(4)
| 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. | 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. | Page | | | 55 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
Outstanding Equity Awards at 20202021 Fiscal Year End The following table includes certain information with respect to outstanding equity awards held by our Named Executive Officers as of January 2, 2021.1, 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) | | |
Outstanding Equity Awards At(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 31, 2021, the last trading day of Fiscal Year End2021. Eric J. Lindberg, Jr. | | | 10/21/2014 | | | 1,107,614 | | | — | | | 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 | | | — | | | — | | | — | | | — | | | 25,136(3) | | | 986,588 | | | 117,300(4) | | | 4,604,025(4) | Charles C. Bracher | | | 11/25/2014 | | | 172,030 | | | | | | 3.81 | | | 11/25/2024 | | | — | | | — | | | — | | | — | | | | 11/25/2014 | | | 137,031 | | | — | | | 7.13 | | | 11/25/2024 | | | — | | | — | | | — | | | — | | | | 6/19/2019 | | | — | | | 91,195(2) | | | 22.00 | | | 6/19/2029 | | | — | | | — | | | — | | | — | | | | 5/13/2020 | | | — | | | — | | | — | | | — | | | 11,679(3) | | | 458,401 | | | 35,036 | | | 1,375,163(4) | Robert Joseph Sheedy, Jr. | | | 11/25/2014 | | | 217,061 | | | — | | | 3.81 | | | 11/25/2024 | | | — | | | — | | | — | | | — | | | | 6/19/2019 | | | — | | | 91,195(2) | | | 22.00 | | | 6/19/2029 | | | — | | | — | | | — | | | — | | | | 5/13/2020 | | | — | | | — | | | — | | | — | | | 15,809(3) | | | 620,503 | | | 47,426(4) | | | 1,861,471(4) | Pamela B. Burke | | | 9/29/2015 | | | 37,567 | | | | | | 8.11 | | | 9/29/2025 | | | — | | | — | | | — | | | — | | | | 3/31/2017(5) | | | 21,045 | | | 14,030 | | | 8.57 | | | 3/31/2027 | | | — | | | — | | | — | | | — | | | | 12/26/2018(6) | | | 19,642 | | | 29,463 | | | 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 | | | — | | | — | | | — | | | — | | | 9,050(3) | | | 355,213 | | | 27,148(4) | | | 1,065,559(4) | Heather L. Mayo | | | 5/13/2020 | | | — | | | — | | | — | | | — | | | 8,677(3) | | | 340,572 | | | 26,032(4) | | | 1,021,756(4) | | | | 5/13/2020 | | | — | | | — | | | — | | | — | | | 5,423(7) | | | 212,853 | | | — | | | — |
(2)
(1)
| The amounts shown in this column represents the number of shares of common stock that have not vested multiplied by $39.25, the closing price per share of our common stock on December 31, 2020, the last trading day of Fiscal Year 2020. |
(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 of the identified time-based RSU vests in three equal annual installments over the three-year period measured from the vesting commencement date of March 1, 2020, subject to continued service with us on each vesting date. |
(4)
| The number and market value of the PSUs reported reflect maximum performance because performance through January 2, 2021, the last day of Fiscal Year 2020, was tracking above 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 on the vesting date. See “Executive Compensation—Compensation Discussion and Analysis—Long-Term Equity Incentive Compensation” for more information on the cumulative operating goals. |
(5)
| The identified 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 vesting on March 31, 2022. |
(6)
| The identified 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 of 7,015 shares vesting on December 26, 2023. |
(7)
| The identified time-based RSU vests in one installment on June 19, 2023, subject to Ms. Mayo’s 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. | Page | | | 56 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Named Executive Officer Compensation Tables
Option Exercises and Stock Vested During Fiscal Year 20202021 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 January 2, 2021.1, 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. | | | 250,000 | | | 8,723,845 | | | — | | | — | Charles C. Bracher | | | 415,000 | | | 13,466,068 | | | — | | | — | Robert Joseph Sheedy, Jr. | | | 507,000 | | | 15,519,093 | | | — | | | — | Pamela B. Burke | | | 152,052 | | | 4,997,911 | | | — | | | — | Heather L. Mayo | | | — | | | — | | | — | | | — |
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) | 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.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 January 2, 2021,1, 2022, the last day of our Fiscal Year 2020.2021. 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. LindbergSEVERANCE BENEFITS UPON TERMINATION FOR MR. LINDBERG
The employment agreement for Mr. Lindberg provides that in the event of a termination of employment without causeCause or resignation for good reasonGood 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 PlanEXECUTIVE SEVERANCE PLAN
On November 9, 2020, the Compensation Committee adopted the Grocery Outlet Holding Corp. Executive Severance Plan (the “Severance Plan”) 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. TABLE OF CONTENTS
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 officersNamed 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 tax code,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 tax codeCode 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 EventsACCELERATED VESTING OF EQUITY AWARDS UPON CERTAIN EVENTS
Time-Vesting Options.Options Each of our Named Executive Officers were granted time-vesting options under the 2019 Incentive Plan in Fiscal Year 2019, (other than Ms. Mayo who joined us in October 2019), which provide that if the executive undergoes a termination of employment without causeCause following a changeChange in control,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 changeChange in control.Control. Performance-Vesting Units (PSUs). Each of our Named Executive Officers were also granted Performance Stock UnitsPSUs under the 2019 Incentive Plan.Plan (with all defined terms below defined in the 2019 Incentive Plan). Those awards provide for the following vesting upon various 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 shallwill vest (at target performance) on the date of such termination; 44•
TABLE OF CONTENTS
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 shallwill 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 shallwill 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 time-vesting Restricted Stock UnitsRSUs under the 2019 Incentive Plan.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 2, 2021,1, 2022, the last business day of our Fiscal Year 2020.2021. 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 | | |
Potential Payments Upon Termination(1)
The employment agreement for Mr. Lindberg provides that in the event of a termination of employment without cause or After Changeresignation for good reason, the executive is entitled to (i) payment of his base salary, payable in Controlequal 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 Eric J. Lindberg, Jr | | | Termination Without Cause or for Good Reason(1) | | | 1,545,000 | | | 1,545,000 | | | 47,051 | | | — | | | — | | | — | | | 3,137,051 | | | | Death or Disability prior to Change in Control | | | — | | | 772,500(2) | | | — | | | — | | | — | | | 775,698(3) | | | 1,548,198 | | | | Termination Without Cause after Change in Control | | | — | | | — | | | — | | | 3,630,263(4) | | | 986,588(3) | | | 2,302,013(3) | | | 6,918,863 | | | | Death or Disability after a Change in Control | | | — | | | — | | | — | | | — | | | — | | | 2,302,013(3) | | | 2,302,013 | Charles C. Bracher | | | Termination Without Cause or for Good Reason(5) | | | 538,379 | | | 323,028 | | | 27,623 | | | — | | | — | | | — | | | 889,030 | | | | Qualifying Termination after Change in Control | | | 807,569(5) | | | 484,541(5) | | | 27,623(5) | | | 1,573,114(4) | | | 458,401(3) | | | 687,582(3) | | | 4,038,829 | | | | Death or Disability prior to Change in Control | | | — | | | — | | | — | | | — | | | — | | | 231,693(3 | | | 231,693 | | | | Death or Disability after a Change in Control | | | — | | | — | | | — | | | — | | | — | | | 687,582(3) | | | 687,582 | Robert Joseph Sheedy, Jr | | | Termination Without Cause or for Good Reason(5) | | | 583,000 | | | 437,250 | | | 27,623 | | | — | | | — | | | — | | | 1,047,873 | | | | Qualifying Termination after Change in Control | | | 874,500(5) | | | 655,875(5) | | | 41,435(5) | | | 1,573,114(4) | | | 620,503(3) | | | 930,735(3) | | | 4,696,162 | | | | Death or Disability prior to Change in Control | | | | | | — | | | — | | | — | | | — | | | 313,608(3) | | | 313,608 | | | | Death or Disability after a Change in Control | | | — | | | — | | | — | | | — | | | — | | | 930,735(3 | | | 930,735 | Pamela B. Burke | | | Termination Without Cause or for Good Reason(5) | | | 417,173 | | | 250,304 | | | 27,696 | | | — | | | — | | | — | | | 695,173 | | | | Qualifying Termination after Change in Control | | | 625,760(5) | | | 375,456(5) | | | 41,544(5) | | | 1,089,079(4) | | | 355,213(3) | | | 532,780(3) | | | 3,019,830 | | | | Death or Disability prior to Change in Control | | | — | | | — | | | — | | | — | | | — | | | 179,530(3) | | | 179,530 | | | | Death or Disability after a Change in Control | | | — | | | — | | | — | | | — | | | — | | | 532,780(3) | | | 532,780 | | | | Change in Control | | | — | | | — | | | — | | | 1,243,914(6) | | | — | | | — | | | 1,243,914 |
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Heather L. Mayo | | | Termination Without Cause or for Good Reason(5) | | | 400,000 | | | 240,000 | | | 9,443 | | | — | | | — | | | — | | | 649,443 | | | | Qualifying Termination after Change in Control | | | 600,000(5) | | | 360,000(5) | | | 14,134(5) | | | — | | | 439,914(3) | | | 510,878(3) | | | 1,924,926 | | | | Death or Disability prior to Change in Control | | | — | | | — | | | — | | | — | | | — | | | 172,151(3) | | | 172,151 | | | | Death or Disability after a Change in Control | | | — | | | — | | | — | | | — | | | — | | | 510,878(3) | | | 510,878 |
Named Executive Officer Compensation Tablesin equal installments for a period of 24 months following the termination date; and (iii) medical and dental benefit 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. For purposes of calculating (iii) we used the COBRA premium amounts. (2)
(1)
| The employment agreement for Mr. Lindberg 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 in equal installments for a period of 24 months following the termination date; and (iii) medical and dental benefit 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. For purposes of calculating (iii) we used the COBRA premium amounts. |
(2)
| The employment agreement for 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. |
(3)
| The form of Time-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, then a prorated portion of the PSU shall 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 shall vest in full at target performance as of the date of such termination. |
(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 common stock, respectively, at an exercise price of $22.00. As of January 2, 2021, 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 31, 2020, the last trading day of Fiscal Year 2020 ($39.25) and (B) the exercise price ($22.00); and (ii) the number of unvested shares subject to the option as of January 2, 2021. |
(5)
| In connection with the executive Severance Plan described above each of our NEOs (other than Mr. Lindberg) is entitled to the following benefits if he or she is terminated without cause, or by the participant for good reason not in connection with a Change in Control: (i) 1.0 times the sum 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)
| The employment agreement for 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. (3)
The form of Time-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, then 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. (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 common stock, respectively, at an exercise price of $22.00. As of January 1, 2022, 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 31, 2021, the last trading day of Fiscal Year 2020 ($28.28) and (B) the exercise price ($22.00); and (ii) the number of unvested shares subject to the option as of January 1, 2022. (5)
In connection with the Executive Severance Plan described above each of our NEOs (other than Mr. Lindberg) is entitled to the following benefits if he or she is terminated without cause, or by the participant for good reason not in connection with a Change in Control: (i) 1.0 times the sum 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 an exercise price of $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 the extent not vested, become fully vested and exercisable immediately prior to the effective time of such Change in Control. | Page | | | 61 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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. | Page | | | 62 | | | Grocery Outlet 2022 Proxy Statement | | | | |
CERTAIN RELATIONSHIPS AND 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 initial public offering.
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 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. The Stockholder Nominee, Mr. Read, is currently a Class II director and the Chief Executive Officer, Mr. Lindberg, is currently a Class III director. The Amended and Restated Stockholders Agreement also gave the H&F Investor the right to nominate a certain number of persons to our board of directors for so long it maintained certain levels of ownership of our common stock. In May 2020, the H&F Investor ceased to own any shares of our common stock and all such nomination rights lapsed.
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. For so long as the H&F Investor held shares of our common stock, it was subject to similar obligations and their nominees were entitled to similar support.
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 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 of 1933, as amended (the “Securities Act”). The H&F Investor was 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, the 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. During the Fiscal Year 2020 we incurred approximately $2.1 million in expenses associated with registered securities offerings conducted by persons with registration rights under the Amended and Restated Stockholders Agreement. We have not incurred any such expenses in Fiscal Year 2021 through the date hereof.
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
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for use of private aircraft, which previously had been primarily conducted through charter arrangements. Since the beginning of Fiscal Year 2020 through April 12, 2021 we have paid $35,075 in expenses to Mr. Lindberg’s entity in connection with this lease.
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 12, 2021, 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 2020 of approximately $6.0 million and of approximately $1.5 million in the 13 weeks ended April 3, 2021. The leases for seven of these stores expire in August 2024. The leases on the nine remaining properties expire on various dates between January 2022 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. 48 | Page | | | 63 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 sets forth information about the beneficial ownership of the common stock of Grocery Outlet Holding Corp. as of April 12, 202111, 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 and nominees for director; and •
all of our executive officers and directors as a group. For each executive officer, director, or director nominee, information with respect to beneficial ownership is 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 information reported in Schedules 13D or 13G filed with the SEC. We have determined beneficial ownership in accordance with the rules of the SEC. Under these rules, a person is deemed to be a “beneficial owner” of a security if that person has sole or shared “voting power,” which includes the power to vote or direct the voting of such security, or “investment power,” which includes the power to dispose of or to direct the disposition of such security. Common stock subject to stock options that are currently exercisable or exercisable within 60 days 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 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 dispositive power with respect to all common stock that they beneficially own. Common stock subject to stock options that are currently exercisable or exercisable within 60 days of April 12, 2021 and RSUs that vest within 60 days of April 12, 2021 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.
The percentages of beneficial ownership set forth below are based on 95,551,90396,338,755 shares of our common stock outstanding as of April 12, 2021.11, 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:
| | | | | | | Jackson Square Partners, LLC(1) | | | 9,527,609 | | | 10.0% | Sands Capital Management, LLC(2) | | | 8,875,219 | | | 9.3% | The Vanguard Group(3) | | | 7,277,300 | | | 7.6% | BlackRock, Inc.(4) | | | 7,056,652 | | | 7.4% | Kayne Anderson Rudnick Investment Management LLC(5) | | | 5,885,728 | | | 6.2% | Named Executive Officers and Directors:
| | | | | | | Eric J. Lindberg, Jr.(6) | | | 5,098,439 | | | 5.2% | Charles C. Bracher(7) | | | 310,726 | | | * | Robert Joseph Sheedy, Jr.(8) | | | 202,640 | | | * | Pamela B. Burke.(9) | | | 136,186 | | | * | Heather L. Mayo | | | 1,961 | | | * | Erik D. Ragatz(10) | | | 209,096 | | | * | S. MacGregor Read, Jr.(11) | | | 4,819,837 | | | 5.0% | Kenneth W. Alterman(12) | | | 62,827 | | | * | John E. Bachman | | | 3,061 | | | * | Mary Kay Haben | | | 3,061 | | | * | Thomas F. Herman(13) | | | 78,917 | | | * | Carey F. Jaros | | | — | | | * | Norman S. Matthews(14) | | | 147,696 | | | * | Maria Fernanda Mejía | | | — | | | * | Gail Moody-Byrd | | | — | | | * | Jeffrey York | | | 132,823 | | | * | All directors and executive officers as a group (20 persons)(15) | | | 11,650,899 | | | 11.8% |
| 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 | Based upon statements contained in a Schedule 13G/A filed by Jackson Square Partners, LLC on February 9, 2021. According to the Schedule 13G/A, Jackson Square Partners, LLC has sole voting power over 7,551,889 of the reported shares, shared voting power over 621,204 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. Ownership percentage assumes the stockholder continued to own the number of shares reflected in the table above on April 12, 2021. | | 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) | Based upon statements contained in a Schedule 13G filed by Sands Capital Management, LLC on February 16, 2021. Shares reported are beneficially owned by clients of Sands Capital Management, LLC. According to the Schedule 13G, Sands Capital Management, LLC has sole voting power over 6,310,332 of the reported shares, shared voting power over none of the reported shares and sole dispositive power over all of the reported shares. The address of Sands Capital Management, LLC is 1000 Wilson Blvd., Suite 3000, Arlington, Virginia 22209. Ownership percentage assumes the stockholder continued to own the number of shares reflected in the table above on April 12, 2021. |
(3) Page | Based upon statements in a Schedule 13G filed by The Vanguard Group on February 10, 2021. The Vanguard Group may be deemed to beneficially own the reported shares and has filed the Schedule 13G as the parent holding company or control person on behalf of its subsidiaries Vanguard Asset Management, Limited, Vanguard Fiduciary Trust Company, Vanguard Global Advisors, LLC, Vanguard Group (Ireland) Limited, Vanguard Investments Australia Ltd, Vanguard Investments Canada Inc., Vanguard Investments Hong Kong Limited and Vanguard Investments UK, Limited. According to the Schedule 13G, The Vanguard Group has sole voting power over none of the reported shares, shared voting power over 52,753 of the reported shares, sole dispositive power over 7,163,367 of the reported shares and shared dispositive power over 113,933 of the reported shares. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. Ownership percentage assumes the stockholder continued to own the number of shares reflected in the table above on April 12, 2021. |
(4) | 66 | | | Based upon statements in a Schedule 13G filed by BlackRock, Inc. on February 2, 2021. BlackRock, Inc. may be deemed to beneficially own the reported shares and has filed the Schedule 13G as the parent holding company or control person on behalf of its subsidiaries BlackRock Life Limited, BlackRock Advisors, LLC, BlackRock (Netherlands) B.V., BlackRock Institutional Trust Company, National Association, BlackRock Asset Management Ireland Limited, BlackRock Financial Management, Inc., BlackRock Asset Management Schweiz AG, BlackRock Investment Management, LLC, BlackRock Investment Management (UK) Limited, BlackRock Asset Management Canada Limited, BlackRock (Luxembourg) S.A., BlackRock Investment Management (Australia) Limited, BlackRock Advisors (UK) Limited, BlackRock Fund Advisors and BlackRock Fund Managers Ltd. According to the Schedule 13G, BlackRock, Inc. has sole voting power over 6,828,420 of the reported shares, shared voting power over none of the reported shares, sole dispositive power over 7,056,652 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. Ownership percentage assumes the stockholder continued to own the number of shares reflected in the table above on April 12, 2021.Grocery Outlet 2022 Proxy Statement
|
(5) | | Based upon statements in a Schedule 13G/A filed jointly by Kayne Anderson Rudnick Investment Management LLC and Virtus Investment Advisers, Inc. on February 16, 2021. Kayne Anderson Rudnick Investment Management, LLC has sole power to vote or to direct the vote of 1,067,846 of the reported shares, sole power to dispose or to direct the disposition of 1,067,846 of the reported shares, shared power to vote or direct the vote of 4,817,882 of the reported shares (shared with Virtus Investment Advisers, Inc.) and shared power to dispose or direct the disposition of 4,817,882 of the reported shares (shared with Virtus Investment Advisers, Inc.). The address of Kayne Anderson Rudnick Investment Management LLC is 1800 Avenue of the Stars, 2nd Floor, Los Angeles, California 90067. Ownership percentage assumes the stockholder continued to own the number of shares reflected in the table above on April 12, 2021. |
(6)
| Consists of 2,265,228s shares issuable upon the exercise of options exercisable within 60 days following April 12, 2021 directly held by Mr. Lindberg, 460 shares directly held by Mr. Lindberg’s wife and 460 shares directly held by Mr. Lindberg’s child, 2,126,670 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. |
(7)
| Consists of 265,311 shares issuable upon the exercise of options exercisable within 60 days following April 12, 2021, 44,005 shares held directly by Mr. Bracher and 1,410 shares directly held by Mr. Bracher’s spouse. 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. |
(8)
| Consists of 177,059 shares issuable upon the exercise of options exercisable within 60 days following April 12, 2021 and 25,581 shares held directly by Mr. Sheedy. |
(9)
| Consists of 134,374 shares issuable upon the exercise of options exercisable within 60 days following April 12, 2021 and 1,812 shares held directly by Ms. Burke. |
(10)
| Consists of shares of held by a limited partnership controlled by Mr. Ragatz. |
(11)
| Consists of (i) 200,000 shares issuable upon the exercise of options exercisable within 60 days following April 12, 2021 directly held by Mr. Read, (ii) 1,175 shares held as fully vested deferred stock units under our Director Deferral Program directly held by Mr. Read, (iii) 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 (iv) 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. |
(12)
| Includes 39,592 shares directly held by the Alterman Revocable Trust, of which Mr. Alterman is a Trustee. |
(13)
| Includes 68,805 shares directly held by the Thomas F. Herman Separate Property Trust, of which Mr. Herman is a Trustee. |
(14)
| Includes 612 shared held as fully vested deferred stock units under our Director Deferral Program. |
(15)
| Consists of (i) 3,242,319 shares issuable upon the exercise of options exercisable within 60 days following April 12, 2021; (ii) 1,787 shares held as fully vested deferred stock units under our Director Deferral Program; and (iii) 8,406,793 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 January 2, 2021.1, 2022. All outstanding awards relate to our common stock. Equity Compensation Plans Approved by Stockholders(1) | | | 7,075,476(2) | | | $9.46(3) | | | 3,076,015(4) | Equity Compensation Plans Not Approved by Stockholders | | | — | | | — | | | — | Total | | | 7,075,476 | | | $9.46 | | | 3,076,015 |
| 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) 3,864,772 shares issuable in connection with time-based options, (ii) 2,325,580 shares issuable in connection with performance-based options, (iii) 341,842 shares issuable in connection with unvested restricted stock units, and (iv) 543,282 shares issuable in connection with PSUs (assuming maximum performance level). |
(3)
| Represents weighted average exercise price of outstanding options. Excludes restricted stock units, which have no exercise price. |
(4)
| Represents all shares available for future issuance under the 2019 Incentive Plan as of January 2, 2021. On the first day of each fiscal year beginning in Fiscal Year 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. Pursuant to this provision, on January 3, 2021, 718,158 new shares became available for issuance under the 2019 Incentive Plan. |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform2019 Incentive Plan. We cannot issue any further awards under the 2014 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 Consumer Protection Act,(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 Item 402(u)PSUs, which have no exercise price. (4)
Represents all shares available for future issuance under the 2019 Incentive Plan as of Regulation S-K, we are providingJanuary 1, 2022. On the following information regardingfirst day of each fiscal year beginning in fiscal 2020 and ending in fiscal 2029, the ratio2019 Incentive Plan provides for an annual automatic increase of the annual total compensation of our median employeeshares reserved for issuance in an amount equal to the annual total compensation of Eric J. Lindberg, Jr., our Chief Executive Officer (our “CEO”). We consider the pay ratio specified below to be a reasonable estimate, calculated in a manner that is intended to be consistent with the requirements Item 402(u) of Regulation S-K. For Fiscal Year 2020:
1.
| the annual total compensation of the employee who represents our median compensated employee (other than our CEO) was $54,870; and |
2.
| the annual total compensation of our CEO, as reported in the Summary Compensation Table above, was $5,452,022. |
Based on this information, for Fiscal Year 2020, the annual total compensation of our CEO was approximately 99.4 times the medianpositive difference between (i) 4% of the annual total compensation of all of our employees (other thanOutstanding Common Stock (as defined in the CEO).
This pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules. Because2019 Incentive Plan) on 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. Other companies may have different employment & compensation practices, different geographic breadth, perform different types of work, and may utilize different methodologies, exclusions, estimates and assumptions in calculating their own pay ratios. This information is being provided for compliance purposes. Neither the Compensation Committee nor managementlast day of the company usedimmediately preceding fiscal year and (ii) the pay ratio measure in making compensation decisions.plan share reserve on the last day of the immediately preceding fiscal year, or a lesser number as determined by our Board. Pursuant to this provision, on January 2, 2021, 764,118 new shares became available for issuance under the 2019 Incentive Plan.
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TABLE OF CONTENTS Determining the Median Employee
Employee Population
The Company used our employee population data as of December 1, 2020 as the reference date for identifying our median employee. 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 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 did not make any cost-of-living adjustments.
Compensation Measure and Annual Total Compensation of Median Employee
With respect to the annual total compensation of the median employee, we calculated such employee’s compensation for 2020 in accordance with the requirements of Item 402(c)(2)(x) of Regulation S-K, plus, pursuant to SEC rules and to maintain consistency with the calculation of compensation for our CEO, we have elected to voluntarily include the value of benefits provided to our median employee under non-discriminatory benefit plans available to all employees during 2020, which includes, for this purpose, medical benefit premiums paid by the Company, educational reimbursement benefits and the value of employee discounts provided to the median employee during 2020. The value of these non-discriminatory benefits provided to our CEO (if applicable to him) during 2020 are also included in the annual total compensation of our CEO, as applicable, reported in our 2020 Summary Compensation Table above.
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 2020 Summary Compensation Table included in this Proxy Statement, which includes the value of benefits provided to our CEO under non-discriminatory benefit plans available to all employees during 2020.
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. 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 Year 2020, all officers and directors subject to the reporting requirements of Section 16(a) filed the required reports on a timely basis, except that (i) Mr. Herman filed a late Form 4 on November 30, 2020 to report a sale on November 16, 2020; and (ii) Mr. Lindberg filed a late Form 4 on December 21, 2020 to report a stock option exercise and subsequent sale on December 16, 2020.
PROPSALS FOR CONSIDERATION AT ANNUAL MEETING Proposal 1—Election of Class III DirectorsTABLE OF CONTENTS
ELECTION OF DIRECTORS
At our Annual Meeting, stockholders will elect three Class IIIII directors to hold office until our 20242025 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: Mary Kay Haben, Gail Moody-Byrd, S. MacGregor Read, Jr., and Jeffrey York. 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 FIRM
Proposal 2—Ratification of Independent Registered Public Accounting Firm The Audit and Risk 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 1, 2022. 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 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 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 Committee’s selection, the Audit and Risk 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 1, 2022.
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 1, 2022.
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 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 Year 2020 and Fiscal Year 2019.
Audit Fees | | | $2,402,790 | | | $3,237,693 | Audit-Related Fees | | | $— | | | $90,000 | Tax Fees | | | $290,875 | | | $214,693 | All Other Fees | | | $1,895 | | | $3,790 | Total Fees | | | $2,695,560 | | | $3,546,176 |
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 Year 2020 SOX compliance.
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 Committee’s charter, the Audit and Risk 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 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.
TABLE OF CONTENTS
ADVISORY (NON-BINDING) VOTE TO APPROVE
THE COMPANY’S NAMED EXECUTIVE OFFICER COMPENSATION
The 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 Year 20202021 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 directorsOur 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 of directors recommends a vote “FOR” the approval of the compensation of | | 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. | Page | | | 71 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 can 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. | Page | | | 73 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 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 Restated Certificate of Incorporation of the Company as it will appear if both the Supermajority Voting Removal Amendment and the Declassification Amendment are adopted by our stockholders and become effective. | | The Board unanimously recommends that the stockholders vote “FOR” Proposal 5 to approve the Declassification Amendment. | | |
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ADDITIONAL INFORMATION Frequently Asked Questions About the Proxy Materials and the Annual Meeting WHEN AND WHERE WILL THE MEETING TAKE PLACE? The 2022 Annual Meeting will be held on 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 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). 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 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 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 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 login page. If you are a stockholder of record, 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, through 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 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. 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. | Page | | | 75 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 | |
| Page | | | 76 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 votes 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 time. 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. | Page | | | 77 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 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 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. •
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. | Page | | | 78 | | | Grocery Outlet 2022 Proxy Statement | | | | |
You may vote during the meeting. •
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 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 and the advisory 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 pursuantthat 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 Item 402your 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. If you are a stockholder of Regulation S-K underrecord, then your shares will not be voted if you do not provide your proxy, unless you attend the Securities Exchange Actlive 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 1934, includingholders entitled to cast at least a majority of the Compensation Discussionvotes 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 Analysis,entitled to vote for purposes of establishing a quorum for the compensation tables and narrative discussion that accompaniestransaction of business at the compensation tables.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: •
Submitting to our Corporate Secretary, before the voting at the 2022 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 56 | Page | | | 79 | | | Grocery Outlet 2022 Proxy Statement | | | | |
•
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. | Page | | | 80 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 20202021 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 20202021 Annual Report. For stockholders receiving a printed copy of this Proxy Statement, a copy of our 20202021 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 20202021 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. INCORPORATION BY REFERENCEStockholder Proposals and Director Nominations for the 2023 Annual Meeting of StockholdersNoStockholders 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 containedand 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 available throughafter 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 | Page | | | 81 | | | Grocery Outlet 2022 Proxy Statement | | | | |
forth in our bylaws, which are posted in the Corporate Governance section of the Investor Relations page on our website referencedat https://investors.groceryoutlet.com. Candidates 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 Proxy Statement,way may include an analysis of the candidate from our corporate website or anymanagement. Any stockholder making a nomination in accordance with the foregoing process will be notified of the Nominating and Corporate Governance Committee’s decision. To comply with the universal proxy rules (effective in 2023), stockholders who intend to solicit proxies in support of director nominees other websitethan the Company’s nominees must provide notice that we may maintain shall be deemed included or incorporatedsets forth the information required by reference into this Proxy Statement.Rule 14a-19 under the Exchange Act no later than April 7, 2023. DELIVERY OF DOCUMENTS TO STOCKHOLDERS SHARING AN ADDRESSCertain 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 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 Vice President and Corporate Controller, filed one late Form 4 to report one transaction. Delivery of Documents to Stockholders Sharing an Address We 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 20202021 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 20202021 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 20202021 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 20202021 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. | Page | | | 82 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 15th15th 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. Forward-Looking Statements Certain statements contained in this Proxy Statement 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 identify such forward-looking statements. These forward-looking statements are subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied by any forward-looking statements we make, including those described under the headings “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of 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. 57 | Page | | | 83 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Appendix ASupermajority 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 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. | Page | | | A-1 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 | Page | | | A-2 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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. | Page | | | A-3 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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); | Page | | | A-4 | | | Grocery Outlet 2022 Proxy Statement | | | | |
(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. | Page | | | A-5 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 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 | Page | | | B-1 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 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. | Page | | | B-2 | | | Grocery Outlet 2022 Proxy Statement | | | | |
Appendix C 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 | Page | | | C-1 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 | Page | | | C-2 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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. | Page | | | C-3 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 | Page | | | C-4 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 | Page | | | C-5 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 | Page | | | C-6 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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 | Page | | | C-7 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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. [Remainder of Page Intentionally Left Blank] | Page | | | C-8 | | | Grocery Outlet 2022 Proxy Statement | | | | |
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
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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