DEF 14A 1 formdef14a2020.htm DEF 14A Document

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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United Natural Foods, Inc.
(Name of Registrant as Specified in its Charter)
 
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Letter from Our Lead Independent Director
Dear Fellow Stockholders,
As Lead Director, I have had the privilege of working closely with a dynamic and diverse group of executives and directors through these challenging and unprecedented times. The value to our suppliers, customers, and our communities of our full-line of natural and conventional products and expanded delivery network as a result of the Supervalu acquisition was demonstrated throughout fiscal 2020, and continues today, as we navigate the COVID-19 pandemic. In this time of crisis, I am proud of the Board as UNFI delivered on its purpose to keep food on the tables of families throughout North America, while prioritizing the safety and security of our front-line associates. In addition to the pandemic, the Board has been focused on the most critical objectives for UNFI, including appointing a new CEO, appointing new Board members, and seeking input from our investors through our annual engagement process.
Management Succession Planning. Earlier this year, we announced Steve Spinner’s intent to retire from his position as Chief Executive Officer of UNFI. Over the last 12 years, Steve oversaw the tremendous growth of our Company from $3 billion to over $26 billion in annual sales, while strategically positioning UNFI for long-term success. Throughout his tenure, Steve fostered an unwavering commitment to our core value of doing the right thing, including through the challenges of COVID-19, civil unrest, extreme weather events, and the wildfires in the West. Given his deep knowledge of UNFI and our broader industry, we are pleased that Steve has agreed to continue to serve as Executive Chair of the Board after his retirement as CEO.
Board Refreshment and Corporate Governance. We continue to focus on strong corporate governance practices, including Board refreshment. Pursuant to the director retirement age provisions of our Corporate Governance Principles, James Heffernan will not stand for re-election as director. Mr. Heffernan has made significant contributions to the growth and strategic direction of the Company during his 20-year tenure on the Board. The Board and management of the Company are very appreciative of Mr. Heffernan’s service and commitment to the Board and the Company, and we are pleased to have Mr. Heffernan serve as an advisor to the Board through March 31, 2021.
We are actively engaged in a robust director search process using a leading search firm. The Board considered the desired mix of skills, qualifications, and experience needed across the current and future Board members given the evolving strategic direction of the Company following the impact of the pandemic and shifting retail grocery landscape. The Board’s objective with these appointments is to continue to evolve the Board to maximize its value and effectiveness to UNFI.
Stockholder Engagement. We are deeply interested in hearing from you, our stockholders. This summer we conducted our third annual stockholder engagement program and are happy to report that we spoke with holders of approximately 50% of our outstanding common shares across the broad spectrum of matters facing the Company, including the pandemic impact and response, our evolving strategy, Board refreshment, executive compensation, environmental, social and governance (ESG) practices, and other topics. We find these sessions very informative and, as a result of feedback received in prior years, in fiscal 2020, we made several changes to our executive compensation program, which changes were well received by stockholders. We look forward to talking with you again this year, as we navigate the exciting future that lies ahead for UNFI.
On behalf of the Board of Directors, thank you for your continued investment and support as we continue to deliver on our mission to transform the world of food through these unprecedented times.
 
Sincerely,
 
sig_peterroy.jpg
 
Peter A. Roy
 
Lead Independent Director



Letter from Our CEO and Chairman of the Board
Dear Fellow Stockholders,
Fiscal 2020 was truly a year of unprecedented challenges, as we delivered on our mission through the global pandemic, civil unrest, extreme weather events and wildfires out West. I would like to take this opportunity to thank you for your support of UNFI and the trust you have placed in our Board of Directors and management to oversee our Company’s long-term success over the course of these events and into the evolving landscape that lies ahead.
As I announced in September 2020, I plan to retire as Chief Executive Officer by July 31, 2021. It has been my honor to lead UNFI over these past 12 years, and I am proud of the incredible growth we have achieved while maintaining our culture of doing the right thing. The future has never been stronger for UNFI as our integration work is nearing completion, and we now look toward expansion of new services, technologies, brands, and optimization of our supply chain network. I have great confidence in the strength of our team and the opportunities ahead.
COVID-19 and Strategic Management. Fiscal 2020 presented unprecedented challenges in the face of the COVID-19 pandemic. I am proud of how we prioritized the health and safety of our associates, customers, and communities throughout our response. We were early to adopt a temporary state of emergency pay increase, implement robust safety protocols and attendance flexibility and provide increased grants through our associate assist program. Additionally, we maintained constant communication with our customers, committed over one million dollars to philanthropic organizations helping those impacted by COVID-19, donated over 10 million pounds of food and essential items and continued grants through our UNFI Foundation to support access to healthy food. Our Board met frequently during the early peak of the pandemic to oversee management’s risk and response efforts. And, importantly, we have continued our unrelenting focus on maintaining and evolving our safety protocols as the guidance from the CDC and local agencies has progressed to continue to protect the well-being of our employees, customers and communities.
Diversity and Inclusion. We recognize that we have an important role to play in making our world and our Company a more equal and inclusive place. To that end, we have publicly committed to take action, and have recently hired a Vice President, Diversity and Inclusion to develop and guide our diversity strategy, from the inside out. We are starting on the inside with a review of our recruiting, training and talent development practices. We are also committing to increase our spending with diverse owned suppliers and vendors and providing grants to support food justice in underserved communities through the UNFI Foundation. You can view the pillars of our diversity and inclusion strategy through the link on the main page of our website, www.unfi.com.
Dedication to Strong Corporate Governance Practices and ESG. Our commitment to doing things the right way remains steadfast, and in the “Decade of Action” we are determined to enhance our dedication to good environmental, social and governance (ESG) practices. In 2020, we reinforced our commitment to good corporate governance principles by strengthening certain governance policies, such as our recoupment policy, disclosures policies, stock ownership guidelines and Enterprise Risk Management policies.
We continue to focus on reducing our environmental impact, conserving natural resources and promoting sustainability across our value chain and in our operations. In early 2020, UNFI joined the Climate Collaborative, solidifying commitments to energy efficiency, food waste reduction and sustainable transportation. We also conducted a materiality assessment to identify areas where we can have the largest impact, and are excited to share more on the results and our long-term initiatives in our upcoming ESG report. In the meantime, information on our ESG commitments and primary focus areas can be found under the “ESG” section of our website.
In conclusion, I am very proud and grateful for all of the incredible work of our front-line associates, as well as our corporate support teams during the pandemic and other challenges we faced in fiscal 2020 and that continue today. On behalf of our Board of Directors, and everyone at UNFI, thank you for your continued support of this great Company.
 
Sincerely,
 
spinnersignature.jpg
 
Steven L. Spinner
 
Chairman of the Board and Chief Executive Officer
 
 
Please vote. Stockholders may vote through the Internet, by telephone or by mail. Please refer to your proxy card or the notice of proxy availability distributed to you on or about November 25, 2020 for information on how to vote through the Internet, by telephone or by mail.



Notice of Annual Meeting of Stockholders
Meeting Information
Tuesday, January 12, 2021, 4:00 p.m. EST, with log-in at 3:45 p.m. EST.
You may attend the annual meeting through the Internet by virtual web conference at www.virtualshareholdermeeting.com/unfi2021. The meeting will be a virtual-only meeting, consistent with the two prior years. We believe the virtual meeting allows greater access to participate in the meeting, hear from management and ask questions than an in-person meeting in one geographic location provides.
Items to be Voted on
1.
The election of nine nominees as directors to serve until the next annual meeting of stockholders.
2.
The ratification of the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending July 31, 2021.
3.
The approval, on an advisory basis, of our executive compensation.
4.
The approval of an amendment to the 2020 Equity Incentive Plan.
5.
Consideration of such other matters as may properly come before the meeting or any adjournments or postponements thereof.
Record Date
Only stockholders of record on our books at the close of business on Monday, November 16, 2020, will be entitled to vote at the annual meeting and any adjournments or postponements of the annual meeting.
Proxy Voting
Your vote is important. If you do not attend the annual meeting, we encourage you to vote your shares through the Internet, by telephone or by completing, dating, signing and promptly returning your proxy card to us in the envelope provided. The proxy materials provide you with details on how to vote by these three methods. If you decide to attend the annual meeting through the Internet, you may revoke your proxy and cast your vote during the meeting.
Proxy Materials
In accordance with rules approved by the Securities and Exchange Commission, we furnish proxy materials to our stockholders over the Internet. On or about November 25, 2020, we mailed to all stockholders of record as of the close of business on November 16, 2020, a notice containing instructions on how to access our Annual Report to Stockholders, which contains our audited consolidated financial statements for the fiscal year ended August 1, 2020; our proxy statement; proxy card; and other items of interest to stockholders on the Internet website indicated in our notice, at www.proxyvote.com, as well as instructions on how to vote your shares of common stock in connection with the annual meeting. That notice also provided instructions on how you can request a paper copy of our proxy materials and Annual Report to Stockholders if you desire.                                        
 
By Order of the Board of Directors,
 
sig_jillesutton.jpg
 
Jill E. Sutton, Esq.
 
Chief Legal Officer, General Counsel and Corporate Secretary
November 25, 2020




Table of Contents
Environmental, Social and Governance Practices
Outstanding Equity Awards at Fiscal 2020 Year-End



Forward Looking Statements
This proxy statement contains forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Our actual results may differ from our expectations, estimates and projections, and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “might,” “continues,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, our expectations with respect to our future performance and the drivers of that performance. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Most of these factors are outside our control and are difficult to predict. Factors that may cause such differences include, but are not limited to: (1) the impact and duration of the COVID-19 outbreak; (2) risks associated with our high level of debt and leverage; (3) our ability to recognize the anticipated benefits of our acquisition and dispositions, including the acquisition of SUPERVALU INC. (Supervalu), which may be affected by, among other things, increased competition in our industry and the ability of the combined company to grow and manage growth profitably and retain key employees; (4) our ability to optimize our network of distribution centers to serve our customers and retain existing customers; and (5) other risks and uncertainties identified in our filings with the Securities and Exchange Commission (“SEC”). More information about other potential factors that could affect our business and financial results is included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 1, 2020 filed with the SEC.




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Proxy Statement Summary
For the Annual Meeting of Stockholders, January 12, 2021

Voting Matters
Proposal
 
Board Recommendation
 
Page
Proposal 1Election of Directors
 
FOR
 
Proposal 2Ratification of Independent Auditor
 
FOR
 
Proposal 3Say on Pay Resolution
 
FOR
 
Proposal 4The approval of an amendment to the 2020 Equity Incentive Plan
 
FOR
 

Board of Directors
Our business and affairs are managed under the direction of the Board of Directors. The Board currently consists of ten (10) directors, eight (8) of whom are independent.
Information about our directors and the committees on which they serve is set forth below. Each director serves a one-year term and, other than Mr. Heffernan, who will retire under our governance guidelines as of the date of the annual meeting, has been nominated for re-election. Effective as of the close of business of the annual meeting, given Mr. Heffernan’s departure, the size of the Board will be reduced to nine (9) directors.
Name
 
Age
 
Director
Since
 
Audit
 
Compensation
 
Nominating
and
Governance
Eric F. Artz
     Independent
 
53
 
Oct 2016
 
 
 
ü
Ann Torre Bates
     Independent
 
62
 
Oct 2013
 
O
 
 
Denise M. Clark
     Independent
 
63
 
Feb 2013
 
 
 
O
Daphne J. Dufresne
     Independent
 
48
 
Oct 2016
 
 
ü
 
ü
Michael S. Funk
     Co-Founder
 
66
 
Feb 1996
 
 
 
James P. Heffernan1
     Independent
 
74
 
Mar 2000
 
ü
 
ü
 
James L. Muehlbauer
     Independent
 
59
 
April 2019
 
ü
 
ü
 
Peter A. Roy
     Lead Independent Director
 
64
 
June 2007
 
 
 
ü
Steven L. Spinner
     Chairman and Chief Executive Officer
 
60
 
Sept 2008
 
 
 
Jack Stahl
     Independent
 
67
 
June 2019
 
ü
 
O
 

 
O
Denotes Committee Chair
 
 
1
Mr. Heffernan will serve as a member of the Board until his upcoming retirement on January 12, 2021, after which date, he will serve as an advisor to the Board until March 31, 2021.

1


Governance Highlights
Eight of ten directors are independent
 
Fully independent Audit, Compensation and Nominating and Governance Committees
Annual election of directors and majority voting policy
 
Active stockholder engagement for three consecutive years
Recent updates to charters and policies to enhance governance processes
 
Comprehensive Board and Committee self-evaluations
Lead Independent Director, duties outlined in our Corporate Governance Principles, appointed annually by our independent directors
 
Recently enhanced stock ownership guidelines for directors, executive officers and additional senior officers
Strong commitment to Board diversity
 
Proxy access in Bylaws
Enhanced business continuity and crisis management team
 
Stockholders with 25% ownership may call a special meeting
Robust Board refreshment process
 
Board oversight of ESG
Fully integrated and enhanced Enterprise Risk Management Program
 
Industry-Leading safety protocols and procedures for COVID-19
Strong executive compensation governance:
 
Delaware forum selection clause
 
Long-term incentive compensation capped and aligned with pre-determined financial metrics
 
No poison pill
 
Independent compensation consultant
 
 
 
 
No gross-ups or excessive perquisites
 
 
 
 
Robust stock ownership guidelines and recoupment policy
 
 
 
How to Vote:
Phone
Internet before meeting
Mail
During the meeting
1-800-690-6903
www.proxyvote.com
Vote Processing
c/o Broadridge
51 Mercedes Way
Edgewood, NY 11717
www.virtualshareholdermeeting.com/unfi2021
How to attend and ask questions at the meeting:
Attend the annual meeting online, including to vote and/or submit questions at www.virtualshareholdermeetings.com/unfi2021
The annual meeting will begin at approximately 4:00 p.m. EST, with log-in at 3:45 p.m. EST on Tuesday, January 12, 2021
You may submit questions for the meeting in advance at www.proxyvote.com
You may submit live questions during the meeting at www.virtualshareholdermeeting.com/unfi2021
For more information about voting and attending the meeting, see “Information About the Meeting,” beginning on page 66.


2


Corporate Governance
Governance Highlights
We are committed to best practices in corporate governance. Some of our key corporate governance practices are summarized below, with further information provided in this proxy statement.
Independent Oversight
Seven out of nine director nominees are independent
Lead Independent Director is selected by independent directors and has clearly defined and robust responsibilities
Regular executive sessions of independent directors at Board and Committee meetings
100% independent Board Committees, with strong Committee mandates
Active Board oversight of the Company’s strategy and risk management
Board and Committees may hire outside advisors independent of management
Board oversight of ESG
Focused meetings and review of COVID risk and response
Board Skills and Qualifications
Regular Board refreshment and mix of tenure of directors
Diverse backgrounds, ages, experiences and qualifications, with a view to making changes as needed to continue to add value and meet strategic needs of UNFI
Diverse gender and ethnicity, with renewed focus going forward
Several directors have deep industry expertise
Annual Board and Committee self-evaluations and individual director performance reviews
Mandatory director retirement age of 75
Orientation program for new directors and ongoing director education programs for all directors
Limitations on other board memberships
Directors must notify the Chair of the Nominating and Governance Committee in the case of any change in principal occupation or business association, and before accepting any new commitments involving other businesses, non-profit entities or governmental units
Good Governance Practices
Annual comprehensive review of governance policies leading to the following updates in 2020:
Recoupment (“clawback”) policy for executives in the event of a financial restatement or inaccurate performance metrics, including inimical conduct and recently expanded to (i) include forfeiture of incentive compensation in certain cases of misconduct resulting in reputational harm and (ii) require public disclosure in certain circumstances
Director and executive stock ownership policies requiring meaningful levels of ownership, expanded to include more senior officers and more stringent requirements for share holdings in September 2020
Recently amended our Social and Environmental Policy to further substantiate our commitment to social, environmental and governance (ESG) matters, overseen by our Nominating and Governance Committee, supported by a newly created ESG Executive Committee
Enterprise Risk Management program now incorporates fully integrated, operationalized and enhanced risk reporting to our Board and Committees
Restrictions on hedging or pledging of Company stock by directors and executive officers
Strong policies restricting trading by insiders, including discussion-based pre-clearance process
Stockholder engagement initiatives, including an annual off-season outreach program, undertaken for general business and for governance policies and practices, including executive compensation

3


Stockholder Protections
Annual election of all directors
Majority vote and director resignation policy for directors in uncontested elections
Bylaws provide proxy access right for stockholders (3% ownership threshold continuously held for 3 years/2 director nominees or 20% of the Board/20 stockholder aggregation limit)
Stockholder rights to call special meeting for stockholders owning at least 25% of the outstanding shares
One class of shares, with each share entitled to one vote
No poison pill
We maintain a corporate governance page on our corporate UNFI website that includes key information about our corporate governance initiatives and our Code of Conduct. The corporate governance page can be found at www.unfi.com, by clicking on “Governance” listed under “Investors” at the bottom of our website. Copies of our Corporate Governance Principles, our Code of Conduct, our Social and Environmental Policy and the charters for each of the Board’s Committees can be found on our website. During fiscal 2020, we revised and updated the Compensation Committee charter, Nominating and Governance Committee charter, and the Code of Conduct, and in September 2020, we revised and updated the Social and Environmental Policy, each in connection with our ongoing comprehensive review of our governance practices. Information contained on our website is not incorporated by reference in this proxy statement or considered to be part of this document.
Director Independence
Our Corporate Governance Principles require a majority of the members of the Board to be independent directors as such term is defined in the New York Stock Exchange (NYSE) listing standards. The Board, upon the recommendation of the Nominating and Governance Committee, has determined that eight of its ten current members are independent. Our eight independent directors are Eric F. Artz, Ann Torre Bates, Denise M. Clark, Daphne J. Dufresne, James P. Heffernan, James L. Muehlbauer, Peter A. Roy and Jack Stahl. Michael S. Funk, one of our co-founders, was an employee until January 1, 2019, and Steven L. Spinner is our employee and Chief Executive Officer (CEO), and therefore they are not independent directors.
Our Corporate Governance Principles and the charter for each of the Board’s standing Committees—the Audit Committee, the Compensation Committee, and the Nominating and Governance Committee—require all members of such Committees to be independent within the meaning of the NYSE listing standards and the SEC’s rules. The charter of the Audit Committee also requires each of its members to meet the definition of independence under Section 10A of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the SEC’s rules thereunder. The charter of the Compensation Committee requires each of its members to be a non-employee director within the meaning of Rule 16b-3 under the Exchange Act.
Lead Independent Director
The Lead Independent Director is elected annually by the independent directors of the Board. In September 2020, the independent directors appointed Mr. Roy to serve as the Board’s Lead Independent Director for a second consecutive year. In accordance with our Corporate Governance Principles, the Lead Independent Director must be independent. The Lead Independent Director is responsible for coordinating the activities of the other independent directors and for performing such other duties and responsibilities as the Board may determine from time to time, including:
Serving as a liaison between the independent directors and the Chair and CEO;
Providing input to the Board and the Nominating and Governance Committee on the membership of various committees;
Advising and assisting the chairs of the Board’s committees in fulfilling such individuals’ roles and responsibilities;
Advising the Chair of the Board as to an appropriate schedule of and agenda for the Board’s meetings and including the Board’s input into the agenda for the Board’s meetings;
Leading the independent directors in their role in the annual evaluation of the performance of the CEO,
Serving as a key member of the ad hoc succession planning committee overseeing the process for CEO succession;
Consulting with the Chair of the Board regarding the retention of advisors and consultants who report directly to the Board;
Acting as the chair of regular and special Board meetings when the Chair is unable to preside; and
Calling meetings of, developing agendas for, and serving as chair of the executive sessions of the Board’s independent directors
A description of the duties of the Lead Independent Director is included in the Corporate Governance Principles, a copy of which can be found in the “Governance” section of our website at www.unfi.com.

4


Board Leadership Structure
The Board is currently led by the Chair of the Board, Mr. Spinner, and by the Lead Independent Director, Mr. Roy. Our Corporate Governance Principles do not require the Chair of the Board to be independent and do not specify whether the positions of Chair of the Board and the CEO must be separated. The Board regularly considers the appropriate leadership structure for the Company and has concluded that the Company and its stockholders are best served by the Board retaining discretion to determine whether the same individual should serve as both CEO and Chair of the Board, or whether the roles should be separated. The Board believes that it is important to retain the flexibility to make this determination at any point in time based on what it believes will provide the best leadership structure for the Company, based on the circumstances at such time.
The Board believes that having Mr. Spinner serve as both Chairman and CEO, coupled with strong independent director leadership, including the Lead Independent Director, is currently the most appropriate leadership structure for the Company, for several reasons. Having a single person fulfill the roles of Chair and CEO promotes decisive leadership, establishes clear accountability and enhances our ability to communicate with a single and consistent voice to stockholders, employees and other stakeholders. Together with our Lead Independent Director and in consultation with the chairs of the Board’s various standing committees, Mr. Spinner is well-positioned to set the Board’s agenda and provide leadership as to the strategic, compliance, and risk matters subject to the Board’s oversight. With over 30 years of operational and leadership experience with distributors of food and non-food products, Mr. Spinner has exceptional industry knowledge, which the Board believes is critical for the chair of a board of a company in an evolving industry, one that has undergone significant change in particular over the past decade. The Board also has considered Mr. Spinner’s strong performance as a leader. Mr. Spinner has most recently brought his industry knowledge and leadership skills to bear in leading the Company through the significant operational challenges arising in connection with the COVID-19 pandemic, and, prior to that, integrating the business of Supervalu with our Company. At present, the Board believes that combining the roles of Chair and CEO, along with having a Lead Independent Director vested with key duties and responsibilities (as discussed above) and the Board’s standing committees consisting of and being chaired by independent directors, provides a formal structure for strong independent oversight of our management team. We plan to continue to examine our corporate governance policies and leadership structure on an ongoing basis, including in connection with the evaluation and appointment of Mr. Spinner’s successor as CEO, so that our policies and governance processes continue to meet our Company’s evolving needs. In this regard, the Board has determined that upon the appointment of a successor to Mr. Spinner as CEO, Mr. Spinner will continue to serve the Board as an Executive Director, such that the Board and the new CEO continue to benefit from Mr. Spinner’s leadership and knowledge of the Company and industry through the time of the CEO transition.

5


Risk Oversight
Full Board
The Board has overall responsibility for risk oversight. The Board exercises its oversight responsibilities with respect to strategic, operational and competitive risks, as well as risks related to the succession planning of our CEO and other members of senior management. In light of Mr. Spinner’s upcoming retirement as CEO, the Board is actively working with a leading search firm to identify Mr. Spinner’s successor. The Board has delegated responsibility for the oversight of certain risks to its Committees. All Committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise-level risk. Certain risks are overseen by the full Board directly, such as strategic, cyber, other operational and macro-environment risks.
 
 
 
 
 
 
 
 
Audit Committee
 
Compensation Committee
 
Nominating & Governance Committee
The Audit Committee and full Board receive management’s quarterly Enterprise Risk Management (ERM) report and the Audit Committee discusses significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures with management, the Company’s internal audit department and our independent auditor. During fiscal 2020, we fully integrated our legacy UNFI and Supervalu Risk Management Programs. The integration focused on assessing the current maturity state of our ERM program and desired future state, as well as establishing processes to integrate risk assessment into strategic and operational decision making.
 
The Compensation Committee is responsible for developing and maintaining compensation policies and programs that are aligned with pay for performance, stockholder interests, and the other elements of the executive compensation philosophy developed and maintained by the Committee. Embedded in this philosophy and foundational to these programs is that they mitigate any unnecessary and excessive risks in our compensation plans and programs that could threaten our long-term value. See further discussion below.
 
The Nominating and Governance Committee oversees our compliance programs, and oversees our environmental, social and governance programs. This Committee also participates extensively in our Enterprise Risk Management and compliance programs generally, actively considering assessment and mitigation for risks that do not fall within the purview of the Audit Committee or the Compensation Committee.
Other committees address risk on an ad hoc basis, as appropriate. We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing our Company.
Compensation Risk
Our Compensation Committee charter requires the Compensation Committee to assess, on an annual basis, whether the Company’s compensation policies and practices encourage the Company’s executive officers or other key employees to take unnecessary and excessive risks that could threaten the value of the Company. The Compensation Committee believes that our compensation policies do not encourage the taking of unnecessary and excessive risks. Our compensation and governance practices are designed to align the interests of our executive officers with the interests of stockholders and the achievement of the Company’s performance objectives. For example:
A substantial portion of our executive officers’ compensation is “at risk,” including compensation paid in the form of common stock;
Total executive officer compensation is substantially weighted to long-term equity, half of which is tied to longer-term performance targets (which targets were recently extended from two- to three-year targets);
The short-term bonus program has an established performance metric (adjusted EBITDA) that is a long-term growth driver;
We set a maximum level of compensation; there is no uncapped compensation for our executive officers in any element of executive compensation;
Our executive officers are required to maintain certain levels of stock ownership, which are tested each year based on the then-current price of our common stock;
Our executive officers are subject to restrictions on hedging and pledging shares of Company common stock; and

6


Performance-based compensation is subject to recoupment in the event of a restatement of the Company’s financial statements or a material inaccuracy in the performance metrics used to measure performance-based compensation and is subject to forfeiture of incentive compensation in the event of certain misconduct resulting in reputational harm. Additionally, performance-based compensation may be forfeited in the case of misconduct in violation of law or Company policy, including through failure of an executive’s oversight responsibilities, that results in material financial or reputational harm to the Company.
Anti-Hedging and Insider Trading Policies
Our stock ownership guidelines and our Policy Regarding Trading in Company Securities (“Insider Trading Policy”) include prohibitions against speculative trading activities in relation to Company securities. Senior employees, including executive officers, and non-employee directors are strictly prohibited from entering into any transaction that would operate as a hedge against their ownership position of stock or that would hedge against the financial effect of their building up stock ownership to reach the requirements set forth in our stock ownership guidelines. Under our Insider Trading Policy, directors, certain employees (including executive officers) and other individuals with access to material non-public information about the Company are prohibited from engaging in transactions in Company securities during blackout periods (other than in accordance with a pre-approved Rule 10b5-1 trading plan), and such persons are required to pre-clear (through discussion) any transactions in Company securities with a member of our legal department who specializes in securities law. Under our policy governing 10b5-1 trading plans, we permit all directors and employees, including executive officers, to enter into 10b5-1 plans. All plans must have a 30-day “cooling-off” period between entering into a plan and the start of trading under that plan, and no plan may be shorter than six months or longer than 18 months.
Committees of the Board of Directors
The Board currently has three standing committees: the Compensation Committee, the Audit Committee and the Nominating and Governance Committee. Upon recommendation of the Nominating and Governance Committee, the full Board appoints members of each committee. Each committee is responsible for appointing its chair.
Compensation Committee
The Compensation Committee establishes or approves all policies and procedures related to our human resources function with respect to our executive officers, including employee compensation, incentive programs, and the 401(k) Plan, and administers our stock incentive plans. Additionally, this committee evaluates and establishes the respective compensation of our executive officers on an individual basis, including our CEO and Chief Financial Officer (“CFO”). The Compensation Committee also reviews the compensation of certain other members of our senior management team and recommends to the Board the compensation for our non-employee directors. For a description of the role of the Compensation Committee, its consultants and management in setting executive compensation, please see “Executive CompensationCompensation Discussion and AnalysisHow We Make Decisions Regarding Executive Pay.” The Compensation Committee approves our compensation discussion and analysis included in our annual proxy statements. The Compensation Committee oversees our leadership development and management succession planning, as well as our diversity initiatives.
The agenda for meetings of the Compensation Committee is determined by its Chair with the assistance of our CEO, CFO, Chief Human Resources Officer (“CHRO”) and General Counsel and Secretary. Compensation Committee meetings are regularly attended by the Chairman of the Board and CEO, the CFO, the CHRO and the General Counsel. At certain meetings during fiscal 2020, the Compensation Committee met in executive session. The Compensation Committee’s Chair reports the Committee’s recommendations on CEO executive compensation to the Board, which sets the CEO’s compensation, and reports its determinations on other executive compensation to the Board. Independent advisors and our finance, human resources, benefits and legal departments support the Compensation Committee in its duties and may be delegated authority to fulfill certain administrative duties regarding the compensation programs. The Compensation Committee has authority under its charter to retain, approve fees for (and, as may be necessary or advisable, change or terminate) a compensation consultant, legal counsel or other advisor as it deems necessary to assist in the fulfillment of its responsibilities. The Compensation Committee annually evaluates the independence of its consultants and assesses their performance pursuant to a pre-approval policy.
The Compensation Committee’s charter is available on our website, www.unfi.com. The charter was most recently amended in September 2019. The Compensation Committee held five meetings during fiscal 2020. The current members of the Compensation Committee are Messrs. Heffernan, Muehlbauer and Stahl (chair) and Ms. Dufresne, each of whom is an independent director under the SEC and NYSE rules applicable to compensation committee members.
Audit Committee
The Audit Committee is responsible for monitoring the integrity of our financial reporting process and systems of disclosure controls and internal controls over financial reporting; monitoring the independence and performance of our independent registered public accounting firm; and overseeing our internal audit department. Among the Audit Committee’s duties are to review the results and scope of the audit and other services provided by our independent registered public accounting firm.

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The Audit Committee’s charter is available on our website, www.unfi.com. The charter was most recently amended in October 2018. The Audit Committee held four meetings during fiscal 2020. The current members of the Audit Committee are Ms. Bates (chair) and Messrs. Heffernan, Muehlbauer and Stahl, each of whom is an independent director under SEC rules and the NYSE listing standards applicable to audit committee members. The Board has determined that Ms. Bates and Messrs. Heffernan, Muehlbauer and Stahl are audit committee financial experts, as defined by the rules and regulations of the SEC.
Nominating and Governance Committee
The Nominating and Governance Committee is responsible for developing, reviewing and recommending to the Board for adoption our Corporate Governance Principles; identifying and nominating candidates for election to the Board; assessing and making recommendations to the Board regarding the size and composition of the Board and the size, composition, scope of authority, responsibilities and reporting obligations of each of the Board’s committees; assisting the Board in conducting performance reviews of the Board and its Committees and members; oversight of our environmental, social and governance programs; and other duties and responsibilities. The Nominating and Governance Committee is also responsible for reviewing related party transactions under our Related Party Transaction Policy and oversees certain compliance matters under our Code of Conduct that are not related to finance or accounting (which are overseen by the Audit Committee), and provides oversight of general risk and compliance areas not falling under the Audit Committee or Compensation Committee.
For information regarding the director nomination process undertaken by the Nominating and Governance Committee, please refer to “Proposal 1Election of DirectorsNomination of Directors.”
The Nominating and Governance Committee’s charter is available on our website, www.unfi.com. The charter was most recently amended in October 2018. The Nominating and Governance Committee held six meetings during fiscal 2020. The current members of the Nominating and Governance Committee are Mses. Clark (chair) and Dufresne and Messrs. Artz and Roy, each of whom is an independent director under SEC and NYSE rules.
Board Meetings
During fiscal 2020, the Board met 13 times and following each of the Board’s regular quarterly meetings, the independent directors met in executive session without the presence of management (including meetings conducted by telephone conference). All directors attended at least 75% of the aggregate meetings of the Board and of the committees on which they served. We encourage each member of the Board to attend our annual meeting of stockholders. All of our directors attended our last annual meeting virtually.
Stockholder Engagement
Stockholder engagement is an important and regular part of the Company’s strategy so that the Board and management are aware of and respond to stockholder input on a broad spectrum of business and governance matters. Our Lead Independent Director, the Chair of our Compensation Committee, and various members of management, including our Chief Legal Officer and General Counsel, Chief Human Resources Officer, and Head of Investor Relations, as primary participants, have engaged in discussions with stockholders as part of our efforts to gain an understanding of stockholder views. For the third consecutive year, the Company reached out to a significant percentage of its stockholders. Management found its outreach efforts in 2018, 2019 and 2020 to be very helpful in understanding our investors’ perspectives on various business and governance matters and intends to maintain ongoing discussions with a large number of investors each year.
Topics of discussion included corporate governance, specifically business performance and strategy evolution post-integration of Supervalu and as a result of the COVID-19 experience; Board refreshment and Board leadership structure; our safety and risk response to the COVID-19 pandemic, including how we protected the health and well-being of our associates; our commitments to diversity and inclusion; components of our executive compensation, of which many investors acknowledged the improvements made in response to our stockholder engagement last year; and our sustainability and philanthropy programs. Stockholders were supportive of our efforts to strengthen our existing corporate governance policies and were pleased with our efforts regarding Board refreshment.
Board Evaluation and Refreshment
Our Board regularly evaluates its composition, assessing individual director’s skills, qualifications and experience to align the overall Board composition to best meet the needs of the Company’s evolving long-term business strategy. Each year, the Board assesses the directors to be nominated at the annual meeting. The Board uses a skills matrix to assess the different contributions, background and experience of each director. The Nominating and Governance Committee considers prospective candidates and identifies appropriate individuals for the Board’s further consideration. The Nominating and Governance Committee also assesses the proper mix of skills and expertise for directors serving on the Board’s committees, as well as our Board’s commitment to diversity.

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Summary of Board Skills, Experiences and Qualifications
Skills, Experiences and Qualifications
 
Director
 
 
Artz
Bates
Clark
Dufresne
Funk
Heffernan
Muehlbauer
Roy
Spinner
Stahl
Significant experience in business, education, the professions or public service
 
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
Commitment to areas aligned with the Company’s public interest commitments
 
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
Service as an executive officer for another public company
 
ü
ü
 
 
 
 
ü
ü
ü
ü
Experience in the Company’s industry
 
 
 
 
ü
ü
ü
 
ü
ü
 
Experience with risk oversight
 
ü
ü
ü
ü
ü
ü
ü
 
 
ü
Experience with shareholder engagement
 
 
ü
 
ü
ü
ü
ü
ü
 
ü
Information technology experience
 
 
ü
ü
 
 
 
 
 
 
 
International experience
 
 
 
ü
ü
 
ü
ü
 
 
ü
Experience in leadership development
 
 
ü
ü
ü
ü
 
ü
ü
ü
ü
Experience with mergers and acquisitions
 
 
ü
ü
ü
ü
ü
ü
ü
ü
ü
eCommerce experience
 
 
 
ü
 
 
 
 
 
 
 
Supply chain management experience
 
ü
 
 
 
ü
 
ü
ü
ü
ü
Consumer products/retail experience
 
ü
 
ü
 
 
 
ü
 
 
ü
Senior operations management/CEO
 
ü
ü
 
 
ü
 
 
ü
ü
ü
Strategic thinking, planning and execution
 
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
Experience in broad-scale mergers, acquisitions and integration
 
 
ü
 
ü
 
 
ü
 
 
ü
Operating financial expertise (CFO)
 
ü
ü
 
 
 
 
ü
 
 
ü
Senior operations experience in industry or adjacent industry
 
 
 
 
 
ü
 
 
ü
ü
ü
Highly leveraged / “turnaround” structures experience
 
 
 
 
ü
 
 
 
 
 
ü

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Skills, Experiences and Qualifications
 
Director
 
 
Artz
Bates
Clark
Dufresne
Funk
Heffernan
Muehlbauer
Roy
Spinner
Stahl
Service on other public companies’ audit committee
 
 
ü
ü
ü
 
ü
 
ü
 
ü
Service in the financial reporting process of another public company
 
ü
ü
 
 
 
 
ü
ü
 
ü
Financial expert
 
ü
ü
 
ü
 
ü
ü
 
 
ü
Relevant compensation committee experience
 
 
ü
ü
ü
 
 
 
 
 
ü
Service on the compensation committee of another public company
 
 
ü
ü
 
 
ü
 
ü
 
ü
Relevant experience for the nominating and governance committee
 
 
ü
ü
ü
 
 
 
ü
 
ü
In September 2020, our Board, upon the recommendation of the Nominating and Governance Committee, revised the composition of the Compensation and Nominating and Governance committees. The current composition of each committee is disclosed above. In September 2020, the Board appointed Mr. Roy as Lead Independent Director for a second year, and appointed a new Chair of the Compensation Committee, Mr. Stahl, in anticipation of Mr. Heffernan’s retirement.
The Board has three directors who have served for more than ten years, in addition to our CEO, while the remaining directors have served for eight or fewer years. The overall average tenure of the Board is approximately nine years.
Our Board is diverse in gender and ethnic background, as well as having a broad range of experience. Three out of ten directors are female, with one member identifying as African American and one member identifying as LGBT. Our Nominating and Governance Committee charter provides for the consideration of gender, race and ethnic diversity when considering Board candidates. The Board is highly skilled and qualified, and committed to the Company’s success, as indicated by the high attendance rate and robust discussion and debate that occurs during each Board and committee meeting.
Following the acquisition of Supervalu in fiscal 2019, the Board conducted a thorough self-evaluation process led by a third-party consultant, as well as comprehensive assessment of skills, experience and qualifications desired as a result of the changing strategic needs of the Company. The Nominating and Governance Committee successfully identified two candidates possessing the desired mix of expertise and background to complement the Board’s then-existing skills and experience. The Board appointed James Muehlbauer in April 2019 and Jack Stahl in June 2019 to serve as directors of the Board in recognition of their extensive financial and strategic backgrounds, as well as executive leadership experience. In fiscal 2020, the Board again completed a thorough self-evaluation process and considered additional skills and experience that may be desirable in light of the impacts on our industry of the COVID-19 pandemic and rapidly evolving retail landscape, many of which we believe are long term in nature. In connection with Mr. Heffernan’s retirement, the Board has commenced a search process for one or two additional Board members to complement the existing Board’s skill set and with a focus on seeking diverse candidates.
Environmental, Social and Governance Practices
We have long been committed to incorporating environmentally sustainable and socially responsible practices into our business operations. This commitment is described in our Social and Environmental Policy, which was most recently updated in September 2020 and is available on our website, www.unfi.com. Our Nominating and Governance Committee has direct oversight of our policies and strategies addressing environmental, social and governmental matters, including sustainability, corporate social responsibility and political contributions, and is responsible for reporting to the Board on such matters at least annually.
Our commitment is further evidenced by more than ten years of issuing Corporate Social Responsibility (CSR) reports highlighting our focus on sustainability and philanthropy. Our fiscal 2019 CSR report also referenced both GRI and SASB standards, and those tables are available on our website. In conjunction with our fiscal 2020 CSR report, we expect to announce our 2030 vision, an ambitious ten-year plan to pioneer solutions across the food system. Our plan includes expanding and enhancing our policies and practices related to climate change, waste reduction, food access, safety and well-being and diversity and inclusion. We expect to release our 2020 CSR report in the coming months, which will include more details on our long-term goals and how

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we serve our communities, employees and the environment. When issued, the report will be available on the “ESG” section of our website.
Despite our strong track record, we Believe in Better. In fiscal 2020, we undertook a materiality assessment involving key internal and external stakeholders to identify the areas that we believe will drive greater value for the communities we serve and our broader business. Additionally, we created an executive steering committee to oversee implementation of our ESG initiatives and provide executive sponsorship for our ESG strategy and goals. Examples of our ESG initiatives and commitment to doing better are highlighted below.
Better for Our World
 
 
 
 
Annually report climate performance to CDP
Joined the Climate Collaborative
Sixth consecutive year on Food Logistics’ Top Green Provider list
Regular recycling of delivery fleet to improve efficiency, lower costs and protect planet
Committed to sourcing 100% of top 20 wild caught fish from MSC- or FIP-certified sources
Follow EPA’s Food Recovery Hierarchy to reduce waste
Partner with leading organizations to increase opportunities for diverse-owned businesses, including the National Minority Supplier Development Council
LEED- and solar-powered buildings to provide more efficiency and benefit the environment
 
 
 
 
Better for Our Communities
 
 
 
 
UNFI Foundation funded 69 nonprofits in 2019 and is committed to providing grants to support food injustice in underserved communities
Committed to strength and safety of distribution networks and retail operations during pandemic
Matched associate donations to nonprofits fighting for racial justice and reform
Leading distributor of natural, organic, specialty produce and other products
Dedicated to providing healthy food options to school children by supporting FoodCorps
80% of food waste diversion through donations
Better for Our People
 
 
 
 
Hired a Vice President of Diversity & Inclusion to further enhance commitment to diversity, equity and inclusion
Reviewing and improving our recruiting, training, and talent development practices to remove bias and increase diversity in leadership
Hosted “Community Conversations” for our associates to share experiences and process together
Partnered with Network of Executive Women to enhance our commitment to the advancement of women in the workplace
Ongoing communication with employees through mid-year and year-end performance reviews
Signed pledge to CEO Action for Diversity and Inclusion
Committed to workplace safety and developed robust safety programs, including additional sanitation, social distancing practices, face-covering requirements, temperature checking, and PPE requirements
Launched a wellness program to provide employees with tools and resources to encourage healthy habits and track progress

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Proposal 1—Election of Directors
Directors and Nominees for Director
The Board currently consists of ten directors, each of whose terms will expire at the annual meeting. On November 20, 2020, the Board resolved to decrease its size to nine members as of the date of the Annual Meeting.
Mses. Bates, Clark and Dufresne and Messrs. Artz, Funk, Muehlbauer, Roy, Spinner and Stahl have been nominated to stand for election as directors at the annual meeting to hold office until the next annual meeting of stockholders and until their successors are elected and qualified. Each nominee has indicated his or her willingness to continue to serve if elected by our stockholders. If any nominee should be unable to serve, the person acting under the proxy may vote the proxy for a substitute nominee. We have no reason to believe any of the nominees will be unable to serve if elected.
We have described below information concerning the business experience and qualifications, and the age as of November 16, 2020, of each of our director nominees.
The Board unanimously recommends that stockholders vote “FOR” each of the director nominees. Proxies received by the Board will be voted “FOR” each of the nominees unless a contrary choice is specified in the proxy.

Nominees for Election as Directors for a Term Expiring at the Next Annual Meeting
Eric F. Artz, age 53, has served as a member of the Board since October 2015. Mr. Artz is a member of the Nominating and Governance Committee. Mr. Artz previously served as a member of the Compensation Committee from December 2015 to September 2020. Mr. Artz has served as President and Chief Executive Officer, and member of the board of directors, of Recreational Equipment, Inc. (“REI”) since May 2019. He served as Executive Vice President and Chief Operating Officer of REI from August 2014 to May 2019. In addition to this role, Mr. Artz also served as Executive Vice President, Chief Financial Officer and Treasurer of REI from May 2012 to December 2015. Prior to REI, Mr. Artz served as Chief Financial Officer for Urban Outfitters, Inc. from February 2010 to April 2012. From August 1992 until January 2010, Mr. Artz served in various positions of increasing responsibility at VF Corporation.
Mr. Artz brings valuable knowledge and insight to our Board. The Board values his experience as a Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, which provides him with valuable knowledge and insight regarding operations of retailers as well as the background and experience in overseeing the audits of financial statements, communicating with independent auditors and assisting with the general oversight of accounting and financial reporting processes.
Ann Torre Bates, age 62, has served as a member of the Board since October 2013. Ms. Bates serves as the Chair of the Audit Committee. Ms. Bates has served as a member of the board of directors of Ares Capital Corporation since 2010 and held a directorship at Allied Capital Corporation until it was acquired by Ares Capital Corporation in 2010. Ms. Bates also serves as director or trustee of 17 investment companies in the Franklin Templeton Group of mutual funds. Ms. Bates was a strategic and financial consultant from 1997 to 2012. From 1995 to 1997, Ms. Bates served as Executive Vice President, Chief Financial Officer and Treasurer of NHP, Inc., a national real estate services firm. Ms. Bates previously served as a member of the board of directors of Navient Corporation from April 2014 to August 2016, and she served on the board of directors of Navient’s predecessor, SLM Corporations, from 1997 to 2014.
Ms. Bates’ professional experience and service on other boards brings valuable knowledge and insight to our Board. The Board values her experience serving on audit committees, which provide her with the background and experience in overseeing the audits of financial statements, communicating with independent auditors and assisting with the general oversight of accounting and financial reporting processes.
Denise M. Clark, age 63, has served as a member of the Board since February 2013. Ms. Clark serves as the Chair of the Nominating and Governance Committee. Since October 2018, Ms. Clark has served as a member of the Board of Directors of Caesars Entertainment Corporation and also serves as a member of its Compensation Committee. Ms. Clark served as Senior Vice President and Global Chief Information Officer for The Estée Lauder Companies Inc. from November 2012 until her retirement in March 2017. Prior to that role, Ms. Clark served as Senior Vice President and Chief Information Officer for Hasbro Inc. from October 2007 to November 2012. Ms. Clark also served at Mattel, Inc., where she was Global Chief Technology Officer and later Chief Information Officer for the Fisher Price brand between January 2000 and February 2007. Ms. Clark’s previous experience includes two other consumer goods companies, Warner Music Group, formerly a division of Time Warner Inc., and Apple Inc. Ms. Clark has over 20 years of experience in the delivery of enterprise resource planning, digital platforms and innovative business transformation initiatives.

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Ms. Clark’s extensive background in complex organizations, particularly her expertise involving information technology, allows her to provide the Board valuable guidance on our strategic initiatives, especially as it relates to information technology solutions, and leadership development.
Daphne J. Dufresne, age 48, has served as a member of the Board since October 2016. Ms. Dufresne is a member of the Compensation Committee and Nominating and Governance Committee. Ms. Dufresne has been a Managing Partner of GenNx360 Capital Partners since January 2017. Ms. Dufresne was previously a Managing Director of RLJ Equity Partners, a private equity fund, from December 2005 to June 2016. Ms. Dufresne participated in building the RLJ investment team, raising capital to fund its operations and constructing a partnership with The Carlyle Group, a global private equity firm. Prior to that role, Ms. Dufresne was a Venture Partner during 2005 with Parish Capital Advisors, an investment fund for emerging and experienced institutional investors and a Principal from 1999 to 2005 at Weston Presidio Capital, a private equity organization. She also served as Associate Director in 1997 in the Bank of Scotland’s Structured Finance Group. Ms. Dufresne has been a director of Condor Hospitality Trust, Inc. since June 2015, and was appointed chair in May 2019.
Ms. Dufresne’s professional experience, including her role as an equity investor for over 23 years, brings valuable knowledge and insight to our Board. Ms. Dufresne is very familiar with conducting due diligence, negotiating purchase and sale agreements and leading the board during these processes. She possesses experience in owning and managing enterprises like our Company and is familiar with corporate finance, strategic business planning activity and general issues involving various types of stockholders.
Michael S. Funk, age 66, has been a member of the Board since February 1996 and served as Chair of the Board from January 2003 to December 2003, and again from September 2008 to December 2016. Mr. Funk served as our President and Chief Executive Officer from October 2005 to September 2008. Mr. Funk also served as Vice Chair of the Board from February 1996 until December 2002, as our Chief Executive Officer from December 1999 until December 2002 and as our President from October 1996 until December 1999. From its inception in July 1976 until April 2001, Mr. Funk served as President of Mountain People’s Warehouse, Inc., now known as United Natural Foods West, Inc., one of our wholly-owned subsidiaries.
Mr. Funk’s extensive knowledge of our industry and our historical operations, as well as his past service as our Chief Executive Officer, brings to the Board valuable insight into the core operations of our Company and a deep understanding of the natural and organic products distribution business. His institutional knowledge of all operational aspects of our business resulting from his long-term involvement with our Company is valuable to the Board.
James L. Muehlbauer, age 59, has served as a member of the Board of Directors since April 2019. Mr. Muehlbauer serves as a member of the Audit Committee and Compensation Committee. Mr. Muehlbauer previously served as a member of the Nominating and Governance Committee from May 2019 to September 2020. Mr. Muehlbauer served as the Executive Vice President, Chief Financial and Administrative Officer for The Valspar Corporation from 2013 to 2017. Prior to that role, Mr. Muehlbauer served as Executive Vice President and Chief Financial Officer of Best Buy Co., Inc. from 2007 to 2013.
Mr. Muehlbauer’s extensive finance, commercial and leadership experience with complex, multinational organizations provide him with background and experience in strategic planning, financial oversight, and large-scale business transformations. Mr. Muehlbauer’s knowledge and experience in broad strategic transitions and large-scale integration efforts are valuable to our Board.
Peter A. Roy, age 64, has served as a member of the Board since June 2007 and as the Lead Independent Director since September 2019. Mr. Roy serves as a member of the Nominating and Governance Committee. Mr. Roy is an entrepreneur and since 1999, Mr. Roy has served as a strategic advisor to North Castle Partners, a private equity firm focused on healthy living and aging investments. Mr. Roy has worked with many iconic brands such as Stonyfield Farms and Applegate. From 1993 to 1998, Mr. Roy served as President of Whole Foods Market, Inc. and, for five years prior to that, served as President of that company’s West Coast Region.
Mr. Roy’s experience as the President of Whole Foods Market, Inc. allows him to provide the Board essential insight and guidance into the day-to-day operations of natural and organic products retailers, including our largest customer. In addition, his experience in the healthy lifestyle industry helps the Board maintain its focus on our core values, including our sustainability goals.
Steven L. Spinner, age 60, has served as Chairman of the Board since December 2016 and as our Chief Executive Officer and as a member of the Board since September 2008. He also served as our President from September 2008 until August 2018. Prior to joining the Company in September 2008, Mr. Spinner served as a director and as Chief Executive Officer of Performance Food Group Company (“PFG”) from October 2006 to May 2008, when PFG was acquired by affiliates of The Blackstone Group and Wellspring Capital Management. Mr. Spinner previously had served as PFG’s President and Chief Operating Officer beginning in May 2005. Mr. Spinner served as PFG’s Senior Vice President and Chief Executive Officer—Broadline Division from February 2002 to May 2005 and as PFG’s Broadline Division President from August 2001 to February 2002. Mr. Spinner has served as a

13


Director of ArcBest Corporation, a holding company of businesses providing integrated logistics solution, since July 2011 and as its Lead Independent Director since April 2016.
Mr. Spinner’s extensive experience of over 30 years in the wholesale food distribution business, including having held executive management positions with major distribution businesses in the United States, brings valuable insight to the Board beyond the knowledge and insight he brings from being our Chief Executive Officer.
Jack Stahl, age 67, has served as a member of our Board since June 2019. Mr. Stahl serves as Chair of the Compensation Committee and as a member of the Audit Committee. Mr. Stahl has served as a member of the Board and the Lead Director of Catalent, Inc., a contract manufacturing and development company for drugs, biologics and consumer health products since August 2014. Mr. Stahl served as President and Chief Executive Officer of Revlon Inc., a multinational cosmetics, skin care, fragrance and personal care company, from 2002 until his retirement in 2006. Prior to joining Revlon, Mr. Stahl served as President and Chief Operating Officer of The Coca-Cola Company from 2000 to 2001, after previously serving in various management positions of increasing responsibility, including Chief Financial Officer, during a tenure with Coca-Cola which began in 1979. Today, Mr. Stahl also serves on the U.S. board of advisors of CVC Capital, a private equity firm. Additionally, he formerly served on the Boards of Board of Advantage Solutions LLC, Schering Plough Corporation, Dr Pepper Snapple Group, Saks, Inc., Coty Inc. and Ahold Delhaize, and was chairman of the board of managers of New Avon LLC.
Mr. Stahl has extensive leadership and significant Board experience. Mr. Stahl has a long-term record of profit and value driving performance in both stable and turnaround operating environments, and significant experience with complex, large, and dynamic organizations. At The Coca-Cola Company and at Revlon, he gained significant skills and general management experience in building brands, maximizing customer relationships, and reducing costs.
Majority Vote Standard for Election of Directors
Our Bylaws provide for a majority voting standard for the election of directors in an uncontested election. If the number of nominees exceeds the number of directors to be elected in an election (a contested election), directors will be elected by a plurality standard. When the number of nominees does not exceed the number of directors to be elected (an uncontested election), however, as is the case at this year’s annual meeting, our Bylaws require each of the directors to be elected by a majority of the votes cast (that is, the number of shares voted “for” a director must exceed the number of shares voted “against” that director). If a nominee who is serving as a director is not elected at the annual meeting, under Delaware law the director would continue to serve on the Board as a “holdover director.” However, under our Bylaws, any director who fails to be elected must offer to tender his or her resignation to the Board. The Nominating and Governance Committee would then make a recommendation to the Board whether to accept or reject the resignation, or whether other action should be taken. The Board will act on the Nominating and Governance Committee’s recommendation and publicly disclose its decision and the rationale behind it within 90 days from the date the election results are certified. The director who offers to tender his or her resignation will not participate in the Board’s decision or the Nominating and Governance Committee’s deliberations (if the director is a member of that committee). All nominees for election as directors at the annual meeting are currently serving on the Board.
Nomination of Directors
The Nominating and Governance Committee reviews the qualifications of every person recommended as a nominee to the Board, including potential nominees recommended by third-party recruiting firms, to determine whether the recommended nominees are qualified to serve on the Board. The Nominating and Governance Committee has adopted standards by which it identifies nominees and determines if nominees are qualified to serve on the Board. The Nominating and Governance Committee evaluates recommended nominees in accordance with the following criteria:
Personal Characteristics. The Nominating and Governance Committee considers the personal characteristics of each nominee, including the nominee’s integrity, accountability, ability to make informed judgments, financial literacy, professionalism and willingness to meaningfully contribute to the Board (including by possessing the ability to communicate persuasively and address difficult issues). In addition, the Nominating and Governance Committee evaluates whether the nominee’s previous experience reflects a willingness to establish and meet high standards of performance, both for him or herself and for others.
Core Competencies. The Nominating and Governance Committee considers whether the nominee’s knowledge and experience would contribute to the Board possessing certain core competencies. The Nominating and Governance Committee believes that the Board, as a whole, should possess competencies in accounting and finance, business judgment, management best practices, senior leadership, crisis response, industry knowledge, strategy and vision, and broad-scale transition and transformation, and it periodically reassesses the specific skill sets that are needed by the Board.
Board Independence. The Nominating and Governance Committee considers whether the nominee would qualify as “independent” under SEC rules and the NYSE listing standards.

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Director Commitment. The Nominating and Governance Committee expects that each of our directors will prepare for and actively participate in meetings of the Board and its committees, provide advice and counsel to our management, develop a broad knowledge of our business and industry and, with respect to an incumbent director, maintain the expertise that led the Nominating and Governance Committee to initially select the director as a nominee. The Nominating and Governance Committee evaluates each nominee on his or her ability to provide this level of commitment if elected to the Board.
Additional Considerations. Each nominee also is evaluated based on the overall needs of the Board and the diversity of experience he or she can bring to the Board, whether in terms of specialized knowledge, skills or expertise. Our Nominating and Governance Committee charter provides for the consideration of gender, race, and ethnic diversity when considering Board candidates, and the Committee is committed to maintaining a diverse Board. The Nominating and Governance Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee our businesses and add value to strategic plans and initiatives.
Following this evaluation, the Nominating and Governance Committee will ultimately make recommendations for membership on the Board and review such recommendations with the Board, which will decide whether to appoint the candidate to the Board.
Stockholder Director Recommendations and Proxy Access
Stockholder Director Recommendations
The Nominating and Governance Committee evaluates nominees recommended by stockholders on the same basis as nominees recommended by any other sources, including determining whether the candidate is qualified to serve on the Board based on the qualitative standards described above. To have a nominee considered by the Nominating and Governance Committee, a stockholder must follow the procedures in our Bylaws related to director nominations described under “Other MattersStockholder Proposals for the Next Annual Meeting of Stockholders.” Written notice must be delivered or sent by first class U.S. mail addressed to Corporate Secretary, United Natural Foods, Inc., 313 Iron Horse Way, Providence, RI 02908.
Proxy Access
We have also adopted a proxy access provision in our Bylaws that permits a stockholder, or a group of up to 20 stockholders, owning, continuously for at least three years, shares of our stock representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees, provided that the stockholder(s), the nominee(s), and the notice satisfy the requirements in our Bylaws. The number of potential proxy access nominees nominated by all eligible stockholders shall not exceed the greater of (A) two or (B) 20% of the directors then in office. Under our Bylaws, to be timely, notice of proxy access director nominations must be received by our Corporate Secretary at the address specified above no earlier than 150 days and no later than 120 days prior to the first anniversary of the date the Company mailed its proxy statement for the preceding year’s annual meeting; provided, however, that if (A) the annual meeting is not within 30 days before or after the anniversary date of the preceding year’s annual meeting, or (B) no annual meeting was held during the preceding year, to be timely the stockholder notice must be received no later than 120 days prior to such annual meeting or, if later, the tenth day after the day on which notice of the date of the meeting was mailed or public disclosure of the date of the annual meeting is first made, whichever occurs first.
Communication with the Board of Directors
Our stockholders may communicate directly with the Board. All communications should be in written form and directed to our Corporate Secretary, United Natural Foods, Inc., 313 Iron Horse Way, Providence, RI 02908, who will forward such communications to the appropriate party. All correspondence will be compiled and summarized by the Corporate Secretary and periodically submitted to the Board or individual directors. The Corporate Secretary may also forward certain correspondence elsewhere within the Company for review by a subject matter expert and for a response, as appropriate.

15



Director Compensation
The Board and the Compensation Committee review and determine compensation for our non-employee directors, based in part on a review of the annual Director Compensation Survey prepared by the National Association of Corporate Directors and other reputable sources, as well as with the input from the Compensation Committee’s independent consultant, Semler Brossy Consulting Group, LLC (“Semler Brossy”) based on benchmarking of comparable peer company director compensation. The Compensation Committee and the Board believe that we should fairly compensate non-employee directors for work required in a company of our size and scope and that compensation should align the non-employee directors’ interests with the long-term interest of our stockholders. Our non-employee director stock ownership guidelines, which are discussed in greater detail below, are also designed to align the interests of our non-employee directors with those of our stockholders. Mr. Spinner, our CEO, does not receive compensation for his service on the Board, including in his capacity as Chair of the Board.
Non-Employee Director Compensation
The components of our non-employee director compensation are annual cash retainers and awards of time-based restricted stock units (“RSUs”). Each non-employee director is also reimbursed for direct expenses (e.g. travel, hotel, and meals) incurred in connection with his or her attendance at meetings of the Board and its committees.
Effective in March 2020, non-employee director compensation consists of:
Annual cash retainer of:
$90,000 for serving as a director;
$30,000 for serving as the chair of the Audit Committee;
$20,000 for serving as chair of the Compensation Committee; and
$20,000 for serving as chair of the Nominating and Governance Committee.
Annual equity grants of RSUs having a value, based on the stock price on the date of grant, of:
$162,000 for serving as a director; and
an additional $50,000 for serving as Lead Independent Director.
Prior to March 2020, the annual cash retainer for serving as the chair of the Nominating and Governance Committee was $15,000. Fiscal 2020 equity awards to non-employee directors will vest one-year from the date of grant of the award.
Deferred Compensation
Our non-employee directors were eligible to participate in the United Natural Foods, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) until it was frozen in February 2019. Non-employee directors were also eligible to defer compensation under the United Natural Foods, Inc. Deferred Stock Plan (the “Deferred Stock Plan”) until it was frozen as to new deferrals in January 2007. The Deferral Compensation Plan and the Deferred Stock Plan (together, the “Deferral Plans”) were terminated in February 2019, and amounts held in the Deferral Plans were distributed in March 2020. For a description of the Deferral Plans, please see “Executive Compensation TablesNonqualified Deferred CompensationFiscal 2020.”

16



Director Compensation Table—Fiscal 2020
The following table summarizes compensation provided to each individual who served as a non-employee director during fiscal 2020.
Director Compensation
Name
 
Fees Earned
or Paid in
Cash ($)(1) 
 
Stock
Awards
($)(2)
 
Option
Awards
($)(3) 
 
Change in
Pension Value
and
Nonqualified
Deferred
Compensation
Earnings ($)(4)
 
Total ($)
Eric F. Artz
 
90,000

 
162,000

 

 

 
252,000

Ann Torre Bates
 
120,000

 
162,000

 

 


282,000

Denise M. Clark
 
108,075

 
162,000

 

 
426

 
270,501

Daphne J. Dufresne
 
90,000

 
162,000

 

 
2,392

 
254,392

Michael S. Funk
 
90,000

 
162,000

 

 

 
252,000

James P. Heffernan
 
110,000

 
162,000

 

 

 
272,000

James L. Muehlbauer
 
90,000

 
235,233

 

 

 
325,233

Peter A. Roy
 
89,796

 
213,096

 

 

 
302,892

Jack Stahl
 
90,000

 
206,827

 

 

 
296,827

(1)
This column shows the amount of cash compensation earned in fiscal 2020 for service on the Board and its committees.
(2)
The amounts contained in this column represent the grant date fair value for the RSUs granted in fiscal 2020 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Stock Compensation (“ASC 718”). The grant date fair value for RSUs is calculated based on the closing price of our common stock on the NYSE on the date of grant.
(3)
As of August 1, 2020, the directors held options to purchase the following number of shares of common stock: Mr. Artz—none; Ms. Bates—none; Ms. Clark—none; Ms. Dufresne—none; Mr. Funk—3,500 shares; Mr. Heffernan—2,660 shares; Mr. Muehlbauer—none; Mr. Roy—2,660 shares; and Mr. Stahl—none.
(4)
During fiscal 2019, prior to the termination of the Deferred Compensation Plan, Ms. Clark and Mr. Heffernan had elected to defer RSUs under the Deferred Compensation Plan. Deferred shares are valued at the current market price of our common stock, and therefore have no above market or preferential earnings. Additionally, Mses. Clark and Dufresne elected to defer a portion of their director fees paid in cash under the Deferred Compensation Plan prior to it being frozen. Such amounts disclosed above reflect earnings on the deferred compensation in fiscal 2019 and paid in March 2020. See “Executive Compensation Tables—Nonqualified Deferred Compensation—Fiscal 2020” for a description of how the portion of directors’ fees payable in cash earned interest.
Stock Ownership Guidelines
All non-employee directors are required to hold shares of our stock in an amount that is determined in accordance with the requirements of our stock ownership guidelines. The guidelines provide that each of our non-employee directors must acquire and hold shares of our common stock valued at five times the annual cash retainer, not including supplemental retainers for committee leadership. Our stock ownership guidelines require that each new non-employee director is expected to comply with the policy by the end of the fifth year after he or she becomes a member of the Board. Compliance with the guidelines is tested once per year for as long as the director serves on the Board. When calculating whether a director owns a sufficient number of shares under these guidelines, shares owned in a deferred compensation plan are included in the number of shares owned. Vested and unvested restricted stock and RSUs are also included, but unvested stock options do not count. Vested stock options and stock appreciation rights count to the extent of their net value after deduction for the exercise price. Directors are not allowed to hedge their interests in the stock held pursuant to the guidelines. Given the sustained decline in our stock price at the level specified in our stock ownership guidelines for 18 months, the accumulation period was reset for our directors as of August 1, 2020, in accordance with the terms of the guidelines, and they will be required to accumulate shares to reach the required ownership level by the end of that period. As of August 1, 2020, each of our directors was in compliance.

17


Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Ms. Dufresne and Messrs. Heffernan, Muehlbauer and Stahl. All members of the Compensation Committee are independent within the meaning of the NYSE listing standards, and no member is an employee or former employee of the Company. During fiscal 2020, no member of the Compensation Committee had any relationship requiring disclosure under “Certain Relationships and Related Transactions” below. During fiscal 2020, none of our executive officers served as a director or a member of the compensation committee (or other committee serving an equivalent function) of any other entity for which one of whose executive officers served as a director on our Board or as a member of our Compensation Committee.

Certain Relationships and Related Transactions
Review and Approval of Related Party Transactions
Pursuant to our Related Party Transaction Policy, our Nominating and Governance Committee reviews all transactions in which the Company or any of its subsidiaries is a participant if a “related party” will have a direct or indirect interest and the amount involved or expected to be involved in any fiscal year exceeds $120,000. The transaction will not be approved unless, after a consideration of all relevant circumstances, the Committee determines that the transaction is in the best interests of the Company. The Nominating and Governance Committee reports any transaction that has been approved to the Audit Committee and the full Board. For purposes of this policy, “related parties” include our directors, nominees for director, executive officers, greater than 5% beneficial owners, any of their immediate family members (as defined in the policy, which includes additional family members beyond the SEC’s related person disclosure rules) or any entity in which they have a material interest. Among the factors that must be considered are: the nature of the related party’s interest in the transaction; the material terms of the transaction, including whether the terms of the transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party; the significance of the transaction to the related party and the Company; whether the transaction would impair the judgment of a director or executive officer to act in the best interests of the Company; compliance with applicable law; and any other factors deemed appropriate by our Nominating and Governance Committee. As required under SEC regulations, transactions between us and any related person in which the amount involved exceeds $120,000 and a related person has a direct or indirect material interest are disclosed in this proxy statement.
Each of our executive officers, directors and nominees for director is required to complete and deliver to us an annual questionnaire that includes, among other things, a request for information relating to any transactions in which (i) any executive officer, director, nominee, beneficial owner or any of their respective immediate family members or affiliates, on the one hand, and (ii) the Company or any of its subsidiaries, on the other hand, participates. We review the responses to these questionnaires as part of our process for determining whether disclosure is required to be made under the SEC’s related person disclosure rules.
Transactions with Related Persons
Steven Spinner has a minority interest in a private equity fund that is managed by his brother that owns a minority interest of less than 10% in each of two of the Company’s suppliers. In addition, Steven Spinner’s brother has direct ownership interests in each of these suppliers in excess of 10% of each company. Consolidated annual purchases from the suppliers for fiscal 2020 were approximately $6.0 million. Supplier terms are substantially the same as other suppliers with whom we have similar purchase volumes. We do not believe that Steven Spinner or his brother has a material interest in these transactions.

18



Audit Committee Report
The Audit Committee of the Board of Directors consists solely of independent directors, as defined by the NYSE listing standards and Section 10A of the Exchange Act and SEC rules thereunder, and it operates under a written charter adopted by the Board of Directors. The composition of the Audit Committee, the attributes of its members and its responsibilities, as reflected in its charter, are intended to be in accordance with applicable requirements for corporate audit committees. The Audit Committee reviews and assesses the adequacy of its charter on an annual basis. A copy of the Audit Committee’s current charter can be found in the Investors section of our website, www.unfi.com. The Board has determined that all Audit Committee members qualify as “audit committee financial experts” within the meaning of SEC regulations and have accounting and related financial management expertise in accordance with the NYSE listing standards.
The Audit Committee has prepared the following report on its activities with respect to the audited consolidated financial statements for the fiscal year ended August 1, 2020 (for purposes of this report, the “audited financial statements” or “consolidated financial statements”). The following report of the Audit Committee does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other of our filings under the Securities Act of 1933, as amended (the “Securities Act”) or the Exchange Act, except to the extent we specifically incorporate this report by reference in the specified filing.
As part of its specific duties, the Audit Committee reviews the Company’s financial reporting process on behalf of the Board of Directors; reviews the financial information issued to stockholders and others, including a discussion of the quality, and not only the acceptability, of our accounting principles, the reasonableness of significant judgments, and the clarity of discussions in the financial statements; and monitors our systems of internal control over financial reporting and the audit process. Management is responsible for the preparation, presentation and integrity of our financial statements, accounting and financial reporting principles, and disclosure controls and procedures designed to drive compliance with accounting standards and applicable laws and regulations. Management also is responsible for objectively reviewing and evaluating the adequacy, effectiveness and quality of our own systems of internal control over financial reporting. Our independent registered public accounting firm, KPMG LLP, is responsible for performing an independent integrated audit of the consolidated financial statements and the effectiveness of internal control over financial reporting and expressing an opinion as to whether the consolidated financial statements conform with accounting principles generally accepted in the United States (“GAAP”) and as to whether the Company maintained effective internal control over financial reporting.
The Audit Committee has met and held discussions with management and KPMG LLP. In our discussions, management has represented to the Audit Committee that the Company’s consolidated financial statements were prepared in conformity with GAAP. The Audit Committee has reviewed and discussed the audited financial statements with management and KPMG LLP. The Audit Committee meets with our internal auditors and KPMG LLP, with and without management present, to discuss the results of their examinations, the evaluations of the Company’s internal controls and the overall quality of the Company’s financial reporting.
The Audit Committee held four formal meetings in fiscal 2020. The Audit Committee discussed with KPMG LLP all matters required to be discussed in accordance with auditing standards, including the statement on Public Company Accounting Oversight Board Auditing Standard No. 1301, Communications with Audit Committees.
KPMG LLP has also provided to the Committee the written disclosures and the letter required by the Public Company Accounting Oversight Board regarding the independent accountant’s communications with the Audit Committee concerning independence, and the Audit Committee has considered and discussed with KPMG LLP the firm’s independence and the compatibility of any non-audit services provided by the firm with its independence.
Based on the Audit Committee’s review of the audited financial statements and the review and discussions noted above, the Audit Committee recommended that the Board of Directors include the audited financial statements in the Company’s Annual Report on Form 10-K for the year ended August 1, 2020, for filing with the SEC.
 
 
Ann Torre Bates, Chair
 
 
James P. Heffernan
 
 
James L. Muehlbauer
 
 
Jack Stahl
    

19



Executive Officers of the Company
Our executive officers are elected on an annual basis and serve at the discretion of our Board of Directors. Our executive officers and their ages as of November 16, 2020 are listed below:
Name
 
Age
 
Position
Steven L. Spinner
 
60
 
Chief Executive Officer and Board Chairman
John W. Howard
 
51
 
Chief Financial Officer
Danielle Benedict
 
48
 
Chief Human Resources Officer
Eric A. Dorne
 
60
 
Chief Operating Officer
Jill E. Sutton
 
49
 
Chief Legal Officer, General Counsel and Corporate Secretary
Christopher P. Testa
 
50
 
President
    
Described below is information concerning the business experience and qualifications of each of our executive officers, except Mr. Spinner whose business experience and qualifications are described above in the section “Proposal 1—Election of Directors.”

John W. Howard was appointed Interim Chief Financial Officer in August 2019 and then later named Chief Financial Officer in February 2020. Mr. Howard joined us in July 2019 as Senior Vice President, Finance. Prior to that, Mr. Howard served as Interim Chief Financial Officer for Prime Therapeutics from July 2018 to May 2019. From August 2014 to July 2017, Mr. Howard was Vice President, Corporate Finance for Valspar Corporation leading the global accounting, tax, treasury, regional CFOs and corporate financial planning and analysis. Prior to that, Mr. Howard held a number of finance and tax roles at Celanese Corporation and Reichhold, Inc. Mr. Howard began his career as a tax consultant with Arthur Anderson and PricewaterhouseCoopers.
Danielle Benedict was appointed as our Chief Human Resources Officer in September 2017. Ms. Benedict previously served as our Senior Vice President, Human Resources from May 2016 to September 2017 and as our National Vice President, Human Resources from August 2014 to May 2016 and Director, Compensation & Benefits from April 2013 to August 2014. Prior to joining us, Ms. Benedict was Vice President, Human Resources & Leadership Development at Clean Harbors Environmental Services from 2007 to 2013. She began her career with Dunkin Brands, Inc. in 1999.
Eric A. Dorne was appointed Chief Operating Officer in March 2020. Mr. Dorne served as our Chief Administrative Officer and Chief Information Officer from September 2016 to March 2020. Mr. Dorne previously served as our Senior Vice President, Chief Information Officer from September 2011 to September 2016. Prior to joining us, Mr. Dorne was Senior Vice President and Chief Information Officer for The Great Atlantic & Pacific Tea Company, Inc., the parent company of the A&P, Pathmark, SuperFresh, Food Emporium and Waldbaum’s supermarket chains located in the Eastern United States from January 2011 to August 2011, and Vice President and Chief Information Officer from 2005 to 2011. In his more than 30 years at The Great Atlantic & Pacific Tea Company, Mr. Dorne held various executive positions including Vice President of Enterprise IT Application Management and Development, Vice President of Store Operations Systems and Director of Retail Support Services.
Jill E. Sutton has served as our Chief Legal Officer, General Counsel and Corporate Secretary since October 2018. From May 2018 to October 2018, she served as our Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary. Prior to joining us, Ms. Sutton was Deputy General Counsel and Corporate Secretary at General Motors from 2015 to 2018 and Executive Vice President, General Counsel and Corporate Secretary at Tim Hortons, Inc. from 2012 to 2015. From 2006-2012, Ms. Sutton held various leadership roles of increasing accountability in the legal department at Tim Hortons, Inc.
Christopher P. Testa has served as our President, United Natural Foods, Inc. since August 1, 2018. In March 2020, Mr. Testa assumed additional oversight of supplier services, customer care and the Canadian business. From August 2016 to August 2018, he served as our President, Atlantic Region. Mr. Testa previously served as President, Woodstock Farms Manufacturing, from September 2012 to August 2016 and President, Blue Marble Brands, from August 2009 until August 2016. Mr. Testa served as Vice President of Marketing for Cadbury Schweppes Americas Beverages from 2002 to 2005 and as CEO of Wild Waters, Inc. from 2005 to 2009.


20


Executive Compensation
Compensation Discussion and Analysis
Overview
In this section, we describe the principles, policies and practices that form the basis for our executive compensation program and how they were applied to our Named Executive Officers in fiscal 2020, as well as changes we have made or expect to make for fiscal 2021. For purposes of this Compensation Discussion and Analysis, the following individuals were our Named Executive Officers for fiscal 2020:
Chief Executive Officer and Board Chairman (Steven L. Spinner);
Chief Financial Officer (John W. Howard);
Chief Operating Officer (Eric A. Dorne);
Chief Legal Officer, General Counsel and Corporate Secretary (Jill E. Sutton);
President (Christopher P. Testa);
(Former) Chief Executive Officer of SUPERVALU INC. and UNFI Chief Operating Officer (Sean F. Griffin); and
(Former) Chief Financial Officer (Michael P. Zechmeister).
Mr. Zechmeister resigned from his position as our Chief Financial Officer effective August 23, 2019. Mr. Howard was appointed as our Interim Chief Financial Officer in August 2019 and our Chief Financial Officer in February 2020. Mr. Griffin retired from his position as CEO, Supervalu and Chief Operating Officer effective July 31, 2020, and he provided consulting services through November 2020. In anticipation of Mr. Griffin’s retirement at the end of the fiscal year, Mr. Dorne and Mr. Testa took on expanded responsibilities in March 2020.
Our compensation policies and programs are designed to support the achievement of our strategic business plans by motivating, retaining, and attracting exceptional talent to develop and execute our key objectives. Our ability to compete effectively in the marketplace depends on the knowledge, capabilities and integrity of our leaders. Our compensation programs help create a high-performance, outcome-driven and principled culture by holding leaders accountable for delivering results, developing our employees and exemplifying our core values. In addition, we believe our compensation policies and programs for leaders and employees are appropriately balanced and reinforce short- and long-term results, and therefore drive behavior that is aligned with our overall objectives of driving long-term growth and stockholder value for UNFI.
In fiscal 2020, we adopted further changes in our executive compensation policies to reflect best practices. We proactively sought the views of our stockholders through our annual stockholder engagement program and have adopted changes that responded to stockholder feedback. We continue to value and respond to the feedback we receive on executive compensation, as further described below.

21


Executive Compensation Program Highlights
Our executive compensation program is designed to align our executive compensation with long-term stockholder interests and incorporates the following best practices:
 
 
WHAT WE DO
 
 
WHAT WE DON’T DO
 
ü
Our Named Executive Officer pay is aligned with financial performance, with variable performance-based pay constituting 76% - 85% of Named Executive Officer compensation in fiscal 2020
 
û
No uncapped incentive opportunities
 
û
No change in control agreements are expected to be extended beyond key executive officers and the existing group
 
 
 
ü
We grant incentive compensation based on rigorous performance conditions and peer group comparisons
 
û
No severance agreements are expected to be extended beyond existing group and are time-bound
 
 
 
 
 
ü
Performance-based incentive awards are tied 100% to pre-established goals; adjustments to performance targets and conditions considered under pre-established guidelines for Compensation Committee consideration
 
û
No tax gross-ups of severance or change in control payments
 
 
 
 
 
 
 
û
No hedging or short sales of our stock; no pledging
 
 
 
û
No excessive perquisites
 
ü
Our Compensation Committee utilized the services of an independent compensation consultant who provides recommendations on CEO and other Named Executive Officer pay
 
û
No supplemental retirement benefits
 
 
 
û
No guaranteed bonuses
 
 
 
û
No incentives that motivate excessive risk-taking
 
 
 
û
No acceleration of equity awards expected for executive officers
 
ü
Our change in control severance benefits are double-trigger
 
 
 
 
 
 
 
 
ü
Change in control agreements are set at market multiple and cover only executive officers and small groups of officers under pre-existing agreements
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ü
Employment agreements with Steven Spinner and Sean Griffin include post-termination non-compete and non-solicitation clauses, as well as severance and change in control severance terms
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ü
Severance agreements for other executives are limited to 1x multiple of base and bonus and to three-year terms (from unlimited terms) and cover only executive officers and a small group of officers under pre-existing agreements in exchange for non-compete and no solicitation covenants
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ü
We have a policy for recoupment of performance-based compensation applicable to our Named Executive Officers and other senior officers, which we most recently enhanced in September 2020 to permit the Board to require forfeiture of incentive compensation in the event of misconduct causing reputational harm
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ü
We have robust stock ownership guidelines (that we strengthened in September 2020) for Named Executive Officers and certain other officers
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ü
Equity awards continue to vest through qualifying retirement, with proration in year of retirement to match service period
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ü
We require employment and post-employment covenants (including non-compete, non-solicitation and assignment of intellectual property) for executive officers and all equity and bonus participants
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



22


Business and Performance Highlights
We are a leading distributor of natural, organic, specialty, produce, and conventional grocery and nonfood products, and provider of retail services in the United States and Canada. We offer products consisting of national, regional and private label brands grouped into six product categories: grocery and general merchandise; produce; perishables and frozen foods; nutritional supplements and sports nutrition; bulk and food service products; and personal care items. Through our October 2018 acquisition of Supervalu, we have become North America’s premier wholesaler with 55 distribution centers and warehouses representing approximately 29 million square feet of warehouse space.
In fiscal 2020, we moved closer to completing the integration of Supervalu and positioned ourselves for future growth. Our operating performance in fiscal 2020 benefited from the shift in food-at-home consumption driven by the impact of the global COVID-19 pandemic, during which we fulfilled our role as a critical link in the North American food supply chain while prioritizing the safety and well-being of our associates. By the end of fiscal 2020, we had completed the consolidation of five distribution centers in the Pacific Northwest into two distribution centers. We expect this consolidation to provide significant future operating benefits. We now operate more than 55 distribution centers and warehouses, have more than 28,000 employees and serve approximately 30,000 unique customer locations.
Fiscal 2020 was a monumental year for UNFI as the flexibility and strength of our supply chain network led to full-year results that exceeded our expectations. At the same time, we focused on keeping our associates safe and maintaining the food supply chain for communities across North America through the unprecedented events of 2020, including the pandemic, civil unrest, and natural disasters. We are continuing to execute with passion and purpose on our strategy to drive further growth in fiscal 2021.

Key Business Highlights from Fiscal 2020:
Net sales of approximately $26.5 billion.
Adjusted EBITDA of $673 million. (see Annex B for reconciliation of non-GAAP metrics (including adjusted EBITDA) to the most comparable GAAP metrics).
Continued focus on debt reduction; and accelerated reduction of outstanding net debt by $388 million as of year end.
We exceeded our original cost synergy expectations by the end of the fourth quarter and believe we have further cost savings opportunities that we plan to pursue in fiscal 2021 and beyond.
We were designated as an essential business, which enabled us to serve our customers and consumers during the COVID-19 pandemic; we rallied to meet the surge in demand while prioritizing the health and safety of our associates, customers and communities.

performancehighlights2.jpg
Say on Pay Vote and Investor Engagement
Our annual say-on-pay vote is one of our opportunities to receive feedback from stockholders regarding our executive compensation program. At our annual meeting of stockholders in December 2019, we submitted a proposal to our stockholders to approve, on an advisory basis, our executive compensation for our Named Executive Officers, and 72.7% of our stockholders voted for that proposal, as compared to over 91% in December 2018. Our Board and Compensation Committee took this matter seriously and sought additional feedback from investors through our stockholder engagement process. In addition to regular communication with our stockholders about our business results, we share relevant information and solicit feedback from our

23


stockholders on our executive compensation programs, corporate governance, and business priorities including through our established annual stockholder engagement program.
In recent years, we have made several changes to our executive compensation programs in response to our investor engagement activities. At the end of fiscal 2020 and the beginning of fiscal 2021, we conducted our third annual stockholder outreach program, and we met with stockholders representing approximately 50% of our common stock outstanding. Investors we met with viewed the changes we have made to our compensation program and overall governance principles and practices positively.
Our Response to Stockholder Feedback
 
 
 
Enhanced our recoupment policy to permit the Board to require forfeiture of incentive compensation in the event of certain misconduct causing reputational harm, and to provide for reporting of any required recoupment or forfeiture thereunder in certain circumstances;
 
Implemented the use of tally sheets (showing all forms of compensation for each officer) and measurements of internal pay equity, beginning in fiscal 2019 and expanding the use of these tools and measurements into fiscal 2020;
 
 
 
Removed duplicative performance metrics from short- and long- term incentive plans and revised payout levels at threshold and maximum to 50% and 150%, respectively, from 35% and 200%, respectively, to limit potential maximum payments, and further align our program to market practice at both the threshold and maximum payout;
 
Removed subjective personal goals from our annual cash incentive program and tied all payouts under this program to pre-established financial goals that are aligned with strategic initiatives;
 
 
 
Aligned all executives, including the CEO, to adjusted EBITDA as the single metric for the annual cash incentive program to support a unified focus on growth in core operational performance and to reward achievement of this most important driver of our overall financial performance;
 
Aligned long-term incentive awards to market by moving to 3-year cliff-vesting from 2 years for performance share units, or PSUs, and moved to 3-year ratable annual vesting from 4-year ratable annual vesting for time-based restricted share units, or RSUs, to align with focus on long-term goals and market expectations;
 
 
 
Implemented a provision for equity awards to continue vesting in retirement, to keep executives focused on long-term performance through their retirement date, and to create a universal approach to all equity participants;
 
Implemented a new stock plan that includes the addition of robust restrictive covenants, payment of dividends only upon vesting, one-year minimum vesting period and better defined death, disability and retirement treatment to create a universal approach for equity participants;
 
 
 
Reduced the multiples in our change in control and severance agreements, clarified the definition of change in control and limited the number of executives who are covered by these arrangements, which we intend to maintain going forward;
 
Aligned pay programs competitively, both internally and externally with the market; and

 
 
 
Revised the metrics in the long-term incentive program to base awards on adjusted EPS (60% of the award potential), adjusted ROIC (20% of the award potential), and leverage ratio (net debt to adjusted EBITDA) (20% of the award potential), which are the most important drivers of the Company’s long-term success.
We regularly review our compensation program to align with best practices and to confirm our program supports our pay for performance philosophy. We intend to continue our stockholder outreach activities to understand investor perspectives firsthand and incorporate that feedback into our program.

24


Executive Compensation Program Philosophy
Our executive compensation program is designed to:

 
Attract and retain individuals with the skills to develop and execute the strategy and advance the Company culture necessary for us to achieve long-term growth;
 
Maintain a strong pay for performance work environment;
 
Motivate our executives and align their interests with those of our stockholders by delivering more at-risk pay for senior executives;
 
Reward our executives fairly over time for performance that enhances stockholder value;
 
Emphasize consistent and sustainable top and bottom-line growth; and
 
Not encourage excessive risk taking.
Our executive compensation program is also designed to reinforce a sense of ownership in the Company and overall entrepreneurial spirit. The program links rewards, including both short- and long-term awards, as well as cash and non-cash awards, to measurable corporate performance metrics established by the Compensation Committee.
The program measures achievement of corporate financial goals. These goals support our short- and long-term business strategies and are aligned with the interests of our stockholders. By aligning all executives to corporate financial goals, we encourage a shared focus and collaborative work toward strong, long-term operating performance. In addition, our executive compensation program is designed to balance our growth strategies with a managed approach to risk tolerance. Our compensation programs provide assurances of stability and a focus on the long term, together with an insistence on personal integrity and compliance.
How We Make Decisions Regarding Executive Pay
The Compensation Committee, management and the Compensation Committee’s independent compensation consultant (which was Semler Brossy for purposes of fiscal 2020 compensation) each play a role in designing our executive compensation program and determining performance levels and associated payouts. We also look at market data and take into consideration stockholder views about executive compensation expressed in our stockholder engagement process, as described above.
Role of the Compensation Committee
The Compensation Committee is responsible for establishing, implementing and monitoring our executive compensation program and its adherence to our compensation philosophy. The Compensation Committee approves the performance thresholds and the financial and strategic performance metrics applicable to executive officers under our annual cash incentive plan as described in “Components of Our Executive Compensation Program for Fiscal 2020Performance-Based Annual Cash Incentive Compensation” and sets performance metrics applicable to the performance-based component of our long-term equity incentive plan as described in “Components of Our Executive Compensation Program for Fiscal 2020Long-Term Equity-Based Incentive Program”. The Compensation Committee is responsible for approving our employment policies and agreements impacting executive officers. The Compensation Committee also evaluates actual corporate and individual performance against the established goals and determines appropriate levels of compensation for our executives. The Compensation Committee makes all decisions with respect to, and approves, compensation for our executive officers, including base salary, annual cash incentive, long-term equity incentive, and benefits, except that the compensation of our CEO is further reviewed and ratified by the independent members of our Board.
As part of the compensation approval process for our executive officers, the Compensation Committee considers the views and recommendations of management, particularly our CEO. For our CEO, we have established an annual performance evaluation process, which includes a self-assessment by the CEO and a formal performance assessment by the full Board, which is considered in setting the CEO’s annual compensation. In setting the compensation for all of our executive officers, the Compensation Committee considers the recommendation of its independent compensation consultant as described in greater detail below.
Role of Management
Our CEO and Chairman and CHRO provide the Compensation Committee with an assessment of our corporate performance, market pay practices, and the performance of our executive officers and make recommendations for the compensation of our other executive officers based on this assessment, including recommendations for pay mix and the nature of performance metrics that best support our business objectives. Additionally, our CEO and Chairman, CHRO and CFO discuss with the Compensation Committee management’s internal projections with respect to a variety of performance metrics and operations goals for future fiscal years on which performance-based compensation will be based. The Chief Legal Officer, General Counsel and

25


Corporate Secretary advises on the foregoing matters and provides guidance on governance principles and practices, investor perspectives and regulatory trends and analyses in the context of executive compensation determinations.
No executive officer makes any decision on any element of his or her own compensation, and our CEO and Chairman does not participate in deliberations regarding his compensation, which is recommended by the Compensation Committee to the full Board.
Role of Independent Compensation Consultant
The Compensation Committee selected and directly retained Semler Brossy as its compensation consultant during fiscal 2020 to provide independent, third-party advice and expertise on all aspects of executive compensation and related corporate governance matters, including designing and establishing our executive compensation program for fiscal 2020 and fiscal 2021. Semler Brossy provided input and guidance related to our fiscal 2020 and fiscal 2021 incentive plan design, reviewed our Compensation Discussion and Analysis and associated disclosures, and summarized and provided perspective on market developments related to executive compensation, including regulatory requirements and related disclosures. Semler Brossy only provides services to the Compensation Committee. It does not provide any services to management. The Compensation Committee assessed the independence of Semler Brossy pursuant to SEC and NYSE rules, as described below, and concluded that no conflict of interest exists that would prevent Semler Brossy from serving as an independent consultant to the Compensation Committee. In the future, the Compensation Committee may retain other similar consultants.
As mentioned above, the Compensation Committee analyzed whether the work of Semler Brossy as its compensation consultant raises any conflict of interest, taking into consideration the following factors: (i) Semler Brossy does not provide any other services to the Company; (ii) the amount of fees the Company paid to Semler Brossy represents less than 2% of Semler Brossy’s total revenues; (iii) Semler Brossy maintains policies and procedures designed to prevent conflicts of interest; (iv) Semler Brossy does not have any business or personal relationship with any executive officer of the Company; (v) neither Semler Brossy nor any member of its consulting team directly owns any stock of the Company; and (vi) Semler Brossy does not have any known business or personal relationship with any member of the Committee. The Committee determined, based on its analysis of the above factors, that the work of Semler Brossy and the individual compensation advisors employed by Semler Brossy as compensation consultant to the Committee does not create any conflict of interest. The Committee will continue to monitor the independence of its compensation consultant on an annual basis. The Compensation Committee also annually evaluates the performance of its consultants and maintains a pre-approval policy for consultant fees.
Competitive Marketplace Assessment
In making compensation decisions, the Compensation Committee periodically, generally once per annum in August or September, reviews the compensation packages for officers in like positions with similar responsibilities at “peer” organizations, i.e. those organizations that are similar to our Company.
In setting compensation for Named Executive Officers for fiscal 2020, the Compensation Committee considered Willis Towers Watson Retail/Wholesale survey data for companies in the retail/wholesale distribution sector with revenues comparable to ours, as well as the following companies, the Comparator Group:

26


Food- and Distribution-Related Companies of Comparable Size
 
Company
GICS Sub-Industry
Revenue
($ in millions)

Market Value
($ in millions)

Sysco Corporation
Food Distributors
$
52,893

$
26,828

Tech Data Corporation
Technology Distributors
$
36,998

NA

Arrow Electronics, Inc.
Technology Distributors
$
28,917

$
5,560

Performance Food Group Company
Food Distributors
$
25,086

$
3,712

SYNNEX Corporation
Technology Distributors
$
23,757

$
6,423

US Foods Holding Corp.
Food Distributors
$
25,939

$
4,472

CDW Corporation
Technology Distributors
$
18,032

$
16,544

Avnet, Inc.
Technology Distributors
$
17,634

$
2,639

Core-Mark Holding Company, Inc.
Distributors
$
13,329

$
1,196

Pilgrim’s Pride Corporation
Packaged Foods and Meats
$
11,409

$
3,746

Henry Schein, Inc.
Health Care Distributors
$
9,986

$
9,812

SpartanNash Company
Food Distributors
$
8,536

$
750

 
Summary Statistics (n=12)
 
 
 
75th Percentile
 
$
26,683

$
8,118

Median
 
$
20,895

$
4,472

25th Percentile
 
$
12,849

$
3,175

United Natural Foods, Inc.
Food Distributors
$
26,514

$
1,086

Percentile Rank
 
74P

8P

Source: CapIQ; Revenue as of most recent filed 10-K on November 10, 2020 and Market Cap as of UNFI fiscal year end on August 1, 2020
Tech Data ceased trading on June 29, 2020.
Market data is only one factor that the Compensation Committee considers when making determinations regarding executive compensation. Other factors considered include individual performance, internal pay equity, scope of responsibilities, tenure, criticality of the position and executive retention concerns, and the need to recruit new officers. The Compensation Committee does not target a specific positioning versus the market for each role and takes into account all the above factors in determining the competitiveness of our compensation.
Components of Our Executive Compensation Program for Fiscal 2020
Our executive compensation philosophy is reflected in the principal elements of our executive compensation program. The four key components of our executive compensation program in fiscal 2020 and how each component supports our compensation philosophy are set forth in the table below.
Component
How It Supports Our Compensation Philosophy
Base Salary
Provides competitive level of compensation to attract and retain top talent
Performance-based annual cash incentive
At-risk, variable pay to motivate our executives to achieve short-term (annual) business objectives within appropriate risk parameters
Long-term equity awards in the form of time-based vesting restricted stock units, or RSUs, and performance-based vesting restricted stock units, or PSUs
At-risk, variable pay that motivates our executives to focus on multi-year operational performance and stockholder value; also a long-term retention tool
Other compensation and benefits, including minimal perquisites and participation in benefit plans generally available to all our employees, such as the 401(k) Plan
Assist in attracting and retaining top talent by providing competitive benefits, with minimal perquisites

27


Pay Mix
When setting target total compensation for fiscal 2020 for the Named Executive Officers other than our CEO, the Compensation Committee determined that total target compensation should be weighted toward variable, at-risk pay, and a significant percentage should consist of equity-based compensation. We believe this approach appropriately aligns executive compensation with financial results and provides a balance between managing risk and incentivizing our management team to create short- and long-term stockholder value by achieving pre-established strategic performance objectives. The Compensation Committee determined that a separate pay structure for our CEO is necessary to deliver competitive pay while emphasizing at-risk incentives within the design. The charts below illustrate the mix of pay elements for 2020 at target for our CEO (85% at-risk pay) and the average for our other NEOs, excluding Mr. Zechmeister who resigned in early fiscal 2020, (76% at-risk pay).
paymix4.jpg
Base Salary
As described above, for fiscal 2020, the Compensation Committee considered data from the Willis Towers Watson Retail/Wholesale survey as well as proxy data from the Comparator Group for the second and third highest paid executive and CFO roles. Base salaries were generally targeted at the median of these data sources. Mr. Spinner’s salary, although unchanged, was generally aligned with market midpoints for both the general industry and the comparator group. Mr. Griffin’s salary was also at market, and therefore no increase was given. With the expanded roles of Messrs. Howard, Dorne, Testa and Ms. Sutton, the competitive market assessment determined that their base salaries were below market for an executive performing comparable duties in the Comparator Group, and their salary increases reflect our attempt to close this gap. Increases for Messrs. Dorne and Testa represent the additional chief operating officer duties they assumed in connection with Mr. Griffin’s retirement. Their increased responsibilities commenced on March 8, 2020, with a transition period through Mr. Griffin’s retirement at the end of July 2020.
Set forth below are the fiscal 2019 and fiscal 2020 base salaries for the Named Executive Officers and the percentage change between periods, as well as the further changes to base salaries in connection with the management changes in the third quarter of fiscal 2020 and the percentage change from the fiscal 2020 base salary set at the beginning of fiscal 2020.
Named Executive Officer
 
Fiscal 2019
Base Salary
 
Fiscal 2020
Base Salary(1)
 
Percentage
Change
 
Base Salary (Effective Third Quarter)(2)
 
Percentage
Change
Steven L. Spinner
 
$
1,200,000

 
$
1,200,000

 
%
 
$
1,200,000

 
%
John W. Howard
 
$
550,000

 
$
550,000

 
%
 
$
600,000

 
9
%
Eric A. Dorne
 
$
500,000

 
$
540,000

 
8
%
 
$
750,000

 
39
%
Jill E. Sutton
 
$
465,000

 
$
510,000

 
10
%
 
$
510,000

 
%
Christopher P. Testa
 
$
450,000

 
$
550,000

 
22
%
 
$
750,000

 
36
%
Sean F. Griffin
 
$
930,000

 
$
930,000

 
%
 
$
930,000

 
%
Michael P. Zechmeister
 
$
675,000

 
$
675,000

 
%
 
$
675,000

 
%
(1)
Reflects changes made by the Compensation Committee during its annual review, effective November 3, 2019.
(2)
Reflects changes made to Mr. Howard’s base salary in connection with his appointment to Chief Financial Officer, effective on February 9, 2020, and to Messrs. Dorne’s and Testa’s base salary in connection with their assumption of additional responsibilities, effective on March 8, 2020.

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Performance-Based Compensation Metrics
The Compensation Committee is responsible for setting the minimum, target and maximum or “stretch” performance levels (objectives that must be achieved) and related payout levels from $0 to maximum payout for our performance-based compensation discussed below. Receipt of this compensation is contingent upon satisfaction of corporate-wide metrics established by the Compensation Committee.
The Compensation Committee retains the ability to adjust targets in certain circumstances, including in the event that unbudgeted or unforeseen events would materially impact the metric, such that it is not reflective of actual underlying operating performance that it was designed to assess. In making any such adjustment, consistent with established guidelines that allow for consistency in consideration from year to year, the Compensation Committee reviews, among other things, the original target and the budget upon which the target was based, whether the events giving rise to a potential adjustment had occurred or were contemplated at the time the performance targets were established and whether these factors were related to our core operating performance. After consideration of these factors, the Compensation Committee may determine to make adjustments to metrics or payouts where, absent such adjustment, the payout would not, in the Compensation Committee’s determination, be reflective of actual performance. For the payouts described below, the Committee determined no such adjustments to the pre-established targets were necessary.
Performance-Based Annual Cash Incentive Compensation
Performance Metrics. The factors considered in setting the target compensation for fiscal 2020 continued to focus and align everyone on adjusted earnings before interest, taxes, depreciation and amortization (“adjusted EBITDA”), a key metric tied to our long-term business performance. We believe using adjusted EBITDA as a performance metric focuses our executive officers on growth in core operational performance and rewards all officers for achievement of this important driver of overall financial performance. For information on how we calculate adjusted EBITDA, a non-GAAP measure, and a reconciliation of adjusted EBITDA to net income, please see Annex B.
Performance-Based Annual Cash Incentive Targets (Potential Payouts). For our Named Executive Officers, the annual cash award targets, or potential payouts, for fiscal 2020 at various Company-wide performance levels were set as percentages of base salary earned, and prorated if applicable to changes in base salary over the fiscal year, as follows:
 
 
Applicable Targets as % of Fiscal 2020 Salary
Named Executive Officer
 
Threshold (50%)
 
Target
 (100%)
 
Stretch
(150%)
Steven L. Spinner
 
75.0
%
 
150.0
%
 
225.0
%
John W. Howard
 
50.0
%
 
100.0
%
 
150.0
%
Eric A. Dorne
 
43.7
%
 
87.3
%
 
131.0
%
Jill E. Sutton
 
37.5
%
 
75.0
%
 
112.5
%
Christopher P. Testa
 
43.8
%
 
87.5
%
 
131.3
%
Sean F. Griffin
 
62.5
%
 
125.0
%
 
187.5
%
Michael P. Zechmeister
 
%
 
%
 
%
For example, if the Company achieved its targets at the threshold level, Mr. Spinner’s potential cash incentive would be an amount equal to 75% of his base salary; at target level, he would potentially receive a cash incentive in an amount equal to 150% of his base salary; and at the stretch level he would potentially receive an award equal to 225% of his base salary. The actual payout would also depend, however, on whether the Company met the threshold performance level. If performance were below the threshold level, there would be no payout.
The bonus opportunities described above reflect a pro-rated adjustment made to reflect the increased responsibilities assumed by Messrs. Howard, Dorne and Testa in the third quarter of fiscal 2020. The full-year target for each of these executives was increased from 75% to 100% of base salary, effective upon their assumption of these responsibilities, while the targets for each of Messrs. Spinner and Griffin and Ms. Sutton remained unchanged.
Performance Target. In setting the performance target for fiscal 2020, the Compensation Committee reviewed historical levels of performance, expected initiatives in connection with the integration of the combined company, and the competitive environment. In establishing the intended degree of difficulty of the payout level for adjusted EBITDA, the Compensation Committee set the performance targets at levels that required successful implementation of corporate operating objectives for meaningful payouts to occur. The Compensation Committee believed that the initial targets related to “threshold” performance were achievable in light of budgeted expectations, but the payouts for “target” performance and “stretch” performance each required significant improvement over the prior year’s comparable performance, after taking into account the impact of important Company-

29


specific initiatives designed to support our growth and enhance our long-term operating results, including significant integration efforts. We believe that one of the best indicators of how difficult a performance metric was to achieve is reflected in the level of payout the executive actually received with respect to the metric, measured against the financial results the Company achieved.
To promote a shared focus by all executives on improving the core operating performance of the Company, annual incentive compensation for all Named Executive Officers was weighted 100% on adjusted EBITDA, the Company’s most critical driver of financial performance.
Determination of Performance-Based Annual Cash Incentive Plan Payouts. Annual cash incentive plan goals for Named Executive Officers for fiscal 2020 were set by the Compensation Committee at the following amounts of adjusted EBITDA:
Performance Measure
 
Threshold
 
Target
 
Stretch
 
Threshold Payout
 
Target Payout
 
Stretch Payout
Adjusted EBITDA in $000’s
 
$
463,872

 
$
579,839

 
$
695,807

 
50
%
 
100
%
 
150
%
In September 2020, the Compensation Committee reviewed with management our financial results for fiscal 2020. The Compensation Committee determined the level at which adjusted EBITDA had been achieved as set forth below:
Performance Metric
 
Target
 
Actual
 
Performance as a Percentage of Target
Adjusted EBITDA in $000’s
 
$
579,839

 
$
672,922

(1) 
116
%
(1)
See Annex B for a reconciliation to the most comparable GAAP metric.
The Company exceeded its adjusted EBITDA target for fiscal 2020. The payout amounts below were linearly interpolated for results between target and maximum or “stretch” performance, which resulted in a 140.13% payout as a percentage of target. The payout amounts reflect performance in fiscal 2020 that significantly exceeded the established performance objective, demonstrating the effectiveness of our pay for performance incentive plans. Payments of the bonus amount were made in a lump sum following the filing of our Annual Report on Form 10-K for the year ended August 1, 2020.
 
 
Performance-Based Annual Incentive
Named Executive Officer
 
Target (1)
 
Actual
Steven L. Spinner
 
$
1,800,000

 
$
2,522,394

John W. Howard
 
$
567,308

 
$
794,985

Eric A. Dorne
 
$
536,828

 
$
752,274

Jill E. Sutton
 
$
374,063

 
$
524,185

Christopher P. Testa
 
$
530,049

 
$
742,774

Sean F. Griffin
 
$
1,162,500

 
$
1,629,046

Michael P. Zechmeister (2)
 
$

 
$

(1)
Based on prorated salary and bonus target changes during the fiscal year where applicable.
(2)
Mr. Zechmeister resigned prior to the bonus payout date and therefore forfeited any potential bonus payout.
Long-Term Equity-Based Incentive Program
2020 Grant of Time- and Performance-Based Vesting Restricted Stock Units. Our long-term equity-based incentive program in fiscal 2020 for our Named Executive Officers consisted of RSUs and PSUs. Approximately 50% of the aggregate grant date fair value of these units awarded to Named Executive Officers represented RSUs that vest ratably over three years and 50% were PSUs that cliff-vest at the end of a three-year performance period.
The Compensation Committee believes that a mix of time- and performance-based vesting restricted stock units provides a Named Executive Officer with an incentive to improve our stock price performance and a direct alignment with stockholders’ interests, as well as a continuing stake in our long-term success. As described above, in fiscal 2020, we made further changes to our program based on investor feedback and market practice of longer performance periods for equity awards to align vesting periods to three years.
In fiscal 2020, the Compensation Committee determined the target grant date fair value of equity awards for our compensation program was to be based on percentages of the recipient’s then base salary dependent on the eligible employee’s position within the Company. For our Named Executive Officers, the percentages were:

30


Steven L. Spinner
425
%
John W. Howard (1)
N/A

Eric A. Dorne (2)
150
%
Jill E. Sutton
150
%
Christopher P. Testa
200
%
Sean F. Griffin
250
%
Michael P. Zechmeister (3)
%
(1)
In connection with Mr. Howard’s appointment as our CFO in February 2020, his target was increased to 200%, applicable for fiscal 2021. He received a fixed value of equity awards in RSUs and PSUs of $149,995 and $149,996, respectively, as part of his original offer of employment as Senior Vice President, Finance and then a 3-year cliff vested retention award of $549,996 on October 4, 2019.
(2)
In connection with Mr. Dorne’s promotion to Chief Operating Officer in March 2020, his target percentage was increased to 200%, applicable for fiscal 2021.
(3)
Given Mr. Zechmeister’s resignation, he did not receive an equity award.
These grants were made in December 2019, following approval by our stockholders of our 2020 Equity Incentive Plan, and the vesting periods were aligned to our pre-set annual grant date in October, established pursuant to our Equity Grant and Settlement Policy.
Performance-Metrics for Performance Units. PSUs granted in fiscal 2020 (December 2019) are subject to three metrics that the Compensation Committee believes are critical to our long-term strategy. The performance criteria and weighting of these PSUs are as follows: fiscal 2020-2022 adjusted EPS growth, weighted at 60%; fiscal 2022 adjusted return on invested capital (adjusted ROIC), weighted at 20%; and fiscal 2022 Leverage (Net Debt/Adjusted EBITDA), weighted at 20%, described below.
Adjusted EPS Growth. At the end of 3 years, adjusted EPS growth is based on the average achievement against the 3-year performance goals and metrics. Adjusted EPS growth rate targets are set for each year at the time of grant as a rate of growth compared to the prior year actual adjusted EPS. This design is intended to keep management engaged throughout the three-year cycle even if there is under-performance in one year; or, conversely, if the maximum growth is achieved in one year, management must still meet predetermined growth goals in subsequent years. For example, if our executives were to significantly outperform relative to the year-one adjusted EPS target, they must still achieve the pre-determined growth rate targets in the second and third years to attain an above-target payout. The Compensation Committee believes that including an adjusted EPS metric aligns executives’ interest with long-term stockholder interests.
Fiscal 2022 Adjusted ROIC. Adjusted ROIC is defined as net operating profit after income taxes, divided by the sum of total debt (including finance lease obligations) and stockholders’ equity, plus or minus certain adjustments falling into categories approved by the Compensation Committee. Fiscal 2022 adjusted ROIC target was set based on our long-range plan and expected initiatives. The Compensation Committee believes this metric drives long-term value by emphasizing prudent investments and effective capital management.
Fiscal 2022 Leverage (Net Debt/Adjusted EBITDA). For the purposes of the long-term incentive plan, Leverage represents the ratio of total net debt (including finance lease obligations) to the last four quarters adjusted EBITDA. The Compensation Committee believes that, consistent with stockholder feedback, the leverage ratio metric supports a focus on our stated commitments to pay down our outstanding debt. Fiscal 2022 Leverage target was set based on our long-range plan and expected initiatives.

In addition to the performance criteria tied to the three financial metrics described above, the Compensation Committee approved a feature pursuant to which the number of units that will vest will be adjusted upward or downward by up to 10% depending on how our common stock price performs relative to the S&P Mid Cap 400 Index (“Relative TSR”) over the three-year performance period ending on the close of fiscal 2022.
The Compensation Committee believes this design focuses our management team on improving core operational performance and long-term value creation. Targets were based on long-term projections for all three fiscal years, taking into account the Supervalu acquisition, related synergies, our desire to divest our retail holdings and manage long-term debt while continuing to invest in future business growth. The applicable Named Executive Officers are eligible to earn between 0% and 150% of their targeted award, depending on our performance during the relevant measurement period. Each metric must meet a minimum threshold level of performance for any payout to occur (shown below).

31


Performance Measures
 
Weight
 
Threshold
 
Target
 
Stretch
 
Threshold Payout(1)
 
Target Payout(1)
 
Stretch Payout(1)
Fiscal 2020-2022 adjusted EPS Growth
 
60
%
 
70
%
 
100
%
 
130
%
 
50
%
 
100
%
 
150
%
Fiscal 2022 adjusted ROIC
 
20
%
 
90
%
 
100
%
 
110
%
 
50
%
 
100
%
 
150
%
Fiscal 2022 Leverage (Net Debt/adjusted EBITDA)
 
20
%
 
110
%
 
100
%
 
90
%
 
50
%
 
100
%
 
150
%
(1)
Payout subject to 10% adjustment based on Relative TSR.
The performance metrics underlying these performance units were established by the Compensation Committee based on our business planning process with target level of performance established at levels that were, at the time of the grant, consistent with our internally prepared projections, with significant improvements over those projections required to achieve above-target payouts and a threshold level below which none of the performance units would be earned.
Prior Long-Term Equity-Based Incentive Program, Results and Payouts
Fiscal 2019. The performance-based restricted stock units granted in fiscal 2019 (September 2018) have two equally weighted metrics: fiscal 2020 adjusted EBITDA, calculated based on forecasted results for UNFI plus Supervalu after the acquisition, which closed in October 2018, and fiscal 2020 adjusted ROIC, calculated in a similar manner. The applicable Named Executive Officers were eligible to earn between 35% and 200% of their targeted award, depending on our performance during the relevant measurement period across the threshold, target and maximum levels below. Adjusted EBITDA and adjusted ROIC are non-GAAP metrics. A reconciliation to the nearest GAAP metrics is provided in Annex B.
Performance Measures
 
Weight
 
Threshold
 
Target
 
Stretch
 
Threshold Payout
 
Target Payout
 
Stretch Payout
Fiscal 2020 Adjusted EBITDA in $000’s (1)
 
50
%
 
$672,107
 
$763,758
 
$855,409
 
35
%
 
100
%
 
200
%
Fiscal 2020 Adjusted ROIC
 
50
%
 
3.44
%
 
3.91
%
 
4.38
%
 
35
%
 
100
%
 
200
%
(1)
“Target” is based on original acquisition target, excluding retail, which was in discontinued operations at the time the target was set.
In addition to the performance criteria tied to adjusted EBITDA and adjusted ROIC, the grants included a provision for adjustment of the number of units that will vest upward or downward by up to 10% depending on the Relative TSR over the two-year performance period. The number of units that will vest is adjusted up or down proportionally by up to 10% based on the number of basis points difference between our performance and the performance of the S&P Mid Cap 400 Index.
In September 2020, the Compensation Committee reviewed performance against the two-year performance period ending in fiscal 2020. Fiscal 2020 adjusted EBITDA was $572.6 million when excluding adjusted EBITDA of our retail segment from our reported adjusted EBITDA, and adjusted ROIC was 3.57%.
Adjusted EBITDA was below threshold and resulted in 0% payout on that metric. Adjusted ROIC was 91.4% of target, resulting in metric payout of 53.5% and a weighted payout of 26.74%. After application of the Relative TSR modifier, payout was reduced to 24.07%. See Annex B for reconciliation to the most comparable GAAP metrics for adjusted EBITDA and adjusted ROIC.
Performance Measures
 
Target
 
Actuals
 
Achievement
 
Metric Payout
 
Final Weighted Payout
Fiscal 2019-2020 Adjusted EBITDA in $000’s
 
$763,758
 
$572,660
 
75
%
 
%
 
%
Fiscal 2019-2020 Adjusted ROIC
 
3.91
%
 
3.57
%
 
91.4
%
 
53.5
%
 
26.74
%
The number of earned PSUs was then adjusted downward by 10% as a result of application of the Relative TSR modifier, for a final payout of 24.07%. The table below shows the number of shares earned compared to target.

32


Named Executive Officer(1)
 
Shares at Target
 
Metric Payout %
 
Shares at Metric Payout
 
Final Shares After -10% TSR Modifier
Steven L. Spinner
 
116,667

 
26.74
%
 
31,197

 
28,077

John W. Howard
 

 

 

 

Eric A. Dorne
 
13,736

 
26.74
%
 
3,673

 
3,305

Jill E. Sutton
 
12,611

 
26.74
%
 
3,372

 
3,034

Christopher P. Testa
 
13,400

 
26.74
%
 
3,583

 
3,224

Sean F. Griffin
 
87,538

 
26.74
%
 
23,408

 
21,067

(1)
Mr. Zechmeister resigned prior to the end of the performance period and forfeited his award. Mr. Howard was not employed by the Company at the time these awards were granted.
The payouts under the 2019 PSUs reflect our executive compensation program’s pay for performance structure. Despite exceeding performance expectations in fiscal 2020, under-performance against targets in the prior year resulted in a lower final payout, which demonstrates that consistent financial performance over the performance period is required to achieve the robust targets set by our Compensation Committee.
Other Compensation and Benefits
The Named Executive Officers are eligible for the same level and offering of benefits that we make available to other employees, including our 401(k) plan, health care plan, life insurance plans, and other welfare benefit programs. In addition to the standard benefits offered to all employees, the Named Executive Officers were eligible to participate in the Deferral Plans prior to such plans being frozen in February 2019 and funds distributed in March 2020. These Deferral Plans were terminated and paid out in fiscal 2020. For a description of the Deferral Plans, see “Executive Compensation TablesNonqualified Deferred CompensationFiscal 2020” below. We do not have any defined benefit pension plans available to our Named Executive Officers.
Additional Benefits. We provide certain Named Executive Officers with additional benefits that we believe are reasonable and consistent with our overall executive compensation program. The costs of these benefits constitute only a small portion of each Named Executive Officer’s total compensation and include, for certain Named Executive Officers, contributions to our defined contribution plan, relocation expenses and commuting air and travel reimbursement. We offer perquisites and other benefits that we believe to be competitive with benefits offered by companies with whom we compete for talent for purposes of recruitment and retention.
Retirement. Under the Company’s prior stock incentive plan and related award agreements with executives, an executive who retired would generally forfeit his or her awards if they had not yet vested. In the second quarter of fiscal 2019, after reviewing retirement provisions and practices for the treatment of equity awards at comparable companies, the Compensation Committee determined to change the terms of its long-term compensation awards to incentivize employees who might consider retiring to remain focused on the long-term best interests of the Company regardless of their personal retirement plans, which could otherwise create bias toward short-term performance. Accordingly, the Committee determined that time-vesting RSUs will continue to vest during retirement on the same terms as they would if the executive had not retired, but without the requirement that they remain employed. PSUs will be treated similarly on retirement, but subject to actual performance at the time when achievement of performance objectives are measured. In addition, an executive’s equity awards granted in the year of retirement will be prorated to reflect the service period prior to the date of retirement. Qualified retirement is defined as voluntary termination of employment by an employee who has reached age 59 or older and who has achieved at least 10 years of service to the Company.
Components of Executive Compensation Program for Fiscal 2021
In September 2020, to further align executive pay to market, our Compensation Committee made the following changes to base salary for the Named Executive Officers, effective November 1, 2020:
Named Executive Officer
 
Fiscal 2020 Base Salary (1)
 
Fiscal 2021 Base Salary
 
% Change
Steven L. Spinner
 
$
1,200,000

 
$
1,200,000

 
%
John W. Howard
 
$
600,000

 
$
625,000

 
4
%
Eric A. Dorne
 
$
750,000

 
$
750,000

 
%
Jill E. Sutton
 
$
510,000

 
$
580,000

 
14
%
Christopher P. Testa
 
$
750,000

 
$
750,000

 
%
(1)
Reflects annual rate as of the end of fiscal 2020.

33


Ms. Sutton’s adjustment to market reflects her oversight of the Company’s risk and safety, real estate, labor relations and environmental functions in addition to her responsibilities in her role as Chief Legal Officer, General Counsel and Secretary. The Compensation Committee adjusted Ms. Sutton’s annual cash incentive plan target as a percent of base salary from 75% to 85% to better align her overall pay against market. The Committee determined to make no additional changes to the long-term incentive plan targets. Accordingly, fiscal 2021 targets are as set forth below.
Named Executive Officer
 
Fiscal 2021 Annual Cash Incentive Plan Target (as a percent of Base Salary)
 
% Change from fiscal 2020
 
Fiscal 2021 Long-Term Incentive Plan Target (as a percent of Base Salary)
 
% Change from fiscal 2020
Steven L. Spinner
 
150
%
 
%
 
425
%
 
%
John W. Howard
 
100
%
 
%
 
200
%
 
%
Eric A. Dorne
 
100
%
 
%
 
200
%
 
%
Jill E. Sutton
 
85
%
 
13
%
 
150
%
 
%
Christopher P. Testa
 
100
%
 
%
 
200
%
 
%
In September 2020, the Compensation Committee approved a performance share unit award to Ms. Sutton valued at $500,000 in recognition of her extraordinary performance during the year, including her oversight of the Company’s business continuity planning and risk and safety programs in response to the COVID-19 pandemic, making the safety and well-being of our associates a top priority. The award will vest at the end of a three-year performance period subject to achievement of a cumulative adjusted EBITDA target.
Employment, Severance and Change in Control Agreements
We are party to employment agreements with Mssrs. Spinner and Griffin, as well as severance and change in control agreements with Messrs. Howard, Dorne and Testa and Ms. Sutton. The capitalized terms “Cause,” “Good Reason” and “Change in Control” in this section are used as defined in those agreements.
Employment Agreement with Steven L. Spinner
Our employment agreement with Mr. Spinner (the “Spinner Employment Agreement”) was most recently amended on February 6, 2020. Prior to the February 2020 amendment, the Spinner Employment Agreement provided for a term ending on July 31, 2020. Under the agreement prior to the amendment, a failure by the Company to renew the term beyond such date would be deemed to be termination of Mr. Spinner’s employment without Cause, entitling him to receive severance. In February 2020, the Board extended the term of the Spinner Employment Agreement, through the end of the 2021 fiscal year (July 31, 2021), or such earlier date as his successor is duly appointed, and made certain changes in the timing of potential severance payments designed to assure compliance with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”). Under the Spinner Employment Agreement, if Mr. Spinner’s employment is terminated without Cause, including non-renewal of the term, or Mr. Spinner resigns for Good Reason, Mr. Spinner will be entitled to 200% of his current (a) base salary and (b) annual cash incentive bonus based on target performance, to be paid out in a lump sum no later than 190 days from the date of his separation. Other payments include prorated annual bonus, at actual levels of performance, and a lump sum cash payment of $35,000 for medical benefits, payable as provided in the Spinner Employment Agreement upon termination without Cause. As Mr. Spinner is retirement eligible under the terms of the agreement (having attained fifty-nine (59) years of age and provided ten (10) years of service to the Company), upon his separation from the Company, his outstanding time-based equity awards will vest in full and performance-based awards will continue to vest, based on actual performance.
If Mr. Spinner’s employment is terminated without Cause or he resigns for Good Reason following a Change in Control but before July 31, 2021, he would be entitled to: (a) 2.99 times his then current base salary, (b) 2.99 times the current-year annual cash incentive payments based on target performance and (c) the pro-rated portion of the current-year annual cash incentive payments he would have been owed for the fiscal year in which his employment was terminated based on the Company’s actual results when measured against the performance metrics applicable to Mr. Spinner for that period. Mr. Spinner would also be entitled to $105,000 that he may use to pay for medical benefits for himself and his dependents. In addition, any and all unvested and unexercised stock options, restricted stock, restricted stock units and performance-based vesting equity awards granted to Mr. Spinner would be treated in accordance with the applicable award agreements evidencing such equity-based awards and any applicable election forms related thereto. Mr. Spinner will not be entitled to any other severance payments. If a Change in Control has not yet occurred, but Mr. Spinner is replaced as CEO and Chairman of the Board in connection with or in anticipation of a Change in Control prior to July 31, 2021, Mr. Spinner will also be entitled to the compensation described above as if the Change in Control already occurred. If, however, an agreement to effect a Change in Control has been entered into but not yet completed, and Mr. Spinner remains the CEO until July 31, 2021, then Mr. Spinner will be entitled to the general severance payments described above available for any termination without Cause, but not the Change in Control severance payments described in this paragraph.

34


The Spinner Employment Agreement contemplates that if any payments or benefits otherwise payable to Mr. Spinner constitute “parachute payments” within the meaning of Section 280G of the Code and are subject to the excise tax imposed by Section 4999 of the Code, then such payments and benefits will either be (x) delivered in full, or (y) delivered as to such lesser extent that would result in no portion of such payments and benefits being subject to such excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account applicable taxes and the excise tax imposed by Section 4999 of the Code, results in the receipt by Mr. Spinner on an after-tax basis, of the greatest amount of benefits.
Receipt of any severance payments or benefits is conditioned upon Mr. Spinner’s release of claims against the Company and its officers and directors.
The Spinner Employment Agreement contains provisions governing the nondisclosure and nonuse of confidential information of the Company, as well as provisions requiring the assignment of certain intellectual property rights to the Company. The agreement also contains non-competition and non-solicitation restrictive covenants that remain in existence for one year or, in the event of termination for “Cause” or without “Good Reason,” two years following Mr. Spinner’s termination.
Finally, the Spinner Employment Agreement provides that the Company may seek recoupment for incentive compensation in any of the circumstances covered by the Company’s recently amended recoupment policy or any violation of the covenants in the Spinner Employment Agreement relating to non-competition, non-solicitation, and nondisclosure and nonuse of confidential information.
Employment Agreement with Sean F. Griffin
Our employment agreement with Mr. Griffin was most recently amended on February 6, 2020. Prior to February 6, 2020, the employment agreement provided for an initial term ending on July 31, 2021 and renewing automatically for successive period of one year thereafter. Prior the to amendment, the Company’s termination of Mr. Griffin’s employment without Cause prior to July 31, 2021 or its failure to renew the term of the agreement would entitle him to severance. Pursuant to the February 6, 2020 amendment, the Company and Mr. Griffin agreed that he would continue his employment until July 31, 2020, and that, at the Company’s request, he would provide consulting services until November 5, 2020.
Under the employment agreement as amended, following the termination of Mr. Griffin’s employment on July 31, 2020, he became entitled to payment of an amount equal to 1.0 times the sum of his (i) base salary and (ii) target annual bonus, payable installments over one year commencing no sooner than 60 days after July 31, 2020. As Mr. Griffin was retirement eligible under the terms of his employment agreement (having attained fifty-nine (59) years of age and provided ten (10) years of service to the Company), his outstanding time-based equity awards vested in full. while his performance-based awards will continue to vest and be payable, based on actual performance. Mr. Griffin is not eligible for any further equity awards and was paid a short-term bonus for full-year fiscal 2020, based on actual performance.
Pursuant to his employment agreement, Mr. Griffin and the Company mutually agreed upon a form of release, effective July 31, 2020 as a result of his resignation.
In addition, as in the case of the Spinner Employment Agreement, Mr. Griffin’s employment agreement contains provisions governing the nondisclosure and nonuse of confidential information of the Company and provisions requiring the assignment of certain intellectual property rights to the Company. Mr. Griffin’s agreement also includes non-competition and non-solicitation restrictive covenants which will remain in existence for one year after his resignation.
Finally, like the Spinner Employment Agreement, Mr. Griffin’s employment agreement provides that the Company may seek recoupment for incentive compensation in any of the circumstances covered by the Company’s recently amended recoupment policy or any violation of the covenants relating to non-competition, non-solicitation, and nondisclosure and nonuse of confidential information.
Severance Agreements and Change in Control Agreements
We are currently a party to severance agreements and change in control agreements with each of Messrs. Howard, Dorne and Testa and Ms. Sutton. The Compensation Committee believes that the protections afforded in these severance agreements and change in control agreements are reasonable and are an important element in retaining our executive officers. We amended the severance and change in control agreements on October 23, 2019, as described below.
Each of the severance agreements includes non-solicitation, non-competition and intellectual property assignment provisions, which apply during the employment period and continue for a one-year period following termination of employment for any reason. The change in control agreements also include non-solicitation and non-competition provisions, which apply during the employment period and continue for a two-year period, and intellectual property assignment provisions, which apply during the employment period and continue for a one-year period, following a termination of employment that occurs within two years after a Change in Control. The severance and change in control agreements also contain confidentiality provisions that are not

35


subject to a term. None of our executives is a party to an agreement providing for “gross up” payments for excise taxes imposed upon termination following a change in control.
The severance agreements include a three-year term (from the October 2019 effective date), subject to extension by mutual agreement of the Company and individual executive officer.
Outside the context of a Change in Control, if we terminate any of the executive officers under these agreements for any reason other than Cause, death, or disability or such executive resigns for Good Reason, we would be required to pay to the executive (i) the executive’s base salary, as in effect as of the termination date of employment for a period of one year following termination of employment, (ii) the prorated portion of the executive’s current-year annual cash incentive payments that would have been owed for the fiscal year in which employment was terminated based on the Company’s actual results when measured against the performance metrics applicable to the executive for that performance period, plus (iii) $35,000 in cash that may be used by the executive to pay for post-termination medical benefits.
Any benefits to be paid upon a Change in Control under the change in control agreements are “double trigger,” which requires both a Change in Control and a termination of a the executive’s employment within two years of the date of the Change in Control, either by us for a reason other than Cause, death or disability or by the executive for Good Reason. Under the change in control agreements, if either a termination of the executive for a reason other than Cause, death or disability or his or her resignation for Good Reason occurs within two years of the date of a Change in Control, the executive would be entitled to receive a lump sum payment equal to (i) a multiple of 2 times his or her base salary, as in effect at the time of termination of employment, (ii) a multiple of 2 times the executive’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated, and (iii) the prorated portion of the executive’s current-year annual cash incentive payments that would have been owed for the fiscal year in which employment was terminated, based on the Company’s actual results when measured against the performance metrics applicable to the executive for that performance period.
Under the change in control agreements, we will also be required to make a cash payment in the amount of $105,000 to the executive that may be used to pay for post-termination medical benefits for the executive and his or her dependents. In addition, any and all unvested and unexercised stock options, restricted stock, restricted stock units and performance-based vesting equity awards granted to the executive will become fully vested, including performance awards, which shall vest at target level of performance unless a greater level of vesting is provided for in the applicable award agreement. The provision of all such benefits will be subject to any restrictions under applicable law, including under Section 409A of the Code. In establishing the multiples of base salary and bonus that a terminated executive would be entitled to receive following termination without Cause or for Good Reason following a Change in Control, the Compensation Committee considered the need to be able to competitively recruit and retain talented executive officers who often-times seek protection against the possibility that they might be terminated without Cause or be forced to resign for Good Reason following a Change in Control.
Other Programs, Policies and Considerations
Recoupment (Clawback) Policy
We have in place a recoupment policy applicable to our executive officers, including our Named Executive Officers, other principal officers and certain key employees or former employees designated by the Board or our Chief Executive Officer. Under the policy, if the Company’s financial statements are required to be restated for any reason, except when due to a change in accounting policy that has a retroactive effect, the Board will review all performance-based compensation awarded or earned for all periods materially affected by such restatement. In addition, the Board will review all performance-based compensation awarded or earned that is based on performance metrics that appear to be materially inaccurate or affected in any way by fraud, regardless of whether a restatement of the Company’s financial statements is required. The Board may, to the extent permitted by applicable law, seek recoupment from the persons covered by the policy for the extent of such performance-based compensation as it deems appropriate, after a review of all relevant facts and circumstances, if:     
the Board determines that the payment of such performance-based compensation was predicated upon the achievement of certain financial statement results that were subsequently corrected, or upon material inaccuracy or fraud, and a lower incentive payment or award would been made based upon the restated financial results or corrected performance metrics; or
the Board determines that a person covered by the policy has engaged in conduct that will cause damage to the Company or is inimical or in any manner contrary to the best interests of the Company, and if the conduct resulted in a material inaccuracy in the Company’s financial statements or performance metrics which affects such person’s compensation.
In September 2020, we amended our recoupment policy to provide the Board authority to require forfeiture of incentive compensation in the case of misconduct in violation of law or Company policy, including through failure of an executive’s oversight responsibilities, that results in material financial or reputational harm to the Company. The policy was also amended to require

36


disclosure in the event the Board seeks recoupment or forfeiture pursuant to the recoupment policy, provided that, among other things, the related facts and circumstances giving rise to the recovery have been publicly disclosed.
Section 304 of the Sarbanes-Oxley Act of 2002 requires the recovery of incentive awards from our Chief Executive Officer and Chief Financial Officer if we are required to restate our financials due to material noncompliance with any financial reporting requirement as a result of misconduct. The Board is aware of this requirement and would consider it to apply in addition to the Recoupment Policy.
Stock Ownership Guidelines
The Compensation Committee believes stock ownership guidelines are a key vehicle for aligning the interests of management and our stockholders. A meaningful ownership stake by our officers demonstrates to our stockholders a strong commitment to our success. Accordingly, the Board has adopted stock ownership guidelines that require our executive officers to hold shares of our common stock having an aggregate market value from time to time which equals or exceeds three times their base salary, and in the case of Mr. Spinner, six times his base salary. Each executive is expected to comply with the policy by the fifth year after he or she became subject to the guidelines. Compliance with the guidelines is tested once per year for as long as the officer is employed by the Company. When calculating whether an officer owns a sufficient number of shares under these guidelines, vested and unvested restricted stock and restricted stock units are included, but unvested stock options do not count. Starting in fiscal 2021, the Compensation Committee strengthened this policy to provide that only 50% of the value of an executive officer’s unvested restricted stock units will count towards ownership, to further align leaders with stockholders and tie their interests to long-term stock price appreciation. Vested stock options and stock appreciation rights count to the extent of their net value after deduction for the exercise price. Officers are not allowed to hedge their interests in the stock held pursuant to the guidelines. The guidelines cover certain senior level associates below the executive officer level, namely, our Senior Vice Presidents, who must hold common stock having an aggregate market value equal to their base salary. They also have a five-year period (commencing in October 2020) in which to meet the requirements. Our guidelines provide that, once in compliance, an officer shall be deemed to remain in compliance despite a subsequent reduction in stock price that may otherwise cause non-compliance. Given the sustained decline in our stock price at the level specified in our stock ownership guidelines for 18 months, the accumulation period was reset as of the end of fiscal 2020. Each of our executive officers was in compliance as of August 1, 2020.
Hedging and Insider Trading Policy
Our Insider Trading Policy prohibits our Directors and certain employees, including executive officers, from engaging in certain speculative transactions in our equity securities, including short sales, hedging transactions and pledging our stock as security.
Tax Deductibility of Compensation
When it reviews compensation matters, the Compensation Committee considers, among other matters, the anticipated tax and accounting treatment of payments and benefits with respect to us and, when relevant, to the executive. Section 162(m) of the Code imposes an annual deduction limit of $1 million on the amount of compensation paid to each of the Chief Executive Officer and certain other Named Executive Officers. Prior to the effectiveness of the Tax Cuts and Jobs Act, this deduction limit did not apply to compensation that qualified as “performance-based compensation” (as defined in Section 162(m)). The Tax Cuts and Jobs Act eliminated the qualified “performance-based compensation” exemption from Section 162(m), subject to an exception for compensation paid pursuant to a written binding contract that was in effect on November 2, 2017 and has not been modified in any material respect after such date. The Compensation Committee also approved, and may continue to approve, compensation that exceeds the $1 million limitation and is non-deductible. While accounting and tax treatment are relevant issues to consider, the Compensation Committee believes that stockholder interests are best served by not restricting flexibility in designing compensation programs, even though such programs may result in non-deductible compensation expenses for tax purposes.

37




Report of the Compensation Committee
We have reviewed and discussed the foregoing Compensation Discussion and Analysis with management. Based on our review and discussion with management, we have recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form 10-K for the fiscal year ended August 1, 2020.
 
 
Jack Stahl, Chair
 
 
Daphne J. Dufresne
 
 
James P. Heffernan
 
 
James L. Muehlbauer
    


38


Executive Compensation Tables
Summary Compensation Table—Fiscal Years 2018-2020
The following table sets forth for each of the Named Executive Officers: (i) the dollar value of base salary and non-equity incentive compensation earned during the fiscal year indicated; (ii) the aggregate grant date fair value related to all equity-based awards made to the Named Executive Officer for the fiscal year indicated; (iii) non-qualified deferred compensation earnings during the fiscal year where applicable; (iv) all other compensation for the fiscal year indicated; and (v) the dollar value of total compensation for the fiscal year indicated.
Summary Compensation Table
Name and Principal Position
 
Year
 
Salary
 
Bonus
 
Stock
Awards(1)
 
Option
Awards
 
Non-Equity
Incentive Plan
Compensation(2)
 
Change in Pension Value and Nonqualified Deferred Compensation Earnings(3)
 
All Other
Compensation(4)
 
Total
Steven L. Spinner
 
2020
 
$
1,200,000

 
$

 
$
5,099,987

 
$

 
$
2,522,394

 
$
12,612

 
$
29,175

(5) 
$
8,864,168

Chief Executive Officer and Chairman
 
2019
 
1,164,462

 

 
5,099,897

 

 
759,556

 
13,154

 
63,793

 
7,100,862

 
2018
 
942,385

 

 
2,998,780

 

 
1,013,300

 
49,025

 
114,932

 
5,118,422

John W. Howard(6)
 
2020
 
567,308

 

 
849,987

 

 
794,985

 

 
9,577

 
2,221,857

Chief Financial Officer
 
2019
 

 

 

 

 

 

 

 

 
2018
 

 

 

 

 

 

 



Eric A. Dorne
 
2020
 
614,808

 

 
749,993

 

 
752,274

 

 
8,767

 
2,125,842

Chief Operating Officer
 
2019
 
492,308

 

 
750,310

 

 
160,579

 

 
11,427

 
1,414,624

 
2018
 
392,835

 

 
575,435

 

 
146,136

 

 
9,216

 
1,123,622

Jill E. Sutton(6)
 
2020
 
498,750

 

 
697,487

 

 
524,185

 

 
8,631

 
1,729,053

Chief Legal Officer, General Counsel and Secretary
 
2019
 
458,942

 
40,000

 
697,674

 

 
149,696

 

 
157,277

(9) 
1,503,589

 
2018
 

 

 

 

 

 

 

 

Christopher P. Testa(6)
 
2020
 
605,769

 

 
899,988

 

 
742,774

 
266

 
10,942

 
2,259,739

President
 
2019
 
458,654

 

 
899,923

 

 
149,601

 

 
11,683

 
1,519,861

 
2018
 

 

 

 

 

 

 

 

Sean F. Griffin
 
2020
 
930,000

 

 
2,324,992

 

 
1,629,046

 
38,047

 
40,637

(7) 
4,962,722

(Former) Chief Operating Officer, Chief Executive Officer SUPERVALU
 
2019
 
869,077

 

 
2,325,009

 

 
472,452

 
44,937

 
32,507

 
3,743,982

 
2018
 
582,577

 

 
1,100,004

 

 
325,081

 
79,936

 
5,594

 
2,093,192

Michael P. Zechmeister(8)
 
2020
 
38,942

 

 

 

 

 
2,483

 

 
41,425

(Former) Chief Financial Officer
 
2019
 
652,559

 

 
1,350,006

 

 

 
3,201

 
11,382

 
2,017,148

 
2018
 
488,571

 

 
922,762

 

 
320,717

 
12,209

 
13,818