 | | | Principal Occupation✓
No change to target equity opportunity as % of base salary | |
| | Page | | | 6 | | | Grocery Outlet 2022 Proxy Statement | | | CC | | | A&RC
| | | NCGC
|
Kenneth W. Alterman, 64
| | | 2011
| | | I
| | | Executive Advisor and Former Chief Executive Officer at Savers, Inc.
| | | | | | | | | |
John E. Bachman, 64
| | | 2019
| | | I
| | | Former Chief Operating Officer and Partner of PriceWaterhouseCoopers
| | | | | | | | | |
Thomas F. Herman, 80
| | | 2004
| | | I
| | | Management Consultant and Former President and Chief Operating Officer of Good Guys, Inc.
| | | | | | | | | |
Erik D. Ragatz, 47***
| | | 2014
| | | I
| | | Partner, Hellman & Friedman
| | | | | | | | | |
*
| | | CC
| | | Compensation Committee
|
| | | A&RC
| | | Audit & Risk Management Committee
|
| | | NCGC
| | | Nominating and Corporate Governance Committee
|
**
| | | Chair of the Committee
|
***
| | | Chair of the Board
|
PROXY STATEMENT
2020 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 8, 2020 2022 Annual Meeting of Stockholders to be held on June 6, 2022
This Proxy Statement is being furnished together with our 2021 Annual Report for the fiscal year ended December 28, 2019 in connection with the solicitation of proxies by our board of directors (“Board of Directors” or “Board”) for the 2022 Annual Meeting of Stockholders of Grocery Outlet Holding Corp. on June 8, 2020 (the “Annual Meeting”), and any postponements or adjournments of the meeting.Meeting. On or about April 24, 2020,22, 2022, we will mail to each of our stockholders (other than those who previously requested electronic delivery or previously elected to receive delivery of a paper copy of the proxy materials) a Notice of Internet Availability of Proxy Materials containing instructions on how to access and review the proxy materials via the internetInternet and how to submit a proxy electronically using the internet.Internet.
FREQUENTLY ASKED QUESTIONSCORPORATE GOVERNANCE AND BOARD MATTERSWhen and where willCorporate Governance Evolution
While pursuing our long-term strategy of being the meeting take place?
The Annual Meeting will be held on Monday, June 8, 2020nation’s largest extreme value retailer by bringing top brands to customers at 1:00 p.m. Pacific Daylight Time. The 2020 Annual Meeting will be a virtual meeting of stockholders. You will be able to attend the Annual Meeting, vote your shares electronically and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/GO2020. To participate in the meeting, you must have the sixteen-digit number that is shown on your Notice of Internet Availability of Proxy Materials or on your proxy card if you elected to receive proxy materials by mail. You will be able to attend the Annual Meeting from any location with internet connectivity. Online access to the Annual Meeting will begin at 12:45 p.m. on June 8, 2020. We encourage our stockholders to access the meeting prior to the start time.
How do stockholders participate in the virtual meeting?
To participate in the meeting, you must have the 16-digit number that is shown on your Notice of Internet Availability of Proxy Materials or on your proxy card if you elected to receive proxy materials by mail. You may access the Annual Meeting by visiting www.virtualshareholdermeeting.com/GO202. We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting or submitting questions. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the virtual meeting log in page.
If you are a record holder, appointing a proxy in response to this solicitation will not affect your right to attend the Annual Meeting and to vote during the Annual Meeting. Please note that if you hold your common stock in “street name” (that is, through a broker, bank or other nominee), you will receive instructions from your broker, bank or other nominee that you must follow in order to have your shares of common stock voted.
Stockholders may submit questions and comments during the meeting. During the meeting, we will spend up to 15 minutes answering stockholder questions that comply with the meeting rules of procedure. The rules of procedure will be posted on the virtual meeting web portal. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.
Why did I receive only a Notice of Internet Availability of Proxy Materials?
As permitted by the Securities and Exchange Commission (the “SEC”), the Company is furnishing to stockholders its notice of the Annual Meeting (the “Notice”), this Proxy Statement and the 2019 Annual Report primarily over the internet. On or about April 24, 2020, we will mail to each of our stockholders (other than those who previously requested electronic delivery or previously elected to receive delivery of a paper copy of the proxy materials) a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) containing instructions on how to access and review the proxy materials via the internet and how to submit a proxy electronically using the internet. The Notice of Internet Availability also contains instructions on how to receive, free of charge, paper copies of the proxy materials. If you received the Notice of Internet Availability, you will not receive a paper copy of the proxy materials unless you request one.
We believe the delivery options thatprices they love, we have chosen will allow usrelied on protections from significant macroeconomic and stock price volatility and potential short-term hostile threats through the use of customary governance provisions for new public companies. Our governance structure also has been useful and appropriate given our recent transition to provide our stockholders witha non-controlled company following the proxy materials they need, while minimizing the cost of the delivery of the materialssale and the environmental impact of printing and mailing paper copies.
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What is the purpose of this meeting and these materials?
We are providing these proxy materials in connection with the solicitation by our board of directors of proxies to be voted at the Annual Meeting and any adjournments or postponements of the meeting.
At the Annual Meeting, you will be asked to vote on the following matters:
Proposal 1: Election of four Class I directors to hold office until the 2023 annual meeting of stockholders and until their respective successors have been duly elected and qualified;
Proposal 2: Ratification of the appointment of Deloitte and Touche LLP as our independent registered public accounting firm for the current fiscal year ending January 2, 2021;
Proposal 3: Approval, in a non-binding advisory vote, of our compensation paid to our named executive officers;
Proposal 4: Approval, in a non-binding advisory vote, on whether the frequency of the stockholder vote on our executive compensation should be every one, two or three years; and
Any other business that may properly come before the Annual Meeting or any adjournments or postponements thereof.
What are the voting recommendations of the board of directors on these matters?
The board of directors recommends that you vote your shares as follows:
Proposal 1: FOR each of the board’s four nominees for the board of directors;
Proposal 2: FOR the ratification of the appointment of Deloitte and Touche LLP as our independent registered public accounting firm for the current fiscal year ending January 2, 2021;
Proposal 3: FOR the approval, on an advisory basis, of our Named Executive Officer compensation;
Proposal 4: FOR a frequency of every year for future advisory votes to approve executive compensation.
Are all of the Company’s directors standing for election to the board of directors at the Annual Meeting?
No, only our Class I directors are standing for re-election at this time. Our Class II directors will stand for election in 2021 and our Class III directors will stand for election in 2022.
Why is the 2020 Annual Meeting being held online?
Due to the public health impact of the coronavirus outbreak (COVID-19) and to support the health and well-being of our stockholders and other participants at the Annual Meeting, our board of directors has determined to hold our 2020 Annual Meeting via live webcast. This virtual meeting will provide the same rights and advantages that would be provided by a physical meeting. Stockholders will be able to present questions online during the meeting, providing our stockholders with the opportunity for meaningful engagement with the Company.
Who is entitled to vote at the Annual Meeting?
The record date for the Annual Meeting is April 13, 2020. You have one vote for each sharedistribution of our common stock that you owned at the close of business on the record date, provided that on the record date those shares were either held directly in your name as the stockholder of record or were held for you as the beneficial owner through a bank, broker, or other intermediary. As of that date, there were 90,006,592 shares of common stock outstanding entitled to vote. There is no other class of voting securities outstanding.
What is the difference between holding shares as a stockholder of record and as a beneficial owner?
As summarized below, there are some distinctions between shares held of record and those owned beneficially.
Stockholder of Record. If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered to be the stockholder of record with respect to those shares, and we have sent the Notice of Internet Availability directly to you. As a stockholder of record, you have the right to grant your voting proxy directly to us or to vote during the live webcast of the Annual Meeting.
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Beneficial Owner. If your shares are held in a stock brokerage account or by a bank or other intermediary, you are considered to be the beneficial owner of shares held in “street name,” and the Notice of Internet Availability has been forwarded to you by your bank, broker, or intermediary (which is considered to be the stockholder of record with respect to those shares). As a beneficial owner, you have the right to direct your bank, broker, or intermediary on how to vote. Your bank, broker, or intermediary has sent you a voting instruction card for you to use in directing the bank, broker, or intermediary regarding how to vote your shares. However, since you are not the stockholder of record, you may not vote these shares during the live webcast of the Annual Meeting.
What options are available to me to vote my shares?
Whether you hold shares directly as the stockholder of record or through a bank, broker, or other intermediary, your shares may be voted at the Annual Meeting by following any of the voting options available to you below:
You may vote via the internet.
If you received a Notice of Internet Availability by mail, you can submit your proxy or voting instructions over the internet by following the instructions provided in the Notice of Internet Availability;
If you received a Notice of Internet Availability or proxy materials by email, you may submit your proxy or voting instructions over the internet by following the instructions included in the email; or
If you received a printed set of the proxy materials by mail, including a paper copy of the proxy card or voting instruction form, you may submit your proxy or voting instructions over the internet by following the instructions on the proxy card or voting instruction form.
You may vote via the telephone.
If you are a stockholder of record, you can submit your proxy by calling the telephone number specified on the paper copy of the proxy card you received if you received a printed set of the proxy materials. You must have the control number that appears on your proxy card available when submitting your proxy over the telephone.
Most stockholders who hold their shares in street name may submit voting instructions by calling the number specified on the paper copy of the voting instruction form provided by their bank, broker, or other intermediary. Those stockholders should check the voting instruction form for telephone voting availability.
You may vote by mail.
If you received a printed set of the proxy materials, you can submit your proxy or voting instructions by completing and signing the separate proxy card or voting instruction form you received and mailing it in the accompanying prepaid and addressed envelope.
You may vote during the meeting.
All stockholders of record may vote while attending the Annual Meeting via live webcast while the polls remain open at visiting www.virtualshareholdermeeting.com/GO2020. You will need your number found in the Notice of Availability or your proxy card. However, if you are the beneficial owner of shares held in street name through a bank, broker, or other intermediary, you should receive separate instructions from the holder of your common stock describing how you can vote that stock.
Even if you plan to attend the Annual Meeting, we recommend that you submit your proxy or voting instructions in advance to authorize the voting of your shares at the Annual Meeting to ensure that your vote will be counted if you later are unable to attend.
What if I don’t vote for some of the items listed on my proxy card or voting instruction card?
If you properly execute and return your proxy card but do not mark selections, your shares will be voted in accordance with the recommendations of our board of directors. If you indicate a choice with respect to any matter to be acted upon on your proxy card, your shares will be voted in accordance with your instructions.
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If you are a beneficial owner and hold your shares in street name through a bank, broker, or other intermediary and do not give voting instructions to the bank, broker, or intermediary, the bank, broker, or other intermediary, as applicable, will determine if it has the discretionary authority to vote on the particular matter. Under applicable rules, brokers have the discretion to vote on routine matters (sometimes referred to as “broker discretionary voting”), such as the ratification of the selection of accounting firms, but do not have discretion to vote on non-routine matters, including the election of directors. Our Proposal 2 (ratify the appointment of our independent registered public accounting firm for fiscal year 2020) is the only proposal in this Proxy Statement that is considered a routine matter. The other proposals are not considered routine matters, and without your instructions, your broker cannot vote your shares.
If you do not provide voting instructions to your broker, and your broker indicates on its proxy card that it does not have discretionary authority to vote on a particular proposal, your shares will be considered to be “broker non-votes” with regard to that matter. Proxy cards that reflect a broker non-vote with respect to at least one proposal to be considered at the Annual Meeting (so long as they do not apply to all proposals to be considered) will be considered to be represented for purposes of determining a quorum but generally will not be considered to be entitled to vote with respect to that proposal. Broker non-votes are not counted in the tabulation of the voting results with respect to proposals that require a majority of the votes cast.
How is a quorum determined?
The representation, at the Annual Meeting or by proxy, of holders entitled to cast at least a majority of the votes entitled to be cast at the Annual Meeting constitutes a quorum at the Annual Meeting. Abstentions, votes to “WITHHOLD” authority on the election of directors, broker votes and broker non-votes (only when accompanied by broker votes with respect to at least one matter at the meeting) are considered present and entitled to vote for purposes of establishing a quorum for the transaction of business at the Annual Meeting. If a quorum is not present by attendance at the Annual Meeting or represented by proxy, the stockholders present by attendance at the meeting or by proxy may adjourn the Annual Meeting, until a quorum is present. If a new record date is fixed for the adjourned meeting, we will provide notice of the adjourned meeting to each stockholder of record entitled to vote at the meeting.
What vote is required to approve each proposal at the Annual Meeting?
Proposal No. 1
| | | Election of Directors
| | | Plurality of Votes Cast for each Director Nominee
| | | No
|
Proposal No. 2
| | | Ratification of Appointment of Independent Registered Public Accounting Firm
| | | Majority of Votes Cast
| | | Yes
|
Proposal No. 3
| | | Advisory Vote Related to Named Executive Officer Compensation
| | | Majority of Votes Cast
| | | No
|
Proposal No. 3
| | | Advisory Vote on Frequency of Advisory Votes on Executive Compensation
| | | Majority of Votes Cast
| | | No
|
With respect to Proposal No. 1, you may vote “FOR” or “WITHHOLD” with respect to each director nominee. Only votes cast “FOR” a nominee will be counted in the election of directors. Votes cast to “WITHHOLD” with respect to one or more nominees will result in those nominees receiving fewer votes but will not count as a vote against the nominees. The individuals who receive the largest number of votes are elected as directors up to the maximum number of directors to be elected at the meeting. This means that the four nominees receiving the highest number of votes at the Annual Meeting will be elected, even if these votes do not constitute a majority of the votes cast. Proxies may not be voted for more than four directors and stockholders may not cumulate votes in the election of directors.
With respect to Proposals Nos. 2 and 3, you may vote “FOR”, “AGAINST” or “ABSTAIN”.
With respect to Proposal No. 4, you may vote for “EVERY YEAR”, for “EVERY 2 YEARS”, for “EVERY 3 YEARS”, or “ABSTAIN”.
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If you abstain from voting on any of these matters, your shares will be counted as present and entitled to vote on that matter for purposes of establishing a quorum, but will not be counted for purposes of determining the number of votes cast.
Can I change my vote or revoke my proxy?
Yes. Any stockholder of record has the power to change or revoke a previously submitted proxy at any time before it is voted at the Annual Meeting by:
Submitting to our Corporate Secretary, before the voting at the Annual Meeting, a written notice of revocation bearing a later date than the proxy;
Timely delivery of a valid, later-dated proxy (only the last proxy submitted by a stockholder by internet, telephone or mail will be counted); or
Attending the Annual Meeting and during the live webcast while the polls are open; however, attendance at the Annual Meeting will not by itself constitute a revocation of a proxy.
For shares held in street name, you may revoke any previous voting instructions by submitting new voting instructions to the bank, broker, or intermediary holding your shares by the deadline for voting specified in the voting instructions provided by your bank, broker, or intermediary.
Are there other matters to be voted on at the Annual Meeting?
We do not know of any other matters that may come before the Annual Meeting other than Proposals 1, 2, 3 and 4 included herein. If any other matters are properly presented at the Annual Meeting, the persons named as proxies in the enclosed proxy card intend to vote or otherwise act in accordance with their judgment on the matter.
Is a list of stockholders available?
The names of stockholders of record entitled to vote at the Annual Meeting will be available for review by stockholders at the Annual Meeting.
A list of these stockholders will be open for examination electronically by any stockholder for any purpose germane to the Annual Meeting for a period of 10 days prior to the Annual Meeting by contacting our Investor Relations department at 646-277-1214 and during the Annual Meeting at www.virtualshareholdermeeting.com/GO2020.
Where can I find the voting results?
Preliminary voting results will be announced at the Annual Meeting, and final voting results will be reported in a Current Report on Form 8-K, which we will file with the SEC within four business days following the Annual Meeting.
Who is soliciting proxies, how are they being solicited, and who pays the cost?
The solicitation of proxies is being made on behalf of our board of directors and we will bear the costs of the solicitation. This solicitation is being made by mail and through the internet, but also may be made by telephone or in person. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to stockholders and obtaining their votes.
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Our Amended and Restated Certificate of Incorporation (our “certificate of incorporation”) provides that, subject to the right of holders of any series of preferred stock, our board of directors will be divided into three classes of directors, with the classes to be as nearly equal in number as possible, and with the directors serving staggered three-year terms. Our certificate of incorporation and our Amended and Restated Bylaws (our “bylaws”) provide that the number of members of our board of directors shall be determined by our board from time to time. The number of members of our board is currently eleven.
Unless otherwise specified in the proxy, the shares voted pursuant thereto will be cast for each of Messrs. Alterman, Bachman, Herman and Ragatz. If, for any reason, at the time of election any of the nominees named should decline or be unable to accept his or her nomination or election, it is intended that such proxy will be voted for a substitute nominee, who would be recommended by our board of directors. Our board of directors, however, has no reason to believe that any of the nominees will be unable to serve as a director.
The following biographical information is furnished as to each nominee for election as a director and each of our directors as of April 24, 2020.
Nominees for Election to the Board of Directors for a Three-Year Term Expiring at the 2023 Annual Meeting
Kenneth W. Alterman. Mr. Alterman, 64, has served as a director since 2011. Mr. Alterman has served as an Executive Adviser to Savers, Inc., a retail thrift store chain, since January 2017. He previously served as the President, Chief Executive Officer and a director of Savers, Inc. from January 2004 to January 2017 and as the Vice President and General Manager from December 2002 to December 2003. As a member of the board of directors, Mr. Alterman’s knowledge of the discount industry, as well as substantial experience developing corporate strategy and assessing emerging industry trends and business operations led to the conclusion that he should serve as a director of Grocery Outlet.
John E. Bachman. Mr. Bachman, 64, has served as a director since November 2019. Mr. Bachman has been an outside director for various public companies since his retirement in 2015. From 1978 to 2015, Mr. Bachman was a certified public accountant at the accounting firm, PricewaterhouseCoopers LLP, most recently as a partner. Mr. Bachman currently serves on the board of directors and as chair of the audit committee of The Children’s Place, a children’s clothing store, and serves on the board of directors and as a member of the audit and finance committees of WEX Inc., a global corporate payment solutions company. Mr. Bachman’s extensive background in auditing, as well as his business strategy and oversight experience serving in the leadership of one of the world’s largest accounting firms led to the conclusion that he should serve as a director of Grocery Outlet.
Thomas F. Herman. Mr. Herman, 80, has served as a director since 2004. Mr. Herman has been engaged in consulting since 2004. From 2003 to 2004, Mr. Herman was the president and chief operating officer of Good Guys, Inc., a consumer electronics retailer. Prior to that time, he served in various management positions, including at Oak Harbor Partners, a boutique financial services firm, Employment Law Learning Technologies, a distance learning company focused on employment law, Alamo Group, a real estate & operations business, American Copy Jewelry and the San Francisco Music Box Co. Mr. Herman’s significant retail experience and financial expertise based on his years of senior executive experience as well as his prior experience serving on the boards of public companies such as Crdentia Corp. and Good Guys, Inc. led to the conclusion that he should serve as a director of Grocery Outlet.
Erik D. Ragatz. Mr. Ragatz, 47, has served as a director and as Chairman of our board of directors since October 2014. Mr. Ragatz has served as a Partner atformer controlling stockholder, Hellman & Friedman LLC (“H&F”), a private equity firm, since January 2008. that led our IPO in June 2019.
Our Board has continued to evaluate our governance structure following the valuable feedback elicited from the Q1 2020 Stockholder Engagement, and has determined to gradually phase out certain of these governance provisions. The Board has developed the following corporate governance roadmap, which outlines its current and future intent regarding specified corporate governance practices:
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HIGHLIGHTS OF CURRENT CORPORATE GOVERNANCE PRACTICES
Our current corporate governance practices include:
•
Independent, Non-Executive Chairman—Our leadership structure separates the offices of Chief Executive Officer (Mr. Lindberg) and Chairman of the Board (Mr. Ragatz serving as non-executive Chairman of the Board). As Chairman, Mr. Ragatz currently servesholds regular executive sessions of independent directors.
•
Substantial Board and full Committee independence—Nine of our eleven current directors are independent, and all of our Board Committees are comprised entirely of independent directors. Each Committee is authorized to hire, determine compensation of and establish the work plan for advisors independent of management.
•
Board refreshment and commitment to diversity—Since our IPO in 2019, we have added four women directors, including two from underrepresented communities. However, one of such directors, Maria Fernanda Mejía, who is a woman and from an underrepresented community, resigned in January 2022 due to her appointment to an executive position with another company. We will continue to recruit directors from underrepresented communities as we believe the fresh perspectives and breadth of diversity have enhanced, and will continue to enhance, the Board’s overall effectiveness. The recent Board refreshment also greatly increased the breath of skills and industry experience on the boardsBoard.
•
Annual Board and Committee evaluations—The Nominating and Corporate Governance Committee coordinates a comprehensive annual Board and Committee evaluation process, including providing a report and leading a discussion of directors and audit and compensation committeesoverall results to the Board.
•
Single voting class of Crackle Holdings GP, LLC (d/b/common stock—All holders of Grocery Outlet’s common stock have the same voting rights (one vote per share of stock).
•
No poison pill—We do not have an effective stockholder rights plan, commonly known as a SnapAV),poison pill.
•
No director overboarding—We maintain a manufacturer and distributorpolicy with respect to director overboarding. We currently do not have any members of audio/visual equipment, and Associated Materials Group, Inc.,our Board who are overboarded under our policy.
•
Director resignation policy in uncontested elections—We maintain a manufacturer and distributordirector resignation policy which provides for the contingent resignation of exterior building products,a director who receives more “withheld” votes than “for” votes in an uncontested director election, as well as the boardprocess of the Nominating and Corporate Governance Committee and the Board to review such resignation offer and publicly disclose the Board’s decision on whether to accept such offer.
2022 PROPOSALS TO STOCKHOLDERS AND BOARD ACTION
•
Board Proposal to Eliminate Supermajority Voting Provisions—In this Proxy Statement, our Board is submitting a proposal for stockholders to approve eliminating certain supermajority voting provisions from our Certificate of Incorporation.
•
Board Proposal to Declassify the Board of Directors—In this Proxy Statement, our Board is submitting a proposal for stockholders to approve fully declassifying the Board in 2026. Our Certificate of Incorporation currently divides the Board into three separate classes, with one class being elected by our stockholders each year for three-year terms.
•
Majority Voting Standard for Director Elections—In April 2022, our Board amended our Amended and Restated Bylaws (the “Bylaws”) to eliminate supermajority provisions to amend our bylaws and to implement a majority voting standard for directors in uncontested elections and a plurality voting standard in contested elections (effective for and after our 2023 annual meeting of stockholders).
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Our Environmental, Social and Governance Approach
At Grocery Outlet, attention to environmental, social and governance (“ESG”) issues is integral to our business strategy and our culture. Our focus on ESG and corporate responsibility reflects our business model and our commitment to live out our mission to Touch Lives for the Better. We believe focusing on the best interests of our stakeholders and engaging with our stakeholders in a transparent fashion are critical components to our approach to generating value for our stockholders.
At Grocery Outlet, we believe that being a good environmental and social citizen is not just the right thing to do from a moral perspective but the right thing to do for long-term value creation. Our unique business model is inherently one of positive impact: (i) our opportunistic sourcing model reduces food waste by providing an efficient distribution channel for excess inventory, (ii) our store footprint delivers healthy, affordable nutrition to underserved communities, (iii) our success and growth provides our employees with meaningful opportunities for professional growth and financial gain, and (iv) our independent operator model provides entrepreneurs with the opportunity to run their own businesses and serve their communities. Having a positive impact on all of those we touch is part of the history and culture of Grocery Outlet and continues to be a guiding principle as we grow our business. We expect these positive impacts will grow as we continue to expand our retail footprint.
The importance of sustainable growth as it relates to the environment becomes of increasing focus and importance as we grow. Our Director of Refrigeration Engineering, Energy & Sustainability is an important element to these efforts and we have already taken important steps to improve our environmental impact. In the energy management area, we have several initiatives underway, including a pilot program in which we are testing natural refrigerants, obtaining green chill certification for new stores, and partnering with a pilot group of our independent operators to participate in the Self-Generation Incentive Program. We are also analyzing ways to reduce energy in our stores with alternatives to traditional lighting. While our unique opportunistic sourcing model results in reduced food waste, for decades our IOs have partnered with local food bank organizations to donate food and other items that would have otherwise been discarded. California Senate Bill 1383 (“California law SB 1383”) now formally requires, among other things, that we and our IOs in California donate a certain amount of edible food that would otherwise have been thrown away to food recovery organizations. Our IOs in California have adopted formal donor partner agreements to ensure that their regular donating activities meets the technical requirements of this new legislation. We continue to actively pursue energy and waste management programs across our stores and in collaboration with our IOs.
Our Nominating and Corporate Governance Committee is responsible for overseeing matters of corporate responsibility, sustainability and impacts to our environmental, social and governance issues, as well as our public reporting regarding these matters. To support our efforts in this area, we have engaged an outside ESG advisor and are in the process of evaluating emerging best practices, policies at other companies and market standards. We intend to conduct a gap analysis and materiality assessment during fiscal 2022 to evaluate potential ESG risks and opportunities relevant for our Company based on internal interviews and surveys of our key stakeholders. Further, we will evaluate leading ESG frameworks and determine which ones are the most relevant to us. We plan to publish our first sustainability report during fiscal year 2023.
Our Commitment to Human Capital Management
At Grocery Outlet, our mission is to Touch Lives for the Better. To do this, we work together to foster and enhance a culture grounded in talented and passionate people who live our values: entrepreneurship, integrity, achievement, family, service to others, diversity and fun. Our employees are at the heart of who we are and what we do. Our values translate into our human capital offerings to recruit, engage, develop, reward and retain employees who believe in our mission and emulate our values. As of the end of Fiscal Year 2021, we had 946 employees, 803 of whom were full-time and 143 of whom were part-time. As of January 1, 2022, 427 of our employees were based at our corporate headquarters in Emeryville, California, and our Leola, Pennsylvania office, 130 of which were classified as field employees. As of January 1, 2022, our distribution centers employed 331 persons. The remaining 188 employees were employees in our Company-operated stores.
As with many companies, the COVID-19 pandemic and its direct and indirect effects has put a strain on our people, and we experienced higher than our usual turnover. However, we are proud of our efforts in Fiscal Year 2021 to engage with, “re-recruit” and elicit feedback from our employees as we continue to navigate the effects of the pandemic on our people as well as the effects of what has been called “The Great Resignation.” To this end, we proactively addressed employee engagement and retention by listening to our employees through “re-recruiting” conversations, roundtable meetings and “All Hands” open
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forum meetings. From these meetings, we gleaned valuable information that helped us begin to further address work environment and schedule flexibility, career development, emotional support and total rewards concerns.
COVID-19 SAFETY MEASURES
In response to the COVID-19 pandemic, we continued to reinforce and implemented new safety precautions we determined were in the best interest of our employees, and which comply with government regulations. These measures included allowing certain of our employees to work from home, while implementing additional safety measures for employees continuing critical on-site work, including providing personal protective equipment, health and temperature checks, spacing markers, plexiglass shields at check stands, signage regarding face coverings and physical distancing and sanitation stations. We closely monitor the evolving landscape of the COVID-19 pandemic so we can quickly make appropriate decisions to support and keep our employees safe.
BOARD INVOLVEMENT IN HUMAN CAPITAL MATTERS
Our Board and Board Committees provide oversight on human capital matters and risks including employee engagement, equity, diversity and inclusion (“ED&I”), talent development and succession planning. Our full Board provides oversight of our executive management talent development, succession planning and talent acquisition, and has access to key leaders and other key talent throughout the organization through participation in Board and Board Committee meetings. Our Audit and Risk Committee provides oversight for enterprise risk management. Our Nominating and Corporate Governance Committee oversees the effectiveness of our governance and social responsibility policies, goals and programs. Our Compensation Committee provides oversight of our total rewards offerings for employees and conducts both a yearly compensation benchmarking assessment and yearly compensation risk assessment.
EMPLOYEE DEVELOPMENT
We seek to grow leaders at every level of our organization by creating a culture of mentoring and coaching. As part of our succession planning, we prioritize growing talent internally within our organization and invest resources to develop our employee’s skill sets and career path. Some of our offerings during Fiscal Year 2021 (offered virtually and, in some cases, in person) included:
•
A Customized Leadership Resilience program for all employees at or above the director level focusing on a variety of topics including, leading and working in a remote environment, strengthening teamwork, learning agility, and managing anxiety
•
Certification program opportunities, including offerings in personal growth and professional development
•
Lunch and learn events, featuring a wide variety of personal development topics and industry speakers
•
Individual coaching for leadership development, and other leadership training on an ad hoc basis
During Fiscal Year 2021 we promoted 83 employees and of those employees, 40 were promoted to leadership positions, including four to vice president positions.
EMPLOYEE COMPENSATION AND BENEFITS
We provide compensation and comprehensive benefits designed to recruit and retain the talent necessary to advance our mission, meet our business goals and execute our long-term growth strategy. Our compensation components vary by employee level and include cash base compensation, cash bonuses, equity awards and a profit-sharing program. As part of our IPO, each of our then current employees, regardless of level, was granted an equity award scheduled to vest in one tranche in June 2023. Our generous and highly competitive health and welfare benefits programs during Fiscal Year 2021, available equitably to full-time employees, include:
•
Leading healthcare offered to employees, including medical, vision, dental, life insurance, accidental death and dismemberment, long-term disability, health savings accounts and wellness programs
•
An employee assistance program providing free access to financial, legal and mental health counseling; parenting and childcare resources; adult care services; a travel assistance program; and training courses on topics such as time management, work/life balance, and personal growth
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•
Free access to on demand mental health support, providing confidential coaching and counseling
•
A 401(k) and profit-sharing program available to all employees meeting eligibility requirements (See “Compensation, Discussion and Analysis” below for further information)
•
An education assistance program providing tuition reimbursement for eligible employees seeking to improve their job-related skills through additional education (subject to the conditions of the program). We also participate in the California Grocers Association Educational Foundation program to offer scholarships to employees, IOs and dependents
CULTURE AND DIVERSITY, EQUITY AND INCLUSION
We report annually on employment data, including ethnicity, in line with Equal Employment Opportunity Commission guidelines and we believe that a diverse and inclusive team is critical to our long-term business success and makes us a better company.
| | EMPLOYEE DIVERSITY AS OF JANUARY 1, 2022 | |
| | Women | | | 38% | |
| | Racially and ethnically diverse | | | 58% | |
While all employment related decisions are made based on merit and without any quota requirements, our ongoing diversity commitment has resulted in the hiring and promotion of a diverse workforce. In Fiscal Year 2021, over 70% of our newly hired employees were racially and ethnically diverse, and over 35% were women. Also in Fiscal Year 2021, over 50% of our promoted employees were racially and ethnically diverse and nearly 60% of our promoted employees were women.
We have several employee resource groups (“ERGs”) that enhance our inclusive and diverse culture, including our overarching ED&I Council, our Black Partnership Network and our WOW! (Winning with Outstanding Women) Network. We also invite the launch of new ERGs with our ERG resource guide. We provide regular training and open employee discussions on diversity topics, including those relating to current events in our communities. In Fiscal Year 2021, we encouraged all employees to participate in an ED&I Survey that included a number of questions designed to measure employee beliefs and attitudes about the Company’s progress toward executing its ED&I strategy. We had a response rate of nearly 75% and the results highlighted both our successes and opportunities with respect to our ED&I practices.
We have made concerted efforts to expand the diversity of our Board and our executive leadership. Currently, of the ten non-executive members of our Board, three are women and one member is Black. Our senior leadership team consists of eleven individuals, three of whom are women, two of whom are Black, and one of whom is Native American.
We will continue to focus on recruiting and retaining women and historically underrepresented populations. We will also continue to focus on cultivating an inclusive and diverse corporate culture through continued education for all our employees, ERGs and talent development across our organization.
We strive to nurture and uphold an inclusive, diverse environment free from discrimination of any kind, including sexual or other discriminatory/ harassing behavior. We do this by setting an appropriate tone at the top with an open-door policy and robust policies/procedures such as our Code of Business Conduct and Ethics (the “Code of Ethics”) (which includes access to an anonymous hotline) as well as an internal audit function—all of which support compliance with regulations and ethical behavior. We conduct regular training on all of our corporate policies, including on our Code of Ethics and Insider Trading policies, and on topics such as workplace harassment and cybersecurity.
COMMUNITY INVOLVEMENT
The commitment by Grocery Outlet to our communities extends well beyond our offices and storefronts. We pride ourselves on giving back to local communities. In Fiscal Year 2021, through a coordinated effort with our independent operators and suppliers involving food, cash and online donations, we held our 11th Annual Independence from Hunger food drive, which supported over 400 non-profit agencies and helped reduce food insecurity and food waste within the communities in which we operate. In the eleven years Grocery Outlet has run this food drive, we and our IOs have raised approximately $14 million to fight food insecurity.
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As an additional part of our efforts to fight hunger and minimize food waste, for decades our IOs have partnered with local food bank organizations to donate food and other items that would have otherwise been thrown away. California law SB 1383 now formally requires, among other things, that we and our IOs in California donate a certain amount of edible food that would otherwise have been thrown away to food recovery organizations. Our IOs in California have adopted formal donor partner agreements to ensure that their regular donating activities meets the technical requirements of this new legislation.
COMPANY FOUNDATION
In 2011 we established the Touching Lives Foundation, a 501(c)(3) non-profit organization. The Foundation’s purpose is to help people within the Grocery Outlet family (i.e. employees and immediate family members of Grocery Outlet or independent operators) who have financial need resulting from a catastrophic life event. The Foundation has covered expenses, among others, related to illness, funeral expense, emergency travel, temporary housing and relocation. The Touching Lives Foundation receives financial support from the Board members, management and employees of Grocery Outlet, independent operators, an annual corporate endowment from Grocery Outlet, Inc., as well as outside donors.
Code of Business Conduct and Ethics
We have adopted a Code of Ethics applicable to all employees, executive officers and directors that addresses legal and ethical issues that may be encountered in carrying out their duties and responsibilities, including the requirement to report any conduct they believe to be a violation of the Code of Ethics. The Code of Ethics is available under the Corporate Governance tab of our Investor Relations page of our website at https://investors.groceryoutlet.com. If we ever were to amend or waive any provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, we intend to satisfy our disclosure obligations with respect to any such waiver or amendment by posting such information on our Internet website set forth above rather than by filing a Form 8-K.
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Board of Directors
DIRECTORS AS OF RECORD DATE
| | NAME | | | AGE | | | POSITION | | | TERM ENDING | |
| | Carey F. Jaros | | | 44 | | | Director
Member of the Audit and Risk Committee | | | CLASS III -2022 | |
| | Eric J. Lindberg, Jr. | | | 51 | | | Chief Executive Officer | | | CLASS III -2022 | |
| | Norman S. Matthews | | | 89 | | | Director
Member of the Compensation Committee
Member of the Nominating and Corporate Governance Committee | | | CLASS III -2022 | |
| | Kenneth W. Alterman | | | 65 | | | Director
Chair of the Compensation Committee | | | CLASS I -2023 | |
| | John (“Jeb”) E. Bachman | | | 66 | | | Director
Chair of the Audit and Risk Committee | | | CLASS I -2023 | |
| | Thomas F. Herman | | | 81 | | | Director
Member of the Audit and Risk Committee
Member of the Nominating and Corporate Governance Committee | | | CLASS I -2023 | |
| | Erik D. Ragatz | | | 49 | | | Chairman of the Board
Chair of the Nominating and Corporate Governance Committee
Member of the Compensation Committee | | | CLASS I -2023 | |
| | Mary Kay Haben | | | 66 | | | Director
Member of the Nominating and Corporate Governance Committee | | | CLASS II -2024 | |
| | Gail Moody-Byrd | | | 64 | | | Director
Member of the Audit and Risk Committee | | | CLASS II -2024 | |
| | S. MacGregor Read, Jr. | | | 51 | | | Vice Chairman of the Board | | | CLASS II -2024 | |
| | Jeffrey R. York | | | 58 | | | Director
Member of the Compensation Committee | | | CLASS II -2024 | |
SPECIFIC SKILLS, EXPERIENCE AND QUALIFICATIONS
Our Nominating and Corporate Governance Committee is responsible for reviewing the qualifications of potential director candidates and recommending to the Board those candidates to be nominated for election to the Board, subject to any obligations and procedures governing the nomination of directors to the Board that may be set forth in any stockholders agreement of which the Company is a party. The Board, through the Nominating and compensation committeeCorporate Governance Committee, also monitors the mix of Wand TopCo Inc. (d/b/specific experience, qualifications and skills of its directors to assure that the Board, as a Caliber Collision)whole, has the necessary tools to perform its oversight function effectively in light of the Company’s business and structure. This process has led to significant Board refreshment since our IPO in June 2019, which included an increased focus on director independence and diversity.
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| | NOTABLE
STATISTICS | | | | 9 of 11
independent
directors | | | | 3 of 11
female
directors | | | | 1 of 11
ethnically diverse
director | | | | 8.7 years
average director
tenure | |
| | 5
new directors
since IPO | | | | 2
departures in 2020 | | | | 1
departure
in 2022 | | | | BOARD
REFRESHMENT | |
Set forth below are other key skills, experience and qualifications evaluated by our Nominating and Corporate Governance Committee and Board.
| | SKILLS AND EXPERIENCE | |
| | Retailing and/or Consumer Packaged Goods
Provide operational and strategic advice and oversight to our executive management on the business of national retail companies, including our industry. | | | ![[MISSING IMAGE: tm229979d2-icon_personbw.gif]](https://files.docoh.com/DEF 14A/0001104659-22-048942/tm229979d2-icon_personbw.gif) | | | 11 | |
| | Marketing and Brand Management
Provide experience and advice as our executive management seeks to increase brand awareness and market share among customers. | | | | | | 7 | |
| | Executive Management
Provide our executive management with perspective in analyzing and overseeing the execution of operational, organizational and policy issues | | | | | | 10 | |
| | Public Company Experience
Offer insights regarding the operation of a public company and public company board, including key issues of corporate governance, audit, compensation, SEC matters, stakeholder engagement and regulatory/compliance matters. | | | | | | 5 | |
| | Finance, Accounting and Financial Reporting
Understand, oversee and advise our management with respect to our operating and strategic performance, capital structure, finance and investing activities, financial reporting and internal control over financial reporting. | | | | | | 8 | |
| | Risk Oversight
Provide our executive management with perspective in identifying, analyzing, addressing and mitigating enterprise risks, financial risks, business continuity risks and other risks. | | | | | | 10 | |
| | Digital Transformation or Technology
Offer insights regarding using technologies to create new or modify existing business processes to meet evolving business, market and customer expectations. | | | | | | 4 | |
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BOARD DIVERSITY MATRIX (AS OF APRIL 8, 2022)
| | Total Number of Directors | | | 11 | | | | |
| | PART I: GENDER IDENTITY | | | FEMALE | | | MALE | | | NON-BINARY | | | DID NOT DISCLOSE
GENDER | |
| | Directors | | | | | 3 | | | | | | 8 | | | | | | — | | | | | | — | | |
| | PART II: DEMOGRAPHIC BACKGROUND | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Alaskan Native or Native American | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Asian | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Black or African American | | | | | 1 | | | | | | — | | | | | | — | | | | | | — | | |
| | Hispanic or Latinx | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | Native Hawaiian or Pacific Islander | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | White | | | | | 2 | | | | | | 8 | | | | | | — | | | | | | — | | |
| | Two or More Races or Ethnicities | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | LGBTQ+ | | | | | | | | | | | | | | | | | — | | | | | | | | |
| | Did Not Disclose Demographic Background | | | | | | | | | | | | | | | | | — | | | | | | | | |
DIRECTOR RECRUITMENT, NOMINATIONS AND APPOINTMENTS
The Nominating and Corporate Governance Committee is responsible for facilitating director assessments, identifying skills and expertise that candidates should possess, and screening, selecting and recommending candidates for approval by the Board. The Nominating and Corporate Governance Committee may solicit recommendations for nominees from other members of the Board and management. Our Nominating and Corporate Governance Committee may also retain professional search firms to identify candidates.
The Committee will take into account all factors it considers appropriate in recommending candidates for election to the Board, which will include:
•
ensuring that the Board, as a whole, is appropriately diverse and consists of individuals with various and relevant career experience (including current employment), a chain of auto body repairprior and paint shops, each currently private H&F portfolio companies. Mr. Ragatz’s significantcurrent service on public company boards, relevant technical skills, industry knowledge and experience, financial expertise (including expertise that could qualify a director as an “audit committee financial expert”), local or community ties and insight intoservice, and diversity (age, race, ethnicity and gender, among other factors);
•
minimum individual qualifications, including integrity, strength of character, mature and good business judgment, familiarity with the proper functioningCompany’s business and roleindustry, independence of corporate boards of directors, gained through his years of servicethought and ability to work collegially; and
•
the extent to which the candidate would fill a present need on the boardsBoard.
The Committee will consider the qualifications of nominees recommended by stockholders. We did not receive any recommendations for director nominations from stockholders for the 2022 Annual Meeting.
NOMINATION RIGHTS AND SUPPORT OBLIGATIONS UNDER OUR AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
Our Amended and Restated Stockholders Agreement provides, among other terms, that the Executive Stockholders (as defined in the Amended and Restated Stockholders Agreement) and the Read Trust Rollover Stockholders (as defined in the Amended and Restated Stockholders Agreement), trusts controlled by Mr. Lindberg, Mr. Read or members of their immediate family,
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acting together by majority vote, will have the right to nominate one person (such person, the “Stockholder Nominee”) to our Board for so long as such stockholders collectively own at least 5% of our outstanding shares of common stock. The Amended and Restated Stockholders Agreement also provides that our Chief Executive Officer will be nominated to our Board. The Stockholder Nominee, Mr. Read, is a Class II director and the Chief Executive Officer, Mr. Lindberg, is a Class III director and director nominee at the 2022 Annual Meeting.
Pursuant to the Amended and Restated Stockholders Agreement, we must include the Stockholder Nominee and the Chief Executive Officer nominee on the slate that is included in our proxy statements relating to the election of directors of H&F’s portfolio companiesthe class to which such persons belong and provide the highest level of support for the election of each such persons as we provide to any other individual standing for election as a director. In addition, each stockholder party to the Amended and Restated Stockholders Agreement agrees to vote in favor of the Company slate that is included in our proxy statement.
In the event that the Stockholder Nominee ceases to serve as a director for any reason (other than the failure of our stockholders to elect such individual as a director), the persons entitled to designate such nominee director under the amended and restated stockholders agreement are entitled to appoint another nominee to fill the resulting vacancy.
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DIRECTOR BACKGROUND AND QUALIFICATIONS
The following biographical information sets forth the business experience during at least the past five years of each director nominee and each director whose term of office will continue after the 2022 Annual Meeting, together with a brief discussion of the specific experience, skills, expertise, backgrounds and other attributes that led to the conclusion that heeach director should continue to serve as a director of Grocery Outlet.on the Board.
2022 Class III Director Nominees
| | CAREY F. JAROS | |
| | Director since September 2020 Committees •
Audit and Risk Committee Other Public Company Directorships •
None | | | Ms. Jaros, 44, serves as President and Chief Executive Officer and a member of the board of directors of GOJO Industries, Inc., a global manufacturer of hand hygiene and surface disinfecting products and the maker of PURELL® brand Hand Sanitizer. Ms. Jaros joined GOJO Industries in 2014 as a director and served as the company’s Chief Operating Officer and Chief Strategy Officer prior to becoming CEO in January 2020. She is also a director of ACRT Services Inc., a vegetation management ESOP. Previously, Ms. Jaros served for over a decade in various senior management positions at Deal Tire and at Bain and Company, a management consulting firm. Ms. Jaros has been a board member and advisor to more than a half-dozen early stage companies including edtech startup WISR Inc., and personal care startup Aunt Flow. Qualifications And Experience
As a sitting CEO, Ms. Jaros brings perspective on a broad range of management topics and also contributes her knowledge of retail and consumer products. She has substantial experience developing corporate strategy, assessing emerging industry trends as well as optimizing business operations. Ms. Jaros has been identified by our Board as an audit committee financial expert. | |
| | ERIC J. LINDBERG, JR. | |
| | Director since January 2006 Other Public Company Directorships •
None | | | Mr. Lindberg, 51, has served as our Chief Executive Officer since January 2019 and as a director since January 2006. Previously, from January 2006 to December 2018, Mr. Lindberg served as our Co-Chief Executive Officer. Prior to being appointed Co-Chief Executive Officer, Mr. Lindberg served in various positions with the Company since 1996. Mr. Lindberg and Mr. Read are cousins by marriage. Qualifications And Experience
As our Chief Executive Officer, Mr. Lindberg brings to our Board significant senior leadership, and his detailed knowledge of our operations, finances, strategies and industry garnered over his 25-year tenure with us makes him well qualified to serve as our Chief Executive Officer and as member of the Board. | |
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Members of theCorporate Governance and Board of Directors Continuing in Office for a Term Expiring at the 2021 Annual Meeting
Mary Kay Haben.Matters Ms. Haben, 64, has served as a director since November 2019. Ms. Haben has been an outside director for various public companies since her retirement in February 2011. From April 2007 to February 2011, Ms. Haben held various senior positions with Wm. Wrigley Jr. Company, a confectionery company. Prior to that time, she held several key positions during her 27-year career with Kraft Foods, Inc., a grocery manufacturing and processing conglomerate. Ms. Haben currently serves on the board of directors of The Hershey Company, a confectionery company, and the board of trustees of Equity Residential, a publicly traded REIT. Ms. Haben’s substantial governance expertise and experience with consumer preferences as a senior executive for consumer packaged goods companies led to the conclusion that she should serve as a director of Grocery Outlet.
Sameer Narang. Mr. Narang, 36, has served as a director since October 2014. Mr. Narang joined H&F in 2010 and has served as a Partner at H&F since January 2018 and served as a Director at H&F from January 2014 to December 2017. Mr. Narang currently serves as chairman of the board of directors and a member of the compensation committee of Arrow Holding Corp. (d/b/a Applied Systems, Inc.), a provider of cloud-based insurance software and a private H&F portfolio company. Mr. Narang’s financial expertise and knowledge of corporate governance gained through his years of service on the boards of directors of H&F’s portfolio companies led to the conclusion that he should serve as a director of Grocery Outlet.
S. MacGregor Read, Jr. Mr. Read, 49, served as the Vice Chairman of the Company from January 2019 through April 2020 and has served as a director since January 2006. In April 2020, Mr. Read became the Vice Chairman of our board of directors. From January 2006 to December 2018, Mr. Read served as our Co-Chief Executive Officer. Prior to being appointed Co-Chief Executive Officer, Mr. Read served in various positions with the Company since 1996. Mr. Read and Mr. Lindberg are cousins by marriage. Mr. Read’s extensive knowledge of our operations, finances, strategies and industry garnered over his 23-year tenure with us led to the conclusion that he should serve as a director of Grocery Outlet.
Jeffrey York. Mr. York, 57, has served as a director since November 2010. Mr. York has served as Co-Chief Executive Officer and President of Farm Boy Inc., a grocery retailer, since November 2009. Mr. York currently serves as a member of the boards of directors and audit committee of Focus Graphite, an advanced exploration and mining company, Braille Energy Systems, Inc., a manufacturer of race car batteries and other energy storage devices and Stria Lithium, a lithium mining exploration company. Mr. York’s extensive knowledge of the grocery industry and corporate governance based on his experience as a senior executive and serving on public company boards of directors led to the conclusion that he should serve as a director of Grocery Outlet.
Members of the Board of Directors Continuing in Office for a Term Expiring at the 2022 Annual Meeting
Matthew B. Eisen. Mr. Eisen, 32, has served as a director since March 2019. Mr. Eisen has served as a Director at H&F since January 2020 and previously served as a Principal at H&F from July 2016 to January 2020 and as an Associate at H&F from July 2012 to July 2014. From June 2010 to July 2012, Mr. Eisen was an Analyst in the Media and Communications Group of Morgan Stanley & Co. LLC. Mr. Eisen currently serves on the board of directors and as a member of the Audit and Risk Management Committee of Wand TopCo Inc. (d/b/a Caliber Collision), a chain of auto body repair and paint shops and a private H&F portfolio company. Mr. Eisen’s financial and capital markets expertise and experience advising and serving on the boards of H&F’s portfolio companies led to the conclusion that he should serve as a director of Grocery Outlet.
Norman S. Matthews. Mr. Matthews, 87, has served as a director since October 2014. From 1978 to 1988, Mr. Matthews served in various senior management positions for Federated Department Stores, Inc., including President from 1987 to 1988. Mr. Matthews currently serves on the boards of directors and compensation committees of The Children’s Place Inc., a children’s clothing store, Party City Holdco, Inc., a party goods supply store, and Spectrum Brands Holdings, Inc., a consumer products company, and previously has served as director of Henry Schein, Inc. and The Progressive Company. Mr. Matthews’ extensive knowledge of the retail industry and strategic marketing and sales and corporate governance practices from his years as a senior executive and member of the boards of directors of several public companies led to the conclusion that he should serve as a director of Grocery Outlet.
Eric J. Lindberg, Jr. Mr. Lindberg, 49, has served as our Chief Executive Officer since January 2019 and as a director since January 2006. Previously, from January 2006 to December 2018, Mr. Lindberg served as our Co-Chief Executive Officer. Prior to being appointed Co-Chief Executive Officer, Mr. Lindberg served in various positions with the Company since 1996. Mr. Lindberg and Mr. Read are cousins by marriage. As our Chief Executive
| | NORMAN S. MATTHEWS | |
| | Director since October 2014 Committees •
Compensation Committee •
Nominating and Corporate
Governance Committee Other Public Company Directorships •
The Children’s Place Inc. (NASDAQ: PLCE)
(2009 to current) •
Party City Holdco, Inc.
(NASDAQ: PRTY)
(2013 to current) •
ThredUp Inc. (NASDAQ: TDUP) (Private: 2014-2021; since IPO: 2021-current) •
Spectrum Brands Holdings, Inc. (NYSE: SPB) (2010 to 2021) | | | Mr. Matthews, 89, served in various senior management positions for Federated Department Stores from 1978 to 1988, including most recently as President from 1987 to 1988. Prior to joining Federated Department Stores, Mr. Matthews served as Senior Vice President, General Merchandise Manager for E.J. Korvette, and as Senior Vice President, Marketing and Corporate Development for Broyhill Furniture Industries. Mr. Matthews currently serves on the boards of directors of The Children’s Place Inc., Party City Holdco, Inc. and ThredUp Inc. He also previously has served as director of Spectrum Brand Holdings, Inc., Henry Schein, Inc. and The Progressive Corporation. Qualifications And Experience
Mr. Matthews has extensive knowledge of the retail industry and strategic marketing and sales and corporate governance practices from his years as a senior executive and member of the boards of directors of several public companies. | |
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Officer, Mr. Lindberg brings to our board of directors significant senior leadership,Corporate Governance and his detailed knowledge of our operations, finances, strategies and industry garnered over his 23-year tenure with us makes him well qualified to serve as our Chief Executive Officer and led to the conclusion that he should serve as a director of Grocery Outlet.Board Matters
In addition to the information presented above regarding each director’s specific experiences, qualifications, attributes and skills, we believe that all of our directors have a reputation for integrity and adherence to high ethical standards. Each of our directors has demonstrated business acumen and an ability to exercise sound judgment, as well as a commitment of service to us and our board. Finally, we value our directors’ experience on other company boards and board committees.
There are no family relationships among any of our directors or executive officers, except that Messrs. Lindberg and Read are cousins by marriage.
Board Composition
Our business and affairs are managed under the direction of our board of directors, which currently consists of eleven members. Our certificate of incorporation and bylaws provide that our board of directors will consist of a number of directors to be fixed exclusively by resolution of the board of directors.
Our articles of incorporation provide for a staggered, or classified, board of directors consisting of three classes of directors, each serving staggered three-year terms, which is constituted as follows:
Class I directors are Messrs. Alterman, Bachman, HermanDirectors with Terms Expiring in 2023
| | KENNETH W. ALTERMAN | |
| | Director since February 2011 Committees •
Compensation Committee (Chair) Other Public Company Directorships •
None | | | Mr. Alterman, 65, currently retired, most recently served as an Executive Adviser to Savers, Inc., a retail thrift store chain from January 2017 to January 2022. He previously served as the President, Chief Executive Officer and a director of Savers, Inc. from January 2004 to January 2017 and as the Vice President and General Manager from December 2002 to December 2003. Qualifications And Experience
Mr. Alterman has extensive knowledge of the discount industry, as well as substantial experience developing corporate strategy and assessing emerging industry trends and business operations. | |
| | JOHN (“JEB”) E. BACHMAN | |
| | Director since November 2019 Committees •
Audit and Risk Committee (Chair) Other Public Company Directorships •
The Children’s Place Inc. (NASDAQ: PLCE)
(2016 to current) •
Recharge Acquisition Corp. (NASDAQ: RCHG)
(2020 to current) •
WEX Inc. (NASDAQ: WEX)
(2016-2021) | | | Mr. Bachman, 66, has been an outside director for various public companies since his retirement in 2015. From 1978 to 2015, Mr. Bachman was a certified public accountant at the accounting firm, PricewaterhouseCoopers LLP (“PwC”), most recently as a partner. At PwC, Mr. Bachman served for six years as the Operations Leader of the firm’s U.S. Assurance Practice with full operational and financial responsibility for this $4 billion line of business, which included the firm’s audit and risk management practices. Mr. Bachman currently serves on the boards of directors of The Children’s Place Inc. and Recharge Acquisition Corp. Qualifications And Experience
Mr. Bachman is a retired CPA and has extensive background in auditing, as well as business strategy and risk oversight experience from serving in the leadership of one of the world’s largest accounting firms. Mr. Bachman has been identified by our Board as an audit committee financial expert. | |
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Corporate Governance and Board Matters
| | THOMAS F. HERMAN | |
| | Director since 2004 Committees •
Audit and Risk Committee •
Nominating and Corporate Governance Committee Other Public Company Directorships •
None | | | Mr. Herman, 81, served as the President and Chief Operating Officer of Good Guys, Inc., a consumer electronics retailer from 2003 to 2004. Prior to that time, he served in various management positions, including at Oak Harbor Partners, a boutique financial services firm, Employment Law Learning Technologies, a distance learning company focused on employment law, Alamo Group, a real estate & operations business, American Copy Jewelry and the San Francisco Music Box Co. Qualifications And Experience
Mr. Herman has significant retail experience and financial expertise based on his years of senior executive experience as well as his prior experience serving on the boards of public companies such as Crdentia Corp. and Good Guys, Inc. Mr. Herman has been identified by our Board as an audit committee financial expert. | |
| | ERIK D. RAGATZ | |
| | Chairman of the Board since October 2014 Committees •
Compensation Committee •
Nominating and Corporate
Governance Committee (Chair) Other Public Company Directorships •
Snap One Holdings Corp. (NASDAQ: SNPO)
(2017 to current) | | | Mr. Ragatz, 49, has served as a Partner at Hellman & Friedman LLC, a private equity firm, since January 2008. Mr. Ragatz leads Hellman & Friedman’s efforts to invest in the consumer, retail and industrial sectors. He currently serves as Chairman and a member of the board of directors of Snap One Holdings Corp. He also serves as lead outside director and as a member of the audit and compensation committees of Wand TopCo Inc. (d/b/a Caliber Collision) and At Home Group, Inc., both private H&F portfolio companies. Qualifications And Experience
Mr. Ragatz has significant strategic, financial, and business development expertise, along with insight into the proper functioning and role of corporate boards of directors, gained through his years of service on the boards of directors of H&F’s portfolio companies. | |
| | Page | | | 20 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and their terms will expire at the Annual Meeting;Board Matters
Class II directors are Directors with Terms Expiring in 2024
| | MARY KAY HABEN | |
| | Director since November 2019 Committees •
Nominating and Corporate Governance Committee Other Public Company Directorships •
The Hershey Company
(NYSE: HSY) (2013 to current) •
Equity Residential (NYSE: EQR) (2011 to current) | | | Ms. Haben, 66, has been an outside director for various public companies since her retirement in February 2011. From April 2007 to February 2011, Ms. Haben held various senior positions with Wm. Wrigley Jr. Company, a confectionery company, most recently as President, North America. Prior to that time, she held several key positions during her 27-year career with Kraft Foods, Inc., a grocery manufacturing and processing conglomerate, including serving as President of multibillion dollar divisions. Ms. Haben currently serves on the boards of directors of The Hershey Company and Equity Residential. Qualifications And Experience
Ms. Haben has substantial governance expertise and experience with consumer preferences as a senior executive for consumer-packaged goods companies. | |
| | GAIL MOODY-BYRD | |
| | Director since January 2021 Committees •
Audit and Risk Committee Other Public Company Directorships •
None | | | Ms. Moody-Byrd, 64, has served as Vice President, Marketing, LinkedIn Sales Solutions at LinkedIn Corporation since March 2022. Previously, she served as the Chief Marketing Officer of Noodle.ai, a software company, from November 2018 to February 2022. Prior to Noodle.ai, from September 2007 to June 2017, Ms. Moody-Byrd held various positions with SAP SE, a multinational software corporation, most recently as Vice President of Web Marketing. Her retail industry experience also includes roles with divisions of Macy’s and Target Corporation, with Levi, Strauss & Co., and as a retail consultant with McKinsey & Company and Walter K. Levy Associates. Qualifications And Experience
Ms. Moody-Byrd has extensive marketing and retail background, as well as experience in driving brand awareness, demand generation and business development. | |
| | Page | | | 21 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and Messrs. Narang, Read and York, and their terms will expire at the annual meeting of stockholders to be held in 2021; andBoard Matters
Class III directors are Messrs. Eisen, Lindberg and Matthews, and their terms will expire at the annual meeting of stockholders to be held in 2022.
Upon expiration of the term of a class of directors, directors for that class will be elected for a three-year term at the annual meeting of stockholders in the year in which that term expires. Each director’s term shall continue until the election and qualification of his or her successor, or his or her earlier death, resignation, retirement, disqualification or removal. Any vacancies on our board of directors will be filled only by the affirmative vote of a majority of the directors then in office. Any increase or decrease in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
We believe that our board of directors’ classified structure provides enhanced continuity and stability in the board’s business strategies and policies. Under the current system, after each election, at least two-thirds of the board will have had prior experience and familiarity with our business, which is beneficial for long-term strategic planning and oversight of the Company’s operations. We believe that maintaining a classified board structure balances the need for stockholders to express their opinion on the board’s performance with the need for our directors to focus on the Company’s long-term success and maximize value for stockholders. The classification of our board of directors will make it more difficult for a third party to acquire control of us in a transaction not approved by our board of directors.| | S. MACGREGOR READ JR. | |
| | Director since January 2006 Vice Chairman since April 2020 Other Public Company Directorships •
None | | | Mr. Read, 51, served as the Executive Vice Chairman of the Company from January 2019 through April 2020. In April 2020, Mr. Read became the Vice Chairman of our Board. From January 2006 to December 2018, Mr. Read served as our Co-Chief Executive Officer. Prior to being appointed Co-Chief Executive Officer, Mr. Read served in various positions with the Company since 1996. Mr. Read and Mr. Lindberg are cousins by marriage. Qualifications And Experience
Mr. Read has extensive knowledge of our operations, finances, strategies and industry garnered over his 25-year tenure with us. | |
| | JEFFREY R. YORK | |
| | Director since November 2010 Committees •
Compensation Committee Other Public Company Directorships •
None | | | Mr. York, 58, has served as Partner, Farm Boy Stores and Special Advisor to Sobeys, Inc. the second largest food retailer in Canada, since June 2020. Previously, he served as Co-Chief Executive Officer and President of Farm Boy, Inc., a grocery retailer from November 2009 through June 2020. Mr. York currently serves as a member of the boards of directors of Focus Graphite, an advanced exploration and mining company, Braille Energy Systems, Inc., a manufacturer of race car batteries and other energy storage devices and Stria Lithium, a junior mineral exploration company with lithium claims in Northern Quebec. Qualifications And Experience
Mr. York has extensive knowledge of the grocery industry and corporate governance based on his experience as a senior executive and serving on boards of directors. | |
Director IndependenceCompensation Committee
Pursuant
•
Nominating and Corporate
Governance Committee
Other Public Company Directorships
•
The Children’s Place Inc. (NASDAQ: PLCE)
(2009 to current)
•
Party City Holdco, Inc.
(NASDAQ: PRTY)
(2013 to current)
•
ThredUp Inc. (NASDAQ: TDUP) (Private: 2014-2021; since IPO: 2021-current)
•
Spectrum Brands Holdings, Inc. (NYSE: SPB) (2010 to 2021)
| | Mr. Matthews, 89, served in various senior management positions for Federated Department Stores from 1978 to 1988, including most recently as President from 1987 to 1988. Prior to joining Federated Department Stores, Mr. Matthews served as Senior Vice President, General Merchandise Manager for E.J. Korvette, and as Senior Vice President, Marketing and Corporate Development for Broyhill Furniture Industries. Mr. Matthews currently serves on the boards of directors of The Children’s Place Inc., Party City Holdco, Inc. and ThredUp Inc. He also previously has served as director of Spectrum Brand Holdings, Inc., Henry Schein, Inc. and The Progressive Corporation. Qualifications And Experience
Mr. Matthews has extensive knowledge of the retail industry and strategic marketing and sales and corporate governance listing standardspractices from his years as a senior executive and member of The NASDAQ Stock Market LLC (“Nasdaq”)the boards of directors of several public companies. | | | | Page | | | 18 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and Board Matters
Class I Directors with Terms Expiring in 2023
| | KENNETH W. ALTERMAN | |
| | Director since February 2011 Committees •
Compensation Committee (Chair) Other Public Company Directorships •
None | | | Mr. Alterman, 65, currently retired, most recently served as an Executive Adviser to Savers, Inc., a director employed by us cannot be deemedretail thrift store chain from January 2017 to be an “independent director.” Each other director will qualifyJanuary 2022. He previously served as “independent” only if our board of directors affirmatively determines that he has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us. Ownership of a significant amount of our stock, by itself, does not constitute a material relationship. Our board of directors has determined that Mme. Haben and Messrs. Alterman, Bachman, Eisen, Herman, Matthews, Narang, Ragatz and York are “independent” in accordance with the Nasdaq rules.
Board Leadership Structure and Board’s Role in Risk Oversight
Our board of directors has no policy with respect to the separation of the offices ofPresident, Chief Executive Officer and Chairmana director of Savers, Inc. from January 2004 to January 2017 and as the Vice President and General Manager from December 2002 to December 2003.
Qualifications And Experience
Mr. Alterman has extensive knowledge of the boarddiscount industry, as well as substantial experience developing corporate strategy and assessing emerging industry trends and business operations. | |
| | JOHN (“JEB”) E. BACHMAN | |
| | Director since November 2019 Committees •
Audit and Risk Committee (Chair) Other Public Company Directorships •
The Children’s Place Inc. (NASDAQ: PLCE)
(2016 to current) •
Recharge Acquisition Corp. (NASDAQ: RCHG)
(2020 to current) •
WEX Inc. (NASDAQ: WEX)
(2016-2021) | | | Mr. Bachman, 66, has been an outside director for various public companies since his retirement in 2015. From 1978 to 2015, Mr. Bachman was a certified public accountant at the accounting firm, PricewaterhouseCoopers LLP (“PwC”), most recently as a partner. At PwC, Mr. Bachman served for six years as the Operations Leader of directors. It is the boardfirm’s U.S. Assurance Practice with full operational and financial responsibility for this $4 billion line of directors’ view that rather than having a rigid policy,business, which included the boardfirm’s audit and risk management practices. Mr. Bachman currently serves on the boards of directors withof The Children’s Place Inc. and Recharge Acquisition Corp. Qualifications And Experience
Mr. Bachman is a retired CPA and has extensive background in auditing, as well as business strategy and risk oversight experience from serving in the advice and assistanceleadership of one of the world’s largest accounting firms. Mr. Bachman has been identified by our Board as an audit committee financial expert. | |
| | Page | | | 19 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and Board Matters
| | THOMAS F. HERMAN | |
| | Director since 2004 Committees •
Audit and Risk Committee •
Nominating and Corporate Governance Committee Other Public Company Directorships •
None | | | Mr. Herman, 81, served as the President and upon Chief Operating Officer of Good Guys, Inc., a consumer electronics retailer from 2003 to 2004. Prior to that time, he served in various management positions, including at Oak Harbor Partners, a boutique financial services firm, Employment Law Learning Technologies, a distance learning company focused on employment law, Alamo Group, a real estate & operations business, American Copy Jewelry and the San Francisco Music Box Co.Qualifications And Experience
Mr. Herman has significant retail experience and financial expertise based on his years of senior executive experience as well as his prior experience serving on the boards of public companies such as Crdentia Corp. and Good Guys, Inc. Mr. Herman has been identified by our Board as an audit committee financial expert. | |
| | ERIK D. RAGATZ | |
| | 9![[MISSING IMAGE: ph_erikdragatz-4c.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/ph_erikdragatz-4c.jpg) Chairman of the Board since October 2014 Committees •
Compensation Committee consideration of all relevant factorsNominating and circumstances, will determine,Corporate
Governance Committee (Chair)
Other Public Company Directorships •
Snap One Holdings Corp. (NASDAQ: SNPO)
(2017 to current) | | | Mr. Ragatz, 49, has served as a Partner at Hellman & Friedman LLC, a private equity firm, since January 2008. Mr. Ragatz leads Hellman & Friedman’s efforts to invest in the consumer, retail and when appropriate, whether the two offices should be separate. Currently, our leadership structure separates the offices of Chief Executive Officerindustrial sectors. He currently serves as Chairman and Chairmana member of the board of directors with Mr. Lindberg servingof Snap One Holdings Corp. He also serves as our Chief Executive Officerlead outside director and as a member of the audit and compensation committees of Wand TopCo Inc. (d/b/a Caliber Collision) and At Home Group, Inc., both private H&F portfolio companies. Qualifications And Experience
Mr. Ragatz serving as non-executive Chairmanhas significant strategic, financial, and business development expertise, along with insight into the proper functioning and role of the board. We believe this is appropriate as it provides Mr. Lindberg with the ability to focus on our day-to-day operations while allowing Mr. Ragatz to lead our boardcorporate boards of directors, in its fundamental rolegained through his years of providing advice to and oversight of management. The boardservice on the boards of directors has extensive involvement in the oversight of risk management related to us and our business and accomplishes this oversight through the regular reporting by the Audit and Risk Management Committee. The Audit and Risk Management Committee represents the board of directors by periodically reviewing our accounting, reporting and financial practices, including the integrity of our financial statements, the surveillance of administrative and financial controls and our compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance, legal and internal audit functions, the Audit and Risk Management Committee reviews and discusses all significant areas of our business and summarizes for the board of directors all areas of risk and the appropriate mitigating factors. In addition, our board of directors receives periodic detailed operating performance reviews from management.H&F’s portfolio companies.
| |
Our chief executive officer, president and other executive officers regularly report to the non-executive directors and the Audit and Risk Management, the Compensation and the Nominating and Corporate Governance Committees to ensure effective and efficient oversight of our activities and to assist in proper risk management and the ongoing evaluation of management controls. The internal audit finance function reports functionally and administratively to our chief financial officer and directly to the Audit and Risk Management Committee. We believe that the leadership structure of our board of directors provides appropriate risk oversight of our activities given the controlling interests held by an investment fund affiliated with H&F (the “H&F Investor”).| | Page | | | 20 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and Board Matters
Class II Directors with Terms Expiring in 2024
| | MARY KAY HABEN | |
| | Our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements. Our Director since November 2019
Committees •
Nominating and Corporate Governance Committee is responsible Other Public Company Directorships •
The Hershey Company
(NYSE: HSY) (2013 to current) •
Equity Residential (NYSE: EQR) (2011 to current) | | | Ms. Haben, 66, has been an outside director for managing risks associatedvarious public companies since her retirement in February 2011. From April 2007 to February 2011, Ms. Haben held various senior positions with Wm. Wrigley Jr. Company, a confectionery company, most recently as President, North America. Prior to that time, she held several key positions during her 27-year career with Kraft Foods, Inc., a grocery manufacturing and processing conglomerate, including serving as President of multibillion dollar divisions. Ms. Haben currently serves on the independence of the board of directors. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our full boardboards of directors keeps itself regularly informed regarding such risks through committee reportsof The Hershey Company and otherwise.Equity Residential. Compensation Risk AnalysisQualifications And Experience
Ms. Haben has substantial governance expertise and Stock Ownership Guidelines
The Compensation Committee is aware that compensation arrangements, if not properly structured, may encourage inappropriate risk-taking. In designing our compensation programs, the Compensation Committee seeks to mitigate such risk by providingexperience with consumer preferences as a meaningful portion of total compensation in the form of equity incentives that are earned over multiple years to encourage an appropriately long-term focus.
Moreover, the Compensation Committee approved the implementation of formal stock ownership guidelinessenior executive for our management team, which we adopted in September 2019. Pursuant to the guidelines, each of the Company’s executives with a title Vice President and above is required to own shares of our common stock having an aggregate fair market value equal to or greater than the following (each as measured with reference to the base salary payable to each executive in the immediately preceding calendar year):
Chief Executive Officer
| | | Five (5)
| Executive Officer-Level / EVP
| | | Three (3)
| Senior Vice Presidents and Vice Presidents
| | | Two (2)
|
| | GAIL MOODY-BYRD | | | | For purposes of the guidelines, the base salary payable will include any base salary payable in a given calendar year (even if the payment of which is deferred to a later calendar year). For purposes of the guidelines, an executive’s holdings include: (i) shares owned separately by the executive or owned either jointly or with, or separately by, his or her immediate family, (ii) shares held in trust for the benefit of the executive or his or her immediate family members, (iii) shares purchased on the open market, (iv) shares obtained through stock option exercises (and not thereafter sold), (v) vested but unexercised stock options and (vi) shares of restricted stock and restricted stock units, in each case, whether vested or unvested. Executives have five years to attain the specified level of equity ownership. Executives must hold 50% “net shares” (shares left after the tax liability is settled) until the guidelines are met. Our board of directors may waive compliance with the guidelines on a case by case basis where these guidelines would place a severe hardship on an individual, but it is anticipated that waivers will be rare.
![[MISSING IMAGE: ph_gailmoodybyrd-4c.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/ph_gailmoodybyrd-4c.jpg) TABLE OF CONTENTS
We note that our Named Executive Officers already maintain an equity ownership position, through direct stock ownership and/or the ownership of stock option and restricted stock unit awards. We believe that this ownership position as well as the implementation of formal guidelines provide significant incentives to ensure that the management team’s actions, and the actions of all those reporting to them, are focused on the creation of sustainable stockholder value and the avoidance of excessive risk.Director since January 2021
Committees of the Board of Directors The standing committees of our board of directors include: the Audit and Risk Management Committee, the Compensation Committee and the Nominating and Corporate Governance Committee. The composition and responsibilities of each standing committee are described below. Members will serve on these committees until their resignation or until otherwise determined by our board of directors. Current copies of the charters for each of these committees are available on our website at https://investors.groceryoutlet.com/corporate-governance/governance-highlights, under the “Corporate Governance” section.•
Audit and Risk Management Committee The members of our current Audit and Risk Management Committee are Mme. Haben and Messrs. Bachman, Eisen, Herman and York. Mr. Bachman
Other Public Company Directorships •
None | | | Ms. Moody-Byrd, 64, has served as Vice President, Marketing, LinkedIn Sales Solutions at LinkedIn Corporation since March 2022. Previously, she served as the Chief Marketing Officer of Noodle.ai, a software company, from November 2018 to February 2022. Prior to Noodle.ai, from September 2007 to June 2017, Ms. Moody-Byrd held various positions with SAP SE, a multinational software corporation, most recently as Vice President of Web Marketing. Her retail industry experience also includes roles with divisions of Macy’s and Target Corporation, with Levi, Strauss & Co., and as a retail consultant with McKinsey & Company and Walter K. Levy Associates. Qualifications And Experience
Ms. Moody-Byrd has extensive marketing and retail background, as well as experience in driving brand awareness, demand generation and business development. | |
| | Page | | | 21 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and Board Matters
| | S. MACGREGOR READ JR. | | | | Director since January 2006 Vice Chairman since April 2020 Other Public Company Directorships •
None | | | Mr. Read, 51, served as the Executive Vice Chairman of the AuditCompany from January 2019 through April 2020. In April 2020, Mr. Read became the Vice Chairman of our Board. From January 2006 to December 2018, Mr. Read served as our Co-Chief Executive Officer. Prior to being appointed Co-Chief Executive Officer, Mr. Read served in various positions with the Company since 1996. Mr. Read and Risk Management CommitteeMr. Lindberg are cousins by marriage. Qualifications And Experience
Mr. Read has extensive knowledge of our operations, finances, strategies and industry garnered over his 25-year tenure with us. | |
| | JEFFREY R. YORK | | | | Director since November 2019. Mme. Haben2010 Committees •
Compensation Committee Other Public Company Directorships •
None | | | Mr. York, 58, has served as Partner, Farm Boy Stores and Messrs. Bachman, Eisen, HermanSpecial Advisor to Sobeys, Inc. the second largest food retailer in Canada, since June 2020. Previously, he served as Co-Chief Executive Officer and President of Farm Boy, Inc., a grocery retailer from November 2009 through June 2020. Mr. York all qualifycurrently serves as independenta member of the boards of directors underof Focus Graphite, an advanced exploration and mining company, Braille Energy Systems, Inc., a manufacturer of race car batteries and other energy storage devices and Stria Lithium, a junior mineral exploration company with lithium claims in Northern Quebec. Qualifications And Experience
Mr. York has extensive knowledge of the Nasdaqgrocery industry and corporate governance standards,based on his experience as a senior executive and Mme. Haben and Messrs. Bachman, Herman and York qualify as independent directors under the independence requirementsserving on boards of Rule 10A-3 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). Our board of directors has determined that each of Messrs. Bachman, Eisen, Herman and York qualify as an “audit committee financial expert” as such term is defined in Item 407(d)(5) of Regulation S-K promulgated under the Exchange Act. We expect Mr. Eisen to resign from the Audit and Risk Management Committee prior to the anniversary of our initial public offering.directors. The purpose of the Audit and Risk Management Committee is to prepare the audit committee report required by the SEC to be included in our proxy statement and to assist our board of directors in overseeing and monitoring (1) the quality and integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent registered public accounting firm’s qualifications and independence, (4) the performance of our internal audit function, (5) the risk management policies and procedures of the Company and (6) the performance of our independent registered public accounting firm.
| |
Compensation Committee •
Nominating and Corporate
Governance Committee Other Public Company Directorships •
The membersChildren’s Place Inc. (NASDAQ: PLCE)
(2009 to current) •
Party City Holdco, Inc.
(NASDAQ: PRTY)
(2013 to current) •
ThredUp Inc. (NASDAQ: TDUP) (Private: 2014-2021; since IPO: 2021-current) •
Spectrum Brands Holdings, Inc. (NYSE: SPB) (2010 to 2021) | | | Mr. Matthews, 89, served in various senior management positions for Federated Department Stores from 1978 to 1988, including most recently as President from 1987 to 1988. Prior to joining Federated Department Stores, Mr. Matthews served as Senior Vice President, General Merchandise Manager for E.J. Korvette, and as Senior Vice President, Marketing and Corporate Development for Broyhill Furniture Industries. Mr. Matthews currently serves on the boards of our current directors of The Children’s Place Inc., Party City Holdco, Inc. and ThredUp Inc. He also previously has served as director of Spectrum Brand Holdings, Inc., Henry Schein, Inc. and The Progressive Corporation. Qualifications And Experience
Mr. Matthews has extensive knowledge of the retail industry and strategic marketing and sales and corporate governance practices from his years as a senior executive and member of the boards of directors of several public companies. | |
| | Page | | | 18 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and Board Matters
Class I Directors with Terms Expiring in 2023
| | KENNETH W. ALTERMAN | |
| | Director since February 2011 Committees •
Compensation Committee are Messrs.(Chair) Other Public Company Directorships •
None | | | Mr. Alterman Ragatz, Matthews, Eisen, 65, currently retired, most recently served as an Executive Adviser to Savers, Inc., a retail thrift store chain from January 2017 to January 2022. He previously served as the President, Chief Executive Officer and York. a director of Savers, Inc. from January 2004 to January 2017 and as the Vice President and General Manager from December 2002 to December 2003. Qualifications And Experience
Mr. Alterman has served as Chairmanextensive knowledge of the Compensation Committeediscount industry, as well as substantial experience developing corporate strategy and assessing emerging industry trends and business operations. | |
| | JOHN (“JEB”) E. BACHMAN | |
| | Director since November 2019. All2019 Committees •
Audit and Risk Committee (Chair) Other Public Company Directorships •
The Children’s Place Inc. (NASDAQ: PLCE)
(2016 to current) •
Recharge Acquisition Corp. (NASDAQ: RCHG)
(2020 to current) •
WEX Inc. (NASDAQ: WEX)
(2016-2021) | | | Mr. Bachman, 66, has been an outside director for various public companies since his retirement in 2015. From 1978 to 2015, Mr. Bachman was a certified public accountant at the accounting firm, PricewaterhouseCoopers LLP (“PwC”), most recently as a partner. At PwC, Mr. Bachman served for six years as the Operations Leader of the membersfirm’s U.S. Assurance Practice with full operational and financial responsibility for this $4 billion line of business, which included the firm’s audit and risk management practices. Mr. Bachman currently serves on the boards of directors of The Children’s Place Inc. and Recharge Acquisition Corp. Qualifications And Experience
Mr. Bachman is a retired CPA and has extensive background in auditing, as well as business strategy and risk oversight experience from serving in the leadership of one of the Compensationworld’s largest accounting firms. Mr. Bachman has been identified by our Board as an audit committee financial expert. | |
| | Page | | | 19 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Corporate Governance and Board Matters
| | THOMAS F. HERMAN | |
| | Director since 2004 Committees •
Audit and Risk Committee are independent under applicable rules and regulations of the SEC and Nasdaq. In addition, each of Messrs. Alterman and York qualifies as a “non-employee director” within the meaning of Section 16 of the Exchange Act. The Compensation Committee has the authority to delegate any of its responsibilities, along with the authority to take action in relation to such responsibilities, to one or more subcommittees as the Compensation Committee may deem appropriate in its sole discretion, subject to applicable law, rules and regulations. The purpose of the Compensation Committee is to assist our board of directors in discharging its responsibilities relating to, among other things, (1) setting our compensation program and compensation of our executive officers and directors, (2) monitoring our incentive and equity-based compensation plans and (3) preparing the Compensation Committee report required to be included in our proxy statement under the rules and regulations of the SEC.
•
Nominating and Corporate Governance Committee The members
Other Public Company Directorships •
None | | | Mr. Herman, 81, served as the President and Chief Operating Officer of Good Guys, Inc., a consumer electronics retailer from 2003 to 2004. Prior to that time, he served in various management positions, including at Oak Harbor Partners, a boutique financial services firm, Employment Law Learning Technologies, a distance learning company focused on employment law, Alamo Group, a real estate & operations business, American Copy Jewelry and the San Francisco Music Box Co. Qualifications And Experience
Mr. Herman has significant retail experience and financial expertise based on his years of senior executive experience as well as his prior experience serving on the boards of public companies such as Crdentia Corp. and Good Guys, Inc. Mr. Herman has been identified by our current Board as an audit committee financial expert. | |
| | ERIK D. RAGATZ | |
| | Chairman of the Board since October 2014 Committees •
Compensation Committee •
Nominating and Corporate
Governance Committee are Mme. Haben and Messrs. Ragatz, Matthews and Narang. (Chair) Other Public Company Directorships •
Snap One Holdings Corp. (NASDAQ: SNPO)
(2017 to current) | | | Mr. Ragatz, 49, has served as a Partner at Hellman & Friedman LLC, a private equity firm, since January 2008. Mr. Ragatz leads Hellman & Friedman’s efforts to invest in the consumer, retail and industrial sectors. He currently serves as Chairman of the Nominating and Corporate Governance Committee since June 2019. All of the members of the Nominating and Corporate Governance Committee are determined to be independent under applicable rules and regulations of the SEC and Nasdaq. The purpose of our Nominating and Corporate Governance Committee is to assist our board of directors in discharging its responsibilities relating to (1) identifying individuals qualified to become new board members,
TABLE OF CONTENTS
consistent with criteria approved by the board of directors, (2) reviewing the qualifications of incumbent directors to determine whether to recommend them for reelection and selecting, or recommending that the board of directors select, the director nominees for the next annual meeting of stockholders, (3) identifying board members qualified to fill vacancies on any board of directors committee and recommending that the board of directors appoint the identifieda member or members to the applicable committee, (4) reviewing and recommending to the board of directors corporate governance principles applicable to us, (5) overseeing the evaluation of the board of directors and management and (6) handling such other matters that are specifically delegated to the committee by the board of directors from time to time.
Code of Business ConductSnap One Holdings Corp. He also serves as lead outside director and Ethics
We have adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) applicable to all employees, executive officers and directors that addresses legal and ethical issues that may be encountered in carrying out their duties and responsibilities, including the requirement to report any conduct they believe to be a violation of the Code of Ethics. The Code of Ethics is available on the Company / Investor Relations / Corporate Governance page of our website, www.groceryoutlet.com. The information available on or through our website is not part of this Proxy Statement. If we ever were to amend or waive any provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or any person performing similar functions, we intend to satisfy our disclosure obligations with respect to any such waiver or amendment by posting such information on our internet website set forth above rather than by filing a Form 8-K.
Corporate Governance Guidelines
Our board of directors has adopted corporate governance guidelines which describe the principles and practices that our board of directors will follow in carrying out its responsibilities. These guidelines cover a number of areas including the role and responsibilities, size and composition of the board, independence of directors, selection of chairperson of the board and chief executive officer, conflicts of interest, change in present job responsibility, retirement age of directors, director orientation and continuing education, lead director , term limits, board meetings, board committees, expectations of directors, management succession planning, evaluation of board performance, board compensation, communications with stockholders, implementation of stockholder agreements, communications with non-management directors.
A copy of our corporate governance guidelines is available on our website at https://investors.groceryoutlet.com
/corporate-governance/governance-highlights, under the “Corporate Governance” section.
Meetings and Attendance
During fiscal 2019, there were five meetings of the board of directors, seven meetings of the Audit and Risk Management Committee, five meetings of the Compensation Committee and one meeting of the Nominating and Corporate Governance Committee. Each of our directors attended at least 75% of the aggregate meetings of the board of directors and the committees of the board of directors on which they served during the period they served in fiscal 2019. In addition, our independent directors regularly meet in executive session. The Chairman of the Nominating and Corporate Governance Committee chairs these executive sessions of independent directors.
We strongly encourage our board of directors to attend the annual meetings of stockholders.
Compensation Committee Interlocks and Insider Participation
Compensation decisions are made by our Compensation Committee. None of our current or former executive officers or employees currently serves, or has served during our last completed fiscal year, as a member of our Compensation Committee and, during that period, none of our executive officers served as a member of the Compensation Committee (or other committee serving an equivalent function)audit and compensation committees of any other entity whose executive officers served as Wand TopCo Inc. (d/b/a member of our board of directors.
We have entered into certain indemnification agreements with our directorsCaliber Collision) and are party to certain transactions with theAt Home Group, Inc., both private H&F Investor described in “Certain Relationshipsportfolio companies.
Qualifications And Experience
Mr. Ragatz has significant strategic, financial, and Related Party Transactions—Indemnificationbusiness development expertise, along with insight into the proper functioning and role of Directors and Officers” and “—Stockholders Agreement,” respectively. While Messrs. Ragatz and Narang are Partners at an affiliate of the H&F Investor, neither has a material interest in our transactions with the H&F Investor. TABLE OF CONTENTS
Director Compensation
Pursuant to our non-employee director compensation policy, cash and equity compensation is paid or made, as applicable, to each member of our boardcorporate boards of directors, who is not either (i) an employeegained through his years of us or any parent or subsidiary of us, or (ii) an employee of H&F or its affiliates (excluding portfolio companies) (each, a “Non-Employee Director”).
In fiscal 2019, we engaged Korn Ferry (US) (“Korn Ferry”),service on the Compensation Committee’s independent advisor, to review the competitiveness of compensation provided to our board of directors. In connection with our initial public offering in June 2019, our boardboards of directors adopted our current non-employee director compensation policy. Under both our prior and current non-employee director compensation policies, each Non-Employee of H&F’s portfolio companies.
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Corporate Governance and Board Matters
Class II Directors with Terms Expiring in 2024
| | MARY KAY HABEN | |
| | Director is entitled to receive an annual retainer of $75,000 and a Non-Employee Director serving as chairperson of our board of directors is entitled to receive an additional annual retainer of $100,000 for such service. Effective fiscal year 2020, the Non-Employee Directors may elect to receive the annual retainer in cash or a grant of restricted stock units with respect to a number of shares of our common stock having a grant date fair market value equal to the applicable annual retainer. In addition, our current non-employee director compensation policy provides that each Non-Employee Director is entitled to receive additional annual retainers as shown in the following table, as applicable. The prior non-employee director compensation policy provided for the same additional committee retainers, except that it did not cover the since November 2019 Committees •
Nominating and Corporate Governance Committee because we did not have such Other Public Company Directorships •
The Hershey Company
(NYSE: HSY) (2013 to current) •
Equity Residential (NYSE: EQR) (2011 to current) | | | Ms. Haben, 66, has been an outside director for various public companies since her retirement in February 2011. From April 2007 to February 2011, Ms. Haben held various senior positions with Wm. Wrigley Jr. Company, a committee prior to our initial public offering. The annual retainers are earned on a quarterly basis based on a calendar quarter and paid by us in arrears prior to the fifth business day following the end of each calendar quarter. Audit and Risk Management Committee | | | $15,000 | | | $25,000 | Compensation Committee | | | $10,000 | | | $15,000 | Nominating and Corporate Governance Committee | | | $7,500 | | | $10,000 |
In addition to cash compensation, both the prior and current non-employee director compensation policies provide that each Non-Employee Director will be granted an annual restricted stock unit award with respect to a number of shares of our common stock having a grant date fair market value of $100,000.confectionery company, most recently as President, North America. Prior to the adoptionthat time, she held several key positions during her 27-year career with Kraft Foods, Inc., a grocery manufacturing and processing conglomerate, including serving as President of our 2019 Incentive Plan (as defined below), restricted stock unit awards were granted to Non-Employee Directors under our 2014 Stock Plan (as defined below) on a date determined by our board of directors. Following the adoption of the 2019 Incentive Plan, restricted stock unit awards are granted to Non-Employee Directors under our 2019 Incentive Plan annually, subject to the Non-Employee Director’s continued service immediately following such annual meeting. Subject to the Non-Employee Director’s continued service to us on each applicable vesting date, the annual restricted stock unit awards granted under the prior policy vest in equal annual installments on each of the first three anniversaries of December 31 of each year and will vest in full upon a change in control. Under our current non-employee director compensation policy, subject to the Non-Employee Director’s continued service with usmultibillion dollar divisions. Ms. Haben currently serves on the applicable vesting date, the annual restricted stock unit awards will generally vest in full over twelve months or in full upon a change in control. Under both our prior and current non-employee director compensation policies, upon each vesting event, the annual restricted stock unit grant, or the relevant portion thereof, will be settled in our shares of common stock within 30 days of the date on which the relevant vesting date occurs. The number of shares underlying the annual restricted stock unit grant is calculated by dividing $100,000 by the fair market value as of the date the annual restricted stock unit grant is granted (which, following the public trading date, will be the closing price of a share of our common stock on the principal stock exchange on which such shares are listed).
Under both our prior and current non-employee director compensation policies, none of our directors receive separate compensation for attending meetings of our boardboards of directors or any committees thereof. All directors are reimbursedof The Hershey Company and Equity Residential.
Qualifications And Experience
Ms. Haben has substantial governance expertise and experience with consumer preferences as a senior executive for travelconsumer-packaged goods companies. | |
| | GAIL MOODY-BYRD | |
| | Director since January 2021 Committees •
Audit and other expenses directly relatedRisk Committee Other Public Company Directorships •
None | | | Ms. Moody-Byrd, 64, has served as Vice President, Marketing, LinkedIn Sales Solutions at LinkedIn Corporation since March 2022. Previously, she served as the Chief Marketing Officer of Noodle.ai, a software company, from November 2018 to director activitiesFebruary 2022. Prior to Noodle.ai, from September 2007 to June 2017, Ms. Moody-Byrd held various positions with SAP SE, a multinational software corporation, most recently as Vice President of Web Marketing. Her retail industry experience also includes roles with divisions of Macy’s and responsibilities.Target Corporation, with Levi, Strauss & Co., and as a retail consultant with McKinsey & Company and Walter K. Levy Associates. With respect to fiscal year 2019, Mme. HabenQualifications And Experience
Ms. Moody-Byrd has extensive marketing and Messrs. Alterman, Bachman, Herman, Matthewsretail background, as well as experience in driving brand awareness, demand generation and York were our Non-Employee Directors and were entitled to separate compensation for their service on our board of directors, while none of our other directors in fiscal year 2019 (including our employee-directors, Messrs. Lindberg and Read) were entitled to such compensation.business development.
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| | S. MACGREGOR READ JR. | |
| | 13![[MISSING IMAGE: ph_smacgregorreadjr-4c.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/ph_smacgregorreadjr-4c.jpg) Director since January 2006 Vice Chairman since April 2020 Other Public Company Directorships •
None | | |
TABLE OF CONTENTS
The following table summarizesMr. Read, 51, served as the compensation paid to or earned by our directors in 2019.
Kenneth W. Alterman(1) | | | 85,685 | | | 100,000 | | | 26,994 | | | 212,679 | John E. (Jeb) Bachman(2) | | | 13,699 | | | — | | | — | | | 13,699 | Mary Kay Haben(3) | | | 13,356 | | | — | | | — | | | 13,356 | Thomas F. Herman(4) | | | 100,000 | | | 100,000 | | | 26,994 | | | 226,994 | Norman S. Matthews(5) | | | 86,027 | | | 100,000 | | | 26,994 | | | 213,021 | Jeffrey York(6) | | | 83,542 | | | 100,000 | | | 26,994 | | | 210,564 | Matthew B. Eisen(7)(8) | | | — | | | — | | | — | | | — | Philip Hammarskjold(8)(9) | | | — | | | — | | | — | | | — | Sameer Narang(8) | | | — | | | — | | | — | | | — | Erik D. Ragatz(8) | | | — | | | — | | | — | | | — |
(1)
| Mr. Alterman received $10,685 in cash as committee fees. |
(2)
| Mr. Bachman joined our board of directors on November 12, 2019 and received $3,425 in cash as committee fees. |
(3)
| Ms. Haben joined our board of directors on November 13, 2019 and received $3,082 in cash as committee fees. |
(4)
| Mr. Herman received $25,000 in cash as committee fees. |
(5)
| Mr. Matthews received $11,027 in cash as committee fees. |
(6)
| Mr. York received $8,542 in cash as committee fees. |
(7)
| Mr. Eisen joined our board of directors on March 22, 2019. |
(8)
| Messrs. Eisen, Hammarskjold, Narang and Ragatz did not receive any compensation for their service on our board of directors. |
(9)
| Mr. Hammarskjold resigned as a director on March 22, 2019. |
(10)
| Each of Messrs. Alterman, Herman, Matthews and York received an annual retainer of $75,000 in cash for service on our board of directors. Each of Mme. Haben and Mr. Bachman received a pro-rated annual retainer of $10,274 in cash for service on our board of directors as of November 2019. |
(11)
| Each of Messrs. Alterman, Herman, Matthews and York was granted a restricted stock unit award on March 30, 2019 with respect to 7,984 shares of our common stock, pursuant to the terms of the 2014 Stock Plan. Each of Messrs. Alterman, Herman, Matthews and York was granted a restricted stock unit award on June 24, 2019 with respect to 5,612 shares of our common stock, pursuant to the terms of the 2019 Incentive Plan. |
(12)
| In connection with the 2016 Dividend and the 2018 Dividend, we made cash payments in the amount of $26,994 on January 4, 2019 to each of Messrs. Alterman, Herman, Matthews and York, in respect of restricted stock units each such person held that vested on December 31, 2018. |
Fiscal Year 2020 Director Compensation Matters
Following his transition from the executive role ofExecutive Vice Chairman of the Company tofrom January 2019 through April 2020. In April 2020, Mr. Read became the non-executive role of Vice Chairman of our board of directors effective as of April 1, 2020,Board. From January 2006 to December 2018, Mr. Read will be compensatedserved as our Co-Chief Executive Officer. Prior to being appointed Co-Chief Executive Officer, Mr. Read served in various positions with the same mannerCompany since 1996. Mr. Read and Mr. Lindberg are cousins by marriage.
Qualifications And Experience
Mr. Read has extensive knowledge of our operations, finances, strategies and industry garnered over his 25-year tenure with us. | |
| | JEFFREY R. YORK | |
| | Director since November 2010 Committees •
Compensation Committee Other Public Company Directorships •
None | | | Mr. York, 58, has served as other Non-Employee Directors pursuantPartner, Farm Boy Stores and Special Advisor to our non-employee director compensation policy for his serviceSobeys, Inc. the second largest food retailer in Canada, since June 2020. Previously, he served as Co-Chief Executive Officer and President of Farm Boy, Inc., a grocery retailer from November 2009 through June 2020. Mr. York currently serves as a member of our boardthe boards of directors (including, as applicable,of Focus Graphite, an advanced exploration and mining company, Braille Energy Systems, Inc., a manufacturer of race car batteries and other energy storage devices and Stria Lithium, a junior mineral exploration company with lithium claims in Northern Quebec. Qualifications And Experience
Mr. York has extensive knowledge of the grocery industry and corporate governance based on his serviceexperience as a membersenior executive and serving on boards of directors. | |
Director Independence
Pursuant to the corporate governance listing standards of The NASDAQ Stock Market LLC (“Nasdaq”), a director employed by us cannot be deemed to be an independent director. Each other director will qualify as independent only if the director satisfies a series of objective tests, including that the director has not engaged in various types of business dealings with us, and that our Board affirmatively determines, on a subjective basis, that he or she has no material relationship with us, either directly or as a partner, stockholder or officer of an organization that has a relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Ownership of a significant amount of our stock, by itself, does not constitute a material relationship.
Upon the recommendation of the Nominating and Corporate Governance Committee, our Board has affirmatively determined all of our current directors are independent in accordance with the Nasdaq rules, other than Mr. Lindberg, who serves as our Chief Executive Officer and Mr. Read, who served as Executive Vice Chairman of the Company through April 2020. In making these determinations, the Nominating and Corporate Governance Committee reviewed and discussed information provided by the directors and us regarding each director’s business and personal activities as they may relate to us and our management, and determined that no subjective independence concerns existed. Each member of the Committees is independent under Nasdaq rules
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Additionally, our Board has determined that each of the members of the Audit and Risk Committee and Compensation Committee qualify as independent in accordance with the additional independence rules established by the U.S. Securities and Exchange Commission (“SEC”) and Nasdaq.
Board Leadership Structure
Our Board has a general policy that the positions of Chairman of the Board and Chief Executive Officer should be held by separate persons to further enhance the Board’s oversight of management. In the event that such positions are not separated, a lead independent director would be elected. Currently, our leadership structure separates the offices of Chief Executive Officer and Chairman of the Board with Mr. Lindberg serving as our Chief Executive Officer and Mr. Ragatz serving as non-executive Chairman of the Board. We believe this is appropriate as it provides Mr. Lindberg with the ability to focus on our day-to-day operations and implementing strategies while allowing Mr. Ragatz to lead our Board in its fundamental role of providing advice to and oversight of management, including by leading Board executive sessions of the independent directors and presiding at all Board and stockholder meetings. Mr. Ragatz qualifies as independent under applicable rules and regulations of the SEC and Nasdaq. Further, the Committees consist solely of independent directors and provide significant oversight and leadership of key Board functions.
Corporate Governance Guidelines
Our Board has adopted Corporate Governance Guidelines, which describe the principles and practices that our Board will follow in carrying out its responsibilities. These guidelines cover a number of policies and practices, including certain matters described under “Highlights of Current Corporate Governance Practices.” Additionally, these guidelines address:
•
the role and responsibilities, size and composition of the Board
•
the independence of directors
•
the selection of Chairman of the Board,
•
potential and actual conflicts of interest
•
consideration of matters impacting director service, including a change in present job responsibility and retirement age (see below)
•
director orientation and continuing education
•
the lead independent director role, if any
•
the conduct of Board meetings
•
standing Committees
•
expectations of directors
•
management succession planning
•
Board compensation
•
communications with stockholders and non-employee directors
•
the process for evaluating Board performance
A copy of our Corporate Governance Guidelines is available on our website at https://investors.groceryoutlet.com under the “Corporate Governance” section.
Waiver of Retirement Age Requirement for Mr. Matthews. Our Corporate Governance Guidelines provide that a director is generally required to retire from our Board when they reach the age of 80, provided that a director serving as a member of our Board as of the date of our IPO may continue to serve until the next stockholder meeting coincident with or following his or her 80th birthday at which directors of the class to which such director belongs will be elected. On the
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recommendation of the Nominating and Corporate Governance Committee, the Board may waive this requirement as to any director if it deems such waiver to be in the best interests of the Company.
Mr. Matthews, a Class III director nominee for election at the 2022 Annual Meeting, exceeds our retirement age. After consideration of facts and circumstances that it deemed relevant, our Nominating and Corporate Governance Committee recommended, and our Board approved, a waiver of this requirement for Mr. Matthews and re-nominated him. The Nominating and Corporate Governance Committee and the Board considered, among other things, the current composition of our Board, including the mix of diversity in age and tenure, as well as Mr. Matthews’ participation and continuing valuable contributions to the Board.
Board and Board Committee Meetings and Annual Meeting Attendance
The Board and its Committees meet throughout the year at regularly scheduled meetings and also hold special meetings as needed. Additionally, they act by unanimous written consent when needed and appropriate. During the Fiscal Year 2021, there were five meetings of the Board, eight meetings of the Audit and Risk Committee, six meetings of the Compensation Committee and seven meetings of the Nominating and Corporate Governance Committee. Each of our directors attended at least 75% of the aggregate meetings of the Board and its Committees on which they served during the period they served in Fiscal Year 2021.
In addition, our independent directors regularly meet in executive session, without management present. The Chairman of the Board, currently Mr. Ragatz, chairs these executive sessions of independent directors. Our fully independent Committees also regularly meet in executive session (chaired by the respective Committee Chair).
We strongly encourage our directors to attend our annual meetings of stockholders. Eleven of our then twelve members attended our 2021 annual meeting of stockholders.
Board and Committees’ Role in Risk Oversight
Our Board and its Committees has extensive involvement in overseeing the Company’s risk management through their activities, some of which are noted below. We believe that the leadership structure of our Board and Committees provides appropriate risk oversight.
| | Full Board | | | •
General risk management oversight, including strategic, operational, financial and legal risks •
Joint leadership with management regarding crisis management, such as the Company’s response to the COVID-19 pandemic, and disaster recovery activities | |
| | Audit and Risk Committee | | | •
Oversees enterprise risk management and reviews key findings and strategies to mitigate identified risks •
Oversees significant financial risk exposures, including liquidity, legal, regulatory and other contingencies •
Regularly reviews reports from the Company’s legal, regulatory and compliance functions, including ethics hotline •
Oversees cybersecurity risk management | |
| | Compensation Committee | | | •
Annually reviews whether any committee of our board of directors). In addition, while Mr. Read remains non-executive Vice Chairman of our board of directors, Mr. Read will receive an annual cash retainer of $100,000 for such service. For purposes of fiscal 2020, Mr. Read’s compensation for serviceprograms encourage excessive risk taking, as a member of our board of directors will be calculated without proration sowell as to include service as a member of our board of directorsrisk mitigation policies and considerations •
Increasing role in fiscal 2020 prior to April 1, 2020. For more information on Mr. Read’s transition agreement and fiscal 2020 compensation see “—Read Transition Agreement” below. In fiscal year 2020, each Non-Employee Director has the option to receive some or all of his or her cash retaineroverseeing human capital management, including any human capital risks identified in the form of shares of our common stock.enterprise risk management process
| |
| | Nominating and Corporate Governance Committee | | | •
Considers any governance risks identified in in the enterprise risk management process •
Responsible for sustainability or other risks related to ESG | |
Enterprise Risk Management Process. Our Audit and Risk Committee oversees our approach to enterprise risk management, which is designed to work across our business to identify, assess, govern and manage risks and our response to those risks. The Senior Director of Corporate Internal Audit & Enterprise Risk, who reports functionally and administratively to
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our Chief Financial Officer and directly to the Audit and Risk Committee, leads an annual risk assessment process. Through this process, risks are identified through a series of interviews and quetionnaires, and then prioritized based on quantitative and qualitative factors that consider the likelihood and impact of the risk. Senior management aligns on critical risks and then identifies risk owners among the executive leadership team. Overall results are reported to and discussed with the Audit and Risk Committee annually and more frequently based on the materiality of specified risks. The Audit and Risk Committee provides updates to the Board, at least annually, on such review.
Cybersecurity, Data Privacy and Data Security. We consider cybersecurity to be an important issue affecting the enterprise both in terms of economic risk and reputational risk. Our Chief Information Officer regularly provides reports to the Audit and Risk Committee regarding cybersecurity and related topics. We have implemented controls in line with the requirements of the International Organization for Standardization and have assessed our cybersecurity maturity levels against the National Institute of Standards and Technology framework to set appropriate standards and guidelines. We monitor and remediate threats through our managed detection and response, and our vulnerability management programs. We provide regular employee communications and training, regularly review our incident response and breach notification plan, and leverage third-party expertise for testing, assessments and improvements.
We have in place a cybersecurity incident response team, comprised of members of the Company’s information security, legal, human resources and communications teams, and whose function is to respond to any such incident, define and seek to control the extent of the incident, assess and remediate any damage caused, and implement measures designed to prevent future reoccurrences.
During the COVID-19 pandemic, the Audit and Risk Committee and management have focused on ensuring that we have secure remote access with trusted devices, endpoint security controls and infrastructure resiliency. As part of this process, we enhanced our security incident response procedures to address risks specific to remote working conditions. We continue to improve our security posture with process improvement, testing, simulation training and investments where necessary.
Compensation Risk Analysis
The Compensation Committee reviews management’s annual assessment of our compensation programs and policies for our executive officers as well as for our other employees to determine whether those programs and policies encourage excessive risk taking that are reasonably likely to have a material adverse effect on our Company. Our compensation policies and practices (including those for our executive officers described in more detail under “Compensation Discussion and Analysis” below) balance short- and long-term goals and awards, as well as the mix of the cash and equity components, and have reasonable payout caps and other risk mitigants, including our clawback policy and stock ownership guidelines (for executives and directors). Based upon this review, the Compensation Committee believes the elements of our compensation programs and policies do not encourage unnecessary or excessive risk-taking that are reasonably likely to have a material adverse effect on us.
Committees of the Board
The standing Committees of our Board include: the Audit and Risk Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee. The composition and responsibilities of each standing Committee are described below, as well as above under “Board and Committees’ Role in Risk Oversight”. Members will serve on these Committees until their resignation, retirement or other termination of service, or until otherwise determined by our Board. Current copies of the charters for each of these Committees are available on our website at https://investors.groceryoutlet.com, under the “Corporate Governance” section.
The following table sets forth the standing Committees and their Chairs and members as of the date of this Proxy Statement. Neither Mr. Lindberg or Mr. Read served on any standing Committees.
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Ms. Haben and Mr. York served on the Audit and Risk Committee during Fiscal Year 2021 until June 2021.
Audit and Risk Committee. The Audit and Risk Committee is solely and directly responsible for the appointment, compensation, retention, oversight of the work and termination, if any, of our independent registered accounting firm, Deloitte & Touche LLP (“Deloitte & Touche” or “Deloitte”). The additional primary responsibilities of the Audit and Risk Committee are to provide assistance to the Board regarding:
•
oversight of the quality and integrity of the Company’s financial statements, including the oversight of the Company’s accounting and financial reporting processes and reviewing reports filed or furnished to the SEC that include new financial statements or results;
•
oversight of the Company’s compliance with legal and regulatory requirements;
•
review and assessment of the independent registered public accounting firm’s qualifications, performance and independence;
•
oversight of the Company’s corporate compliance program, including the Code of Ethics, and investigating possible violations thereunder;
•
oversight of the risk management policies and procedures of the Company;
•
the preparation of the Audit and Risk Committee report included in our proxy statement, as well as the review of related disclosures in such proxy statement; and
•
review of the work plan and performance of the Company’s internal audit function.
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The Board has determined that each of Messrs. Bachman and Herman and Ms. Jaros qualifies as an “audit committee financial expert” under SEC rules, and that each member of the Audit Committee has sufficient knowledge in reading and understanding financial statements to serve on such Committee.
Compensation Committee. The primary responsibilities of the Compensation Committee are to provide assistance to the Board regarding:
•
evaluating, with the assistance of the CEO, the performance of the executive officers (other than the CEO);
•
annually determining the appropriate peer group and survey data in connection with evaluating executive compensation and benefits;
•
approving the compensation program and target compensation of the Company’s executive officers (other than the CEO) and recommending to the full Board the compensation program and compensation of the non-employee members of the Board;
•
consider on an annual basis management’s assessment of whether risks arising from the Company’s compensation policies and practices for all employees, including non-executive officers, are reasonably likely to have a material adverse effect on the Company;
•
monitoring or administering incentive and equity-based compensation plans;
•
review any compensation-related disclosures in this Proxy Statement, including reviewing and discussing with management our “Compensation, Discussion and Analysis” and producing the Compensation Committee Report included in our proxy statement, and reviewing any stockholder proposals related to such matters;
•
overseeing certain matters related to human capital management; and
•
being solely and directly responsible for the engagement, qualifications, scope of work, performance, independence and fees of the Compensation Committee’s independent compensation consultant.
The Board has determined that each member of the Compensation Committee qualifies as a non-employee director under applicable rules and regulations of the SEC.
To the extent permitted by applicable law and the Nasdaq rules, the Compensation Committee may delegate its responsibilities to a subcommittee and may authorize members of our Human Resources department to carry out certain administrative duties regarding our compensation programs. Pursuant to delegated authority from the Compensation Committee, the Committee Chair and the Chief Executive Officer approve certain equity awards for non-executive officer employees, subject to specified limitations.
For Fiscal Year 2021, the Compensation Committee determined to re-engage Korn Ferry as its independent consultant. In connection with such engagement, the Committee reviewed the independence of Korn Ferry based on the factors specified by Nasdaq as well as other factors it deemed relevant, and any conflicts of interest raised by the work of Korn Ferry. In Fiscal Year 2021, management engaged Korn Ferry for consulting services regarding certain non-executive compensation matters. The fees for those services were less than $120,000. The Committee determined that there were no conflicts of interest raised by Korn Ferry’s work for management. For information on the processes and roles for determining compensation, including the role of the Compensation Committee’s independent consultant, Korn Ferry, and the role of our Chief Executive Officer, in the consideration and determination of executive compensation, see “Compensation Discussion and Analysis” below.
Nominating and Corporate Governance Committee. The primary responsibilities of the Nominating and Corporate Governance Committee are to provide assistance to the Board regarding:
•
developing and recommending to the Board a set of corporate governance principles applicable to the Company, including reviewing key governance policies of the Company (including the Corporate Governance Guidelines and Code of Ethics) and monitoring or administering such policies as specified therein;
•
identifying and evaluating individuals qualified to become directors (including candidates nominated or recommended by stockholders), consistent with the criteria approved by the Board and set forth in Company policies,
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and recommending to the Board the director nominees for the next annual meeting of stockholders or to fill vacancies or newly created directorships that may occur between such meetings;
•
reviewing director independence;
•
evaluating the composition the Board and considerations related to director succession planning;
•
reviewing Committee membership and Board and Committee leadership roles;
•
overseeing the evaluation of the Board and its Committees;
•
review any governance-related disclosures in this Proxy Statement, and reviewing any stockholder proposals related to such matters;
•
oversight of management and director engagement with stockholders;
•
reviewing matters of corporate responsibility and sustainability, including potential long- and short-term trends and impacts to the Company’s business of environmental, social and governance issues, and the Company’s public reporting on these topics; and
•
otherwise taking a leadership role in overseeing and developing the corporate governance of the Company.
Compensation Committee Interlocks and Insider Participation
Compensation decisions are made by our Compensation Committee, which in Fiscal Year 2021 consisted of Kenneth W. Alterman, Norman S. Matthews, Erik D. Ragatz and Jeffrey R. York. None of our current or former executive officers or employees currently serves, or has served during our last completed fiscal year, as a member of our Compensation Committee and, during that period, none of our executive officers served as a member of the Compensation Committee (or other Committee serving an equivalent function) of any other entity whose executive officers served as a member of our Board.
We have entered into indemnification agreements with our directors as described in “Certain Relationships and Related Party Transactions—Indemnification of Directors and Officers.”
Communications with the Board of Directors
Our Board welcomes correspondence from our stockholders. Stockholders may initiate in writing any communication with our board of directorsBoard or any individual director by sending the correspondence to our General Counsel, c/o Grocery Outlet Holding Corp., 5650 Hollis Street, Emeryville, CA, 94608. This centralized process assists our board of directorsBoard in reviewing and responding to stockholder communications in an appropriate manner. The General Counsel shallwill initially review and compile all such communications and may summarize such communications prior to forwarding to the to the appropriate party.
TABLE OF CONTENTS
TheOur General Counsel will not forward communications that are not relevant to the duties and responsibilities of the board of directors,Board, including spam, junk mail and mass mailings, product or service inquiries, new product or service suggestions, resumes or other forms of job inquiries, opinion surveys and polls, business solicitations or advertisements, or other frivolous communications.
Director Nomination Process
Minimum Qualifications of Directors| | Page | | | 28 | | | Grocery Outlet 2022 Proxy Statement | | | | |
The Nominating and Corporate Governance and Board Matters
Director Compensation
Pursuant to our non-employee director compensation policy, cash and equity compensation is paid or made, as applicable, to each member of our Board who is not an employee of us or any parent or subsidiary of us, (each, a “Non-Employee Director”).
Non-Employee Director Cash Compensation
Under our Non-Employee Director compensation policy in effect for Fiscal Year 2021, Non-Employee Directors receive the following cash compensation:
| | Component of Cash Retainer | | | ($) | |
| | Annual cash retainer for Board service: | | | | | | | |
| | Chairman or Vice Chairman | | | | | 175,000 | | |
| | Other Non-Employee Directors | | | | | 75,000 | | |
| | Annual cash retainer for Committee service: | | | | | | | |
| | Audit and Risk Committee – Chair | | | | | 25,000 | | |
| | Audit and Risk Committee – Member | | | | | 15,000 | | |
| | Compensation Committee – Chair | | | | | 15,000 | | |
| | Compensation Committee – Member | | | | | 10,000 | | |
| | Nominating and Corporate Governance Committee – Chair | | | | | 10,000 | | |
| | Nominating and Corporate Governance Committee – Member | | | | | 7,500 | | |
The annual retainers are earned on a quarterly basis based on a calendar quarter.
Under our current Non-Employee Director compensation policy, none of our directors receive separate compensation for attending meetings of our Board or any Committees. All directors are reimbursed for travel and other expenses directly related to director activities and responsibilities.
Charitable Donations of Compensation Made by Mr. Ragatz
In Fiscal Year 2021, Mr. Ragatz elected to forgo the additional annual cash retainer fee of $100,000 payable to him in connection with his service as Chairman of the board of directors is responsible for facilitatingBoard and elected to donate the other Board and Committee annual cash retainer fees payable to him (equal to $95,000) to our Touching Lives Foundation. He has made the same elections with respect to his Fiscal Year 2022 compensation.
Non-Employee Director Equity Compensation
The current non-employee director assessments, identifying skills and expertisecompensation policy provides that candidates should possess, and screening, selecting and recommending candidates for approval by the board of directors. The Nominating and Corporate Governance Committee may solicit recommendations for nominees from other members of the board and management. Our Nominating and Corporate Governance Committee may also retain professional search firms to identify candidates. The Nominating and Corporate Governance Committee seeks to identify as candidates for director persons with a reputation for and record of integrity and good business judgment. The Nominating and Corporate Governance Committee considers the nature of the expertise and experience required for the performance of the duties of a director of the Company, and such matters as the candidate’s relevant business and industry experience, professional background, age, current employment, community service and other board service. The Nominating and Corporate Governance Committee shall also consider the racial, ethnic and gender diversity of the board of directors.
In addition, the committee shall take into account all factors it considers appropriate in recommending candidates for election to the board of directors, which may include:
ensuring that the board of directors, as a whole, is appropriately diverse and consists of individuals with various and relevant career experience, relevant technical skills, industry knowledge and experience, financial expertise (including expertise that could qualify a director aseach Non-Employee Director will be granted an “audit committee financial expert”), local or community ties;
minimum individual qualifications, including strength of character, mature judgment, familiarity with the Company’s business and industry, independence of thought and ability to work collegially; and
the extent to which the candidate would fill a present need on the board of directors.
Nomination Rights and Support ObligationsRSU award under our Amended and Restated Stockholders Agreement
Our Amended and Restated Stockholders Agreement provides that the H&F Investor will have the right2019 Incentive Plan (the “2019 Incentive Plan”) with respect to nominate to our board of directors (such persons, the “H&F nominees”) a number of nominees equal to: (x)shares of our common stock having a grant date fair market value of $100,000 (rounded up to the totalnext whole share). The number of directors comprising our board of directors at such time, multipliedshares underlying the annual RSU grant is calculated by (y)dividing $100,000 by the percentagefair market value as of our outstanding common stock held from time(which is the closing price of a share of our common stock on Nasdaq) on the annual RSU grant date. Non-Employee Directors who join the Board mid-year receive a prorated grant.
Subject to time by the H&F Investor. Non-Employee Director’s continued service with us on the applicable vesting date, the annual RSU awards will generally vest in full over twelve months or in full upon a change in control. Upon vesting, the annual RSU grant will be settled in shares of our common stock within 30 days of the date on which the relevant vesting date occurs.
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Corporate Governance and Board Matters
Director Equity Ownership Guidelines
Our director equity ownership guidelines provide that our Non-Employee Directors are expected to achieve and maintain ownership of equity with a total value equal to five times the annual cash retainer for Board service ($75,000 for Fiscal Year 2021). Non-Employee Directors are expected to initially satisfy such guidelines within a five-year initial compliance period. As of December 31, 2021, all non-employee directors in service were either in compliance with the guidelines or within the compliance period and making appropriate progress.
For purposes of calculating the numberguidelines, a director’s holdings include: (i) shares owned separately by the director or owned either jointly or with, or separately by, his or her immediate family, (ii) shares held in trust for the benefit of the director or his or her immediate family members, (iii) shares purchased on the open market, (iv) shares obtained through stock option exercises (and not thereafter sold), (v) vested but unexercised in-the-money stock options and (vi) shares of restricted stock and RSUs, in each case, whether vested or unvested. Directors must hold 50% “net shares” (shares remaining after any tax liability is settled) received from their equity awards until the guidelines are met.
Fiscal Year 2021 Director Compensation Table
The following table summarizes the compensation paid to or earned by our directors thatin Fiscal Year 2021, excluding Mr. Lindberg whose compensation is disclosed in the H&F Investor will be entitled to nominate, any fractional amounts are rounded upSummary Compensation Table.
| | NAME | | | FEES EARNED OR
PAID IN CASH
($)(1) | | | STOCK
AWARDS
($)(2) | | | ALL OTHER
COMPENSATION
($)(3) | | | TOTAL
($) | |
| | Kenneth W. Alterman | | | | | 90,000 | | | | | | 100,004 | | | | | | 5,985 | | | | | | 195,989 | | |
| | John E. (Jeb) Bachman | | | | | 100,000 | | | | | | 100,004 | | | | | | — | | | | | | 200,004 | | |
| | Mary Kay Haben | | | | | 89,086 | | | | | | 100,004 | | | | | | — | | | | | | 189,090 | | |
| | Thomas F. Herman | | | | | 97,500 | | | | | | 100,004 | | | | | | 5,985 | | | | | | 203,489 | | |
| | Carey F. Jaros | | | | | 90,000 | | | | | | 100,004 | | | | | | — | | | | | | 190,004 | | |
| | Norman S. Matthews | | | | | 92,533 | | | | | | 100,004 | | | | | | 5,985 | | | | | | 198,523 | | |
| | María Fernanda Mejía(4) | | | | | 90,000 | | | | | | 100,004 | | | | | | — | | | | | | 190,004 | | |
| | Gail Moody-Byrd(4) | | | | | 90,000 | | | | | | 100,004 | | | | | | — | | | | | | 190,004 | | |
| | Erik D. Ragatz(5) | | | | | 95,000 | | | | | | 100,004 | | | | | | — | | | | | | 195,004 | | |
| | S. MacGregor Read, Jr.(6) | | | | | 175,084 | | | | | | 100,004 | | | | | | — | | | | | | 275,088 | | |
| | Jeffrey R. York | | | | | 91,586 | | | | | | 100,004 | | | | | | 5,985 | | | | | | 197,575 | | |
(1)
This column represents the dollar amount of retainers either actually paid in cash or voluntarily deferred into cash accounts under the director Deferral Plan (defined below) for Board and committee service by each director for 2021. Messrs. Matthews and Read deferred all of their Fiscal Year 2021 cash compensation pursuant to the nearest whole number. Deferral Plan. Accordingly, Mr. Matthews received 3,057 Deferred Stock Units (“DSUs”) and Mr. Read received 5,784 DSUs with respect to their Fiscal Year 2021 cash compensation.
(2)
Amounts reported in this column represent the grant date fair value of RSUs granted. RSU awards listed in this column may be deferred under the Deferral Plan. These amounts do not reflect actual amounts that may be paid to or realized by the director. See Note 7, Share-based Awards to our consolidated financial statements contained in our 2021 Annual Report for a discussion of all assumptions made by us in determining the grant date fair value under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 718. Each of our non-employee directors was granted an RSU award on March 4, 2021 (with a vesting commencement date of March 1, 2021) for 2,821 shares of our common stock, pursuant to our Non-Employee Director compensation policy and the terms of the 2019 Incentive Plan. Pursuant to our Deferral Plan, Ms. Haben, and Messrs. Alterman, Matthews and Read each made elections in 2020 to defer the issuance of all of their RSUs granted during Fiscal Year 2021, and in March 2022, they each received 2,821 DSUs upon vesting.
(3)
In additionconnection with the Executive Stockholders2018 Dividend (as defined and described in “Executive Compensation—Compensation Discussion and Analysis”), we made cash payments in the amount of $5,985 on January 8, 2021 to each of Messrs. Alterman, Herman, Matthews and York, in respect of RSUs each such person held that vested on December 31, 2020.
(4)
Mmes. Mejía and Moody-Byrd were each elected to our Board effective January 18, 2021. Ms. Mejía resigned from our Board in February 2022 in connection with her appointment to an executive role with another company.
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Corporate Governance and Board Matters
(5)
Mr. Ragatz elected to forgo the additional annual cash retainer fee of $100,000 payable to him in connection with his service as Chairman of the Board and elected to donate the other Board and Committee annual cash retainer fees payable to him (equal to $95,000) to Grocery Outlet’s Touching Lives Foundation.
(6)
See “Transition Agreement with Mr. Read” below for a discussion of Mr. Read’s compensation as a non-employee director.
Transition Agreement with Mr. Read
On January 6, 2020, Mr. Read informed us of his decision to transition to the newly created non-executive role of Vice Chairman of our Board, effective as of April 1, 2020. In connection with this transition, we entered into a letter agreement with Mr. Read.
Following his transition to the non-executive role of Vice Chairman of our Board and effective as of April 1, 2020, Mr. Read was and continues to be compensated in the same manner as other Non-Employee Directors pursuant to our Non-Employee Director compensation policy.
For purposes of Mr. Read’s outstanding option award agreements, Mr. Read’s transition to Vice Chairman of our Board did not constitute a Termination (as defined in the Amended2019 Incentive Plan) or a termination of Employment (as defined in our predecessor plan, the 2014 Stock Incentive Plan (the “2014 Stock Plan”)). Mr. Read’s outstanding options will continue to vest based on his continued service as a member of our Board, with such Termination, or termination of Employment, as applicable, occurring upon cessation of Mr. Read’s service on our Board. In the event of a termination of Mr. Read’s service as a director as a result of his not being re-elected to our Board, or his death or disability, (i) all of Mr. Read’s (A) outstanding unvested time-based options will become fully vested upon the date of such termination of service and Restated Stockholders Agreement)(B) outstanding unvested performance-based options will remain outstanding and eligible to vest pursuant to the Read Trust Rollover Stockholdersterms of the applicable option agreement and (ii) the options will remain outstanding through the applicable option expiration date.
Director Deferral Program
On November 6, 2020, the Compensation Committee approved the Grocery Outlet Holding Corp. Directors Deferral Plan (the “Deferral Plan”). All of our current Non-Employee Directors are eligible to participate in the Deferral Plan. Under the terms of the Deferral Plan, Non-Employee Directors may elect to defer all of their annual cash compensation and/or all of the Company shares issued upon settlement of their annual RSU award, in each case, in the form of DSUs credited to an account maintained by us. The number of DSUs credited in respect of annual cash compensation is determined by dividing the dollar amount of the deferred cash compensation by the fair market value of a share of our common stock on the date the cash compensation would otherwise have been paid to the director. DSUs are awarded from, and remain subject to the terms of, the 2019 Incentive Plan.
Each DSU represents the right to receive a number of shares of our common stock equal to the number of DSUs initially credited to the director’s account plus the number of DSUs credited as a result of any dividend equivalent rights (to which DSUs initially credited to a director’s account are entitled). Directors may elect that settlement of DSUs be made or commence on (i) the first business day in a year following the year for which the deferral is made, (ii) following termination of service on the Board or (iii) the earlier of (i) or (ii). Directors may elect that DSUs be settled in a single one-time distribution or in a series of up to 5 annual installments. In addition, DSU accounts will be settled upon a Change in Control (as defined in the Amended and Restated Stockholders Agreement), trusts controlled by Mr. Lindberg,2019 Incentive Plan) or upon a director’s death. Notwithstanding the foregoing, with respect to Mr. Read or members of their immediate family, acting together by majority vote,only, he will haveforfeit the right to nominate one person (such person, the “Executive nominee”) to our boardsettlement of directors for so long as such stockholders collectively own at least 5% of our outstanding shares of common stock. The Amended and Restated Stockholders Agreement also provides that our Chief Executive Officer will be nominated to our board of directors. For so long as we have a classified board, the H&F nominees will be divided by the H&F Investor as evenly as possible among the classes of directors. The Executive nominee will initially be a Class II director and the Chief Executive Officer will initially be a Class III director.
Pursuanthis DSUs to the Amended and Restated Stockholders, we must includeextent that the H&F nominees, the Executive nominee and the Chief Executive Officer nominee on the slateDSUs would otherwise be settled upon a Change in Control that is included in our proxy statements relatingoccurred prior to the election of directors of the class to which such persons belong and provide the highest level of support for the election of each such persons as we provide to any other individual standing for election as a director. In addition, each stockholder party to the amended and restated stockholders agreement agrees to vote in favor of the Company slate that is included in our proxy. As of April 13, 2020, parties to the Amended and Restated Stockholders Agreement beneficially owned more than 45% of our outstanding shares of common stock.
specified date.15| | Page | | | 31 | | | Grocery Outlet 2022 Proxy Statement | | | | |
TABLE OF CONTENTS
Messrs. Eisen, Narang and Ragatz were nominated by the H&F Investor pursuant to the Amended and Restated Stockholders Agreement and Mr. Read was nominated by the Executive Stockholders and the Read Trust Rollover Stockholders pursuant to the Amended and Restated Stockholders Agreement.
In the event that an H&F nominee or the Executive nominee ceases to serve as a director for any reason (other than the failure of our stockholders to elect such individual as a director), the persons entitled to designate such nominee director under the amended and restated stockholders agreement are entitled to appoint another nominee to fill the resulting vacancy.
TABLE OF CONTENTS
STOCKHOLDER PROPOSALS AND DIRECTOR NOMINATIONS FOR THE 2021 ANNUAL MEETING OF STOCKHOLDERSStockholders wishing to include a proposalThe Audit and Risk Committee of the Board (solely for stockholder consideration in our 2021 proxy statement or bring business before our annual meetingthe purpose of stockholders in 2021 must send notice to our Corporate Secretary at our principal executive offices at 5650 Hollis Street, Emeryville, CA 94608 by registered, certified, or express mailthis report, the “Committee”) consists of John E. Bachman (Chair), Thomas F. Herman, Carey F. Jaros, and provide the required information and follow the other procedural requirements described below.
Stockholder Proposals for Inclusion in our 2021 Proxy Statement.
Stockholders who wish to present a proposalGail Moody-Byrd. The Board has determined, in accordance with applicable Nasdaq and SEC Rule 14a-8 for inclusion in our proxy materials to be distributed in connection with our 2021 annual meeting of stockholders must submit their proposals in accordance withrules and regulations, that rule so that they are received by our Corporate Secretary at the address set forth above no later than the close of business on December 25, 2020. If the date of our 2021 annual meeting is more than 30 days before or after June 8, 2021, then the deadline to timely receive such material shall be a reasonable time before we begin to print and send our proxy materials. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received. As the rules of the SEC make clear, simply submitting a timely proposal does not guarantee that it will be included in our proxy materials.
Other Stockholder Proposals or Nominations for Presentation at the 2021 Annual Meeting
Our bylaws provide procedures by which a stockholder may bring business before any meeting of stockholders or nominate individuals for election to our board of directors at an annual meeting of stockholders. If a stockholder wishes to bring business to a meeting for consideration other than a matter brought pursuant to SEC Rule 14a-8 or to nominate one or more persons for election to our board of directors, the stockholder must deliver a written notice to our Corporate Secretary at the address written above and provide the information required by the provisions of our bylaws dealing with stockholder proposals or director nominations. The notice of such a proposal or director nomination must be delivered to (or mailed to and received at) the address set forth above no later than March 10, 2021 and no earlier than February 8, 2021, unless our 2021 annual meeting of stockholders is to be held more than 30 days before, or more than 70 days after, June 8, 2021, in which case the stockholder’s notice must be delivered not earlier than the close of business on the 120th day prior to the 2021 annual meeting and not later than the close of business on the later of the 90th day prior to the 2021 annual meeting or the 10th day after public announcement of the date of the 2021 annual meeting is first made by the Company. Public announcement of an adjournment or postponement of an annual meeting shall not commence a new time period for the giving of stockholder notice. If the number of directors to be elected to the board of directors at an annual meeting is increased and there is no public announcement by the Company naming all of the nominees for director or specifying the size of the increased board of directors by February 28, 2021, thenCommittee members are independent and able to read and understand fundamental financial statements, and Messrs. Bachman and Herman and Ms. Jaros are audit committee financial experts.
Charter and Responsibilities
The Committee operates under a stockholder’s notice required shall be considered timely, but only with respect to nominees for any new positions created by such increase, if it is receivedwritten charter adopted by the Corporate Secretary not later than the close of business on the tenth calendar day following the day onBoard, which such public announcement is first made by the Company. The requirements for such stockholder’s notice are set forth in our bylaws, which are posted in the Corporate Governance section of the Investor Relations pageavailable on our website at https://investors.groceryoutlet.com.
Candidates proposed by stockholders in accordanceinvestors.groceryoutlet.com. The Committee reviews the charter annually and works with the proceduresBoard to make any necessary amendments that may be appropriate to reflect the evolving role of the Committee.
Among other responsibilities set forth in its charter, the Company’s bylaws will be considered by the Nominating and Corporate Governance Committee under criteria similar to the evaluation of other candidates set forth above in “—Minimum Qualifications of Directors.” Candidates submitted this way may include an analysis of the candidate from our management. Any stockholder making a nomination in accordance with the foregoing process will be notified of the Nominating and Corporate Governance Committee’s decision.
Certain stockholders have director nomination rights pursuant to our Amended and Restated Stockholders Agreement. See “—Nomination Rights and Support Obligations under our Amended and Restated Stockholders Agreement” above for more information.
TABLE OF CONTENTS
AUDIT AND RISK MANAGEMENT COMMITTEE REPORTThe Audit and Risk Management Committee of the board of directors assists the board of directorsBoard in performing its oversight responsibilities foroverseeing our financial reporting, processinternal control and audit process as more fully described inprocesses, monitoring our compliance with significant legal and regulatory requirements related to financial reporting and internal control, overseeing the AuditCompany’s major financial, enterprise, and Risk Management Committee’s charter. certain other risk exposures and related risk mitigation policies, and evaluating the qualifications, scope of work, performance and independence of our independent registered public accounting firm. The Committee also is responsible for the engagement and establishing the terms of retention, including compensation, of our independent registered public accounting firm.
Management has the primary responsibility to establish and maintain a system of internal control over financial reporting, for the preparation, presentation and integrity of the financial statements, and the reporting process.process and accounting and financial reporting principles, and compliance with applicable laws and regulations. Our independent registered public accounting firm, Deloitte & Touche, LLP, is responsible for performing an independent audit of our financial statements and the effectiveness of internal control over financial reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”) and to issue reports thereon. The Committee does not provide any expert or other special assurance as to the Company’s financial statements or any expert or professional certification as to the work of our independent registered public accounting firm.
Fiscal Year 2021 Financial Statements
In the performance of its oversight function, the Audit and Risk Management Committee reviewed and discussed our audited financial statements included in our Annual Report on Form 10-K for Fiscal Year 2021 and the reporting process forwith the fiscal year ended December 28, 2019.Company’s management and Deloitte, as well as Deloitte’s audit report. In addition, the Audit and Risk Management Committee discussed with Deloitte, with and without management present, the effectiveness of our independent registered public accounting firminternal control over financial reporting, and reviewed and discussed Deloitte’s report on internal control. The Committee also discussed with Deloitte the matters required to be discussed by the applicable requirements of the Public Company Accounting Oversight BoardPCAOB and the SEC. The Audit and Risk Management Committee has also received and reviewedThese required communications included Deloitte’s perspective on the written disclosures andquality (not merely the letter from our independent registered public accounting firm required by the applicable requirementsacceptability) of the Public Company Accounting Oversight BoardCompany’s accounting principles, the reasonableness of significant estimates and judgments made by management, including related disclosures regarding thecritical accounting firm’s communications with the Auditpolicies and Risk Management Committee concerning independencesignificant accounting policies included in our Annual Report on Form 10-K for Fiscal Year 2021, and has discussed with our independent registered public accounting firm that firm’s independence and considered whether any non-audit services provided by the independent registered public accounting firm are compatible with maintaining its independence. critical audit matters addressed in Deloitte’s audit report.
Based on the review and discussions with management and our independent registered public accounting firmDeloitte described above, the Audit and Risk Management Committee recommended to the board of directorsBoard that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019Fiscal Year 2021 filed with the SEC.
Other Reporting Matters
During Fiscal Year 2021, the Committee also reviewed and discussed with management and Deloitte the unaudited quarterly financial statements included in our Quarterly Reports on Form 10-Q filed with the SEC and the matters required to be discussed for an interim review by the applicable requirements of the PCAOB and SEC, our earnings press releases, our earnings guidance, and the use and presentation of non-GAAP financial information. Further, during Fiscal Year 2021, the Committee considered our critical accounting policies and significant judgements and estimates, and changes in the Company’s accounting practices, principles, controls and methodologies applicable to its financial statements.
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Audit and Risk Committee Report
Independence and Pre-Approval Policy
The Committee received and reviewed the written disclosures and the letter from Deloitte required by the applicable requirements of the PCAOB regarding Deloitte’s communications with the Committee concerning independence and has discussed that firm’s independence.
The Committee’s policy is to pre-approve all audit and permissible non-audit services provided by Deloitte. For each proposed service, Deloitte provides the Committee with a description of the service and sufficient information to confirm Deloitte’s determination that the provision of such service will not impair independence. The Committee reviewed and pre-approved all audit and non-audit services performed by Deloitte during Fiscal Year 2021 in accordance with established procedures.
Independent Registered Public Accounting Firm Tenure and Rotation
As part of its engagement process, the Committee considers whether to rotate the independent registered public accounting firm. Deloitte has been our independent registered public accounting firm since 2007. The Committee believes there are significant benefits to having an independent registered public accounting firm with an extensive history with the Company. These include:
•
Higher quality audit work and accounting advice due to Deloitte’s institutional knowledge of and familiarity with our business and operations, accounting policies and financial systems, and internal control framework.
•
Operational efficiencies and a resulting lower fee structure because of Deloitte’s history and familiarity with our business.
In addition, the Committee oversees the process for evaluation and selection of the lead audit engagement partner every five years.
The Committee approved the appointment of Deloitte as our independent registered public accounting firm for the fiscal year ending December 31, 2022.
| | | | | Audit and Risk Committee | |
| | | | | John E. Bachman, ChairmanChair
Matt Eisen
Mary Kay Haben
Thomas F. Herman
Jeffrey YorkCarey F. Jaros
Gail Moody-Byrd | |
The foregoing report of the Audit and Risk Management Committee does not constitute soliciting material and shall not be deemed filed, incorporated by reference into or a part of any other filing by the Company (including any future filings) under the Securities Act of 1933, as amended (the “Securities Act”), or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), except to the extent the Company specifically incorporates such report by reference therein.
TABLE OF CONTENTS
COMPENSATION COMMITTEE REPORTWe have reviewed and discussed the Compensation Discussion and Analysis with management. Based on our review and discussion with management, the Compensation Committee recommended to our board of directors that the Compensation Discussion and Analysis be included in this Proxy Statement.
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OTHER AUDIT AND RISK COMMITTEE MATTERS
FEE INFORMATION
The following table sets forth fees in connection with services rendered by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, for Fiscal Year 2021 and Fiscal Year 2020.
| | | | | FISCAL
YEAR
2021 | | | FISCAL
YEAR
2020 | |
| | Audit Fees | | | | $ | 1,824,835 | | | | | $ | 2,402,790 | | |
| | Audit-Related Fees | | | | $ | — | | | | | $ | — | | |
| | Tax Fees | | | | $ | 245,908 | | | | | $ | 290,875 | | |
| | All Other Fees | | | | $ | 1,895 | | | | | $ | 1,895 | | |
| | Total Fees | | | | $ | 2,072,638 | | | | | $ | 2,695,560 | | |
Audit Fees
Audit fees include fees for professional services rendered in connection with the annual audit of the Company’s financial statements and the review of the Company’s interim financial statements included in quarterly reports, as well as fees for services that generally only the independent registered public accounting firm can be reasonably expected to provide, including comfort letters, consents, and review of registration statements filed with the SEC.
Tax Fees
Tax fees include fees for professional services rendered for tax compliance and tax consultation.
All Other Fees
All other fees include fees for a technical research tool subscription service.
AUDIT AND RISK COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES
Under our Audit and Risk Committee’s charter, the Audit and Risk Committee must pre-approve all audit and other permissible non-audit services proposed to be performed by the Company’s independent registered public accounting firm. In pre-approving such services, the Committee considers whether the provision of services is consistent with maintaining the independence of the independent registered public accounting firm, including under applicable law. The Committee may delegate authority to one or more independent members to grant pre-approvals of audit and permitted non-audit services, provided that any such preapprovals will be presented to the full Committee at its next scheduled meeting.
All of the services provided by Deloitte & Touche LLP described above were approved by our Audit and Risk Committee. The Audit and Risk Committee approved a pre-approval policy for services provided by the independent registered public accounting firm. Under the policy, our Audit and Risk Committee has pre-approved the provision by the independent registered public accounting firm of certain services that fall within specified categories. Any services exceeding pre-approved cost levels or budgeted amounts, or any services that fall outside of the general pre-approved categories, require specific pre-approval by the Audit and Risk Committee.
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| | | Kenneth W. Alterman, Chairman
Matt Eisen
Norman Matthews
Erik Ragatz
Jeffrey York
|
The foregoing report of the Compensation Committee does not constitute soliciting material and shall not be deemed filed, incorporated by reference into or a part of any other filing by the Company (including any future filings) under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates such report by reference therein.
The following table sets forth information about our executive officers as of April 13, 2020:11, 2022:
Name
| NAME | | | Age
AGE | | | Position
POSITION | |
| Eric J. Lindberg, Jr. | | | 49
51 | | | Chief Executive Officer and Director | |
| Robert Joseph Sheedy, Jr. | | | 45
47 | | | President | |
| Charles C. Bracher | | | 47
49 | | | EVP, Chief Financial Officer | |
| Andrea R. Bortner | | | 58
60 | | | EVP, Chief Human Resources Officer | |
| Pamela B. Burke | | | 52
54 | | | EVP, Chief AdministrativeStores Officer, Interim General Counsel and Secretary | |
Heather L. Mayo
| Brian T. McAndrews | | | 56
61 | | | Executive Vice President, Sales and Merchandising
SVP, Chief New Store Development Officer | |
Brian T. McAndrews
| Steven K. Wilson | | | 59
58 | | | Senior Vice President, Store Development
|
Thomas H. McMahon
SVP, Chief Purchasing Officer | | | 58
| | | Executive Vice President, Sales and Merchandising
|
Steven K. Wilson
| | | 56
| | | Senior Vice President, Purchasing
|
Set forth below is a brief description of the business experience of our executive officers. AllSee “Board of our officers serve at the discretion of our board of directors.
Eric J. Lindberg, Jr. Directors—has served as our Chief Executive Officer since January 2019Director Backgrounds and as a director since January 2006. Previously, from January 2006 to December 2018,Qualifications” for biographical and other information for Mr. Lindberg served as our Co-Chief Executive Officer. Prior to being appointed Co-Chief Executive Officer, Mr. Lindberg served in various positions with us since 1996. As our Chief Executive Officer, Mr. Lindberg brings to our board of directors significant senior leadership, and his detailed knowledge of our operations, finances, strategies and industry garnered over his 23-year tenure with us makes him well qualified to serve as our Chief Executive Officer and as a member of the board of directors. Mr. Lindberg and Mr. Read, a member of our board of directors, are cousins by marriage.
Robert Joseph Sheedy, Jr. has served as our President since January 2019. Mr. Sheedy previously served as our Chief Merchandise, Marketing &Strategy Officer from April 2017 to December 2018, our Chief Merchandise & Strategy Officer from March 2014 to April 2017 and our Vice President, Strategy from April 2012 to February 2014. Before joining us, Mr. Sheedy served in various roles at Staples Inc., an office supply company, from 2005 to 2012, most recently as their Vice President, Strategy.
Charles C. Bracher has served as our Chief Financial Officer since August 2012. Before joining us, Mr. Bracher served in various roles at Bare Escentuals, Inc., a mineral cosmetics company, from 2005 to 2012, most recently as Chief Financial Officer. Mr. Bracher began his career in the Investment Banking Division of Goldman, Sachs & Co.
Andrea R. Bortner has served as our Chief Human Resources officer since March 2020. Before joining us, Ms. Bortner served as Chief Human Resources Officer at Maxar Technologies, Inc., a space technology company, from August 2016 to October 2019 and as Chief Human Resources Officer at Catalina, an advertising and marketing company, from August 2012 to June 2016.
Pamela B. Burke has served as our Chief Administrative Officer, General Counsel and Secretary since January 2019 and previously served as our General Counsel and Secretary from June 2015 to December 2018. Before joining us, Ms. Burke served in various management positions at CRC Health Group, Inc., a provider of specialized behavioral health services, most recently as Senior Vice President of Legal, HR and Risk from April 2010 to February 2015.
Heather L. Mayo has served as our Executive Vice President of Sales and Merchandising, East since October 2019. Before joining us, Ms. Mayo served as Chief Merchandising Officer of Boxed, a wholesale bulk retailer, from November 2016 to September 2017. Ms. Mayo served in various roles in merchandising and operations at Sam’s Club, a division of Walmart, from 2004 to 2016, most recently as their Senior Vice President, Operations for the West Division from February 2015 to March 2016 and as Senior Vice President, Operations for the South Division from August 2014 to February 2015.
Brian T. McAndrews has served as our Senior Vice President of Store Development overseeing all company real estate functions since July 2018. Before joining us, Mr. McAndrews served as Chief Real Estate Officer at Conn’s Home Plus, a furniture and appliance store chain, from June 2017 to June 2018 and as Senior Vice President, Global Real Estate & Construction at Dollar Financial Corporation from February 2010 to June 2017.
TABLE OF CONTENTS
Thomas H. McMahon has served as our Executive Vice President of Sales and Merchandising since January 2017 and served as our Vice President of Sales and Merchandising from December 2008 to December 2016. Before joining us in 2008, Mr. McMahon was the Chief Executive Officer and Chief Operating Officer of T Street Incorporated, a retail specialty company.
Steven K. Wilson has served as our Senior Vice President of Purchasing since February 2018 and previously served as our Vice President of Purchasing from July 2006 to January 2018. Prior to being appointed Vice President of Purchasing, Mr. Wilson served in various positions with us since 1994.
Lindberg. Our executive officers are appointed by our board of directorsBoard and serve until their successors have been duly appointed and qualified or their earlier resignation, retirement or removal.other termination of service.
| | ROBERT JOSEPH SHEEDY, JR. | |
| | President
Since January 2019 | | | Mr. Sheedy previously served as our Chief Merchandise, Marketing & Strategy Officer from April 2017 to December 2018, our Chief Merchandise & Strategy Officer from March 2014 to April 2017 and our Vice President, Strategy from April 2012 to February 2014. Before joining us, Mr. Sheedy served in various roles at Staples Inc., an office supply company, from 2005 to 2012, most recently as their Vice President, Strategy | |
| | CHARLES C. BRACHER | |
| | EVP, Chief Financial Officer
Since April 2012 | | | Mr. Bracher previously served in roles at Bare Escentuals, Inc., a mineral cosmetics company, from 2005 to 2012, most recently as Chief Financial Officer. Mr. Bracher began his career in the Investment Banking Division of Goldman, Sachs & Co. | |
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FISCAL 2019 HIGHLIGHTSExecutive OfficersOur fiscal 2019 results reflect strong execution across our business as we continue to invest in our future growth. Highlights include the following:
Grew annual net sales to $2.56 billion from $2.29 billion in the same period in fiscal 2018, representing 11% growth year over year
Increased comparable store sales by 5.2%
Opened 31 net new stores
Generated net income of $15.4 million compared to net income of $15.9 million in the same period in fiscal 2018
• | ANDREA R. BORTNER | |
| | Increased non-GAAP adjusted net income(1)![[MISSING IMAGE: ph_andrearbortner-4c.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/ph_andrearbortner-4c.jpg) EVP, Chief Human Resources Officer
Since March 2020 | | | Ms. Bortner previously served as Chief Human Resources Officer at Maxar Technologies, Inc., a space technology company, from August 2016 to $65.0 millionOctober 2019 and as Chief Human Resources Officer at Catalina, an advertising and marketing company, from $49.3 million in fiscal 2018August 2012 to June 2016. | |
• | PAMELA B. BURKE | |
| | Increased adjusted EBITDA(1)![[MISSING IMAGE: ph_pamelabburke-4c.jpg]](https://files.docoh.com/DEF 14A/0001104659-22-048942/ph_pamelabburke-4c.jpg) EVP, Chief Stores Officer, Interim General Counsel and Secretary
Since January 2022 | | | Ms. Burke previously served as our EVP, Chief Administrative Officer, General Counsel and Secretary from January 2019 to $169.8 million comparedDecember 2021 and our General Counsel and Secretary from June 2015 to $153.6 millionDecember 2018. Before joining us, Ms. Burke served in the same periodvarious management positions at CRC Health Group, Inc., a provider of specialized behavioral health services, most recently as Senior Vice President of Legal, HR and Risk from April 2010 to February 2015. Prior to CRC Health Group, Ms. Burke was a partner of DLA Piper. | |
| | BRIAN T. MCANDREWS | |
| | SVP, Chief Store Development Officer
Since August 2020 | | | Mr. McAndrews previously served as our Senior Vice President of Store Development overseeing all company real estate functions from July of 2018 to August 2020. Before joining us, Mr. McAndrews served as Chief Real Estate Officer at Conn’s Home Plus, a specialty retailer of home goods, including furniture, appliances and consumer electronics, from June 2017 to June 2018 and as Senior Vice President, Global Real Estate & Construction at Dollar Financial Corporation from February 2010 to June 2017. | |
| | STEVEN K. WILSON | |
| | SVP, Chief Purchasing Officer
Since August 2020 | | | Mr. Wilson previously served as our Senior Vice President of Purchasing from February 2018 to August 2020 and as our Vice President of Purchasing from July 2006 to January 2018. Prior to being appointed Vice President of Purchasing, Mr. Wilson served in fiscal 2018various positions of increasing responsibility with us since 1994. | |
Reduced total debt by 47.7% to $448.0 million compared to $857.4 million at the end of fiscal 2018
�� | Grew net cash provided by operations to $132.8 million from $105.8 million in the same period in fiscal 2018Page | | | 36 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Expanded our Board of Directors to 11 with the appointments of two independent directors, John E. (“Jeb”) Bachman and Mary Kay Haben
As we continue to grow, we remain committed to advancing our mission of Touching Lives for the Better. During fiscal 2019 we & our independent operators:
Partnered with over 400 local charities & foodbanks throughout the year
Raised over $2.0 million through our annual “Independence From Hunger” campaign – the equivalent of approximately one million meals – to address critical food insecurity needs in local communities
Saved customers over $2.0 billion compared to traditional retailers
Were named ‘Grocer of the Year’ by Grocery Dive
For more complete information regarding our fiscal 2019 performance, please review our Annual Report.
(1)
| Adjusted EBITDA and non-GAAP adjusted net income are non-GAAP financial measures, which exclude the impact of certain special items. For supplemental information about these numbers and a reconciliation of adjusted EBITDA and non-GAAP adjusted net income to net income computed in accordance with GAAP see Annex A to this Proxy Statement. |
Compensation Discussion and AnalysisCOMPENSATION DISCUSSION AND ANALYSIS
This Compensation Discussion and Analysis provides an overview of our executive compensationthe philosophy, the overall objectives, process and components of our executive compensation program for the following named executive officers (collectively, our “Named Executive Officers” or “NEOs”). The compensation program for our NEOs generally is consistent with the compensation program for other executive officers, and each material elementthe Compensation Committee generally evaluates compensation programs for executive officers, including NEOs, as a group. The Compensation Committee administers our Named Executive Officer compensation program, except certain matters administered by the Board regarding our Chief Executive Officer.
Our Named Executive Officers are as follows:
| | NAME | | | TITLE IN FISCAL YEAR 2021 | |
| | Eric J. Lindberg, Jr. | | | Chief Executive Officer | |
| | Charles C. Bracher | | | EVP, Chief Financial Officer | |
| | Robert Joseph Sheedy, Jr. | | | President | |
| | Pamela B. Burke* | | | EVP, Chief Administrative Officer, General Counsel and Secretary | |
| | Steven K. Wilson | | | SVP, Chief Purchasing Officer | |
* Effective January 1, 2022, Ms. Burke was appointed as EVP, Chief Stores Officer, Interim General Counsel and Secretary
Executive Summary
FISCAL YEAR 2021 COMPANY PERFORMANCE
The Fiscal Year 2021 was our second full year as a public company, and one that presented many challenges including the pandemic and global supply chain issues. Due to these challenging macroeconomic conditions, and on the back of compensationvery strong COVID-related results in Fiscal Year 2020, our top- and bottom-line performance in Fiscal Year 2021 was below both our long-term growth algorithm and our historical track record of double-digit annual growth in Net Sales and Adjusted EBITDA over the prior decade. From 2019 to 2021, we grew Net Sales and Adjusted EBITDA(1) at 9.7% and 8.6% on a compounded basis, respectively.
Despite our disappointing financial results, we are pleased with our operational performance and progress we made on our growth initiatives. We leveraged our flexible business model to deliver the unbeatable deals and exciting treasure hunt experience that our customers love. We expanded our store base with the opening of 35 net new stores in 2021, representing close to 10% unit growth. In addition, we embarked on several new initiatives to expand our customer reach and engagement, including piloting e-commerce and strategically expanding our product assortment.
Our IOs continued to deliver exceptional values and the WOW! shopping experience to their local communities. While the past year presented our IOs with unprecedented challenges, they rose to the occasion in order to serve their customers and we continued to invest in systems and process improvements to support them.
We realigned our organizational structure to streamline and strengthen corporate resources available to our independent operators, while continuing to support local decision-making and independence. To lead this effort, in late 2021 we took action to promote Ms. Burke to the newly created position of Chief Stores Officer effective on January 1, 2022.
Our Fiscal Year 2021 results reflect solid execution during a challenging environment while continuing to scale our business in support of long-term growth objectives. Financial highlights from Fiscal 2021 include:
•
Net Sales decreased by 1.8% to $3.08 billion. Net Sales were roughly flat versus the prior year after adjusting for the 53rd week in Fiscal 2020.
(1)
Adjusted EBITDA, adjusted net income and adjusted diluted earnings per share are non-GAAP financial measures, which exclude the impact of certain special items. For supplemental information about these numbers and a reconciliation of adjusted EBITDA and non-GAAP adjusted net income to net income computed in accordance with GAAP see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—GAAP to Non-GAAP Reconciliations” included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2019 that we provided to each person who served as our principal executive officer or principal financial officer during 2019 and our three most highly compensated executive officers employed at the end of 2019, all of whom we refer to collectively as our Named Executive Officers.January 1, 2022.
Our Named Executive Officers for the fiscal year ended December 28, 2019 were as follows:
Eric J. Lindberg, Jr., Chief Executive Officer
Charles C. Bracher, Chief Financial Officer
S. MacGregor Read, Jr., Vice Chairman of the Company*
Robert Joseph Sheedy, Jr., President
Thomas H. McMahon, Executive Vice President, Sales & Merchandising
*
| Page | | | 37 | | | Mr. Read served as our executive Vice Chairman from January 2019 to April 2020, at which time he transitioned to the non-executive role of Vice Chairman of our board of directors. In connection with this transition, Mr. Read and the Company entered into a transition letter agreement which is described below under “—Grocery OutletRead Transition Agreement 2022 Proxy Statement.”
| | | | |
Compensation Discussion and Analysis
Role•
Comparable store sales decreased 6.0% compared to a 12.7% increase in the same period last year, reflecting 2-year stacked comparable store sales growth of 6.7%.
•
We opened 36 new stores and closed one store during the year, ending the year with 415 locations.
•
Net income decreased to $62.3 million, or $0.63 per diluted share.
•
Adjusted EBITDA(1) decreased to $198.5 million.
•
Adjusted net income(1) decreased to $89.9 million, or $0.90 per adjusted diluted share(1).
Except where noted, each of the Compensation Committeeabove comparisons is based on a 52-week Fiscal Year 2021 versus a 53-week Fiscal Year 2020. For more complete information regarding our 2021 performance, please review our 2021 Annual Report.
KEY ELEMENTS OF FISCAL YEAR 2021 COMPENSATION
Substantially consistent with Fiscal Year 2020, the key elements of our NEO pay mix in Fiscal Year 2021 consisted of:
•
Base salary
•
The Compensation Committee is responsibleAIP, an annual performance-based cash bonus generally based on our achievement of adjusted EBITDA and comparable store sales performance goals (other than for establishing, implementingMr. Wilson, as discussed below)
•
Long-term equity incentives, consisting of time-vesting restricted stock units and evaluatingperformance-vesting stock units, with the PSUs based on our employeeachievement of revenue and adjusted EBITDA growth goals over a three-year performance period
COMPENSATION MIX FOR NEOS
In line with our compensation and benefit programs. The Compensation Committee periodically reviews and makes recommendations to our board of directors with respect to the adoption of, or amendments to, all equity-based incentive compensation plans for employees, and cash-based incentive plans for executive officers, and evaluates whether the relationship between the incentives associated with these plans and the level of risk-taking by executive officers in response to such incentives is reasonably likely to havephilosophy that a material adverse effect on us. The Compensation Committee annually evaluates the performancesignificant portion of our executive officers, establishes the annual salariespay be tied to company performance:
•
approximately 83% of our Chief Executive Officer’s and annual cash incentive awards for75% of our executive officers and approves all equity awards. The Compensation Committee’s objective is to ensure that theother NEO’s target total compensation paidis variablewith value ultimately tied to our Named Executive Officers as well as our other senior officers is fair, competitive, performance based and financially efficient. Generally, the types of compensation and benefits provided to our Named Executive Officers are similar to those provided to other senior members of our management team.
Executive Compensation Objectives and Philosophy
The goal of our executive compensation program is to create long-term value for our investors while at the same time rewarding our executives for superior financial and operating performance and encouraging them to remain with us for long, productive careers. We believe the most effective way to achieve this objective is to design an executive compensation program rewarding the achievement of specific annual, long-termobjective corporate goals or stock price performance
•
approximately 64% of our Chief Executive Officer’s and strategic52% of our other NEO’s target total compensation is performance-based through the achievement of objective corporate goals and aligning executives’
We believe this pay mix appropriately aligns the interests of executives with those of our investors by further rewarding performance above established goals. stockholders. The charts below illustrate the target mix of pay (excluding benefits and perquisites) for our CEO and other NEOs for Fiscal Year 2021.
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Compensation Discussion and Analysis
FISCAL YEAR 2021 COMPENSATION DETERMINATIONS
| | BASE SALARY | | | AIP | | | EQUITY | |
| | ✓
Reasonable merit base salary increases | | | ✓
No change to target bonus opportunity as % of base salary ✓
Based on our performance, no AIP awards were earned or paid to any of our Named Executive Officers in Fiscal Year 2021 | | | ✓
No change to target equity opportunity as % of base salary | |
THE ROLE OF STOCKHOLDER SAY-ON-PAY VOTES
We use thisprovide our stockholders with the annual opportunity to cast an advisory vote on our NEO compensation (a Say-on-Pay proposal). The Compensation Committee considered stockholder support for our NEO compensation policies and practices based on the results of our most recent Say-on-Pay proposal at the 2021 annual meeting of stockholders, and no material changes were made to such policies and practices in 2021 or 2022 as a result. The Compensation Committee will continue to consider the results of future Say-on-Pay votes, including results for the current year when available, when making future compensation decisions for our NEOs.
EXECUTIVE COMPENSATION OBJECTIVES AND PHILOSOPHY
Our compensation philosophy asis the foundation for evaluating and improving the effectiveness of our executive pay program.compensation program and is regularly reviewed by the Compensation Committee. The following are the core elements of our executive compensation philosophy:
• | Market Competitive: GOAL-ORIENTED
| | | Our executive compensation program rewards the achievement of specific short-term (annual) and long-term financial goals, which are aligned with our operational and strategic objectives. | |
| | MARKET COMPETITIVE | | | Compensation levels and programs for executives, including the Named Executive Officers, should be competitive, relative to the marketplace in which we operate. It is important for us to leverage an understanding of what constitutes competitive pay in our market and build unique strategies to attract, motivate and retain the high caliber talent we require to lead, manage and successfully grow our Company;Company. | |
• | Performance-Based: MostPERFORMANCE-BASED
| | | The majority of our executive compensation should be performance-based pay that is “at risk,” based on short-term and long-term financial goals which reward both organizationalthat are key performance indicators and individual performance;easily understood by investors and executives, as well as reasonably determined and measured. | |
• | Investor Aligned: INVESTOR-ALIGNED
| | | Incentives should be structured to create a strong alignment between executives and investors on both a short-term and a long-term basis;basis, each within our risk framework. Equity awards with long-term performance goals and vesting foster a shared culture of ownership. Our executives’ interests are aligned with those of our investors by further rewarding performance achieved above established goals. | |
• | Financially Efficient: FINANCIALLY EFFICIENT
| | | Pay programs and features should attempt to minimize the impact on our earnings and maximize our tax benefits, all other things being equal.benefits. | |
By incorporating these elements,philosophies, we believe our executive compensation program is both responsive to our investors’ objectives and effective in attracting, motivating and retaining the level of talent necessary to lead, grow and manage our business successfully.
Process for Determining Compensation
In 2019, the Compensation Committee reviewed the performance of our Chief Executive Officer. The Compensation Committee tries to ensure that a substantial portion of the Chief Executive Officer’s compensation is directly linked to individual performance and the performance of our business. As discussed under “—Employment Agreements with Named Executive Officers—Chief Executive Officer Employment Agreement,” we entered into an employment agreement with our Chief Executive Officer, which addresses certain elements of his compensation and benefits package.
In determining the compensation of each of our Named Executive Officers (other than the Chief Executive Officer), the Compensation Committee seeks the input of the Chief Executive Officer. At the end of each year, the Chief Executive Officer reviews a self-assessment prepared by each Named Executive Officer and assesses the Named Executive Officer’s performance against the business unit (or area of responsibility) and individual goals and objectives. The Compensation Committee then considers the Chief Executive Officer’s assessment and reviews and approves the compensation for each Named Executive Officer.
TABLE OF CONTENTS
Relationship of Compensation Practices to Risk Management and Governance
We have reviewed and considered our compensation plans and practices for all our employees and do not believe that our compensation policies and practices create risks that are reasonably likely to have a material adverse effect on us. We utilize many design features that mitigate the possibility of encouraging excessive risk-taking behavior. Among these design features are: reasonable goals and objectives that are well-defined and communicated; and a balance of short- and long-term variable compensation tied to a mix of financial and operational objectives. Personal objectives are not built into our incentive design.
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| | | What We Don’t Do | |
Compensation Discussion and Analysis
When aligning our executive pay program with this philosophy, the Compensation Committee and the Company steadfastly adhere to the following best pay practices:
✓
| WHAT WE DO | | | WHAT WE DON’T DO | |
| | We align✓
Align short- and long-term incentive programs to shareholderstockholder interests | | | ✘ | | | We do not provide our executive officers withNo tax gross ups on severance or change-in-control benefits
| |
| | ✓
Engage periodically with our stockholders regarding our executive compensation program | | | We engage with and seek feedback from our shareholders regarding our executive compensation program | | | ✘
| | | Our equity plan does not allow repricing or exchange of underwater options without shareholderstockholder approval | |
| | ✓
Conduct an annual risk assessment of the Company’s compensation programs, policies and practices, and have confirmed not reasonably likely to have a material adverse effect | | | We conduct annual risk assessmentsNo hedging or pledging of our compensation policies and practicesstock | |
| | ✓
Maintain a clawback policy | | | ✘No significant executive perquisites or supplemental benefits | |
| | We do not permit directors and officers to hedge our stock✓
|
✓
| | | We maintain rigorousMaintain stock ownership guidelines to support the alignment of executive officer and Board interests with those of our stockholders
| | | ✘
| | | We do not provide significant executive perquisites or supplemental benefits |
✓
| | | Our Compensation Committee retains an independent compensation consultant
| | | ✘
| | | We do not payNo dividend equivalents to executive officers on unvested restricted stock unitRSU or performance share unitPSU awards
| |
| | ✓
Our fully independent Compensation Committee retains and actively engages an independent compensation consultant | | | We capNo single-trigger vesting of equity-based awards upon change in control | |
| | ✓
Maintain a “pay for performance” cash incentive payoutsplan and a PSU equity award program, each based on objective financial goals aligned with business strategy and with payout cap of 200% of target | | | No guaranteed bonuses, excluding limited new hire inducement | |
| | ✓
Annually determine our peer group and utilize peer group and survey benchmarking data | | | | |
| | ✓
Provide an annual stockholder Say-on-Pay vote | | | | |
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Considerations in Setting 2019 Compensation
The 2019 compensationCompensation Discussion and Analysis
Elements of our Named Executive Officers was based on company-wide operating results for all incentives and individual performance objectives associated with base salary increases. The2021 NEO Compensation Committee believes that the total 2019 compensation opportunity for our Named Executive Officers was competitive while at the same time being responsible to our investors because a significant percentage of total compensation in 2019 was allocated to variable compensation, paid only upon achievement of both individual and Company performance objectives.Program
The following is a summary of key considerations that affected the development of 2019the Fiscal Year 2021 compensation targets and 2019 compensation decisions for our Named Executive Officers (and which the Compensation Committee believes will continue to affect its compensation decisions in future years):
| | COMPONENT | | | DESCRIPTION | | | OBJECTIVES AND LINK TO
STOCKHOLDER VALUE | |
| | Short-Term | | | | Base Salary | | | Annual fixed cash compensation | | | Securing and retaining executives by providing stability and reflecting the market for executive talent | |
| | Annual Incentive Plan (Bonus) | | | Annual cash compensation based on annual financial goals •
Bonus target as percentage of base salary Company performance goals generally: •
60% adjusted EBITDA •
40% comparable store sales growth 2021 payout range for each metric: 20% (threshold) to 200% (maximum) | | | Pay-for-performance focus/”at risk” compensation, linking our annual financial goals and short-term performance | |
| | Long-Term | | | | PSUs | | | Performance-based award that vests in a single instalment on the third anniversary of the vesting commencement date and are based on two measures: •
3-year cumulative revenue (50% weighting) •
3-year cumulative adjusted EBITDA growth (50% weighting) 2021 payout range for each metric: 50% (threshold) to 200% (maximum) | | | Pay-for-performance focus/”at risk” compensation, incentivizing strategic long-term decision-making within our risk framework | |
| | RSUs | | | Time-based award, with three equal annual instalments vesting over a three-year vesting period from the vesting commencement date | | | Foster a culture of ownership, aligning long-term interests of our executive officers and stockholders, within our risk framework | |
In addition to these key compensation elements, our Named Executive Officers are provided certain other compensation as set forth in “—Other Compensation” below.
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Compensation Discussion and Analysis
. BASE SALARY
We establish target compensation levels that are consistent with market practice and internal equity considerations (including position, responsibility and contribution) relative topay our Named Executive Officers base salaries annual bonusesto compensate them for services rendered each year. Base salary is a regular, cash payment, the amount of which is based on position, experience and long-term equityperformance after considering the following primary factors: internal review of the executive’s compensation and the Compensation Committee’s assessment of the executive’s individual prior performance, as well as the appropriate pay mix for a particular position. In order to gauge the competitivenessbenchmarking data. Salary levels are typically considered annually as part of our compensation programs, we may alsoperformance review compensation practices and pay opportunities from retail and grocery industry survey data. We attemptprocess but can be adjusted in connection with a promotion or other change in job responsibility. Merit-based increases to position ourselves to attract and retain qualified senior executives in the facesalaries of competitive pressures in our relevant labor markets.
Emphasis on Performance. Our compensation program provides increased pay opportunity correlated with superior performance over the long term. When evaluating base salary, individual performance is the primary driver that determines the Named Executive Officer’sOfficers are determined and approved each December or January by the Compensation Committee after an assessment of the performance of each executive for that fiscal year and effective as of the start of the respective fiscal year.
The following table summarizes the annual increase, if any. Inbase salaries increases for our Named Executive Officers for the Fiscal Year 2021.
| | NEO | | | FY 2020 BASE SALARY | | | FY 2021 BASE SALARY | | | YOY CHANGE | |
| | Eric J. Lindberg, Jr. | | | | $ | 772,500 | | | | | $ | 800,001 | | | | | | 3.6% | | |
| | Charles C. Bracher | | | | $ | 538,379 | | | | | $ | 555,015 | | | | | | 3.1% | | |
| | Robert Joseph Sheedy, Jr. | | | | $ | 583,000 | | | | | $ | 600,024 | | | | | | 2.9% | | |
| | Pamela B. Burke | | | | $ | 417,173 | | | | | $ | 430,022 | | | | | | 3.1% | | |
| | Steven K. Wilson | | | | $ | 375,000 | | | | | $ | 400,000 | | | | | | 6.7% | | |
2021 ANNUAL CASH INCENTIVE PLAN
Our Named Executive Officers and other senior members of our management team are eligible to receive an annual cash bonus pursuant to our Annual Incentive Plan, (the “AIP”), performancereferred to as our AIP. Our AIP is designed to create a performance-based link between executive compensation and our short-term annual performance. The AIP provides metrics for the calculation of annual incentive-based cash compensation against pre-determined quantitative measures within the context of our overall performance. Actual annual cash incentive awards are key drivers in determining thecalculated by multiplying each Named Executive Officer’s non-equitybase salary for the applicable fiscal year by his or her target bonus opportunity, which is then multiplied by an overall achievement factor based on the combined weighted achievement of the applicable performance goals.
When establishing the performance targets for the AIP, the Compensation Committee set targets that it believes are challenging to achieve and reasonable, and that fairly incentivizes participants. The Compensation Committee establishes what it believes are stretch goals that would incentivize and reward exceptional employee performance without any guarantee that we would meet or exceed any such metrics in the prevailing business environment.
We continue to deploy a unique design feature in the AIP for all participants. We provide for the potential of interim quarterly bonus payments based on specific performance goals being achieved during the performance period that align to the annual performance goals with a holdback against the full year target. This feature is used to engage and retain our employees, especially in this competitive talent environment, and also applies to our executive officers as they participate in the same AIP. Following the end of the performance year, any remaining earned AIP is paid. No quarterly payments were made in Fiscal Year 2021 due to the requisite performance goals not being achieved.
Bonus amounts (including any interim quarterly payments thereof) are payable in a lump sum cash amount (or, at the discretion of the Compensation Committee, in shares of our stock), and the payment with respect to any bonus amount under the 2021 AIP was subject to a participant’s continued employment through the payment date.
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Compensation Discussion and Analysis
2021 Target Bonus Opportunity
For each fiscal year, the participants’ annual target incentive award. In addition,bonuses are determined as a percentage of their base salaries and typically determined with the same timing and based on the same factors that the Compensation Committee considers in setting base salary. The following table summarizes the annual cash incentive opportunity for fiscaleach of our Named Executive Officers for the Fiscal Year 2021, which was unchanged from Fiscal Year 2020.
| | NEO | | | TARGET BONUS OPPORTUNITY
(% OF SALARY) | |
| | Eric J. Lindberg, Jr. | | | | | 100% | | |
| | Charles C. Bracher | | | | | 60% | | |
| | Robert Joseph Sheedy, Jr. | | | | | 75% | | |
| | Pamela B. Burke | | | | | 60% | | |
| | Steven K. Wilson | | | | | 50% | | |
Overall Achievement Factor for NEOs. Consistent with our compensation risk framework, the actual awards under the 2021 AIP that any Named Executive Officer is eligible to receive is capped at a maximum of 200% of a participant’s bonus target. Further, for Fiscal Year 2021, a minimum achievement of 93% of the adjusted EBITDA target needed to be achieved before any amount under the 2021 AIP pool could be earned and regardless of the achievement under other AIP performance metrics.
Overall Achievement Factor for NEOs (except Mr. Wilson). Consistent with the AIP in Fiscal Year 2020, the Compensation Committee hasutilized adjusted EBITDA and comparable store sales growth as the two performance metrics for the 2021 AIP.
* Adjusted EBITDA and comparable store sales growth are both calculated as described for such metrics in Fiscal Year 2021 in our 2021 Annual Report under the heading “Item 7—Management’s Discussion and Analysis of Results of Operations and Financial Condition—EBITDA, Adjusted EBITDA, Adjusted Net Income and Adjusted Earnings Per Share.” Beginning with the fourth quarter of Fiscal Year 2020, we updated our definition of adjusted EBITDA to simplify our presentation and enhance comparability between periods. We no longer exclude new store pre-opening expenses from our presentation of adjusted EBITDA.
The following core corporate performance goals were used to calculate the annual bonus pool under the 2021 AIP: (i) 60% related to “FY21 adjusted EBITDA,” which is our Fiscal Year 2021 adjusted EBITDA, (with an annual target goal of $217.7 million); and (ii) 40% related to Comparable Store Sales growth (with an annual target goal of -0.9% over the prior year). The adjusted EBITDA metric scales between a threshold of 93% achievement, which would yield 20% payout for that metric to a maximum of 106% achievement, which would yield 200% payout for that metric. The Comparable Store Sales growth metric scales between a threshold of -4.9% for a 50% payout on that metric to a target achievement of -0.9% for 100% payout and a maximum achievement of 2.6% which would yield 200% payout for that metric. For actual performance between the specified minimum, target and maximum levels, the resulting achievement percentage is adjusted on a linear interpolation basis.
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Compensation Discussion and Analysis
Overall Achievement Factor for Mr. Wilson. Mr. Wilson had an additional performance metric related to a department goal, as well as different weighting of such performance metrics. For Mr. Wilson’s 2021 AIP, the performance metrics and weightings were: (i) adjusted EBITDA (20% weighting), (ii) comparable store sales growth (40% weighting) and (iii) a department goal of buyer-controlled gross margin dollars (40% weighting), which is calculated by multiplying comparable store sales growth by the portion of gross margin that is controlled by our buying group which excludes distribution costs and other adjustments. The minimum achievement was 95.4% of target and would result in a 20% payout, target achievement would result in a 100% payout, and maximum achievement of 105.7% of target would result in a 200% payout. Further, for Fiscal Year 2021, a minimum achievement of 93% of the adjusted EBITDA target needed to be achieved before any amount under the 2021 AIP pool could be awarded to Mr. Wilson and regardless of the achievement under other AIP performance metrics.
2021 Earned AIP. For the Fiscal Year 2021, based on our performance, no AIP awards were earned or paid to any of our Named Executive Officers.
LONG-TERM EQUITY INCENTIVE COMPENSATION
Each of our Named Executive Officers is provided long-term equity incentive compensation.
2021 Target Equity Opportunity
The overall value of each equity award was determined with reference to position and base salary of award recipient, with consideration of the participant’s prior year’s performance and benchmarking data. In addition, Mr. Wilson notably had the third highest target equity opportunity due to the importance of his role in driving revenue and to compete in a highly aggressive talent market.
| | NEO | | | TARGET EQUITY OPPORTUNITY
(% OF SALARY) | |
| | Eric J. Lindberg, Jr. | | | | | 400% | | |
| | Charles C. Bracher | | | | | 200% | | |
| | Robert Joseph Sheedy, Jr. | | | | | 300% | | |
| | Pamela B. Burke | | | | | 200% | | |
| | Steven K. Wilson | | | | | 250% | | |
2021 Equity Awards. For Fiscal Year 2021, the Compensation Committee approved a long-term incentive program consisting of time-vesting restricted stock units (“RSUs”)RSUs and performance-based restricted stock units (“PSUs”). Although individual grants have not yet been made to our Named Executive Officers for 2020,performance-vesting PSUs. In prior years, the Compensation Committee approvedgranted stock options but has no plans to do so in the future. In Fiscal Year 2021, the Committee set the mix of long-term equity incentive value should be splitas 70% PSUs and 30% RSUs for our Chief Executive Officer and 60% PSUs and 40% RSUs for the other Named Executive Officers.
The Importance of Organizational Results. The AIP uses the achievement of specific organizational metrics in determining approximately 50% to 100% of the Named Executive Officers’ target annual cash incentive award to hold the Named Executive Officers, accountable for both the resultsthereby making a significant portion of their organization and overall company results.equity compensation performance-based.
2021 RSU Awards. The RSUs vest over a three-year period with one-third vesting on the first three anniversaries of a specified vesting commencement date, contingent on continued employment with us on each such date.
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2021 PSU Awards.The AIP was designed to emphasize and reward the Named Executive Officers for corporate performance. In addition, for fiscal 2020, the PSUs included in our long-term incentive program will vestbe earned based on the achievement of cumulative operating goals aftera revenue-based performance target (50% weighting) and an adjusted EBITDA-based performance target (50% weighting), each over a three-year performance period.
Role of Compensation Consultant
In fiscal 2019, Any earned PSUs will vest in connection with the Company’s initial public offering, we engaged Korn Ferry, the Compensation Committee’s independent advisor, to review the competitiveness of compensation provided to executives and provide the Compensation Committee with an executive compensation assessment, peer group analysis and related compensation advice. Korn Ferry provides analyses that inform the decisionsone installment as of the Compensation Committee, but it does not decide or approve any compensation decisions. In 2019, Korn Ferry developed criteria used to identify and refine peer and other comparable companies for executive compensation and performance comparisons. Korn Ferry representatives met informally with the chairpersonend of the performance period and contingent on continued employment with us on or prior to the determination date.
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Compensation CommitteeDiscussion and with certain membersAnalysis
The number of PSUs ultimately earned will equal the number of PSUs granted multiplied by the applicable percentage of actual revenue and adjusted-EBITDA performance target levels achieved, and can range from 0% to 200% of the number of PSUs granted based on the following performance levels and percentages: below minimum (0%); minimum (50%); target (100%); maximum (200%). Actual performance achievement percentages that fall between the levels of achievement will be determined using linear interpolation.
2021 RSU and PSU Grants. The target equity opportunities above were divided by the closing price of our management team,common stock on the grant date to determine the number of RSUs and formally with our Compensation Committee as requested.
For fiscal 2020, the Compensation Committee retained Korn Ferry to providenumber of target PSUs awarded. Accordingly, the Compensation Committee with input and guidance on all components of our executive compensation program and advise the Compensation Committee with respect to market data for base salary, annual bonus andfollowing long-term equity compensation for similarly situated executivesawards were made to our Named Executive Officers in our peer group.Fiscal Year 2021:
| | NEO | | | TIME-VESTING RSUS | | | PSUS AT TARGET | |
| | Eric J. Lindberg, Jr. | | | | | 27,081 | | | | | | 63,188 | | |
| | Charles C. Bracher | | | | | 12,526 | | | | | | 18,788 | | |
| | Robert Joseph Sheedy, Jr. | | | | | 20,312 | | | | | | 30,467 | | |
| | Pamela B. Burke | | | | | 9,705 | | | | | | 14,557 | | |
| | Steven K. Wilson | | | | | 11,284 | | | | | | 16,926 | | |
Compensation Levels and Benchmarking
WeSince our IPO in 2019, we benchmark our executive compensation against a peer group of public companies with whichthat we maybelieve we compete for executive talent. Market paytalent as well as general retail market survey data for the peer group for 2019 was gathered through publicly available information and compensation surveys conducted byfrom Korn Ferry. When making compensation decisions,Ferry, the Compensation Committee’s independent consultant. Such benchmarking by the independent members of the Board (for Mr. Lindberg) and Compensation Committee takes into consideration(for the value ofother Named Executive Officers) focuses on target total direct compensation (TDC)(“TDC”), which consists of base salary, the target annual incentive bonus opportunity and long termthe target long-term equity incentive compensation, provided to executivesopportunity. While the Board and where that value falls in relation to comparable companies (our peer group discussed below along with other market survey data). While the Compensation Committee doesdo not target a specific percentile of comparable companies when making decisions regardingbenchmark individual compensation components, the Compensation Committeethey generally looks to position the value of target TDC so as to be competitive withuse the 50thpercentile of comparable companies, with exceptions made based onTDC as a reference point. Additionally, we establish TDC levels taking into account internal equity considerations (including position, responsibility and contribution), as well as the Compensation Committee’s analysis of key factors.appropriate pay mix for a particular position.
The peer group will beis periodically evaluated and updated to ensure the companies in the group remain relevant to us based on our changing size, changing dynamics in the market in which we compete for executive talent and other factors. For 2019, our Compensation Committee reviewed the compensation of our executive officers and compared it with that of both our peer group companies and broader, composite global market survey data provided by our independent compensation consultant. In assessing the appropriateness of peer companies, the Compensation Committee primarily considered the following criteria for our peer group in 2019:2021: number of stores, annual revenues and market capitalization. The Company approximated the 50% of the peer companies using these criteria. They also took into account the following: EBITDA, net income, companies in grocery and discount retail, as well as broader retail, talent market that represents the market for executive talent for our company, growth-oriented companies and the peer groups used by proxy advisory firms.
The peer group of 1517 companies which, along with broader market survey data, were used for benchmarking purposes in fiscal 2019Fiscal Year 2021 is set forth below.
| | | National Vision Holdings,✓
Aaron’s, Inc. | | | ✓
Five Below, Inc. | | | ✓
RH | | |
| | | ✓
At Home Group Inc. | | | ✓
Floor & Décor Holdings, Inc.
Five Below, Inc.
Ollies Bargain Market Holdings
Sprouts Farmers Market, Inc.
Aaron’s, Inc.
Dunkin’ Brands Group, Inc.
Boot Barn Holdings, Inc. | | | ✓
Sleep Number Corporation | | |
| | | ✓
Brinker International, Inc. | | | ✓
Lululemon Athletica Inc. | | | ✓
Sprouts Farmers Market, Inc. | | |
| | | ✓
Carter’s Inc. | | | ✓
National Vision Holdings, Inc. | | | ✓
Texas Roadhouse, Inc. | | |
| | | ✓
Deckers Outdoor Corporation | | | ✓
Ollies Bargain Market Holdings | | | ✓
Weis Markets, Inc. | | |
| | | ✓
Lululemon Athletica Inc.
Texas Roadhouse, Inc.
RH
Deckers Outdoor Corporation
Sleep Number Corporation
At Home Dunkin’ Brands Group, Inc. | | | ✓
PriceSmart, Inc. | | | | | |
There following changes were made to the Fiscal Year 2021 peer group from the Fiscal Year 2020 peer group based on the criteria noted above: (i) Brinker International, Inc., Carter’s, Inc. and PriceSmart, Inc. were added; and (ii) Boot Barn Holding, Inc. was removed.
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Compensation Discussion and Analysis
ElementsProcess and Roles for Determining Compensation
The independent members of 2019the Board set the compensation of the Chief Executive Officer after reviewing his performance against pre-established annual goals, the Company’s overall performance, market data and other factors it deems relevant. The Board seeks to tie a substantial portion of the Chief Executive Officer’s compensation directly to the performance of our business under his leadership. As discussed below under “—Employment Arrangements with Named Executive Officers—Agreement with Mr. Lindberg,” we entered into an employment agreement with our Chief Executive Officer, which addresses certain elements of his compensation and benefits package.
The Compensation ProgramCommittee sets the compensation of each of the other Named Executive Officers. During that process, the Compensation Committee seeks the input of the Chief Executive Officer and the Chief Human Resource Officer. At the end of each year, the Chief Executive Officer reviews a self-assessment prepared by each Named Executive Officer and assesses the Named Executive Officer’s performance against the business unit (or area of responsibility) and individual goals and objectives, as well the potential for advancement. The Compensation Committee then considers the Chief Executive Officer’s assessment, the Company’s overall performance, benchmarking data and other factors it deems relevant, and reviews and approves the compensation for each Named Executive Officer.
ThereNo NEO provides input or participates in the deliberation of the Board or Compensation Committee with respect to their own compensation.
The Compensation Committee determined to re-engage Korn Ferry as its independent compensation consultant for Fiscal Year 2021 and approved the terms of the engagement. Representatives of Korn Ferry attend each regular Compensation Committee meeting. Korn Ferry provided recommendations on an appropriate peer group and general retail market survey data to assist in benchmarking TDC for all Named Executive Officers (including for Mr. Lindberg), as well as detailed market information on the elements and design of the Named Executive Officer compensation programs.
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Compensation Discussion and Analysis
The key roles for determining market-based and competitive compensation programs and then awarding the compensation components are three key componentsas follows:
| | ROLE | | | | RESPONSIBILITY | |
| | Full Board | | | | ✓
Approve new equity incentive plans and share pool increases under existing equity plans (subject to stockholder approval) | |
| | Independent Members of Board | | | | ✓
Establish the annual salary, and the annual cash incentive award targets and payouts and annual target equity compensation for our Chief Executive Officer ✓
Review succession planning for our Chief Executive Officer and senior executive team | |
| | Compensation Committee | | | | ✓
Oversee our employee compensation and benefit programs ✓
Seek to ensure that the total compensation paid to our Named Executive Officers as well as our other senior officers is fair, competitive, performance-based and financially efficient ✓
Establish annual salaries and annual cash incentive award targets and payouts for our executive officers (other than our Chief Executive Officer) and approve equity awards (which may be done by a subcommittee of the Compensation Committee) ✓
Periodically review and make recommendations to the Board with respect to the adoption of, or amendments to, all equity-based incentive compensation plans for employees, and cash-based incentive plans for executive officers ✓
Evaluate our employee compensation programs to determine whether the relationship between the incentives associated with these plans and the level of risk-taking in response to such incentives is reasonably likely to have a material adverse effect on us ✓
Periodically engage with stockholders regarding our executive officer compensation programs | |
| | Independent Consultant | | | | ✓
Serve as the independent members of the Board’s and the Compensation Committee’s independent advisor, to review the competitiveness of compensation provided to the Chief Executive Officer and other executive officers and provide the Compensation Committee with an executive compensation assessment, peer group and general retail market survey data analysis, review of our annual Compensation, Discussion and Analysis, and related compensation advice ✓
Provide analyses that inform the decisions of the Compensation Committee without deciding or approving any compensation decisions ✓
Independently meet with the Compensation Committee in executive session during each regularly scheduled meeting each year, to the extent requested | |
| | CEO | | | | ✓
Establish strategic direction and goals, supported by the executive compensation programs, which are then reviewed and approved by the Compensation Committee and Board, as applicable ✓
Evaluate executive officer performance and develop recommendations for compensation aligned to the compensation philosophy and compensation and benefits programs, excluding his own compensation | |
RISK CONSIDERATIONS
In establishing and reviewing our executive compensation program for our Named Executive Officers:
base salary;
annual incentive bonus pursuant to the AIP; and
long-term equity incentive compensation in the form of stock options.
In addition to these key compensation elements, our Named Executive Officers are provided certain other compensation. See “—Other Compensation.”
We believe that offering each of the components of our executive compensation program is necessary to remain competitive in attracting and retaining talented executives. Furthermore, the annual incentive bonus and long-term equity incentive compensation align the executive’s goals with those of the organization and our stockholders. Collectively, these components are designed to reward and influence the executive’s individual performance and our short-term and long-term performance. Base salaries and annual incentive bonuses are designed to reward executives for their performance and our short-term performance. We believe that providing long-term incentive compensation in the form of stock options, time based restricted stock units and performance based restricted stock units ensures that our executives have a continuing stake in our long-term success and have incentives to increase our equity value. Total compensation for each Named Executive Officer is reviewed annually to ensure that the proportions of the executive’s short-term incentives and long-term incentives are properly balanced.
The components of incentive compensation (the annual incentive bonus and equity awards) are significantly “at risk,” as the degree to which the annual incentive bonuses are paid and the performance vesting and the intrinsic value of the equity awards all depend on the extent to which certain of our operating and financial goals are achieved. When reviewing compensation levels, each component of compensation is reviewed independently, and the total pay package is reviewed in the aggregate. However,Fiscal Year 2021, the Compensation Committee believesconcluded that an important componentthe Company’s employee compensation programs and policies did not encourage unnecessary or excessive risk-taking that would be reasonable likely to result in a material adverse effect on us. See the section entitled “Corporate Governance and Board Matters—Board of aligning the interestsDirectors—Board and Board Committee’s Role in Oversight of investors and executives is to place a strong emphasis on “at risk” compensation linked to overall Company performance. In 2019, approximately 80% of the total target direct compensationRisk Management” above for our Chief Executive Officer was “at risk.”
Base Salary
We pay our Named Executive Officers base salaries to compensate them for services rendered each year. Base salary is a regular, cash payment, the amount of which is based on position, experience and performance after considering the following primary factors: internal review of the executive’s compensation and the Compensation Committee’s assessment of the executive’s individual prior performance. Salary levels are typically considered annually as part of our performance review process but can be adjusted in connection with a promotion or other change in job responsibility. Merit-based increases to salaries of our Named Executive Officers are determined each December by the Compensation Committee after an assessment of the performance of each executive for that fiscal year.
Effective July 1, 2019, the base salary of Mr. Lindberg was increased from $584,298 to $750,000, and the base salary of Mr. Sheedy was increased from $489,250 to $550,000, in each case reflecting our board of directors’ assessment of the executive’s individual contributions and performance during the 2019 fiscal year, and to provide a competitive salary within range of market median for the executive’s particular position and duties. None of our other Named Executive Officers received an additional base salary increase in the 2019 fiscal year.discussion of risk considerations.
The following table summarizes the annual base salaries as of December 28, 2019 of our Named Executive Officers.
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Salary ($)
|
Eric J. Lindberg, Jr. | | | 750,000
|
Charles C. Bracher
| | | 522,698
|
S. MacGregor Read, Jr.
| | | 584,298
|
Robert Joseph Sheedy, Jr.
| | | 550,000
|
Thomas H. McMahon
| | | 358,217
|
Effective January 5, 2020, the base salary of each of our Named Executive Officers was increased by a certain percentage as shown in the following table, in order to provide a competitive salary for the executive’s particular position and duties.
Eric J. Lindberg, Jr. | | | 3.00 | | | 772,500 |
Charles C. Bracher | | | 3.00 | | | 538,379 |
S. MacGregor Read, Jr. | | | 3.00 | | | 601,827 |
Robert Joseph Sheedy, Jr. | | | 6.00 | | | 583,000 |
Thomas H. McMahon | | | 11.67 | | | 400,021 |
Annual Cash Incentive Compensation
In addition to receiving base salaries, our Named Executive Officers and other senior members of our management team are eligible to receive an annual incentive bonus pursuant to the AIP each year. Our AIP is an annual cash incentive program designed to create a link between executive compensation and our performance. The AIP provides metrics for the calculation of annual incentive-based cash compensation after assessing the participant’s performance against pre-determined quantitative and qualitative measures within the context of our overall performance. For each fiscal year, the participants’ annual incentive bonuses are determined as a percentage of their base salaries, based on the achievement of the applicable Company-wide and individual goals established by the Compensation Committee on a sliding scale.
2019 Annual Incentive Plan
In February 2019, our board of directors adopted the 2019 Annual Incentive Plan (the “2019 AIP”), pursuant to which the Compensation Committee set the performance goals for the 2019 fiscal year. The following core corporate performance measures were used to calculate the annual bonus pool under the 2019 AIP: (i) 50% related to “FY19 Bonus EBITDA,” which is our fiscal 2019 Adjusted EBITDA, calculated as set forth in our Annual Report under the heading “Item 7—Management’s Discussion and Analysis of Results of Operations and Financial Condition — Operating Metrics and Non-GAAP Financial Measures—EBITDA, Adjusted EBITDA and Non-GAAP Adjusted Net Income,” adjusted to exclude public company costs and other items (with an annual target goal of $170.1 million); (ii) 25% related to comparable store sales growth (with an annual target goal of 4.14% over the prior year); and (iii) 25% sales for stores opened in fiscal 2019 and 2018 (with an annual target goal of $225.5 million for each fiscal year). Each of these metrics scale independently above 100% subject to the achievement of 95% of the FY19 Bonus EBITDA target and are not capped. Awards under the 2020 AIP (as defined below) will be capped at a maximum of 200% of a participant’s bonus target.
Subject to the minimum achievement of a 3% year to date FY19 Bonus EBITDA growth from the prior fiscal year and 95% of target achievement, we made interim quarterly payments under the 2019 AIP based on FY19 Bonus EBITDA and comparable store sales growth metrics, and 25% of the calculated quarterly payouts were retained to be paid at year-end.
When establishing the foregoing performance targets, the Compensation Committee set targets that it believed (i) were challenging to achieve and reasonable and (ii) fairly incentivized participants. By setting the foregoing targets, the Compensation Committee established what it believed were stretch goals that would incentivize and reward exceptional employee performance without any guarantee that we would meet or exceed any such metrics in the prevailing business environment. Achievement of performance goals, which will determine the amount, if any, earned under the 2019 AIP, was determined by the Compensation Committee in its sole discretion. Bonus amounts (including any interim quarterly payments thereof) are payable in a lump sum cash amount (or, at the discretion of the Compensation Committee, in shares of our stock), and the payment with respect to any bonus amount under the 2019 AIP is subject to a participant’s continued employment through the payment date.
Actual annual cash incentive awards were calculated by multiplying each Named Executive Officer’s average base salary for fiscal 2019 by his target award potential, which were then adjusted by an overall achievement factor based on the combined weighted achievement of the performance measures.
AGREEMENT WITH MR. LINDBERGTABLE OF CONTENTS
For fiscal 2019, the percentage of target achievement for each core corporate performance measure described above was as follows: (i) FY19 Bonus EBITDA: 101.8%, resulting in a payout of 108.8%; (ii) 12 month comparable store sales growth: 126.4%, resulting in a payout of 126.4%; and (iii) sales for stores opened in fiscal 2019 and fiscal 2018: 102.6%, resulting in a payout of 112.9%.
The following table summarizes the fiscal 2019 annual incentive awards earned based on actual performance, as compared to the target opportunity, for each of our Named Executive Officers:
Eric J. Lindberg, Jr.(1)(2) | | | 666,694 | | | 100 | | | 666,694 | | | 114.2612 | | | 761,772 |
Charles C. Bracher | | | 522,698 | | | 60 | | | 313,619 | | | 114.2612 | | | 358,345 |
S. MacGregor Read, Jr. | | | 584,298 | | | 100 | | | 584,298 | | | 114.2612 | | | 667,626 |
Robert Joseph Sheedy, Jr.(1)(3) | | | 519,458 | | | 75 | | | 389,593 | | | 114.2612 | | | 445,154 |
Thomas H. McMahon | | | 358,217 | | | 50 | | | 179,109 | | | 114.2612 | | | 204,651 |
(1)
| 2019 Base Salary reflects the average base salary for the year. |
(2)
| Effective July 1, 2019, the base salary of Mr. Lindberg was increased from $584,298 to $750,000, and his target bonus amount was 100% of his base salary paid for fiscal year 2019. |
(2)
| Effective July 1, 2019, the base salary of Mr. Sheedy was increased from $489,250 to $550,000, and his target bonus amount was 75% of his base salary paid for fiscal year 2019. |
In February 2020, our board of directors adopted the 2020 Annual Incentive Plan (the “2020 AIP”), pursuant to which the Compensation Committee set the performance goals for the 2020 fiscal year. The following core corporate performance measures were used to calculate the annual bonus pool under the 2020 AIP: (i) 60% based on FY 2020 Adjusted EBITDA; and (ii) 40% based on comparable store sales growth. Based on input from Korn Ferry and review of peer benchmarking and to better align the bonus payout with growth strategy performance, the Company revised the payout range to include a minimum (50% of bonus target) and maximum (200% of bonus target).
Long-Term Equity Incentive Compensation
In addition to base salary and cash bonus compensation, each of our Named Executive Officers is provided long-term equity incentive compensation. The use of long-term equity incentives creates a link between executive compensation and our long-term performance, thereby creating alignment between executive and investor interests.
Equity awards granted to our Named Executive Officers under our 2014 Stock Incentive Plan (the “2014 Stock Plan”) and 2019 Incentive Plan (the “2019 Incentive Plan”) were determined based on market competitiveness, criticality of position and individual performance (both historical and expected future performance). Historically, stock options have been a core element of long-term incentive opportunity for our Named Executive Officers. However, we have moved to time-vesting restricted stock units (RSUs) and performance-based stock units (PSUs) for 2020 grants.
For fiscal 2020, the Compensation Committee has approved a long-term incentive program consisting of time-vesting RSUs”) and performance-vesting PSUs. The RSUs will vest over a three year period with one third vesting on the first three anniversaries of a specified vesting commencement date, contingent on continued employment with the Company on each such date. The PSUs vest after a three-year performance period based on the achievement of cumulative operating goals and contingent on continued employment with the Company. Although individual grants have not yet been made to our Named Executive Officers for 2020, the Committee agreed that the mix of long-term equity incentive value should be split 70% PSUs and 30% RSUs for our Chief Executive Officer and 60% PSUs and 40% RSUs for the other Named Executive Officers.
Options Granted in 2019
In connection with the closing of our initial public offering, we granted equity awards to our Named Executive Officers under the 2019 Incentive Plan in order to (i) recognize such individuals’ efforts on our behalf in connection with our formation and our initial public offering, (ii) ensure their alignment with our stockholder’s interests and (iii) provide a retention element to their compensation.
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The Company granted each of our Named Executive Officers a time-vesting option to purchase shares of our common stock at an exercise price of $22.00, the price of a share of our common stock in the initial public offering, as shown in the following table. Such options will vest and become exercisable on the fourth anniversary of the grant date, subject to the executive’s continued employment with us on the vesting date. If the executive undergoes a termination of employment without cause following a change in control (as such terms are defined in the 2019 Incentive Plan), such options will become fully vested and exercisable.
Eric J. Lindberg, Jr. | | | 210,450 | | | 1,643,387 |
Charles C. Bracher | | | 91,195 | | | 712,134 |
S. MacGregor Read, Jr. | | | 210,450 | | | 1,643,387 |
Robert Joseph Sheedy, Jr. | | | 91,195 | | | 712,134 |
Thomas H. McMahon | | | 63,135 | | | 493,016 |
(1)
| The amounts included in this column represent the grant date fair value of options granted to our Named Executive Officers under the 2019 Incentive Plan, computed in accordance with FASB Accounting Standards Codification Topic 718. The valuation assumptions used in determining such amounts are described in Note 7, Share-based Awards to the consolidated financial statements included in our Annual Report. |
The options were granted to each of our Named Executive Officers pursuant to an option agreement which provides that if the executive engages in any “detrimental activity” (as defined in the 2019 Incentive Plan and provided below), our Compensation Committee may, in its sole discretion, take actions permitted under the 2019 Incentive Plan, including: (a) canceling the options, or (b) requiring that the executive forfeit any gain realized on the exercise of the options or the disposition of any shares of our common stock received upon exercise of the options, and repay such gain to us. Under the 2019 Incentive Plan, “detrimental activity” is generally defined as any of the following: (i) unauthorized disclosure of any of our confidential or proprietary information; (ii) any activity that would be grounds to terminate the executive’s employment or service with us for cause; (iii) a breach by the executive of any restrictive covenant by which such executive is bound, including, without limitation, any covenant not to compete or not to solicit, in any agreement with us; or (iv) fraud or conduct contributing to any financial restatements or irregularities, as determined by our Compensation Committee in its sole discretion.
2016 and 2018 Dividends on Options
As described below, we declared cash dividends in respect of our outstanding common stock in 2016 and 2018. Pursuant to the terms of the 2014 Stock Plan, our board of directors was required to make an equitable adjustment to all outstanding options in connection with the payment of the extraordinary dividend.
In June 2016, our board of directors declared a cash dividend of $1.23 per share of our outstanding common stock (the “2016 Dividend”). In connection with the 2016 Dividend, we treated the outstanding options held by each of Named Executive Officers our pursuant to the 2014 Stock Plan as follows:
With respect to vested time-vesting options, the Named Executive Officer received a lump-sum cash payment in an amount equal to the number of shares underlying the vested option multiplied by the 2016 Dividend amount, less applicable tax withholdings, paid in June 2016.
With respect to unvested time-vesting options, the Named Executive Officer received a right to cash payment in an amount equal to the number of shares underlying the option multiplied by the 2016 Dividend amount, to be paid in part upon each vesting date under the unvested option (provided that the executive satisfied the vesting conditions applicable to the unvested option, for such vesting date).
We reduced the per share exercise prices of any outstanding unvested performance-vesting options held by Named Executive Officers, by the per share 2016 Dividend amount.
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In October 2018, our board of directors declared a cash dividend of $2.10 per share of the company’s outstanding common stock (the “2018 Dividend”). In connection with the 2018 Dividend, we treated the outstanding options held by each of our Named Executive Officers pursuant to the 2014 Stock Plan as follows:
With respect to vested time-vesting options, the Named Executive Officer received a lump-sum cash payment in an amount equal to the number of shares underlying the vested option multiplied by the 2018 Dividend amount, less applicable tax withholdings, paid on October 26, 2018.
With respect to unvested time-vesting options, the Named Executive Officer received a right to cash payment in an amount equal to the number of shares underlying the unvested option multiplied by the 2018 Dividend amount, to be paid in part upon each vesting date under the option (provided that the executive satisfied the vesting conditions applicable to the unvested option, for such vesting date).
We reduced the per share exercise prices of any outstanding unvested performance-vesting options held by Named Executive Officers, by the per share 2018 Dividend amount.
Employment Agreements with Named Executive Officers
Messrs. Lindberg and Read
On October 7, 2014, we entered into an amendedAmended and restated chief executive officer employment agreementRestated Executive Employment Agreement with each of Messrs.Mr. Lindberg, and Read, pursuant to which each executivehe agreed to serve as a Co-Chief Executive Officers. As of January 2019, Mr. Lindberg has served as our Chief Executive Officer and Mr. Read has served as our executive Vice Chairman. Under their employment agreements, each of Messrs. Lindberg’s and Read’s initial annual base salary was $504,000 ($750,000 in 2019Officer. In consideration for Mr. Lindberg and $584,298 in 2019 for Mr. Read) and each executive’s target AIP award is 100% of his base salary. Each employment agreement provides that in the event of a termination of employment without cause or resignation for good reason (as such terms are defined in the employment agreement), each of Messrs. Lindberg and Read is entitled to (i) payment of his base salary, payable in equal installments in accordance with our regular payroll practices for a period of 24 months following the termination date; (ii) an amount equal to two times his target bonus for the year in which the termination date occurs, payable in equal installments for a period of 24 months following the termination date; and (iii) payment for up to 18 months of medical and dental benefits for the executive and his dependents which are substantially the same as the benefits provided immediately prior to Mr. Lindberg, the termination date (including, in our discretion, payment for the costs associated with continuation coverage pursuant to COBRA). Each employment agreement further provides that if the executive’s employment is terminated by reason of his death or disability, he will be entitled to a lump sum amount equal to his target annual bonus for the year in which the termination occurs, prorated based on the ratio of the number of days during such year that the executive was employed to 365. Each employment agreement contains non-competition covenants during the term of the agreement as well as confidentiality and employee non-solicitation covenants.
Messrs. Bracher, Sheedy and McMahon
On October 7, 2014, we entered into an employment See “Potential Payments Upon Termination or Change in Control” for additional information on the terms of this agreement. Other than the agreement with eachMr. Lindberg, we have no employment agreements with any of Messrs. Bracher, Sheedyour Named Executive Officers.
EXECUTIVE SEVERANCE PLAN
On November 9, 2020, based on the recommendation of Korn Ferry, and McMahon, pursuantafter reviewing peer company and general retail market practices, the Committee adopted the Grocery Outlet Holding Corp. Executive Severance Plan (the “Executive Severance Plan”) to which each executive serves as Chief Financial Officer, President and Executive Vice President of Sales & Merchandising, respectively. Under each employment agreement, Mr. Bracher’s initial annual base salary was $450,883 ($522,698 in 2019), Mr. Sheedy’s initial annual base salary was $350,000 ($550,000 in 2019) and Mr. McMahon’s initial annual base salary was $309,000 ($358,217 in 2019). Each employment agreement contains non-competition covenants during the termprovide severance benefits to certain eligible employees of the agreement as well asCompany and its affiliates who experience a termination of employment under the conditions described in the Executive Severance Plan. Eligible employees under the Executive Severance Plan include all of our Named Executive Officers, other than Mr. Lindberg. The purposes of the Executive Severance Plan, among others, is to assist us in attracting and retaining executives by providing a level of protection against involuntary job loss and to provide appropriate incentives to executives to maintain ongoing alignment with stockholder interests. Eligible employees who receive severance benefits under the Executive Severance Plan will be bound by certain restrictive covenants in favor of the Company, including confidentiality, non-disparagement and employee non-solicitation covenants. See “Potential Payments Upon Termination or Change in Control” for additional information.
Other Compensation
BenefitsSPECIAL BONUS
As part of our employee recognition program for all employees, anniversary awards are provided based on significant milestones. Mr. Lindberg received a one-time $5,000 discretionary bonus, as well as a tax gross-up amount on such bonus, in recognition of his 25th anniversary with the Company. Due to the one-time nature of such compensation, such amounts were not considered by the Board and the Compensation Committee for their benchmarking analysis or otherwise in establishing TDC, and therefore discussions regarding the components of TDC and related analyses in this CD&A exclude such amounts.
BENEFITS
We provide various employee benefit programs to our Named Executive Officers, including medical, vision, dental, life insurance, accidental death & dismemberment, long-term disability, short-term disability, health savings accounts and wellness programs. These common benefit programs are generally available to all of our employees. These benefits are provided to our Named Executive Officers to eliminate potential distractions from performing their regular job duties. We believe the cost of these programs is counterbalanced by an increase in productivity by the executives receiving access to them.
TABLE OF CONTENTS
Profit Sharing Contributions
We maintain a defined contribution pension plan (the “401(k) Plan”) for all full-time employees, including our Named Executive Officers, with at least three months of service. The 401(k) Plan is intended to qualify as a tax-qualified plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “Code”). The 401(k) Plan provides that each participant may contribute up to 60% of such participant’s compensation subjecthis or her salary up to certain restrictions. Thethe legally allowed maximum amount.
Additionally, our 401(k) Plan allows for discretionary employer contributions. We refer to our contributions to the 401(k) Plan as our “Profit-Sharing Program.” Under this program, any employee who meets the eligibility requirements, which includes, among others, one year of continuous employment with us, is eligible to receive Company contributions to their 401(k) account generally based on (i) the Company’s profitability during a given year and (ii) a percentage of their salary (in accordance with IRS rules, if a Participant has a base salary greater than $290,000 in 2021, then $290,000 is used as the base salary for the purposes of this latter calculation). Company contributions generally vest over a period of six years. The amount of these contributions paid to the Named Executive Officers are disclosed in the “All Other Compensation” column of the Summary Compensation Table.Table; however, no contributions were made to our Named Executive Officers for the Fiscal Year 2021.
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Compensation Discussion and Analysis
2016 AND 2018 DIVIDENDS ON OPTIONS
As previously disclosed in our proxy statement for the 2021 annual meeting of stockholders, we declared cash dividends in respect of our outstanding common stock in 2016 and 2018. Pursuant to the terms of the 2014 Stock Plan, our Board was required to make an equitable adjustment to all outstanding options in connection with the payment of the extraordinary dividend.
As disclosed in the Summary Compensation Table below, Ms. Burke was the only Named Executive Officer during Fiscal Year 2021 holding outstanding options required to be equitably adjusted in connection with the payment of the extraordinary dividend.
Other Equity-Related Policies
STOCK OWNERSHIP GUIDELINES
The Compensation Committee approved the implementation of formal stock ownership guidelines for our management team, which we adopted in September 2019. Pursuant to the guidelines, each of our executives with a title of Vice President and above is required to own shares of our common stock having an aggregate fair market value equal to or greater than a multiple of their salary as set forth below (each as measured with reference to the base salary payable to each executive in the immediately preceding calendar year):
| | TITLE | | | MULTIPLE OF BASE SALARY | |
| | Chief Executive Officer | | | Five | |
| | Executive Officer Level (EVP) | | | Three | |
| | Senior Vice President and Vice President | | | Two | |
For purposes of the guidelines, the base salary payable will include all base salary payable in a given calendar year (even if the payment of which is deferred to a later calendar year). For purposes of the guidelines, an executive’s holdings include: (i) shares owned separately by the executive or owned either jointly or with, or separately by, his or her immediate family, (ii) shares held in trust for the benefit of the executive or his or her immediate family members, (iii) shares purchased on the open market, (iv) shares obtained through stock option exercises (and not thereafter sold), (v) vested but unexercised stock options and (vi) shares of restricted stock and restricted stock units, in each case, whether vested or unvested, however, PSUs are not included when calculating holdings. Executives have five years to attain the specified level of equity ownership. Executives must hold 50% “net shares” (shares left after the tax liability is settled) received from their equity awards until the guidelines are met. Our Board may waive compliance with the guidelines on a case-by-case basis where these guidelines would place a severe hardship on an individual, but it is anticipated that waivers will be rare.
All of our Named Executive Officers already maintain an equity ownership position, through direct stock ownership and/or the ownership of stock option and RSU awards that meets the requirements of this policy.
SECURITIES TRADING POLICY
Our insider trading policy is designed to inform, educate and create reasonable processes to prevent the Company and its directors, officers, employees and other specified persons from insider trading violations and the appearance of any related improper conduct. Our insider trading policy specifically prohibits, among other things all directors, officers and other employees from speculating in our stock, including trading in options, warrants, puts and calls, or similar derivative securities, selling our stock short and participating in hedging transactions. Our policy also prohibits our directors, officers and certain other employees from pledging our stock as collateral for a loan.
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Compensation Discussion and Analysis
CLAWBACK POLICY
In the event that the Compensation Committee determines, in its discretion, that any fraud, willful misconduct or gross negligence by a current or former “Officer” (as that term is defined in Rule 16a-1(f) under the Exchange Act) caused or contributed, directly or indirectly, to the restatement of our reported financial results, our clawback policy empowers our Compensation Committee to seek recovery of or cancel any “Overpayment”, which is defined as the difference between (i) any incentive compensation paid, granted, vested, settled or accrued based on the belief that the Company, had met or exceeded performance targets that would not have been met had the financial information been accurate, and (ii) the incentive compensation in which the Officer would have been paid or awarded based on the accurate financial information or restated results, as applicable. The Compensation Committee has discretion whether to seek recoupment, taking into account any factors as it deems appropriate.
TIMING OF EQUITY AWARDS
The Compensation Committee does not coordinate the timing of equity awards to executive officers or employees with the release of material non-public information. Annual equity awards generally made in the first quarter of each year during an open window period.
Tax and Accounting Implications
The Compensation Committee operates its compensation programs with the good faith intention of complying with Section 409A of the Code. We account for equity-based paymentscompensation with respect to our long-term equity incentive award programs in accordance with the requirements of FASB Accounting Standards Codification Topic 718, Compensation—Compensation—Stock Compensation, or FASB ASC Topic 718.
The employment agreement with Mr. Lindberg, the Executive Severance Plan and certain incentive plans and agreements may entitle participants to receive payments in connection with a change in control that may result in excess parachute payments. Section 280G of the Code prohibits the company from deducting the portion of the parachute payments constituting “excess parachute payments” and Section 4999 of the Code imposes on the payee a 20% excise tax on the excess parachute payments. For this purpose, parachute payments generally are defined as payments to specified persons that are contingent upon a change in control in an amount equal to or greater than three times the person’s base amount (i.e., the five-year average Form W-2 compensation). The excess parachute payments equal the portion of the parachute payments that exceeds one times the payee’s base amount. We are not obligated to pay any tax gross-ups with respect to the excise tax imposed on any person who received excess parachute payments, although our plans and agreements may contain provisions to limit or prevent parachute payments.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Code generally prohibits public companies from taking a tax deduction for compensation paid in excess of $1,000,000 to certain executive officers. Prior to its amendment as implemented by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), Section 162(m) of the Code provided an exception from the compensation deduction limitations for compensation that was considered “qualified performance-based compensation” under the applicable regulations. Section 162(m) of the Code also provides that a company that becomes public in connection with an IPO is exempt from applying the compensation deduction limitations for a specified period of time following its IPO (the “IPO Transition Period”). The Tax Act’s amendment of Section 162(m) of the Code, among other things, eliminated, beginning in 2018, the exception to the compensation deduction limitations for “qualified performance-based compensation,” other than in limited circumstances. The IPO Transition Period for an IPO effectuated prior to December 20, 2019, was not impacted by the Tax Act’s amendments to Section 162(m) of the Code.
The Company completed its IPO in June of 2019 and is currently operating within its IPO Transition Period with respect to certain of its executive compensation plans. Accordingly, any payments made under these incentive compensation plans following the expiration of the Company’s IPO Transition Period to employees covered by Section 162(m) of the Code will be subject to the compensation deduction limitations set forth in Section 162(m) of the Code. In order to maintain flexibility, the Compensation Committee retains the authority to authorize compensation that may not be deductible if the Compensation Committee believes doing so is in the best interests of the Company.
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COMPENSATION COMMITTEE REPORT
We have reviewed and discussed the Compensation Discussion and Analysis with management. Based on our review and discussion with management, the Compensation Committee recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Compensation Committee
Kenneth W. Alterman, Chair
Norman S. Matthews
Erik D. Ragatz
Jeffrey R. York
The foregoing report of the Compensation Committee does not constitute soliciting material and shall not be deemed filed, incorporated by reference into or a part of any other filing by the Company (including any future filings) under the Securities Act or the Exchange Act, except to the extent the Company specifically incorporates such report by reference therein.
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NAMED EXECUTIVE OFFICER COMPENSATION TABLES
Summary Compensation Table in Fiscal Years 2021, 2020 and 2019
The following table summarizes the total compensation earned in 2019 by our Named Executive Officers duringfor the fiscal years 2018 and 2019.indicated. We have omitted from this table the columns for Change in Pension Value and Nonqualified Deferred Compensation Earnings, because no Named Executive Officer received such types of compensation during the fiscal years covered.
| | NAME AND PRINCIPAL
POSITION | | | FISCAL
YEAR | | | SALARY
($)(1) | | | STOCK
AWARDS
($)(2) | | | OPTION
AWARDS
($) | | | NON-EQUITY
INCENTIVE PLAN
COMPENSATION
($)(3) | | | ALL OTHER
COMPENSATION
($)(4) | | | TOTAL
($) | |
| | Eric J. Lindberg, Jr.
Chief Executive Officer | | | | | 2021 | | | | | | 798,943 | | | | | | 3,200,036 | | | | | | — | | | | | | — | | | | | | 9,985 | | | | | | 4,008,965 | | |
| | | | 2020 | | | | | | 771,635 | | | | | | 3,090,028 | | | | | | — | | | | | | 1,545,000 | | | | | | 45,360 | | | | | | 5,452,022 | | |
| | | | 2019 | | | | | | 666,694 | | | | | | — | | | | | | 1,643,387 | | | | | | 761,772 | | | | | | 934,422 | | | | | | 4,006,275 | | |
| | Charles C. Bracher
Chief Financial Officer | | | | | 2021 | | | | | | 554,375 | | | | | | 1,110,081 | | | | | | — | | | | | | — | | | | | | 1,860 | | | | | | 1,666,317 | | |
| | | | 2020 | | | | | | 537,776 | | | | | | 1,076,785 | | | | | | — | | | | | | 646,055 | | | | | | 45,360 | | | | | | 2,305,977 | | |
| | | | 2019 | | | | | | 522,698 | | | | | | — | | | | | | 712,134 | | | | | | 358,345 | | | | | | 271,365 | | | | | | 1,864,542 | | |
| | Robert Joseph Sheedy, Jr.
President | | | | | 2021 | | | | | | 599,369 | | | | | | 1,800,116 | | | | | | — | | | | | | — | | | | | | 1,860 | | | | | | 2,401,345 | | |
| | | | 2020 | | | | | | 581,731 | | | | | | 1,457,571 | | | | | | — | | | | | | 874,501 | | | | | | 45,360 | | | | | | 2,959,163 | | |
| | | | 2019 | | | | | | 519,458 | | | | | | — | | | | | | 712,134 | | | | | | 445,154 | | | | | | 271,365 | | | | | | 1,948,111 | | |
| | Steven K. Wilson(5)
Chief Purchasing Officer | | | | | 2021 | | | | | | 399,039 | | | | | | 1,000,045 | | | | | | — | | | | | | — | | | | | | 2,532 | | | | | | 1,401,615 | | |
| | Pamela B. Burke(5)
Chief Administrative Officer,
General Counsel and Secretary | | | | | 2021 | | | | | | 429,528 | | | | | | 860,088 | | | | | | — | | | | | | — | | | | | | 16,784 | | | | | | 1,306,400 | | |
| | | | 2020 | | | | | | 416,706 | | | | | | 834,373 | | | | | | — | | | | | | 500,608 | | | | | | 120,563 | | | | | | 1,872,250 | | |
(1)
Amounts reported in the “Salary” column represent the base salary earned by each Named Executive Officer during the fiscal year covered. For a description of salary increases see “Executive Compensation—Compensation Discussion and Analysis”
(2)
Amounts reported in the “Stock Awards” column represent the aggregate grant date fair value of PSUs and RSUs granted. See the “Grants of Plan-Based Awards Table” for further information on the number of PSUs and RSUs granted to our Named Executive Officers in Fiscal Year 2021. These amounts reflect the grant date fair value of the awards (and for the PSUs, the grant date fair value at target), and do not correspond to the actual value that may be realized by the Named Executive Officer. The grant date fair value of the PSUs and RSUs are calculated as of the closing price of our common stock as quoted on Nasdaq on the grant date multiplied by the number of shares subject to the award. See Note 7, Share-based Awards to our consolidated financial statements contained in our 2021 Annual Report for a discussion of all assumptions made by us in determining the grant date fair value in accordance with FASB ASC Topic 718. For the PSUs granted in Fiscal Year 2021, the amounts reported are based on target achievement, which was the probable outcome of the related performance conditions as of the grant date. The aggregate grant date fair value of these awards, assuming achievement at the target and the maximum level of performance (the latter of which is 200% of the target amount) is shown in the chart below for each Named Executive Officer.
| | NEO | | | GRANT DATE FAIR VALUE OF
PSUS GRANTED IN 2021 AT
TARGET PERFORMANCE
($) | | | GRANT DATE FAIR VALUE OF
PSUS GRANTED IN 2021 AT
MAXIMUM PERFORMANCE
($) | |
| | Eric J. Lindberg, Jr. | | | | | 2,240,015 | | | | | | 4,480,030 | | |
| | Charles C. Bracher | | | | | 666,035 | | | | | | 1,332,070 | | |
| | Robert Joseph Sheedy, Jr. | | | | | 1,080,055 | | | | | | 2,160,110 | | |
| | Steven K. Wilson | | | | | 600,027 | | | | | | 1,200,054 | | |
| | Pamela B. Burke | | | | | 516,046 | | | | | | 1,032,092 | | |
(3)
Amounts reported in the “Non-Equity Incentive Plan Compensation” column represent the annual incentive bonus amounts earned by each Named Executive Officer pursuant to the AIP during the fiscal year covered. No amounts were earned for Fiscal Year 2021.
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SUMMARY COMPENSATION TABLENamed Executive Officer Compensation Tables
Eric J. Lindberg, Jr.
Chief Executive Officer
| | | 2019 | | | 666,694(5) | | | 1,643,387 | | | 761,772 | | | 934,422 | | | 4,006,275 |
| | 2018 | | | 567,279 | | | — | | | 440,042 | | | 2,638,485 | | | 3,645,806 |
Charles C. Bracher
Chief Financial Officer
| | | 2019 | | | 522,698 | | | 712,134 | | | 358,345 | | | 271,365 | | | 1,864,542 |
| | 2018 | | | 507,473 | | | — | | | 262,747 | | | 725,402 | | | 1,495,622 |
S. MacGregor Read, Jr.
Vice Chairman
| | | 2019 | | | 584,298 | | | 1,643,387 | | | 667,626 | | | 934,422 | | | 3,829,733 |
| | 2108 | | | 567,279 | | | — | | | 440,042 | | | 2,638,485 | | | 3,645,806 |
Robert Joseph Sheedy, Jr.
President
| | | 2019 | | | 519,458(5) | | | 712,134 | | | 445,154 | | | 271,365 | | | 1,948,111 |
| | 2018 | | | 475,000 | | | — | | | 245,934 | | | 725,376 | | | 1,446,310 |
Thomas H. McMahon
Executive Vice President,
Sales &Merchandising
| | | 2019 | | | 358,217 | | | 493,016 | | | 204,651 | | | 190,992 | | | 1,246,876 |
| | 2018 | | | 347,783 | | | — | | | 180,066 | | | 494,269 | | | 1,022,118 |
(4)
Amounts reported in the “All Other Compensation” column represent the following with respect to each Named Executive Officer in the Fiscal Year 2021:
(1)
| Amounts reported in the “Salary” column represent the base salary earned by each Named Executive Officer during the fiscal year covered. Effective July 1, 2019, the base salary of Mr. Lindberg was increased from $584,298 to $750,000 and the base salary of Mr. Sheedy was increased from $489,250 to $550,000. |
(2)
| Amounts reported in the “Option Awards” column represent the grant date fair value of the options granted during the fiscal year covered to our Named Executive Officers, computed in accordance with FASB Accounting Standards Codification Topic 718. The valuation assumptions used in determining such amounts are described in Note 7, Share-based Awards to our consolidated financial statements included in our Annual Report. |
(3)
| Amounts reported in the “Non-Equity Incentive Plan Compensation” column represent the annual incentive bonus amounts earned by each Named Executive Officer pursuant to the AIP during the fiscal year covered. |
(4)
| Amounts reported in the “All Other Compensation” column represent the following with respect to each Named Executive Officer in fiscal year 2019: |
| | NEO | | | HEALTH SAVING
ACCOUNT
CONTRIBUTION
($) | | | COMPANY-PAID
GROUP TERM
LIFE INSURANCE
($) | | | OTHER(I)
($) | |
| | Eric J. Lindberg, Jr. | | | | | 1,500 | | | | | | 552 | | | | | | 7,933 | | |
| | Charles C. Bracher | | | | | 1,500 | | | | | | 360 | | | | | | — | | |
| | Robert Joseph Sheedy, Jr. | | | | | 1,500 | | | | | | 360 | | | | | | — | | |
| | Steven K. Wilson | | | | | 1,500 | | | | | | 1,032 | | | | | | — | | |
| | Pamela B. Burke | | | | | 1,500 | | | | | | 552 | | | | | | 14,732 | | |
(i)
For Mr. Lindberg: profit sharing contributionLindberg, “Other” represents a one-time $5,000 discretionary bonus, as well as a tax gross-up amount on such bonus, in recognition of $30,250 underhis 25th anniversary with the Company. This award was made as part of our 401(k) Plan; and aemployee recognition program for all employees where anniversary awards are provided based on significant milestones. For Ms. Burke, “Other” represents lump sum cash payment in the amount of $904,172payments in connection with the payment of the 2016 and 2018 Dividends relating to the vesting of the last tranche ofher time-based options.
(5)
Ms. Burke was not a Named Executive Officers in Fiscal Year 2019 and Mr. Lindberg’s time-based options.Wilson was not a Named Executive Officer in Fiscal Year 2020 or Fiscal Year 2019 and accordingly, their respective compensation information for those fiscal years is not included herein. Effective January 1, 2022, Ms. Burke was appointed as EVP, Chief Stores Officer, Interim General Counsel and Secretary.
Mr. Bracher: profit sharing contribution amount of $30,250 under the 401(k) Plan; and a lump sum cash payment in the amount of $241,115 in connection with the payment of the 2016 and 2018 Dividends relating to the vesting of the last tranche of Mr. Bracher’s time-based options.
Mr. Read: profit sharing contribution amount of $30,250 under the 401(k) Plan; and a lump sum cash payment in the amount of $904,172 in connection with the payment of the 2016 and 2018 Dividends relating to the vesting of the last tranche of Mr. Read’s time-based options.
Mr. Sheedy: profit sharing contribution amount of $30,250 under the 401(k) Plan; and a lump sum cash payment in the amount of $241,115 in connection with the payment of the 2016 and 2018 Dividends relating to the vesting of the last tranche of Mr. Sheedy’s time-based options.
Mr. McMahon: profit sharing contribution amount of $30,250 under the 401(k) Plan; and a lump sum cash payment in the amount of $160,742 in connection with the payment of the 2016 and 2018 Dividends relating to the vesting of the last tranche of Mr. McMahon’s time-based options.
(5)
| 2019 Salary reflects the average base salary for the year.Page | | | 53 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
Grants of Plan-Based Awards in 2019Fiscal Year 2021
The following table provides information with respect to grants of plan-based awards to our Named Executive Officers in 2019.2021 under our AIP and 2019 Incentive Plan.
| | | | | | | | | | | ESTIMATED POSSIBLE PAYOUTS
UNDER NON-EQUITY
INCENTIVE PLAN AWARDS(1) | | | ESTIMATED FUTURE PAYOUTS
UNDER EQUITY INCENTIVE
PLAN AWARDS(2) | | | ALL OTHER
STOCK
AWARDS:
NUMBER
OF SHARES
OF STOCK
OR
UNITS(3) | | | GRANT
DATE FAIR
VALUE OF
STOCK
AWARDS
($)(4) | |
| | NAME | | | GRANT
DATE | | | TYPE OF AWARD | | | THRESHOLD
($) | | | TARGET
($) | | | MAXIMUM
($) | | | THRESHOLD
(#) | | | TARGET
(#) | | | MAXIMUM
(#) | |
| | Eric J. Lindberg, Jr. | | | N/A | | | Performance-Based
Cash Award (AIP) | | | | | 160,000 | | | | | | 800,001 | | | | | | 1,600,002 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | 3/4/2021 | | | Performance-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | 15,797 | | | | | | 63,188 | | | | | | 126,376 | | | | | | — | | | | | | 2,240,015 | | |
| | 3/4/2021 | | | Time-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 27,081 | | | | | | 960,021 | | |
| | Charles C. Bracher | | | N/A | | | Performance-Based
Cash Award (AIP) | | | | | 66,602 | | | | | | 333,309 | | | | | | 666,018 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | 3/4/2021 | | | Performance-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | 4,697 | | | | | | 18,788 | | | | | | 37,576 | | | | | | — | | | | | | 666,035 | | |
| | 3/4/2021 | | | Time-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 12,256 | | | | | | 440,047 | | |
| | Robert Joseph Sheedy, Jr. | | | N/A | | | Performance-Based
Cash Award (AIP) | | | | | 90,004 | | | | | | 450,018 | | | | | | 900,036 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | 3/4/2021 | | | Performance-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | 7,617 | | | | | | 30,467 | | | | | | 60,934 | | | | | | — | | | | | | 1,080,055 | | |
| | 3/4/2021 | | | Time-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,312 | | | | | | 720,060 | | |
| | Steven K. Wilson | | | N/A | | | Performance-Based
Cash Award (AIP) | | | | | 40,000 | | | | | | 200,000 | | | | | | 400,000 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | 3/4/2021 | | | Performance-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | 4,232 | | | | | | 16,926 | | | | | | 33,852 | | | | | | — | | | | | | 600,027 | | |
| | 3/4/2021 | | | Time-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 11,284 | | | | | | 400,018 | | |
| | Pamela B. Burke | | | N/A | | | Performance-Based
Cash Award (AIP) | | | | | 51,627 | | | | | | 258,133 | | | | | | 516,266 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | 3/4/2021 | | | Performance-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | 3,639 | | | | | | 14,557 | | | | | | 29,114 | | | | | | — | | | | | | 516,046 | | |
| | 3/4/2021 | | | Time-Based
Restricted Stock Unit | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,705 | | | | | | 344,042 | | |
GRANTS OF PLAN BASED AWARDS(1)
Eric J. Lindberg, Jr. | | | — | | | 667,149 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 210,450 | | | 22.00 | | | 1,643,387 | | | 6/19/2019 |
Charles C. Bracher | | | — | | | 313,619 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 91,195 | | | 22.00 | | | 712,134 | | | 6/19/2019 |
S. MacGregor Read, Jr. | | | — | | | 584,298 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 210,450 | | | 22.00 | | | 1,643,387 | | | 6/19/2019 |
Robert Joseph Sheedy, Jr. | | | — | | | 389,719 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 91,195 | | | 22.00 | | | 712,134 | | | 6/19/2019 |
Thomas H. McMahon | | | — | | | 179,109 | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — |
| | — | | | — | | | — | | | — | | | — | | | — | | | — | | | 63,135 | | | 22.00 | | | 493,016 | | | 6/19/2019 |
See “Compensation Discussion and Analysis—Elements of 2021 Compensation Program” for a description of our annual performance-based cash bonus plan. The amounts in the “Target” column represent the target amounts available under the 2021 AIP for our Fiscal Year 2021 with respect to each Named Executive Officer. For purposes of this table, the “Threshold” amount shown represents an assumption that the Company achieves only the threshold level of adjusted EBITDA performance. No cash bonuses were earned or paid for Fiscal Year 2021.
(2)
The PSUs vest (if at all) based on achievement of performance goals over a three-year performance period.
(3)
The RSUs vest in three equal annual installments on the three anniversary dates following the vesting commencement date.
(4)
The amounts included in this column represent the grant date fair value of equity awards granted to our Named Executive Officers under the 2019 Incentive Plan, computed in accordance with FASB ASC Topic 718. The grant date fair value of the PSUs and RSUs are calculated as of the closing price of our common stock as quoted on Nasdaq on the grant date multiplied by the number of shares subject to the award. The grant date fair value of the PSUs was computed based upon target achievement, which was the probable outcome of the performance conditions as of the grant date. See footnote 2 to the Summary Compensation Table.
(1)
| See “Annual Cash Incentive Compensation—2019 Annual Incentive Plan” for a description of our annual performance-based cash bonus plan. The amounts in the “Target” column represent the target amounts available under the 2019 AIP for our 2019 fiscal year with respect to each Named Executive Officer. The calculation uses each Named Executive Officer’s base salary as of January 7, 2019. For purposes of this table, the “Threshold” amount shown represents an assumption that the Company achieves the threshold level of adjusted EBITDA performance and individual performance attainment that is slightly greater than 0%, which would result in a de minimis AIP payout. There is no maximum level with respect to awards under the 2019 AIP.Page | | | 54 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards
Our Compensation, Discussion and Analysis section of this proxy statement describes all material factors necessary to understand and give context to the information in the two preceding tables for the Fiscal Year 2021.
In Fiscal Years 2020 and 2019 each of our NEOs received profit-sharing contributions under our 401(k) plan, which are included under “All Other Compensation” in the Summary Compensation Table. No payments under this program were made for Fiscal Year 2021.
In Fiscal Year 2019, in connection with our IPO, each of our then current employees, including our NEOs, was granted a stock option which will cliff vest in in June 2023. The Compensation Committee has no plans to utilize stock options going forward. Also in Fiscal Year 2019, each of our NEOs received payments in connection with the cash dividends on our outstanding common stock in 2016 and 2018 relating to the vesting of their time-based options, which amounts are included under “All Other Compensation” in the Summary Compensation Table” above.
(2)
| The amounts included in this column represent the grant date fair value of options granted to our Named Executive Officers under the 2019 Incentive Plan, computed in accordance with FASB Accounting Standards Codification Topic 718. The valuation assumptions used in determining such amounts are described in Note 7, Share-based Awards to the consolidated financial statements included in our Annual Report.Page | | | 55 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
Outstanding Equity Awards at 20192021 Fiscal Year End
The following table includes certain information with respect to stock optionsoutstanding equity awards held by our Named Executive Officers as of January 1, 2022.
| | | | | | | | | | | 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
(#) | | | MARKET
VALUE OF
SHARES OR
UNITS OF
STOCK THAT
HAVE NOT
VESTED
($)(1) | | | EQUITY
INCENTIVE
PLAN AWARDS:
NUMBER OF
UNEARNED
SHARES,
UNITS OR
OTHER
RIGHTS THAT
HAVE NOT
VESTED
(#) | | | EQUITY
INCENTIVE
PLAN AWARDS:
MARKET
VALUE OF
UNEARNED
SHARES, UNITS
OR OTHER
RIGHTS THAT
HAVE NOT
VESTED
($)(1) | |
| | Eric J. Lindberg, Jr. | | | | | 10/21/2014 | | | | | | 782,614 | | | | | | — | | | | | | 3.81 | | | | | | 10/21/2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 10/21/2014 | | | | | | 1,332,614 | | | | | | — | | | | | | 7.13 | | | | | | 10/21/2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 6/19/2019 | | | | | | — | | | | | | 210,450(2) | | | | | | 22.00 | | | | | | 6/19/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 5/13/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 16,758(3) | | | | | | 473,916 | | | | | | 117,300(4) | | | | | | 3,317,244(4) | | |
| | | | 3/4/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 27,081(3) | | | | | | 765,851 | | | | | | 63,188(4) | | | | | | 1,786,957(4) | | |
| | Charles C. Bracher | | | | | 11/25/2014 | | | | | | 150,155 | | | | | | — | | | | | | 3.81 | | | | | | 11/25/2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 11/25/2014 | | | | | | 115,156 | | | | | | — | | | | | | 7.13 | | | | | | 11/25/2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 6/19/2019 | | | | | | — | | | | | | 91,195(2) | | | | | | 22.00 | | | | | | 6/19/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 5/13/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 7,786(3) | | | | | | 220,188 | | | | | | 35,036(4) | | | | | | 990,818(4) | | |
| | | | 3/4/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 12,526(3) | | | | | | 354,235 | | | | | | 18,788(4) | | | | | | 531,325(4) | | |
| | Robert Joseph Sheedy, Jr. | | | | | 11/25/2014 | | | | | | 177,059 | | | | | | — | | | | | | 3.81 | | | | | | 11/25/2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 6/19/2019 | | | | | | — | | | | | | 91,195(2) | | | | | | 22.00 | | | | | | 6/19/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 5/13/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 10,540(3) | | | | | | 298,071 | | | | | | 47,426(4) | | | | | | 1,341,207(4) | | |
| | | | 3/4/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 20,312(3) | | | | | | 574,423 | | | | | | 30,467(4) | | | | | | 861,607(4) | | |
| | Steven K. Wilson | | | | | 11/25/2014 | | | | | | 55,522 | | | | | | — | | | | | | 3.81 | | | | | | 11/25/2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 11/25/2014 | | | | | | 26,495 | | | | | | — | | | | | | 7.13 | | | | | | 11/25/2024 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 6/19/2019 | | | | | | — | | | | | | 56,120(2) | | | | | | 22.00 | | | | | | 6/19/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 5/13/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,025(3) | | | | | | 170,387 | | | | | | 27,112(4) | | | | | | 766,727(4) | | |
| | | | 3/4/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 11,284(3) | | | | | | 319,112 | | | | | | 16,926(4) | | | | | | 478,667(4) | | |
| | Pamela B. Burke | | | | | 9/29/2015 | | | | | | 22,567 | | | | | | — | | | | | | 8.11 | | | | | | 9/29/2025 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 3/31/2017(5) | | | | | | 28,060 | | | | | | 7,015 | | | | | | 8.57 | | | | | | 3/31/2027 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 12/26/2018(6) | | | | | | 29,463 | | | | | | 19,642 | | | | | | 11.64 | | | | | | 12/26/2028 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 12/26/2018 | | | | | | 49,105 | | | | | | — | | | | | | 11.64 | | | | | | 12/26/2028 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 6/19/2019 | | | | | | — | | | | | | 63,135(2) | | | | | | 22.00 | | | | | | 6/19/2029 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | |
| | | | 5/13/2020 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 6,034(3) | | | | | | 170,642 | | | | | | 27,148(4) | | | | | | 767,745(4) | | |
| | | | 3/4/2021 | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 9,705(3) | | | | | | 274,457 | | | | | | 14,557(4) | | | | | | 411,672(4) | | |
(1)
The amounts shown in this column represents the number of shares of common stock that have not vested multiplied by $28.28, the closing price per share of our common stock on December 28, 2019.
Outstanding Equity Awards At31, 2021, the last trading day of Fiscal Year End2021.
Eric J. Lindberg, Jr. | | | 10/21/14 | | | 1,357,614 | | | | | | | | | 7.13 | | | 10/21/24 |
| | 10/21/14 | | | | | | | | | 1,357,614 | | | 3.81 | | | 10/21/24 |
| | 6/19/19 | | | | | | 210,450 | | | | | | 22.00 | | | 6/19/29 |
Charles C. Bracher | | | 11/25/14 | | | 362,030 | | | | | | | | | 7.13 | | | 11/25/24 |
| | 11/25/14 | | | | | | | | | 362,030 | | | 3.81 | | | 11/25/24 |
| | 6/19/19 | | | | | | 91,195 | | | | | | 22.00 | | | 6/19/29 |
S. MacGregor Read, Jr. | | | 10/21/14 | | | 1,357,614 | | | | | | | | | 7.13 | | | 10/21/24 |
| | 10/21/14 | | | | | | | | | 1,357,614 | | | 3.81 | | | 10/21/24 |
| | 6/19/19 | | | | | | 210,450 | | | | | | 22.00 | | | 6/19/29 |
Robert Joseph Sheedy, Jr. | | | 11/25/14 | | | 362,031 | | | | | | | | | 7.13 | | | 11/25/24 |
| | 11/25/14 | | | | | | | | | 362,030 | | | 3.81 | | | 11/25/24 |
| | 6/19/19 | | | | | | 91,195 | | | | | | 22.00 | | | 6/19/29 |
Thomas H. McMahon | | | 11/25/14 | | | 241,352 | | | | | | | | | 7.13 | | | 11/25/24 |
| | 11/25/14 | | | | | | | | | 241,353 | | | 3.81 | | | 11/25/24 |
| | 6/19/19 | | | | | | 63,135 | | | | | | 22.00 | | | 6/19/29 |
(2)
Represent unvested time-vesting options granted under the 2019 Incentive Plan in Fiscal Year 2019, which vest and become exercisable in one installment on the fourth anniversary of the grant date, subject to continued employment on the vesting date.
(3)
Each RSU vests in three equal annual installments over the three-year period measured from the vesting commencement date of March 1, 2020 (for Fiscal Year 2020 grants) or March 1, 2021 (for Fiscal Year 2021 grants), subject to continued service with us on each vesting date.
(4)
The number and market value of the PSUs reported for Fiscal Year 2020 grants reflect maximum performance because performance through January 1, 2022, the last day of Fiscal Year 2021, was tracking above the target payout level. The number and market value of the PSUs reported for Fiscal Year 2021 grants reflect target performance because performance through the last day of Fiscal Year 2021, was tracking above threshold but below the target payout level. The actual numbers of shares that will be distributed at the end of the three-year performance period are not yet determinable. The PSUs will vest (if at all) based on the achievement of cumulative operating goals over a three-year performance period, subject to continued service with us through the date that Compensation Committee approves the extent to which such performance conditions were met. See “Compensation Discussion and Analysis—Long-Term Equity Incentive Compensation” for more information on the cumulative operating goals.
(5)
The stock option has a vesting commencement date of March 31, 2017 and vests in installments of 7,015 shares each year with the final installment of 7,015 shares that vested on March 31, 2022.
(6)
The stock option has a vesting commencement date of December 26, 2018 and vests in installments of 9,821 shares each year with the final installment vesting on December 26, 2023.
33| | Page | | | 56 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
(1)
| The numbers in this column represent vested time-vesting options granted under the 2014 Stock Plan in 2014, which vest as follows: 20% of the shares subject to the option vest and become exercisable on each of the first five anniversaries of the grant date, subject to continued employment on each applicable vesting date. |
(2)
| The numbers in this column represent unvested time-vesting options granted under the 2014 Stock Plan in 2014, which vest as follows: 20% of the shares subject to the option vest and become exercisable on each of the first five anniversaries of the grant date, subject to continued employment on each applicable vesting date. In addition, the numbers in this column represent unvested time-vesting options granted under the 2019 Incentive Plan in 2019, which vest as follows: 100% of the shares subject to the option will vest and become exercisable on the fourth anniversary of the grant date, subject to continued employment on the vesting date. If the executive undergoes a termination of employment without cause following a change in control (as such terms are defined in the 2019 Incentive Plan), the option will become fully vested and exercisable. |
(3)
| The numbers in this column represent unvested performance-vesting options granted under the 2014 Stock Plan in 2014, which vest as follows: the shares subject to the option vest and become exercisable on each “measurement date” (generally defined as the date on which the H&F Investor receives proceeds prior to the occurrence of a change in control (as defined in the 2014 Stock Plan)) based on the achievement of certain IRR performance hurdles. Upon the occurrence of the “final measurement date” (generally defined as a change in control or in the case of an initial public offering at such time that the H&F Investor holds less than 10% of our issued and outstanding common stock for a period of 30 consecutive trading days), the IRR will be measured for the final time and any portion of the option that does not vest at such time will be forfeited without consideration to the executive. |
Option Exercises and Stock Vested During Fiscal Year 20192021
The following table includes certainprovides information with respect to stock options exercisedabout the value realized by the Named Executive Officers on the exercise of stock options and the vesting of stock awards during the fiscal year ended December 28, 2019.January 1, 2022.
| | | | | OPTION AWARDS | | | STOCK AWARDS | |
| | NAME | | | NUMBER OF
SHARES
ACQUIRED ON
EXERCISE
(#) | | | VALUE
REALIZED
ON EXERCISE
($)(1) | | | NUMBER OF
SHARES
ACQUIRED ON
VESTING
(#) | | | VALUE
REALIZED
ON VESTING
($) | |
| | Eric J. Lindberg, Jr. | | | | | 325,000 | | | | | | 10,790,079 | | | | | | 8,378 | | | | | | 302,781 | | |
| | Charles C. Bracher | | | | | 43,750 | | | | | | 1,654,628 | | | | | | 3,893 | | | | | | 140,693 | | |
| | Robert Joseph Sheedy, Jr. | | | | | 40,002 | | | | | | 1,549,231 | | | | | | 5,269 | | | | | | 190,422 | | |
| | Steven K. Wilson | | | | | 61,430 | | | | | | 1,983,015 | | | | | | 3,012 | | | | | | 108,854 | | |
| | Pamela B. Burke | | | | | 15,000 | | | | | | 478,350 | | | | | | 3,016 | | | | | | 108,998 | | |
OPTION EXERCISES AND STOCK VESTED(1)
Eric J. Lindberg, Jr. | | | 25,000 | | | 665,500 | | | — | | | — |
Charles C. Bracher | | | — | | | — | | | — | | | — |
S. MacGregor Read, Jr. | | | 350,000 | | | 9,317,000 | | | — | | | — |
Robert Joseph Sheedy, Jr. | | | — | | | — | | | — | | | — |
Thomas H. McMahon | | | 50,000 | | | 1,331,000 | | | — | | | — |
Based on the amount by which the market price of a share of our common stock on the dates of exercise exceeded the applicable exercise price per share of the option.
(1)
| On October 21, 2014, Mr. Lindberg was granted a time-vesting option to purchase 1,357,614 shares of our common stock under the 2014 Stock Plan; on October 8, 2019, he exercised 25,000 of the shares subject to the option. On October 21, 2014, Mr. Read was granted a time-vesting option to purchase 1,357,614 shares of our common stock under the 2014 Stock Plan; on October 8, 2019, he exercised 350,000 of the shares subject to the option. On November 25, 2014, Mr. McMahon was granted a time-vesting option to purchase 241,352 shares of our common stock under the 2014 Stock Plan; on October 8, 2019, he exercised 50,000 of the shares subject to the option. On the date of exercise for each Named Executive Officer, the market value of the shares underlying the options was $33.75 per share.Page | | | 57 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
Potential Payments Upon Termination or Change in Control
The information below describes and estimates certain compensation that would have been payable to our Named Executive Officers under existing plans and arrangements if a qualifying termination or change in control occurred on December 28, 2019,January 1, 2022, the last business day of our 2019 fiscal year.Fiscal Year 2021. These benefits are in addition to benefits available generally 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 from those estimated below. Factors that could affect these amounts include the timing during the year of any such event and our valuation at that time. There can be no assurance that a termination or change in control would produce the same or similar results as those described below if any assumption used to prepare this information is not correct in fact.
SEVERANCE BENEFITS UPON TERMINATION FOR MR. LINDBERG
The employment agreement for Mr. Lindberg provides that in the event of a termination of employment without Cause or resignation for Good Reason (as defined in his agreement) he is entitled to (i) payment of his base salary, payable in equal installments in accordance with our regular payroll practices for a period of 24 months following the termination date; (ii) an amount equal to two times his target bonus for the year in which the termination date occurs, payable in equal installments for a period of 24 months following the termination date; and (iii) payment for up to 18 months of his medical and dental benefits for him and his dependents which are substantially the same as the benefits provided immediately prior to the termination date (including, in our discretion, payment for the costs associated with continuation coverage pursuant to COBRA). Mr. Lindberg’s agreement further provides that if his employment is terminated by reason of his death or disability, he will be entitled to a lump sum amount equal to his target annual bonus for the year in which the termination occurs, prorated based on the ratio of the number of days during such year that the executive was employed to 365.
EXECUTIVE SEVERANCE PLAN
On November 9, 2020, the Compensation Committee adopted the Executive Severance BenefitsPlan to provide severance benefits to certain eligible employees of the Company and its affiliates who experience a termination of employment under the conditions described in the Executive Severance Plan. Eligible employees under the Executive Severance Plan include all of the Company’s Named Executive Officers, other than Mr. Lindberg.
Non-Change-in-Control Severance
Under the terms of the Executive Severance Plan, if a participant at the executive vice president level or senior vice president level experiences a termination by the Company without Cause (as defined in the Incentive Plan) or by the participant for Good Reason (as defined in the Executive Severance Plan), either of which is referred to as a “covered termination,” not in connection with a Change in Control (as defined in the 2019 Incentive Plan), the Company will provide the participant with the following severance payments and benefits, subject to his or her continued compliance with a restrictive covenant agreement and the execution and non-revocation of a release of claims. The severance payments and benefits provided to our Named Executive Officers are as follows:
•
an amount equal to 1.0 times the sum of the participant’s annual base salary and target annual bonus, payable in accordance with the Company’s normal payroll practice over 12 months, and
•
subject to the participant’s timely election under COBRA, payment, or reimbursement for, the difference between the COBRA premium and the premium paid by active Company employees for the same coverage for 12 months.
Change-in-Control Severance
Under the terms of the Executive Severance Plan, if a participant at the executive vice president or senior vice president level experiences a covered termination within 18 months following a Change in Control, the Company will provide the participant with the following severance payments and benefits, subject to his or her continued compliance with a restrictive covenant agreement and the execution and non-revocation of a release of claims. The payments and benefits provided to our named executive officers are as follows:
•
an amount equal to 1.5x times the sum of the participant’s annual base salary and target annual bonus, in each case, payable in a lump sum within 60 days following termination of employment, and
•
subject to the participant’s timely election under COBRA, payment, or reimbursement for, the difference between the COBRA premium and the premium paid by active Company employees for the same coverage for 18 months.
| | Page | | | 58 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
Eligible employees who receive severance benefits under the Executive Severance Plan will be bound by certain restrictive covenants in favor of the Company, including confidentiality, non-disparagement and non-solicitation covenants.
The Executive Severance Plan provides that if payments and benefits provided to the participant would constitute an “excess parachute payment” for purposes of Section 280G of the Code, the participant will either have his or her payments and benefits reduced to the highest amount that could be paid without triggering Section 280G or receive the after-tax amount of his or her payment and benefits, whichever results in the greater after-tax benefit, taking into account the excise tax imposed under Section 4999 of the Code and any applicable federal, state and local taxes.
The Executive Severance Plan may be amended, terminated or discontinued in whole or in part, at any time and from time to time at the discretion of the Board or the Compensation Committee; provided, however, that no adverse amendment, termination or discontinuance may be made without the consent of a participant who has undergone a covered termination prior to the effective date of any such adverse amendment, termination or discontinuance. In addition, following a Change in Control, the Executive Severance Plan may not be amended, terminated or discontinued in whole or in part, at any time prior to the second anniversary of the date of such change in control without the written consent of an affected participant.
ACCELERATED VESTING OF EQUITY AWARDS UPON CERTAIN EVENTS
Time-Vesting Options
Each of our Named Executive Officers were granted time-vesting options under the 2019 Incentive Plan in Fiscal Year 2019, which provide that if the executive undergoes a termination of employment without Cause following a Change in Control (each as defined in the 2019 Incentive Plan), such options will become fully vested and exercisable.
In addition, Ms. Burke holds two partially unvested time-based stock option awards that were under the 2014 Stock Plan. Those awards provide that if a Change in Control (as defined in such plan) occurs during the optionee’s employment, the option will, to the extent not vested, become fully vested and exercisable immediately prior to the effective time of such Change in Control.
Performance-Vesting Units (PSUs)
Each of our Named Executive Officers were also granted PSUs under the 2019 Incentive Plan (with all defined terms below defined in the 2019 Incentive Plan). Those awards provide for the following vesting upon Terminationvarious events:
•
if the participant undergoes a termination as a result of participant’s death or disability prior to a Change in Control, a prorated portion of the PSU will vest (at target performance) on the date of such termination;
•
in the event a participant undergoes a termination without Cause a prorated portion of the PSU will remain outstanding, and, in the event of a subsequent Change in Control following such termination, the outstanding portion of the PSU will vest at target performance; and
•
in the event a participant undergoes a termination (i) without Cause, (ii) for Good Reason or (iii) by reason of death or disability, in each case following a Change in Control, the earned PSU will vest in full at target performance on the date of such termination.
Time-Vesting Restricted Stock Units (RSUs)
Each of our Named Executive Officers were also granted RSUs under the 2019 Incentive Plan (with all defined terms below defined in 2019 Incentive Plan). Those awards provide for full acceleration of the award if the participant undergoes a termination without Cause following a Change in Control.
| | Page | | | 59 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
POTENTIAL PAYMENTS UPON TERMINATION OR AFTER CHANGE IN CONTROL
(AS OF JANUARY 1, 2021)
The following table describes the potential payments and benefits that would have been payable to our Named Executive Officers under existing plans and arrangements if a qualifying termination or change in control occurred on January 1, 2022, the last business day of our Fiscal Year 2021. The amounts shown in the tables do not include payments and benefits to the extent they are provided generally to all salaried employees upon termination of employment and do not discriminate in scope, terms or operation in favor of our Named Executive Officers.
| | NAME | | | TRIGGERING EVENT | | | SALARY | | | BONUS | | | HEALTH
BENEFITS
CONTINUATION
COVERAGE | | | VALUE OF
OPTION
ACCELERATION | | | VALUE OF
TIME-BASED
RSU
ACCELERATION | | | VALUE OF PSU
AWARD
ACCELERATION | | | TOTAL | |
| | Eric J. Lindberg, Jr | | | Termination Without Cause
or for Good Reason(1) | | | | | 1,600,002 | | | | | | 1,600,002 | | | | | | 70,835 | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,270,839 | | |
| | Death or Disability prior to
Change in Control | | | | | — | | | | | | 800,001(2) | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,701,400(3) | | | | | | 2,501,401 | | |
| | Termination Without Cause
after Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | 1,321,626(4) | | | | | | 1,239,767(3) | | | | | | 3,445,579(3) | | | | | | 6,006,972 | | |
| | Death or Disability after a
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 3,445,579(3) | | | | | | 3,445,579 | | |
| | Charles C. Bracher | | | Termination Without Cause or
for Good Reason(5) | | | | | 555,015 | | | | | | 333,009 | | | | | | 35,034 | | | | | | — | | | | | | — | | | | | | — | | | | | | 923,058 | | |
| | Qualifying Termination after
Change in Control | | | | | 832,523(5) | | | | | | 499,514(5) | | | | | | 52,742(5) | | | | | | 572,705(4) | | | | | | 574,423(3) | | | | | | 1,026,734(3) | | | | | | 3,558,640 | | |
| | Death or Disability prior to
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 507,381(3) | | | | | | 507,381 | | |
| | Death or Disability after a
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,026,734(3) | | | | | | 1,026,734 | | |
| | Robert Joseph Sheedy, Jr | | | Termination Without Cause or
for Good Reason(5) | | | | | 600,024 | | | | | | 450,018 | | | | | | 35,004 | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,085,046 | | |
| | Qualifying Termination after
Change in Control | | | | | 900,036(5) | | | | | | 675,027(5) | | | | | | 52,742(5) | | | | | | 572,704(4) | | | | | | 872,495(3) | | | | | | 1,532,210(3) | | | | | | 4,605,215 | | |
| | Death or Disability prior to
Change in Control | | | | | | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 734,271(3) | | | | | | 734,271 | | |
| | Death or Disability after a
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 1,532,210(3) | | | | | | 1,532,210 | | |
| | Steven K. Wilson | | | Termination Without Cause or
for Good Reason(5) | | | | | 386,000 | | | | | | 193,000 | | | | | | 34,811 | | | | | | — | | | | | | — | | | | | | — | | | | | | 613,811 | | |
| | Qualifying Termination after
Change in Control | | | | | 579,000(5) | | | | | | 289,500(5) | | | | | | 52,399(5) | | | | | | 352,434(4) | | | | | | 489,499(3) | | | | | | 862,031(3) | | | | | | 2,624,862 | | |
| | Death or Disability prior to
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 415,132(3) | | | | | | 415,132 | | |
| | Death or Disability after a
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 862,031(3) | | | | | | 862,031 | | |
| | Pamela B. Burke | | | Termination Without Cause or
for Good Reason(5) | | | | | 430,022 | | | | | | 258,013 | | | | | | 35,216 | | | | | | | | | | | | | | | | | | | | | | | | 723,252 | | |
| | Qualifying Termination after
Change in Control | | | | | 645,033(5) | | | | | | 387,020(5) | | | | | | 53,021(5) | | | | | | 396,488 | | | | | | 445,099 | | | | | | 795,545(3) | | | | | | 2,722,205 | | |
| | Death or Disability prior to
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 393,139 | | | | | | 393,139 | | |
| | Death or Disability after a
Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | — | | | | | | 795,545(3) | | | | | | 795,545 | | |
| | Change in Control | | | | | — | | | | | | — | | | | | | — | | | | | | 465,109(6) | | | | | | — | | | | | | — | | | | | | 465,109 | | |
(1)
The employment agreement for each of Messrs.Mr. Lindberg and Read provides that in the event of a termination of employment without cause or resignation for good reason, the executive is entitled to (i) payment of his base salary, payable in equal installments in accordance with our regular payroll practices for a period of 24 months following the termination date; (ii) an amount equal to two times his target bonus for the year in which the termination date occurs, payable
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Named Executive Officer Compensation Tables
in equal installments for a period of 24 months following the termination date; and
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(iii) payment for up to 18 months of medical and dental benefitsbenefit payments and, in our discretion, payment for the costs associated with COBRA premium for a period of 18 months for the executive and his dependents, which benefits are substantially the same as the benefits provided immediately prior to the termination date (including, in our discretion, payment fordate. For purposes of calculating (iii) we used the costs associated with continuation coverage pursuant to COBRA). EachCOBRA premium amounts.
(2)
The employment agreement furtherfor Mr. Lindberg provides that if his employment is terminated by reason of his death or disability, he will be entitled to a lump sum amount equal to his target annual bonus for the year in which the termination occurs, prorated based on the ratio of the number of days during such year that the executive was employed to 365.
Accelerated Vesting
(3)
The form of Options uponTime-Based Restricted Stock Unit Notice and Agreement under our 2019 Incentive Plan provides, among other terms, full acceleration of the award if the participant undergoes a termination without Cause following a Change in Control. Additionally, the form of Performance Stock Unit Grant Notice and Agreement under our 2019 Incentive Plan provides, among other terms, (i) in the event a participant undergoes a termination as a result of participant’s death or disability prior to a Change in Control, or Termination followingthen a prorated portion of the PSU will vest, with such proration based on the number of days elapsed from the commencement of the performance period through the date of such termination; and (ii) in the event a participation undergoes a termination after a Change in Control either without cause, for good reason or due to participant’s death or disability, then the PSUs will vest in full at target performance as of the date of such termination.
Each
(4)
On June 19, 2019, the Company granted each of Messrs. Lindberg, Bracher and Sheedy and Ms. Burke a time-vesting option to purchase shares of our Named Executive Officers were granted performance-vesting options under the 2014 Stock Plan in 2014, which vest as follows: thecommon stock, respectively, at an exercise price of $22.00. As of January 1, 2022, all shares subject to the option vest and become exercisable onheld by each “measurement date” (generally defined as the date on which the H&F Investor receives proceeds prior to the occurrence of a change in control, as defined in the 2014 Stock Plan) based on the achievement of certain IRR performance hurdles. Upon the occurrence of the “final measurement date” (generally defined as a change in control or in the case of an initial public offering at such time that the H&F Investor holds less than 10% of our issued and outstanding common stock for a period of 30 consecutive trading days), the IRR will be measured for the final time and any portion of the option that does not vest at such time will be forfeited without consideration to the executive. In addition, each of our Named Executive Officers were granted time-vesting options under the 2019 Incentive Plan in 2019, which provide that ifexecutives are unvested. If the executive undergoes a termination of employment without cause following a change in control, such optionsthe option will become fully vested and exercisable.
The following tables describeamounts above represent the potential payments and benefits that would have been payablevalue associated with the accelerated vesting of the unvested shares subject to our Named Executive Officers under existing plans and arrangements ifeach option held by the executive upon a qualifying termination or change in control, occurred onwhich is the product of (i) the difference between (A) the closing price of our common stock as of December 28, 2019,31, 2021, the last businesstrading day of our 2019 fiscal year. The amounts shown inFiscal Year 2020 ($28.28) and (B) the tables do not include paymentsexercise price ($22.00); and benefits(ii) the number of unvested shares subject to the extent they are provided generally to all salaried employees upon terminationoption as of employment and do not discriminate in scope, terms or operation in favorJanuary 1, 2022.
(5)
In connection with the Executive Severance Plan described above each of our Named Executive Officers. The amounts reported assume thatNEOs (other than Mr. Lindberg) is entitled to the performance-vesting options granted to each Named Executive Officer in 2014 wouldfollowing benefits if he or she is terminated without cause, or by the participant for good reason not vest in connection with a changeChange in control becauseControl: (i) 1.0 times the performance hurdles would not be metsum of the participant’s annual base salary and target bonus, payable in accordance with our regular payroll practices over 12 months; and (ii) subject to participant’s timely election under COBRA, payment, or reimbursement for, the difference between the COBRA premium and the premium paid by active Company employees for the same coverage for 12 months.
(6)
On March 17, 2017 and December 26, 2018 Ms. Burke was granted time-based stock options under our predecessor 2014 Stock Plan at the year-end valuean exercise price of our common stock.
Potential Payments Upon Termination or$8.57 and $11.64, respectively. Those stock options provide that if a Change in Control occurs during the Optionee’s Employment, the Option will, to Messrs. Lindbergthe extent not vested, become fully vested and Readexercisable immediately prior to the effective time of such Change in Control.
Eric J. Lindberg, Jr. | | | Base Salary | | | 1,500,000 | | | — | | | — |
| | | Bonus | | | 1,334,298 | | | 667,149 | | | — |
| | | Medical/Dental/COBRA | | | 81,954 | | | — | | | — |
| | | Accelerated Vesting of Option | | | — | | | — | | | 2,413,862 |
| | | Total | | | 2,916,252 | | | 667,149 | | | 2,413,862 |
S. MacGregor Read, Jr. | | | Base Salary | | | 1,168,596 | | | — | | | — |
| | | Bonus | | | 1,168,596 | | | 584,298 | | | — |
| | | Medical/Dental/COBRA | | | 81,594 | | | — | | | — |
| | | Accelerated Vesting of Option | | | — | | | — | | | 2,413,862 |
| | | Total | | | 2,418,786 | | | 584,298 | | | 2,413,862 |
(1)
| The employment agreement for each of Messrs. Lindberg and Read provides that in the event of a termination of employment without cause or resignation for good reason, the executive is entitled to (i) payment of his base salary ($750,000 for Mr. Lindberg and $584,298 for Mr. Read), payable in equal installments in accordance with our regular payroll practices for a period of 24 months following the termination date; (ii) an amount equal to two times his target bonus ($667,149 for Mr. Lindberg and $584,298 for Mr. Read) for the year in which the termination date occurs, payable in equal installments for a period of 24 months following the termination date; and (iii) medical and dental benefit payments ($2,098 monthly for Mr. Lindberg and $2,097 monthly for Mr. Read) and COBRA premium payments ($2,455 monthly for Mr. Lindberg and $2,436 monthly for Mr. Read) for a period of 18 months for the executive and his dependents, which benefits are substantially the same as the benefits provided immediately prior to the termination date. |
(2)
| The employment agreement for each of Messrs. Lindberg and Read provides that if the executive’s employment is terminated by reason of his death or disability, he will be entitled to a lump sum amount equal to his target annual bonus ($667,149 for Mr. Lindberg and $584,298 for Mr. Read) for the year in which the termination occurs, prorated based on the ratio of the number of days during such year that the executive was employed to 365. |
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(3)
| On June 19, 2019, the Company granted each of Messrs. Lindberg and Read a time-vesting option to purchase 210,450 shares of our common stock at an exercise price of $22.00. As of December 28, 2019, all shares subject to the option held by each of the executives are unvested. The option provides that if the executive undergoes a termination of employment without cause following a change in control, the option will become fully vested and exercisable. The amounts above represent the value associated with the accelerated vesting of the unvested shares subject to the option held by the executive upon a change in control, which is the product of (i) the difference between (A) the closing price of our common stock as of December 28, 2019 ($33.47) and (B) the exercise price ($22.00); and (ii) the number of unvested shares subject to the option as of December 28, 2019.Page |
Potential Payments Upon Change in Control to Messrs. Bracher, Sheedy and McMahon
CEO PAY RATIO
We are providing the following information regarding the ratio of the annual total compensation of Eric J. Lindberg, Jr., our Chief Executive Officer, to the annual total compensation of our median employee.
For Fiscal Year 2021:
| | MEDIAN EMPLOYEE | | | The annual total compensation of our median compensated employee (other than our CEO) was $50,531 | |
| | CHIEF EXECUTIVE OFFICER | | | The annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $4,008,965 | |
| | PAY RATIO | | | The annual total compensation of our CEO was approximately 79.3 times the annual total compensation of our median employee (other than our CEO) | |
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on the methodology described below. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies—including companies in our peer group—may not be comparable to the pay ratio reported above. Further, other companies may have different employment and compensation practices, different geographic breadth, and have more or less employees at comparable skill and pay levels. This information is being provided for compliance purposes. Neither the Compensation Committee nor management of the Company used the pay ratio measure in making compensation decisions.
Determining the Median Employee
We had previously identified a median employee for disclosure in our 2021 proxy statement using the methodology set forth below. For purposes of determining our CEO pay ratio for Fiscal Year 2021, SEC rules allow us to use the same median employee (or comparable employee) for three years as long as there has been no change in our employee population or employee compensation programs that we reasonably believe would result in a significant change to our CEO pay ratio disclosure. During the last completed fiscal year, we determined there has been no change in our employee population or employee compensation programs that would significantly impact our CEO pay ratio disclosure, and given that we have used the same median employee for this pay ratio calculation as we had used in the prior year.
EMPLOYEE POPULATION
As previously disclosed, to identify our median employee in Fiscal Year 2020, we used our employee population data as of December 1, 2020 as the reference date. As of such date, our employee population consisted of approximately 960 individuals, approximately 70% of which were hourly employees and all of whom were located in the United States. For purposes of the pay ratio calculation, our employee population consists of all full- and part-time employees at all locations (other than our CEO), including all temporary employees employed as of the measurement date.
METHODOLOGY FOR DETERMINING OUR MEDIAN EMPLOYEE
To identify the median employee from our employee population, we used Box 1 Form W-2 earnings for Fiscal Year 2020 as reflected in our U.S. and local payroll records plus the value of all benefits and employee discounts provided to all employees on a non-discriminatory basis. In identifying the median employee, we annualized the compensation for full-time employees hired during the fiscal year, and we did not make any cost-of-living adjustments.
Annual Total Compensation of Median Employee
We calculated the median employee’s compensation for Fiscal Year 2021 on the same basis as required by the Summary Compensation Table, plus the value of benefits provided to our median employee under non-discriminatory benefit plans available to all employees during Fiscal Year 2021.
Annual Total Compensation of CEO
With respect to the annual total compensation of our CEO, we used the amount reported in the “Total” column of our 2021 Summary Compensation Table included in this Proxy Statement and added the value of benefits provided to our CEO under non-discriminatory benefit plans available to all employees during Fiscal Year 2021.
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Cause after
Change in Control ($)(1)
|
Charles C. Bracher | | | Accelerated Vesting of Options
| | | 1,046,007
|
Robert Joseph Sheedy, Jr.
| | | Accelerated Vesting of Options
| | | 1,046,007
|
Thomas H. McMahon
| | | Accelerated Vesting of Options
| | | 724,158
|
(1)
| On June 19, 2019, the Company granted each of Messrs. Bracher, Sheedy and McMahon a time-vesting option to purchase 91,195, 91,195 and 63,135 shares of our common stock, respectively, at an exercise price of $22.00. As of December 28, 2019, all shares subject to the option held by each of the executives are unvested. If the executive undergoes a termination of employment without cause following a change in control, the option will become fully vested and exercisable. The amounts above represent the value associated with the accelerated vesting of the unvested shares subject to each option held by the executive upon a change in control, which is the product of (i) the difference between (A) the closing price of our common stock as of December 28, 2019 ($33.47) and (B) the exercise price ($22.00); and (ii) the number of unvested shares subject to the option as of December 28, 2019. |
Read Transition Agreement
On January 6, 2020, Mr. Read informed us of his decision to transition to the newly created non-executive role of Vice Chairman of our board of directors, effective as of April 1, 2020. In connection with this transition, Mr. Read and the Company entered into a transition letter agreement.
Following his transition to the non-executive role of Vice Chairman of our board of directors and effective as of April 1, 2020, Mr. Read will be compensated in the same manner as other Non-Employee Directors pursuant to our non-employee director compensation policy for his service as a member of our board of directors (including, as applicable, his service as a member of any committee of our board of directors). In addition, while Mr. Read remains non-executive Vice Chairman of our board of directors, Mr. Read will receive an annual cash retainer of $100,000 for such service. For purposes of fiscal 2020, Mr. Read’s compensation for service as a member of our board of directors will be calculated without proration so as to include service as a member of our board of directors in fiscal 2020 prior to April 1, 2020.
For purposes of Mr. Read’s outstanding option award agreements, Mr. Read’s transition to Vice Chairman of our board of directors shall not constitute a Termination (as defined in the 2019 Incentive Plan) or a termination of Employment (as defined in the 2014 Stock Plan). Mr. Read’s outstanding options shall continue to vest based on his continued service as a member of our board of directors, with such Termination, or termination of Employment, as applicable, occurring upon cessation of Mr. Read’s service on our board of directors. In the event of a termination of Mr. Read’s service as a director as a result of his not being re-elected to our board of directors, or his death or disability, (i) all of Mr. Read’s (A) outstanding unvested time-based options shall become fully vested upon the date of such termination of service and (B) outstanding unvested performance-based options shall remain outstanding and eligible to vest pursuant to the terms of the applicable option agreement and (ii) the options will remain outstanding through the applicable option expiration date.
In respect of our 2020 fiscal year, subject to Mr. Read’s continued employment through April 1, 2020, Mr. Read will be eligible to receive a pro-rata portion of his bonus, based on target performance, under the 2020 AIP.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Stockholders Agreement
On October 7, 2014, we entered into a stockholders agreement with the H&F Investor, certain executive officers and their family trusts, including Messrs. Lindberg, Read, Bracher and Wilson, and certain of our directors and their family trusts, including Messrs. Herman, Mathews and York. We amended and restated this stockholders agreement on June 19, 2019 in connection with our initial public offering.
The Amended and Restated Stockholders Agreement provides that the H&F Investor has the right to nominate to our board of directors (such persons, the “H&F nominees”) a number of nominees equal to: (x) the total number of directors comprising our board of directors at such time, multiplied by (y) the percentage of our outstanding common stock held from time to time by the H&F Investor. For purposes of calculating the number of directors that the H&F Investor is entitled to nominate, any fractional amounts are rounded up to the nearest whole number. In addition, the Executive Stockholders (as defined in the Amended and Restated Stockholders Agreement) and the Read Trust Rollover Stockholders (as defined in the Amended and Restated Stockholders Agreement), trusts controlled by Mr. Lindberg, Mr. Read or members of their immediate family, acting together by majority vote, have the right to nominate one person (such person, the “Executive nominee”) to our board of directors for so long as such stockholders collectively own at least 5% of our outstanding shares of common stock. The Amended and Restated Stockholders Agreement also provides that our Chief Executive Officer will be nominated to our board of directors. For so long as we have a classified board, the H&F nominees will be divided by the H&F Investor as evenly as possible among the classes of directors. The Executive nominee is initially a Class II director and the Chief Executive Officer is initially a Class III director.
Pursuant to the Amended and Restated Stockholders Agreement, we will include the H&F nominees, the Executive nominee and the Chief Executive Officer nominee on the slate that is included in our proxy statement relating to the election of directors of the class to which such persons belong and provide the highest level of support for the election of each such person as we provide to any other individual standing for election as a director. In addition, each stockholder party to the Amended and Restated Stockholders Agreement agrees to vote in favor of the Company slate that is included in our proxy statement.
In the event that an H&F nominee or the Executive nominee ceases to serve as a director for any reason (other than the failure of our stockholders to elect such individual as a director), the persons entitled to designate such nominee director under the Amended and Restated Stockholders Agreement are entitled to appoint another nominee to fill the resulting vacancy.
The Amended and Restated Stockholders Agreement contains provisions that entitle the H&F Investor, the Executive Stockholders and the Read Trust Rollover Stockholders to certain rights to have their securities registered by us under the Securities Act. The H&F Investor is entitled to an unlimited number of “demand” registrations and the Executive Stockholders and Read Trust Rollover Stockholders collectively are entitled to three “demand” registrations, subject in each case to certain limitations. Every stockholder party to the amended and restated stockholders agreement is also entitled to customary “piggyback” registration rights. In addition, Amended and Restated Stockholders Agreement provides that we will pay certain expenses of the stockholder parties relating to such registrations and indemnify them against certain liabilities which may arise under the Securities Act. Through April 13, 2020, we have incurred approximately $[•] in expenses associated with registered securities offerings conducted by persons with registration rights under the Amended and Restated Stockholders Agreement.
Company Use of Private Aircraft
In April 2020, we entered into an aircraft dry lease agreement with an entity controlled by Mr. Lindberg to lease a Pilatus PC-12 airplane. We believe that this will allow us better access to visit our stores, many of which are in remote areas or are not easily accessible by car or regular commercial airplane service, and to visit prospective real estate sites. The lease will give us the ability to use the aircraft in the course of our operations on an as-needed, non-exclusive basis. The lease provides that we will pay an hourly lease rate and we will bear all direct operating costs associated with our use of the aircraft, and the lessor will bear all fixed costs (e.g. maintenance, hangar, insurance). Mr. Lindberg, to the extent that he operates the aircraft for his personal use, will bear all costs associated with his operation of the aircraft. We believe that the terms of the aircraft dry lease agreement are on terms no less favorable than could be obtained from an unrelated third party and we believe that the foregoing arrangement, including related direct operating costs, insurance and crew costs, will reduce the average hourly cost to the company for use of private aircraft, which previously had been primarily conducted through charter arrangements.
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Indemnification of Directors and Officers
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements, together with our amended and restated bylaws, provide that we will jointly and severally indemnify each indemnitee to the fullest extent permitted by the Delaware general corporation law from and against all loss and liability suffered and expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by or on behalf of the indemnitee in connection with any threatened, pending, or completed action, suit or proceeding. Additionally, we agree to advance to the indemnitee all out-of-pocket costs of any type or nature whatsoever incurred in connection therewith.
Lease Arrangements
As of March 28, 2020, we leased fifteen store properties and one distribution center from entities in which Messrs. Lindberg and Read, or their respective families, had a direct or indirect material interest. These entities received aggregate annual lease payments in fiscal year 2019 of approximately $6.1 million and of approximately $1.5 million in the 13 weeks ended March 28, 2020. The leases for seven of these stores expire in August 2024. The leases on the nine remaining properties expire on various dates between December 2020 and December 2032.
Related Persons Transaction Policy
We have a written policy on transactions with related persons, which we refer to as our “related person policy.”Related Person Policy. Our related person policyRelated Person Policy requires that all “related persons” (as defined in paragraph (a) of Item 404 of Regulation S-K) must promptly disclosethe prompt disclosure to our general counselGeneral Counsel of any “related person transaction” (defined as any transaction that is anticipated would be reportable by us under Item 404(a) of Regulation S-K in which we were or are to be a participant and the amount involved exceeds $120,000 and in which any related person had or will have a direct or indirect material interest) and all material factsinterest, with respect thereto. a related person being a person(i) who is or was at any time since the beginning of our last fiscal year, a director, director nominee, or executive officer; (ii) who is the beneficial holder of more than 5% of any class of our voting securities; (iii) any of their immediate family members; or (iv) any entity owned or controlled by any of the foregoing persons.
Our general counsel will communicate that information to our board of directors or to a duly authorized committee thereof.Audit and Risk Committee. Our related person policyRelated Person Policy provides that no related person transaction entered into following the completion of our initial public offering will be executed without the approval or ratification of our board of directors or a duly authorized committee thereof.Audit and Risk Committee. It is our policy that any directors interested in a related person transaction must recuse themselves from any vote on a related person transaction in which they have an interest.
Related Party Transactions
STOCKHOLDERS AGREEMENT
On October 7, 2014, we entered into a stockholders agreement with an affiliate of H&F (referred to as the “H&F Investor”), certain executive officers and their family trusts, including Messrs. Lindberg, Read, Bracher and Wilson, and certain of our directors and their family trusts, including Messrs. Herman, Mathews and York. We amended and restated this stockholders agreement on June 19, 2019 in connection with our IPO.
The Amended and Restated Stockholders Agreement provides, among other terms, that the Executive Stockholders (as defined in the Amended and Restated Stockholders Agreement) and the Read Trust Rollover Stockholders (as defined in the Amended and Restated Stockholders Agreement), trusts controlled by Mr. Lindberg, Mr. Read or members of their immediate family, acting together by majority vote, have the right to nominate one person (such person, the “Stockholder Nominee”) to our Board for so long as such stockholders collectively own at least 5% of our outstanding shares of common stock. The Amended and Restated Stockholders Agreement also provides that our Chief Executive Officer will be nominated to our Board. The Stockholder Nominee, Mr. Read, is a Class II director and the Chief Executive Officer, Mr. Lindberg, is a Class III director and director nominee at the 2022 Annual Meeting.
Pursuant to the Amended and Restated Stockholders Agreement, we will include the Stockholder Nominee and the Chief Executive Officer nominee on the slate that is included in our proxy statement relating to the election of directors of the class to which such persons belong and provide the highest level of support for the election of each such person as we provide to any other individual standing for election as a director. In addition, each stockholder party to the Amended and Restated Stockholders Agreement agrees to vote in favor of the Company slate that is included in our proxy statement.
In the event that the Stockholder Nominee ceases to serve as a director for any reason (other than the failure of our stockholders to elect such individual as a director), the persons entitled to designate such nominee director under the Amended and Restated Stockholders Agreement are entitled to appoint another nominee to fill the resulting vacancy.
The Amended and Restated Stockholders Agreement contains provisions that entitle the Executive Stockholders and the Read Trust Rollover Stockholders to certain rights to have their securities registered by us under the Securities Act.
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Certain Relationships and Related Party Transactions
INDEMNIFICATION OF DIRECTORS AND OFFICERS
We have entered into an indemnification agreement with each of our directors and executive officers. The indemnification agreements, together with our amended and restated bylaws, provide that we will jointly and severally indemnify each indemnitee to the fullest extent permitted by the Delaware general corporation law from and against all loss and liability suffered and expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by or on behalf of the indemnitee in connection with any threatened, pending, or completed action, suit or proceeding. Additionally, we agree to advance to the indemnitee all out-of-pocket costs of any type or nature whatsoever incurred in connection therewith.
LEASE ARRANGEMENTS
As of April 2, 2022, we leased fifteen store properties and one distribution center from entities in which Messrs. Lindberg and Read, or their respective families, had a direct or indirect material interest. These entities received aggregate annual lease payments in Fiscal Year 2021 of $6.1 million and of $1.5 million in the 13 weeks ended April 2, 2022. The leases for seven of these stores expire in August 2024. The leases on the nine remaining properties expire on various dates between May 2023 and December 2032.
| | Page | | | 64 | | | Grocery Outlet 2022 Proxy Statement | | | | |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table and accompanying footnotes setsets forth information with respect toabout the beneficial ownership of the common stock of Grocery Outlet Holding Corp. as of April 13, 2020 by:11, 2022 for:
•
each person known by us to own beneficially 5% or more of our outstanding shares of common stock;
•
each Named Executive Officer;
•
each of our directors;directors and nominees for director; and
each
•
all of our named executive officers; and
our directors and executive officers and directors as a group.
The percentages of
For each executive officer, director, or director nominee, information with respect to beneficial ownership set forth below areis based upon information furnished to us by such person and for each person known by us to own beneficially 5% or more of our outstanding shares of common stock, based on 90,006,592 shares of our common stock outstanding as of April 13, 2020. The following table does not give effect to any sales ofinformation reported in Schedules 13D or other transactions involving our common stock completed after April 13, 2020 or13G filed with the vesting of any performance-based securities for which the conditions for vesting were met after such date.
BeneficialSEC. We have determined beneficial ownership for the purposes of the following table is determined in accordance with the rules and regulations of the SEC. AUnder these rules, a person is deemed to be a “beneficial owner” of a security if that person has sole or sharesshared “voting power,” which includes the power to vote or to direct the voting of thesuch security, or “investment power,” which includes the power to dispose of or to direct the disposition of the securitysuch security. Common stock subject to stock options that are currently exercisable or has the right to acquire such powersexercisable within 60 days.
Unless otherwise noted indays of April 11, 2022 and RSUs that vest within 60 days of April 11, 2022 are deemed to be outstanding and to be beneficially owned by the person holding the equity award for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Except as indicated by the footnotes to the following table,below, and subject to applicable community property laws, we believe, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investmentdispositive power with respect to theirall common stock that they beneficially ownedown.
The percentages of beneficial ownership set forth below are based on 96,338,755 shares of our common stock.stock outstanding as of April 11, 2022.
Except as otherwise indicated in the footnotes below, the address of each beneficial owner is c/o Grocery Outlet Holding Corp., 5650 Hollis Street, Emeryville, California 94608.
5% Stockholders:
| | | | | | |
H&F Globe Investor LP(1) | | | 26,543,362 | | | 29.5% |
Executive Officers and Directors:
| | | | | | |
Eric J. Lindberg, Jr.(2) | | | 5,666,494 | | | 6.1% |
S. MacGregor Read, Jr.(3) | | | 6,583,804 | | | 7.2% |
Robert Joseph Sheedy, Jr.(4) | | | 536,021 | | | * |
Charles C. Bracher(5) | | | 595,969 | | | * |
Thomas H. McMahon(6) | | | 403,255 | | | * |
Erik D. Ragatz(7) | | | — | | | * |
Kenneth W. Alterman(8) | | | 48,992 | | | * |
John E. Bachman | | | — | | | * |
Matthew B. Eisen(7) | | | — | | | * |
Thomas F. Herman(9) | | | 85,082 | | | * |
Mary Kay Haben | | | — | | | * |
Norman S. Matthews | | | 90,428 | | | * |
Sameer Narang(7) | | | — | | | * |
Jeffrey York | | | 156,488 | | | * |
All directors and executive officers as a group (19 persons)(10) | | | 14,957,487 | | | 15.5% |
| | NAME OF BENEFICIAL OWNER | | | SHARES
BENEFICIALLY
OWNED | | | PERCENTAGE
BENEFICIALLY
OWNED | |
| | 5% Stockholders: | | | | | | | | | | | | | |
| | Jackson Square Partners, LLC(1) | | | | | 10,769,730 | | | | | | 11.2% | | |
| | The Vanguard Group(2) | | | | | 8,394,132 | | | | | | 8.7% | | |
| | BlackRock, Inc.(3) | | | | | 8,220,729 | | | | | | 8.5% | | |
| | Capital Research Global Investors(4) | | | | | 6,876,031 | | | | | | 7.1% | | |
| | Capital World Investors(5) | | | | | 5,693,839 | | | | | | 5.9% | | |
| | Mackenzie Financial Corporation(6) | | | | | 4,998,053 | | | | | | 5.2% | | |
| | Parnassus Investments, LLC(7) | | | | | 4,843,029 | | | | | | 5.0% | | |
| | Named Executive Officers and Directors: | | | | | | | | | | | | | |
| | Eric J. Lindberg, Jr.(8) | | | | | 4,909,872 | | | | | | 5.0% | | |
| | Charles C. Bracher(9) | | | | | 315,946 | | | | | | * | | |
*
| Indicates beneficial ownership of less than 1%. |
(1)
Page | Reflects shares directly held by the H&F Investor. The general partner of the H&F Investor is H&F Globe Investor GP LLC (“Globe Investor GP”). Hellman & Friedman Capital Partners VII (Parallel), L.P. (“HFCP VII”) is the managing member of Globe Investor GP. Hellman & Friedman Investors VII, L.P. (“H&F Investors VII”) is the general partner of HFCP VII. H&F Corporate Investors VII, Ltd. (“H&F VII”) is the general partner of H&F Investors VII. As the general partner of H&F Investors VII, H&F VII may be deemed to have beneficial ownership of the shares of common stock beneficially owned by the H&F Investor. The board of directors of H&F VII consists of Philip U. Hammarskjold, David R. Tunnell and Allen Thorpe. Each of the members of the board of directors of H&F VII disclaims beneficial ownership of such shares of our common stock The address of each entity named in this footnote is c/o Hellman & Friedman LLC, 415 Mission Street, Suite 5700, San Francisco, California 94105. | | 65 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Security Ownership of Certain Beneficial Owners and Management
| | NAME OF BENEFICIAL OWNER | | | SHARES
BENEFICIALLY
OWNED | | | PERCENTAGE
BENEFICIALLY
OWNED | |
| | Robert Joseph Sheedy, Jr.(10) | | | | | 198,924 | | | | | | * | | |
| | Steven K. Wilson(11) | | | | | 202,161 | | | | | | * | | |
| | Pamela B. Burke(12) | | | | | 80,440 | | | | | | * | | |
| | Erik D. Ragatz(13) | | | | | 211,917 | | | | | | * | | |
| | S. MacGregor Read, Jr.(14) | | | | | 4,628,721 | | | | | | 4.8% | | |
| | Kenneth W. Alterman(15) | | | | | 68,310 | | | | | | * | | |
| | John E. Bachman | | | | | 5,882 | | | | | | * | | |
| | Mary Kay Haben(16) | | | | | 5,882 | | | | | | * | | |
| | Thomas F. Herman(17) | | | | | 60,400 | | | | | | * | | |
| | Carey F. Jaros | | | | | 3,581 | | | | | | * | | |
| | Norman S. Matthews(18) | | | | | 156,393 | | | | | | * | | |
| | Gail Moody-Byrd | | | | | 2,821 | | | | | | * | | |
| | Jeffrey R. York | | | | | 138,306 | | | | | | * | | |
| | All directors and executive officers as a group (17 persons)(19) | | | | | 11,072,773 | | | | | | 11.2% | | |
*
Indicates beneficial ownership of less than 1%.
(1)
Based upon statements contained in a Schedule 13G/A filed by Jackson Square Partners, LLC on February 11, 2022. According to the Schedule 13G/A, Jackson Square Partners, LLC has sole voting power over 8,573,211 of the reported shares, shared voting power over none of the reported shares and sole dispositive power over all reported shares. The address of Jackson Square Partners, LLC is One Letterman Drive, Building A, Suite A3-200, San Francisco, California 94129.
(2)
Based upon statements in a Schedule 13G/A filed by The Vanguard Group on February 10, 2022. According to the Schedule 13G/A, The Vanguard Group has sole voting power over none of the reported shares, shared voting power over 41,820 of the reported shares, sole dispositive power over 8,274,979 of the reported shares and shared dispositive power over 119,153 of the reported shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(3)
Based upon statements in a Schedule 13G/A filed by BlackRock, Inc. on February 3, 2022. The report includes holdings of various subsidiaries of the holding company, none of whom are reported to beneficially own more than 5% of our common stock. According to the Schedule 13G/A, BlackRock, Inc. has sole voting power over 7,749,953 of the reported shares, shared voting power over none of the reported shares, sole dispositive power over 8,220,729 of the reported shares and shared dispositive power over none of the reported shares. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055.
(4)
Based upon statements contained in a Schedule 13G filed by Capital Research Global Investors on February 11, 2022. According to the Schedule 13G Capital Research Global Investors has sole voting power over 6,876,031 of the reported shares, shared voting power over none of the reported shares and sole dispositive power over all reported shares. The address of Capital Research Global Investors is 333 South Hope Street, 55th Fl, Los Angeles, California 90071.
(5)
Based upon statements contained in a Schedule 13G filed by Capital World Investors on February 11, 2022. According to the Schedule 13G Capital World Investors has sole voting and dispositive power over all of the reported shares. The address of Capital World Investors is 333 South Hope Street, 55th Fl, Los Angeles, California 90071.
(6)
Based upon statements contained in a Schedule 13G/A filed by Mackenzie Financial Corporation on February 4, 2022. According to the Schedule 13G Mackenzie Financial Corporation has sole voting and dispositive power over all of the reported shares. The address of Mackenzie Financial Corporation is 180 Queen Street West, Toronto, Ontario M5V 3K1.
(7)
Based upon statements contained in a Schedule 13G filed by Parnassus Investments LLC on February 16, 2022. According to the Schedule 13G Mackenzie Financial Corporation has sole voting and dispositive power over all of the reported shares. The address of Parnassus Investments LLC is 1 Market Street, Suite 1600, San Francisco, CA 94105.
(8)
Consists of (i) 15,554 shares of Common Stock directly held by Mr. Lindberg, (ii) 2,065,228 shares of Common Stock issuable upon the exercise of options exercisable within 60 days following April 11, 2022 directly held by Mr. Lindberg, (iii) 460 shares directly held by Mr. Lindberg’s wife, (iv) 460 shares directly held by one of Mr. Lindberg’s children, (v) 2,126,670 shares directly held by the Lindberg Revocable Trust u/a/d 2/14/06 of which Mr. Lindberg is a Trustee, and (vi) 701,500 shares directly held by the Lindberg Irrevocable Trust u/a/d 5/12/17 of which Mr. Lindberg is a Trustee. Mr. Lindberg reports that he has sole voting and dispositive power over 2,080,782 shares and shared voting and dispositive power over 2,829,090 shares.
(2)
| Consists of 2,292,854 shares issuable upon the exercise of options exercisable within 60 days following April 13, 2020 directly held by Mr. Lindberg, 460 shares directly held by Mr. Lindberg’s wife and 460 shares directly held by Mr. Lindberg’s child, 2,376,670 shares directly held by the Lindberg Revocable Trust u/a/d 2/14/06 of which Mr. Lindberg is a Trustee, 701,500 shares directly held by the Lindberg Irrevocable Trust u/a/d 5/12/17 of which Mr. Lindberg is a Trustee and 294,550 shares directly held by The Tuckernuck Limited Partnership of which The Read Family 2014 Irrevocable Trust, f/b/o Brady Read and The Read Family 2014 Irrevocable Trust, f/b/o Charlotte Read are the general partners. Mr. Lindberg is a Trustee of each of the general partners of The Tuckernuck Limited Partnership. Not included in the table above are 210,450 shares issuable upon the exercise of time-based options held by Mr. Lindberg that vest more than 60 days following April 13, 2020 and 397,374 shares issuable upon the exercise of performance-based options held by Mr. Lindberg that may vest in the future when the H&F Investor has satisfied additional specified internal rates of return with respect to its investment in the Company. |
(3)
Page | Consists of 1,967,854 shares issuable upon the exercise of options exercisable within 60 days following April 13, 2020 directly held by Mr. Read, 2,307,975 shares directly held by The Nordlingen Trust dated 1/23/2012, as amended and restated, 9/17/2014 of which Mr. Read is a Trustee and 2,307,975 shares directly held by The Redmond Trust dated 10/19/2003, as amended and restated, 9/17/2014 of which Mr. Read is a Trustee. Not included in the table above are 210,450 shares issuable upon the exercise of time-based options held by Mr. Read that vest more than 60 days following April 13, 2020 and 397,374 shares issuable upon the exercise of performance-based options held by Mr. Read that may vest in the future when the H&F Investor has satisfied additional specified internal rates of return with respect to its investment in the Company. |
(4)
| Consists of 526,021 shares issuable upon the exercise of options exercisable within 60 days following April 13, 2020 and 10,000 shares held directly by Mr. Sheedy. Not included in the table above are 105,967 shares issuable upon the exercise of performance-based options held by Mr. Sheedy that may vest in the future when the H&F Investor has satisfied additional specified internal rates of return with respect to its investment in the Company. |
(5)
| Consists of 552,469 shares issuable upon the exercise of options exercisable within 60 days following April 13, 2020, 42,090 shares held directly by Mr. Bracher, and 1,410 shares directly held by Mr. Bracher’s wife. Not included in the table above are 105,967 shares issuable upon the exercise of performance-based options held by Mr. Bracher that may vest in the future when the H&F Investor has satisfied additional specified internal rates of return with respect to its investment in the Company or 1,200 shares held in a trust for Mr. Bracher’s children over which Mr. Bracher has no voting or investment power. |
(6)
66 | Consists of 312,060 shares issuable upon the exercise of options exercisable within 60 days following April 13, 2020 and 91,195 shares held directly by Mr. McMahon. Not included in the table above are 70,645 shares issuable upon the exercise of performance-based options held by Mr. McMahon that may vest in the future when the H&F Investor has satisfied additional specified internal rates of return with respect to its investment in the Company. |
(7)
| The address of each of Messrs. Ragatz, Eisen and Narang is c/o Hellman & Friedman LLC, 415 Mission Street, Suite 5700, San Francisco, California 94105. |
(8)
| Includes 39,592 shares directly held by the Alterman Revocable Trust, of which Mr. Alterman is a Trustee. |
(9)
Grocery Outlet 2022 Proxy Statement | Includes 75,682 shares directly held by the Thomas F. Herman Separate Property Trust, of which Mr. Herman is a Trustee. |
(10)
| Consists of 6,296,294 shares issuable upon the exercise of options exercisable within 60 days following April 13, 2020 and 8,661,193 shares held by our current executive officers and directors. | | |
Security Ownership of Certain Beneficial Owners and Management
(9)
Consists of (i) 49,225 shares held directly by Mr. Bracher, (ii) 1,410 shares directly held by Mr. Bracher’s spouse, and (iii) 265,311 shares issuable upon the exercise of options exercisable within 60 days following April 11, 2022. Not included in the table above are 1,200 shares held in a trust for Mr. Bracher’s children over which Mr. Bracher has no voting or investment power.
(10)
Consists of 21,865 shares held directly by Mr. Sheedy and 177,059 shares issuable upon the exercise of options exercisable within 60 days following April 11, 2022.
(11)
Consists of 131,255 shares held directly by Mr. Wilson and 70,906 shares issuable upon the exercise of options exercisable within 60 days following April 11, 2022.
(12)
Consists of 5,797 shares held directly by Ms. Burke and 74,643 shares issuable upon the exercise of options exercisable within 60 days following April 11, 2022.
(13)
Consists of shares of 2,821 shares held directly by Mr. Ragatz and 209,096 held by a limited partnership controlled by Mr. Ragatz.
(14)
Consists of (i) 2,712 shares directly held by Mr. Read; (ii) 2,307,975 shares directly held by The Nordlingen Trust dated 1/23/2012, as amended and restated, 9/17/2014 of which Mr. Read is a Trustee, (iii) 2,307,975 shares directly held by The Redmond Trust dated 10/19/2003, as amended and restated, 9/17/2014 of which Mr. Read is a Trustee, and (iv) 10,059 shares held as fully vested DSUs under our Director Deferral Program. The address of Mr. Read is c/o Katz, Baskies & Wolf PLLC, 3020 North Military Trail, Suite 100, Boca Raton, Florida 33431.
(15)
Consists of (i) 25,897 shares directly held by Mr. Alterman, (ii) 39,592 shares directly held by the Alterman Revocable Trust, of which Mr. Alterman is a Trustee and (iii) 2,821 shares held as fully vested DSUs under our Director Deferral Program.
(16)
Consists of 3,061 shares directly held by Ms. Haben and 2,821 shares held as fully vested DSUs under our Director Deferral Program.
(17)
Consists of 14,883 shares directly held by Mr. Herman, and 45,517 shares directly held by the Thomas F. Herman Separate Property Trust, of which Mr. Herman is a Trustee.
(18)
Consists of (i) 25,897 shares directly held by Mr. Matthews, (ii) 123,849 shares held by The Matthews Family 2020 Trust dtd 11/24/2020 of which Mr. Matthews is a Trustee; and (iii) 6,647 shares held as fully vested DSUs under our Director Deferral Program.
(19)
Includes (i) 2,730,611 shares issuable upon the exercise of options exercisable within 60 days following April 11, 2022; and (ii) 22,348 shares held as fully vested DSUs under our Director Deferral Program.
EQUITY COMPENSATION PLAN INFORMATION
The following table summarizes information about our equity compensation plans as of December 28, 2019.January 1, 2022. All outstanding awards relate to our common stock.
Equity Compensation Plans Approved by Stockholders(1) | | | 12,211,660(2) | | | $7.57(3) | | | 3,100,124(4) |
Equity Compensation Plans Not Approved by Stockholders | | | — | | | — | | | — |
Total | | | 12,211,660 | | | $7.57 | | | 3,100,124 |
| | PLAN CATEGORY | | | NUMBER OF SECURITIES
TO BE ISSUED UPON
EXERCISE OF
OUTSTANDING
EQUITY AWARDS
(A) | | | WEIGHTED-AVERAGE
EXERCISE PRICE OF
OUTSTANDING
EQUITY AWARDS
(B) | | | NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
EQUITY COMPENSATION
PLANS (EXCLUDING
SECURITIES REFLECTED IN
COLUMN (A))
(C) | |
| | Equity Compensation Plans Approved
by Stockholders(1) | | | | | 6,770,373(2) | | | | | $ | 9.90(3) | | | | | | 2,783,396(4) | | |
| | Equity Compensation Plans Not Approved by Stockholders | | | | | — | | | | | | — | | | | | | — | | |
| | Total | | | | | 6,770,373 | | | | | $ | 9.90 | | | | | | 2,783,396 | | |
(1)
(1)
| Consists of options and restricted stock unit awardsConsists of options, RSUs and PSUs issued under our 2019 Incentive Plan and our 2014 Stock Plan. For the PSUs included in this number, maximum achievement levels were used. The actual number of shares issuable will be determined at the time of vesting and could be less. Our 2014 Stock Plan terminated in June 2019 in connection with the adoption of the 2019 Incentive Plan. We cannot issue any further awards under the 2014 Stock Plan. |
(2)
| Includes (i) 6,243,667 shares issuable in connection with time-based options, (ii) 5,777,121 shares issuable in connection with performance-based options and (iii) 190,872 shares issuable in connection with unvested restricted stock units. |
(3)
| Represents weighted average exercise price of outstanding options. Excludes restricted stock units, which have no exercise price. |
(4)
| Represents 3,100,124 available and reserved for future issuance under the 2019 Incentive Plan. On the first day of each fiscal year beginning in fiscal 2020 and ending in fiscal 2029, the 2019 Incentive Plan provides for an annual automatic increase of the shares reserved for issuance in an amount equal to the positive difference between (i) 4% of the outstanding common stock on the last day of the immediately preceding fiscal year and (ii) the plan share reserve on the last day of the immediately preceding fiscal year, or a lesser number as determined by our board of directors. |
DELINQUENT SECTION 16(A) REPORTSSection 16(a) of the Exchange Act requires2019 Incentive Plan. We cannot issue any further awards under the Company’s officers2014 Stock Plan.
(2)
Includes (i) 3,135,141 shares issuable in connection with time-based options, (ii) 1,696,194 shares issuable in connection with performance-based options, (iii) 836,496 shares issuable in connection with unvested RSUs, (iv) 8,841 shares issuable in connection with DSUs under the Director Deferral Program and directors(iv) 546,851 shares issuable in connection with PSUs (assuming target performance level).
(3)
Represents weighted average exercise price of outstanding options. Excludes RSUs and persons who own more than 10%PSUs, which have no exercise price.
(4)
Represents all shares available for future issuance under the 2019 Incentive Plan as of a registered classJanuary 1, 2022. On the first day of each fiscal year beginning in fiscal 2020 and ending in fiscal 2029, the 2019 Incentive Plan provides for an annual automatic increase of the Company’s equity securities to file reports of ownership and changesshares reserved for issuance in ownership with the SEC. Such officers, directors and stockholders are required by SEC regulations to furnish the Company with copies of all such reports that they file. Based solely on a review of copies of reports filed with the SEC and of written representations by officers and directors, the Company believes that during fiscal 2019, all officers and directors subjectan amount equal to the reporting requirementspositive difference between (i) 4% of Section 16(a) filed the required reportsOutstanding Common Stock (as defined in the 2019 Incentive Plan) on the last day of the immediately preceding fiscal year and (ii) the plan share reserve on the last day of the immediately preceding fiscal year, or a timely basis, except that Messrs. Sheedy, Wilson, and York each filed a late Form 4lesser number as determined by our Board. Pursuant to this provision, on June 28,January 2, 2021, 764,118 new shares became available for issuance under the 2019 to report a common stock purchase on June 24, 2019.Incentive Plan.
41| | Page | | | 67 | | | Grocery Outlet 2022 Proxy Statement | | | | |
PROPOSAL 1ELECTION OF DIRECTORSPROPSALS FOR CONSIDERATION AT ANNUAL MEETINGProposal 1—Election of Class III Directors
At our Annual Meeting, stockholders will elect fourthree Class IIII directors to hold office until our 20222025 annual meeting of stockholders. NomineesThe following directors are being nominated for election to our Board: Carey F. Jaros, Eric J. Lindberg, Jr. and Norman S. Matthews. These nominees were recommended by our Nominating and Corporate Governance Committee and approved for nomination by our Board. Biographical information regarding the nominees and information regarding the qualifications of the nominees appears under the heading “Corporate Governance and Board Matters—Directors as of the Record Date”. Our Nominating and Corporate Governance Committee. Committee and Board believes that each director nominee has the experience, qualification, personal and professional integrity, and diversity of background and understands our business and industry. Our Board believes that each director nominee has demonstrated the willingness and the ability to dedicate adequate time and attention to fulfill the responsibilities required as a director. The Board has determined that Ms. Jaros and Mr. Matthews are independent directors.
The directors shallwill serve until their successors have been duly elected and qualified, or until any such director’s earlier resignation, retirement or removal.other termination of service. The individuals named as proxies in the form of proxy solicited by our Board intend to vote the represented shares for such nominees, unless otherwise instructed on the form of proxy. Proxies cannot be voted for a greater number of persons than the number of nominees named. If you sign and return the accompanying proxy, your shares will be voted “FOR” the election of the four nominees recommended by our board of directors, unless you mark the proxy in such a manner as to vote “WITHHOLD” with respect to one or more nominees. If any nominee for any reason is unable to serve or will not serve, the proxies may be voted for such substitute nominee as the proxy holder may determine. Alternatively, the Board may reduce the size of the Board and, therefore, the number of directors to be elected. If any substitute nominee is designated, we will file amended proxy materials that, as applicable, identifies any substitute nominee, discloses that such nominee has consented to being named in the revised proxy statement and to serve if elected, and includes certain biographical and other information about such nominee as required by the rules of the SEC. We are not aware of any nominee who will be unable to or will not serve as a director.
| | | The Board unanimously recommends that the stockholders vote “FOR” the election of each of the nominated Class III directors. | | |
The following directors are being nominated for election to our board of directors: Kenneth W. Alterman, John E. Bachman, Thomas F. Herman and Erik D. Ragatz. Please see the discussion under “Board of Directors” in this Proxy Statement for information concerning each of our nominees for director.| | Page | | | 68 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Required Vote
Our bylaws provide for a plurality voting standard for the election of directors. Under this voting standard, once a quorum has been established, the nominees who receive the largest number of votes are elected as directors up to the maximum number of directors to be elected at the meeting. This means that the four nominees receiving the highest number of votes at the Annual Meeting will be elected, even if these votes do not constitute a majority of the votes cast. Only votes cast “FOR” a nominee will be counted in the election of directors. Votes that are “WITHHELD” with respect to one or more nominees will result in those nominees receiving fewer votes but will not count as a vote against the nominees
The board of directors recommends a vote “FOR” the election of each of the nominated directors.
PROPOSAL 2Proposals for Consideration at Annual MeetingRATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMProposal 2—Ratification of Independent Registered Public Accounting Firm
The Audit and Risk Management Committee has appointedre-appointed Deloitte & Touche LLP to serve as our independent registered public accounting firm for Fiscal Year 2022. In making the fiscal year ending January 2,determination to re-appoint Deloitte & Touche for Fiscal Year 2022, the Audit and Risk Committee considered, among other factors:
•
The significant benefits from Deloitte’s extensive historical experience, including:
–
Higher quality audit work and accounting advice due to Deloitte’s institutional knowledge of and familiarity with our business and operations, accounting policies and financial systems, and internal control framework.
–
Operational efficiencies and a resulting lower fee structure because of Deloitte’s history and familiarity with our business.
•
The positive assessment of management and the Committee regarding Deloitte’s performance of services during Fiscal Year 2021.
•
Deloitte’s qualifications, independence, capabilities and expertise, evident through its audit planning and reports, industry knowledge, resources and staffing, objectivity and professional skepticism.
•
Results from the most recent PCAOB report on Deloitte and peer firms and continuing improvements made since the prior report.
•
The quality and frequency of Deloitte’s communications to and interactions with the Committee, including the Chair, at meetings and between meetings.
Deloitte & Touche has served as our independent registered public accounting firm since 2007. The fees paid to Deloitte & Touche during Fiscal Years 2020 and 2021 can be found under the heading “Other Audit and Risk Committee Matters” above.
The Company is not required by its bylaws or applicable law to submit the appointment of Deloitte & Touche LLP for stockholder approval. However, as a matter of good corporate governance, the board of directorsBoard has determined to submit the Audit and Risk Management Committee’s appointment of Deloitte & Touche LLP as our independent registered public accounting firm to stockholders for ratification. If stockholders do not ratify the appointment of Deloitte & Touche, LLP, the Audit and Risk Management Committee may consider such vote when determining whether to appoint our independent registered public accounting firm in the appointment offuture, or determine to appoint another independent registered public accounting firm. In addition, even if stockholders ratify the Audit and Risk Management Committee’s selection, the Audit and Risk Management Committee, in its discretion, may appoint a different independent registered public accounting firm if it believes that such a change would be in the best interests of the Company and our stockholders.
Required Vote
The affirmative vote of a majority of votes cast is required to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending January 2, 2021.
The board of directors recommends that you vote “FOR” ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending January 2, 2021.
A representative of Deloitte & Touche LLP is expected to attend the 2022 Annual Meeting. The representative will have the opportunity to make a statement if he or she desires to do so, and is expected to be available to answer appropriate questions.questions from stockholders.
| | | The Board unanimously recommends that the stockholders vote “FOR” Proposal 2 to ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for Fiscal Year 2022. | | |
Fee Information| | Page | | | 69 | | | Grocery Outlet 2022 Proxy Statement | | | | |
The following table sets forth fees in connection with services rendered by Deloitte & Touche LLP, the Company’s independent registered public accounting firm, for fiscal 2019 and fiscal 2018.
Audit Fees | | | $3,237,693 | | | $771,000 |
Audit-Related Fees | | | $90,000 | | | $0 |
Tax Fees | | | $214,693 | | | $181,936 |
All Other Fees | | | $3,790 | | | $1,895 |
Total Fees | | | $3,546,176 | | | $954,831 |
Audit Fees
Audit fees include fees for professional services rendered in connection with the annual audit of the Company’s financial statements and the review of the Company’s interim financial statements included in quarterly reports, as well as fees for services that generally only the independent registered public accounting firm can be reasonably expected to provide, including comfort letters, consents, and review of registration statements filed with the SEC.
Audit-Related Fees
Audit-related fees in 2019 include fees for professional services rendered in connection with planning for fiscal 2020 SOX compliance. There were no amounts billed for audit-related fees during fiscal 2018.
Tax Fees
Tax fees include fees for professional services rendered for tax compliance and tax consultation.
All Other Fees
All other fees include fees for a technical research tool subscription service.
Audit Committee Pre-Approval Policies and ProceduresProposals for Consideration at Annual Meeting
Under our Audit and Risk Management Committee’s charter, the Audit and Risk Management Committee must pre-approve all audit and other permissible non-audit services proposedProposal 3—Advisory (Non-Binding) Vote to be performed byApprove the Company’s independent registered public accounting firm. The Committee may delegate authority to one or more independent members to grant pre-approvals of audit and permitted non-audit services; provided that any such preapprovals shall be presented to the full Committee at its next scheduled meeting. The following shall be “prohibited non-audit services”: (i) bookkeeping or other services related to the accounting records or financial statements of the Company; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, providing fairness opinions or preparing contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service that the PCAOB prohibits through regulation. Notwithstanding the foregoing, pre-approval is not necessary for minor non-audit services if: (i) the aggregate amount of all such non-audit services provided to the Company constitutes not more than five percent of the total amount of revenues paid by the Company to its registered public accounting firm during the fiscal year in which the non-audit servicesNamed Executive Officer Compensation
We are provided; (ii) such services were not recognized by the Company at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee who are members of the board of directors to whom authority to grant such approvals has been delegated by the Committee.
All of the services provided by Deloitte & Touche described above were approved by our Audit and Risk Management Committee. The Audit and Risk Management Committee approved a pre-approval policy for services provided by the independent registered public accounting firm. Under the policy, our Audit and Risk Management Committee has pre-approved the provision by the independent registered public accounting firm of certain services that fall within specified categories. Any services exceeding pre-approved cost levels or budgeted amounts, or any services that fall outside of the general pre-approved categories, require specific pre-approval by the Audit and Risk Management Committee.
TABLE OF CONTENTS
PROPOSAL 3ADVISORY (NON-BINDING) VOTE TO APPROVETHE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATIONThe Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) enablesasking our stockholders to indicate their support for our Named Executive Officers’ compensation as described in this Proxy Statement as required by Section 14A of the Exchange Act. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to approve, on an advisory (non-binding) basis,address any specific item of compensation, but rather the overall compensation of our Named Executive Officers as disclosedand the philosophy, policies and practices described in this Proxy Statement in accordance with the SEC’s rules.Statement.
As described in detail under the heading “Compensation Discussion and Analysis,” our executive compensation programs are designed to attract, develop, motivate, and retain our Named Executive Officers, who are critical to our success. Under these programs, our Named Executive Officers are rewarded for the achievement of specific annual, long-term and strategic goals, corporate goals, and the realization of increased stockholder value. Please read the “Compensation Discussion and Analysis” for additional details about our executive compensation programs, including information about the fiscal 2019Fiscal Year 2021 compensation of our Named Executive Officers.
We are asking our stockholders to indicate their support for our Named Executive Officers’ compensation as described in this Proxy Statement. This proposal, commonly known as a “say-on-pay” proposal, gives our stockholders the opportunity to express their views on our Named Executive Officers’ compensation. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our Named Executive Officers and the philosophy, policies and practices described in this Proxy Statement.
In accordance with the requirements of Section 14A of the Exchange Act (which was added by the Dodd-Frank Act) and the related rules of the SEC, our board of directors will requestOur Board requests your advisory vote on the following resolution at the 2022 Annual Meeting:
RESOLVED, that the compensation paid to the Named Executive Officers, as disclosed in this Proxy Statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved.
This “say-on-pay” vote is advisory, and therefore not binding on the Company, the Compensation Committee or our board of directors.Board. Our board of directorsBoard and our Compensation Committee value the opinions of our stockholders and to the extent there is any significant vote against the Named Executive Officer compensation as disclosed in this Proxy Statement, we will consider our stockholders’ concerns and the Compensation Committee will evaluate whether any actions are necessary to address those concerns.
| | | The Board unanimously recommends that the stockholders vote “FOR” Proposal 3 to approve the compensation of our Named Executive Officers, as disclosed in this Proxy Statement pursuant to the rules of the SEC. | | |
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Proposals for Consideration at Annual Meeting
Proposal 4—Approval of Amendments of our Certificate of Incorporation to (i) Eliminate Applicable Supermajority Voting Requirements and (ii) Make Certain Changes to Remove Obsolete Language
GENERAL DESCRIPTION
Upon the unanimous recommendation of the Nominating and Corporate Governance Committee, our Board unanimously approved, and recommends that the Company’s stockholders approve, amendments of certain provisions to our current Amended and Restated Certificate of Incorporation to (i) remove the requirement that certain amendments to the Company’s Certificate of Incorporation and Bylaws require the approval of at least 66 2/3% in voting power of all the then outstanding shares of voting stock of the Company entitled to vote, as described below; and (ii) make additional changes to remove obsolete language relating to a former stockholder (such changes, together, the “Supermajority Voting Removal Amendment”).
SUMMARY OF PROPOSAL
The following is a summary of the Supermajority Voting Removal Amendment, and is qualified in its entirety by reference to the full text of the Supermajority Voting Removal Amendment as set forth in Appendix A (with additions shown as underlined and deletions shown as struck through).
Currently, Article V of the Certificate of Incorporation requires that at any time affiliates of H&F beneficially own, in the aggregate, less than 40% in voting power of our stock, amendments to the following provisions be approved by 66 2/3% in voting power of all the then outstanding shares of voting stock of the Company entitled to vote:
•
matters regarding amendments to the Certificate of Incorporation and Bylaws (Article V)
•
matters related to the Board, including the classification of the Board, authority to fix the total number of directors and removal of directors (Article VI)
•
the limitation of director liability (Article VII)
•
matters regarding stockholder action by written consent, and at special and annual meetings of stockholders (Article VIII)
•
provisions related to competition and corporate opportunities for certain Identified Persons (as defined in the Certificate of Incorporation) (Article IX)
•
the application of Section 203 of the Delaware General Corporation Law and Business Opportunities (as defined in the Certificate of Incorporation) (Article X)
Additionally, Article VI.C. requires that at any time affiliates of H&F beneficially own, in the aggregate, less than 40% in voting power of our stock, directors may only be removed for cause and only by the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote.
We believe that H&F no longer owns any shares of our stock.
The Supermajority Voting Removal Amendment would replace the supermajority voting provisions described above in the Certificate of Incorporation with a voting standard based on the majority of the outstanding shares entitled to vote thereon.
In addition, the Supermajority Voting Removal Amendment would remove various references and provisions related to H&F, including provisions that applied when affiliates of H&F beneficially owned 40% or more in voting power of our stock.
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Proposals for Consideration at Annual Meeting
REASONS FOR THE PROPOSAL
In deciding to approve the Supermajority Voting Removal Amendment and to recommend that the stockholders vote to adopt the Supermajority Voting Removal Amendment, our Board, upon the recommendation of the Nominating and Corporate Governance Committee, considered the advantages and disadvantages of a supermajority voting requirement in respect of the aforementioned provisions. Our current supermajority voting requirements have been in place since our IPO, at which time we were a controlled company due to H&F’s ownership. The supermajority voting protections are common among new public companies as well as controlled companies, as these requirements can benefit stockholders by promoting corporate governance stability for a new public company and reducing the Company’s vulnerability to coercive takeover tactics and special interest groups by requiring broad stockholder consensus to make certain fundamental changes.
We have since transitioned to a non-controlled, widely held public company and our Board has conducted a review of corporate governance matters to consider practices that are aligned with our current ownership. While the Board continues to believe that supermajority protections provide important benefits, the Board recognizes that supermajority voting requirements may have the effect of reducing the accountability of directors to stockholders and a lower voting standard provides stockholders with a greater opportunity to participate in fundamental corporate governance decisions. The Board also considered that eliminating these supermajority voting requirements is consistent with generally held views of evolving corporate governance practice for non-controlled companies and better aligns with the perspectives of many of our stockholders as expressed to us in recent stockholder outreach.
Therefore, the Board has adopted resolutions to approve the Supermajority Voting Removal Amendment, to declare the Supermajority Voting Removal Amendment advisable and in the best interests of the Company and its stockholders and to submit the Supermajority Voting Removal Amendment to our stockholders for consideration.
REQUIRED VOTE AND EFFECTIVENESS
The affirmative vote of at least 66 2/3% of the voting power of all of the shares of our common stock outstanding as of the Record Date is required to adopt the Supermajority Voting Removal Amendment. If our stockholders adopt the Supermajority Voting Removal Amendment, the Supermajority Voting Removal Amendment will become effective upon the filing of a certificate reflecting such amendment to our current Certificate of Incorporation with the Delaware Secretary of State. We intend to make that filing as soon as practicable if the Supermajority Voting Removal Amendment is adopted at the 2022 Annual Meeting.
However, even if our stockholders adopt the Supermajority Voting Removal Amendment, the Board may abandon the Supermajority Voting Removal Amendment without further stockholder action prior to the effectiveness of the filing of a certificate reflecting such amendment with the Delaware Secretary of State and, if abandoned, the Supermajority Voting Removal Amendment will not become effective. If the Board abandons the Supermajority Voting Removal Amendment, we will publicly disclose that fact and the reason for its determination. If the Supermajority Voting Removal Amendment is not approved by our stockholders, all of the supermajority provisions set forth in our current Certificate of Incorporation will remain in effect and all references to H&F will remain unchanged.
We are asking our stockholders to vote on separate proposals with respect to certain governance provisions in the Certificate of Incorporation, which are separately being presented in accordance with SEC guidance to give stockholders the opportunity to present their separate views on important corporate governance provisions. This Proposal No. 4 is separate from, and is not conditioned on, the approval of Proposal No. 5 (Approval of Amendment to Certificate of Incorporation to declassify the Board of Directors). Your vote on Proposal No. 4 does not affect your vote on Proposal No. 5. You can vote FOR, AGAINST, or ABSTAIN from voting on either of these proposals. For reference, Appendix C sets forth the Restated Certificate of Incorporation of the Company as it will appear if both the Supermajority Voting Removal Amendment and the Declassification Amendment (as defined below) are adopted by our stockholders and become effective.
| | | The Board unanimously recommends that the stockholders vote “FOR” Proposal 4 to approve the Supermajority Voting Removal Amendment. | | |
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Proposals for Consideration at Annual Meeting
Proposal 5—Approval of Amendment to our Certificate of Incorporation to Declassify our Board of Directors by 2026
GENERAL DESCRIPTION
Upon the unanimous recommendation of the Nominating and Corporate Governance Committee, our Board unanimously approved, and recommends that the Company’s stockholders approve, amendments of certain provisions to our current Amended and Restated Certificate of Incorporation to fully declassify the Board by the 2026 annual meeting of stockholders (the “Declassification Amendment”).
SUMMARY OF PROPOSAL
The following is a summary of the Declassification Amendment, and is qualified in its entirety by reference to the full text of the Declassification Amendment as set forth in Appendix B (with additions shown as underlined and deletions shown as struck through).
Currently, our Certificate of Incorporation divides the Board into three classes (Class I, Class II and Class III), with members of each class serving for staggered three-year terms. We are seeking stockholder approval to adopt the Declassification Amendment to fully declassify the Board, and provide for the annual election of directors, by our 2026 annual meeting of stockholders. The Board has approved the Declassification Amendment and declared it to be advisable and in the best interests of the Company and its stockholders, and recommends that the stockholders adopt the Declassification Amendment. The Declassification Amendment does not shorten the term of any director currently in office; however, the term of all classes of directors would terminate at our 2026 annual meeting of stockholders, notwithstanding that any such director may have previously been elected for a term extending beyond the 2026 annual meeting.
In addition, because our Board is currently classified, our directors can be removed only for cause, whereas Delaware law provides that directors serving on boards of directors that are not classified may be removed with or without cause. The Amended Certificate would permit stockholders to remove directors with or without cause following our 2026 annual meeting of stockholders. Directors with a term expiring on or before the 2026 annual meeting would continue to be removable only for cause.
REASONS FOR THE PROPOSAL
Our Board is committed to good corporate governance that aligns with our business and strategy and the interests of the Company and its stockholders. Following our IPO, we have transitioned to a non-controlled, widely held public company and our Board has conducted a review of corporate governance matters to consider practices that are aligned with our current ownership, including our classified board structure. In deciding to approve the Declassification Amendment and to recommend that the stockholders vote to adopt the Declassification Amendment, our Board, upon the recommendation of the Nominating and Corporate Governance Committee, considered the advantages and disadvantages of maintaining a classified board structure. A classified board of directors recommendscan benefit stockholders by: promoting continuity and stability of the Board; encouraging directors to take a long-term perspective; reducing the Company’s vulnerability to coercive takeover tactics and special interest groups; and enhancing the independence of non-employee directors by providing them with a longer term of office.
While the Board continues to believe that a classified board provides are important benefits, the Board also has considered that a classified board structure may have the effect of reducing the accountability of directors to stockholders, and recognizes the benefit of providing stockholders an annual opportunity to express their satisfaction or dissatisfaction with the actions of each director. Furthermore, the Board recognizes that stockholders of public companies are generally supportive of non-controlled public companies shifting from classified boards to the annual election of directors and better aligns with the perspectives of many of our stockholders as expressed to us in recent stockholder outreach.
Therefore, the Board has adopted resolutions to approve the Declassification Amendment, to declare the Declassification Amendment advisable and in the best interests of the Company and its stockholders, and to submit the Declassification Amendment to our stockholders for consideration.
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Proposals for Consideration at Annual Meeting
The Board believes that declassifying the Board in 2026 rather than immediately is appropriate given our IPO was in June 2019, we became a non-controlled company in October 2019 and we continue to evolve our business and governance as a new public company. Additionally, between November 2019 and January 2021 our Board appointed five new Board members, while two directors resigned from the Board during such period. Considering all of these factors and the Board’s confidence in the Company’s long-term strategic plans, the Board believes that the appropriate time to have a fully declassified Board would be in 2026 to provide the Company with time to focus on a successful transition and successful execution of its strategic plan with stable Board leadership.
REQUIRED VOTE AND EFFECTIVENESS
The affirmative vote “FOR”of at least 66 2/3% of the voting power of all of the shares of our common stock outstanding as of the Record Date is required to adopt the Declassification Amendment. If our stockholders adopt the Declassification Amendment, the Declassification Amendment will become effective upon the filing of a certificate reflecting such amendment to our current Certificate of Incorporation with the Delaware Secretary of State. We intend to make that filing as soon as practicable if the Declassification Amendment is adopted at the 2022 Annual Meeting.
However, even if our stockholders adopt the Declassification Amendment, the Board may abandon the Declassification Amendment without further stockholder action prior to the effectiveness of the filing of a certificate reflecting such amendment with the Delaware Secretary of State and, if abandoned, the Declassification Amendment will not become effective. If the Board abandons the Declassification Amendment, we will publicly disclose that fact and the reason for its determination. If the Declassification Amendment is not approved by our stockholders, our Board will remain classified as provided for in our current Certificate of Incorporation.
We are asking our stockholders to vote on separate proposals with respect to certain governance provisions in the Certificate of Incorporation, which are separately being presented in accordance with SEC guidance to give stockholders the opportunity to present their separate views on important corporate governance provisions. This Proposal No. 5 is separate from, and is not conditioned on, the approval of Proposal No. 4 (Approval of Amendments of our Certificate of Incorporation to (i) Eliminate Applicable Supermajority Voting Requirements and (ii) Make Certain Changes to Remove Obsolete Language). Your vote on Proposal No. 4 does not affect your vote on Proposal No. 5. You can vote FOR, AGAINST, or ABSTAIN from voting on either of these proposals. For reference, Appendix C sets forth the compensationRestated Certificate of Incorporation of the Named Executive OfficersCompany as disclosed in this Proxy Statement pursuant to Item 402 of Regulation S-K underit will appear if both the Securities Exchange Act of 1934, includingSupermajority Voting Removal Amendment and the Compensation DiscussionDeclassification Amendment are adopted by our stockholders and Analysis, the compensation tables and narrative discussion that accompanies the compensation tables.become effective.
| | | The Board unanimously recommends that the stockholders vote “FOR” Proposal 5 to approve the Declassification Amendment. | | |
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ADDITIONAL INFORMATION
PROPOSAL 4ADVISORY (NON-BINDING) VOTE ONFrequently Asked Questions About the Proxy Materials and the Annual MeetingWHEN AND WHERE WILL THE FREQUENCY OF
FUTURE ADVISORY VOTES TO APPROVE EXECUTIVE COMPENSATIONMEETING TAKE PLACE?
As discussed in Proposal 3, the board of directors values the input of stockholders regarding the Company’s executive compensation practices. As contemplated by the Dodd-Frank Act, stockholders are also invited to express their views on how frequently advisory votes on executive compensation, such as Proposal 3,The 2022 Annual Meeting will occur. Stockholders can advise the board of directors on whether such votes should occur every year, every two years, or every three years or may abstain from voting.
After careful consideration, the board of directors has determined that holding an advisory vote on executive compensation every year is the most appropriate policy for the Company at this time. Our board recommends that this vote be held every year because it believeson Monday, June 6, 2022 at 11:00 a.m. Pacific Daylight Time. The 2022 Annual Meeting will again be a virtual meeting of stockholders. You will be able to attend the 2022 Annual Meeting from any location with Internet connectivity and submit your questions during the meeting via live webcast by visiting www.virtualshareholdermeeting.com/GO2022. To participate in the meeting, you must have the sixteen-digit number that it allowsis shown on your Notice of Internet Availability of Proxy Materials or on your proxy card or voting instruction form (if you elected to receive proxy materials by mail). Online access to the 2022 Annual Meeting will begin at 10:45 a.m. Pacific Daylight Time on June 6, 2022. We encourage our stockholders to provide usaccess the meeting prior to the start time.
HOW DO STOCKHOLDERS PARTICIPATE IN THE VIRTUAL MEETING?
To participate in the meeting, you must have the 16-digit number that is shown on your Notice of Internet Availability of Proxy Materials or on your proxy card or voting instruction form if you elected to receive proxy materials by mail. You may access the 2022 Annual Meeting by visiting www.virtualshareholdermeeting.com/GO2021. We will have technicians ready to assist you with direct input on our compensation philosophy, policies and practices on an annual basis.
This advisory voteany technical difficulties you may have accessing the virtual meeting or submitting questions. If you encounter any difficulties accessing the virtual meeting during the check-in or meeting time, please call the technical support number that will be posted on the frequencyvirtual meeting login page.
If you are a stockholder of future advisory votes on executive compensationrecord, appointing a proxy in response to this solicitation will not affect your right to attend the 2022 Annual Meeting and to vote during the 2022 Annual Meeting. Please note that if you hold your common stock in “street name” (that is, non-binding onthrough a broker, bank or other intermediary), you will receive instructions from your broker, bank or other nominee that you must follow to have your shares of common stock voted.
This virtual meeting will provide the board of directors.same rights and advantages that would be provided by a physical meeting. Stockholders will be able to specifypresent questions online during the meeting, providing our stockholders with the opportunity for meaningful engagement with the Company. We will spend up to 15 minutes answering stockholder questions that comply with the meeting rules of procedure. The rules of procedure will be posted on the virtual meeting web portal. If we receive substantially similar questions, we will group such questions together and provide a single response to avoid repetition.
WHY DID I RECEIVE ONLY A NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS?
As permitted by the SEC, the Company is furnishing to stockholders its notice of the 2022 Annual Meeting (the “Notice”), this Proxy Statement and the 2021 Annual Report primarily over the Internet. On or about April , 2022, we will mail to each of our stockholders of record (other than those who previously requested electronic delivery or previously elected to receive delivery of a paper copy of the proxy materials) a Notice of Internet Availability of Proxy Materials (the “Notice of Internet Availability”) containing instructions on how to access and review the proxy materials via the Internet and how to submit a proxy electronically using the Internet. The Notice of Internet Availability also contains instructions on how to receive, free of charge, paper copies of the proxy materials. If you received the Notice of Internet Availability, you will not receive a paper copy of the proxy materials unless you request one.
We believe the delivery options that we have chosen will allow us to provide our stockholders with the proxy materials they need, while minimizing the environmental impact and the cost of printing and mailing paper copies.
WHAT IS THE PURPOSE OF THIS MEETING AND WHAT ARE THE VOTING RECOMMENDATIONS OF THE BOARD OF DIRECTORS?
We are providing these proxy materials in connection with the solicitation by our Board of proxies to be voted at the 2022 Annual Meeting and any adjournment or postponement of the meeting.
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At the 2022 Annual Meeting, you will be asked to vote on the following matters and the Board recommends you vote your shares as follows:
| | PROPOSAL | | | VOTING ALTERNATIVES | | | BOARD
RECOMMENDATION | |
| | 1
Election of Class III directors to hold office until the 2025 annual meeting of stockholders and until their respective successors have been duly elected and qualified, or until such director’s earlier resignation, retirement or other termination of service | | | FOR the election of all Class III director nominees named herein WITHHOLD authority to vote for all such Class III director nominees FOR the election of all such Class III director nominees other than for whom authority to vote is specifically withheld | | | FOR each director nominee | |
| | 2
Ratification of appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2022 | | | FOR or AGAINST the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for fiscal 2022 ABSTAIN from voting on the matter | | | FOR | |
| | 3
Advisory (non-binding) vote to approve our Named Executive Officer compensation | | | FOR or AGAINST the advisory vote to approve our Named Executive Officer compensation ABSTAIN from voting on the matter | | | FOR | |
| | 4
Amendments to our Amended and Restated Certificate of Incorporation to (i) eliminate applicable supermajority voting requirements; and (ii) make certain other changes to remove obsolete language | | | FOR or AGAINST the amendments to our Amended and Restated Certificate of Incorporation ABSTAIN from voting on the matter | | | FOR | |
| | 5
Amendment to our Amended and Restated Certificate of Incorporation to declassify our Board of Directors | | | FOR or AGAINST the amendment to our Amended and Restated Certificate of Incorporation to declassify our Board of Directors by 2026 ABSTAIN from voting on the matter | | | FOR | |
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WHAT VOTE IS REQUIRED TO APPROVE EACH PROPOSAL AT THE ANNUAL MEETING?
| | | | | | | | VOTE IMPACT | |
| | PROPOSAL
NO. | | | VOTE
REQUIRED | | | FOR | | | WITHHOLD /
AGAINST | | | ABSTAIN | | | BROKER
NON-VOTES | |
| | Proposal No. 1 | | | Plurality of Votes Cast for each Director Nominee | | | For the director nominee(s) | | | Against the director nominee(s) | | | — | | | Not a vote cast | |
| | Proposal No. 2 | | | Majority of Shares Present or Represented and Entitled to Vote | | | For the proposal | | | Against the proposal | | | Against the
proposal | | | — | |
| | Proposal No. 3 | | | Majority of Shares Present or Represented and Entitled to Vote | | | For the proposal | | | Against the proposal | | | Against the
proposal | | | Not entitled to vote | |
| | Proposal No. 4 | | | 66 2/3 of Outstanding Shares | | | For the proposal | | | Against the proposal | | | Against the proposal | | | Against the proposal | |
| | Proposal No. 5 | | | 66 2/3 of Outstanding Shares | | | For the proposal | | | Against the proposal | | | Against the proposal | | | Against the proposal | |
With respect to Proposal No. 1, only votes cast “FOR” a nominee will be counted in the election of directors. While votes cast to “WITHHOLD” with respect to one or more nominees will result in those nominees receiving fewer votes, the individuals who receive the largest number of four choicesvotes are elected as directors up to the maximum number of directors to be elected at the meeting. This means that the three nominees receiving the highest number of votes at the 2022 Annual Meeting will be elected, even if these votes do not constitute a majority of the votes cast. Proxies may not be voted for more than three directors and stockholders may not cumulate votes in the election of directors.
We maintain a director resignation policy which provides for the contingent resignation of a director who receives more “withheld” votes than “for” votes at an uncontested director election, as well as the process of the Nominating and Corporate Governance Committee and the Board to review such resignation offer and publicly disclose the Board’s decision on whether to accept such offer. Beginning with our 2023 annual meeting, our directors will be elected to the Board using a majority voting standard as set forth in our Bylaws.
ARE ALL OF THE COMPANY’S DIRECTORS STANDING FOR ELECTION TO THE BOARD OF DIRECTORS AT THE ANNUAL MEETING?
No, only our Class III directors are standing for re-election at this proposaltime. Our Class I directors will stand for election in 2023 and our Class II directors will stand for election in 2024. If Proposal 5 is approved, beginning with the annual meeting of stockholders in 2026, each director will be elected for one-year terms.
WHO IS ENTITLED TO VOTE AT THE ANNUAL MEETING?
If at the close of business on the record date, April 11, 2022, you were a stockholder of record or held shares through a bank, broker or other intermediary, you may vote your shares on the matters presented at the 2022 Annual Meeting. You have one vote for each share of our common stock that you owned at the close of business on the record date. As of that date, there were 96,338,755 shares of common stock outstanding entitled to vote. There is no other class of voting securities outstanding.
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WHAT IS THE DIFFERENCE BETWEEN HOLDING SHARES AS A STOCKHOLDER OF RECORD AND HOLDING SHARES AS A BENEFICIAL OWNER?
Key distinctions between shares held of record and those owned beneficially are summarized below.
Stockholder of Record
If your shares are registered directly in your name with our transfer agent, American Stock Transfer & Trust Company, LLC, you are considered to be the stockholder of record with respect to those shares, and we have sent the Notice of Internet Availability directly to you. As a stockholder of record, you have the right to grant your voting proxy directly to us or to vote during the live webcast of the 2022 Annual Meeting. However, even if you plan to attend the 2022 Annual Meeting, we recommend that you vote your shares in advance, so that your vote will be counted if you later decide not to attend the 2022 Annual Meeting.
Beneficial Owner Stockholders
If you hold your shares through a bank, broker or other intermediary, you are considered to be the beneficial owner of shares held in “street name,” and the Notice of Internet Availability has been forwarded to you by your bank, broker, or intermediary (which is considered to be the stockholder of record with respect to those shares). Most of our stockholders are beneficial owner stockholders. As a beneficial owner, you have the right to direct your bank, broker, or intermediary on how to vote. Your bank, broker, or intermediary has sent you a voting instruction card for you to use in directing the bank, broker, or intermediary regarding how to vote your shares. The availability of online voting during the meeting for beneficial stockholders may depend on the voting procedures of the organization that holds your shares. Please instruct your broker, bank, or other nominee how to vote your shares using the voting instruction form you received from them. Even if you plan to attend the 2022 Annual Meeting, we recommend that you vote your shares in advance, so that your vote will be counted if you later decide not to attend the 2022 Annual Meeting.
WHAT OPTIONS ARE AVAILABLE TO ME TO VOTE MY SHARES?
Whether you hold shares directly as the stockholder of record or indirectly through a bank, broker, or other intermediary, your shares may be voted by following any of the voting options available to you below:
You may vote via the Internet.
•
You can submit your proxy or voting instructions over the Internet by following the instructions provided in the Notice of Internet Availability or, if you received a printed set of the proxy materials by mail, on the proxy card: one year, two years, three yearscard or abstain. voting instruction form.
You may vote via the telephone.
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If you are a stockholder of record, you can submit your proxy by calling the telephone number specified on the paper copy of the proxy card you received if you received a printed set of the proxy materials. You must have the control number that appears on your proxy card available when submitting your proxy over the telephone.
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Most beneficial owner stockholders (also referred to as holding shares in “street name”) may submit voting instructions by calling the number specified on the paper copy of the voting instruction form provided by their bank, broker, or other intermediary. Those stockholders should check the voting instruction form for telephone voting instructions and availability.
You may vote by mail.
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If you received a printed set of the proxy materials, you can submit your proxy or voting instructions by completing and signing the separate proxy card or voting instruction form you received and mailing it in the accompanying prepaid and addressed envelope.
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You may vote during the meeting.
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Stockholders of record may vote while attending the 2022 Annual Meeting via live webcast while the polls remain open by visiting www.virtualshareholdermeeting.com/GO2022. You will need your 16-digit number found in the Notice of Internet Availability or your proxy card. If you are the beneficial owner of shares holding your shares through a bank, broker, or other intermediary, you should receive separate instructions from the holder of record of your common stock describing how you can vote that stock.
Even if you plan to attend the 2022 Annual Meeting, we recommend that you submit your proxy or voting instructions in advance to authorize the voting of your shares at the 2022 Annual Meeting. This will ensure that your vote will be counted if you later are unable to attend.
WHAT IF I DON’T VOTE FOR SOME OF THE ITEMS LISTED ON MY PROXY CARD OR VOTING INSTRUCTION CARD?
If you properly execute and return your proxy card but do not mark selections, your shares will be voted in accordance with the recommendations of our Board. If you indicate a choice with respect to any matter to be acted upon on your proxy card, your shares will be voted in accordance with your instructions.
If you are a beneficial owner and hold your shares in street name through a bank, broker, or other intermediary and do not give voting instructions to approvethe bank, broker, or disapproveintermediary, the boardbank, broker, or other intermediary, as applicable, will determine if it has the discretionary authority to vote on the particular matter. Under applicable rules, brokers have the discretion to vote on routine matters (sometimes referred to as “broker discretionary voting”), such as the ratification of directors’ recommendation. Although non-binding, the boardselection of accounting firms, but do not have discretion to vote on non-routine matters, including the election of directors and the Compensation Committeeadvisory vote to approve executive officer compensation. Our Proposal 2 (ratification of the appointment of our independent registered public accounting firm for Fiscal Year 2022) is the only proposal in this Proxy Statement that is considered a routine matter. The other proposals are not considered routine matters, and without your instructions, your broker cannot vote your shares.
If you do not provide voting instructions to your broker, and your broker indicates on its proxy card that it does not have discretionary authority to vote on a particular proposal, your shares will carefully reviewbe considered to be “broker non-votes” with regard to that matter.
If you are a stockholder of record, then your shares will not be voted if you do not provide your proxy, unless you attend the live webcast and vote online during the 2022 Annual Meeting.
HOW IS A QUORUM DETERMINED?
The representation, at the 2022 Annual Meeting or by proxy, of holders entitled to cast at least a majority of the votes entitled to be cast at the 2022 Annual Meeting constitutes a quorum at the 2022 Annual Meeting. Shares represented by proxy or voting instructions are considered present and entitled to vote for purposes of establishing a quorum for the transaction of business at the 2022 Annual Meeting. If a quorum is not present by attendance at the 2022 Annual Meeting or represented by proxy, the stockholders present by attendance at the meeting or by proxy may adjourn the meeting, until a quorum is present. If a new record date is fixed for the adjourned meeting, we will provide notice of the adjourned meeting to each stockholder of record entitled to vote at the meeting.
CAN I CHANGE MY VOTE OR REVOKE MY PROXY?
Yes. Any stockholder of record has the power to change or revoke a previously submitted proxy at any time before it is voted at the 2022 Annual Meeting by:
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Submitting to our Corporate Secretary, before the voting results. Notwithstandingat the board2022 Annual Meeting, a written notice of directors’ recommendation andrevocation bearing a later date than the outcomeproxy;
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Timely delivery of a valid, later-dated proxy (only the last proxy submitted by a stockholder vote, the board of directors may in the future decide to conduct advisory votes on a moreby Internet, telephone or less frequent basis and may vary its practice based on factors such as discussions with stockholders and the adoption of material changes to compensation programs.mail will be counted); or
The board of directors recommends a vote for “EVERY YEAR” as the frequency with which stockholders are provided an advisory vote on executive compensation, as disclosed pursuant to Item 402 of Regulation S-K under the Securities Exchange Act of 1934, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.
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Attending the 2022 Annual Meeting and voting during the live webcast while the polls are open; however, attendance at the 2022 Annual Meeting will not by itself constitute a revocation of a proxy.
For shares held in street name, you may revoke any previous voting instructions by submitting new voting instructions to the bank, broker, or intermediary holding your shares by the deadline for voting specified in the voting instructions provided by your bank, broker, or intermediary.
ARE THERE OTHER MATTERS TO BE VOTED ON AT THE 2022 ANNUAL MEETING?
We do not know of any other matters that may come before the 2022 Annual Meeting other than Proposals 1, 2, 3, 4 and 5 included herein. If any other matters are properly presented at the 2022 Annual Meeting, the persons named as proxies in the enclosed proxy card intend to vote or otherwise act in accordance with their judgment on the matter.
IS A LIST OF STOCKHOLDERS AVAILABLE?
The names of stockholders of record entitled to vote at the 2022 Annual Meeting will be available for review by stockholders at the 2022 Annual Meeting on the virtual meeting web portal by logging in as a stockholder using your 16-digit number.
A list of these stockholders will be open for examination electronically by any stockholder for any purpose germane to the Annual Meeting for a period of 10 days prior to the 2022 Annual Meeting by contacting our Investor Relations department at 646-277-1214 and during the Annual Meeting at www.virtualshareholdermeeting.com/GO2022.
WHERE CAN I FIND THE VOTING RESULTS?
Preliminary voting results will be announced at the 2022 Annual Meeting, and final voting results will be reported in a Current Report on Form 8-K, which we will file with the SEC within four business days following the 2022 Annual Meeting.
WHO IS SOLICITING PROXIES, HOW ARE THEY BEING SOLICITED, AND WHO PAYS THE COST?
The solicitation of proxies is being made on behalf of our Board and we will bear the costs of the solicitation. This solicitation is being made by mail and through the Internet, but also may be made by telephone or in person. We will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for sending proxy materials to stockholders and obtaining their votes. We have retained the services of Morrow Sodali LLC, 333 Ludlow Street, Fifth Floor, South Tower, Stamford, CT 06902, to assist us in the solicitation of proxies for a fee of approximately $7,500 plus out of pocket expenses. No additional compensation will be paid to our directors, officers or other employees for such services.
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OTHER MATTERS
Our board of directorsBoard does not presently intend to bring any other business before the meeting, and, so far as is known to our board of directors,Board, no matters are to be brought before the meeting except as specified in the Notice of Annual Meeting. As to any business that may properly come before the meeting, however, it is intended that proxies, in the form enclosed, will be voted in respect thereof in accordance with the judgment of the persons voting such proxies.
ANNUAL REPORT TO STOCKHOLDERSAvailability of Fiscal Year 2021 Annual Report to StockholdersOur 20192021 Annual Report has been posted, and is available without charge, on our corporate website at https://investors.groceryoutlet.com/financial-information/sec-filings in the Company / Investor Relations / Financial Information section.www.proxyvote.com. For stockholders receiving a Notice of Internet Availability, such Notice will contain instructions on how to request a printed copy of our 20192021 Annual Report. For stockholders receiving a printed copy of this Proxy Statement, a copy of our 20192021 Annual Report has also been provided to you (including the financial statements and the financial statement schedules but excluding the exhibits thereto). In addition, we will provide, without charge, a copy of our 20192021 Annual Report (including the financial statements and the financial statement schedules but excluding the exhibits thereto) to any stockholder of record or beneficial owner of our common stock. Requests can be made by writing to Corporate Secretary, c/o Grocery Outlet Holding Corp., 5650 Hollis Street, Emeryville, CA 94608.
Stockholder Proposals and Director Nominations for the 2023 Annual Meeting of Stockholders
Stockholders wishing to include a proposal for stockholder consideration in our 2023 proxy statement or bring business before our annual meeting of stockholders in 2023 must send notice to our Corporate Secretary at our principal executive offices at 5650 Hollis Street, Emeryville, CA 94608 by registered, certified, or express mail and provide the required information and follow the other procedural requirements described below.
STOCKHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING OF STOCKHOLDERS
Stockholders who wish to present a proposal in accordance with SEC Rule 14a-8 for inclusion in our proxy materials to be distributed in connection with our 2023 annual meeting of stockholders must submit their proposals in accordance with that rule so that they are received by our Corporate Secretary at the address set forth above no later than the close of business on December 23, 2022. If the date of our 2023 annual meeting is more than 30 days before or after June 6, 2023, then the deadline to timely receive such material will be a reasonable time before we begin to print and send our proxy materials. Failure to deliver a proposal in accordance with this procedure may result in it not being deemed timely received. As the rules of the SEC make clear, simply submitting a timely proposal does not guarantee that it will be included in our proxy materials.
Our bylaws provide procedures by which a stockholder may bring business before any meeting of stockholders or nominate individuals for election to our Board at an annual meeting of stockholders. If a stockholder wishes to bring business to a meeting for consideration other than a matter brought pursuant to SEC Rule 14a-8 or to nominate one or more persons for election to our Board, the stockholder must deliver a written notice to our Corporate Secretary at the address written above and provide the information required by the provisions of our bylaws dealing with stockholder proposals or director nominations. The notice of such a proposal or director nomination must be delivered to (or mailed to and received at) the address set forth above no later than March 8, 2023 and no earlier than February 6, 2023, unless our 2023 annual meeting of stockholders is to be held more than 30 days before, or more than 70 days after, June 6, 2023, in which case the stockholder’s notice must be delivered not earlier than the close of business on the 120th day prior to the 2023 annual meeting and not later than the close of business on the later of the 90th day prior to the 2023 annual meeting or the 10th day after public announcement of the date of the 2023 annual meeting is first made by the Company. Public announcement of an adjournment or postponement of an annual meeting will not commence a new time period for the giving of stockholder notice. If the number of directors to be elected to the Board at an annual meeting is increased and there is no public announcement by the Company naming all of the nominees for director or specifying the size of the increased Board by February 26, 2023, then a stockholder’s notice will be considered timely, but only with respect to nominees for any new positions created by such increase, if it is received by the Corporate Secretary not later than the close of business on the tenth calendar day following the day on which such public announcement is first made by the Company. The requirements for such stockholder’s notice are set
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forth in our bylaws, which are posted in the Corporate Governance section of the Investor Relations page on our website at https://investors.groceryoutlet.com.
INCORPORATION BY REFERENCECandidates proposed by stockholders in accordance with the procedures set forth in the Company’s bylaws will be considered by the Nominating and Corporate Governance Committee under criteria similar to the evaluation of other candidates set forth above in “—Director Recruitment, Nomination and Appointment Process.” Candidates submitted this way may include an analysis of the candidate from our management. Any stockholder making a nomination in accordance with the foregoing process will be notified of the Nominating and Corporate Governance Committee’s decision.NoTo comply with the universal proxy rules (effective in 2023), 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 containedrequired by Rule 14a-19 under the Exchange Act no later than April 7, 2023.
Certain stockholders have director nomination rights pursuant to our Amended and Restated Stockholders Agreement. See “—Nomination Rights and Support Obligations under our Amended and Restated Stockholders Agreement” above for more information.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s officers and directors and persons who own more than 10% of a registered class of the Company’s equity securities to file reports of ownership and changes in ownership with the SEC. Based solely on or available through any website referenced in this Proxy Statement,a review of copies of reports filed with the SEC and of written representations by officers and directors, the Company believes that during Fiscal Year 2021, all officers and directors subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis, except that, due to administrative errors, (i) Mr. Herman filed one late Form 4 on to report one transaction; and (ii) Lindsay E. Gray, our corporate website or any other website that we may maintain shall be deemed included or incorporated by reference into this Proxy Statement.Vice President and Corporate Controller, filed one late Form 4 to report one transaction.
DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESSDelivery of Documents to Stockholders Sharing an AddressWe have adopted a procedure, approved by the SEC, called “householding.” Under this procedure, stockholders of record who have the same address and last name and did not receive a Notice of Internet Availability or otherwise receive their proxy materials electronically will receive only one copy of this Proxy Statement and the 20192021 Annual Report, unless we are notified that one or more of these stockholders wishes to continue receiving individual copies. This procedure will reduce our printing costs and postage fees.
If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of this Proxy Statement and the 20192021 Annual Report, or if you hold our stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, please contact our Corporate Secretary by mail, c/o Grocery Outlet Holding Corp., 5650 Hollis Street, Emeryville, CA 94608 or by phone at (510) 704-2859. If you participate in householding and wish to receive a separate copy of this Proxy Statement and the 20192021 Annual Report, or if you do not wish to continue to participate in householding and prefer to receive separate copies of these documents in the future, please contact our Corporate Secretary as indicated above.
If your shares are held in street name through a broker, bank or other intermediary, please contact your broker, bank or intermediary directly if you have questions, require additional copies of this Proxy Statement or the 20192021 Annual Report or wish to receive a single copy of such materials in the future for all beneficial owners of shares of the Company’s common stock sharing an address.
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Transfer Agent Information
American Stock Transfer & Trust Company, LLC., or AST, is the transfer agent for our common stock. AST can be reached at American Stock Transfer & Trust Company, LLC 6201 15th Ave, New York NY 11219, Attention: Shareholder Services, (800) 937-5449. You should contact AST if you are a registered stockholder and have a question about your account or if you would like to report a change in your name or address.
TABLE OF CONTENTS
ANNEX ARECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURESWe use non-GAAP financial measures withinCertain statements contained in this Proxy Statement. We provide below reconciliationsStatement constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Proxy Statement and the documents incorporated by reference herein other than statements of historical fact, including statements regarding the Company’s outlook, prospects, plans, business, results of operations, financial position, future financial performance and business strategy, may constitute forward-looking statements. Words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “outlook,” “plan,” “project,” “seek,” “will,” and similar expressions, are intended to their corresponding financial measure computed in accordance with GAAP. As described in our Annual Report, EBITDA, adjusted EBITDAidentify such forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and non-GAAP adjusted net income are key metrics used by our management and our board of directors to assess our financial performance. We use EBITDA, adjusted EBITDA and non-GAAP adjusted net income to supplement GAAP measures of performance to evaluate the effectiveness of our business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. In addition, we use EBITDA to supplement GAAP measures of performance to evaluate our performance in connection with compensation decisions. Management believes it is useful to investors and analysts to evaluate these non-GAAP measures on the same basis as management uses to evaluate our operating results. We believe that excluding items from operating income, net income and net income per diluted shareassumptions that may not be indicative of,cause actual results to differ materially from those expressed or are unrelated to, our core operating results,implied by any forward-looking statements we make, including those described under the headings “Risk Factors,” and that may vary in frequency or magnitude, enhances the comparability of our results and provides a better baseline for analyzing trends in our business. EBITDA, adjusted EBITDA and non-GAAP adjusted net income are non-GAAP measures and may not be comparable to similar measures reported by other companies. EBITDA, adjusted EBITDA and non-GAAP adjusted net income have limitations as analytical tools, and you should not consider them in isolation or as a substitute for analysis of our results as reported under GAAP. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Metrics and Non-GAAP Financial Measures—EBITDA, Adjusted EBITDA and Non-GAAP Adjusted Net Income”Operations” in our 2021 Annual Report or as described in other subsequent reports we file with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activities, performance or achievements. These forward-looking statements are made as of the date of this Proxy Statement or as of the date specified herein and we have based these forward-looking statements on our current expectations and projections about future events and trends. Except as required by law, we do not undertake any duty to update any of these forward-looking statements after the date of this Proxy Statement or to conform these statements to actual results or revised expectations.
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Appendix A
Supermajority Voting Removal Amendment
ARTICLE V
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
A.Notwithstanding anything contained in this Certificate of Incorporation to the contrary, at any time when H&F (as defined in Article VI(B) below) beneficially own, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, in addition to any vote required by applicable law, the following provisions in this Certificate of Incorporation may be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent therewith or herewith may be adopted, only by the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class: this Article V, Article VI, Article VII, Article VIII, Article IX and Article X. For the purposes of this Certificate of Incorporation, beneficial ownership of shares shall be determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
A. The Corporation reserves the right to amend, alter, or repeal any provisioncontained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation.
B.The Board of Directors is expressly authorized to make, alter, amend, change, add to, rescind or repeal, in whole or in part, the bylaws of the Corporation (as in effect from time to time, the “Bylaws”) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or this Certificate of Incorporation. Notwithstanding anything to the contrary contained in this Certificate of Incorporation or any provision of law that might otherwise permit a lesser vote of the stockholders, at any time when H&F beneficially owns, in the aggregate, less than 40% The affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, in addition to any vote of the holders of any class or series of capital stock of the Corporation required herein (including any certificate of designation relating to any series of Preferred Stock), by the Bylaws or by applicable law, the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class, shall be required in order for the stockholders of the Corporation to amend, alter, rescind, change, add or repeal, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith.
ARTICLE VI
BOARD OF DIRECTORS
A.Except as otherwise provided in this Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Except as otherwise provided for or fixed pursuant to the provisions of Article IV (including any certificate of designation with respect to any series of Preferred Stock) and this Article VI relating to the rights of the holders of any series of Preferred Stock to elect additional directors, the total number of directors shall be determined from time to time exclusively by resolution adopted by the Board of Directors; provided that, at any time H&F owns, in the aggregate, at least 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, the stockholders may also fix the number of directors by resolution adopted by the stockholders. The directors (other than those directors elected by the holders of any series of Preferred Stock, voting separately as a series or together with one or more information.other such series, as the case may be) shall be divided into three classes designated Class I, Class II and Class III. Each class shall consist, as nearly as possible, of one-third of the total number of such directors. Class I directors shall initially serve for a term expiring at the first annual meeting of stockholders following the date the Common Stock is first publicly traded (the “IPO Date”), Class II directors shall initially serve for a term expiring at the second annual meeting of stockholders following the IPO Date and Class III directors shall initially serve for a term expiring at the third annual meeting of stockholders following the IPO Date. Commencing with the first annual meeting following the IPO Date, the directors of the class to be elected at each annual meeting shall be elected for a three year term. If the number of such directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director.
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Any such director shall hold office until the annual meeting at which his or her term expires and until his or her successor shall be elected and qualified, or his or her earlier death, resignation, retirement, disqualification or removal from office. The Board of Directors is authorized to assign members of the Board of Directors already in office to their respective class.
B.Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Amended and Restated Stockholders Agreement, dated as of June 19, 2019, by and among the Corporation, certain affiliates of Hellman & Friedman LLC (together with its Affiliates (as defined below), subsidiaries, successors and assigns (other than the Corporation and its subsidiaries), “H&F”) and certainand the other parties named therein (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Stockholders Agreement”), any newly-created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring in the Board of Directors (whether by death, resignation, retirement, disqualification, removal or other cause) may be filled by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director or by the stockholders; provided, however, that, subject to the aforementioned rights granted to holders of one or more series of Preferred Stock or rights generated pursuant to the Stockholders Agreement, at any time when H&F beneficially owns, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, any newly-created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director (and not by stockholders). Any director elected to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal.
C.Any or all of the directors (other than the directors elected by the holders of any series of Preferred Stock of the Corporation, voting separately as a series or together with one or more other such series, as the case may be) may be removed at any time either with or without cause by the affirmative vote of a majority in voting power of all outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class; provided, however, that at any time when H&F beneficially owns, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, any such director, or all such directors may be removed only for cause and only by the affirmative vote of the holders of at least 66 2/3%a majority in voting power of all the then-outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class.
ARTICLE VIII
CONSENT OF STOCKHOLDERS IN LIEU OF MEETING, ANNUAL AND SPECIAL MEETINGS OF STOCKHOLDERS
A.At any time when H&F beneficially owns, in the aggregate, at least 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation’s registered office shall be made by hand, or by certified or registered mail, return receipt requested. At any time when H&F beneficially owns, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, anyAny action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders; provided, however, that any action required or permitted to be taken by the holders of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable certificate of designation relating to such series of Preferred Stock.
B.Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time only by or at the direction of the Board of Directors or the Chairman of the Board of Directors; provided, however, that at any time when H&F beneficially owns, in the aggregate, at least 40% in voting power of the stock of the Corporation entitled to vote generally in
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the election of directors, special meetings of the stockholders of the Corporation for any purpose or purposes shall also be called by or at the direction of the Board of Directors or the Chairman of the Board of Directors at the request of H&F.
ARTICLE IX
COMPETITION AND CORPORATE OPPORTUNITIES
A.In recognition and anticipation that (i) certain directors, principals, officers, employees and/or other representatives of H&F and its Affiliates (as defined below) may serve as directors, officers or agents of the Corporation, (ii) H&F and its Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, and (iii) members of the Board of Directors who are not employees of the Corporation (“Non-Employee Directors”) and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, the provisions of this Article IX are set forth to regulate and define the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities as they may involve any of H&F, the Non-Employee Directors or their respective Affiliates and the powers, rights, duties and liabilities of the Corporation and its directors, officers and stockholders in connection therewith.
B.None of (i) H&F or (ii) anythe Non-Employee Directors (including any Non-Employee Director who serves as an officer of the Corporation in both his or her director and officer capacities) or his or her Affiliates (the Persons (as defined below) identified in (i) and (ii) abovethis sentence being referred to, collectively, as “Identified Persons” and, individually, as an “Identified Person”) shall, to the fullest extent permitted by law, have any duty to refrain from directly or indirectly (1) engaging in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates now engages or proposes to engage or (2) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such activities. To the fullest extent permitted from time to time by the laws of the State of Delaware, the Corporation hereby renounces any interest or expectancy in, or right to be offered an opportunity to participate in, any business opportunity that may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates, except as provided in Section (C) of this Article IX. Subject to said Section (C) of this Article IX, in the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity that may be a corporate opportunity for itself, herself or himself, or any of its or his or her Affiliates, and the Corporation or any of its Affiliates, such Identified Person shall, to the fullest extent permitted by law, have no duty to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, director or officer of the Corporation solely by reason of the fact that such Identified Person pursues or acquires such corporate opportunity for itself, herself or himself, or offers or directs such corporate opportunity to another Person.
E.For purposes of this Article IX, (i) “Affiliate” shall mean (a) in respect of H&F, any Person that, directly or indirectly, is controlled by H&F, controls H&F or is under common control with H&F and shall include any principal, member, director, partner, stockholder, officer, employee or other representative of any of the foregoing (other than the Corporation and any entity that is controlled by the Corporation), (b) in respect of a Non-Employee Director, any Person that, directly or indirectly, is controlled by such Non-Employee Director (other than the Corporation and any entity that is controlled by the Corporation) and (cb) in respect of the Corporation, any Person that, directly or indirectly, is controlled by the Corporation; and (ii) “Person” shall mean any individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.
ARTICLE X
DGCL SECTION 203 AND BUSINESS COMBINATIONS
C.
For purposes of this Article X, references to:
1.
“affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.
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2.
“associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.
3.
Reserved.
4.
Reserved.
3.
“H&F Direct Transferee” means any person that acquires (other than in a registered public offering) directly from H&F or any of its successors or any “group”, or any member of any such group, of which such persons are a party under Rule 13d-5 of the Exchange Act beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.
4.
“H&F Indirect Transferee” means any person that acquires (other than in a registered public offering) directly from any H&F Direct Transferee or any other H&F Indirect Transferee beneficial ownership of 15% or more of the then outstanding voting stock of the Corporation.
5.
“business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:
(i)
any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (a) with the interested stockholder, or (b) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section (B) of this Article X is not applicable to the surviving entity;
(ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;
(iii)
any transaction that results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (a) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (b) pursuant to a merger under Section 251(g) of the DGCL; (c) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (d) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (e) any issuance or transfer of stock by the Corporation; provided, however, that in no case under items (c)-(e) of this subsection (iii) shall there be an increase in the interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);
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(iv)
any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation that has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary that is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or
(v)
any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.
6.
“control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of the Corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article X, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.
7.
“interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder; and the affiliates and associates of such person; but “interested stockholder” shall not include (a) H&F, any H&F Direct Transferee, any H&F Indirect Transferee or any of their respective affiliates or successors or any “group”, or any member of any such group, to which such persons are a party under Rule 13d-5 of the Exchange Act, or (b) any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation, provided that in the case of clause (b) such person shall be an interested stockholder if thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
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Appendix B
Declassification Amendment
ARTICLE VI
BOARD OF DIRECTORS
A.Except as otherwise provided in this Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Except as otherwise provided for or fixed pursuant to the provisions of Article IV (including any certificate of designation with respect to any series of Preferred Stock) and this Article VI relating to the rights of the holders of any series of Preferred Stock to elect additional directors, the total number of directors shall be determined from time to time exclusively by resolution adopted by the Board of Directors; provided that, at any time H&F owns, in the aggregate, at least 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, the stockholders may also fix the number of directors by resolution adopted by the stockholders.
B. The directors (other than those directors elected by the holders of any series of Preferred Stock, voting separately as a series or together with one or more other such series, as the case may be) shall be divided into three classes designated Class I, Class II and Class III. Each class shall continue to consist, as nearly as possible, of one-third of the total number of such directors. Class I directors shall initially serve for a term “GAAP”expiring at the first annual meeting of stockholders following the date the Common Stock is first publicly traded (the “IPO Date”), Class II directors shall initially serve for a term expiring at the second annual meeting of stockholders following the IPO Date and Class III directors shall initially serve for a term expiring at the third annual meeting of stockholders following the IPO Date. Commencing with the first annual meeting following the IPO Date,, and the directors of thein each such class to be elected at each annual meeting shall be elected for a three year termthree-year term; provided, however, that the term of all classes of directors shall terminate at the 2026 annual meeting of stockholders of the Corporation, notwithstanding that any such director may have previously been elected for a term extending beyond the 2026 annual meeting. Commencing with the 2026 annual meeting of stockholders of the Corporation, the Board shall cease to be divided into classes, and all directors shall be elected to hold office for a term of one year. Each director shall serve from the date of his or her election or appointment and until the next annual meeting at which the class of directors to which he or she belongs is elected (or, from and after the 2026 annual meeting of stockholders, the annual meeting following his or her election or appointment)and until his or her successor shall have been dulyelected and qualified, or until his or her earlier death, resignation, removal, disqualification or retirement. If the number of such directors is changed prior to the 2026 annual meeting of stockholders of the Corporation, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director. Any such director shall hold office until the annual meeting at which his or her term expires and until his or her successor shall be elected and qualified, or his or her earlier death, resignation, retirement, disqualification or removal from office. The Board of Directors is authorized to assign members of the Board of Directors already in office to their respective class.
BC.Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Amended and Restated Stockholders Agreement, dated as of June 19, 2019, by and among the Corporation, certain affiliates of Hellman & Friedman LLC (together with its Affiliates (as defined below), subsidiaries, successors and assigns (other than the Corporation and its subsidiaries), “H&F”) and certain other parties named therein (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Stockholders Agreement”), any newly-created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring in the Board of Directors (whether by death, resignation, retirement, disqualification, removal or other cause) may be filled by the affirmative vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director or by the stockholders; provided, however, that, subject to the aforementioned rights granted to holders of one or more series of Preferred Stock or rights generated pursuant to the Stockholders Agreement, at any time when H&F beneficially owns, in the aggregate, less than 40% in voting power of the stock of the Corporation entitled to vote generally in the election of directors, any newly-created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director (and not by stockholders). Any director elected to
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fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal.
CD.Any Commencing with the 2026 annual meeting of stockholders of the Corporation, any or all of the directors (other than the directors elected by the holders of any series of Preferred Stock of the Corporation, voting separately as a series or together with one or more other such series, as the case may be) may be removed at any time either with or without cause by the affirmative vote of a majority in voting power of all outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class; provided, however, that at any time when H&F beneficially owns, in the aggregate, less than 40% in voting power of the stock. Prior to the 2026 annual meeting of stockholders of the Corporation entitled to vote generally in the election of directors, any such director, any or all such directors may be removed only for cause and only by the affirmative vote of the holders of at least 66 2/3% in voting power of all the then-outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class.
DE.Elections of directors need not be by written ballot unless the Bylaws shall so provide.
EF.During any period when the holders of any series of Preferred Stock have the right to elect additional directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board of Directors in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate (in which case each such director thereupon shall cease to be qualified as, and shall cease to be, a director) and the total authorized number of directors of the Corporation shall automatically be reduced accordingly.
FG.As used in this Proxy StatementArticle VI only, the term “Affiliate” means generally accepted accounting principles ina Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person, and the United States.
The following tables provide a reconciliation from our GAAP net income to EBITDA and adjusted EBITDA, GAAP net income to non-GAAP adjusted net income, and our GAAP to non-GAAP earnings per share for the periods presented:
Net income | | | $15,419 | | | $15,868 |
Interest expense, net | | | 45,927 | | | 55,362 |
Income tax expense | | | 1,363 | | | 5,984 |
Depreciation and amortization expenses(a) | | | 50,143 | | | 47,057 |
EBITDA | | | 112,852 | | | 124,271 |
Share-based compensation expenses(b) | | | 31,439 | | | 10,409 |
Debt extinguishment and modification costs(c) | | | 5,634 | | | 5,253 |
Non-cash rent(d) | | | 10,582 | | | 7,903 |
Asset impairment and gain or loss on disposition(e) | | | 1,957 | | | 1,306 |
New store pre-opening expenses(f) | | | 1,509 | | | 1,555 |
Provision for accounts receivable reserves(g) | | | 2,575 | | | 749 |
Other(h) | | | 3,294 | | | 2,132 |
Adjusted EBITDA | | | $169,842 | | | $153,578 |
| | | | | | |
Net income | | | $15,419 | | | $15,868 |
Share-based compensation expenses(b) | | | 31,439 | | | 10,409 |
Debt extinguishment and modification costs(c) | | | 5,634 | | | 5,253 |
Non-cash rent(d) | | | 10,582 | | | 7,903 |
Asset impairment and gain or loss on disposition(e) | | | 1,957 | | | 1,306 |
New store pre-opening expenses(f) | | | 1,509 | | | 1,555 |
Provision for accounts receivable reserves(g) | | | 2,575 | | | 749 |
Other(h) | | | 3,294 | | | 2,132 |
Amortization of purchase accounting assets and deferred financing costs(j) | | | 11,917 | | | 16,744 |
Tax effect of total adjustments(j) | | | (19,363) | | | (12,611) |
Non-GAAP adjusted net income | | | $64,963 | | | $49,308 |
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GAAP earnings per share(k)
| | | | | | |
Basic | | | $0.20 | | | $0.24 |
Diluted | | | $0.19 | | | $0.23 |
Non-GAAP adjusted earnings per share(k)
| | | | | | |
Basic | | | $0.82 | | | $0.72 |
Diluted | | | $0.79 | | | $0.72 |
GAAP weighted average shares outstanding(k)
| | | | | | |
Basic | | | 79,044 | | | 68,473 |
Diluted | | | 81,863 | | | 68,546 |
Non-GAAP weighted average shares outstanding(k)
| | | | | | |
Basic | | | 79,044 | | | 68,473 |
Diluted | | | 81,863 | | | 68,546 |
RESTATED CERTIFICATE OF INCORPORATION
OF
GROCERY OUTLET HOLDING CORP.
* * * * *
The present name of the corporation is Grocery Outlet Holding Corp. (the “Corporation”). The Corporation was incorporated under the name “Cannery Sales Holding Corp.” by the filing of the Corporation’s original Certificate of Incorporation with the Secretary of State of the State of Delaware on September 11, 2014. This Restated Certificate of Incorporation of the Corporation (the “Certificate of Incorporation”) only restates and integrates and does not further amend the provisions of the Corporation’s Certificate of Incorporation, as theretofore amended or supplemented, and there is no discrepancy between the provisions of the Certificate of Incorporation as thereto amended and supplemented and the provisions of this Restated Certificate of Incorporation. This Restated Certificate of Incorporation of the Corporation was duly adopted in accordance with the provisions of Section 245 of the General Corporation Law of the State of Delaware. The Corporation’s Certificate of Incorporation as theretofore amended or supplemented is hereby integrated and restated to read in its entirety as follows:
ARTICLE I
NAME
The name of the Corporation is Grocery Outlet Holding Corp.
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State of Delaware is 200 Bellevue Parkway, Suite 210 in the City of Wilmington, County of New Castle, 19809. The name of the registered agent of the Corporation in the State of Delaware at such address is Intertrust Corporate Services Delaware Ltd.
ARTICLE III
PURPOSE
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may now or hereafter be organized under the General Corporation Law of the State of Delaware (the “DGCL”).
ARTICLE IV
CAPITAL STOCK
The total number of shares of all classes of stock that the Corporation shall have authority to issue is 550,000,000, which shall be divided into two classes as follows:
500,000,000 shares of common stock, par value $0.001 per share (“Common Stock”); and
50,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”).
I.
Capital Stock.
A.The board of directors of the Corporation (the “Board of Directors”) is hereby expressly authorized, by resolution or resolutions, at any time and from time to time, to provide, out of the unissued shares of Preferred Stock, for one or more series of Preferred Stock and, with respect to each such series, to fix, without further stockholder approval, the number of shares constituting such series and the designation of such series, the powers (including voting powers), preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such series of Preferred Stock. The powers (including voting powers), preferences and relative, participating, optional and other
(a)
| Includes depreciation related to our distribution centers which is included within the cost of sales line item in our consolidated statements of operations and comprehensive income. See “NOTE 1—Organization and Summary of Significant Accounting Policies to our Consolidated Financial Statements for additional information about the components of cost of sales” in our Annual Report. |
(b)
Page | Includes $3.6 million, $10.0 million, and $1.3 million of cash dividends paid in fiscal 2019, 2018, and 2017 respectively, in respect of vested options as a result of dividends declared in connection with our recapitalizations in fiscal 2018 and 2016. |
(c)
| Represents the write-off of debt issuance costs and debt discounts related to the repricing and/or repayment of our first and second lien credit facilities. See “NOTE 6—Long-term Debt to our Consolidated Financial Statements for additional information” in our Annual Report. |
(d)
| Consists of the non-cash portion of rent expense, which represents the difference between our straight-line rent expense recognized under GAAP and cash rent payments. The adjustment can vary depending on the average age of our lease portfolio, which has been impacted by our significant growth in recent years. Non-cash rent was impacted by the adoption of ASC 842, Leases, which moved approximately $3.2 million out of amortization expense and into non-cash rent expense. |
(e)
C-1 | Represents impairment charges with respect to planned store closures and gains or losses on dispositions of assets in connection with store transitions to new independent operators (“IOs”). |
(f)
| Includes marketing, occupancy and other expenses incurred in connection with store grand openings, including costs that will be the IO’s responsibility after store opening. |
(g)
| Represents non-cash changes in reserves related to our IO notes and accounts receivable. |
(h)
Grocery Outlet 2022 Proxy Statement | Other non-recurring, non-cash or discrete items as determined by management, including transaction related costs, personnel-related costs, store closing costs, legal expenses, strategic project costs, and miscellaneous costs. |
(i)
| Represents the amortization of debt issuance costs and incremental amortization of an asset step-up resulting from purchase price accounting related to the 2014 H&F Acquisition (as defined in the Annual Report) which included trademarks, customer lists, and below-market leases. In fiscal 2019, due to the adoption of ASC 842, Leases, approximately $3.2 million in below-market lease amortization expense was moved out of this line and into non-cash rent expense. |
(j)
| Represents the tax effect of the total adjustments. Because of the increased impact of discrete items on our effective tax rate including the excess tax benefits from the exercise and vest of share-based awards, beginning in the fourth quarter of fiscal 2019, we changed our methodology in order to tax effect the total adjustments on a discrete basis excluding any non-recurring and unusual tax items. Prior to the fourth quarter of fiscal 2019, the methodology we used was to calculate the tax effect of the total adjustments using our quarterly effective tax rate. |
(k)
| On June 6, 2019, we effected a 1.403 for 1 forward stock split. All share amounts and per share disclosures for all periods presented have been adjusted retroactively for the impact of this forward stock split. |
special rights of, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding.B.Each holder of record of Common Stock, as such, shall be entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders are entitled to vote generally, including the election or removal of directors. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) or pursuant to the DGCL.
C.Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled to only such voting rights, if any, as shall expressly be granted thereto by this Certificate of Incorporation (including any certificate of designation relating to such series of Preferred Stock).
D.Subject to applicable law and the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the payment of dividends, dividends may be declared and paid ratably on the Common Stock out of the assets of the Corporation that are legally available for this purpose at such times and in such amounts as the Board of Directors in its discretion shall determine.
E.Upon the dissolution, liquidation or winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the rights, if any, of the holders of any outstanding series of Preferred Stock or any class or series of stock having a preference over or the right to participate with the Common Stock with respect to the distribution of assets of the Corporation upon such dissolution, liquidation or winding up of the Corporation, the holders of Common Stock shall be entitled to receive the remaining assets of the Corporation available for distribution to its stockholders ratably in proportion to the number of shares held by them.
F.The number of authorized shares of Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote of the holders of any of the Common Stock or the Preferred Stock voting separately as a class shall be required therefor, unless a vote of any such holder is required pursuant to this Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock).
ARTICLE V
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
A.The Corporation reserves the right to amend, alter, or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by the laws of the State of Delaware, and all rights conferred herein are granted subject to this reservation.
B.The Board of Directors is expressly authorized to make, alter, amend, change, add to, rescind or repeal, in whole or in part, the bylaws of the Corporation (as in effect from time to time, the “Bylaws”) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or this Certificate of Incorporation. The affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, in addition to any vote of the holders of any class or series of capital stock of the Corporation required herein (including any certificate of designation relating to any series of Preferred Stock), by the Bylaws or by applicable law, shall be required in order for the stockholders of the Corporation to amend, alter, rescind, change, add or repeal, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith.
ARTICLE VI
BOARD OF DIRECTORS
A.Except as otherwise provided in this Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. Except as otherwise provided for or fixed
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pursuant to the provisions of Article IV (including any certificate of designation with respect to any series of Preferred Stock) and this Article VI relating to the rights of the holders of any series of Preferred Stock to elect additional directors, the total number of directors shall be determined from time to time exclusively by resolution adopted by the Board of Directors.
B.The directors (other than those directors elected by the holders of any series of Preferred Stock, voting separately as a series or together with one or more other such series, as the case may be) shall be divided into three classes designated Class I, Class II and Class III. Each class shall continue to consist, as nearly as possible, of one-third of the total number of such directors, and the directors in each such class shall be elected for a three-year term; provided, however, that the term of all classes of directors shall terminate at the 2026 annual meeting of stockholders of the Corporation, notwithstanding that any such director may have previously been elected for a term extending beyond the 2026 annual meeting. Commencing with the 2026 annual meeting of stockholders of the Corporation, the Board shall cease to be divided into classes, and all directors shall be elected to hold office for a term of one year. Each director shall serve from the date of his or her election or appointment and until the next annual meeting at which the class of directors to which he or she belongs is elected (or, from and after the 2026 annual meeting of stockholders, the annual meeting following his or her election or appointment) and until his or her successor shall have been duly elected and qualified, or until his or her earlier death, resignation, removal, disqualification or retirement. If the number of such directors is changed prior to the 2026 annual meeting of stockholders of the Corporation, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director.
C.Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding or the rights granted pursuant to the Amended and Restated Stockholders Agreement, dated as of June 19, 2019, by and among the Corporation and the other parties named therein (as the same may be amended, supplemented, restated or otherwise modified from time to time, the “Stockholders Agreement”), any newly-created directorship on the Board of Directors that results from an increase in the number of directors and any vacancy occurring in the Board of Directors (whether by death, resignation, retirement, disqualification, removal or other cause) may be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director (and not by stockholders).
D.Commencing with the 2026 annual meeting of stockholders of the Corporation, any or all of the directors (other than the directors elected by the holders of any series of Preferred Stock of the Corporation, voting separately as a series or together with one or more other such series, as the case may be) may be removed at any time either with or without cause by the affirmative vote of a majority in voting power of all outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class. Prior to the 2026 annual meeting of stockholders of the Corporation, any or all such directors may be removed only for cause by the affirmative vote of a majority in voting power of all outstanding shares of stock of the Corporation entitled to vote thereon, voting together as a single class.
E.Elections of directors need not be by written ballot unless the Bylaws shall so provide.
F.During any period when the holders of any series of Preferred Stock have the right to elect additional directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Corporation shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board of Directors in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate (in which case each such director thereupon shall cease to be qualified as, and shall cease to be, a director) and the total authorized number of directors of the Corporation shall automatically be reduced accordingly.
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G.As used in this Article VI only, the term “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person, and the term “Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.
ARTICLE VII
LIMITATION OF DIRECTOR LIABILITY
A.To the fullest extent permitted by the DGCL as it now exists or may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty owed to the Corporation or its stockholders.
B.Neither the amendment nor repeal of this Article VII, nor the adoption of any provision of this Certificate of Incorporation, nor, to the fullest extent permitted by the DGCL, any modification of law shall eliminate, reduce or otherwise adversely affect any right or protection of a current or former director of the Corporation existing at the time of such amendment, repeal, adoption or modification.
ARTICLE VIII
CONSENT OF STOCKHOLDERS IN LIEU OF MEETING, ANNUAL AND SPECIAL MEETINGs OF STOCKHOLDERS
A.Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders; provided, however, that any action required or permitted to be taken by the holders of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable certificate of designation relating to such series of Preferred Stock.
B.Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time only by or at the direction of the Board of Directors or the Chairman of the Board of Directors.
C.An annual meeting of stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, if any, on such date, and at such time as shall be fixed exclusively by resolution of the Board of Directors or a duly authorized committee thereof.
ARTICLE IX
COMPETITION AND CORPORATE OPPORTUNITIES
A.In recognition and anticipation that members of the Board of Directors who are not employees of the Corporation (“Non-Employee Directors”) and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Corporation, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Corporation, directly or indirectly, may engage, the provisions of this Article IX are set forth to regulate and define the conduct of certain affairs of the Corporation with respect to certain classes or categories of business opportunities as they may involve any of the Non-Employee Directors or their respective Affiliates and the powers, rights, duties and liabilities of the Corporation and its directors, officers and stockholders in connection therewith.
B.None of the Non-Employee Directors (including any Non-Employee Director who serves as an officer of the Corporation in both his or her director and officer capacities) or his or her Affiliates (the Persons (as defined below) identified in this sentence being referred to, collectively, as “Identified Persons” and, individually, as an “Identified Person”) shall, to the fullest extent permitted by law, have any duty to refrain from directly or indirectly (1) engaging in the same or similar business activities or lines of business in which the Corporation or any of its Affiliates now engages or proposes to engage or (2) otherwise competing with the Corporation or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such activities. To the fullest extent permitted from time to time by the laws of the State of Delaware, the Corporation hereby renounces any interest or expectancy in, or right to
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be offered an opportunity to participate in, any business opportunity that may be a corporate opportunity for an Identified Person and the Corporation or any of its Affiliates, except as provided in Section (C) of this Article IX. Subject to said Section (C) of this Article IX, in the event that any Identified Person acquires knowledge of a potential transaction or other business opportunity that may be a corporate opportunity for itself, herself or himself, or any of its or his or her Affiliates, and the Corporation or any of its Affiliates, such Identified Person shall, to the fullest extent permitted by law, have no duty to communicate or offer such transaction or other business opportunity to the Corporation or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Corporation or its stockholders or to any Affiliate of the Corporation for breach of any fiduciary duty as a stockholder, director or officer of the Corporation solely by reason of the fact that such Identified Person pursues or acquires such corporate opportunity for itself, herself or himself, or offers or directs such corporate opportunity to another Person.
C.The Corporation does not renounce its interest in any corporate opportunity offered to any Non-Employee Director (including any Non-Employee Director who serves as an officer of this Corporation) if such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of the Corporation, and the provisions of Section (B) of this Article IX shall not apply to any such corporate opportunity.
D.In addition to and notwithstanding the foregoing provisions of this Article IX, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Corporation if it is a business opportunity that (i) the Corporation is neither financially or legally able, nor contractually permitted to undertake, (ii) from its nature, is not in the line of the Corporation’s business or is of no practical advantage to the Corporation or (iii) is one in which the Corporation has no interest or reasonable expectancy.
E.For purposes of this Article IX, (i) “Affiliate” shall mean (a) in respect of a Non-Employee Director, any Person that, directly or indirectly, is controlled by such Non-Employee Director (other than the Corporation and any entity that is controlled by the Corporation) and (b) in respect of the Corporation, any Person that, directly or indirectly, is controlled by the Corporation; and (ii) “Person” shall mean any individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity.
F.To the fullest extent permitted by law, any Person purchasing or otherwise acquiring any interest in any shares of capital stock of the Corporation shall be deemed to have notice of and to have consented to the provisions of this Article IX.
ARTICLE X
DGCL SECTION 203 AND BUSINESS COMBINATIONS
A.The Corporation hereby expressly elects not to be governed by Section 203 of the DGCL.
B.Notwithstanding the foregoing, the Corporation shall not engage in any business combination (as defined below), at any point in time at which the Corporation’s Common Stock is registered under Section 12(b) or 12(g) of the Exchange Act, with any interested stockholder (as defined below) for a period of three (3) years following the time that such stockholder became an interested stockholder, unless:
1.
prior to such time, the Board of Directors approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder, or
2.
upon consummation of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock (as defined below) of the Corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (i) persons who are directors and also officers and (ii) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer, or
3.
at or subsequent to such time, the business combination is approved by the Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the
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affirmative vote of at least 66 2/3% of the outstanding voting stock of the Corporation that is not owned by the interested stockholder, or
4.
the stockholder became an interested stockholder inadvertently and (i) as soon as practicable divested itself of ownership of sufficient shares so that the stockholder ceased to be an interested stockholder and (ii) was not, at any time within the three-year period immediately prior to a business combination between the Corporation and such stockholder, an interested stockholder but for the inadvertent acquisition of ownership.
C.
For purposes of this Article X, references to:
1.
“affiliate” means a person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another person.
2.
“associate,” when used to indicate a relationship with any person, means: (i) any corporation, partnership, unincorporated association or other entity of which such person is a director, officer or partner or is, directly or indirectly, the owner of 20% or more of any class of voting stock; (ii) any trust or other estate in which such person has at least a 20% beneficial interest or as to which such person serves as trustee or in a similar fiduciary capacity; and (iii) any relative or spouse of such person, or any relative of such spouse, who has the same residence as such person.
3.
Reserved.
4.
Reserved.
5.
“business combination,” when used in reference to the Corporation and any interested stockholder of the Corporation, means:
(i)
any merger or consolidation of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation (a) with the interested stockholder, or (b) with any other corporation, partnership, unincorporated association or other entity if the merger or consolidation is caused by the interested stockholder and as a result of such merger or consolidation Section (B) of this Article X is not applicable to the surviving entity;
(ii)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions), except proportionately as a stockholder of the Corporation, to or with the interested stockholder, whether as part of a dissolution or otherwise, of assets of the Corporation or of any direct or indirect majority-owned subsidiary of the Corporation which assets have an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the Corporation determined on a consolidated basis or the aggregate market value of all the outstanding stock of the Corporation;
(iii)
any transaction that results in the issuance or transfer by the Corporation or by any direct or indirect majority-owned subsidiary of the Corporation of any stock of the Corporation or of such subsidiary to the interested stockholder, except: (a) pursuant to the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which securities were outstanding prior to the time that the interested stockholder became such; (b) pursuant to a merger under Section 251(g) of the DGCL; (c) pursuant to a dividend or distribution paid or made, or the exercise, exchange or conversion of securities exercisable for, exchangeable for or convertible into stock of the Corporation or any such subsidiary which security is distributed, pro rata to all holders of a class or series of stock of the Corporation subsequent to the time the interested stockholder became such; (d) pursuant to an exchange offer by the Corporation to purchase stock made on the same terms to all holders of said stock; or (e) any issuance or transfer of stock by the Corporation; provided, however, that in no case under items (c)-(e) of this subsection (iii) shall there be an increase in the
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interested stockholder’s proportionate share of the stock of any class or series of the Corporation or of the voting stock of the Corporation (except as a result of immaterial changes due to fractional share adjustments);
(iv)
any transaction involving the Corporation or any direct or indirect majority-owned subsidiary of the Corporation that has the effect, directly or indirectly, of increasing the proportionate share of the stock of any class or series, or securities convertible into the stock of any class or series, of the Corporation or of any such subsidiary that is owned by the interested stockholder, except as a result of immaterial changes due to fractional share adjustments or as a result of any purchase or redemption of any shares of stock not caused, directly or indirectly, by the interested stockholder; or
(v)
any receipt by the interested stockholder of the benefit, directly or indirectly (except proportionately as a stockholder of the Corporation), of any loans, advances, guarantees, pledges, or other financial benefits (other than those expressly permitted in subsections (i)-(iv) above) provided by or through the Corporation or any direct or indirect majority-owned subsidiary.
6.
“control,” including the terms “controlling,” “controlled by” and “under common control with,” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting stock, by contract, or otherwise. A person who is the owner of 20% or more of the outstanding voting stock of the Corporation, partnership, unincorporated association or other entity shall be presumed to have control of such entity, in the absence of proof by a preponderance of the evidence to the contrary. Notwithstanding the foregoing, a presumption of control shall not apply where such person holds voting stock, in good faith and not for the purpose of circumventing this Article X, as an agent, bank, broker, nominee, custodian or trustee for one or more owners who do not individually or as a group have control of such entity.
7.
“interested stockholder” means any person (other than the Corporation or any direct or indirect majority-owned subsidiary of the Corporation) that (i) is the owner of 15% or more of the outstanding voting stock of the Corporation, or (ii) is an affiliate or associate of the Corporation and was the owner of 15% or more of the outstanding voting stock of the Corporation at any time within the three (3) year period immediately prior to the date on which it is sought to be determined whether such person is an interested stockholder; and the affiliates and associates of such person; but “interested stockholder” shall not include any person whose ownership of shares in excess of the 15% limitation set forth herein is the result of any action taken solely by the Corporation, provided that such person shall be an interested stockholder if thereafter such person acquires additional shares of voting stock of the Corporation, except as a result of further corporate action not caused, directly or indirectly, by such person. For the purpose of determining whether a person is an interested stockholder, the voting stock of the Corporation deemed to be outstanding shall include stock deemed to be owned by the person through application of the definition of “owner” below but shall not include any other unissued stock of the Corporation that may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise.
8.
“owner,” including the terms “own” and “owned,” when used with respect to any stock, means a person that individually or with or through any of its affiliates or associates:
(i)
beneficially owns such stock, directly or indirectly; or
(ii)
has (a) the right to acquire such stock (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise; provided, however, that a person shall not be deemed the owner of stock tendered pursuant to a tender or exchange offer made by such person or any of such
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person’s affiliates or associates until such tendered stock is accepted for purchase or exchange; or (b) the right to vote such stock pursuant to any agreement, arrangement or understanding; provided, however, that a person shall not be deemed the owner of any stock because of such person’s right to vote such stock if the agreement, arrangement or understanding to vote such stock arises solely from a revocable proxy or consent given in response to a proxy or consent solicitation made to ten (10) or more persons; or
(iii)
has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except voting pursuant to a revocable proxy or consent as described in item (b) of subsection (ii) above), or disposing of such stock with any other person that beneficially owns, or whose affiliates or associates beneficially own, directly or indirectly, such stock.
9.
“person” means any individual, corporation, partnership, unincorporated association or other entity.
10.
“stock” means, with respect to any corporation, capital stock and, with respect to any other entity, any equity interest.
11.
“voting stock” means stock of any class or series entitled to vote generally in the election of directors and, with respect to any entity that is not a corporation, any equity interest entitled to vote generally in the election of the governing body of such entity. Every reference in this Article X to a percentage of voting stock shall refer to such percentage of the votes of such voting stock.
ARTICLE XI
MISCELLANEOUS
If any provision or provisions of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not, to the fullest extent permitted by law, in any way be affected or impaired thereby and (ii) to the fullest extent permitted by law, the provisions of this Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.
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IN WITNESS WHEREOF, Grocery Outlet Holding Corp. has caused this Restated Certificate of Incorporation to be executed by its duly authorized officer on this day of , 2022.
| | | | | GROCERY OUTLET HOLDING CORP. | |
| | | | | Name: Title: | |
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Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) DateTO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:KEEP THIS PORTION FOR YOUR RECORDSTHIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLYD79451-P71345! ! !ForAllWithholdAllFor AllExceptFor Against Abstain! ! !To withhold authority to vote for any individualnominee(s), mark "For All Except" and write thenumber(s) of the nominee(s) on the line below.GROCERY OUTLET HOLDING CORP.5650 HOLLIS STREETEMERYVILLE, CA 94608Nominees:01) Carey F. Jaros02) Eric J. Lindberg, Jr.03) Norman S. Matthews2. To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the current fiscal year endingDecember 31, 2022.NOTE: In their discretion, the proxies, and each of them acting alone, are authorized to vote on such other business as may properly come before theAnnual Meeting or any adjournments or postponements thereof.Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Jointowners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.3. To hold an advisory (non-binding) vote to approve the Company’s named executive officer compensation.4. To approve amendments to our Amended and Restated Certificate of Incorporation to (i) eliminate applicable supermajority voting requirements; and(ii) make certain other changes to remove obsolete language.5. To approve an amendment to our Amended and Restated Certificate of Incorporation to declassify our Board of Directors by 2026.1. Election of Class III Directors.GROCERY OUTLET HOLDING CORP.The Board of Directors recommends you vote FOR thefollowing:The Board of Directors recommends you vote FOR the following proposals:! ! !! ! !! ! !VOTE BY INTERNETBefore The Meeting - Go to www.proxyvote.com or scan the QR Barcode aboveUse the Internet to transmit your voting instructions and for electronic delivery of informationup until 11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card inhand when you access the web site and follow the instructions to obtain your records and tocreate an electronic voting instruction form.During The Meeting - Go to www.virtualshareholdermeeting.com/GO2022You may attend the meeting via the Internet and vote during the meeting. Have the informationthat is printed in the box marked by the arrow available and follow the instructions.VOTE BY PHONE - 1-800-690-6903Use any touch-tone telephone to transmit your voting instructions up until11:59 p.m. Eastern Time the day before the meeting date. Have your proxy card in hand whenyou call and then follow the instructions.VOTE BY MAILMark, sign and date your proxy card and return it in the postage-paid envelope wehave provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way,Edgewood, NY 11717.SCAN TOVIEW MATERIALS & VOTE w
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Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com.GROCERY OUTLET HOLDING CORP.Annual Meeting of StockholdersJune 6, 2022 11:00 AM Pacific Daylight TimeTHIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORSThe undersigned hereby appoints Eric J. Lindberg, Jr. and Charles C. Bracher, or either of them, as proxies, each with the powerto appoint his substitute, and hereby authorizes them to represent and to vote, as designated on the reverse side, all of theshares of Common Stock of Grocery Outlet Holding Corp. ("Grocery Outlet") that the undersigned would be entitled to voteat the Annual Meeting of Stockholders of Grocery Outlet to be held on June 6, 2022 at 11:00 AM Pacific Daylight Time atwww.virtualshareholdermeeting.com/GO2022 and any adjournment or postponement thereof (the "Annual Meeting").The undersigned revokes any proxy previously given to vote at such meeting.This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is made, thisproxy will be voted in accordance with the Board of Directors' recommendations.In their discretion, the proxies are authorized to vote upon such other business as may properly come before theAnnual Meeting or any adjournment or postponement thereof.Continued and to be signed on reverse side
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