Form DEF 14A UNITED NATURAL FOODS For: Dec 13

November 3, 2017 4:06 PM


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant
x
Filed by a Party other than the Registrant
_
Check the appropriate box:
 
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Preliminary Proxy Statement
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

United Natural Foods, Inc.
(Name of Registrant as Specified in its Charter)
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x
No fee required.
 
 
_
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
 
(1)
Title of each class of securities to which transaction applies:
 
(2)
Aggregate number of securities to which transaction applies:
 
(3)
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
 
(4)
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Fee paid previously with preliminary materials.
 
 
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
 
(1)
Amount Previously Paid:
 
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Date Filed:





unfilogoa11.jpg
UNITED NATURAL FOODS, INC.
Notice of Annual Meeting of Stockholders
to be held on December 13, 2017
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of United Natural Foods, Inc., which will be held on Wednesday, December 13, 2017 at 4:00 p.m. eastern standard time at the Providence Marriott Downtown, 1 Orms Street, Providence, RI 02904, and any adjournments or postponements of the annual meeting. For your convenience, we are also offering you the option to attend the annual meeting on the Internet through a virtual web conference at www.virtualshareholdermeeting.com/unfi2017.
We are holding the annual meeting for the following purposes:
1.
To elect eight nominees as directors to serve until the 2018 annual meeting of stockholders.
2.
To ratify the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending July 28, 2018.
3.
To approve, on an advisory basis, our executive compensation.
4.
To approve the amendment and restatement of the United Natural Foods, Inc. Amended and Restated 2012 Equity Incentive Plan.
5.
To approve, on an advisory basis, the frequency of advisory approval of our executive compensation.
6.
To consider a stockholder proposal regarding stockholder approval of certain future severance agreements, if properly presented at the annual meeting.
7.
To consider a stockholder proposal regarding a decrease to the ownership threshold for stockholders to call a special stockholder meeting, if properly presented at the annual meeting.
These matters are more fully described in the accompanying proxy statement, which is made a part of this notice. We are not aware of any other business to be transacted at the annual meeting.
Only stockholders of record on our books at the close of business on Monday, October 16, 2017 will be entitled to vote at the annual meeting and any adjournments or postponements of the annual meeting. For 10 days prior to the annual meeting, a list of stockholders entitled to vote will be available for inspection at our principal executive offices located at 313 Iron Horse Way, Providence, RI 02908. If you would like to view the stockholder list, please call our Investor Relations Department at (401) 528-8634 or send a request via email to InvestorRelations@unfi.com to schedule an appointment. The stockholder list will also be available at the annual meeting and on the Internet through the virtual web conference at the beginning of the annual meeting.
In accordance with rules approved by the Securities and Exchange Commission, this year we are again furnishing proxy materials to our stockholders over the Internet. On or about November 3, 2017 we mailed to all stockholders of record as of the close of business on October 16, 2017 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 July 29, 2017, our proxy statement, proxy card and other items of interest to stockholders on the Internet website indicated in our notice, 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.
If you do not attend the annual meeting, you may vote your shares via the Internet, by telephone or by completing, dating, signing and promptly returning your proxy card to us in the envelope provided, if you received a paper copy of the proxy card by mail. The proxy materials provide you with details on how to vote by these three methods. Whether or not you plan to attend the annual meeting, we encourage you to vote in the method that suits you best so that your shares will be voted at the annual meeting. If you decide to attend the annual meeting in person or virtually through the Internet, you may revoke your proxy and cast your vote during the meeting.
By Order of the Board of Directors,
sssign.jpg
Steven L. Spinner
Chair of the Board, President and Chief Executive Officer


November 3, 2017
PLEASE VOTE. STOCKHOLDERS MAY VOTE IN PERSON OR BY THE INTERNET, TELEPHONE OR MAIL. PLEASE REFER TO YOUR PROXY CARD OR THE NOTICE OF PROXY AVAILABILITY DISTRIBUTED TO YOU ON OR ABOUT NOVEMBER 3, 2017 FOR INFORMATION ON HOW TO VOTE BY THE INTERNET, TELEPHONE OR MAIL.







TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 




 
 
 
 
 
 
 
 
 
 
 
 

 
 
 
 
A-1





UNITED NATURAL FOODS, INC.
313 Iron Horse Way
Providence, Rhode Island 02908
PROXY STATEMENT
For the Annual Meeting of Stockholders
To Be Held On December 13, 2017
This proxy statement is being furnished in connection with the solicitation of proxies by the Board of Directors of United Natural Foods, Inc., for use at the Annual Meeting of Stockholders to be held on Wednesday, December 13, 2017 at 4:00 p.m. (eastern standard time) at the Providence Marriott Downtown, 1 Orms Street, Providence, RI 02904, and any adjournments or postponements of the annual meeting, and on the Internet through a virtual web conference at www.virtualshareholdermeeting.com/unfi2017. The Board of Directors (which we sometimes refer to as the Board in this proxy statement) is soliciting proxies for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders. We will bear the cost of soliciting the proxies.
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on December 13, 2017:
As outlined on the notice we mailed to you on or about November 3, 2017 (the “Notice of Proxy Availability”), the proxy statement, proxy card and Annual Report to Stockholders for the fiscal year ended July 29, 2017 are available on the Internet at http://www.proxyvote.com.
INFORMATION ABOUT THE MEETING
Record Date and Share Ownership
Only stockholders of record on our books at the close of business on Monday, October 16, 2017 (the “Record Date”) will be entitled to vote at the annual meeting and any adjournments or postponements of the annual meeting. As of the close of business on October 16, 2017, we had 50,816,288 shares of common stock outstanding. Each share of common stock entitles the record holder to one vote on each matter to be voted upon at the annual meeting. Copies of the Notice of Annual Meeting of Stockholders, this proxy statement, the proxy card and our Annual Report to Stockholders for the fiscal year ended July 29, 2017, were first made available to stockholders of record as of the Record Date on or about November 3, 2017. The Board is making these materials available to you on the Internet or, upon your request, is delivering printed versions of these materials to you without charge by mail. On or about November 3, 2017, we mailed to all stockholders of record as of the Record Date the Notice of Proxy Availability, which contains instructions on how to access these materials and vote.
We will, upon written request of any stockholder, furnish without charge a copy of our Annual Report on Form 10-K for the fiscal year ended July 29, 2017, as filed with the Securities and Exchange Commission (the “SEC”), without exhibits. Please address all such requests to the attention of Investor Relations, United Natural Foods, Inc., 313 Iron Horse Way, Providence, Rhode Island 02908 or via email to InvestorRelations@unfi.com. Exhibits will be provided upon written request and payment of an appropriate processing fee.
Submitting and Revoking Your Proxy
If you complete and submit a proxy, the persons named as proxies will vote the shares represented by your proxy in accordance with your instructions. If you submit a proxy but do not complete the voting instructions, the persons named as proxies will vote the shares represented by your proxy as follows:
FOR the election of Eric F. Artz, Ann Torre Bates, Denise M. Clark, Daphne J. Dufresne, Michael S. Funk, James P. Heffernan, Peter A. Roy, and Steven L. Spinner as directors to serve until the 2018 annual meeting of stockholders (Proposal 1);
FOR the ratification of the selection of KPMG LLP as our independent registered public accounting firm for the fiscal year ending July 28, 2018 (Proposal 2);
FOR the advisory approval of our executive compensation (Proposal 3);
FOR the approval of the amendment and restatement of the United Natural Foods, Inc. Amended and Restated 2012 Equity Incentive Plan (Proposal 4);

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For ONE YEAR as the frequency of advisory approval of our executive compensation (Proposal 5);
AGAINST the stockholder proposal regarding stockholder approval of certain future severance agreements (Proposal 6); and
AGAINST the stockholder proposal regarding a decrease to the ownership threshold for stockholders to call a special stockholder meeting (Proposal 7).
If other matters come before the annual meeting, the persons named as proxies will vote on such matters in accordance with their best judgment. We have not received notice of other matters that may properly be presented at the annual meeting.
You may revoke or revise your proxy at any time before it is exercised by (1) delivering to us a signed proxy card with a date later than your previously delivered proxy, (2) voting via the Internet while attending the virtual annual meeting, (3) granting a subsequent proxy through the Internet or telephone, (4) voting in person at the annual meeting; or (5) sending a written revocation to our corporate secretary at 313 Iron Horse Way, Providence, Rhode Island 02908. Attendance at the annual meeting in person or virtually through the Internet will not itself be deemed to revoke your proxy unless you vote in person or via the Internet while attending the virtual annual meeting. Your latest dated proxy card or telephone or Internet proxy at the time of the meeting is the one that is counted.
If you hold shares of common stock in a stock brokerage account or through a bank or other nominee, you are considered to be the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by your broker, bank or nominee. You may not vote directly any shares you beneficially own that are held in street name; however, as the beneficial owner of the shares, you have the right to direct your broker, bank or nominee on how to vote your shares. If you do not provide your broker, bank or nominee instructions on how to vote your shares on non-discretionary items, a “broker non-vote” will occur. Proposals 1 and 3 through 7 are non-discretionary items for which your broker, bank or nominee will not be able to vote your shares without your instructions. Proposal 2 (ratification of the selection of KPMG LLP) is a discretionary item, and your broker, bank or nominee may vote your shares in their discretion even without voting instructions from you. Accordingly, it is possible for there to be broker non-votes for Proposals 1 and 3 through 7, but not for Proposal 2. In the case of a broker non-vote, your shares would be included in the number of shares considered present at the meeting for the purpose of determining whether there is a quorum, but will not otherwise have any effect on the outcome of the vote on Proposals 1 and 3 through 7.
If you participate in the United Natural Foods, Inc. Stock Fund (the “Stock Fund”) through the United Natural Foods, Inc. Retirement Plan (the “401(k) Plan”), you will receive a separate voting instructions card that will serve as a voting instruction for Fidelity Management Trust Company (“Fidelity”), the trustee of the plan. If Fidelity does not receive voting instructions for your shares, it will not vote your shares.
In addition to solicitations by mail and the Internet, our directors, officers and employees may, without additional remuneration, solicit proxies by telephone, facsimile and personal interviews. In addition, we have retained Okapi Partners LLC, to assist in the solicitation of proxies for a fee of approximately $9,000 plus associated costs and expenses. We will request brokerage houses, banks, and nominees to forward copies of the proxy materials to those persons for whom they hold shares and request instructions for voting the proxies. We will reimburse such brokerage houses, banks and other nominees for their reasonable expenses in connection with this distribution.
How to Vote
For Proposal 1, you may vote “FOR” or “AGAINST” each of the nominees to the Board. You may also abstain from voting “FOR” or “AGAINST” any nominee. For each of Proposals 2, 3, 4, 6 and 7, you may vote “FOR” or “AGAINST” or abstain from voting. For Proposal 5, you may vote for ONE YEAR, TWO YEARS, THREE YEARS or abstain from voting.
Stockholders of Record: If you are a stockholder of record, there are four ways to vote:
by completing, signing, dating and returning your proxy card by mail, if you request a paper copy of the proxy materials;
by written ballot at the annual meeting;
by making a toll-free telephone call within the United States or Canada using a touch-tone telephone to the toll-free number provided on your Notice of Proxy Availability; or
by voting on the Internet. To vote on the Internet, go to the website address indicated on your Notice of Proxy Availability to complete an electronic proxy card prior to the annual meeting. You will be asked to provide the control number from the Notice of Proxy Availability. You may also vote on the Internet while attending the meeting virtually through the Internet.

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If you plan to vote by telephone or Internet in advance of the meeting, your vote must be received by 11:59 p.m., eastern standard time, on December 12, 2017 to be counted. Internet voting during the annual meeting is also permissible through the virtual web meeting hosted at www.virtualshareholdermeeting.com/unfi2017.
Street Name Holders: If you hold your shares in street name, the Notice of Proxy Availability was forwarded to you by your brokerage firm, bank or other nominee and you should follow the voting instructions provided by your broker, bank or nominee. You may complete and return a voting instruction card to your broker, bank or nominee. Please check your Notice of Proxy Availability for more information. If you hold your shares in street name and wish to vote at the annual meeting in person, you must obtain a legal proxy from your broker and bring that proxy to the meeting. If you wish to vote at the annual meeting while attending through the virtual annual meeting, you must have your 16-digit control number from your Notice of Proxy Availability.
Holders Through the 401(k) Plan: If you hold your shares through the 401(k) Plan’s Stock Fund, you will receive a separate voting instructions card which will serve as a voting instruction for Fidelity, the trustee of the 401(k) Plan. You must submit your voting instructions to Fidelity by 5:00 p.m. eastern standard time on December 8, 2017 to allow time to receive your voting instructions. If Fidelity does not receive voting instructions for your shares, it will not vote your shares.
We provide Internet proxy voting to allow you to vote your shares online both before and during the meeting, with procedures designed to ensure the authenticity and correctness of your proxy vote instructions. However, please be aware that you must bear any costs associated with your Internet access, such as usage charges from Internet access providers and telephone companies.
Quorum
Presence in person, by attendance through the virtual annual meeting, or by proxy of a majority of the shares of common stock outstanding at the close of business on the Record Date and entitled to vote at the annual meeting will be required for a quorum at the meeting. Shares of common stock present in person or by attendance through the virtual annual meeting or represented by proxy (including shares that abstain or do not vote with respect to one or more of the matters presented for stockholder approval) will be counted for purposes of determining whether a quorum exists at the annual meeting.
Votes Required
Proposal 1 (election of a total of eight nominees as directors) is an uncontested director election. In uncontested elections, our Third Amended and Restated Bylaws (the "Bylaws") require that each nominee be elected by a majority of votes cast with respect to such nominee. Therefore, a director will be elected if the number of shares voted “FOR” the director exceeds the number of shares voted “AGAINST” the director. Since each nominee is already a director, our Bylaws require any nominee who does not receive the affirmative vote of at least a majority of the votes cast to offer to tender his or her resignation to the Board. The Nominating and Governance Committee of the Board will make a recommendation to the Board on whether to accept or reject the director’s resignation, or whether other action should be taken. The Board will act on such recommendation within 90 days from the date of the certification of the election results. Abstentions and broker non-votes will have no effect on this item because they are not considered votes cast.
For each of Proposal 2 (ratification of the selection of KPMG LLP), Proposal 3 (advisory approval of our executive compensation), Proposal 4 (the amendment and restatement of the United Natural Foods, Inc. Amended and Restated 2012 Equity Incentive Plan), Proposal 6 (the stockholder proposal regarding stockholder approval of certain future severance agreements), and Proposal 7 (the stockholder proposal regarding a decrease to the ownership threshold for stockholders to call a special stockholder meeting) the affirmative vote of a majority of votes cast on the proposal is necessary for approval. Abstentions (in the case of Proposals 2, 3, 4, 6 and 7) and broker non-votes (in the case of Proposals 3, 4, 6 and 7) will have no effect on the results because they are not considered votes cast.
For Proposal 3 (advisory vote on the frequency of advisory votes to approve our executive compensation), The Company will consider stockholders to have expressed a non-binding preference for the option that receives the most votes. Abstentions and broker non-votes will have no effect on the results because they are not considered votes cast.
Attending the Annual Meeting
We will be hosting the 2017 Annual Meeting of Stockholders at the Providence Marriott Downtown, 1 Orms Street, Providence, RI 02904, as well as live via the Internet. A summary of the information you need to attend the annual meeting online is provided below:
    Any stockholder as of the Record Date can attend the annual meeting in person or virtually through the Internet at www.virtualshareholdermeeting.com/unfi2017.
Meeting starts at 4:00 p.m. eastern standard time.

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If attending the annual meeting virtually through the Internet, please have your 16-digit control number provided on your Notice of Proxy Availability to enter the annual meeting.
If you hold your shares in street name and wish to vote at the annual meeting in person, you must obtain a legal proxy from your broker, bank or nominee and bring that proxy to the meeting.
Stockholders may vote and, subject to any rules of the meeting, submit questions while attending the annual meeting in person or through the Internet.
Instructions on how to attend and participate via the Internet, including how to demonstrate proof of stock ownership, are posted at www.virtualshareholdermeeting.com/unfi2017.
Webcast replay of the annual meeting will be available at www.virtualshareholdermeeting.com/unfi2017 until December 13, 2018.
Householding
We have adopted a procedure for stockholders whose shares are held in street name called “householding,” pursuant to which stockholders of record who have the same address and the same last name will receive only one Notice of Proxy Availability each and, as applicable, one set of any additional proxy materials that are delivered, unless one or more of these stockholders notifies us that they wish to continue receiving multiple copies. This procedure provides extra convenience for stockholders and a cost savings for us. Currently, we are not providing householding to stockholders of record.
If at any time you no longer wish to participate in householding and would prefer to receive a separate Notice of Proxy Availability and, as applicable, any additional proxy materials that are delivered, or if your shares are held in street name and you are receiving multiple copies of our Notice of Proxy Availability and, as applicable, any additional proxy materials that are delivered and wish to receive only one, please notify your bank, broker, nominee, trust or other holder of record. We will promptly deliver, upon oral or written request, a separate copy of the proxy statement to any stockholder residing at an address to which only one copy was mailed. Requests for additional copies for the current year or future years should be directed to our Investor Relations Department at (401) 528-8634 or 313 Iron Horse Way, Providence, Rhode Island 02908.
Stockholders who participate in householding will continue to receive separate control numbers for use in voting their shares, and, if requested, separate proxy cards.

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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This table includes information regarding the amount of our common stock beneficially owned as of October 16, 2017 by (i) each of our directors, (ii) each of our executive officers named in the EXECUTIVE COMPENSATION TABLES—Summary Compensation Table—Fiscal Years 2015-2017, (iii) all of our current directors and executive officers as a group, and (iv) each person or entity known to us to own more than 5% of our outstanding common stock.
Name and Address of Beneficial Owner (1)
 
 
Number of Shares
Beneficially
Owned(2)(3)
 
Percentage
Ownership
Directors and Named Executive Officers:
 
 
 
 
 
Steven L. Spinner
 
 
285,032

 
**

Eric F. Artz
 
 
10,430

 
**

Ann Torre Bates
 
 
9,430

 
**

Denise M. Clark
 
 
17,382

 
**

Daphne J. Dufresne
 
 
7,100

 
**

Michael S. Funk
 
 
64,739

 
**

James P. Heffernan
 
 
54,820

 
**

Peter A. Roy
 
 
51,608

 
**

Sean F. Griffin
 
 
49,121

 
**

Michael P. Zechmeister
 
 
21,855

 
**

Eric A. Dorne
 
 
19,631

 
**

Paul Green
 
 
9,884

 
**

All directors and executive officers, as a group (17 persons)
 
 
714,457

 
1.4
%
Other Stockholders:
 
 
 
 
 
FMR LLC (4)
 
 
5,648,165

 
11.1
%
BlackRock, Inc. (5)
 
 
5,099,833

 
10.0
%
The Vanguard Group, Inc. (6)
 
 
4,053,916

 
8.0
%
** Less than 1%
(1)
The address for each listed director and executive officer is c/o United Natural Foods, Inc., 313 Iron Horse Way, Providence, Rhode Island 02908. The address for FMR LLC is 245 Summer Street, Boston, Massachusetts 02210. The address for BlackRock, Inc. is 55 East 52nd Street, New York, New York 10055. The address for The Vanguard Group, Inc. is 100 Vanguard Boulevard, Malvern, Pennsylvania 19355.
(2)
The number of shares of common stock beneficially owned by each stockholder is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power and also any shares which a person has the right to acquire within 60 days after October 16, 2017 through the vesting and/or exercise of any equity award or other right. The inclusion herein of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each person named in the table has sole voting power and investment power (or shares such power with his or her spouse) with respect to all shares of common stock listed as owned by such person.
(3)
The shares of common stock shown in the table include the following numbers of shares that are issuable upon the exercise of stock options and that are exercisable within 60 days following October 16, 2017: Mr. Spinner—102,089; Mr. Funk—12,625; Mr. Heffernan—11,970; Mr. Roy—11,970; Mr. Griffin—24,825; Mr. Zechmeister—16,515; Mr. Dorne—16,815; Mr. Green—2,843; all directors and executive officers as a group—257,037.
The shares of common stock shown in the table do not include any shares issuable pursuant to restricted stock units.
The shares of common stock shown in the table include the following numbers of shares that are issuable pursuant to phantom stock in our Deferred Compensation and Deferred Stock Plans (the "Deferral Plans"): Mr. Spinner—8,125; Ms. Clark—8,650; Mr. Heffernan—18,756; Mr. Griffin—10,313; all directors and executive officers as a group—59,329.
The shares of common stock shown in the table include the following numbers of shares that are allocated to the individual's account under our 401(k) Plan's Stock Fund: Mr. Spinner—651; Mr. Funk—4,228; Mr. Griffin—1,632; Mr. Dorne—814; Mr. Green—168; all directors and executive officers as a group—9,001.

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The shares of common stock shown in the table include 23,345 vested performance units held by Mr. Spinner that are not payable until the termination of Mr. Spinner's employment with the Company, or if earlier, immediately prior to consummation of a change in control of the Company.
(4)
Beneficial ownership information based solely on a Schedule 13G/A filed with the SEC on February 14, 2017 by FMR LLC. FMR LLC reported sole voting power with respect to 902,932 shares and sole dispositive power with respect to 5,648,165 shares. Includes shares beneficially owned by FIAM LLC, Fidelity Institutional Asset Management Trust Company, FMR Co., Inc., and Strategic Advisers, Inc. FMR Co., Inc. beneficially owns 5% or greater of the outstanding shares reported on the Schedule 13G/A. Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. Neither FMR LLC nor Abigail P. Johnson has the sole power to vote or direct the voting of the shares owned directly by the various investment companies registered under the Investment Company Act (“Fidelity Funds”) advised by Fidelity Management & Research Company, a wholly owned subsidiary of FMR LLC, which power resides with the Fidelity Funds’ Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds’ Boards of Trustees.
(5)
Beneficial ownership information based solely on a Schedule 13G/A filed with the SEC on February 8, 2017 by BlackRock, Inc. BlackRock, Inc. reported sole voting power with respect to 4,984,321 shares and sole dispositive power with respect to 5,099,833 shares.
(6)
Beneficial ownership information based solely on a Schedule 13G/A filed with the SEC on February 10, 2017 by The Vanguard Group, Inc. The Vanguard Group, Inc. reported sole voting power with respect to 59,469 shares, shared voting power with respect to 5,199 shares, sole dispositive power with respect to 3,991,831 shares and shared dispositive power with respect to 62,085 shares. Vanguard Fiduciary Trust Company ("VFTC"), a wholly-owned subsidiary of The Vanguard Group, Inc., reported beneficial ownership of 56,886 shares as a result of VFTC's serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd. ("VIA"), a wholly-owned subsidiary of The Vanguard Group, Inc., reported beneficial ownership of 7,782 shares as a result of VIA's serving as investment manager of Australia investment offerings.

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CORPORATE GOVERNANCE
Summary
We are committed to maintaining strong corporate governance practices and principles. The Board actively monitors developments relating to the corporate governance of public corporations, and the Board has consulted with our legal counsel to evaluate our current corporate governance and other practices in light of these developments. Our policies and practices reflect our reviews of corporate governance best practices and are compliant with the requirements of the Sarbanes-Oxley Act of 2002, SEC rules and regulations and the NASDAQ Stock Market ("NASDAQ") listing standards. For example:
The Board has adopted clear corporate governance principles, which are reviewed annually and were most recently revised in March 2016, that outline the roles and responsibilities of the Board and its committees and establish policies regarding governance matters such as Board meetings and communications, performance evaluations of the Board and our Chief Executive Officer, stock ownership guidelines, and director orientation and continuing education;
Each member of our Board is elected annually to a one-year term;
A majority of the members of the Board are independent within the NASDAQ listing standards' definition, and the Board makes an affirmative determination regarding the independence of each director annually;
All members of the Board's standing committees—the Audit Committee, the Compensation Committee and the Nominating and Governance Committee—are independent within the NASDAQ listing standards' definition and applicable SEC rules and regulations;
The independent members of the Board meet regularly without the presence of management;
We have designated an independent director to serve as our "Lead Independent Director" to coordinate the activities of the other independent members of the Board;
We have a clear code of business conduct and ethics that applies to our principal executive officers and all members of our finance department, including our principal financial officer and principal accounting officer;
The charters of the Board's committees clearly establish their respective roles and responsibilities;
The Compensation Committee has considered whether any of the Compensation Committee's consultants have any relationships with us or our directors or executive officers that would call into question the consultant's independence or constitute a conflict of interest; and
The Audit Committee has procedures in place for the anonymous submission of employee complaints on accounting, internal controls or auditing matters.
In addition, our corporate governance principles limit our independent directors to serving on no more than a total of four public company boards and limit our executive officers to serving on no more than a total of two public company boards, in each case, including our Board. Directors and executive officers must notify the chair of the Nominating and Governance Committee in advance of accepting an invitation to serve on another corporate board. Directors are also required to notify the Nominating and Governance Committee when their principal occupation or business association changes, at which point the committee will evaluate the propriety of continued service on our Board by the director.
As discussed under PROPOSAL 1—ELECTION OF DIRECTORS—Majority Vote Standard for Election of Directors, our Bylaws provide for a majority voting standard for uncontested elections of directors. The Nominating and Governance Committee's charter sets forth the procedures for the Nominating and Governance Committee's deliberations regarding whether to accept an offer by a nominee for director to resign from the Board if that nominee does not receive more votes cast “FOR” his or her election than votes cast “AGAINST” his or her election in an uncontested election.
All directors elected at the annual meeting will be elected for one-year terms.
We maintain a corporate governance page on our website that includes key information about our corporate governance initiatives and our code of business conduct. The corporate governance page can be found at www.unfi.com, by clicking on "Investor Overview" and then on "Corporate Governance" or "Code of Conduct" as applicable. Copies of our corporate governance principles, our code of business conduct and ethics, the charters for each of the Board's committees and the charter of the Lead Independent Director can be found on the investor overview pages of our website. Information contained on our website is not incorporated by reference in this proxy statement or considered to be part of this document.

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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 NASDAQ listing standards. The Board, upon the recommendation of the Nominating and Governance Committee, has determined that six of its eight current members are independent. Our six independent directors are Eric F. Artz, Ann Torre Bates, Denise M. Clark, Daphne J. Dufresne, James P. Heffernan, and Peter A. Roy. Michael S. Funk and Steven L. Spinner are our employees and therefore 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 NASDAQ 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 and an outside director within the meaning of Section 162(m) of the Internal Revenue Code, as amended (the "Code").
Lead Independent Director
The Lead Independent Director is elected annually by the independent directors of the Board. Mr. Heffernan currently serves as the Lead Independent Director. In accordance with our corporate governance principles and the charter of the Lead Independent Director, 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 Chair of the Board, independent directors, and the President and Chief Executive Officer;
Recommending to the Board the membership of the Board's committees, and recommending to the Chair of the Board the retention of advisers and consultants who report directly to the Board;
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 ensuring the Board's input into the agenda for the Board's meetings; and
Serving as the Chair for executive sessions of the Board's independent directors and acting as Chair of the Board's regular and special meetings when the Chair is unable to preside.
A complete description of the duties of the Lead Independent Director is included in the amended and restated charter of the Lead Independent Director, a copy of which can be found in the corporate governance section of our website at www.unfi.com.
Board Leadership Structure
The Board is currently led by the Chair of the Board, Mr. Spinner, and by the Lead Independent Director, Mr. Heffernan.
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 Chief Executive Officer 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 Chief Executive Officer and Chairman 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 given point in time based on what it believes will provide the best leadership structure for the Company, based on the circumstances at the time.
The Board currently believes that having Mr. Spinner serve as both Chairman and Chief Executive Officer, coupled with strong independent director leadership, is the most appropriate leadership structure for the Company at this time. The Board believes a number of factors support this decision. The Board believes the combined Chairman and Chief Executive Officer structure promotes decisive leadership, ensures clear accountability and enhances our ability to communicate with a single and consistent voice to stockholders, employees and other stakeholders. Further, given he has the benefit of over 28 years of operational and leadership experience with distributors of food and non-food products, including during the last six (6) years as our industry has undergone significant changes, Mr. Spinner (together with our Lead Independent Director and in consultation with the chairs of our various standing committees) is well-positioned to set the Board’s agenda and provide leadership. Mr. Spinner’s career experience also gives him exceptional industry knowledge, which the Board believes is critical for the chairman of the board of a company that operates in an evolving industry. The Board also noted Mr. Spinner’s strong performance as a leader. At present, the Board believes that this structure, along with having a Lead Independent Director vested with key duties and responsibilities (as discussed above) and the Board’s standing committees comprised of and chaired by independent directors (as discussed below) provides a formal structure for strong independent oversight of our management team. We plan to continue to examine our corporate governance policies and leadership structures on an ongoing basis to ensure that they continue to meet our needs.

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Risk Oversight
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 planning for succession of our Chief Executive Officer and other members of senior management. The Board has delegated responsibility for the oversight of specific risks to the Board's committees as follows: the Audit Committee receives management’s quarterly Enterprise Risk Management and Risk Committee reports and discusses with management, the Company’s internal audit department and our independent auditor significant financial risk exposures and the steps management has taken to monitor, control, and report such exposures; and the Compensation Committee is responsible for ensuring that compensation policies and programs do not encourage our executives to take unnecessary and excessive risks that could threaten our long-term value. All committees report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk. We believe the division of risk management responsibilities described above is an effective approach for addressing the risks facing our Company.
Compensation Risk
We performed a comprehensive assessment for the Compensation and Audit Committees to determine whether the risks arising from any of our compensation policies or practices are reasonably likely to have a material adverse effect on us. Our assessment covered each material element of executive and non-executive employee compensation and any risk mitigating factors as discussed below. We believe that our policies and practices do not create risks that are reasonably likely to have a material adverse effect on us. In addition, the structure of our compensation program for executive officers does not incentivize unnecessary or excessive risk taking. The base salary component of compensation does not encourage risk-taking because it is a fixed amount. In addition, performance-based cash incentive awards and long-term equity-based incentive awards made in fiscal 2017 as part of our core executive compensation program have the following risk-limiting characteristics:
Our overall compensation levels are competitive with the market.
Our core compensation mix for fiscal 2017 was balanced among (i) fixed components like salary and benefits, (ii) annual incentives that reward total Company financial performance and individual performance, and (iii) a portfolio approach for stock awards with a mix of performance share units and time-based vesting restricted stock units.
Time-based vesting equity awards for the Named Executive Officers under our core program were granted with a grant date fair value equal to the sum of approximately one-half of the total grant date fair value of the core long-term equity based compensation awarded in fiscal 2017, to our Named Executive Officers other than Mr. Spinner, excluding one-time, special retention awards given to Messers. Zechmeister, Dorne, and Green (each of whom received special time-based vesting restricted stock unit awards during fiscal 2017) and Messers. Spinner and Griffin (each of whom received special performance-based vesting restricted stock unit awards during fiscal 2017). Within our core program, Mr. Spinner’s time-based vesting equity awards made up approximately 25% of the grant date fair value of his equity-based awards for fiscal 2017.
Equity awards issued as part of our core executive compensation program were generally delivered equally in the form of time-based vesting restricted stock units and performance-based vesting restricted stock units (or, in the case of Mr. Spinner, with performance awards making up almost 75% of his core awards) which align the interests of our executive officers to long-term stockholder interests.
A significant portion of our executive compensation is tied to how our stock performs over multiple years. Time-based vesting equity awards to employees generally have graded vesting with 25% of the grant vesting on each anniversary of the grant date. This minimizes the benefit of a temporary increase in stock price.
With the exception of awards made to our Directors, with the exception of Mr. Spinner, all equity awards issued as part of our core executive compensation program contain a vesting requirement of at least one year.
Our equity based incentive programs are based on a sliding scale with amounts interpolated between threshold, target and stretch performance metrics rather than "all or none" awards. These awards can typically vest at a value of up to 200% of the grant date value if the stretch performance targets are achieved.
The Compensation Committee has discretion to reduce performance-based awards when it determines that such adjustments would be appropriate based on the Company's interests and the interests of our stockholders.
Payouts for awards under our Annual Cash Incentive Plan are tiered based on threshold, target, and stretch goals and the payout of these annual cash incentives and vesting of performance units are based on results included in, or derived from, the audited consolidated financial statements.
Executive officers are subject to our executive stock ownership guidelines as described in EXECUTIVE COMPENSATION—Compensation Discussion and Analysis—Other Programs, Policies and Considerations and all non-employee directors

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are subject to stock ownership requirements as described in DIRECTOR COMPENSATION—Stock Ownership Requirement.
Equity awards and cash-based incentive plan awards are subject to our Recoupment Policy as described in EXECUTIVE COMPENSATION—Compensation Discussion and Analysis—Other Programs, Policies and Considerations.
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, including the United Natural Foods, Inc. 2002 Stock Incentive Plan (the "2002 Equity Plan"), the United Natural Foods, Inc. Amended and Restated 2004 Equity Incentive Plan (the "2004 Equity Plan") and the United Natural Foods, Inc. Amended and Restated 2012 Equity Incentive Plan (the "Original Amended and Restated Plan"). Additionally, this committee evaluates and establishes the compensation of our executive officers whose compensation is described below in EXECUTIVE COMPENSATION TABLES—Summary Compensation Table—Fiscal Years 2015-2017, including our Chief Executive Officer and Chief Financial Officer. The Compensation Committee also reviews the compensation of the 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 COMPENSATION—Compensation Discussion and Analysis—How We Make Decisions Regarding Executive Pay. The Compensation Committee also approves our annual compensation discussion and analysis included in our annual proxy statements.
The agenda for meetings of the Compensation Committee is determined by its Chair with the assistance of our Chief Executive Officer, Chief Financial Officer, Chief Human Resources Officer and Secretary and General Counsel. Compensation Committee meetings are regularly attended by the Chair of the Board and Chief Executive Officer, the Chief Financial Officer, the General Counsel and the Chief Human Resources Officer. At certain meetings during fiscal 2017, the Compensation Committee met in executive session. The Compensation Committee's Chair reports the committee's recommendations on 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 terminate a compensation consultant, legal counsel or other advisor as it deems necessary to assist in the fulfillment of its responsibilities. Moreover, the Compensation Committee annually evaluates the independence of its consultants.
The Compensation Committee's charter is available on our website, www.unfi.com. The Compensation Committee held nine meetings during fiscal 2017. The current members of the Compensation Committee are Messrs. Heffernan (chair) and Artz, and Ms. Bates, each of whom is an independent director.
Audit Committee. The Board has an Audit Committee that is a separately designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Audit Committee is responsible for monitoring the integrity of our financial reporting process and systems of internal controls regarding finance, accounting, and legal compliance; monitoring the independence of our independent registered public accounting firm; and monitoring the performance of our independent registered public accounting firm and our internal audit department. Among the Audit Committee's duties are to review the results and scope of the audit and other services provided by our independent registered public accounting firm.
The Audit Committee's charter is available on our website, www.unfi.com. The Audit Committee held six meetings during fiscal 2017. The current members of the Audit Committee are Ms. Bates (chair), Mmes. Clark and Dufresne and Messrs. Artz and Heffernan, each of whom is an independent director. The Board has determined that Mmes. Bates and Dufresne and Messrs. Artz and Heffernan 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; and assisting the Board in conducting performance reviews of the Board and its committees and members. For additional information regarding the director nomination process undertaken by the Nominating and Governance Committee, please refer to PROPOSAL 1—ELECTION OF DIRECTORS—Nomination of Directors.
The Nominating and Governance Committee's charter is available on our website, www.unfi.com. The Nominating and Governance Committee held six meetings during fiscal 2017. The current members of the Nominating and Governance Committee are Mr. Roy (chair) and Mmes. Clark and Dufresne, each of whom is an independent director. Gail A. Graham (who was also an

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independent director) served on the Nominating and Governance Committee prior to the expiration of her term as a director at the 2016 annual meeting.
Board Meetings
During fiscal 2017, the Board met nine times and following most of the Board's meetings, the independent directors met in executive session without the presence of management (in each case, including by telephone conference). All directors attended at least 94% 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 meetings of stockholders. All of our current directors attended the annual meeting held in December 2016 either in person or through the virtual annual meeting.

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PROPOSAL 1—ELECTION OF DIRECTORS
Directors and Nominees for Director
The Board is currently comprised of eight directors. All directors elected at the annual meeting will be elected for one-year terms.
The term of each director will expire at the 2018 annual meeting, unless elected to a new term by our stockholders. Mmes. Bates, Clark and Dufresne and Messrs. Artz, Funk, Heffernan, Roy, and Spinner have been nominated to stand for election as a director at the 2017 annual meeting to hold office until the annual meeting of stockholders to be held in 2018 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 qualification 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 IN 2018
Eric F. Artz, age 49, has served as a member of the Board since October 2015. Mr. Artz is a member of the Audit Committee and Compensation Committee. Mr. Artz has served as Executive Vice President and Chief Operating Officer of Recreational Equipment, Inc. ("REI") since August 2014. 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's professional experience brings valuable knowledge and insight to our Board. The Board values his experience as a 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 59, has served as a member of the Board since October 2013. Ms. Bates serves as the chair of the Audit Committee and is a member of the Compensation Committee. Ms. Bates has served as a member of the board 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 Corporation 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 59, has served as a member of the Board since February 2013. Ms. Clark is a member of the Audit Committee and Nominating and Governance Committee. Ms. Clark served as Senior Vice President and Global Chief Information Officer for The Estée Lauder Companies Inc. from November 2012 until her retirement in March 2017. Prior to that role, Ms. Clark served as Senior Vice President and Chief Information Officer for Hasbro Inc. from October 2007 to November 2012. Ms. Clark also served at Mattel, Inc., where she was Global Chief Technology Officer and later Chief Information Officer for the Fisher Price brand between January 2000 and February 2007. Ms. Clark's previous experience includes two other consumer goods companies, Warner Music Group, formerly a division of Time Warner Inc., and Apple Inc. Ms. Clark has over 20 years of experience in the delivery of enterprise resource planning, digital platforms, and innovative business transformation initiatives.
Ms. Clark's extensive background, particularly her expertise involving information technology, allows her to provide the Board valuable guidance on our strategic path, especially as it relates to information technology solutions.
Daphne J. Dufresne, age 45, has served as a member of the Board since October 2016. Ms. Dufresne is a member of the Audit 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

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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.
Ms. Dufresne's professional experience brings valuable knowledge and insight to our Board. 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 stockholders.
Michael S. Funk, age 63, 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 day-to-day 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-time involvement with our Company is also valuable to the Board.
James P. Heffernan, age 71, has served as a member of the Board since March 2000. Mr. Heffernan serves as Lead Independent Director, Chair of the Compensation Committee and as a member of the Audit Committee. Mr. Heffernan has served as a Director of Command Security Corp. since October 2010 and as a Director of Jason Industries, Inc. since August 2013. Mr. Heffernan previously served as Vice Chairman and Trustee of the New York Racing Association from November 1998 until 2012, a member of the Board of Directors of Solutia, Inc. from February 2008 until July 2012, and a member of the Board of Directors of Columbia Gas System, Inc. from January 1993 until November 2000.
The totality of Mr. Heffernan's professional experience, together with his other board service has provided him with the background and experience of board processes, function, compensation practices and oversight of management which is valuable to the Board.
Peter A. Roy, age 61, has served as a member of the Board since June 2007. Mr. Roy serves as Chair of the Nominating and Governance Committee. Mr. Roy is an entrepreneur and since 1999 has been a strategic advisor to North Castle Partners. In connection with his role as a strategic advisor to North Castle Partners, Mr. Roy served on the boards of Avalon Natural Products, Inc. and Naked Juice Company. 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 a key customer of ours. 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 57, has served as Chair of the Board since December 2016 and as our President and Chief Executive Officer and as a member of the Board since September 2008. Mr. Spinner also served as our Interim President of the Eastern Region from September 2010 to December 2010. 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 Director of ArcBest Corporation since July 2011 and as its Lead Independent Director since April 2016.
Mr. Spinner's extensive experience in the wholesale food distribution business, including having served as the president and chief executive officer of one of the largest publicly traded foodservice distribution businesses in the United States, brings valuable insight to the Board beyond the knowledge and insight he brings from being our president and chief executive officer.

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Majority Vote Standard for Election of Directors
We adopted a majority voting standard for the election of directors as an amendment to our Bylaws in 2007. 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. However, when the number of nominees does not exceed the number of directors to be elected (an uncontested election) 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). If a nominee who was not already serving as a director is not elected at the annual meeting, under Delaware law that nominee would not become a director and would not serve on the Board as a "holdover director." All nominees for election as directors at the 2017 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 to determine whether the recommended nominees are qualified to serve on the Board. The Nominating and Governance Committee has adopted qualitative 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's achievement of 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, crisis response, industry knowledge, leadership, strategy and vision.
Board Independence. The Nominating and Governance Committee considers whether the nominee would qualify as "independent" under SEC rules and NASDAQ listing standards.
Director Commitment. The Nominating and Governance Committee expects that each of our directors will prepare for and actively participate in meetings of the Board and its committees, provide advice and counsel to our management, develop a broad knowledge of our business and industry and, with respect to an incumbent director, maintain the expertise that led the Nominating and Governance Committee to initially select the director as a nominee. The Nominating and Governance Committee evaluates each nominee on his or her ability to provide this level of commitment if elected to the Board.
Additional Considerations. Each nominee also is evaluated based on the overall needs of the Board and the diversity of experience he or she can bring to the Board, whether in terms of specialized knowledge, skills or expertise. Although we do not have a formal policy with regard to the consideration of diversity in identifying director nominees, the Nominating and Governance Committee strives to nominate directors with a variety of complementary skills so that, as a group, the Board will possess the appropriate talent, skills and expertise to oversee our businesses.
Following this evaluation, the Nominating and Governance Committee will make recommendations for membership on the Board and review such recommendations with the Board, which will decide whether to invite the candidate to be a nominee for election to the Board.

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Director Nominees Recommended by Stockholders
The Nominating and Governance Committee evaluates nominees recommended by stockholders on the same basis as nominees recommended by any other sources, including making a determination whether the candidate is qualified to serve on the Board based on the qualitative standards described above. To be considered by the Nominating and Governance Committee, a stockholder who wishes to recommend a director nominee must deliver or send by first class U.S. mail a written notice addressed to Joseph J. Traficanti, Corporate Secretary, United Natural Foods, Inc., 313 Iron Horse Way, Providence, RI 02908. Generally, to be timely, the written notice must be received by our Corporate Secretary within the following time periods:
in the case of an annual meeting, no earlier than 120 days and no later than 90 days prior to the first anniversary of the date of the preceding year’s annual meeting; provided, however, that if (A) the annual meeting is not within 30 days before or after such anniversary date, or (B) no annual meeting was held during the preceding year, to be timely the stockholder notice must be received no later than the tenth day after the day on which notice of the date of the meeting was mailed or public disclosure of the date of such meeting is first made, whichever occurs first; and
in the case of a nomination of a person or persons for election to the Board of Directors at a special meeting of the stockholders called for the purpose of electing directors, no earlier than 120 days before such special meeting and no later than 90 days before such special meeting or, if later, the tenth day after the day on which public disclosure of the date of such meeting is first made.
We have also adopted a proxy access right that permits a stockholder, or a group of up to 20 stockholders, owning continuously for at least three years shares of our stock representing an aggregate of at least 3% of the voting power entitled to vote in the election of directors, to nominate and include in our proxy materials director nominees, provided that the stockholder(s) and the nominee(s) satisfy the requirements in our Bylaws. 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 considered timely, compliant notice of proxy access director nominations must be submitted to the 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 90 days prior to such annual meeting or, if later, the tenth day after the day on which notice of the date of the meeting was mailed or public disclosure of the date of such meeting is first made, whichever occurs first.

The foregoing is a summary of the requirements for stockholders to nominate persons for election to our Board of Directors, which requirements are set out fully in our Bylaws and the foregoing description is qualified by reference to the full text of our Bylaws. You should consult our Bylaws for more detailed information regarding the processes by which stockholders may nominate directors, including the specific requirements regarding the content of the written notices and other related requirements.
Communication with the Board of Directors
Our stockholders may communicate directly with the Board. All communications should be in written form and directed to Joseph J. Traficanti, Corporate Secretary, United Natural Foods, Inc., 313 Iron Horse Way, Providence, RI 02908. Communications should be enclosed in a sealed envelope that prominently indicates that it is intended for the Board. Each communication intended for the Board and received by the corporate secretary that is related to our operation and is relevant to a specific director's service on the Board will be forwarded to the specified party following its clearance through normal review and appropriate security procedures.

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DIRECTOR COMPENSATION
The Board and the Compensation Committee review and determine compensation for our non-employee directors, in part, based on a review of the annual Director Compensation Survey prepared by the National Association of Corporate Directors as well as with the input from the Compensation Committee's independent consultant, Semler Brossy Consulting Group, LLC ("Semler Brossy"). 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 President and Chief Executive Officer, does not receive compensation for his service on the Board including in his capacity as Chair of the Board. Mr. Funk does not receive cash compensation for his service as a director. Mr. Funk receives equity-based compensation for his service to the Company. Mr. Funk receives cash compensation for his service as an executive advisor.
Non-Employee Director Compensation
The components of our non-employee director compensation are cash fees and awards of restricted stock units. Each non-employee director is also reimbursed for direct expenses incurred in connection with his or her attendance at meetings of the Board and its committees.
Each non-employee director who served during fiscal 2017 received the following compensation (as applicable):
Annual cash retainer of:
$52,000 for serving as the Lead Independent Director (without duplication for serving as director);
$30,000 for serving as a director;
$15,000 for serving as the chair of the Audit Committee;
$8,000 for serving as chair of the Compensation Committee; and
$8,000 for serving as chair of the Nominating and Governance Committee.
Quarterly cash retainer of:
$6,500 per quarter for serving as a director in lieu of separate meeting fees;
Annual equity grants of restricted stock units having a value, based on the stock price on the date of grant, of (without duplication):
$162,000 for serving as a director;
$190,000 for serving as chair of the Audit Committee; and
$236,000 for serving as Lead Independent Director
With respect to equity awards to non-employee directors in fiscal 2017, one half of the annual grant vest immediately and the remaining half vests on the six month anniversary of the date of grant.
Compensation of Mr. Funk
Mr. Funk, our former Chair of the Board, and former President and Chief Executive Officer, serves as an executive advisor to us and makes himself generally available to our executive officers. We pay him a base salary and provide him with the health and welfare benefits and other employee benefits generally available to our executives. Mr. Funk's base salary during fiscal 2017 was $134,100. Mr. Funk does not receive any cash compensation for serving as a director. During fiscal 2017, Mr. Funk received an equity grant of restricted stock units having a value of $365,000, or 9,230 restricted stock units, of which one half vested immediately and the remaining half vested on the six month anniversary of the date of grant.
We are currently a party to a severance agreement with Mr. Funk. The severance agreement includes confidentiality, non-competition and intellectual property assignment provisions. For a period of one year following either his termination for a reason other than Cause, death or disability, or his resignation for Good Reason, the agreement requires us to pay to Mr. Funk his base salary in effect as of the termination date of his employment and provide certain medical benefits. In the event of either Mr. Funk's termination for a reason other than Cause, death or disability or his resignation for Good Reason within one year of a Change in Control, he will be entitled to the severance payments and medical benefits provided in the previous sentence, and acceleration and full vesting of all unvested stock options and restricted stock units. For purposes of Mr. Funk's severance arrangement, the terms "Cause", "Good Reason" and "Change in Control" have the meanings set forth below.
"Cause" means (1) conviction of the executive under applicable law of any felony or any misdemeanor involving moral turpitude, (2) unauthorized acts intended to result in the executive's personal enrichment at the material expense of the Company

16



or its reputation, or (3) any violation of the executive's duties or responsibilities to the Company which constitutes willful misconduct or dereliction of duty, or material breach of the confidentiality and non-competition restrictions contained in the severance agreement.
"Good Reason" means, without the executive's express written consent, the occurrence of any one or more of the following: (1) the assignment of the executive to duties materially adversely inconsistent with his current duties, and failure to rescind such assignment within thirty (30) days of receipt of notice from the executive; (2) a relocation more than 50 miles from the Company's offices in Providence, Rhode Island; (3) a reduction by the Company in the executive's base salary, or the failure of the Company to pay or cause to be paid any compensation or benefits under the severance agreement when due or under the terms of any plan established by the Company, and failure to restore such base salary or make such payments within five days of receipt of notice from the executive; (4) failure to include the executive in any new employee benefit plans proposed by the Company or a material reduction in the executive's level of participation in any existing plans of any type; provided that a Company-wide reduction or elimination of such plans shall not give rise to a "Good Reason" termination; or (5) the failure of the Company to obtain a satisfactory agreement from any successor to the Company with respect to the ownership of substantially all the stock or assets of the Company to assume and agree to perform the severance agreement.
"Change in Control" means the happening of any of the following:
any "person", including a "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company, any of its affiliates, or any employee benefit plan of the Company or any of its affiliates) is or becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Company representing the greater of 30% or more of the combined voting power of the Company's then outstanding securities;
approval by the stockholders of the Company of a definitive agreement (1) for the merger or other business combination of the Company with or into another corporation if (A) a majority of the directors of the surviving corporation were not directors of the Company immediately prior to the effective date of such merger or (B) the stockholders of the Company immediately prior to the effective date of such merger own less than 60% of the combined voting power in the then outstanding securities in such surviving corporation or (2) for the sale or other disposition of all or substantially all of the assets of the Company; or
the purchase of 30% or more of the Company's stock pursuant to any tender or exchange offer made by any "person", including a "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any of its affiliates, or any employee benefit plan of the Company or any of its affiliates.
Deferred Compensation
Our non-employee directors are eligible to participate in the United Natural Foods, Inc. Deferred Compensation Plan (the "Deferred Compensation Plan") and, prior to being frozen with respect to new deferrals in January 2007, the United Natural Foods, Inc. Deferred Stock Plan (the "Deferred Stock Plan", collectively, the "Deferral Plans"). For a description of the Deferral Plans, please see EXECUTIVE COMPENSATION TABLES—Nonqualified Deferred Compensation—Fiscal 2017.
Director Compensation Table—Fiscal 2017
The following table summarizes compensation provided to our former Chair of the Board (Mr. Funk) and each individual who served as a non-employee director during fiscal 2017.

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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)
 
All Other
Compensation
($)(5)
 
Total ($)
Eric F. Artz
 
56,000

 
162,000

 

 

 

 
218,000

Ann Torre Bates
 
71,000

 
190,000

 

 

 


261,000

Denise M. Clark
 
56,000

 
162,000

 

 
19,555

 

 
237,555

Daphne J. Dufresne
 
57,000

 
203,000

 

 

 

 
260,000

Michael S. Funk
 

 
365,000

 

 

 
134,100

 
499,100

Gail A. Graham (6)
 
28,000

 

 

 

 

 
28,000

James P. Heffernan
 
86,000

 
236,000

 

 

 

 
322,000

Peter A. Roy
 
64,000

 
162,000

 

 

 

 
226,000

(1)
This column shows the amount of cash compensation earned in fiscal 2017 for service on the Board and its committees.
(2)
The amounts contained in this column represent the grant date fair value for the restricted stock units (including those which are not yet vested) granted in fiscal 2017 calculated in accordance with Financial Accounting Standards Board Accounting Standards Codification 718, Stock Compensation ("ASC 718"). The grant date fair value for restricted stock units is calculated using the intrinsic value method based on the closing price of our common stock on the NASDAQ Global Select Market on the date of grant. At July 29, 2017, no director other than Mr. Spinner had any unvested restricted stock units outstanding.
(3)
At July 29, 2017, the directors had 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—12,625 shares; Ms. Graham—none; Mr. Heffernan—14,630 shares; and Mr. Roy—14,630 shares.
(4)
As of July 29, 2017, two of our non-employee directors, Ms. Clark and Mr. Heffernan have elected to defer restricted stock units under the Deferred Compensation Plan. Deferred shares are valued at the current market price of our common stock, and therefore have no above market or preferential earnings. As of July 29, 2017, Ms. Clark is the only director to defer a portion of director fees paid in cash under the Deferred Compensation Plan. For fiscal 2017, Ms. Clark deferred $56,000 of her fees payable in cash.
(5)
The amount in this column represents the amount of cash compensation that Mr. Funk earned in fiscal 2017 in his capacity as our executive advisor. Mr. Funk does not receive any cash compensation for serving as a director.
(6)
Gail A. Graham was not nominated to stand for re-election at our 2016 annual meeting.
Stock Ownership Guidelines
All non-employee directors, and Mr. Funk, 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 three times the annual and quarterly 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 later of the fifth year after (i) the guidelines were adopted or (ii) he or she becomes a member of the Board. Once attained, each non-employee director is required to maintain this level of stock ownership 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, as are shares of vested and unvested restricted stock and restricted stock units subject only to time-based vesting restrictions. Unvested stock options do not count. All of our directors are in compliance with our stock ownership guidelines.
Compensation Committee Interlocks and Insider Participation
The current members of the Compensation Committee are Ms. Bates and Messrs. Artz and Heffernan. All members of the Compensation Committee are independent within the meaning of the NASDAQ listing standards and no member is an employee or former employee of the Company. During fiscal 2017, no member of the Compensation Committee had any relationship requiring disclosure under "Certain Relationships and Related Transactions" below. During fiscal 2017, none of our executive officers served

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as a director or a member of the compensation committee (or other committee serving an equivalent function) of any other entity, one of whose executive officers served as a director on the Board or as a member of the Compensation Committee.
Certain Relationships and Related Transactions
Review and Approval of Related Person Transactions
We review all relationships and transactions in which the Company and our directors, nominees for director, executive officers, greater than 5% beneficial owners or any of their immediate family members are participants (or any entity in which they have an interest is a participant), to determine whether such persons have a direct or indirect material interest in the relationships or transactions. Our legal department, in conjunction with the corporate finance department and outside legal counsel, is primarily responsible for the development and implementation of processes and controls to obtain information from these "related persons" regarding such transactions and relationships and for determining, based on the facts and circumstances and SEC regulations, whether we or a related person has a direct or indirect material interest in the transaction. The Nominating and Governance Committee also reviews this information. Our policies and procedures for the review, approval or ratification of transactions that are required by SEC rules to be reported under Transactions with Related Persons are not in writing, rather, they fall under the general responsibilities of our corporate finance department and Nominating and Governance Committee. We require any related party transactions to be on terms no less favorable to the Company than could be obtained from unaffiliated third parties. 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 both the executive officer, director, nominee, beneficial owner or any of their respective immediate family members, on the one hand, and the Company, on the other hand, participates, and in which the executive officer, director, nominee, beneficial owner or immediate family member, has a material interest. 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
One of our former non-employee directors, Ms. Graham, has been the General Manager of one of our customers, Mississippi Market Natural Foods Cooperative, a consumer owned and controlled cooperative in St. Paul, Minnesota since October 1999. Mississippi Market Natural Foods Cooperative purchased approximately $7.6 million of products from us during fiscal 2017. We do not believe that Ms. Graham has a material direct or indirect financial interest in this commercial relationship. Terms provided to this customer are the same as other customers with similar volumes and purchasing patterns. Ms. Graham was not nominated to stand for re-election at our 2016 annual meeting.
Mr. Spinner has a minority interest in a private equity fund that is managed by his brother that owns a minority interest in two of the Company's suppliers. Consolidated annual purchases from the suppliers for fiscal 2017 were approximately $0.6 million. We do not believe that Mr. Spinner has a material direct or indirect financial interest in these relationships. Supplier terms are the same as other suppliers with whom we have similar purchase volumes.

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AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors is comprised solely of independent directors, as defined by NASDAQ 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 made a determination that the Audit Committee has four members, Ms. Bates, the Chair of the Audit Committee, Ms. Dufresne and Messrs. Artz and Heffernan, that qualify as an "audit committee financial expert" within the meaning of SEC regulations, and that have accounting and related financial management expertise in accordance with NASDAQ listing standards. All committee members are financially literate.
The Audit Committee has prepared the following report on its activities with respect to the audited consolidated financial statements for the fiscal year ended July 29, 2017 (for purposes of this report, the "audited 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 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 ensure 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 of America and as to whether the Company maintained effective internal control over financial reporting.
The Audit Committee has met and held discussions with management and our independent registered public accounting firm. In our discussions, management has represented to the Audit Committee that the Company's consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States. The Audit Committee has reviewed and discussed the audited financial statements with management and KPMG LLP, our independent registered public accounting firm. The Audit Committee meets with our internal auditors and independent registered public accounting firm, 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 six formal meetings in fiscal 2017. These meetings included quarterly pre-earnings release telephone conference calls. The Audit Committee discussed with the independent registered public accounting firm 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.
The Company's independent registered public accounting firm 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 July 29, 2017, for filing with the SEC. The Board has approved this recommendation.
 
 
Ann Torre Bates, Chair
 
 
Eric F. Artz
 
 
Denise M. Clark
 
 
Daphne J. Dufresne
 
 
James P. Heffernan
    

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Executive Officers of the Company
Our executive officers are elected on an annual basis and serve at the discretion of our Board of Directors. Our executive officers and their ages as of November 3, 2017 are listed below:
Name
 
Age
 
Position
Steven L. Spinner
 
57
 
President, Chief Executive Officer and Chairman
Michael P. Zechmeister
 
50
 
Chief Financial Officer
Sean F. Griffin
 
58
 
Chief Operating Officer
Danielle Benedict
 
45
 
Chief Human Resource Officer
Eric A. Dorne
 
57
 
Chief Administrative and Information Officer
Paul S. Green
 
54
 
President, Pacific Region
John M. Hummel
 
46
 
President, Central Region
Craig H. Smith
 
59
 
Senior Vice President, Fresh Sales
Christopher P. Testa
 
47
 
President, Atlantic Region
Joseph J. Traficanti
 
66
 
Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary
    
Steven L. Spinner has served as Chair of the Board since December 2016 and as our President and Chief Executive Officer and as a member of the Board since September 2008. Mr. Spinner also served as our Interim President of the Eastern Region from September 2010 to December 2010. 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 Director of ArcBest Corporation since July 2011 and as its Lead Independent Director since April 2016.
Michael P. Zechmeister has served as our Chief Financial Officer since October 2015. Mr. Zechmeister, previously served as Senior Vice President from September 2015 to October 2015. Prior to joining us, Mr. Zechmeister served in a variety of senior finance roles over a span of 25 years with General Mills, Inc., including most recently as Vice President, Finance at Yoplait USA from 2012 to September 2015. In addition, Mr. Zechmeister was Vice President and Treasurer from 2010 to 2012, Vice President, Finance US Retail Sales from 2007 to 2010 and Vice President, Finance, Pillsbury Division from 2005 to 2007.
Sean F. Griffin has served as our Chief Operating Officer since September 2014. Mr. Griffin previously served as our Senior Vice President, Group President from June 2012 to September 2014 and as our Senior Vice President, National Distribution from January 2010 to June 2012. Prior to joining us, Mr. Griffin was East Region Broadline President of PFG. Previously he served as President of PFG in Springfield, MA from 2003 until 2008. He began his career with Sysco Corporation in 1986 and has held various leadership positions in the foodservice distribution industry with U.S. Foodservice, Alliant Foodservice and Sysco Corporation.
Danielle Benedict was appointed as our Chief Human Resource Officer in September 2017. Ms. Benedict previously served as our Senior Vice President Human Resources from May 2016 to September 2017 and as our National Vice President, Human Resources from August 2014 to May 2016 and Director Compensation & Benefits from April 2013 to August 2014. Prior to joining us, Ms. Benedict was Vice President Human Resources & Leadership Development at Clean Harbors Environmental Services from 2007 to 2013.  She began her career with Dunkin Brands, Inc. in 1999. 
Eric A. Dorne has served as our Chief Administrative and Information Officer since September 2016. 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 August 2005 to January 2011. In his more than 30 years at The Great Atlantic & Pacific Tea Company, Mr. Dorne held various executive positions including Vice President of Enterprise IT Application Management and Development, Vice President of Store Operations Systems and Director of Retail Support Services.
Paul S. Green has served as our President, Pacific Region since August 2016. Mr. Green previously served as our Senior Vice President, Operations from June 2014 to August 2016 and Vice President, Operations from May 2010 to June 2014. Prior to

21



joining us, Mr. Green was Vice President of Sales for PFG-Springfield, MA from 2008 until 2010 and Vice President of Operations for PFG-Springfield, MA from 2005 until 2008. Mr. Green held various other leadership positions in his ten years at PFG. He began his career with Fleming Foods and held several positions over 16 years. 
John M. Hummel has served as our President, Central Region, since August 2016. Mr. Hummel previously served as our Vice President of Distribution, Central Region, from May 2013 until July 2016. Prior to joining us, he was Corporate Vice President of Operations for Reinhart FoodService, LLC, a division of Reyes Holdings, LLC, from 2005 until 2013. In his 24 years at Reinhart, he held other key divisional leadership roles, including Director of Physical Distribution for their largest location in Milwaukee, Wisconsin. He began his career with Walter's Food Service, Inc., in 1987 and has held various leadership positions in other large scale foodservice distribution organizations such as PepsiCo Food Systems/AmeriServe and Institution Food House.
Craig H. Smith has served as our Senior Vice President, Fresh Sales since August 2016. Mr. Smith previously served as our Senior Vice President, National Sales and Service from September 2013 to July 2016. Prior to that, Mr. Smith served as our President of the Eastern Region from December 2010 to August 2013. Prior to joining us, Mr. Smith was Atlantic Region President of U.S. Foodservice, a leading broadline foodservice distributor of national, private label, and signature brand items in the United States from May 2008 to December 2010. In his 17 years at U.S. Foodservice, Mr. Smith held various executive positions including Senior Vice President Street Sales, North Region Zone President, Detroit Market President and Boston Market President. Prior to U.S. Foodservice, Mr. Smith held several positions at foodservice industry manufacturer and distributor Rykoff-Sexton, Inc. from 1982 until 1993.
Christopher P. Testa has served as our President, Atlantic Region since August 2016. 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. Prior to joining us, Mr. Testa served as Vice President of Marketing for Cadbury Schweppes Americas Beverages from August 2002 to May 2005 and as CEO of Wild Waters, Inc. from May 2005 to August 2009.
Joseph J. Traficanti has served as our Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary since April 2009. Prior to joining us, Mr. Traficanti served as Senior Vice President, General Counsel, Chief Compliance Officer and Corporate Secretary of PFG from November 2004 until April 2009.


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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Overview
In this section, we describe the principles, policies and practices that formed the basis for our executive compensation program in fiscal 2017 and explain how they were applied to the Named Executive Officers. This Compensation Discussion and Analysis presents historical and current information and analysis related to the compensation programs for the Named Executive Officers and is not necessarily indicative of the compensation that the Named Executive Officers will receive from us in the future. For purposes of this Compensation Discussion and Analysis, the following individuals were our Named Executive Officers for fiscal 2017:
President, Chief Executive Officer and Chairman (Steven L. Spinner);
Chief Financial Officer (Michael P. Zechmeister);
Chief Operating Officer (Sean F. Griffin);
Chief Administrative and Information Officer (Eric A. Dorne); and
President, Pacific Region (Paul S. Green).
Executive Compensation Program Highlights
Our core executive compensation program incorporates the following best practices:
For fiscal 2017, approximately 68% of total target compensation within our core program for our President, Chief Executive Officer and Chairman and approximately 50% of total target compensation for the other Named Executive Officers within our core program was performance-based and could be earned only upon the achievement of corporate and divisional or individual goals selected to motivate executives to achieve our corporate objectives and enhance stockholder value.
The compensation of our executives differs based on individual experience, role and responsibility and performance.
Portions of Named Executive Officers' incentive compensation are earned over different and overlapping time periods, ensuring that performance is not maximized during one period at the expense of other periods.
A significant portion of each Named Executive Officer's compensation is at risk of forfeiture in the event of conduct detrimental to us, termination of employment prior to vesting or a material negative restatement of our financial condition or operating results.
We have a recoupment (clawback) policy applicable to our executive officers, including the Named Executive Officers, which provides that if we file an amendment to our SEC reports to restate all or a portion of our financial statements within two years of filing the financial statements, all or a portion of any bonus or incentive compensation paid or granted after May 28, 2009 may be recouped by us at the sole discretion of the Board.
We have stock ownership guidelines (that we amended in September 2016) for Named Executive Officers and our other executive officers.
We have a formal policy under which we may not enter into new or amended agreements which provide for "gross ups" for excise tax obligations payable by our executives upon termination of employment following a change in control and we previously amended earlier agreements to remove these types of "gross ups" where they existed before our adoption of this policy.
Any benefits to be paid upon a change in control under the change in control agreements with our Named Executive Officers or the employment agreement with Mr. Spinner are "double trigger," which requires both a Change in Control and a termination of a Named Executive Officer by us for a reason other than Cause, death or disability or a resignation by the executive for Good Reason within one year of the date of the Change in Control.
Our Named Executive Officers participate in the same retirement, health, welfare and other benefits programs as all of our other executive officers.
From time to time we review and assess, with the assistance of management, potential compensation-related risks in our programs. Based on these assessments, we have concluded that our executive compensation program as it is currently designed does not encourage behaviors that would create risks reasonably likely to have a material adverse effect on us.
We have not repriced equity awards.         
The Compensation Committee is comprised solely of independent directors.

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The Compensation Committee was advised by Semler Brossy, an independent compensation consultant, in fiscal 2017. The consultant was retained directly by the Compensation Committee and performed no other consulting or other services for us.
For fiscal 2017, outside of our core program, we awarded our Named Executive Officers special retention equity-based awards including performance units for our Chief Executive Officer and Chief Operating Officer and four-year cliff vesting restricted stock units for our other Named Executive Officers. We also paid our Chief Executive Officer a special cash bonus of $1,250,000 in fiscal 2017 in connection with his entering into an employment agreement and assuming the role of Chairman of the Board. These special awards and payments are described in more detail below.

New Employment Agreement with President, Chief Executive Officer, and Chairman in Fiscal 2017
On October 28, 2016, the Company entered into an employment agreement with Steven L. Spinner (the "Employment Agreement") pursuant to which Mr. Spinner will continue to serve as the Company’s President and Chief Executive Officer. Concurrently with the execution of the Employment Agreement, the Company's Board of Directors (the "Board") appointed Mr. Spinner to serve as its Chairman effective immediately following the annual meeting of stockholders which was held on December 15, 2016.
The Employment Agreement has a three year term, ending October 28, 2019, subject to automatic one year renewals unless either party gives 180 days’ notice of intent not to renew.
The Employment Agreement provides that Mr. Spinner will receive an initial base salary at the annual rate of $922,500 as well as an annual cash incentive opportunity of not less than 100% of his annual base salary for each fiscal year within the term of the Employment Agreement. The Employment Agreement also provides Mr. Spinner with certain benefits, such as reimbursement of expenses, paid leave and participation in the Company’s employee benefit plans and programs.

In connection with the execution of the Employment Agreement, the Company paid Mr. Spinner a cash payment in the amount of $1,250,000. This payment was made to Mr. Spinner in recognition of the successful execution of the Company’s acquisition and “building out the store” strategies in fiscal 2016, Mr. Spinner’s commitment to remain with the Company through the term of the Employment Agreement and expanded non-competition covenants and time periods contained in the Employment Agreement, and the additional responsibilities undertaken with his expanded role as the Chairman.

Further details on the Employment Agreement including severance provisions are described in Employment Agreements below.

Fiscal 2016 Stockholder Advisory Vote on Executive Compensation
At our annual meeting of stockholders in December 2016, we submitted a proposal to our stockholders to approve on an advisory basis our executive compensation for our Named Executive Officers for fiscal 2016. Our stockholders approved our fiscal 2016 compensation to our Named Executive Officers with more than 93% of the votes cast being cast in favor of the proposal.
When discussing our executive compensation program, the Compensation Committee considered the positive outcomes of the advisory vote on executive compensation at last year's annual meeting and other earlier positive votes and viewed the stockholders' prior votes in favor of our executive compensation as a signal that our stockholders are generally supportive of our compensation approach reflected in our core compensation program. As a result of these discussions, the Compensation Committee reaffirmed for the most part our existing executive compensation program philosophy described below. We value the opinions of our stockholders and will continue to consider the outcome of future advisory votes on the compensation of our Named Executive Officers when making compensation decisions for our Named Executive Officers.
Executive Compensation Program Philosophy
Our core executive compensation program is designed to:
Attract individuals with the skills and culture necessary for us to achieve our business plan;
Motivate our executive talent;
Reward our executives fairly over time for performance that enhances stockholder value;
Retain those individuals who continue to ensure our success and culture; and
Instill a pay for performance work environment.

24



Our executive compensation program is also designed to reinforce a sense of ownership in the Company, urgency with respect to meeting deadlines and overall entrepreneurial spirit. The program links rewards, including both short- and long-term awards, as well as cash and non-cash awards, to measurable corporate and individual performance metrics established by the Compensation Committee.
The program measures achievement of corporate and business unit financial goals and individual goals tied to the executive’s specific areas of concentration. These goals support our short- and long-term business strategies and are aligned with the interests of our stockholders. In addition, our executive compensation program is designed to balance our growth strategies with a managed approach to risk tolerance.
In applying these principles, we seek to integrate compensation with our short- and long-term strategic plans and to align the interests of our executives with the long-term interests of our stockholders through equity-based opportunities.
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 2017 compensation) each play a role in designing our executive compensation program and determining performance levels and associated payouts. The roles of the Compensation Committee, management and the independent compensation consultant are carefully determined to reflect many of what the Compensation Committee believes to be best corporate governance practices and to comply with rules and regulations applicable to the setting of our Named Executive Officers' compensation.
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 minimum performance thresholds and our executive officers’ individual financial and strategic performance metrics applicable to our annual cash incentive plan as described in Components of our Core Executive Compensation Program—Performance-Based Annual Cash Incentive Compensation and sets performance metrics applicable to the performance-based component of our long-term equity incentive plan as described in Components of our Core Executive Compensation Program—Long Term Equity-Based Incentive Program. 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 the compensation of our Chief Executive Officer and approves compensation for our other executive officers.
As part of the compensation approval process for our executive officers, other than our Chief Executive Officer, the Compensation Committee considers the views and recommendations of management, particularly our Chief Executive Officer, and in setting the compensation for all of our executive officers the Compensation Committee considered the recommendation of its independent compensation consultant as described in greater detail below.
Role of Management
Our President, Chief Executive Officer and Chairman, Chief Human Resource Officer and Chief Financial Officer provide the Compensation Committee with an assessment of our corporate performance and the performance of our executive officers, and make recommendations for the compensation of our other executive officers based on this assessment. Additionally, our President, Chief Executive Officer and Chairman, Chief Human Resource Officer, and Chief Financial Officer 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. Other members of management assist the Compensation Committee on an as needed basis.
No executive officer makes any decision on any element of his or her own compensation, and our President, Chief Executive Officer and Chairman does not participate in deliberations regarding his compensation.
Role of Independent Compensation Consultant
The Compensation Committee selected and directly retained Semler Brossy as its compensation consultant during fiscal 2017 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 2017 and fiscal 2018. Semler Brossy provided input and guidance related to our fiscal 2017 and fiscal 2018 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 does not provide any other services to us. The Compensation Committee assessed the independence of Semler Brossy pursuant to SEC and Nasdaq rules 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.
Competitive Marketplace Assessment

25



In making compensation decisions, the Compensation Committee has in the past periodically reviewed the compensation packages for officers in like positions with similar responsibilities at organizations similar to ours. In addition to compensation levels, the Compensation Committee also has historically reviewed program designs, including an assessment of pay vehicles and performance metrics. In fiscal 2015, the Compensation Committee determined that it would review base salaries every two years, or more frequently as the need arises, and in connection with that decision decided not to conduct a competitive market assessment annually. Accordingly, a formal competitive assessment was not undertaken in connection with setting fiscal 2017 compensation. Further, and as described below, when setting the Named Executive Officers' compensation for fiscal 2018, the Compensation Committee reviewed a Mercer general industry survey and other information provided by Semler Brossy. In selecting appropriate data, the Compensation Committee considered companies with revenue between $5 and $10 billion and the market midpoint was defined as the average of the 25th and 50th percentiles to account for the low-margin nature of our business relative to general industry companies.
Market data is only one factor that the Compensation Committee considers when making determinations regarding executive compensation.  Other factors considered include individual performance, internal equity, scope of responsibilities, tenure, criticality of the position and executive retention concerns, and the need to recruit new officers. Consequently, 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 Core Executive Compensation Program
Our executive compensation philosophy is reflected in the principal elements of our core executive compensation program. The four key components of our core executive compensation program in fiscal 2017 were:
Base salary;
Performance-based annual cash incentives;
Long-term equity-based incentive awards in the form of time-based vesting restricted stock units and performance-based vesting restricted stock units; and
Other compensation and benefits including minimal perquisites and participation in the Deferral Plans (as described in EXECUTIVE COMPENSATION TABLES—Nonqualified Deferred Compensation—Fiscal 2017 below) as well as participation in benefit plans generally available to all of our employees, such as participation in the 401(k) Plan.
Pay Mix
When setting target total compensation for our core compensation program for fiscal 2017 for the Named Executive Officers other than our Chief Executive Officer, the Compensation Committee determined that target cash compensation and equity-based compensation would each be approximately 50% of such Named Executive Officer's total target compensation, and that base salary would contribute approximately 57% in the case of Messrs. Griffin and Zechmeister and 66% in the case of Messrs. Dorne and Green, to targeted total cash compensation while performance-based cash incentives would contribute approximately 43% of Messrs. Griffin's and Zechmeister’s targeted total cash compensation, and 33% of Messrs. Dorne’s and Green's targeted total cash compensation. The Compensation Committee determined that within our core compensation program target cash compensation and equity-based compensation would be approximately 35% and 65%, respectively, of our Chief Executive Officer's total compensation for fiscal 2017. Total target cash compensation of our Chief Executive Officer within our core compensation program was comprised of approximately 50% base salary and 50% performance-based cash incentives. The Compensation Committee determined that a separate pay structure for our Chief Executive Officer is necessary to ensure competitive pay and the weighting of the design more towards incentive compensation was most appropriate.
Base Salary
Base salaries provide a fixed rate of pay designed to compensate executives for day-to-day responsibilities and are established based on the scope of their respective responsibilities, competitive market conditions, individual performance and tenure.
Base salaries are generally reviewed every two years in the first quarter of the fiscal year in which the review occurs, and are typically effective as of the first day of the fiscal year, but may be adjusted from time to time to realign salaries with market levels, taking into account each Named Executive Officers' responsibilities, performance, increased responsibilities, geographic location, experience and proven capability. Merit increases for our executive officers, including our Named Executive Officers, if given at all, are expected to be modest unless the executive takes on additional responsibility or is promoted or an increase is determined by the Compensation Committee to be necessary as a result of a compensation analysis.
For fiscal 2017, the base salary for each Named Executive Officer was increased over fiscal 2016 levels by the percentage noted below. With the exception of Mr. Griffin, Mr. Dorne and Mr. Green, the percentage increases are consistent with the merit pool for the Company as a whole. In the case of Mr. Griffin, the competitive market place assessment performed in setting fiscal

26



2016 compensation determined his base salary was below market for an employee performing comparable duties. The Committee determined it would be appropriate to bring Mr. Griffin’s salary more in line with the competitive market over multiple years, and the increase shown below for fiscal 2017 is indicative of our attempt to continue to close the gap to the competitive market. Effective October 1, 2016, Mr. Dorne was appointed to a new role and the change in his base salary reflects the additional responsibilities he has assumed. For Mr. Green the change in salary reflects a cost of living adjustment as a result of his relocation from Texas to California as part of his new role as President, Pacific Region.
The table below reflects the fiscal 2016 and fiscal 2017 base salaries for the Named Executive Officers, and the percentage change in base salaries between those two periods:
Named Executive Officer
 
Fiscal 2016
Base Salary (1)
 
Fiscal 2017
Base Salary (1)
 
Percentage
Change
Steven L. Spinner
 
$
900,000

 
$
922,500

 
2.5
%
Michael P. Zechmeister
 
$
450,000

 
$
461,250

 
2.5
%
Sean F. Griffin
 
$
500,000

 
$
550,000

 
10.0
%
Eric A. Dorne
 
$
355,000

 
$
383,400

 
8.0
%
Paul S. Green
 
$
310,000

 
$
335,000

 
8.1
%
(1)
For each Named Executive Officer, fiscal 2016 base salaries were effective as of December 20, 2015 and fiscal 2017 base salaries were effective as of September 25, 2016.
Performance-Based Annual Cash Incentive Compensation
The Compensation Committee is responsible for setting the minimum thresholds of our performance-based annual cash incentive compensation discussed below. Receipt of this compensation is contingent upon satisfaction of these Company-wide metrics established by the Compensation Committee together with specific Company-wide, division-level or individual financial or operational performance goals. In the case of our President, Chief Executive and Chairman these goals are determined by the Compensation Committee after consultation with the Chief Financial Officer and Chief Human Resources Officer. For all other Named Executive Officers these goals are recommended by our President, Chief Executive Officer and Chairman, Chief Human Resources Officer and Chief Financial Officer and approved by the Compensation Committee. The factors considered in setting this target compensation vary depending on the individual executive, but generally relate to strategic projects or financial factors such as net sales, gross margin, earnings before interest, taxes, depreciation and amortization ("EBITDA"), return on invested capital ("ROIC"), earnings per diluted share, and other measures of our profitability.
Minimum Performance Hurdle. For fiscal 2017, as a condition for paying out annual cash incentive compensation to any of the Named Executive Officers we required that we:
maintain a ratio of total debt to EBITDA not to exceed 3.0x;
maintain compliance with our debt covenants under our credit facilities;
achieve a minimum level of GAAP earnings per diluted share of $1.00; and
fully fund a profit sharing program we instituted in fiscal 2016 to replace our Employee Stock Ownership Plan (“ESOP”).
The $1.00 per share of GAAP earnings per diluted share is the Section 162(m) performance metric under the annual cash incentive plan. If these thresholds were not met, our Named Executive Officers would not be eligible to receive annual performance-based cash incentive payouts, regardless of their individual respective achievements. For fiscal 2017, each of these minimum funding hurdles was achieved. Our ratio of total debt to EBITDA was 1.2x, we were in compliance with our debt covenants, our GAAP diluted earnings per share ("EPS") was $2.56, and we fully funded the profit sharing plan.

27



Performance Based Annual Incentive Targets. As discussed in more detail below, for the Named Executive Officers, the annual cash awards for fiscal 2017 at various performance levels were as follows:
 
 
Applicable Targets as % of Fiscal 2017 Salary
Named Executive Officer
 
Threshold
Target
Stretch
Steven L. Spinner
 
16%
100%
200%
Michael P. Zechmeister
 
12%
75%
150%
Sean F. Griffin
 
12%
75%
150%
Eric A. Dorne
 
8%
50%
100%
Paul S. Green
 
8%
50%
100%
Corporate level Performance Metrics. In initially setting the performance targets for fiscal 2017, the Compensation Committee reviewed historical levels of performance, the competitive environment and company-specific initiatives contemplated for fiscal 2017. In establishing the intended degree of difficulty of the payout levels for each performance metric, 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-specific initiatives designed to support our growth and enhance our long-term operating results. We believe that one of the best indicators of how difficult a particular performance metric was to achieve is reflected in what level of payout the executive actually received with respect to the metric. Generally, company-level financial goals, including consolidated adjusted EBITDA, consolidated adjusted EBITDA as a% of net sales, consolidated adjusted earnings per diluted share, consolidated net sales, adjusted return on invested capital ("adjusted ROIC") or regional or division-level adjusted EBITDA and regional or divisional net sales made up 80% of the Named Executive Officer's targeted performance-based annual incentive compensation. One or more strategic goals tailored for each Named Executive Officer based on his responsibilities made up the remaining 20% of the Named Executive Officer’s targeted performance-based annual incentive compensation. This was true in fiscal 2017 for all Named Executive Officers. The Compensation Committee believes that linking a majority of the Named Executive Officers' annual cash incentive compensation to company-level financial metrics is appropriate. The mix of company-level metrics provides a balanced performance-measurement framework that captures earnings, profitability, and capital efficiency. Weightings on company-wide measures for each Named Executive Officer are determined based on each executive’s role and the factors that the executive can influence.  The Compensation Committee also believes that in most cases it is appropriate to link a portion of a Named Executive Officer's annual cash incentive compensation to individual objectives related to the executive’s area of responsibility.
The following is a breakdown of which company-level financial goals applied to each of the Named Executive Officers in addition to the gateway diluted EPS metric applicable to all of our Named Executive Officers:
 
 
Performance Measures
Named Executive Officer
 
Consolidated adjusted EBITDA
Consolidated Net Sales
Consolidated adjusted earnings per diluted share
Adjusted Return on invested capital
Consolidated adjusted EBITDA as % of net sales
Steven L. Spinner
 
 
 
X
X
 
Michael P. Zechmeister
 
 
 
X
X
 
Sean F. Griffin
 
X
X
 
X
X
Eric A. Dorne
 
X
 
 
X
 
Paul S. Green
 
X
 
 
X
 


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Initial Establishment of Performance Metrics. The performance targets tied to company-level financial goals selected by the Compensation Committee for the Named Executive Officers for fiscal 2017, were initially set in October 2016 at the following amounts:
 
 
Applicable Targets
Performance Measures (1)
Threshold
Target
Stretch
Consolidated adjusted EBITDA in $000's (2)
$287,216
$326,382
$365,548
Consolidated net sales in $000's
$9,212,424
$9,596,275
$9,980,126
Consolidated adjusted earnings per diluted share
$2.29
$2.60
$2.91
Adjusted return on invested capital (3)
5.76%
6.55%
7.34%
Consolidated adjusted EBITDA as % of net sales
3.25%
3.40%
3.50%
(1)
Details regarding the performance measures and the associated levels of performance payout percentage for each of our Named Executive Officers are included below.
(2)
Consolidated adjusted EBITDA for purposes of the performance-based annual cash incentive compensation represents net operating profit before non-operating expenses (interest expense, interest income, other expenses), depreciation, amortization, and the provision for taxes, plus or minus certain adjustments described in more detail below.
(3)
Adjusted return on invested capital for purposes of the performance-based annual cash incentive compensation represents net operating profit after income taxes, divided by the sum of total debt and stockholders' equity, plus or minus certain adjustments described in more detail below.
Determination of Performance-Based Annual Cash Incentive Plan Payouts. If the minimum funding hurdles of our annual cash incentive plan are achieved, the Compensation Committee reviews the performance of each Named Executive Officer during the performance period and determines the level of performance-based compensation, if any, to be paid to each Named Executive Officer. This amount may not exceed the amount of payouts for "stretch" performance. However, the Compensation Committee may, in its discretion, award an amount less than the amount attributable to a certain level of performance that was attained.
The Compensation Committee determined in September 2017 that the minimum performance hurdle related to GAAP diluted earnings per share of $1.00 had been achieved as had the funding thresholds related to the level of our debt, expressed as a percentage of EBTIDA, compliance with our debt covenants and funding of the profit sharing plan. Thereafter, the Compensation Committee reviewed with management our anticipated financial results for fiscal 2017 and the actual amounts earned by the Named Executive Officers were determined and paid in a single lump sum in the first quarter of fiscal 2018 following the filing of our Annual Report on Form 10-K, contingent on our results reflected in our Annual Report on Form 10-K not being different than the results anticipated at the time the Compensation Committee reviewed our results, unless the executive had previously elected to defer such compensation into the Deferred Compensation Plan.
When measuring our performance against the consolidated adjusted EBITDA, consolidated adjusted EBITDA as a percentage of net sales, and adjusted ROIC targets, the Compensation Committee made certain adjustments to our actual fiscal 2017 results. The adjusted results included approximately $9.6 million of upward adjustments to EBITDA in the aggregate related to (i) unbudgeted, pre-tax restructuring expense related to fiscal 2017 cost saving measures, (ii) unbudgeted pre-tax legal expense for litigation, legal and governance matters, and (iii) additional pre-tax performance based share based compensation expense as a result of our sale of our investment in Kicking Horse Coffee in the fourth quarter of fiscal 2017. The Compensation Committee believed it was appropriate to adjust for the impact of these items in light of the fact that the events giving rise to these items had not been entered into or had not been contemplated at the time the performance targets were established or were unusual or unrelated to our core performance. As a result, our GAAP based EBITDA of $312.1 million was adjusted upward to $321.6 million and our GAAP based EBITDA as a percentage of net sales of 3.36% was adjusted upward to 3.47%.  In addition to the income statement adjustments noted above, our GAAP ROIC was adjusted to exclude approximately $2.0 million of long-term debt we incurred to make an investment in fiscal 2017. As a result, our ROIC of 6.48% calculated on a GAAP basis for fiscal 2017 was adjusted upward to 6.76%.       
When measuring our performance against the diluted earnings per share target other than the threshold level required for payout of any incentive under the plan, the Compensation Committee approved certain adjustments to our actual fiscal 2017 adjusted diluted earnings per share for the same reasons it approved adjustments to our GAAP based EBITDA and ROIC. The adjustments to our GAAP diluted earnings per share resulted in an upward adjustment of approximately $0.04 to earnings per diluted share in the aggregate related to (i) the net loss per share related to the restructuring and impairment costs and legal expense related to litigation, legal and governance matters and (ii) the diluted earnings per share contribution of the Company's gain on the sale of our investment in Kicking Horse Coffee in the fourth quarter of 2017. As result, our consolidated diluted earnings per share of $2.56 calculated on a GAAP basis for fiscal 2017 was adjusted upward to $2.60 per diluted share.  

29



The following table sets forth for each Named Executive Officer the total amount of performance-based annual incentive awards targeted for the Named Executive Officer (which represents the "target" level) and the actual amount of performance-based annual incentive awards earned by the Named Executive Officer expressed in dollars, as a percentage of the Named Executive Officer's base salary, and as a percentage of the such targeted amount:
 
 
Performance-Based Annual
Incentive
 
Actual Performance-Based Annual
Incentive Payment
Named Executive Officer
 
Target
 
Actual
 
As a Percentage of
Actual Base Salary
 
As a Percentage of
Target
Steven L. Spinner
 
$
919,039

 
$
998,060

 
108.6
%
 
108.6
%
Michael P. Zechmeister
 
$
344,639

 
$
374,272

 
81.4
%
 
108.5
%
Sean F. Griffin
 
$
406,731

 
$
422,753

 
78.0
%
 
104.0
%
Eric A. Dorne
 
$
189,516

 
$
193,202

 
51.0
%
 
102.0
%
Paul S. Green
 
$
165,577

 
$
219,523

 
66.3
%
 
132.6
%
Details regarding the performance targets and the associated levels of performance payout percentage that have been paid for fiscal 2017 for each of our Named Executive Officers are included below. Set forth below is the amount of annual incentive compensation, expressed as a percentage of base salary, that each Named Executive Officer earned and could have earned based on "threshold", "target" and "stretch" fiscal 2017 performance:
Steven L. Spinner
 
 
Annual Incentive Payout as % of Fiscal 2017 Actual Base Salary
Individual Goals
 
Threshold
 
Target
 
Stretch
 
Actual
Consolidated adjusted earnings per diluted share
 
5.0
%
 
50.0
%
 
100.0
%
 
50.7
%
Adjusted return on invested capital
 
3.0
%
 
30.0
%
 
60.0
%
 
37.9
%
Strategic plan execution (1)
 
4.0
%
 
10.0
%
 
20.0
%
 
10.0
%
Succession planning (2)
 
4.0
%
 
10.0
%
 
20.0
%
 
10.0
%
Total:
 
16.0
%
 
100.0
%
 
200.0
%
 
108.6
%

30



(1)
In setting the performance metric applicable to Mr. Spinner based on strategic plan execution, the Compensation Committee based the performance metric on completing acquisition integration, reorganizing the regional sales team, and executing on shared service strategy. The Compensation Committee believed that Mr. Spinner made significant progress against these goals in fiscal 2017. Accordingly, the payout with respect to this metric was determined to be at "target" level of performance.
(2)
In setting the performance metric applicable to Mr. Spinner based on succession planning, we based the performance on results that were improvements over existing strategies and included specific identification of potential internal candidates to replace our Chief Executive Officer in an emergency scenario and in the longer term, the initiation of programs designed to further the development of these individuals and the hiring of an internal resource to further these individuals and others at all levels within the Company. The Compensation Committee believed that Mr. Spinner made significant progress against this challenging long-term strategic goal. Accordingly, the payout with respect to this metric was determined to be at "target" level of performance.
Michael P. Zechmeister
 
 
Annual Incentive Payout as % of Fiscal 2017 Actual Base Salary
Individual Goals
 
Threshold
 
Target
 
Stretch
 
Actual
Consolidated adjusted earnings per diluted share
 
3.8
%
 
37.5
%
 
75.0
%
 
38.0
%
Adjusted return on invested capital
 
2.2
%
 
22.5
%
 
45.0
%
 
28.4
%
Execution of shared service plan (1)
 
6.0
%
 
15.0
%
 
30.0
%
 
15.0
%
Total:
 
12.0
%
 
75.0
%
 
150.0
%
 
81.4
%
(1)
In setting the performance metric applicable to this goal, the Compensation Committee set the goal based on staffing and the deployment of a new shared service team. The Compensation Committee believed that Mr. Zechmeister made significant progress against this challenging long-term strategic goal. Accordingly, the payout with respect to this metric was determined to be at "target" level of performance.
Sean F. Griffin
 
 
Annual Incentive Payout as % of Fiscal 2017 Actual Base Salary
Individual Goals
 
Threshold
 
Target
 
Stretch
 
Actual
Consolidated adjusted EBITDA
 
3.8
%
 
37.5
%
 
75.0
%
 
33.4
%
Adjusted return on invested capital
 
1.1
%
 
11.3
%
 
22.5
%
 
14.2
%
Consolidated net sales
 
1.1
%
 
11.3
%
 
22.5
%
 
2.8
%
Adjusted EBTIDA as % of net sales
 
3.0
%
 
7.5
%
 
15.0
%
 
12.6
%
Acquisition synergies (1)
 
3.0
%
 
7.5
%
 
15.0
%
 
15.0
%
Total:
 
12.0
%
 
75.0
%
 
150.0
%
 
78.0
%
(1)
In setting the performance metrics applicable to Mr. Griffin based on synergies achieved in fiscal 2017 related to the integration of certain acquisitions made in fiscal 2016 we based the performance metric on the amounts of synergies we anticipated we could generate when we consummated the acquisitions. Mr. Griffin exceeded expectations against this challenging goal. Accordingly, the payout with respect to this metric was determined to be at "stretch" level of performance.
Eric A. Dorne
 
 
Annual Incentive Payout as % of Fiscal 2017 Actual Base Salary
Individual Goals
 
Threshold
 
Target
 
Stretch
 
Actual
Consolidated adjusted EBITDA
 
2.5
%
 
25.0
%
 
50.0
%
 
22.3
%
Adjusted return on invested capital
 
1.5
%
 
15.0
%
 
30.0
%
 
19.0
%
Manage IT expenses (1)
 
2.0
%
 
5.0
%
 
10.0
%
 
6.2
%
IT systems conversions (2)
 
2.0
%
 
5.0
%
 
10.0
%
 
3.5
%
Total:
 
8.0
%
 
50.0
%
 
100.0
%
 
51.0
%

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(1)
In setting the performance metric applicable to Mr. Dorne based on IT expenses, we based the performance metric on results that would provide a measurable cost savings compared to the prior year's results. For this performance metric, the "target" set for IT expenses as a percentage of consolidated net sales was approximately 0.865% and a target of approximately 0.779% was set for "stretch." For fiscal 2017, IT expenses as a percentage of net sales was approximately 0.843%. Accordingly, the payout with respect to this metric was determined to be between “target” and “stretch” level of performance.
(2)
In setting the performance metric applicable to this goal, the Compensation Committee set the goal based on progress toward our IT system conversions. We believe that one of the best indicators of how difficult a particular performance metric was to achieve is reflected in what level of payout the executive actually received with respect to the metric. The Compensation Committee believed that Mr. Dorne made notable progress against this challenging long-term strategic goal in fiscal 2017, but below target. Accordingly, the payout with respect to this metric was determined to be between "threshold" and "target" level of performance.
Paul S. Green
 
 
Annual Incentive Payout as % of Fiscal 2017 Actual Base Salary
Individual Goals
 
Threshold
 
Target
 
Stretch
 
Actual
Pacific Region adjusted EBITDA (1)
 
1.5
%
 
15.0
%
 
30.0
%
 
26.7
%
Consolidated adjusted EBTIDA
 
1.0
%
 
10.0
%
 
20.0
%
 
8.9
%
Pacific Region adjusted EBITDA as % of net sales (1)
 
4.0
%
 
10.0
%
 
20.0
%
 
20.0
%
Adjusted return on invested capital
 
0.8
%
 
7.5
%
 
15.0
%
 
9.5
%
Pacific Region net sales (1)
 
0.7
%
 
7.5
%
 
15.0
%
 
1.2
%
Total:
 
8.0
%
 
50.0
%
 
100.0
%
 
66.3
%
(1)
In setting the performance metrics applicable to Mr. Green based on performance of our Pacific Region, we considered historical levels of performance and based the performance metrics on results that were improvements over the prior year's results. We believe that one of the best indicators of how difficult a particular performance metric is to achieve is reflected in what level of payout the executive actually received with respect to that metric. For the performance metrics for which we have not disclosed targets, Mr. Green achieved "stretch" and slightly below "stretch" performance level for Pacific Region adjusted EBITDA as percentage of net sales and Pacific Region adjusted EBTIDA, respectively, and slightly above "threshold" performance level for Pacific Region net sales.
Long-term Equity-Based Incentive Program
Our core long-term equity-based incentive program in fiscal 2017 for our Named Executive Officers consisted of time-based vesting restricted stock units and performance-based vesting restricted stock units. The grant date fair values of time-based vesting restricted stock units and performance-based vesting restricted stock units each represented approximately 50% of the aggregate grant date fair value of the core long-term equity-based awards to each of the Named Executive Officers, other than Mr. Spinner, with the grant date fair value of Mr. Spinner's performance units (including his customary one-year performance units) representing approximately 75% of the aggregate grant date fair value of his core award and time-based vesting restricted units representing approximately 25% of the aggregate grant date fair value of his core award.
In setting our Named Executive Officers' equity-based compensation for fiscal 2017, the Compensation Committee believed that a mix of time and performance-based vesting restricted stock units provided 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. In addition, because the time-based equity awards vest ratably over four years, and the performance units vest two years from the date of grant (or one-year for a portion of Mr. Spinner's historical core award), if earned, we believe these awards provide strong incentives for the executives to remain employees of ours.
In addition to performance units with a two-year performance period (like those granted to all of our Named Executive Officers) we granted Mr. Spinner performance units with performance metrics tied to our performance during fiscal 2017 as part of our core compensation program as described below. Mr. Spinner received these additional performance units as part of his core award in order to incentivize him to achieve financial results for fiscal 2017 and deliver a target total core pay opportunity that the Compensation Committee considered to be competitive with the market.
All of our equity awards are made pursuant to plans that have been approved by stockholders.
Timing of Awards. The Compensation Committee generally makes equity-based grants in September of each year when the Compensation Committee also approves changes to our executive officers' annual base salaries, if any. These grants are effective after we have publicly released our preliminary results of operations for the recently completed fiscal year. The Compensation

32



Committee may also make equity-based grants from time to time for new executive officers or upon a significant change in an executive officer's job scope and responsibility.
Determinations of Awards. The Compensation Committee reviews and approves annual equity-based awards for all of our eligible employees, including our Named Executive Officers. In fiscal 2017, the Compensation Committee determined the target grant date fair value of equity awards for our core 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 executive officers, including our Named Executive Officers, except for Mr. Spinner, Mr. Griffin and Mr. Zechmeister, the percentage used for fiscal 2017 grants related to our core program was 150% of fiscal 2016 base salary. Percentages used for fiscal 2017 grants related to our core program for Mr. Spinner, Mr. Griffin and Mr. Zechmeister were 329.2%, 200%, and 200%, respectively, of fiscal 2016 base salary. As discussed below, each of our Named Executive Officers received an additional grant of performance based or time-based vesting restricted stock units in fiscal 2017 outside of our core program.
The Compensation Committee may disregard these ranges for an employee, including a Named Executive Officer, upon a determination that other factors should result in an equity award that exceeds or is less than the specified range based on the executive's position with us. These factors may include consideration of competitive compensation data, a recent change in assigned duties, retention considerations or the historical performance of the executive. The Compensation Committee also considers the recommendations of members of senior management with respect to the mix of time-based vesting restricted stock units and performance-based vesting restricted stock units.
Time-Based Vesting Restricted Stock Units. For fiscal 2017, the Compensation Committee awarded approximately 50% of the grant date fair value of the Named Executive Officers' (other than Mr. Spinner's) total long-term, equity-based incentive compensation under our core program in the form of time-based vesting restricted stock units pursuant to the Original Amended and Restated Plan. For Mr. Spinner, his time-based awards represented approximately 25% of the grant date fair value of his awards under our core program. These awards were granted effective September 15, 2016. The time-based vesting restricted stock units, with the exception of the additional time-based vesting restricted stock units issued to certain Named Executive Officers outside of our core program as described below, vest in four equal annual installments beginning on the first anniversary of the date of grant and are shown in the table in EXECUTIVE COMPENSATION TABLES—Grants of Plan-Based Awards in Fiscal 2017. For fiscal 2017, certain Named Executive Officers were also awarded additional time-based vesting restricted stock units with four-year cliff vesting pursuant to the Original Amended and Restated Plan as described below.
Performance-Based Vesting Restricted Stock Units. The following information summarizes our long-term performance-based equity grants made in fiscal 2017 under our core program and the settlement of our long-term equity grants made in fiscal 2017, which had performance criteria tied to the one year performance period ended July 30, 2017.
Fiscal 2017 Grant. For fiscal 2017, the Compensation Committee awarded approximately 50% of the grant date fair value of the Named Executive Officers' (other than Mr. Spinner's) long-term, equity-based incentive compensation under our core program in the form of performance units denominated in shares pursuant to the Original Amended and Restated Plan. For Mr. Spinner, his performance units represented approximately 75% of the grant date fair value of his long-term equity based compensation under our core program. The number of shares that may vest at the “threshold,” “target” and “stretch” levels of performance are shown in the table in EXECUTIVE COMPENSATION TABLES—Grants of Plan-Based Awards in Fiscal 2017.
The fiscal 2017 performance-based vesting restricted stock units were denominated in shares based on the closing stock price of our common stock on the date of grant. The performance-based vesting restricted stock units granted in fiscal 2017 have two equally-weighted performance criteria - fiscal 2018 adjusted ROIC and fiscal 2018 adjusted EBITDA (defined as earnings before non-operating expenses (interest expense, interest income and other expense), depreciation, amortization and provision for income taxes, as adjusted by the Compensation Committee in the manner provided for in the award agreement. The applicable Named Executive Officers are eligible to earn between 0% and 200% of their targeted award, depending on our performance during the relevant measurement period with respect to five levels of performance for adjusted ROIC and adjusted EBITDA, respectively. In addition to the performance criteria tied to adjusted ROIC and adjusted EBITDA, the Compensation Committee approved the ability to adjust the number of units that will vest 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 two-year performance period ending on the close of fiscal 2018.
The Compensation Committee determined that adjusted EBITDA, rather than adjusted EBIT, was the appropriate performance metric against which to measure our performance in fiscal 2018 to determine whether a portion of the performance-based vesting restricted stock units would be earned in light of the increased levels of depreciation and amortization expense we are incurring as a result of the numerous acquisitions we completed in fiscal 2016. In addition to the adjusted ROIC and adjusted EBITDA performance metrics, these awards include a minimum level of earnings per diluted share, calculated on a GAAP basis, that must be achieved for the particular performance period before any Named Executive Officer that is a “covered employee” under Section 162(m) of the Code will be eligible to have these units vest. This earnings per diluted share target constitutes the performance metric required under Section 162(m) of the Code. Even if this target is exceeded, the Company’s actual underlying

33



performance must exceed the levels necessary to generate this level of diluted earnings per share before any of these units will be earned.
For purposes of determining adjusted EBITDA and adjusted ROIC pursuant to these awards (and certain of the other one-time awards discussed below), the Compensation Committee excludes from our GAAP results any costs or expenses related to any of the following events or matters: (i) asset impairments or write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring (including acquisitions and dispositions) programs, (v) any items that are unusual in nature or infrequently incurring within the meaning of accounting principles generally accepted in the United States ("GAAP") and/or in management's discussion and analysis of financial condition and results of operations appearing in the Company's annual report to stockholders for fiscal 2018, and (vi) any expenses for share-based compensation under ASC Topic 718. To the extent readily identifiable, the results of operations of businesses acquired in fiscal 2018 and the related balance sheet items shall not be included for purposes of computing adjusted EBITDA and adjusted ROIC. In the event the Company disposes of any line of business during fiscal 2018, adjusted EBITDA and adjusted ROIC shall be adjusted appropriately (based on the number of days during the year during which the line of business was operated) to reflect the disposition. After application of the foregoing mandatory adjustments, the Compensation Committee may adjust actual adjusted EBITDA and/or adjusted ROIC lower, or increase the adjusted EBITDA and/or adjusted ROIC targets, in order to account for the effects of matters the Compensation Committee determines in its sole discretion are not adequately reflected in adjusted EBITDA and/or adjusted ROIC, as otherwise adjusted.
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 of GAAP adjusted EBITDA and/or adjusted ROIC established below which none of the performance units would be earned.
Additional Performance Units Granted to CEO. As part of our core compensation program, our Chief Executive Officer also received additional performance units granted in September 2016 in order to incentivize him to achieve financial results for fiscal 2017 and deliver a target total pay opportunity that the Compensation Committee considered to be competitive with the market. On September 21, 2016, the Compensation Committee granted Mr. Spinner an award of performance units based on a targeted grant date fair value of $1.5 million from the Original Amended and Restated Plan that required that we achieve a threshold level of GAAP earnings per diluted share of $1.00 and thereafter included a matrix of two equally-weighted performance criteria—adjusted ROIC and adjusted EBITDA. The earnings per diluted share target constitutes the performance metric required by Section 162(m) of the Code. Even if this target is exceeded, the Company’s actual underlying performance must exceed the levels necessary to generate this level of diluted earnings per share before any of these units will be earned Mr. Spinner was eligible to earn between 0% and 200% of his targeted award, depending on our performance during fiscal 2017 based on the following performance matrix:
 
 
Adjusted EBITDA ($ Thousands)
 
 
<$308,656
$317,710
$326,764
$335,818
>$344,872
Adjusted Return on Invested Total Capital
>6.95%
100%
125%
150%
175%
200%
6.75%
75%
100%
125%
150%
175%
6.55%
50%
75%
100%
125%
150%
6.36%
25%
50%
75%
100%
125%
<6.16%
0%
25%
50%
75%
100%
In addition to the performance metric tied to adjusted ROIC and adjusted EBITDA, the Compensation Committee approved the ability to adjust the number of units that could vest upward or downward by up to 10% depending on the Relative TSR for the one-year performance period.
On September 15, 2017, the Compensation Committee met to determine what percentage of the fiscal 2017 performance units with a one-year performance period granted to Mr. Spinner as part of our core compensation program had been earned. The Compensation Committee determined that our GAAP earnings per diluted share exceeded the $1.00 threshold required under Mr. Spinner’s award agreement. When measuring our performance against the adjusted EBITDA, and adjusted ROIC targets, the Compensation Committee approved certain adjustment to our actual fiscal 2017 results. The adjusted results included approximately $9.6 million of upward adjustments to EBITDA in the aggregate related to (i) unbudgeted, pre-tax restructuring expense related to fiscal 2017 cost saving measures, (ii) unbudgeted pre-tax legal expense for litigation, legal and governance matters, and (iii) additional pre-tax share performance-based share based compensation expense as a result of our sale of our investment in Kicking Horse Coffee in the fourth quarter of fiscal 2017. The Compensation Committee believed it was appropriate to adjust for the impact of these items in light of the fact that the events giving rise to these items had not been entered into or had not been contemplated

34



at the time the performance targets were established or were unusual or unrelated to our core performance. As a result, our GAAP based EBITDA of $312.1 million was adjusted upward to $321.6 million. In addition to the income statement adjustments noted above, our GAAP ROIC was adjusted to exclude approximately $2.0 million of long-term debt we incurred to make an investment in fiscal 2017. As a result, our ROIC of 6.48% calculated on a GAAP basis for fiscal 2017 was adjusted upward to 6.76%. In reviewing the Company's performance on the Relative TSR for the performance period the Compensation Committee determined that the Company's stock price performance when measured against the S&P 400 Mid Cap Index warranted a full 10% reduction in the actual payment of earned units. As a result, the Compensation Committee approved the vesting of 38,282 performance units, or 100.5% of the number of units that would have vested at target performance, for Mr. Spinner that were granted in September 2016 and tied to our fiscal 2017 performance effective upon the filing of our Annual Report on Form 10-K for fiscal 2017 contingent on our results reflected in our Annual Report on Form 10-K not differing from those anticipated at the time the Compensation Committee reviewed our results. The units earned and payable to Mr. Spinner reflect the application of the full 10% downward adjustment based on Relative TSR for the performance period.
Special, One-Time Performance and Time Based Equity Compensation    
Additional Performance Based Equity Compensation for all of our Named Executive Officers. In September 2016, the Compensation Committee concluded, following discussions with management, the performance-based vesting restricted stock units granted in September 2015 with performance criteria tied to the Company’s adjusted ROIC and adjusted EBITDA for fiscal 2017 were unlikely to be earned based on management’s expectations for the Company’s performance in fiscal 2017. Nonetheless, the Compensation Committee believed that it was appropriate for each of the Named Executive Officers to be eligible to earn performance-based vesting restricted stock units based on the Company’s adjusted ROIC and adjusted EBITDA for fiscal 2017 in order to encourage achieving or exceeding financial and other performance targets for fiscal 2017.
Accordingly, the Compensation Committee approved the award of performance-based vesting restricted stock units to each of the Named Executive Officers, with the exception of Mr. Zechmeister, in amounts, at target level of performance, equal to 50% of the award, at target level of performance, granted in September 2015, with performance criteria tied to fiscal 2017. In exchange for this award, each Named Executive Officer, other than Mr. Zechmeister who had not received a performance-based vesting restricted stock unit award in September 2015 as a result of his “on-boarding grant”, forfeited the performance-based vesting restricted stock unit award granted to him in September 2015. Mr. Zechmeister’s award of these performance units, at target level of performance, is equal to 44% of his fiscal 2016 base salary.
As it had done for the performance-based vesting restricted stock units granted to the Named Executive Officers tied to fiscal 2018 performance, the Compensation Committee utilized adjusted EBITDA, rather than adjusted EBIT, as one of the performance metrics, in addition to adjusted ROIC, for these awards in light of the increased levels of depreciation and amortization expected in future periods as a result of the numerous acquisitions we completed in fiscal 2016 and early fiscal 2017. In addition to the adjusted ROIC and adjusted EBITDA performance metrics, these awards required a minimum level of earnings per diluted share, calculated on a GAAP basis, of $1.00 to be achieved for the particular performance period before any Named Executive Officer that is a “covered employee” under Section 162(m) of the Code would be eligible to have these units vest. This earnings per diluted share target constitutes the performance metric required under Section 162(m) of the Code. Even if this target is exceeded, the Company’s actual underlying performance must exceed the levels necessary to generate this level of diluted earnings per share before any of these units will be earned. Each Named Executive Officer was eligible to earn between 0% and 200% of 50% of the award granted in September 2015 at target level of performance that his award was replacing with the exception of Mr. Zechmeister who was eligible to receive between 0% and 200% of 44% of his fiscal 2016 base salary, depending on our performance during fiscal 2017 based on the following performance matrix:
 
 
Adjusted EBITDA ($ Thousands)
 
 
<$308,656
$317,710
$326,764
$335,818
>$344,872
Adjusted Return on Invested Total Capital
>6.95%
100%
125%
150%
175%
200%
6.75%
75%
100%
125%
150%
175%
6.55%
50%
75%
100%
125%
150%
6.36%
25%
50%
75%
100%
125%
<6.16%
0%
25%
50%
75%
100%
In addition to the performance criteria tied to adjusted ROIC and adjusted EBITDA, the Compensation Committee approved the ability to adjust the number of units that could vest upward or downward by up to 10% depending on the Relative TSR for the one-year performance period.
On September 15, 2017, the Compensation Committee met to determine what percentage of the fiscal 2017 performance units with a one-year performance period granted to the Named Executive Officers outside of our core compensation program

35



had been earned. The Compensation Committee determined that our GAAP earnings per diluted share exceeded the $1.00 threshold required under the award agreements. When measuring our performance against the adjusted EBITDA, and adjusted ROIC targets, the Compensation Committee approved certain adjustment to our actual fiscal 2017 results. The adjusted results included approximately $9.6 million of upward adjustments to EBITDA in the aggregate related to (i) unbudgeted, pre-tax restructuring expense related to fiscal 2017 cost saving measures, (ii) unbudgeted pre-tax legal expense for litigation, legal and governance matters, and (iii) additional pre-tax share performance-based share based compensation expense as a result of our sale of our investment in Kicking Horse Coffee in the fourth quarter of fiscal 2017. The Compensation Committee believed it was appropriate to adjust for the impact of these items in light of the fact that the events giving rise to these items had not been entered into or had not been contemplated at the time the performance targets were established or were unusual or unrelated to our core performance. As a result, our GAAP based EBITDA of $312.1 million was adjusted upward to $321.6 million. In addition to the income statement adjustments noted above, our GAAP ROIC was adjusted to exclude approximately $2.0 million of long-term debt we incurred to make an investment in fiscal 2017. As a result, our ROIC of 6.48% calculated on a GAAP basis for fiscal 2017 was adjusted upward to 6.76%. In reviewing the Company's performance on the Relative TSR for the performance period the Compensation Committee determined that the Company's stock price performance when measured against the S&P 400 Mid Cap Index warranted a full 10% reduction in the actual payment of earned units. As a result, the Compensation Committee approved the vesting at 100.5% of target performance with Messrs. Spinner, Zechmeister, Griffin, Dorne, and Green receiving 9,035, 5,015, 4,914, 3,025 and 2,965 performance units, respectively, that were granted September 2016 and tied to our fiscal 2017 performance effective upon the filing of our Annual Report on Form 10-K for fiscal 2017 contingent on our results reflected in our Annual Report on Form 10-K not differing from those anticipated at the time the Compensation Committee reviewed our results.
Special Performance-Based Equity Grant for Mr. Spinner. In October 2016, the Compensation Committee approved a special performance-based vesting restricted share unit equity award for Mr. Spinner to align him with our Company’s long-term success during this critical period of our Company’s strategic efforts and motivate performance that will contribute to increased stockholder value and stock price appreciation. Mr. Spinner’s award totals 175,000 units at target level of performance with vesting for 50,000 units annually at target level performance based 50% each on the Company’s net sales and adjusted EBITDA for each of fiscal 2017, 2018 and 2019 and 25,000 units at target level performance based on our cumulative adjusted EBITDA for the three-year period inclusive of fiscal 2017, 2018 and 2019. The actual number of shares that may be issued to Mr. Spinner with respect to this award can range from 0% of target to 120% of target with 80% of target payable for threshold level performance and 120% of target payable for maximum performance. In addition to the net sales and adjusted EBITDA performance metrics, each tranche of this award (including the award tied to our performance over the three-year cumulative performance period) includes a minimum level of earnings per diluted share, calculated on a GAAP basis, that must be achieved for the particular performance period before Mr. Spinner will be eligible to have these units vest. This earnings per diluted share target constitutes the performance metric required under Section 162(m) of the Code for the portion of this award intended to constitute performance-based compensation under Section 162(m) of the Code. Even if this target is exceeded, the Company’s actual underlying performance must exceed the levels necessary to generate this level of diluted earnings per share before any of these units will be earned. For the portion of the award tied to our fiscal 2017, Mr. Spinner was eligible to receive from 0% of target to 120% of target with 80% of target payable for threshold level performance and 120% of target payable for maximum performance based on the following performance matrix:
 
Threshold
Target
Stretch
Fiscal 2017 Net Sales (in $ Millions)
$8,893
$9,375
$9,656
Fiscal 2017 Adjusted EBTIDA (in $ Millions)
$256.6
$319.2
$328.6
On September 15, 2017, the Compensation Committee met to determine what percentage of the fiscal 2017 performance-units with performance tied to fiscal 2017 granted to Mr. Spinner had been earned. The Compensation Committee determined that our GAAP earnings per diluted share exceeded the $1.00 threshold required under Mr. Spinner’s award agreement. When measuring our performance against the adjusted EBITDA targets, the Compensation Committee approved certain adjustments to our actual fiscal 2017 results. The adjusted results included approximately $15.6 million of upward adjustment to EBITDA in the aggregate related to (i) unbudgeted, pre-tax restructuring expense related to fiscal 2017 cost saving measures, (ii) unbudgeted pre-tax legal expense for litigation, legal and governance matters, and (iii) the gain the Company recorded in other income related to the sale of our investment in Kicking Horse Coffee in the fourth quarter of fiscal 2017. The Compensation Committee believed it was appropriate to adjust for the impact of these items in light of the fact that the events giving rise to these items had not been entered into or had not been contemplated at the time the performance targets were established and the fact that Mr. Spinner played a key role in returning value to shareholders on the Company's investment in Kicking Horse Coffee. As a result, our GAAP based EBITDA of $312.1 million was adjusted upward to $327.6 million. GAAP net sales of $9.274 billion was not adjusted. As a result, the Compensation Committee approved the vesting of 53,747 performance units, or 107.5% of target performance, effective upon the filing of our Annual Report on Form 10-K for fiscal 2017contingent on our results reflected in our Annual Report on Form 10-K not differing from those anticipated at the time the Compensation Committee reviewed our results. Of these 53,747 units,

36



30,402 units were paid to Mr. Spinner effective upon the filing of such Annual Report on Form 10-K and 23,345 units will be paid to him upon the earlier of Mr. Spinner's termination of employment for any reason or immediately prior to a change in control.
Special Performance-Based Equity Grant for Mr. Griffin. The Compensation Committee recognizing Mr. Griffin’s key role in implementing the Company’s corporate strategy and his significant responsibilities for managing the Company’s operations, in October 2016, approved a special performance-based vesting restricted share unit equity award for Mr. Griffin. Mr. Griffin’s award totals 45,000 units at target level of performance with vesting for 17,500 units annually at target level performance based 50% each on the Company’s net sales and adjusted EBITDA for each of fiscal 2017 and 2018 and 10,000 units at target level performance based on our cumulative adjusted EBITDA for the two-year period inclusive of fiscal 2017 and 2018. The net sales and adjusted EBITDA targets applicable to Mr. Griffin’s award are identical to those utilized for Mr. Spinner’s award with respect to fiscal 2017 and 2018. In addition to the net sales and adjusted EBITDA performance metrics, each tranche of this award includes a minimum level of earnings per diluted share, calculated on a GAAP basis, that must be achieved for the particular performance period before Mr. Griffin will be eligible to have these units vest. This earnings per diluted share target constitutes the performance metric required under Section 162(m) of the Code for this award. Even if this target is exceeded, the Company’s actual underlying performance must exceed the levels necessary to generate this level of diluted earnings per share before any of these units will be earned. For the portion of the award tied to fiscal 2017, Mr. Griffin was eligible to receive from 0% of target to 120% of target with 80% of target payable for threshold level performance and 120% of target payable for maximum performance based on the following performance matrix:
 
Threshold
Target
Stretch
Fiscal 2017 Net Sales (in $ Millions)
$8,893
$9,375
$9,656
Fiscal 2017 Adjusted EBTIDA (in $ Millions)
$256.6
$319.2
$328.6
On September 15, 2017, the Compensation Committee met to determine what percentage of the fiscal 2017 performance-units with performance tied to fiscal 2017 granted to Mr. Griffin had been earned. The Compensation Committee determined that our GAAP earnings per diluted share exceeded the $1.00 threshold required under Mr. Griffin’s award agreement. When measuring our performance against the adjusted EBITDA targets, the Compensation Committee approved certain adjustments to our actual 2017 results. The adjusted results included approximately $15.6 million of upward adjustments to EBITDA in the aggregate related to (i) unbudgeted, pre-tax restructuring expense related to fiscal 2017 cost saving measures, (ii) unbudgeted pre-tax legal expense for litigation, legal and governance matters, and (iii) the gain the Company recorded in other income related to the sale of our investment in Kicking Horse Coffee in the fourth quarter of fiscal 2017. The Compensation Committee believed it was appropriate to adjust for the impact of these items in light of the fact that the events giving rise to these items had not been entered into or had not been contemplated at the time the performance targets were established, and the fact that Mr. Griffin played a key role in returning value to shareholders on the Company's investment in Kicking Horse Coffee. As a result, our GAAP based EBITDA of $312.1 million was adjusted upward to $327.6 million. GAAP net sales of $9.274 billion was not adjusted. As a result, the Compensation Committee approved the vesting and payout of 18,811 performance units, 107.5% of target performance, effective upon the filing of our Annual Report on Form 10-K fiscal 2017contingent on our results reflected in our Annual Report on Form 10-K not differing from those anticipated at the time the Compensation Committee reviewed our results.
Additional Long-Term Equity Based Incentive Compensation. Certain of our Named Executive Officers were awarded additional time-based vesting restricted stock units in September 2016 outside of our core program. Messrs. Zechmeister, Dorne and Green were granted an award of 50,000, 25,000, and 25,000 restricted stock units, respectively. All of these awards vest in full on the fourth anniversary of the grant date. These additional grants were provided to Messrs. Zechmeister, Dorne and Green in light of these individuals’ increased responsibilities and duties within our organization as a result of organizational restructuring changes implemented in fiscal 2016. Mr. Dorne’s new roles include responsibility for our Canadian and Earth Origins operations as well as oversight of our risk and safety areas, Mr. Zechmeister’s responsibilities for fiscal 2017 include overseeing the consolidation of our financial planning and analysis, shared services and regional finance groups, while Mr. Green assumed the role of President of our Pacific Region in fiscal 2016.
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 are eligible to participate in the Deferral Plans. We provide the Named Executive Officers with the ability to defer compensation as a competitive pay practice so they may save amounts in a non-qualified retirement plan that are greater than the amount permitted to be deferred under the 401(k) Plan. For a description of the Deferral Plans, see EXECUTIVE COMPENSATION TABLES—Nonqualified Deferred Compensation—Fiscal 2017 below. We do not have any defined benefit pension plans available to our Named Executive Officers.
Perquisites and Other Benefits. We provide certain Named Executive Officers with perquisites and other benefits that we believe are reasonable and consistent with our overall executive compensation program. The costs of these benefits constitute

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only a small portion of each Named Executive Officer's total compensation and includes, for certain Named Executive Officers, contributions to our defined contribution plan, the payment of premiums for life insurance, automobile allowances, corporate housing and commuting air 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.
Fiscal 2018 Compensation Changes
For fiscal 2018, the Compensation Committee made certain changes to the compensation program for the Named Executive Officers tied to base salary and long-term equity based incentive compensation.
As described above under Competitive Marketplace Assessment, the Compensation Committee determined to conduct competitive market assessments when analyzing and setting the compensation of our Named Executive Officers every two years as opposed to annually and did not perform such an assessment in setting fiscal 2017 compensation. Accordingly, when it established the compensation for fiscal 2018, the Compensation Committee, with the assistance of Semler Brossy, reviewed a broad-based market assessment. In selecting appropriate data for purposes of setting fiscal 2018 compensation, the Compensation Committee considered companies with revenue between $5 and $10 billion and the market midpoint was defined as the average of the 25th and 50th percentiles to account for the low-margin nature of our business relative to general industry companies.
Base Salary. Base salary remains an important component of a Named Executive Officer's total compensation and for fiscal 2018 base salaries were generally targeted in the 25th to 50th percentile of the market assessment. For fiscal 2018, the base salary for each of the Named Executive Officers has been increased over fiscal 2017 levels by the percentage noted below. With the exception of Messrs. Zechmeister, Griffin and Green, the percentage increases are consistent with the merit pool for the Company as a whole. In the case of Messrs. Zechmeister and Griffin, the competitive market place assessment performed in the current year determined that their base salaries were below market for an employee performing comparable duties and their increase is indicative of our attempt to close this gap. For fiscal 2018, Mr. Green is assuming management responsibilities for the Company's Fresh operations in the Pacific region and the change in his base salary reflects the additional responsibilities he has assumed. Set forth below are the fiscal 2017 and fiscal 2018 base salaries for the Named Executive Officers and the percentage change between periods. The fiscal 2018 base salaries were effective for the first pay period in October 2017.
Named Executive Officer
 
Fiscal 2017
Base Salary
 
Fiscal 2018
Base Salary
 
Percentage
Change
Steven L. Spinner
 
$
922,500

 
$
946,000

 
2.5
%
Michael P. Zechmeister
 
$
461,250

 
$
493,538

 
7.0
%
Sean F. Griffin
 
$
550,000

 
$
588,500

 
7.0
%
Eric A. Dorne
 
$
383,400

 
$
393,100

 
2.5
%
Paul S. Green
 
$
335,000

 
$
351,750

 
5.0
%
Long-Term Equity-Based Incentive Compensation. For fiscal 2018 the Compensation Committee approved changes to the Company's long-term equity-based incentive plan with respect to Mr. Spinner. As part of these changes Mr. Spinner will no longer receive a performance-based vesting restricted stock unit grant with a grant date fair value at targeted performance levels of $1.5 million tied to current year Company performance and instead will have that target value of $1.5 million added to his two-year performance period award to align Mr. Spinner’s regular annual long-term equity-based incentive opportunity with the rest of our Named Executive Officers’ core program. In consideration of this change, for fiscal 2018 only, 50% of the value of this award will be awarded as a portion of Mr. Spinner’s time-based vesting RSUs with the remaining 50% awarded as a portion of his two-year performance award. In connection with this transition and for fiscal 2018 only, Mr. Spinner's time-based restricted stock unit award granted in September 2017 will vest 60% on the first anniversary of the award in September 2018 and 13.3% in each successive year until fully vested, rather than ratable vesting over a four year period. The Compensation Committee has not made any special equity grants thus far in fiscal 2018.
Other Programs, Policies and Considerations
Potential Impact on Compensation from Executive Misconduct
If the Board determines that a Named Executive Officer has engaged in fraudulent or intentional misconduct, the Board will take action to remedy the misconduct, prevent its recurrence, and impose such discipline on the wrongdoers as appropriate. Discipline would vary depending on the facts and circumstances, and may include, without limitation, (1) termination of employment, (2) initiating an action for breach of fiduciary duty, and (3) if the misconduct resulted in a significant restatement of the our financial results, seeking reimbursement of any portion of performance-based or incentive compensation paid or awarded to the Named Executive Officer that is greater than would have been paid or awarded if calculated based on the restated financial results. These remedies would be in addition to, and not in lieu of, any actions imposed by law enforcement agencies, regulators or other authorities.

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Recoupment (Clawback) Policy
We have adopted a recoupment policy applicable to our executive officers, including our Named Executive Officers, which provides that if we file an amendment to an SEC report to restate all or a portion of our financial statements within two years of filing the financial statements with the SEC, the Board or the Compensation Committee will, to the extent permitted by law, as it deems appropriate in its sole discretion, require reimbursement of all or a portion of any bonus or incentive compensation paid or granted after May 28, 2009 to any executive officer or other officer covered by this policy. The Board, or the Compensation Committee, also has the right in the event of such a restatement to cause the cancellation of equity-based incentive or bonus awards that had been granted to these individuals and to, in certain circumstances, seek reimbursement of any gains realized on the exercise of stock options or sales of shares of stock or payments received on account of restricted stock units or other awards payable in cash, in either case attributable to any awards that formed all or a portion of such bonus or incentive award. 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 requirements as a result of misconduct. In addition, the SEC is required under Section 954 of the Dodd-Frank Act to adopt rules that will require every exchange-listed company to adopt a “clawback” policy for the recovery of certain incentive-based compensation from its executive officers in the event we are required to restate our financials as a result of material noncompliance with reporting requirements. When final rules under the Dodd-Frank Act are adopted, we expect to revise our existing clawback policy as necessary to comply with these final SEC rules.
Policy on Gross Up Payments in Connection with a Change in Control
We have adopted a policy under which we may not enter into new or amended agreements which provide for "gross ups" for excise tax obligations payable by our executives upon termination of employment following a change in control. We also entered into amendments to the change in control agreement with Mr. Spinner to eliminate such "gross up" payments related to change in control. As a result, 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. Mr. Spinner's employment agreement does not include a "gross up" for excise tax obligations payable by him upon termination of employment following a change in control.
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 Named Executive 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 later of the fifth year after (i) the stock ownership guidelines were adopted, or (ii) he or she became an executive. Once attained, each executive officer is required to maintain this level of stock ownership for as long as they are employed by us and serving as an executive officer. When calculating whether a Named Executive Officer owns a sufficient number of shares under these guidelines, shares owned in the 401(k) Plan and deferred compensation plans are included in the number of shares owned, as are shares of vested and unvested restricted stock and restricted stock units subject only to time-based vesting restrictions. Unvested or unearned performance shares or performance units and unvested stock options do not count, though shares of stock issuable with respect to performance units that have been earned but not yet issued shall count. All our Named Executive Officers met our guidelines as of October 1, 2017.
Hedging and Insider Trading Policy
Our insider trading policy prohibits our executive officers from holding shares of our common stock in a margin account or from pledging shares of our common stock unless, in the case of pledging of the shares as collateral for a loan (not including margin debt), approved in advance by our General Counsel upon demonstration the individual clearly has the financial capacity to repay the loan without resort to the pledged securities. In addition, our insider trading policy permits only limited types of hedging transactions that are structured to avoid the risks of short selling, options trading or margin trading and which must be made pursuant to a Rule 10b5-1 trading plan that is pre-cleared by our General Counsel and for which any securities involved in such transaction must be in excess of our minimum stock ownership guidelines. Currently, none of the members of the Board or our executive officers are engaged in any hedging or pledging transactions involving shares of our common stock.
Employment Agreements
We are currently a party to an employment agreement with Mr. Spinner which was entered into in October 2016 (the “Employment Agreement”). The Employment Agreement has a three year term, subject to automatic one year renewals unless either party gives 180 days’ notice of intent not to renew. The Employment Agreement provides for an initial base salary and a target cash bonus opportunity. The Employment Agreement also provides Mr. Spinner with certain benefits, such as reimbursement of expenses, paid leave and participation in the Company’s employee benefit plans and programs.

39



The Employment Agreement provides for severance payments where Mr. Spinner is terminated without “cause” or if Mr. Spinner resigns with “good reason.” “Good Reason” generally means the occurrence of any one or more of the following: (1) the assignment of Mr. Spinner to duties materially adversely inconsistent with his duties as of the date of the Employment Agreement; (2) a material reduction in Mr. Spinner’s title, executive authority or reporting status, including failure of the Company to appoint Mr. Spinner as the Company’s Chief Executive Officer; (3) a relocation more than fifty (50) miles from Mr. Spinner’s then current place of employment; (4) a reduction by the Company in Mr. Spinner’s base salary, or a failure of the Company to pay or cause to be paid any compensation or benefits when due or under the terms of any plan established by the Company and failure to restore such base salary or make such payments within five (5) days of receipt of notice from Mr. Spinner, (5) failure to include Mr. Spinner in any new employee benefit plans proposed by the Company or a material reduction in Mr. Spinner’s level of participation in any benefit plans of the Company; provided that a Company-wide reduction or elimination of such plans shall not give rise to a “Good Reason” termination; (6) a material breach of the Employment Agreement by the Company; or (7) the failure of the Company to obtain a satisfactory agreement from any successor to the Company with respect to the ownership of substantially all the stock or assets of the Company to assume and agree to perform the terms of the Agreement, in each case to the extent not cured (if curable) following notice of such event.  “Cause” generally means (1) the conviction of Mr. Spinner under applicable law of any felony or any misdemeanor involving moral turpitude, (2) unauthorized acts intended to result in Mr. Spinner’s personal enrichment at the material expense of the Company or its reputation, (3) any violation of Mr. Spinner’s duties or responsibilities to the Company which constitutes willful misconduct or dereliction of duty or (4) material breach of the sections of the Employment Agreement related to non-competition and the other activities that Mr. Spinner may engage in outside of his employment for the Company, in each case to the extent not cured (if curable) following notice of such event.
The severance payments owed to Mr. Spinner in the event the Company terminates his employment without "cause" or he voluntarily terminates his employment for "good reason" generally consist of (a) 200% of Mr. Spinner’s then current base salary, (b) 200% of his current-year annual cash incentive payments based on target performance and (c) the pro-rated portion of the current-year annual cash incentive payments he would have been owed for the fiscal year in which his employment was terminated based on the Company's actual results when measured against the performance metrics applicable to Mr. Spinner for that period. Severance also includes payments to Mr. Spinner of $35,000 that he may use to pay for medical benefits for himself and his dependents following termination. In addition, where Mr. Spinner is terminated without “cause” or Mr. Spinner voluntarily terminates his employment for “good reason”, any stock options awarded to Mr. Spinner and not vested and exercisable on or prior to the date of Mr. Spinner's termination that would otherwise have become vested and exercisable on or prior to the first anniversary of the date of Mr. Spinner's termination, and any shares of restricted stock (including restricted stock units settled in shares of common stock) and performance-based vesting equity awards (including performance-based restricted stock units settled in shares of common stock) granted to Mr. Spinner that would have had any restrictions thereon removed or vested on or prior to the first anniversary of the date of Mr. Spinner's termination, will, in each case, have any restrictions thereon removed or become vested, as the case may be, with such restrictions with respect to any performance-based vesting equity awards to be removed on that number of awards as Mr. Spinner would have earned based on performance at the greater of target or actual levels of performance for the current year (but only if any gateway performance metrics applicable to the awards are achieved).
In addition, where Mr. Spinner is terminated without “cause” or Mr. Spinner voluntarily terminates his employment for “good reason” within one year after a Change in Control (as defined below) of the Company, in lieu of the severance compensation described above, the Company must pay to Mr. Spinner (a) 3 times Mr. Spinner’s then current base salary, (b) 3 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. The Company must make payments to Mr. Spinner of $105,000 that he may use to pay for medical benefits for himself and his dependents following termination. In addition, any and all unvested and unexercised stock options, restricted stock, restricted stock units and performance-based vesting equity awards granted to Mr. Spinner shall be treated in accordance with the applicable award agreements evidencing such equity-based awards and any applicable election forms related thereto. The Employment Agreement contemplates that if any payments or benefits otherwise payable to Mr. Spinner would constitute "parachute payments" within the meaning of Section 280G of the Code and would be 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 Employment Agreement contains provisions governing the nondisclosure and nonuse of confidential information of the Company, provisions requiring the assignment of certain intellectual property rights to the Company, and non-competition and non-solicitation restrictive covenants which remain in existence for one year or, in the event of termination for “cause” or without “good reason”, two years following Mr. Spinner’s termination.

40



The Employment Agreement provides that if the Company files an amendment to an SEC report to restate its financial statements filed in the two preceding years the Board or a committee of the Board consisting entirely of independent directors may require Mr. Spinner to repay any bonus or incentive compensation paid or granted to Mr. Spinner if the amount of bonus or incentive compensation was calculated based upon the achievement of certain financial results that were subsequently reduced due to the restatement, and the amount of the bonus or incentive compensation that would have been awarded to Mr. Spinner had the financial results been properly reported would have been lower than the amount actually awarded. 
Severance Agreements and Change in Control Agreements
We are currently a party to amended and restated severance agreements and amended and restated change in control agreements with each of our Named Executive Officers, except for Mr. Spinner. Given the fact that we do not have employment agreements with our Named Executive Officers, except for Mr. Spinner, 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.
Each of the severance agreements includes confidentiality, non-competition and intellectual property assignment provisions. Outside the context of a Change in Control, if we terminate any of our Named Executive Officers 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) his base salary, as in effect as of the termination date of his employment for a period of one year following his termination, and (ii)make a cash payment in the amount of $35,000 to such individual that may be used by the individual to pay for post-termination medical benefits for himself and his dependents. No payments are owed to the Named Executive Officers pursuant to the severance agreement as a result of a change in control.
Any benefits to be paid upon a change in control under the amended and restated change in control agreements are "double trigger," which requires both a Change in Control and a termination of a Named Executive Officer by us for a reason other than Cause, death or disability or a resignation by the executive for Good Reason within one year of the date of the Change in Control. In the event of either a termination of the executive for a reason other than Cause, death or disability or his resignation for Good Reason within one year of the date of a Change in Control, the executive would be entitled to receive a lump sum payment equal to (i) a multiple of his base salary (multiple of 2.99 times in the case of Messrs. Zechmeister and Griffin and 1.5 times in the case of Messrs. Dorne, and Green), as in effect at that time of his termination of employment, (ii) a multiple of the executive’s annual cash incentive payments based on target performance for the fiscal year in which the executive is terminated (2.99 times in the case of Messrs. Zechmeister and Griffin and 1.5 times in the case of Messrs. Dorne and Green), and (iii) the prorated portion of the executive’s 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 him for that performance period. We will also be required to make a cash payment in the amount of $105,000 to such individual that may be used by the individual to pay for post-termination medical benefits for himself and his dependents. In addition, if the Named Executive Officer is terminated by the Company without Cause or voluntarily terminates his employment for Good Reason, in each case within one year following a Change in Control, any and all unvested and unexercised stock options, restricted stock, restricted stock units and performance-based vesting equity awards granted to the Named Executive Officer shall become fully vested as of the date of the Change in Control, 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 his termination without Cause or for Good Reason, either before or within one year 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.
For purposes of the severance agreements and change in control agreements described above, the terms "Cause", "Good Reason" and "Change in Control" have the meanings set forth below.
"Cause" generally means (1) the conviction of the Named Executive Officer under applicable law of any felony or any misdemeanor involving moral turpitude, (2) unauthorized acts intended to result in the Named Executive Officer's personal enrichment at the material expense of the Company or its reputation, (3) any violation of the Named Executive Officer's duties or responsibilities to the Company which constitutes willful misconduct or dereliction of duty, or (4) material breach of the sections of the agreements related to confidentiality and non-competition, in each case to the extent not cured (if curable) following notice of such event.
"Good Reason" generally means, the occurrence of any one or more of the following without the executive's express written consent: (1) the assignment of the Named Executive Officer to duties materially adversely inconsistent with his duties as of the date of the severance agreement and change in control agreement, as applicable, and failure to rescind such within thirty (30) days of notice from the executive; (2) a material reduction in the Named Executive Officer’s title, executive authority or reporting status; (3) the Company's requirement that the Named Executive Officer relocate more than fifty (50) miles from his

41



then current place of employment; (4) a reduction by the Company in the Named Executive Officer's base salary, or a failure of the Company to pay or cause to be paid any compensation or benefits when due or under the terms of any plan established by the Company and failure to restore such base salary or make such payments within five (5) days of receipt of notice from the Named Executive Officer; (5) failure to include the Named Executive Officer in any new employee benefit plans proposed by the Company or a material reduction in the Named Executive Officer's level of participation in any benefit plans of the Company; provided that a Company-wide reduction or elimination of such plans shall not give rise to a "Good Reason" termination; or (6) the failure of the Company to obtain a satisfactory agreement from any successor to the Company with respect to the ownership of substantially all the stock or assets of the Company to assume and agree to perform the terms of the severance agreement or change in control agreement, as applicable, and in each case to the extent not cured (if curable) following notice of such event.
"Change in Control" means the happening of any of the following:
any "person", including a "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Company, any of its affiliates, or any employee benefit plan of the Company or any of its affiliates) is or becomes the "beneficial owner" (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of the Company representing the greater of 30% or more of the combined voting power of the Company's then outstanding securities;
approval by the stockholders of the Company of a definitive agreement (1) for the merger or other business combination of the Company with or into another corporation if (A) a majority of the directors of the surviving corporation were not directors of the Company immediately prior to the effective date of such merger or (B) the stockholders of the Company immediately prior to the effective date of such merger own less than 60% of the combined voting power in the then outstanding securities in such surviving corporation or (2) for the sale or other disposition of all or substantially all of the assets of the Company; or
the purchase of 30% or more of the Company's stock pursuant to any tender or exchange offer made by any "person", including a "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any of its affiliates, or any employee benefit plan of the Company or any of its affiliates.
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 limits to $1 million the annual tax deduction for compensation paid to each of the chief executive officer and the three other highest paid executive officers employed at the end of the year (other than the chief financial officer). However, compensation that does not exceed $1 million during any fiscal year or that qualifies as "performance-based compensation" (as defined in Section 162(m)) is deductible. The Compensation Committee considers these requirements and attempts to ensure that both cash and equity components of the Named Executive Officers' total compensation are tax deductible by us, to the maximum extent possible, by the use of stockholder-approved plans that are intended to comply, to the extent practicable, with Section 162(m). The Compensation Committee reserves the right to make non-deductible awards (e.g. service vested restricted stock units, non-performance-based cash payments, onboarding grants for new hires or performance-based compensation that exceeds the limits in the Original Amended and Restated Plan). Our performance-based cash incentive plan is intended to be a subplan of our Original Amended and Restated Plan, which was approved by our stockholders.  Accordingly, assuming that awards otherwise comply with the technical requirements of Section 162(m) these awards should qualify as “performance-based compensation” and as a result be deductible if paid out in accordance with the terms of the plan and performance metrics approved by the Compensation Committee. Nonetheless, the Compensation Committee may determine to approve awards that do not meet the requirements of Section 162(m) or make modifications to previously granted awards that may cause the awards to no longer qualify as “performance-based compensation” for purposes of Section 162(m). In making the compensation decisions in connection with Mr. Spinner's employment agreement, the Compensation Committee took into account that it is likely that the cash payment and a portion of the equity award made thereunder will not be deductible for federal income tax purposes given the limitations contained in Section 162(m) and the Original Amended and Restated Plan. The Compensation Committee will continue to review and evaluate, as necessary, the impact of Section 162(m) on our executive compensation programs, but the Compensation Committee has approved in the past and may approve in the future, compensation that is not considered performance-based under Section 162(m) or that is outside the deductibility limitations of Section 162(m).

42



COMPENSATION COMMITTEE REPORT
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 our Annual Report on Form 10-K for the fiscal year ended July 29, 2017.

 
 
James P. Heffernan, Chair
 
 
Eric F. Artz
 
 
Ann Torre Bates
    
The foregoing Report of the Compensation Committee shall not be deemed "filed" for any purpose, including for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that Section. The Report of the Compensation Committee does not contain soliciting material and shall not be deemed to be incorporated by reference into any filing under the Securities Act or under the Exchange Act, regardless of any general incorporation language in such filing.

43



EXECUTIVE COMPENSATION TABLES
Summary Compensation Table—Fiscal Years 2015-2017
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 (1)
Stock
Awards (2)
Option
Awards (3)
Non-Equity
Incentive Plan
Compensation (4)
Nonqualified
Deferred
Compensation
Earnings (5)
All Other
Compensation
 
Total
Steven L. Spinner
2017
$
919,039

$
1,250,000

$
10,656,191

$

$
998,060

$
69,811

$
103,646

(6)
$
13,996,747

President, Chief Executive Officer and Chairman
2016
889,346


3,647,182




103,317

 
4,639,845

2015
872,300


2,758,034

218,840


20,745

88,249

 
3,958,168

Michael P. Zechmeister
2017
459,519


3,075,068


374,272

8,541

54,819

(7)
3,972,219

Chief Financial Officer
2016
398,076


1,515,203

505,029

198,755

2,474

37,715

 
2,657,252

Sean F. Griffin
2017
542,308


3,079,970


422,753

65,905

8,260

(8)
4,119,196

Chief Operating Officer
2016
477,038


1,156,002


183,145

1,573

6,154

 
1,823,912

 
2015
440,300


544,154

94,529


18,411

10,464

 
1,107,858

Eric A. Dorne
2017
379,031


1,640,326


193,202


9,524

(8)
2,222,083

Chief Administrative and Information Officer
2016
340,346


594,193


106,125


6,554

 
1,047,218

 
 
 
 
 
 
 
 
 


Paul S. Green
2017
331,154


1,570,363


219,523

55,637

13,468

(9)
2,190,145

President, Pacific Region
 
 
 
 
 
 
 
 
 


(1)
In October 2016, the Compensation Committee approved the payment of $1,250,000 in cash to Mr. Spinner as part of Mr. Spinner’s entering into an employment agreement with the Company. This payment was made to Mr. Spinner in recognition of the successful execution of the Company’s acquisition and “building out the store” strategies in fiscal 2016 along with Mr. Spinner’s commitment to remain with the Company through the term of his employment agreement and expanded non-competition covenants and time periods contained in his employment agreement.
(2)
Amounts shown represent the grant date fair value of awards of time-based vesting restricted stock units and performance units at the target level, as computed under ASC 718 granted during the fiscal year indicated. For performance units, grant date fair value is calculated based on the probable outcome of the performance result (i.e., target level of performance) for each of the performance periods, excluding the effect of estimated forfeitures. These amounts do not necessarily reflect the actual amounts that were paid to, or may be realized by, the Named Executive Officer for any of the fiscal years reflected. Refer to footnote 3 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended July 29, 2017 for a discussion of the relevant assumptions used to determine the grant date fair value of these awards. The grant date fair value of awards of performance units to Mr. Spinner in fiscal 2017, fiscal 2016 and fiscal 2015, assuming stretch, or maximum, level performance, were $13,978,644, $4,417,488, and$3,943,630, respectively. The grant date fair value of awards of performance units granted in fiscal 2017 to Messrs. Zechmeister, Griffin, Dorne, and Green, assuming stretch performance, or maximum level, performance were $1,293,750, $3,650,023, $770,175, and $697,500, respectively. The grant date fair value of awards of performance units granted in fiscal 2016 to Messrs. Griffin and Dorne, assuming stretch, or maximum, level performance were $770,525 and $475,350, respectively. Mr. Zechmeister did not receive a grant of performance units in fiscal 2016. The grant date fair value of awards of performance units granted in fiscal 2015 to Mr. Griffin, assuming stretch, or maximum, level performance, was $407,951.
(3)
Amounts shown represent the grant date fair value of awards of stock options, as computed under ASC 718, granted to the Named Executive Officers during the fiscal year indicated. These amounts do not reflect the actual amounts that may be realized by the Named Executive Officer for any of the fiscal years reflected. Refer to footnote 3 to the consolidated financial statements in our Annual Report on Form 10-K for the year ended July 29, 2017 for a discussion of the relevant assumptions used to determine the grant date fair value of these awards.
(4)
Amounts shown for fiscal 2017 reflect payments made in fiscal 2018 under our 2017 Senior Management Cash Incentive Plan related to fiscal 2017 performance. For a discussion regarding the 2017 Senior Management Cash Incentive Plan,

44



see EXECUTIVE COMPENSATION-Compensation Discussion and Analysis-Components of our Core Executive Compensation Program-Performance-Based Annual Cash Incentive Compensation.
(5)
Amounts reported in this column represent earnings on deferred compensation that exceed 120% of the federal applicable long-term rate, which was 2.60%. These amounts, as well as all other earnings on deferred compensation of the Named Executive Officers in fiscal 2017, are included in the table included under Nonqualified Deferred Compensation—Fiscal 2017 under the column "Aggregate Earnings in Last Fiscal Year."
(6)
Represents an automobile allowance ($6,934), an allowance for living expenses while in the area of our Corporate Headquarters in Providence, Rhode Island ($53,737), an amount received to "gross up" the two preceding benefits to offset the related tax obligations ($20,534), our contributions to a 401(k) account ($8,855) and the provision of air and rail travel from Mr. Spinner's homes in New York and Pennsylvania to our Corporate Headquarters ($13,586).
(7)
Represents relocation expenses which were reimbursed ($51,119) and our contributions to a 401(k) account ($3,700).
(8)
Represents our contributions to a 401(k) account.
(9)
Represents our contributions to a 401(k) account ($6,732) and taxable fringe benefits relating to a gross up of state taxes as a result of Mr. Green's relocation from Texas to California ($6,736).
GRANTS OF PLAN-BASED AWARDS IN FISCAL 2017
The following table reflects the equity-based awards granted by the Company in fiscal 2017:
 
 
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards(1)

 
Estimated Future Payouts
Under Equity Incentive Plan
Awards

 
 
 
 
 
Name
Grant Date
Threshold ($)
Target
($)
Maximum
($)
 
Threshold
(#)
Target
(#)
Maximum
(#)
 
All
Other
Stock
Awards
(#)
All
Other
Option
Awards
(#)
Exercise
Price of
Option
Awards
($/sh)
Grant Date Fair Value of Stock and Option Awards ($)(8)
Steven L. Spinner
9/15/2016



 



 
18,4806



731,069

 
9/21/2016



 

38,0422

76,0842

 



1,500,000

 
9/21/2016



 
2,2483

8,9903

17,9803

 



354,372

 
9/21/2016



 
4,6384

18,5504

37,1004

 



731,250

 
10/27/2016



 
140,0005

175,0005

210,0005

 



7,339,500

 
N/A
147,046

919,039

1,838,078

 



 




Michael P. Zechmeister
9/15/2016



 



 
11,3806



450,193

 
9/15/2016



 



 
50,0007



1,978,000

 
9/21/2016



 
1,2483

4,9903

9,9803

 



196,875

 
9/21/2016



 
2,8534

11,4104

22,8204

 



450,000

 
N/A
55,142

344,639

689,279

 



 




Sean F. Griffin
9/15/2016



 



 
12,6406



500,038

 
9/21/2016



 
1,2233

4,8903

9,7803

 



192,631

 
9/21/2016



 
3,1704

12,6804

25,3604

 



500,000

 
10/27/2016



 
36,0005

45,0005

54,0005

 



1,887,300

 
N/A
65,077

406,731

813,462

 



 




Eric A. Dorne
9/15/2016



 



 
6,7306



266,239

 
9/15/2016



 



 
25,0007



989,000

 
9/21/2016



 
7533

3,0103

6,0203

 



118,838

 
9/21/2016



 
1,6884

6,7504

13,5004

 



266,250

 
N/A
30,322

189,516

379,031

 



 




Paul S. Green
9/15/2016



 



 
5,8806



232,613

 
9/15/2016



 



 
25,0007



989,000

 
9/21/2016



 
7383

2,9503

5,9003

 



116,250

 
9/21/2016



 
1,4754

5,9004

11,8004

 



232,500

 
N/A
26,492

165,577

331,154

 



 




(1)
This column shows separately the possible payouts to the Named Executive Officers under our 2017 Senior Management Cash Incentive Plan for the fiscal year ended July 29, 2017 for "threshold", "target" and "maximum" performance. Actual amounts paid for these incentives are reflected in the table included under Summary Compensation Table—Fiscal Years 2015-2017 under the column "Non-Equity Incentive Plan Compensation."

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(2)
This award that was granted on September 21, 2016 under the Original Amended and Restated Plan represents the number of performance units that could have been earned at "target" and "maximum" levels of performance granted to Mr. Spinner in fiscal 2017. Vesting of these performance units was linked to our attaining certain levels of diluted EPS, adjusted ROIC and adjusted EBITDA for fiscal 2017. In addition, the amount of performance units that could have been earned could be increased or decreased by the Compensation Committee by up to 10% based on our Relative TSR for the one-year performance period. The performance award was denominated in shares based on the closing price of our common stock on the date of grant. At the conclusion of the performance period, and based on our results measured against the performance measures (adjusted by the Compensation Committee as permitted under the applicable award agreement), 100.50% of the target level of these performance units was earned and the award was settled with the issuance of 38,232 shares of our common stock after the application of a 10% downward adjustment based on our Relative TSR for the one-year performance period.
(3)
These awards that were granted on September 21, 2016 under the Original Amended and Restated Plan represent the number of performance units that could have been earned with a one-year performance period at "threshold," "target" and "maximum" levels of performance. Vesting of these performance units was linked to our attaining certain levels of diluted EPS, adjusted ROIC and adjusted EBITDA for fiscal 2017. In addition, the amount of performance units that could have been earned could be increased or decreased by the Compensation Committee by up to 10% based on our Relative TSR for the one-year performance period. Target levels of performance is equal to 50% of 150% of the base salary for fiscal 2015 for Messrs. Dorne and Green, 50% of 175% of the base salary for fiscal 2016 for Mr. Zechmeister, 50% of 175% of the base salary for fiscal 2015 for Mr. Griffin, and 50% of 162.5% of the base salary for fiscal 2015 for Mr. Spinner. At the conclusion of the one-year performance period and based on our results measured against the performance measures (adjusted by the Compensation Committee as permitted under the applicable award agreement), 100.5% of the target level of these performance were earned and the awards were settled with the issuance of 9,035, 5,015, 4,914, 3,025 and 2,965 shares of our common stock, respectively, for Messrs. Spinner, Zechmeister, Griffin, Dorne and Green after application of a 10% downward adjustment based on our Relative TSR for the one-year performance period. These performance units and their related performance-based vesting are described in more detail in EXECUTIVE COMPENSATION—Compensation Discussion and Analysis—Components of Our Core Executive Compensation Program-Long-term, Equity-Based Incentive Program—Performance-Based Vesting Restricted Stock Units.
(4)
These awards that were granted on September 21, 2016 under the Original Amended and Restated Plan represent the number of performance units that may be earned with a two-year performance period at "threshold," "target" and "maximum" levels of performance. Vesting of these performance units is linked to our attaining certain levels of diluted EPS, adjusted ROIC and adjusted EBITDA for fiscal 2018. In addition, the amount of performance units that may be earned may be increased or decreased by the Compensation Committee by up to 10% based on our Relative TSR for the two-year performance period. Target levels of performance is equal to 50% of 150% of the base salary for fiscal 2016 for Messrs. Dorne and Green, 50% of 200% of the base salary for fiscal 2016 for Messrs. Zechmeister and Griffin, and 50% of 162.5% of the base salary for fiscal 2016 for Mr. Spinner. At the conclusion of the two-year performance period (i.e. fiscal 2018), the performance units may vest based on our diluted EPS, adjusted ROIC and adjusted EBITDA for fiscal 2018. The performance units earned by the Named Executive Officer will be settled in a like number of shares. Moreover, the Compensation Committee may adjust the performance units earned upward or downward by up to 10% based on our Relative TSR for the two-year performance period. These performance units and their related performance-based vesting are described in more detail in EXECUTIVE COMPENSATION—Compensation Discussion and Analysis—Components of Our Core Executive Compensation Program-Long-term, Equity-Based Incentive Program—Performance-Based Vesting Restricted Stock Units.
(5)
These awards that were granted to Messrs. Spinner and Griffin on October 27, 2016 under the Original Amended and Restated Plan represent the number of performance units that may be earned at "threshold," "target" and "maximum" levels of performance. Mr. Spinner’s award totals 175,000 units at target level of performance with vesting for 50,000 units annually at target level performance based on the Company achieving a minimum amount of diluted EPS for the applicable fiscal year and then based 50% each on the Company’s net sales and adjusted EBITDA for each of fiscal 2017, 2018 and 2019 and 25,000 units at target level performance based on the Company achieving a cumulative minimum amount of diluted EPS for fiscal 2017, fiscal 2018 and fiscal 2019 and then based on our cumulative adjusted EBITDA for the three-year period inclusive of fiscal 2017, 2018 and 2019. Mr. Griffin’s award totals 45,000 units at target level of performance with vesting for 17,500 units annually at target level performance based on the Company achieving a minimum amount of diluted EPS for the applicable fiscal year and then based 50% each on the Company’s net sales and adjusted EBITDA for each of fiscal 2017 and 2018 and 10,000 units at target level performance based on the Company achieving a cumulative minimum amount of diluted EPS for fiscal 2017 and fiscal 2018 and then based on our cumulative adjusted EBITDA for the two-year period inclusive of fiscal 2017 and 2018. The actual number of shares that may be issued with respect to these awards can range from 0% of target to 120% of target with 80% of target payable for threshold level performance and 120% of target payable for maximum performance. Based on our GAAP earnings per diluted

46



share, adjusted EBITDA and net sales for fiscal 2017 when measured against the fiscal 2017 performance targets, Messrs. Spinner and Griffin earned 53,747 and 18,811 units, respectively, of which 23,345 of Mr. Spinner's units will be paid out upon his termination of employment, or, if earlier, upon consummation of a change in control.
(6)
These awards were time-based vesting restricted stock units granted in fiscal 2017 to the Named Executive Officers that vest in four equal installments beginning on the first anniversary of the date of grant.
(7)
On September 15, 2016, Messrs. Zechmeister, Dorne and Green were granted time-based vesting restricted stock units of 50,000, 25,000 and 25,000, respectively, that will vest on the fourth anniversary of the date of grant.
(8)
For grants during fiscal 2017, the amount shown with respect to each award represents the grant date fair value of the award calculated using the assumptions described in footnotes (2) and (3) of the table included under Summary Compensation Table—Fiscal Years 2015-2017. The grant date fair value of performance units was calculated based on the probable outcome of the performance result (i.e., target level of performance) for each of the performance periods, excluding the effect of estimated forfeitures.
Outstanding Equity Awards at Fiscal 2017 Year-End
The following table summarizes information with respect to holdings of stock options and stock awards by the Named Executive Officers as of July 29, 2017. This table includes unexercised and unvested stock options, unvested time-based vesting restricted stock units and unvested performance-based vesting restricted stock units. Each equity grant is shown separately for each Named Executive Officer, except that incentive stock options and non-qualified stock options granted on the same date with the same material terms, including exercise price, vesting period and expiration date, are combined.

47



OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
 
Option Awards
 
Stock Awards
Name
Grant Date
Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable (1)
Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable (1)
Option Exercise Price ($)
Option Expiration Date
 
Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)(1)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested
($)(2)
Equity
Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)
 
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(5)
Steven L. Spinner
9/16/2008
7,500


24.54

9/16/2018

 



 

 
9/11/2009
12,311


24.30

9/11/2019

 



 

 
9/10/2010
17,760


33.90

9/10/2020

 



 

 
9/12/2011
17,150


37.82

9/12/2021

 



 

 
9/13/2012
23,160


58.98

9/13/2022

 



 

 
9/16/2013




 
2,707

102,541


 

 
9/16/2013
9,848

3,282

67.48

9/16/2023

 



 

 
9/19/2014




 
6,090

230,689


 

 
9/19/2014
7,385

7,385

64.55

9/19/2024

 



 

 
9/17/2015




 
20,940

793,207


 

 
9/15/2016




 
18,480

700,022


 

 
9/21/2016




 


37,100

(3) 
1,405,348

 
10/27/2016