| - | $20,000 for the chairperson of our compensation committee;
Our board of directors has determined that all of our current directors, except for Mr. Sinclair, are “independent,” as defined in the corporate governance rules of the NASDAQ Stock Market. There are no family relationships among any of our directors, director nominees or executive officers. Mr. Molloy was not “independent” during the period from June 20, 2019 through February 21, 2020 during which he served as our Interim Chief Financial Officer. Only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors. Our directors may be removed for cause by the affirmative vote of the holders of a majority of our voting stock. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company. Board Leadership Structure Our board of directors has no policy with respect to the separation of the offices of Chief Executive Officer and Chairman of the Board. It is the board’s view that rather than having a rigid policy, the board, with the advice and assistance of the nominating and corporate governance committee, and upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether to institute a formal policy. Currently, our leadership structure separates these roles, with Mr. Fortunato serving as our Chairman of the Board and Mr. Sinclair serving as our Chief Executive Officer. Our board believes that separating these roles provides the appropriate balance between strategy development, flow of information between management and the board of directors and oversight of management. We believe this provides guidance for our board of directors, while also positioning our Chief Executive Officer as the leader of the company in the eyes of our customers, team members and other stakeholders. As Chairman, Mr. Fortunato, among other responsibilities, oversees planning of the annual board calendar and develops meeting agendas, presides over regularly scheduled board meetings and executive sessions of the independent members of the board, serves as a liaison between the directors, consults with major stockholders, as appropriate, and performs such additional duties as our board of directors may otherwise determine and delegate. By having Mr. Fortunato serve as Chairman of the Board, Mr. Sinclair is better able to focus his attention on running our company. The Board’s Role in Risk Oversight In 2021, our board of directors formed a risk committee that is primarily responsible for overseeing our risk management processes. We have an enterprise risk management program designed to identify, prioritize and assess a broad range of risks that may affect our ability to execute our corporate strategy and fulfill our business objectives, and formulate plans to mitigate their effects. The risk committee will review our enterprise risk management program and specific risks we face (including risks related to cybersecurity and critical systems and environmental and social matters among others), provide input on the appropriate level of risk for our company and review management’s strategies for adequately mitigating and managing the identified risks. Although the risk committee administers this general risk management oversight function, our audit, compensation and nominating and corporate governance committees support our board in discharging its oversight duties and addressing risks inherent in their respective areas, and our board of directors as a whole receives regular updates on our enterprise risk management program and retains oversight responsibility over our key strategic risks. During 2020, our full board of directors oversaw our efforts to identify, prioritize and mitigate the risks we faced related to the COVID-19 pandemic. We believe this division of responsibilities is an effective approach for addressing the risks we face and that our board committee structure supports this approach. | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 15 |
| - | $20,000 for the chairperson
Board Participation Our board of directors held eight formal meetings in fiscal 2020 and took action by written consent once. During fiscal 2020, each of our directors attended at least 75% of the total number of meetings of our board of directors and of the committees on which they serve. We regularly schedule executive sessions at each formal meeting of the board during which the independent directors meet without the presence or participation of management. We encourage our directors to attend each annual meeting of stockholders. To that end, and to the extent reasonably practical, we generally schedule a meeting of our board of directors on or around the same day as our annual meeting of stockholders. Each of our directors at the time attended our 2020 virtual annual meeting of stockholders. Board Committees Our board of directors has the authority to appoint committees to perform certain oversight and administration functions. Our board of directors has an audit committee, a compensation committee a nominating and corporate governance committee and risk committee. The composition and responsibilities of each committee are described below. Members will serve on these committees until their resignation or until otherwise determined by the board of directors. Audit Committee Our audit committee consists of Doug G. Rauch, Chairperson, Joel D. Anderson and Kristen E. Blum. Our board of directors has determined that each such individual is independent under the rules of the SEC and the NASDAQ Stock Market. Our board has also determined that Mr. Anderson is an “audit committee financial expert” within the meaning of SEC regulations, and that each member of our audit committee can read and understand fundamental financial statements in accordance with audit committee requirements. In arriving at this determination, the board has examined each audit committee member’s scope of experience in financial roles and the nature of their employment. The audit committee has the following responsibilities, among others things, as set forth in the audit committee charter: reviewing and pre-approving the engagement of our independent registered public accounting firm to perform audit services and any permissible non-audit services; evaluating the performance of our independent registered public accounting firm; monitoring the rotation of partners of our independent registered public accounting firm on our engagement team as required by law; reviewing our annual and quarterly financial statements and reports filed with the SEC and discussing the statements and reports with our independent registered public accounting firm and management, including a review of disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations;” reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls, and compliance with legal and regulatory requirements; considering and approving or disapproving all related party transactions and discussing such transactions that are significant to our company with our independent registered public accounting firm; preparing the audit committee report required by the SEC to be included in our annual proxy statement; conducting an annual assessment of the performance of the audit committee and its members, and the adequacy of its charter; | | | | | | 16 2021 Proxy Statement | | | | Sprouts Farmers Market |
establishing procedures for the receipt, retention, and treatment of complaints received by us regarding financial controls, accounting or auditing matters; and reviewing and evaluating, at least annually, the performance of the audit committee and the adequacy of its charter. Our audit committee formally met four times during fiscal 2020. Compensation Committee Our compensation committee consists of Lawrence P. Molloy, Chairperson, Terri Funk Graham and Joseph O’Leary. Our board of directors has determined that each such individual is independent under NASDAQ Stock Market listing standards and a “non-employee director” as defined in Rule 16b-3 promulgated under the Exchange Act. During the period from June 20, 2019 through February 21, 2020 during which he served as our Interim Chief Financial Officer, Mr. Molloy stepped off the compensation committee. The compensation committee has the following responsibilities, among other things, as set forth in the compensation committee’s charter: reviewing, modifying and approving (or if it deems appropriate, recommending to the full board of directors regarding) our overall compensation strategy and policies and discussing such compensation with our independent registered public accounting firm; reviewing (or if it deems appropriate, recommending to the full board of directors regarding) performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives; reviewing and recommending to the full board of directors the compensation of our directors; evaluating, adopting and administering (or if it deems appropriate, making recommendations to the full board of directors regarding) the 2013 Incentive Plan (as defined below), other compensation plans and similar programs advisable for us, as well as modification or termination of existing plans and programs; establishing policies with respect to equity compensation arrangements; reviewing and discussing annually with management our “Compensation Discussion and Analysis”; preparing the compensation committee report required by the SEC to be included in our annual proxy statement; and reviewing and evaluating, at least annually, the performance of the compensation committee and the adequacy of its charter. Our compensation committee formally met two times during fiscal 2020 and took action by written consent twice. Nominating and Corporate Governance Committee Our nominating and corporate governance committee consists of Terri Funk Graham, Chairperson, Kristen E. Blum and Joseph O’Leary. Our board of directors has determined that each such individual is independent under the rules of the NASDAQ Stock Market. The nominating and corporate governance committee has the following responsibilities, among other things, as set forth in the nominating and corporate governance committee’s charter: reviewing periodically and evaluating director performance on our board of directors and its applicable committees, and recommending to our board of directors and management areas for improvement; | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 17 |
establishing criteria and qualifications for membership on the board of directors and its committees; interviewing, evaluating, nominating and recommending individuals for membership on our board of directors; reviewing and recommending to our board of directors any amendments to our corporate governance policies; and reviewing and assessing, at least annually, the performance of the nominating and corporate governance committee and the adequacy of its charter. Our nominating and corporate governance committee formally met two times during fiscal 2020. Risk Committee Our risk committee consists of Kristen E. Blum, Chairperson, Terri Funk Graham and Lawrence P. Molloy. Our board of directors has determined that each such individual is independent under the rules of the NASDAQ Stock Market. The risk committee has the following responsibilities, among other things, as set forth in the risk committee’s charter: providing oversight of our management in its development and administration of our enterprise risk management program; monitoring our risk profile and our ongoing potential exposure to risks of various types, including risks related to cybersecurity and critical systems and environmental and social matters among others; providing input to management regarding risk events or circumstances relevant to our strategic objectives and our risk appetite and tolerance; evaluating periodically and reviewing the enterprise risk management program and its effectiveness and provide updates thereon to the board of directors; and reviewing and assessing, at least annually, the performance of the risk committee and the adequacy of its charter. Our risk committee was formed in March 2021 and accordingly, did not meet during fiscal 2020. Board Evaluations Our board believes that a robust annual evaluation process is a critical part of its governance practices. Accordingly, the nominating and corporate governance committee oversees an annual evaluation of the performance of the board of directors. The committee approves written evaluation questionnaires that are distributed to each director. The results of each written evaluation are provided to, and compiled by, an outside law firm. The chair of the nominating and corporate governance committee discusses the results of the performance evaluations with the full board. Our board utilizes the results of these evaluations in making decisions on director nominees, board agendas, board structure, composition and effectiveness and committee assignments. As a result of past board evaluations, we have made changes to board meeting agenda and the form and scope of materials provided to directors. Identifying and Evaluating Director Candidates Director candidates are evaluated in light of the then-existing composition of the board, and the background and areas of expertise of existing directors and potential nominees. The nominating and corporate governance committee also considers the specific needs of the various board committees. In the case of Mr. Rauch, the most recent addition to our board in 2020, the committee considered, among other | | | | | | 18 2021 Proxy Statement | | | | Sprouts Farmers Market |
factors, his decades of experience in the grocery industry with a national growth retailer where he was instrumental in the development of its prized buying philosophy and creation of its unique private label food program, among other factors. Prior to that, in connection with Mr. Anderson joining our board in 2019, the committee considered his experience as a chief executive officer of a publicly traded high-growth retailer and strong background in ecommerce, among other factors. Our nominating and corporate governance committee will consider persons recommended by stockholders for inclusion as nominees for election to our board of directors. Stockholders wishing to recommend director candidates for consideration by the committee may do so by writing to our Corporate Secretary at our principal executive offices set forth in this proxy statement, and giving the recommended nominee’s name, biographical data and qualifications, accompanied by the written consent of the recommended nominee. The evaluation process for director nominees who are recommended by our stockholders is the same as for any other nominee and is based on numerous factors that our nominating and corporate governance committee considers appropriate, some of which may include strength of character, mature judgment, career specialization, relevant technical skills, diversity reflecting ethnic background, gender and professional experience, and the extent to which the nominee would fill a present need on our board of directors. We typically engage search firms to engage in national searches for prospective board candidates, and we instruct these search firms with which we work to identify potential board candidates that would, in addition to bringing particular skills and experience to the board, also add to the gender and/or ethnic diversity on the board. Availability of Corporate Governance Information Our board of directors has adopted charters for our audit, compensation, nominating and corporate governance and risk committees describing the authority and responsibilities delegated to each committee by our board of directors. Our board of directors has also adopted corporate governance guidelines, a code of conduct and ethics that applies to all of our team members, a code of ethics that applies to members of our board of directors and a code of ethics that applies to our principal executive officer and senior financial officers, including those officers responsible for financial reporting. We post on our website, at investors.sprouts.com, the charters of our audit, compensation, nominating and corporate governance and risk committees, our corporate governance guidelines and the codes of conduct and ethics referenced above. We intend to disclose any amendments to these codes, or any waivers of their requirements, on our website to the extent required by applicable SEC or NASDAQ Stock Market rules. The inclusion of our website address in this proxy statement does not include or incorporate by reference the information on or accessible through our website into this proxy statement. These documents are also available in print to any stockholder requesting a copy in writing from our Corporate Secretary at our principal executive offices set forth in this proxy statement. Communications with our Board of Directors Stockholders or other interested persons wishing to communicate with our board of directors or with an individual member of our board of directors may do so by writing to our board of directors or to the particular member of our board of directors and mailing the correspondence to our Corporate Secretary at 5455 East High Street, Suite 111, Phoenix, Arizona 85054. All such communications will be forwarded to the appropriate member or members of our board of directors, or if none is specified, to the Chairman of our board of directors. Proxy Access Our bylaws allow a stockholder to include director nominees in our proxy materials for election at our annual meeting of stockholders. Such nominations must comply with all applicable conditions in our bylaws and be directed to the attention of our Corporate Secretary at 5455 East High Street, Suite 111, Phoenix, Arizona 85054. See “Director Nominations for Inclusion in our 2022 Proxy Materials (Proxy Access)” below. | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 19 |
| Proposal 1: Election of Directors |
PROPOSAL 1: ELECTION OF DIRECTORS Nominees Our nominating and corporate governance committee recommended, and the board of directors nominated: as nominees for election as Class II members of our board of directors. Each nominee is presently a Class II director of our company and has consented to serve a three-year term if elected, concluding at the 2024 annual meeting of stockholders. Messrs. Fortunato, Molloy and O’Leary were each re-elected a director by the stockholders at the 2018 annual meeting. Biographical information about each of our directors is contained in the “Our Board” section above. At the Annual Meeting, three directors will be elected to our board of directors. Required Vote The three nominees receiving the highest number of affirmative “FOR” votes shall be elected as directors. Unless marked to the contrary, proxies received will be voted “FOR” each of these three nominees. Recommendation of the Board OUR BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” ELECTION OF EACH OF THE ABOVE-NAMED NOMINEES. | | | | | | 20 2021 Proxy Statement | | | | Sprouts Farmers Market |
DIRECTOR COMPENSATION Our directors that are considered “independent” under applicable SEC and NASDAQ stock market rules receive consideration for service on our board of directors. In 2020, these directors received the following cash compensation (all payable quarterly): Annual retainer of $65,000; Annual committee retainer fees of $10,000 per committee assignment; Annual committee chairperson retainer fees in the following amounts: | - | $25,000 for the chairperson of our audit committee; and |
| - | Annual retainer$20,000 for the chairperson of our chairmancompensation committee;
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| - | $20,000 for the chairperson of the board of $30,000. In addition to the cash compensation discussed above, our independent directors also received equity compensation for 2019nominating and corporate governance committee; and
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Annual retainer for our chairman of the board of $30,000. In addition to the cash compensation discussed above, our independent directors also received equity compensation for 2020 equal to $125,000 in the form of restricted stock units (referred to as “RSUs”) vesting on theone-year anniversary of the grant date. The number of RSUs granted to each independent director was determined using the20-day trailing average closing price of our common stock as reported on the grant date. We also pay for or reimburse directors for approved board governance educational seminars and for travel expenses related to attending board and committee meetings. Our board of directors recognizes that stock ownership by directors may strengthen their commitment to the long-term success of our company and further align their interests with those of our stockholders. In accordance with our corporate governance guidelines, our independent directors are expected over a five-year period to beneficially own shares of our common stock (including shares owned outright, unvested shares, and stock options or other equity grants) having a value of at least five times their annual cash retainer until he/she leaves the board. Our compensation committee periodically engages its independent compensation consultant, Korn Ferry, to review our company’s independent director compensation against peer and market data. In late 2020, our compensation committee reviewed the position of our independent director compensation program relative to market data and our peer group discussed below based on data provided by Korn Ferry and determined to make certain changes to increase our independent director compensation to position such compensation closer to the median of our peer group. For fiscal 2021, the annual retainer will increase to $75,000, and the chairman of the board retainer will increase to $150,000, comprised of $90,000 in cash and $60,000 in the form of RSUs. In addition, annual equity compensation for fiscal 2021 will increase to $140,000 in the form of RSUs vesting on the one-year anniversary of the grant date, and the chairperson and members of our newly formed risk committee will receive $20,000 and $10,000 cash retainers, respectively. Director Compensation Table The following table sets forth a summary of the compensation earned by our directors in fiscal 2020. | | | | | | | | | | | | | | | | | Name | | Fees Earned or
Paid in Cash | | | Stock Awards(1) | | | All Other
Compensation | | | Total | | Joel D. Anderson | | $ | 75,000 | | | $ | 145,653 | | | | — | | | $ | 220,653 | | Kristen E. Blum | | $ | 85,000 | | | $ | 145,653 | | | | — | | | $ | 230,653 | | Joseph Fortunato | | $ | 115,000 | | | $ | 145,653 | | | | — | | | $ | 260,653 | | Terri Funk Graham | | $ | 105,000 | | | $ | 145,653 | | | | — | | | $ | 250,653 | | Lawrence P. Molloy(2) | | $ | 95,000 | | | $ | 145,653 | | | $ | 315,848 | | | $ | 556,501 | | Joseph D. O’Leary | | $ | 75,000 | | | $ | 145,653 | | | | — | | | $ | 220,653 | | Doug G. Rauch(3) | | $ | 91,667 | | | $ | 145,653 | | | | — | | | $ | 237,320 | |
| | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 21 |
| (1) | The amounts in this column reflect the aggregate grant date fair value of each RSU granted during the fiscal year, computed in accordance with ASC 718. The valuation assumptions used in determining such amounts are described in Note 26 to our consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended January 3, 2021. The grant date for the RSUs for all independent directors was May 12, 2020. |
| (2) | Mr. Molloy was appointed as our Interim Chief Financial Officer on June 20, 2019 and continued in that role until February 21, 2020. Amounts included in the ‘All Other Compensation’ column are related to Mr. Molloy’s compensation as our Interim Chief Financial Officer. For additional details, see ‘Executive Compensation – Summary Compensation Table’. |
| (3) | Mr. Rauch joined the board of directors effective February 20, 2020 and received a prorated portion of the annual director cash compensation. |
The following table lists outstanding equity awards held by our current non-employee directors as of January 3, 2021. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Date of Grant(1) | | | Number of Shares Underlying Option | | | Exercise Price | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested(2) | | | Market Value of Shares or Units of Stock That Have Not Vested(3) | | Joel D. Anderson | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 5,694 | | | $ | 114,449 | | Kristen E. Blum | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 5,694 | | | $ | 114,449 | | Joseph Fortunato | | | May 19, 2014 | | | | 6,195 | | | $ | 28.50 | | | | May 19, 2021 | | | | — | | | | — | | | | | May 21, 2015 | | | | 3,623 | | | $ | 30.30 | | | | May 21, 2022 | | | | — | | | | — | | | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 5,694 | | | $ | 114,449 | | Terri Funk Graham | | | May 19, 2014 | | | | 6,195 | | | $ | 28.50 | | | | May 19, 2021 | | | | — | | | | — | | | | | May 21, 2015 | | | | 3,623 | | | $ | 30.30 | | | | May 21, 2022 | | | | — | | | | — | | | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 5,694 | | | $ | 114,449 | | Lawrence P. Molloy | | | May 19, 2014 | | | | 6,195 | | | $ | 28.50 | | | | May 19, 2021 | | | | — | | | | — | | | | | May 21, 2015 | | | | 3,623 | | | $ | 30.30 | | | | May 21, 2022 | | | | — | | | | — | | | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 5,694 | | | $ | 114,449 | | Joseph D. O’Leary | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 5,694 | | | $ | 114,449 | | Doug G. Rauch | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 5,694 | | | $ | 114,449 | |
| (1) | All outstanding options are currently vested and exercisable. |
| (2) | Stock awards represent RSUs which cliff vest on the first anniversary of the grant date, in each case assuming continued service through the vesting date. |
| (3) | The market value of unvested RSUs is calculated by multiplying the number of unvested awards held by the applicable named director by the closing market price of our common stock as reported on the grant date. We also pay for or reimburse directors for approved board governance educational seminars and for travel expenses related to attending board and committee meetings. Our boardNasdaq Global Select Market on the last trading day of directors recognizes that stock ownership by directors may strengthen their commitment to the long-term success of our company and further align their interests with those of our stockholders. In accordance with our corporate governance guidelines, our independent directors are expected over a five-year period to beneficially own shares of our common stock (including shares owned outright, unvested shares, and stock options or other equity grants) having a value of at least five times their annual cash retainer until he/she leaves the board.
Our compensation committee periodically engages its independent compensation consultant, Korn Ferry, to review our company’s independent director compensation against peer and market data.
Director Compensation Table
The following table sets forth a summary of the compensation earned by our directors in fiscal 2019.2020, December 31, 2020, which was $20.10 per share.
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| | | | | | | | | | | | | | | | | Name | | Fees Earned or Paid in Cash | | | Stock Awards(1) | | | All Other Compensation | | | Total | | Joel D. Anderson(2) | | | — | | | $ | 63,875 | | | | — | | | $ | 63,875 | | Kristen E. Blum | | $ | 85,000 | | | $ | 125,166 | | | | — | | | $ | 174,494 | | Shon A. Boney(3) | | $ | 32,500 | | | $ | 125,166 | | | | — | | | $ | 157,666 | | Joseph Fortunato | | $ | 115,000 | | | $ | 125,166 | | | | — | | | $ | 240,166 | | Terri Funk Graham | | $ | 105,000 | | | $ | 125,166 | | | | — | | | $ | 230,166 | | Lawrence P. Molloy(4) | | $ | 197,500 | | | $ | 125,166 | | | $ | 928,378 | | | $ | 1,251,044 | | Joseph D. O’Leary | | $ | 75,000 | | | $ | 125,166 | | | | — | | | $ | 200,166 | | Steven H. Townsend(5) | | $ | 105,000 | | | $ | 125,166 | | | | — | | | $ | 230,166 | |
| | | (1) | The amounts in this column reflect the aggregate grant date fair value of each RSU granted during the fiscal year, computed in accordance with ASC 718. The valuation assumptions used in determining such amounts are described in Note 26 to our consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 29, 2019. The grant date for the RSUs for all independent directors except for Mr. Anderson was May 13, 2019, and the grant date for Mr. Anderson was December 3, 2019.
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| 22 2021 Proxy Statement | | | | Sprouts Farmers Market |
Sprouts Farmers Market | | | | 2020 Proxy Statement 19 |
| Director CompensationExecutive Officers
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(2) | Mr. Anderson joined the board of directors effective November 18, 2019 and received apro-ratedEXECUTIVE OFFICERS The following table sets forth information regarding our executive officers as of April 9, 2021: | | | | | | | Name | | Age | | | Position | Jack L. Sinclair | | | 60 | | | Chief Executive Officer | Denise A. Paulonis | | | 49 | | | Chief Financial Officer / Treasurer | J. Scott Neal | | | 54 | | | Chief Fresh Merchandising Officer | Gilliam D. Phipps | | | 55 | | | Senior Vice President, Chief Marketing Officer | Dan J. Sanders | | | 62 | | | Chief Operations Officer | David M. McGlinchey | | | 48 | | | Chief Format Officer | Brandon F. Lombardi | | | 43 | | | Chief Legal Officer / Corporate Secretary |
Jack L. Sinclair’s biography is set forth under the heading “Our Board” above. Denise A. Paulonis joined our company as Chief Financial Officer and Treasurer in February 2020. Ms. Paulonis most recently served as Executive Vice President and Chief Financial Officer of The Michaels Companies (Nasdaq: MIK), the largest arts and crafts specialty retailer in North America, from August 2016 to January 2020. Prior to her service as Michael’s Executive Vice President and Chief Financial Officer, Ms. Paulonis served in various finance roles within the organization, including Senior Vice President of Finance and Treasurer from November 2015 to August 2016, and Vice President of Corporate Finance, Investor Relations and Treasury from September 2014 to November 2015. Prior to joining Michaels, Ms. Paulonis held various senior level positions with PepsiCo from August 2009 to September 2014, including Vice President of Financial Planning and Analysis of the Frito Lay division, Vice President of Finance and strategy of PepsiCo U.S. Sales, and Vice President of Corporate Strategy and Development. Prior to joining PepsiCo, Ms. Paulonis held various senior positions with McKinsey & Company and Bank of America. Ms. Paulonis currently serves on the board of directors of Sally Beauty Holdings, Inc. (NYSE: SBH) and earned a B.S. in Finance and Economics from Miami University and an M.B.A. from The Wharton School at the University of Pennsylvania. J. Scott Neal joined our company in June 2020 as our Chief Fresh Merchandising Officer. Mr. Neal was previously Senior Vice President and General Merchandise Manager for the fresh food division of Walmart U.S., where he oversaw quality control and merchandising of produce, meat and seafood from 2013 to June 2020. Mr. Neal served Walmart over a 24-year career, including as Vice President – Meat and Seafood from 2011 to 2013, Vice President – Divisional Merchandising Manager of Meat from 2009 to 2011, Vice President – Divisional Merchandising Manager of Commercial Bread and Bakery from 2007 to 2009, and Vice President of International Merchandising from 2000 to 2007. Mr. Neal served as a member of the board of directors of Feeding America from 2016 to 2020 and earned a B.A. in Economics from Brigham Young University. Gilliam D. Phipps joined Sprouts as our Senior Vice President, Chief Marketing Officer in April 2020. Mr. Phipps previously served Kroger since 2012, most recently as Vice President of Branding, Marketing & Our Brands from August 2018 to April 2020 and Vice President of Our Brands from August 2012 to August 2018. From 2001 to 2012, Mr. Phipps served as Director of Own Brand at H-E-B. Prior to that, Mr. Phipps led various levels of branding and product development at Hormel Foods. Mr. Phipps serves as a member of the board of directors of Artswave, an organization that helps fund over a hundred arts organizations in dozens of communities, and earned a B.A. in English and Philosophy from The University of Texas at Austin. Dan J. Sanders has served as our Chief Operations Officer since October 2016. Mr. Sanders joined our company as Executive Vice President of Store Operations in July 2015, and previously served as President of Albertsons Southern California and President of Acme Markets, both while affiliated with | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 23 |
| Executive Officers portion of the annual director equity compensation. |
(3) | Mr. Boney resigned from the board effective June 20, 2019.
Supervalu Inc., from March 2010 through March 2013. Additionally, Mr. Sanders served as Chief Executive Officer of United Supermarkets, LLC from June 2004 until February 2010. Prior to serving at United Supermarkets, Mr. Sanders was Division President and a Principal at AdPlex, a retail consulting firm specializing in advertising production and content management technology to Fortune 500 companies, from August 1997 to February 2003. Mr. Sanders is also a military veteran with more than a decade of service as a pilot in the United States Air Force. He holds an M.B.A. from Pepperdine University’s Graziadio School of Business and Management and a B.A. from Lubbock Christian University. David M. McGlinchey was appointed Chief Format Officer in February 2020 to oversee our new store format development, real estate site selection, construction and merchant services, having previously served our company as Chief Merchandising Officer from August 2018 to February 2020 and Senior Vice President of Merchandising Services from July 2017 to August 2018. Before joining Sprouts, Mr. McGlinchey served as Vice President and Chief Grocery Merchant for Sears Holding Corporation from September 2013 through December 2016 and Senior Vice President of Merchandising and Marketing for the Shaw’s and Star Market banners of Supervalu Inc. from March 2010 through April 2013. Earlier, he served in a number of leadership roles of increasing responsibility over a 14-year span at Stop & Shop/Giant Food, including Senior Vice President of Merchandising Support, Vice President of Grocery Merchandising, Director of Dry Grocery Merchandising and Category Manager. Mr. McGlinchey holds a B.S. in Economics and Finance from Bentley University and an M.B.A. from Bentley University’s McCallum Graduate School of Business. Brandon F. Lombardi has served as our Chief Legal Officer and Corporate Secretary since January 2012, and previously served as our Chief Human Resources and Legal Officer from October 2016 to January 2021. Prior to joining our company, Mr. Lombardi was a corporate and securities attorney at the international law firm of Greenberg Traurig, LLP from 2002 to January 2012, having worked in the firm’s Los Angeles and Phoenix offices. While in private practice, Mr. Lombardi served as outside general counsel and corporate secretary to public and private companies in a wide range of industries, specializing in corporate governance, securities and corporate law, and mergers and acquisitions. While acting as our outside counsel, Mr. Lombardi led our merger with Henry’s Farmers Market in April 2011. Mr. Lombardi holds a J.D. from the Sandra Day O’Connor College of Law at Arizona State University and a B.S. in Global Business from Arizona State University. Each of our executive officers serves at the discretion of our board of directors and holds office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers. | | | | | | 24 2021 Proxy Statement | | | | Sprouts Farmers Market |
(4) | Mr. Molloy was appointed
EXECUTIVE COMPENSATION Compensation Discussion and Analysis This Compensation Discussion and Analysis describes the material elements of the compensation of each person who served as our principal executive officer or principal financial officer during fiscal 2020 and our three other most highly compensated executive officers for fiscal 2020, which we collectively refer to as our “named executive officers” or “NEOs”. Our named executive officers for fiscal 2020 were: | | | Name | | Title | Jack L. Sinclair | | Chief Executive Officer and Director | Denise A. Paulonis(1) | | Chief Financial Officer / Treasurer | Gilliam D. Phipps(2) | | Senior Vice President, Chief Marketing Officer | David M. McGlinchey(3) | | Chief Format Officer | J. Scott Neal(4) | | Chief Fresh Merchandising Officer | Lawrence P. Molloy(5) | | Former Interim Chief Financial Officer / Treasurer and Director |
| (1) | Ms. Paulonis was appointed Chief Financial Officer / Treasurer on June 20, 2019 and continued in that role until February 21, 2020. In connection with Mr. Molloy’s appointment, he received an additional $105,000, which was intended to compensate Mr. Molloy for the audit committee retainer fees that he will forego for three years due to his inability to serve on the audit committee for three years following his service as Interim Chief Financial Officer. Amounts included in the ‘All Other Compensation’ column are related to Mr. Molloy’s compensation as our Interim Chief Financial Officer. For additional details, see ‘Executive Compensation – Summary Compensation Table’. |
(5) | Mr. Townsend resigned from the board effective November 18, 2019.
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The following table lists outstanding equity awards held by our currentnon-employee directors as of December 29, 2019.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | Name | | Date of Grant(1) | | | Number of Shares Underlying Option | | | Exercise Price | | | Option Expiration Date | | | Number of Shares or Units of Stock That Have Not Vested(2) | | | Market Value of Shares or Units of Stock That Have Not Vested(3) | | Joel D. Anderson | | | December 3, 2019 | | | | — | | | | — | | | | — | | | | 3,159 | | | $ | 61,632 | | Kristen E. Blum | | | May 13, 2019 | | | | — | | | | — | | | | — | | | | 5,768 | | | $ | 112,534 | | Joseph Fortunato | | | May 19, 2014 | | | | 6,195 | | | $ | 28.50 | | | | May 19, 2021 | | | | — | | | | — | | | | | May 21, 2015 | | | | 3,623 | | | $ | 30.30 | | | | May 21, 2022 | | | | — | | | | — | | | | | May 13, 2019 | | | | — | | | | — | | | | — | | | | 5,768 | | | $ | 112,534 | | Terri Funk Graham | | | July 31, 2013 | | | | 2,778 | | | $ | 18.00 | | | | July 31, 2020 | | | | — | | | | — | | | | | May 19, 2014 | | | | 6,195 | | | $ | 28.50 | | | | May 19, 2021 | | | | — | | | | — | | | | | May 21, 2015 | | | | 3,623 | | | $ | 30.30 | | | | May 21, 2022 | | | | — | | | | — | | | | | May 13, 2019 | | | | — | | | | — | | | | — | | | | 5,768 | | | $ | 112,534 | | Lawrence P. Molloy | | | July 31, 2013 | | | | 2,778 | | | $ | 18.00 | | | | July 31, 2020 | | | | — | | | | — | | | | | May 19, 2014 | | | | 6,195 | | | $ | 28.50 | | | | May 19, 2021 | | | | — | | | | — | | | | | May 21, 2015 | | | | 3,623 | | | $ | 30.30 | | | | May 21, 2022 | | | | — | | | | — | | | | | May 13, 2019 | | | | — | | | | — | | | | — | | | | 5,768 | | | $ | 112,534 | | Joseph D. O’Leary | | | May 13, 2019 | | | | — | | | | — | | | | — | | | | 5,768 | | | $ | 112,534 | | Doug G. Rauch(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
(1) | All outstanding options are currently vested and exercisable.
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(2) | Stock awards represent RSUs which cliff vest on the first anniversary of the grant date, in each case assuming continued service through the vesting date.
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(3) | The market value of unvested RSUs is calculated by multiplying the number of unvested awards held by the applicable named director by the closing market price of our common stock on the Nasdaq Global Select Market on the last trading day of fiscal 2019, December 27, 2019, which was $19.51 per share.
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(4) | Mr. Rauch was appointed to the board effective February 25, 2020.
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| (2) | EXECUTIVE OFFICERSMr. Phipps was appointed Senior Vice President, Chief Marketing Officer on April 14, 2020.
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| (3) | The following table sets forth information regardingMr. McGlinchey served as our executive officersChief Merchandising Officer until his appointment as of March 16, 2020:Chief Format Officer in February 2020.
| | Age | | | Position| (4) | Mr. Neal was appointed Chief Fresh Merchandising Officer on June 15, 2020. | Jack L. Sinclair
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| (5) | | | 59 | | | Chief Executive Officer | Denise A. Paulonis
| | | 48 | | | Chief Financial Officer / Treasurer | Dan J. Sanders
| | | 61 | | | Chief Operations Officer | David M. McGlinchey
| | | 47 | | | Chief Format Officer | Brandon F. Lombardi
| | | 42 | | | Chief Human Resources and Legal Officer / Corporate Secretary |
Jack L. Sinclair’s biography is set forth under the heading “Our Board” above.
Denise A. Paulonisjoined our companyMr. Molloy was appointed Interim Chief Financial Officer on June 20, 2019. Effective upon Ms. Paulonis’s appointment as Chief Financial Officer and Treasurer in February 2020. Ms. Paulonis most recently served as Executive Vice President and Chief Financial Officer of The Michaels Companies (Nasdaq: MIK), the largest arts and crafts specialty retailer in North America, from August 2016 to January 2020. Prior to her service as Michael’s Executive Vice President and Chief Financial Officer, Ms. Paulonis served in various finance roles within the organization, including Senior Vice President of Finance and Treasurer from November 2015 to August 2016, and Vice President of Corporate Finance, Investor Relations and Treasury from September 2014 to November 2015. Prior to joining Michaels, Ms. Paulonis held various senior level positions with PepsiCo from August 2009 to September 2014, including Vice President of Financial Planning and Analysis of the Frito Lay division, Vice President of Finance and strategy of PepsiCo U.S. Sales, and Vice President of Corporate Strategy and Development. Prior to joining PepsiCo, Ms. Paulonis held various senior positions with McKinsey & Company and Bank of America. Ms. Paulonis currently serves on the board of directors of Sally Beauty Holdings, Inc. (NYSE: SBH) and earned a B.S. in Finance and Economics from Miami University and an M.B.A. from The Wharton School at the University of Pennsylvania.
Dan J. Sandershas served as our Chief Operations Officer since October 2016. Mr. Sanders joined our company as Executive Vice President of Store Operations in July 2015, and previously served as President of Albertsons Southern California and President of Acme Markets, both while affiliated with Supervalu Inc., from March 2010 through March 2013. Additionally, Mr. Sanders served as Chief Executive Officer of United Supermarkets, LLC from June 2004 until February 2010. Prior to serving at United Supermarkets, Mr. Sanders was Division President and a Principal at AdPlex, a retail consulting firm specializing in advertising production and content management technology to Fortune 500 companies, from August 1997 to February 2003. Mr. Sanders is also a military veteran with more than a decade of service as a pilot in the United States Air Force. He holds an M.B.A. from Pepperdine University’s Graziadio School of Business and Management and a B.A. from Lubbock Christian University.
David M. McGlinchey was appointed Chief Format Officer in February 2020 to oversee our new store format development, real estate site selection, construction and merchant services, having previously served our company as Chief Merchandising Officer from August 2018 to February 2020 and Senior Vice President of Merchandising Services from July 2017 to August 2018. Before joining Sprouts, Mr. McGlinchey served as Vice President and Chief Grocery Merchant for Sears Holding Corporation from September 2013 through December 2016 and Senior Vice President of Merchandising and Marketing for the Shaw’s and Star Market banners of Supervalu Inc. from March 2010 through April 2013. Earlier, he served in a number of leadership roles of increasing responsibility over a14-year span at Stop & Shop/Giant Food, including Senior Vice President of Merchandising Support, Vice President of Grocery Merchandising, Director of Dry Grocery Merchandising and Category Manager. Mr. McGlinchey holds a B.S. in Economics and Finance from Bentley University and an M.B.A. from Bentley University’s McCallum Graduate School of Business.
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Brandon F. Lombardi has served as our Chief Human Resources and Legal Officer and Corporate Secretary since October 2016, and previously served as our Chief Legal Officer and Corporate Secretary from January 2012 to October 2016. Prior to joining our company, Mr. Lombardi was a corporate and securities attorney at the international law firm of Greenberg Traurig, LLP from 2002 to January 2012, having worked in the firm’s Los Angeles and Phoenix offices. While in private practice, Mr. Lombardi served as outside general counsel and corporate secretary to public and private companies in a wide range of industries, including food retail, specializing in corporate governance, securities and corporate law, and mergers and acquisitions. While acting as our outside counsel, Mr. Lombardi led our merger with Henry’s Farmers Market in April 2011. Mr. Lombardi holds a J.D. from the Sandra Day O’Connor College of Law at Arizona State University and a B.S. in Global Business from Arizona State University.
Each of our executive officers serves at the discretion of our board of directors and holds office until his or her successor is duly elected and qualified or until his or her earlier resignation or removal. There are no family relationships among any of our directors or executive officers.
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EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This Compensation Discussion and Analysis describes the material elements of the compensation of each person who served as our principal executive officer or principal financial officer during fiscal 2019 and our three other most highly compensated executive officers for fiscal 2019, which we collectively refer to as our “named executive officers.” Our named executive officers for fiscal 2019 were:
| | | Name
| | Title | Jack L. Sinclair(1)
| | Chief Executive Officer and Director | Lawrence P. Molloy(2)
| | Interim Chief Financial Officer and Director | Brandon F. Lombardi
| | Chief Human Resources and Legal Officer / Corporate Secretary | Dan J. Sanders
| | Chief Operations Officer | David M. McGlinchey(3)
| | Chief Merchandising Officer | James L. Nielsen(4)
| | Senior Advisor and Former InterimCo-Chief Executive Officer, President and Chief Operating Officer | Bradley S. Lukow(5)
| | Former InterimCo-Chief Executive Officer, Chief Financial Officer and Treasurer |
(1) | Mr. Sinclair was appointed Chief Executive Officer and Director on June 24, 2019.
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(2) | Mr. Molloy was appointed Interim Chief Financial Officer on June 20, 2019. Effective upon Denise Paulonis’s appointment as Chief Financial Officer and Treasurer on February 21, 2020, Mr. Molloy stepped down as Interim Chief Financial Officer and Treasurer, and remains with our company in his capacity as an independent member of our board of directors.
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(3) | Mr. McGlinchey served as our Chief Merchandising Officer during fiscal 2019 and was appointed as our Chief Format Officer in February 2020.
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(4) | Mr. Nielsen served as our InterimCo-Chief Executive Officer until Mr. Sinclair’s appointment on June 24, 2019 and as our President and Chief Operating Officer until his transition to Senior Advisor on August 1, 2019.
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(5) | Mr. Lukow served as our InterimCo-Chief Executive Officer, Chief Financial Officer and Treasurer until his resignation on June 20, 2019.
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Unless otherwise provided below, this Compensation Discussion and Analysis will generally apply to our named executive officers other than Mr. Molloy, who received a cash amount for each week of service as our Interim Chief Financial Officer and did not participateTreasurer, and remains with our company in the other elementshis capacity as an independent member of our board of directors.
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Unless otherwise provided below, this Compensation Discussion and Analysis will generally apply to our named executive officers other than Mr. Molloy, who received a cash amount for each week of service as our Interim Chief Financial Officer and did not participate in the other elements of our executive compensation program. References to our Chief Financial Officer’s compensation generally refer to the compensation package approved for Ms. Paulonis upon her appointment on February 21, 2020, and not the compensation package for Mr. Molloy, who held the Chief Financial Officer position solely on an interim basis prior to Ms. Paulonis’s appointment. Section One – Overview and Executive Summary Executive Summary of Our Fiscal 2020 Executive Compensation Program Our compensation committee has developed an executive compensation program that is designed to align pay with company performance, motivate and incentivize our executive leadership team and be competitive with market practices. Our fiscal 2020 executive compensation program was substantially similar to our fiscal 2019 program. For 2020, our pay mix consisted of base salary, the opportunity to earn annual performance-based cash bonuses based on our achievement of Plan EBT (as defined below) and comparable store sales performance goals and equity incentives consisting of time-vesting RSUs and stock options and performance-based restricted stock (referred to as “performance shares”) based on our achievement of a Plan EBT (as defined below) target over a three-year performance period. We have no pension plans or other executive retirement plans except our 401(k) plan that is available to all team members, and limited executive perquisites consisting primarily of payment of health and life insurance premiums for certain of our named executive officers. We believe that this mix of compensation, including the performance shares and annual performance-based cash bonus program tied to company financial and operational objectives, closely links executive officer compensation to company performance. We exceeded the maximum performance levels for our Plan EBT and comparable store sales goals for our annual performance-based cash bonus in fiscal | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 25 |
| Executive Officer’s compensation generally refer to the compensation package approved for Mr. Sinclair upon his appointment on June 24, 2019, and not the compensation packages for Messrs. Nielsen and Lukow, who held theCo-Chief Executive Officer position solely on an interim basis prior to Mr. Sinclair’s appointment. Section One – Overview and Executive SummaryCompensation
Executive Summary of Our Fiscal 2019 Executive Compensation Program
For 2019, our pay mix consisted of base salary, the opportunity to earn annual performance-based cash bonuses based on our achievement of Plan EBITDA (as defined below) and comparable store sales performance goals and equity incentives consisting of time-vesting RSUs and stock options and performance-based restricted stock (referred to as “performance shares”) based on our achievement of a Plan EBIT (as defined below) target over a three-year performance period. We have no pension plans or other executive retirement plans except our 401(k) plan that is available to all team members, and limited executive perquisites consisting primarily of payment of health and life insurance premiums for certain of our named executive officers. The compensation package approved for Mr. Sinclair upon his appointment as our Chief Executive Officer on June 24, 2019 was largely consistent with this pay mix.
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2020, and we also exceeded the maximum performance level for our performance shares granted in 2018 for our fiscal 2020 Plan EBIT1 goal. Our performance shares granted in 2020 remain subject to a three-year Plan EBT performance target before they may be earned. Accordingly, our executive officers were awarded with payouts at the maximum level of our annual performance-based cash bonus, for our company’s exceptionally strong performance during fiscal 2020, consistent with our pay-for-performance philosophy. 2020 Fiscal Year Performance The onset of the COVID-19 pandemic in the first quarter of fiscal 2020 and its continuation throughout the year created a very challenging environment for our company and the world as a whole. Our team navigated ever-changing circumstances, acted decisively, prioritized team member and customer safety and kept in-stock on fresh, healthy food for our communities. Our grocery stores remained open as essential businesses throughout the pandemic, and the COVID-19 crisis led to a significant increase in sales as consumers bought more food to consume at home during government mandated stay-at-home or similar shelter-in-place orders. We in turn have made significant investments in compensation, benefits and personal protective equipment for our front-line store team members, as well as enhanced store sanitation procedures. We have also incurred increased ecommerce fees as consumers have increasingly used online shopping alternatives to purchase our products during the pandemic. Despite these operational challenges and investments, we generated exceptional results during fiscal 2020, including: | | | | | Sprouts Farmers Market | | | | 2020 Proxy Statement 23 |
We believe that this mix of compensation, including in particular the performance shares and annual performance-based cash bonus program tied to company financial and operational objectives, closely links executive officer compensation to performance. We exceeded the threshold performance levels for our Plan EBITDA and comparable store sales goals for our annual performance-based cash bonus, and our performance shares remain subject to a three-year Plan EBIT performance target before they may be earned. Accordingly, our executive officers were awarded with payouts above threshold, but below target levels, for our company’s performance during fiscal 2019, consistent with ourpay-for-performance philosophy.
2019 Fiscal Year Performance
Fiscal 2019 was another strong year for our company as we continued to grow in our very dynamic industry. Our brand of health and value resonated both with new and existing customers, leading to solid financial performance. Some of our fiscal 2019 results include:
Opened 28 new stores, representing unit growth of 9% from 2018;
Net sales of $5.6 billion; an 8% increase from 2018;
Opened 22 new stores, representing unit growth of over 6% from 2019; Net sales of $6.5 billion; a 15% increase from 2019; | • | | Comparable store sales growth of 1.1%6.9% andtwo-year comparable store sales growth of 3.2%8.0%, both on a 52-week basis2; |
| • | | Net income of $150$287 million and adjusted net income3 of $294 million; compared to net income and adjusted net income of $159$150 million in 2018;from 2019; adjusted net income increased 96% from 2019; |
| | • | | Earnings before interest and taxes (referred to as “EBIT”)1 of $217 million; compared to EBIT of $223 million in 2018;
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Diluted earnings per share of $1.25;$2.43 and adjusted diluted earnings per share3 of $2.49; compared to $1.22 in 2018;diluted and adjusted diluted earnings per share of $1.25 from 2019; |
| • | | Generated cash flowAdjusted diluted earnings per share3 of $2.39, estimated on a 52-week basis, a 91% increase from operations of $355 million, up 21% from 2018;2019; and
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Generated cash flow from operations of $494 million, up 39% from 2019. Despite navigating the challenges of the COVID-19 pandemic, during fiscal 2020 we also laid the foundation and began to implement our transformational growth strategy that we believe will set us up for long-term success. As described in the ‘Business Summary’ section above, this strategy focuses on the following areas: Win with target customer; Update format and expand in select markets; Create an advantaged fresh supply chain; Refine brand and marketing approach; and Deliver on financial targets and box economics. 1 See Appendix A to this proxy statement for further explanation and reconciliation of non-GAAP measures. 2 Fiscal 2020 was a 53-week year that ended January 3, 2021. Period-over-period increases stated herein reflect the comparison of 53 weeks in fiscal 2020 to 52 weeks in fiscal 2019, unless otherwise noted. 3 Adjusted net income and adjusted diluted earnings per share, non-GAAP financial measures, exclude the impact of certain special items. See Appendix A to this proxy statement for further explanation and reconciliation to the comparable GAAP measures. | | | | | | 26 2021 Proxy Statement | | | | Sprouts Farmers Market |
| Drove additional stockholder returns by repurchasing approximately 7.9 million shares.Executive Compensation
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Our encouraging results during fiscal 2020 are fueling our efforts to execute on these strategic initiatives at a more rapid pace than we originally planned and are establishing a solid base from which we can invest and grow. Subsequent to the end of fiscal 2020, our board of directors approved a $300 million share repurchase authorization over the next three years, demonstrating the board’s confidence in our future and growth strategy. Compensation Program Background and Philosophy Our executive compensation program is administered by the compensation committee of our board of directors that is comprised entirely of independent directors. The program is intended to attract, motivate and retain executives and reward the creation of stockholder value. We seek to provide executive compensation packages that are competitive with comparable companies (our peer group discussed below along with other market competitors) and reward the achievement of short-term and long-term performance goals. Like most companies, we use a combination of fixed and variable compensation to reward and incentivize strong performance as well as to align the interests of our executives with those of our stockholders. When making compensation decisions, the compensation committee takes into consideration the value of target total direct compensation (referred to as “TDC”) provided to executives and where that value falls in relation to comparable companies. While theThe compensation committee does not target a specific percentile when making compensation decisions, the committee generally looks to position the value of target TDC around the market median, which we believe will enable us to remain competitive in attracting and retaining qualified executive officers. Our compensation committee’s decisions on target compensation are also influenced by a variety of additional factors, including compensation mix, the executive’s performance, skills, experience, time in the role, retention risk, difficulty to replace and scope of responsibility. 1 EBIT is anon-GAAP financial measure that is explained and reconciled to the comparable GAAP measure inAppendix A to this proxy statement.
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20182019 Say-on-Pay Vote and Stockholder Engagement
At our 20192020 annual meeting, our“say-on-pay” advisory vote on the 20182019 compensation of our named executive officers described in our 20192020 proxy statement received approximately 98%91% support from our stockholders. Our compensation committee took this strong approval into account as one of many factors it considered in connection with the discharge of its responsibilities during 20192020 and attributed this level of support, in part, to many of the features of our company’s compensation program, including: Engaging Korn Ferry, the compensation committee’s independent compensation consultant, to evaluate our incentive plan design and provide executive compensation benchmarking analysis; Conducting calls with several stockholders and implementing certain changes based on this feedback to better align with our peers; Requiring a minimum performance threshold for our annual performance-based cash bonus plan before any bonus amount can be earned; Utilizing a three-year performance period for our performance shares to better align our practices with the broader retail market and to better align our executive officers’ long-term incentives with the creation of long-term value; and Continuing to utilize EBITEBT as our 20192020 performance share metric to provide greater emphasis on our core business; and Not granting any special retention awards in 2018 or 2019.business.
Our compensation committee determined not to make significant structural changes to our executive compensation program in 20192020 based on its review of benchmarking analyses performed by Korn Ferry and the strong level of stockholder support demonstrated by our 20182019 say-on-pay vote. We continued our ongoing stockholder outreach efforts by contacting the majority of our largest 2515 stockholders in late 2020 and early 20202021 to determine if any wished to raise concerns related to our compensation or environmental, social and governance practices. FourSix stockholders collectively holding over 25%17% of our outstanding shares accepted our invitations, and we provided their feedback to our compensation committee, which continued to refine our executive compensation program for 2019 and 2020,2021, as a demonstration of its attention to corporate governance, stockholder feedback and its emphasis on the link between pay and performance. | | | | | | Sprouts Farmers Market | | | | 20202021 Proxy Statement 25 27 |
Section Two – Elements of our Compensation Program The elements of our 20192020 executive compensation program are presented below in summary format and more fully explained in the sections that follow: | | | | | Cash Compensation | | Base Salary | | Base salary is designed to provide a competitive fixed rate of pay recognizing different levels of responsibility and performance within our company, set generally near the 50th percentile of comparable companies. | | | Performance-based Bonus | | Our performance-based bonus is an annual cash incentive program designed to reward team members for achieving company sales and profitability goals. | Long-Term Incentive Compensation | | Performance Shares | | Performance shares are granted to provide incentive for long-term creation of stockholder value based on company profitability goals measured by Plan EBITEBT over a three-year performance period. Performance shares represented 50% of the annual long-term incentive grant value in fiscal 20192020 for all our Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer, and 40% for our othernamed executive officers. | | | RSUs | | Time-vesting restricted stock units (referred to as “RSUs”) are granted to provide incentive for long-term creation of stockholder value. RSUs vest in annual installments over three years and represented 50%25% of the annual long-term incentive grant value in fiscal 20192020 for all our Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer, and 40% for our other named executive officers. | | | | Stock Options | | Time-vesting stock options are granted to provide incentive for long-term creation of stockholder value. Time-based stock options vest in annual installments over three years and represented 20%25% of the annual long-term incentive grant value for our other named executive officers in 2019, excluding our Chief Executive Officer, President and Chief Operating Officer and Chief Financial Officer.2020. | | Benefit Programs | | Health, Welfare and Retirement Programs | | Executives participate in the same benefit programs that are offered to other salaried team members. Our benefits are designed to provide market competitive benefits to protect team members’ and their covered dependents’ health and welfare and provide retirement benefits in the form of a 401(k) plan. | | Other | | Perquisites | | Limited perquisites are provided to certain executives, primarily in the form of company-paid health and life insurance premiums. |
Base Salary Base salary is a fixed portion of compensation that reflects the compensation committee’s (and the Chief Executive Officer’s in the case of other named executive officers) assessment of the individual named executive officer’s performance, skills, experience, time in the role and scope of responsibility. Base salaries are generally set at levels near the median of comparable companies and are reviewed on an annual basis to determine if any adjustments are required. Performance-based Cash Bonus We utilize performance-based cash incentives to motivate executives to attain short-term objectives that align with long-term business goals. Meeting or exceeding our annual business and financial goals is important to executing our business strategy and delivering long-term value to stockholders. Individual award opportunities vary by job level and are generally set so that, along with other components of compensation, the executives’ target TDC is competitive with comparable companies. Our performance-based cash bonus plan iswas based upon (1) Adjusted EBITDAEBT24, as further adjusted for any income or expense that is unusual,non-recurring or extraordinary, as the compensation committee of our board deems appropriate (referred to as “Plan EBITDAEBT”), and (2) comparable store sales growth. No incentive award iswas payable to executives unless apre-established minimum of 91%93.7% of the target Plan EBITDAEBT goal or 98.3% of the target comparable store sales goal was achieved. Incentive award payouts increased for performance up to a maximum of 116.9% of the target Plan EBT goal and 447% of the target comparable store sales goal. 24 Adjusted EBITDAEBT is anon-GAAP financial measure that is explained and reconciled to the comparable GAAP measure inAppendix A to this proxy statement. We define “Adjusted EBITDA”EBT” as net income before interest expense, provision for income tax, and depreciation, amortization and accretion, excluding the impact of special items we do not consider representative of our ongoing financial performance.
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goal or 44% of the target comparable store sales goal is achieved. Incentive award payouts increase for performance up to a maximum of 105% of the target Plan EBITDA goal and 140% of the target comparable store sales goal.
The performance-based cash bonus plan focuses executives on critical financial and operational goals. Our compensation committee believes that Plan EBITDAEBT is a primary indicator to our stockholders of overallour core business health, and its use achieves our desire to use a measure of profitability that drives stockholder value creating behaviors. The second measure, comparable store sales growth, focuses executive officers on both strengthening our core business and making our stores more productive. Each executive officer has a target performance-based cash bonus opportunity, expressed as a percentage of base salary (referred to as the “Target Bonus”), with the ability to earn above or below that target based on our company’s actual performance. At the beginning of 2019,In February 2020, the compensation committee and board of directors approved the financial and operational goals for the company. The compensation committee also reviewed and approved the Target Bonus opportunity for each executive officer. If Plan EBITDAEBT and comparable store sales growth were 100% of the established targets, our executive officers would be each entitled to receive 100% of such officer’s respective Target Bonus. In addition, each executive officer had the opportunity to earn anout-performance bonus of 200%up to 300% of such officer’s Target Bonus (referred to as “Total Bonus Opportunity”)., subject to payout limitations set forth in our 2013 Incentive Plan. The Target Bonus and Total Bonus Opportunity for our executive officers for 20192020 were as follows:
| | | | | | | Compensation Tier | | Threshold Bonus (as % of Base Salary) | | Target Bonus (as % of Base Salary) | | Total Bonus Opportunity (as % of Base Salary) | Chief Executive Officer | | 12.5% | | 125% | | 250% | Other Named Executive Officers | | 6% | | 60% | | 120% |
| | | | | | | Compensation Tier | | Threshold Bonus
(as % of Base Salary) | | Target Bonus
(as % of Base Salary) | | Total Bonus Opportunity (as %
of Base Salary) | Tier I (Chief Executive Officer) | | 31.25% | | 125% | | 364% | Tier II (Chief Financial Officer and Chief Fresh Merchandising Officer) | | 18.75% | | 75% | | 225% | Tier III (other named executive officers) | | 15% | | 60% | | 180% |
Because such a large percentage of executive officer compensation is performance-based, our compensation committee invests significant time determining the annual financial target for our performance-based cash bonus program. In general, management makes the initial recommendation for the financial targets based upon our company’s annual board-approved budget, and these recommendations are reviewed and discussed by the compensation committee. The major factors used in setting one or more targets for a particular year are the results for the most recently-completedrecently completed year and the budget for the current year. Other factors taken into account may include general economic and competitive market conditions and industry dynamics. Our compensation committee sets the final corporate performance goals during our first quarter, typically at a levellevels our compensation committee believes isare challenging but reasonable, for management to achieve. Performance goals for fiscal 2020 were approved by the compensation committee prior to the onset of the COVID-19 pandemic. Award payouts are determined in the first quarter of each Februaryyear following completion of the plan year by measuring the performance against each award component. In determining whether the performance ranges are met, the compensation committee exercises its judgment whether to reflect or exclude the impact of changes in accounting principles and extraordinary, unusual or infrequently occurring events. For 2020, no further adjustments were made to Adjusted EBT to arrive at our Plan EBT. The 20192020 incentive award target goals and 20192020 results and corresponding bonus percentages relative to the target amounts are shown below. | Weighting | | Rationale for Measure | | Threshold
Goal | | Target Goal | | Maximum
Goal | | 2019 Results | | Bonus Payout
Percentage | | Rationale for Measure | | Threshold
Goal | | Target Goal | | Maximum
Goal | | 2020 Results | | Bonus Payout
Percentage | Plan EBITDA (75%) | | Reflects overall business health and is a measure of profitability that is used by our management and drives stockholder value | | $313.9 million | | $345.0 million | | $362.2 million | | $340.8 million (99% of target) | | 88% | | Plan EBT (75%) | | | Reflects overall business health and is a measure of profitability that is used by our management and drives stockholder value | | $189.0 million | | $201.8 million | | $235.9 million | | $370.0 million (183% of target) | | 225% | | Comparable Store Sales (25%) | | Demonstrates strength in core business | | 1.1% | | 2.5% | | 3.5% | | 1.1% (44% of target) | | 12% | | Demonstrates strength in core business | | -0.4% | | 1.3% | | 5.8% | | 6.9% (528% of target) | | 75% |
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Based on these results, our named executive officers other than Mr. Nielsen, earned a 20192020 cash incentive award of 68.8%300% of the Target Bonus amount. In connection withamount based on operating results that exceeded the maximum goals of our performance-based bonus plan; Mr. Sinclair’s payout of his transition to Senior Advisor, Mr. Nielsen’s 2019 bonus2020 cash incentive was capped at $4,000,000, the maximum annual performance award payout permitted under the terms were amended to provide that if his employment was not terminated for cause prior toof the bonus payment date, his 2019 annual bonus would be equal to $320,000.2013 Incentive Plan. Equity Incentive Compensation Each year we grant equity-based awards to executive officers and key team members to motivate and reward them for creating long-term stockholder value. Long-term incentive awards are generally established so that, when added to total cash compensation, the target TDC for an individual executive is generally competitive around the market median of comparable companies, although some of our named executive officers are positioned below the 50th percentile and others are slightly above. In 2019,2020, our compensation committee determined to grant to our executive officers performance shares, time-vestingtime vesting RSUs and stock options. The value of such equity awards increases or decreases as a result of changes in the market price of our common stock, creating opportunities in the event of successful market performance of our shares, aligning the interests of our named executive officers with our stockholders. | | | | | | Award | | Weighting | | Vesting Terms and Other Conditions | ��Performance Shares | | 40-50%50% | | For 2019,2020, all of our Chief Executive Officer and former Chief Financial Officer received 50% performance shares, while our remaining named executive officers received 40%50% of their equity incentive compensation as performance shares. Performance shares are designed to reward cumulative performance over a three-year performance period and are subject to our company achieving a Plan EBIT3EBT (as defined above) performance target for 20212022 based on our financial objectives. If the 20212022 Plan EBITEBT target is achieved, the performance shares will be considered “earned” and will generally vest on the third anniversary of the grant date, subject to continued employment. IfThe performance shares are subject to a threshold of 96% of the Plan EBITEBT performance target, and if the Plan EBT performance target is exceeded, our named executive officers may earn performance shares greater than the target amount, up to 200%. The target number of shares of our common stock subject to performance shares is determined by the20-day trailing average closing price for our common stock as reported on the grant date. As our 20192020 performance shares measure Plan EBITEBT over a three-year performance period, we will measure the Plan EBITEBT performance target insubsequent to the end of fiscal 2022 to determine if performance shares will be earned. If such shares are earned, they will generally vest on the third anniversary of the grant date, subject to continued employment through the vesting date. | RSUs | | 40-50%25% | | For 2019,2020, all of our Chief Executive Officer and former Chief Financial Officer received 50% RSUs, while our remaining named executive officers received 40%25% of their equity incentive compensation as RSUs. All of our Our named executive officers receivereceived time-vesting RSUs that vestone-third on each anniversary of the grant date.
The number of shares of our common stock subject togranted as RSUs is determined by the20-day trailing average closing price for our common stock as reported on the grant date. | Stock Options | | 0-20%25% | | For 2019,2020, all of our Chief Executive Officer and former Chief Financial Officer did not receive stock options, while our remaining named executive officers received 20% stock options based on the compensation committee’s determination to increase25% of their equity incentive compensation for such officers as further incentive for long-term creation of shareholder value. stock options. The exercise price of the stock options equals the closing price on the date of grant. Stock options vestone-third on each anniversary of the grant date and expire after seven years. The number of shares of our common stock granted as stock options is determined by the Black-Scholes model for option valuation on the grant date. |
Benefits and Perquisites We provide our named executive officers with benefits that the compensation committee of our board of directors believes are reasonable and in the best interests of our company and our stockholders. Consistent with our compensation 3 EBIT is anon-GAAP financial measure that is explained and reconciled to the comparable GAAP measure inAppendix A to this proxy statement. We define “Adjusted EBIT” as net income before interest expense and provision for income tax, excluding certain special items we do not consider representative of our ongoing financial performance. We define “Plan EBIT” as Adjusted EBIT, as may be further adjusted for any income or expense that is unusual,non-recurring or extraordinary, as the compensation committee of our board deems appropriate.
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philosophy, we maintain competitive benefit packages for our named executive officers. The compensation committee, in its discretion, may revise, amend or add to an officer’s benefits if it deems it advisable. We believe these benefits are generally equivalent to benefits provided by comparable companies. | | • | | Retirement Plan Benefits. We sponsor a 401(k) defined-contribution plan (referred to as the “401(k) Plan”) covering substantially all eligible team members, including our named executive |
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| officers. Team member contributions to the 401(k) Plan are voluntary. Contributions by participants are limited to their annual tax deferred contribution limit by the Internal Revenue Service. We contribute an amount of up to 50% of the first 6% of the eligible compensation deferred by a participant. |
| | • | | Health and Welfare Benefits. We offer medical, dental, vision, life insurance, short-term and long-term disability insurance and accidental death and dismemberment insurance for all eligible team members. Named executive officers are eligible to participate in the same plans as other eligible team members. |
| | • | | Perquisites. We pay the premium amounts for medical, dental, vision, life insurance, short-term and long-term disability insurance and accidental death and dismemberment insurance plans on behalf of certain of our named executive officers, and impute income related to the limited personal use of our corporate aircraft by certain of our executive officers. |
| | • | | Relocation Reimbursement. During fiscal 2019,2020, we reimbursed Mr. SinclairMs. Paulonis and Messrs. Phipps and Neal for certain relocation expenses in connection with his appointment as our Chief Executive Officer.their respective appointments. |
Section Three – How Executive Pay is Established Role of Our Compensation Committee Our compensation committee, which is comprised entirely of independent directors, is responsible for overseeing our executive compensation policies and programs with the goal of maintaining compensation that is competitive and reflects the long-term interests of our stockholders. You can learn more about the compensation committee’s purpose, responsibilities, and structure by reading the committee’s charter posted on our investor relations website atinvestors.sprouts.com. The inclusion of our website address in this proxy statement does not include or incorporate by reference the information on or accessible through our website into this proxy statement. While our Chief Executive Officer and other executive officers may attend meetings of the compensation committee or our board of directors from time to time, the ultimate decisions regarding executive officer compensation are made solely by the members of our compensation committee. These decisions are based not only on our compensation committee’s deliberations, but also on input requested from our company or outside advisors, including our compensation committee’s independent compensation consultant, with respect to, among other things, market data analyses. The final decisions relating to our Chief Executive Officer’s compensation are determined solely by our compensation committee. Decisions regarding other executive officers are made by our compensation committee after considering recommendations from our Chief Executive Officer. Role of the Compensation Consultant Our compensation committee may periodically engage the services of independent compensation consultants to provide advice in connection with making executive compensation determinations. The chairperson of our compensation committee, in consultation with other committee members, defines the scope of any consultant’s engagement and related responsibilities. These responsibilities may include, among other things, advising on issues of executive compensation and equity compensation structure and assisting in the preparation of compensation disclosure for inclusion in our SEC filings. In fulfilling its responsibilities, the independent compensation consultant may interact with management or our other outside advisors to the extent necessary or appropriate. | | | | | Sprouts Farmers Market | | | | 2020 Proxy Statement 29 |
In 2019,2020, our compensation committee engaged Korn Ferry as its independent compensation consultant to provide the committee with an executive compensation assessment, peer group analysis, incentive plan design review and related compensation advice. The compensation committee’s independent compensation consultant provides analyses that inform the committee’s decisions, but it does not decide or | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 31 |
approve any compensation decisions. Korn Ferry representatives met with the chairperson of the committee, and with certain members of our management team, and at formal meetings with our compensation committee, as requested. The compensation committee considered the factors set forth in the NASDAQ Stock Market rule regarding compensation advisor independence. Specifically, the compensation committee analyzed whether the work of Korn Ferry as compensation consultant raised any conflict of interest, taking into consideration the following factors: (i) the provision of other services to our company by Korn Ferry; (ii) the amount of fees from our company paid to Korn Ferry as a percentage of Korn Ferry’s total revenue; (iii) the policies and procedures of Korn Ferry that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Korn Ferry or the individual compensation advisors employed by Korn Ferry with an executive officer of our company; (v) any business or personal relationship of the individual compensation advisors with any member of the compensation committee; and (vi) any stock of our company owned by Korn Ferry or the individual compensation advisors employed by Korn Ferry. The compensation committee considered the above factors related to compensation advisor independence and based on the foregoing, the committee concluded that Korn Ferry was independent. Our compensation committee intends to continue its practice of retaining executive compensation consultants from time to time, as our compensation committee deems appropriate, to advise our compensation committee with respect to its compensation policies and provide compensation data from comparable companies. Management’s Role in Compensation Decisions Members of our human resources, finance and legal departments work with our Chief Executive Officer to recommend changes to existing compensation plans and programs, to recommend financial and other targets to be achieved under those programs, to prepare analyses of financial data and other briefing materials to assist the compensation committee in making its decisions and, ultimately, to implement the decisions of our compensation committee. Our Chief Executive Officer is actively engaged in setting compensation for other executives through a variety of means, including recommending for committee approval the financial goals and the annual variable pay amounts for our executive team. Our Chief Executive Officer works closely with our ChiefSenior Vice President of Human Resources and Legal Officer and the chairperson of the compensation committee in analyzing relevant market data to determine base salary and annual target bonus opportunities for senior management and to develop targets for our short- and long-term incentive plans. Our Chief Executive Officer is subject to the same financial performance goals as our other executive officers, all of which are ultimately determined and approved by our compensation committee. Compensation Levels and Benchmarking We benchmark our executive compensation against a peer group of companies with which we may compete for executive talent. Market pay data for the peer group for 20192020 was gathered through publicly available information and compensation surveys conducted by Korn Ferry. When making compensation decisions, the compensation committee takes into consideration the value of TDC provided to executives and where that value falls in relation to comparable companies (our peer group discussed below, along with other market survey data). While the compensation committee does not target a specific percentile of comparable companies when making decisions regarding individual compensation components, the committee generally looks to position the value of target TDC so as to be competitive with the market median of comparable companies, with exceptions made based on the committee’s analysis of key factors, as discussed below. The peer group is periodically evaluated and updated to ensure the companies in the group remain relevant to us based on our changing size and other factors. For 2020, our compensation committee reviewed the compensation of our executive officers and compared it with that of both our peer group | | | | | 30 32 20202021 Proxy Statement | | | | Sprouts Farmers Market |
The peer group is periodically evaluated and updated to ensure the companies in the group remain relevant to us based on our changing size and other factors. For 2019, our compensation committee reviewed the compensation of our executive officers and compared it with that of both our peer group companies and broader, composite market survey data provided by our compensation consultant. In assessing the appropriateness of peer companies, the compensation committee considered the following criteria for our peer group in 2019:2020: annual revenues; food retail, health and wellness, as well as broader retail; talent market that represents the market for executive talent for our company; growth-oriented companies; and the peer groups used by proxy advisory firms.
The peer group of 1412 companies which, along with broader market survey data, werewas used for benchmarking purposes in fiscal 20192020 is set forth below. | Company | | Revenue for Last
Twelve Months (in millions) | | | Market Value as of Most Recent FYE (in millions) | | | Revenue for Last
Twelve Months (in millions) | | | Market Value as of Most Recent FYE (in millions) | | United Natural Foods, Inc. | | $ | 24,538 | | | $ | 469 | | | Tractor Supply Company | | | $ | 9,934 | | | $ | 16,377 | | Spartan Nash Co. | | | $ | 9,099 | | | $ | 624 | | Dick’s Sporting Goods, Inc. | | $ | 8,634 | | | $ | 4,350 | | | $ | 9,067 | | | $ | 5,036 | | Spartan Nash Co. | | $ | 8,435 | | | $ | 518 | | | Casey’s General Stores, Inc. | | $ | 8,302 | | | $ | 5,850 | | | $ | 7,347 | | | $ | 6,597 | | Tractor Supply Company | | $ | 8,293 | | | $ | 11,062 | | | Ulta Beauty, Inc. | | $ | 7,217 | | | $ | 14,470 | | | $ | 6,259 | | | $ | 16,178 | | Big Lots, Inc. | | | $ | 6,068 | | | $ | 1,593 | | Burlington Stores, Inc. | | $ | 7,066 | | | $ | 14,994 | | | $ | 5,681 | | | $ | 17,213 | | The Michaels Companies, Inc. | | $ | 5,139 | | | $ | 1,187 | | | $ | 5,077 | | | $ | 1,921 | | Smart & Final Stores, Inc. | | $ | 4,770 | | | $ | 360 | | | Sally Beauty Holdings, Inc. | | $ | 3,876 | | | $ | 2,125 | | | $ | 3,514 | | | $ | 1,466 | | Weis Markets, Inc. | | $ | 3,534 | | | $ | 1,089 | | | Grocery Outlet Holding Corp. | | | $ | 2,983 | | | $ | 3,695 | | Designer Brands Inc. (DSW) | | $ | 3,518 | | | $ | 1,129 | | | $ | 2,455 | | | $ | 554 | | The Hain Celestial Group, Inc. | | $ | 2,266 | | | $ | 2,708 | | | GNC Holdings, Inc. | | $ | 2,146 | | | $ | 228 | | | Five Below, Inc. | | | $ | 1,791 | | | $ | 9,776 | | 75th Percentile | | $ | 8,300 | | | $ | 5,475 | | | $ | 7,777 | | | $ | 11,377 | | 50th Percentile | | $ | 6,102 | | | $ | 1,656 | | | $ | 5,874 | | | $ | 4,366 | | 25th Percentile | | $ | 3,620 | | | $ | 660 | | | $ | 3,382 | | | $ | 1,561 | | Sprouts Farmers Market (as of December 29, 2019) | | $ | 5,635 | | | $ | 2,293 | | | Sprouts Farmers Market (as of January 3, 2021) | | | $ | 6,469 | | | $ | 2,371 | |
Based on input from Korn Ferry, the peer group was updated in early 2020 to assist the compensation committee with determining 2020 compensation. Based on the evaluation criteria, our compensation committee approved the removal of United Natural Foods, Inc., Smart & Final Stores, Inc., Weis Markets, Inc., The Hain Celestial Group, Inc. and GNC Holdings, Inc. and the addition of Big Lots, Inc., Five Below, Inc. and Grocery Outlet Holding Corp. to our peer group for 2020. The compensation committee again reviewed the peer group in the fourth quarter of 2020 and determined no further changes were warranted at that time. Our compensation committee may vary from its general approach for various elements of compensation depending on the committee’s analysis of key factors, such as performance, contributions to the business, ability to replace with a high qualityhigh-quality candidate in our unique industry/model or disruption to our business if an executive were to exit. | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 33 |
Section Four – 20192020 Named Executive Officer Pay Actions 20192020 Compensation Actions
In 2019,2020, the compensation committee approved the following compensation and awards for our named executive officers after considering each officer’s individual achievements and contributions toward our long-term strategic goals, our peer group and market survey data and the accomplishments of the company. Thecompany, and in the cases of Ms. Paulonis and Messrs. Phipps and Neal, their compensation committee approved Mr. Sinclair’s annualized compensation package in connectionarrangements with his appointment astheir then-current employers and incentives offered to join our Chief Executive Officer in June 2019 after considering peer group | | | | | Sprouts Farmers Market | | | | 2020 Proxy Statement 31 |
and market survey data, Mr. Sinclair’s then-current compensation package with his former employer and his prior experience and expected contributions toward our long-term strategic goals.company. Mr. Molloy’s compensation was approved by the compensation committee (with Mr. Molloy abstaining) in consideration of the experience and stability he would bring to the Chief Financial Officer role on an interim basis, as well as Mr. Molloy’s standard consultancy fee and the expected temporary nature of his interim appointment.
| | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Base Salary | | | Target Bonus | | | RSU Awards | | | Performance
Share Awards | | | Stock
Option
Awards | | | Target
TDC | | Jack L. Sinclair(1) | | $ | 1,100,000 | | | $ | 1,375,000 | | | $ | 1,650,000 | | | $ | 1,650,000 | | | | — | | | $ | 5,775,000 | | Lawrence P. Molloy(2) | | $ | 1,820,000 | | | | — | | | | — | | | | — | | | | — | | | $ | 1,820,000 | | Brandon F. Lombardi | | $ | 475,000 | | | $ | 285,000 | | | $ | 190,000 | | | $ | 190,000 | | | $ | 95,000 | | | $ | 1,235,000 | | Dan J. Sanders | | $ | 446,250 | | | $ | 267,750 | | | $ | 178,500 | | | $ | 178,500 | | | $ | 89,250 | | | $ | 1,160,250 | | David M. McGlinchey | | $ | 420,000 | | | $ | 252,000 | | | $ | 168,000 | | | $ | 168,000 | | | $ | 84,000 | | | $ | 1,092,000 | | James L. Nielsen(3) | | $ | 715,000 | | | $ | 536,250 | | | $ | 715,000 | | | $ | 715,000 | | | | — | | | $ | 2,681,250 | | Bradley S. Lukow(3) | | $ | 656,250 | | | $ | 492,188 | | | $ | 492,188 | | | $ | 492,188 | | | | — | | | $ | 2,132,814 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | Name | | Base Salary | | | Target Bonus | | | RSU Awards | | | Performance
Share Awards | | | Stock
Option
Awards | | | Target
TDC | | Jack L. Sinclair | | $ | 1,100,000 | | | $ | 1,375,000 | | | $ | 1,650,000 | | | $ | 825,000 | | | $ | 825,000 | | | $ | 5,775,000 | | Denise A. Paulonis(1) | | $ | 650,000 | | | $ | 487,500 | | | $ | 325,000 | | | $ | 162,500 | | | $ | 162,500 | | | $ | 1,787,500 | | Gilliam D. Phipps(2) | | $ | 500,000 | | | $ | 300,000 | | | $ | 250,000 | | | $ | 125,000 | | | $ | 125,000 | | | $ | 1,300,000 | | David M. McGlinchey(3) | | $ | 450,000 | | | $ | 270,000 | | | $ | 225,000 | | | $ | 112,500 | | | $ | 112,500 | | | $ | 1,170,000 | | J. Scott Neal(4) | | $ | 600,000 | | | $ | 450,000 | | | $ | 300,000 | | | $ | 150,000 | | | $ | 150,000 | | | $ | 1,650,000 | | Lawrence P. Molloy(5) | | $ | 1,820,000 | | | | — | | | | — | | | | — | | | | — | | | $ | 1,820,000 | |
| (1) | RSU awards for Mr. SinclairMs. Paulonis do not include aone-timesign-onone-time sign-on equity grant of RSUs with a value of $1,800,000$750,000 intended to compensate Mr. SinclairMs. Paulonis for compensation from hisher prior employer that heshe relinquished to join our company. The number of RSUs and performance shares granted to Mr. Sinclair differ from the amounts set forth above as such amounts were adjusted so that the grant of performance shares did not exceed limitations provided for in our 2013 Incentive Plan. See – “Summary Compensation Table” and “Grant of Plan-Based Awards.” |
| (2) | RSU awards for Mr. Phipps do not include a one-time sign-on equity grant of RSUs with a value of $400,000 intended to compensate Mr. Phipps for compensation from his prior employer that he relinquished to join our company. See – “Summary Compensation Table” and “Grant of Plan-Based Awards.” |
| (3) | Stock option awards for Mr. McGlinchey do not include a one-time equity grant of stock options with a value of $300,000 in connection with his transition to Chief Format Officer. See – “Summary Compensation Table” and “Grant of Plan-Based Awards.” |
| (4) | RSU awards for Mr. Neal do not include a one-time sign-on equity grant of RSUs with a value of $800,000 intended to compensate Mr. Neal for compensation from his prior employer that he relinquished to join our company. See – “Summary Compensation Table” and “Grant of Plan-Based Awards.” |
| (5) | Mr. Molloy’s base salary reflects the annualized amount of his weekly compensation for his service as Interim Chief Financial Officer. |
(3) | Amounts for Messrs. Nielsen and Lukow include only the amounts approved by the compensation committee in their capacities as President & Chief Operating Officer and Chief Financial Officer, respectively. See – “Summary Compensation Table” and “Grant of Plan-Based Awards” for amounts received in Messrs. Nielsen and Lukow’s capacities as InterimCo-Chief Executive Officers.
|
| | • | | Base Salary: Base salary amounts presented above differ from the amounts disclosed in the Summary Compensation Table becauseas fiscal 2020 was a 53-week fiscal year; therefore, amounts reported in the Summary Compensation Table reflect a 53rd week of salary. In the Summary Compensation Table, the base salaries for Ms. Paulonis and Messrs. Phipps and Neal are prorated based on their respective dates of hire in 2020. In addition, as increases in base salary become effective in late February of each year. Therefore,year, the amounts reported in the Summary Compensation Tablebase salary for Messrs. Lombardi, Sanders,Mr. McGlinchey Nielsen and Lukow reflectreflects approximately one monthtwo months at the 2018his 2019 base salary rate and the remaining portion of the year at the 2019his 2020 rate. |
| | • | | Short-Term Incentive Awards: We achieved 99% ofexceeded the targetmaximum goal for Plan EBITDAEBT goal (which comprised 75% of the Target Bonus amount) and achieved 44% ofexceeded the targetmaximum goal for our comparable store sales goal (which comprised 25% of the Target Bonus amount), which collectively resulted in a 20192020 cash incentive award of 68.8%the maximum payout for each of the Target Bonus amount for our officers. This was calculated under the terms of the plan as described in “Section Two – Elements of Our Executive Compensation Program.” |
| | • | | Long-Term Incentive Grants (Performance Shares, RSUs and Stock Options): The compensation committee approved the long-term incentive grant for each named executive officer in 20192020 with a view towards aligning a large portion of executive pay with the interests of our stockholders. Messrs. Sinclair, Nielsen and Lukow received 50% of their annual equity awards in the form of performance shares with a three-year Plan EBIT target and 50% in the form of RSUs. Messrs. Lombardi, Sanders and McGlinchey received 40% of their equity awards in the form of performance share awards with a three-year Plan EBIT target, 40% in the form of RSUs and 20% in the form of stock options.All |
| | | | | 32 34 20202021 Proxy Statement | | | | Sprouts Farmers Market |
| named executive officers received 50% of their annual equity awards in the form of performance shares with a three-year Plan EBT target, 25% in the form of RSUs, and 25% in the form of stock options. |
To demonstrate our focus onpay-for-performance, each element of compensation for 20192020 target amounts as approved by the compensation committee is set forth as a percentage of target TDC in the following chart.  
Section Five – Executive Compensation Governance Stock Ownership Guidelines To further align the long-term interests of our executives and our stockholders, our board maintains stock ownership guidelines applicable to our Chief Executive Officer and other executive officers. Within five years of appointment to their position, our Chief Executive Officer must obtain and maintain beneficial ownership of shares of Sprouts stock equal in market value to five times his current annual base salary, and our other executive officers must maintain beneficial ownership of shares of Sprouts stock equal in market value to two times his or her respective current annual base salary. As of fiscal 20192020 year-end, each of our named executive officers met these guidelines, with the exception of Mr. SinclairMessrs. Phipps and Neal who hashave an additional four years to satisfy histheir ownership guideline.guidelines. Change-in-Control and Severance Arrangements In February 2020, our compensation committee amended our executive severance andchange-in-control plan, which provides that our Chief Executive Officer is eligible for two to three years of severance benefits upon certain events, including an involuntary termination of employment or termination of employment in connection with a change in control, and our other executive officers are eligible for one to two years of severance benefits upon certain events, including an involuntary termination of employment or a termination of employment in connection with a change in control. For further information regarding compensation payable to our named executive officers in the event of termination of such officer’s employment, see – “Potential Payments Upon Termination or Change in Control”. Hedging and Pledging Policy Our insider trading policy expressly prohibits transactions involving hedging or pledging of Sprouts shares by directors, officers or team members without the approval of our Chief Legal Officer, who would review risks of proposed transactions. | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 35 |
Tax Deductibility of Executive Compensation Section 162(m) of the Code generally does not permit publicly traded companies to take income tax deductions for compensation paid to our Chief Executive Officer and certain other executive officers to the | | | | | Sprouts Farmers Market | | | | 2020 Proxy Statement 33 |
extent that compensation exceeds $1 million per officer in any taxable year. Certain compensation, including performance-based compensation deductible for 2017 and prior years and certain grandfathered performance-based compensation arrangements, meeting specified requirements, is exempt from this limit. As a new public company, under special transition relief, certain compensation paid (and certain equity awards granted) prior to the 2017 Annual Meeting of Stockholders, has also been exempt from this limit. The executive officers to whom Section 162(m) generally applies for 20192020 include our Chief Executive Officer, InterimCo-Chief Executive Officers, Chief Financial Officer and Interim Chief Financial Officer, the next three most highly compensated executive officers, and any such “covered employee” for a year after 2016. Although our compensation committee considers tax consequences as a factor when it makes compensation decisions, it retains the discretion and flexibility to make compensation decisions resulting in the grant ofnon-deductible compensation to the extent it deems that it is appropriate. Clawback of Certain Compensation Following Restatement of Financial Statements Our corporate governance guidelines provide that if the board of directors learns of any misconduct by an officer that contributed to our company having to restate all or a portion of our financial statements, it shall take such action as it deems necessary to remedy the misconduct, prevent its recurrence and, if appropriate, take remedial action against such officer in a manner it deems appropriate. In determining what remedies to pursue, the board of directors will take into account all relevant factors, including whether the restatement was the result of negligence or intentional or gross misconduct. The board of directors will, in all appropriate cases, require reimbursement of any bonus or incentive compensation awarded to an officer or effect the cancellation of unvested restricted, deferred stock awards previously granted to the officer if: (i) the amount of the bonus, incentive compensation or stock award was calculated based upon the achievement of certain financial results that were subsequently the subject of a restatement, (ii) the executive engaged in intentional misconduct that caused or partially caused the need for the restatement and (iii) the amount of the bonus, incentive compensation or stock award that would have been awarded to the officer had the financial results been properly reported would have been lower than the amount actually awarded. In addition, the board or directors, in its full and complete discretion, may dismiss the officer, authorize legal action for breach of fiduciary duty or take such other action to enforce the officer’s obligations to our company as the board of directors determines fit the facts surrounding the particular case. Risk Considerations Our board of directors does not believe that our 20192020 compensation policies and practices create risks that are reasonably likely to have a material adverse effect on our company for the following reasons: we believe our fixed pay is competitive given our size and stage of development; our variable pay is based on achieving short-term financial goals,goals; we set a threshold for financial targets below which no bonus payment can be made,made; and cash bonuses are awarded at amounts that are capped to avoid windfall payouts; and long-term performance is rewarded through grants of options and RSUs that provide retention value only if our stock remains stable or increases and performance shares that are valuable only if our company achieves certain financial targets, which aligns our executives’ interests with those of our equity holders. In addition, the number of shares that can be earned is capped. | | | | | 34 36 20202021 Proxy Statement | | | | Sprouts Farmers Market |
COMPENSATION COMMITTEE REPORT Our compensation committee has reviewed and discussed with management the Compensation Discussion and Analysis included in this proxy statement. Based on such review and discussion, the compensation committee recommended to our board of directors, and our board of directors approved, that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference into our Annual Report on Form10-K for the fiscal year ended December 29, 2019January 3, 2021 for filing with the SEC. Lawrence P. Molloy, Chairperson Joseph Fortunato
Terri Funk Graham Joseph D. O’Leary Mr. Molloy stepped off the compensation committee from June 20, 2019 through February 21, 2020, during which time he served as our Interim Chief Financial Officer. Compensation Committee Interlocks and Insider Participation Our compensation committee is comprised of Lawrence P. Molloy, as Chairperson, Joseph Fortunato and Terri Funk Graham.Graham and Joseph D. O’Leary. Mr. Molloy served as our Interim Chief Financial Officer from June 20, 2019 to February 21, 2020. Otherwise, neitherNeither Ms. Graham nor Mr. Fortunato nor Ms. GrahamO’Leary had any contractual or other relationships with us during fiscal 20192020 except as directors, nor have Mr. Fortunato or Ms. Graham or Mr. O’Leary ever been an officer or team member of our company. None of our executive officers currently serve, or in the past year have served, as a member of the board or compensation committee of any entity that has one or more executive officers serving on our board or compensation committee. | | | | | | Sprouts Farmers Market | | | | 20202021 Proxy Statement 35 37 |
Summary Compensation Table The following table provides information regarding the compensation of our named executive officers for fiscal 2019, 2018,2020 and 2017.2019; none of our current named executive officers were named executive officers during fiscal 2018. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary(1) | | | Option
Awards(2) | | | Stock
Awards(3) | | | Non-Equity
Incentive Plan
Compensation(4) | | | All Other
Compensation(5) | | | Total | | Jack L. Sinclair Chief Executive Officer(6) | | | 2019 | | | $ | 550,000 | | | | — | | | $ | 4,715,454 | | | $ | 946,000 | | | $ | 19,290 | | | $ | 6,230,744 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Lawrence P. Molloy Interim Chief Financial Officer(7) | | | 2019 | | | $ | 924,000 | | | | — | | | | — | | | | — | | | $ | 4,378 | | | $ | 928,378 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Brandon F. Lombardi Chief Human Resources and Legal Officer and Corporate Secretary(8) | | | 2019 | | | $ | 470,193 | | | $ | 94,999 | | | $ | 370,059 | | | $ | 194,095 | | | $ | 3,477 | | | $ | 1,132,823 | | | | | 2018 | | | $ | 422,596 | | | | — | | | $ | 327,743 | | | $ | 209,946 | | | $ | 33,740 | | | $ | 994,025 | | | | | 2017 | | | $ | 397,596 | | | | — | | | $ | 790,719 | | | $ | 357,439 | | | $ | 10,633 | | | $ | 1,556,387 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Dan J. Sanders Chief Operations Officer(9) | | | 2019 | | | $ | 444,207 | | | $ | 89,246 | | | $ | 347,632 | | | $ | 183,369 | | | $ | 14,598 | | | $ | 1,079,052 | | | | | 2018 | | | $ | 422,596 | | | | — | | | $ | 327,743 | | | $ | 209,946 | | | $ | 29,887 | | | $ | 990,172 | | | | | 2017 | | | $ | 397,596 | | | | — | | | $ | 790,719 | | | $ | 357,439 | | | $ | 10,898 | | | $ | 1,556,652 | | David M. McGlinchey Chief Merchandising Officer(10) | | | 2019 | | | $ | 418,077 | | | $ | 83,996 | | | $ | 327,194 | | | $ | 222,582 | | | $ | 61,621 | | | $ | 1,113,470 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | James L. Nielsen Former Interim Co-Chief Executive Officer, President and Chief
Operating Officer(11) | | | 2019 | | | $ | 714,519 | | | | — | | | $ | 1,392,610 | | | $ | 320,000 | | | $ | 169,349 | | | $ | 2,596,478 | | | | | 2018 | | | $ | 645,192 | | | $ | 156,022 | | | $ | 1,253,209 | | | $ | 400,664 | | | $ | 76,260 | | | $ | 2,531,347 | | | | | 2017 | | | $ | 592,788 | | | | — | | | $ | 1,883,295 | | | $ | 746,083 | | | $ | 21,956 | | | $ | 3,244,122 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Bradley S. Lukow Former InterimCo-Chief Executive Officer and Chief Financial Officer(12) | | | 2019 | | | $ | 326,830 | | | | — | | | $ | 958,648 | | | | — | | | $ | 151,449 | | | $ | 1,436,927 | | | | | 2018 | | | $ | 620,192 | | | $ | 156,022 | | | $ | 903,761 | | | $ | 359,463 | | | $ | 35,361 | | | $ | 2,075,051 | | | | | 2017 | | | $ | 564,904 | | | | — | | | $ | 1,072,800 | | | $ | 710,988 | | | $ | 4,453 | | | $ | 2,353,145 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Name and Principal Position | | Year | | | Salary(1) | | | Option
Awards(2) | | | Stock
Awards(3) | | | Non-Equity
Incentive Plan
Compensation(4) | | | All Other
Compensation(5) | | | Total | | Jack L. Sinclair Chief Executive Officer(6) | | | 2020 | | | $ | 1,121,154 | | | $ | 824,998 | | | $ | 2,503,868 | | | $ | 4,000,000 | | | $ | 15,456 | | | $ | 8,465,476 | | | | | 2019 | | | $ | 550,000 | | | | — | | | $ | 4,715,454 | | | $ | 946,000 | | | $ | 19,290 | | | $ | 6,230,744 | | Denise A. Paulonis Chief Financial Officer(7) | | | 2020 | | | $ | 575,000 | | | $ | 162,497 | | | $ | 1,251,934 | | | $ | 1,293,750 | | | $ | 451,549 | | | $ | 3,734,730 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gilliam D. Phipps Senior Vice President, Chief Marketing Officer(8) | | | 2020 | | | $ | 353,846 | | | $ | 124,996 | | | $ | 903,127 | | | $ | 636,923 | | | $ | 173,914 | | | $ | 2,192,806 | | David M. McGlinchey Chief Format Officer(9) | | | 2020 | | | $ | 453,462 | | | $ | 412,497 | | | $ | 341,423 | | | $ | 816,231 | | | $ | 6,084 | | | $ | 2,029,697 | | | | | 2019 | | | $ | 418,077 | | | $ | 83,996 | | | $ | 327,194 | | | $ | 222,582 | | | $ | 61,621 | | | $ | 1,113,470 | | J. Scott Neal Chief Fresh Merchandising Officer(10) | | | 2020 | | | $ | 323,077 | | | $ | 74,994 | | | $ | 975,368 | | | $ | 450,000 | | | $ | 158,763 | | | $ | 1,982,202 | | Lawrence P. Molloy Former Interim Chief Financial Officer(11) | | | 2020 | | | $ | 315,000 | | | | — | | | | — | | | | — | | | $ | 848 | | | $ | 315,848 | | | | | 2019 | | | $ | 924,000 | | | | — | | | | — | | | | — | | | $ | 4,378 | | | $ | 928,378 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Fiscal 20192020 salary consists of a52-week53-week year from December 31, 201830, 2019 through December 29, 2019.January 3, 2021. |
| (2) | The amounts in this column reflect the aggregate grant date fair value of each option award granted during the fiscal year, computed in accordance with ASC 718. The valuation assumptions used in determining such amounts are described in Note 26 to our consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 29, 2019.January 3, 2021. |
| (3) | The amounts in this column reflect the aggregate grant date fair value of each performance share, share of restricted stock or restricted stock unit granted during the fiscal year, computed in accordance with ASC 718. The valuation assumptions used in determining such amounts are described in Note 26 to our consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 29, 2019.January 3, 2021. Amounts shown with respect to unearned performance shares represent the expected value of the award, based on target level of performance. The value of such currently unearned performance shares at the maximum level of issuance for the awards granted in fiscal 20192020 would be $2,796,000$3,338,502 for Mr. Sinclair, $370,059$657,581 for Ms. Paulonis, $582,661 for Mr. Lombardi, $347,632 for Mr. Sanders, $327,194Phipps, $455,231 for Mr. McGlinchey $1,392,610and $285,449 for Mr. Nielsen and $958,648 for Mr. Lukow.Neal. |
| (4) | Unless otherwise indicated, amounts shown in this column include bonuses earned in fiscal 2019, 20182020 and 20172019 under our performance-based cash incentive plan, but not paid until fiscal 2020, 20192021 and 2018,2020, respectively, and are based on percentages of the actual base salary amounts earned by the named executive officers during such years. |
| (5) | Amounts in this column for 20192020 include (a) medical and disability insurance premiums paid on behalf of Messrs. Lombardi, Lukow and Nielsen;Mr. Sinclair; (b) life insurance premiums of $2,451, $2,545, $781, $4,865, $1,036, $2,451,$1,441 paid on behalf of Ms. Paulonis, and $1,710$7,524, $848, $2,501, $1,111 and $1,218 paid on behalf of Messrs. Sinclair, Molloy, Lombardi, Sanders,Phipps, McGlinchey Lukow and Nielsen,Neal, respectively; (c) health savings account contribution of $500 for Mr. McGlinchey;Ms. Paulonis; (d) matching contributions to our 401(k) plan for Messrs. Sanders, McGlincheyMs. Paulonis and Nielsen;Mr. McGlinchey; (e) $1,833, $3,096$5,128 and $16,792$3,544 for personal use of our corporate aircraft by Messrs. Molloy, LukowMs. Paulonis and NielsenMr. Neal, respectively; (f) relocation expenses of $16,839$189,230 paid on behalf of Ms. Paulonis, and $54,812$1,791, $71,413, and $54,000 paid on behalf of Messrs. Sinclair, Phipps, and McGlincheyNeal respectively; and (g) $140,934sign-on bonuses of $250,000 for Ms. Paulonis, and $144,231 paid to$100,000 for each of Messrs. LukowPhipps and Nielsen respectively in connection with their appointments as InterimCo-Chief Executive Officers in December 2018 through June 2019.Neal. |
| (6) | Mr. Sinclair was appointed Chief Executive Officer on June 24, 2019. In addition to his annual equity grant in fiscal 2019, Mr. Sinclair received aone-timesign-onone-time sign-on grant of RSUs with a value of $1,800,000, which was intended to compensate him for compensation from his prior employer that he relinquished to join our company. See – “Grant of Plan-Based Awards”. |
| (7) | Ms. Paulonis was appointed Chief Financial Officer on February 21, 2020. In addition to her annual equity grant in fiscal 2020, Ms. Paulonis received a one-time sign-on grant of RSUs with a value of $750,000, which was intended to compensate her for compensation from her prior employer that she relinquished to join our company. See – “Grant of Plan-Based Awards”. |
| (8) | Mr. Phipps was appointed Senior Vice President, Chief Marketing Officer on April 14, 2020. In addition to his annual equity grant in fiscal 2020, Mr. Phipps received a one-time sign-on grant of RSUs with a value of $400,000, which was intended to compensate him for compensation from his prior employer that he relinquished to join our company. See – “Grant of Plan-Based Awards”. |
| | | | | 36 38 20202021 Proxy Statement | | | | Sprouts Farmers Market |
(7)(9) | On February 24, 2020, Mr. McGlinchey’s base salary increased to $450,000. The 2020 amount shown reflects payment of his base salary of $420,000 from December 30, 2019 through February 23, 2020. The 2019 amount shown reflects payment of his base salary of $400,000 from December 31, 2018 through January 27, 2019 and $420,000 from January 28, 2019 through December 29, 2019. The amount included in the ‘Option Awards’ column for Mr. McGlinchey for 2020 includes a one-time grant of $300,000 in connection with his transition to the Chief Format Officer role. See – “Grant of Plan-Based Awards”. The amount included in the ‘Non-Equity Compensation Plan Compensation’ column for Mr. McGlinchey for 2019 includes a $50,000 discretionary bonus awarded to Mr. McGlinchey in recognition of his interim leadership of our company’s marketing function prior to Mr. Phipps joining our company. |
| (10) | Mr. Neal was appointed Chief Fresh Merchandising Officer on June 15, 2020. In addition to his annual equity grant in fiscal 2020, Mr. Neal received a one-time sign-on grant of RSUs with a value of $800,000, which was intended to compensate him for compensation from his prior employer that he relinquished to join our company. See – “Grant of Plan-Based Awards”. |
| (11) | Mr. Molloy was appointed Interim Chief Financial Officer on June 20, 2019. Mr. Molloy’s 2020 compensation iswas comprised of $35,000 per week between June 20,from December 30, 2019 and December 29, 2019through February 21, 2020 for service as Interim Chief Financial Officer. Amounts exclude compensation earned related to Mr. Molloy’s service on our board of directors. See ‘Director Compensation’ for amounts paid to Mr. Molloy related to his service on our board of directors. |
(8) | On January 28, 2019, Mr. Lombardi’s base salary increased to $475,000. The 2019 amount shown reflects payment of his base salary of $425,000 from December 31, 2018 through January 27, 2019 and $475,000 from January 28, 2019 through December 29, 2019.
|
(9) | On January 28, 2019, Mr. Sanders’ base salary increased to $446,250. The 2019 amount shown reflects payment of his base salary of $425,000 from December 31, 2018 through January 27, 2019 and $446,250 from January 28, 2019 through December 29, 2019.
|
(10) | On January 28, 2019, Mr. McGlinchey’s base salary increased to $420,000. The 2019 amount shown reflects payment of his base salary of $400,000 from December 31, 2018 through January 27, 2019 and $420,000 from January 28, 2019 through December 29, 2019. The amount included in the‘Non-Equity Compensation Plan Compensation’ column for Mr. McGlinchey includes a $50,000 discretionary bonus awarded to Mr. McGlinchey in recognition of his interim leadership of our company’s marketing function.
|
(11) | On January 28, 2019, Mr. Nielsen’s base salary increased to $715,000. The 2019 amount shown reflects payment of his base salary of $650,000 from December 31, 2018 through January 27, 2019 and $715,000 from January 28, 2019 through December 29, 2019. In connection with his appointment as InterimCo-Chief Executive Officer, Mr. Nielsen received an additional $25,000 per month, from December 2018 to June 2019; such amounts are included in the ‘All Other Compensation’ column above. Mr. Nielsen transitioned to Senior Advisor on August 1, 2019, with such arrangement providing for the continuation of Mr. Nielsen’s base salary through March 31, 2020 and payment of a specified 2019 bonus as set forth in the‘Non-Equity Incentive Plan Compensation’ column above. Pursuant to the employment transition agreement we entered into with Mr. Nielsen on August 1, 2019, Mr. Nielsen’s 2019 annual bonus was fixed at $320,000 if his employment was not terminated for cause prior to the bonus payment date.
|
(12) | On January 28, 2019, Mr. Lukow’s base salary increased to $656,250. The 2019 amount shown reflects payment of his base salary of $625,000 from December 31, 2018 through January 27, 2019 and $656,250 from January 28, 2019 through December 29, 2019. In connection with his appointment as InterimCo-Chief Executive Officer, Mr. Lukow received an additional $25,000 per month, from December 2018 to June 2019; such amounts are included in the ‘All Other Compensation’ column above. Mr. Lukow resigned on June 20, 2019.
|
| | | | | | Sprouts Farmers Market | | | | 20202021 Proxy Statement 37 39 |
Grants of Plan-Based Awards The following table sets forth certain information with respect to grants of plan-based awards to the named executive officers for fiscal 2019.2020. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Grant Date | | | Estimated Future Payouts UnderNon-Equity
Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity
Incentive Plan Awards(2) | | | All
Other Stock Awards: Number
of Shares
of Stock or
Units (3)(#) | | | All Other Option Awards: Number of Securities Underlying Options (4)(#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards(5) ($) | | Name | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | Jack L. Sinclair | | | — | | | $ | 137,500 | | | $ | 1,375,000 | | | $ | 2,750,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | June 24, 2019 | | | | — | | | | — | | | | — | | | | 37,500 | | | | 75,000 | | | | 150,000 | | | | — | | | | — | | | | — | | | $ | 1,398,000 | | | | | June 24, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 88,690 | (6) | | | — | | | | — | | | $ | 1,653,182 | | | | | June 24, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 89,285 | (7) | | | — | | | | — | | | $ | 1,664,272 | | Lawrence P. Molloy(8) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Brandon F. Lombardi | | | — | | | $ | 28,500 | | | $ | 285,000 | | | $ | 570,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | 4,002 | | | | 8,003 | | | | 16,006 | | | | — | | | | — | | | | — | | | $ | 185,029 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,003 | | | | — | | | | — | | | $ | 185,029 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 12,451 | | | $ | 23.12 | | | $ | 94,999 | | Dan J. Sanders | | | — | | | $ | 26,775 | | | $ | 267,500 | | | $ | 535,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | 3,759 | | | | 7,518 | | | | 15,036 | | | | — | | | | — | | | | — | | | $ | 173,816 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,518 | | | | — | | | | — | | | $ | 173,816 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,697 | | | $ | 23.12 | | | $ | 89,246 | | David M. McGlinchey | | | — | | | $ | 25,200 | | | $ | 252,000 | | | $ | 504,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | 3,538 | | | | 7,076 | | | | 14,152 | | | | — | | | | — | | | | — | | | $ | 163,597 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,076 | | | | — | | | | — | | | $ | 163,597 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,009 | | | $ | 23.12 | | | $ | 83,996 | | James L. Nielsen | | | — | | | $ | 53,625 | | | $ | 536,250 | | | $ | 1,072,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | 15,059 | | | | 30,117 | | | | 60,234 | | | | — | | | | — | | | | — | | | $ | 696,305 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,117 | | | | — | | | | — | | | $ | 696,305 | | Bradley S. Lukow | | | — | | | $ | 49,219 | | | $ | 492,188 | | | $ | 984,375 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | 10,366 | | | | 20,732 | | | | 41,464 | | | | — | | | | — | | | | — | | | $ | 479,324 | | | | | March 4, 2019 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 20,732 | | | | — | | | | — | | | $ | 479,324 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Grant Date | | | Estimated Future Payouts Under Non-Equity
Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity
Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units (3)(#) | | | All Other Option Awards: Number of Securities Underlying Options (4)(#) | | | Exercise or Base Price of Option Awards ($/Sh) | | | Grant Date Fair Value of Stock and Option Awards(5) ($) | | Name | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | Jack L. Sinclair | | | — | | | $ | 343,750 | | | $ | 1,375,000 | | | $ | 4,000,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | 25,338 | | | | 101,351 | | | | 150,000 | | | | — | | | | — | | | | — | | | $ | 1,669,251 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 50,675 | | | | — | | | | — | | | $ | 834,617 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 169,917 | | | $ | 16.47 | | | $ | 824,998 | | Denise A. Paulonis | | | — | | | $ | 121,875 | | | $ | 487,500 | | | $ | 1,462,500 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | 4,991 | | | | 19,963 | | | | 39,926 | | | | — | | | | — | | | | — | | | $ | 328,791 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9,981 | | | | — | | | | — | | | $ | 164,387 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 46,069 | (6) | | | — | | | | — | | | $ | 758,756 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 33,468 | | | $ | 16.47 | | | $ | 162,497 | | Gilliam D. Phipps | | | — | | | $ | 75,000 | | | $ | 300,000 | | | $ | 900,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | 2,847 | | | | 11,389 | | | | 22,778 | | | | — | | | | — | | | | — | | | $ | 291,331 | | | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,694 | | | | — | | | | — | | | $ | 145,653 | | | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 18,223 | (7) | | | — | | | | — | | | $ | 466,144 | | | | | May 12, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 15,569 | | | $ | 25.58 | | | $ | 124,996 | | David M. McGlinchey | | | — | | | $ | 67,500 | | | $ | 270,000 | | | $ | 810,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | 3,455 | | | | 13,820 | | | | 27,640 | | | | — | | | | — | | | | — | | | $ | 227,615 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,910 | | | | — | | | | — | | | $ | 113,808 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 23,170 | | | $ | 16.47 | | | $ | 112,497 | | | | | March 9, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 61,788 | (8) | | $ | 16.47 | | | $ | 299,999 | | J. Scott Neal | | | — | | | $ | 112,500 | | | $ | 450,000 | | | $ | 1,350,000 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | Aug. 10, 2020 | | | | — | | | | — | | | | — | | | | 1,441 | | | | 5,762 | | | | 11,524 | | | | — | | | | — | | | | — | | | $ | 142,725 | | | | | Aug. 10, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,881 | | | | — | | | | — | | | $ | 71,362 | | | | | Aug. 10, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,734 | (9) | | | — | | | | — | | | $ | 761,281 | | | | | Aug. 10, 2020 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 9,691 | | | $ | 24.77 | | | $ | 74,994 | | Lawrence P. Molloy (10) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | |
| (1) | Amounts in these columncolumns represent possible amounts payable under our 20192020 performance-based cash bonus program. For fiscal 2019,2020, cash bonuses to be awarded to each named executive officer were based on Plan EBITDAEBT and comparable store sales growth targets. The Target Bonus amounts for 20192020 for Messrs.Mr. Sinclair, Lombardi, Sanders,Ms. Paulonis, Mr. Phipps, Mr. McGlinchey Nielsen and LukowMr. Neal were 125%, 60%75%, 60%, 60%, 75% and 75% of 20192020 base salary, respectively. The maximum amount achievable by Messrs. Sinclair, Lombardi, Sanders, McGlinchey, Nielsen and Lukowthe named executive officers in 20192020 was 200%300% of their respective Target Bonus.Bonus, subject to applicable payout limitations in the Company’s 2013 Incentive Plan. In addition, 75% of the bonus criteria for each named executive officer was weighted towards Plan EBITDA,EBT and 25% towards comparable store sales growth. See “– Summary Compensation Table” for actual amounts paid under our 20192020 performance-based cash incentive program. |
| (2) | Amounts in these columns represent unvested performance share awards, which were granted on March 4, 20199, 2020 for all executivesnamed executive officers except Mr. SinclairMessrs. Phipps and Neal who received his granttheir grants on June 24, 2019.May 12, 2020 and August 10, 2020, respectively. The performance shares cliff vest on March 4, 2022,9, 2023, assuming three-year Plan EBITEBT performance conditions are achieved and assuming continued service through the applicable vesting date. |
| (3) | Amounts in this column represent unvested RSUs, which were granted on March 4, 20199, 2020 for all executivesnamed executive officers except Mr. SinclairMessrs. Phipps and Neal who received his granttheir grants on June 24, 2019May 12, 2020 and which are described in Note 6 below.August 10, 2020, respectively. The RSUs vest in three equal installments on March 4, 2020, March 4, 2021 and March 4, 2022,the first three anniversaries of the respective grant dates, assuming continued employment through the applicable vesting date. |
| (4) | Amounts in this column represent unvested options, which were granted on March 4, 2019.9, 2020 for all named executive officers except Messrs. Phipps and Neal who received their grants on May 12, 2020 and August 10, 2020, respectively. The options vest in three equal installments on March 4, 2020, March 4, 2021 and March 4, 2022,the first three anniversaries of the respective grant dates, assuming continued employment through the applicable vesting date. |
| | | | | | 40 2021 Proxy Statement | | | | Sprouts Farmers Market |
| (5) | Amounts in this column reflect the aggregate grant date fair value of each option, share of restricted stock and performance share granted during fiscal 2019,2020, computed in accordance with ASC 718. The valuation assumptions used in determining such amounts are described in Note 26 to our consolidated financial statements included in our Annual Report on Form10-K for the fiscal year ended December 29, 2019.January 3, 2021. Amounts with respect to performance share awards represent the expected value of the award, based on the target level of performance and the fair market value of our stock on the grant date. |
| (6) | Represents unvesteda one-time sign-on grant of $750,000 of RSUs, which were granted on June 24, 2019 in connection with Mr. Sinclair’s appointment as Chief Executive Officer.was intended to compensate Ms. Paulonis for compensation from her prior employer that she relinquished to join our company. The RSUs vest in three equal installments on June 24, 2020, June 24, 2021 and June 24, 2022,the first three anniversaries of the grant date, assuming continued employment through the applicable vesting date. |
| | | | | 38 2020 Proxy Statement | | | | Sprouts Farmers Market |
| (7) | Represents aone-timesign-onone-time sign-on grant of $1,800,000$400,000 of RSUs, which was intended to compensate Mr. SinclairPhipps for compensation from his prior employer that he relinquished to join our company. The RSUs vest in three equal installments on June 24, 2020, June 24, 2021 and June 24, 2022,the first three anniversaries of the grant date, assuming continued employment through the applicable vesting date. |
| (8) | Represents a one-time grant of $300,000 of stock options for Mr. McGlinchey in connection with his transition to the Chief Format Officer role. The stock options cliff vest on March 9, 2023, assuming continued employment through the applicable vesting date. |
| (9) | Represents a one-time sign-on grant of $800,000 of RSUs, which was intended to compensate Mr. Neal for compensation from his prior employer that he relinquished to join our company. The RSUs vest in three equal installments on the first three anniversaries of the grant date, assuming continued employment through the applicable vesting date. |
| (10) | Mr. Molloy’s compensation for his service as our Interim Chief Financial Officer did not include equity grants or eligibility to participate in our incentive plan. See ‘Director Compensation’ for equity awards granted to Mr. Molloy related to his service on our board of directors. |
| | | | | | Sprouts Farmers Market | | | | 20202021 Proxy Statement 39 41 |
Outstanding Equity Awards at FiscalYear-End The following table provides information regarding outstanding equity awards held by our named executive officers as of December 29, 2019.January 3, 2021. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | Number of Securities Underlying
Unexercised Options(1) | | | Option
Exercise
Price | | | Option Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested(2) | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(3) | | | 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Option Awards | | | Stock Awards | | | | | | | Number of Securities Underlying
Unexercised Options(1) | | | Option
Exercise
Price | | | Option Expiration
Date | | | Number of
Shares or
Units of
Stock That
Have Not
Vested(2) | | | Market
Value of
Shares or
Units of
Stock That
Have Not
Vested(3) | | | 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(3) | | Name | | Grant Date | | Exercisable | | | Unexercisable | | | Unearned | | Jack L. Sinclair | | June 24, 2019(7)2019(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 75,000 | | | $ | 1,463,2501,507,500 | | | | June 24, 2019 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 177,975118,649 | | | $ | 3,472,292 | | | | — | | | | — | | Lawrence P. Molloy(4)
| | July 31, 2013 | | | 2,778 | | | | — | | | | — | | | $ | 18.00 | | | | July 31, 2020 | | | | — | | | | —2,384,845 | | | | — | | | | — | | | | May 19, 2014March 9, 2020 | | | 6,195— | | | | —169,917 | | | | — | | | $ | 28.50 | | | | May 19, 2021 | | | | — | | | | — | | | | — | | | | — | | | | May 21, 2015 | | | 3,623 | | | | — | | | | — | | | $ | 30.30 | | | | May 21, 2022 | | | | — | | | | — | | | | — | | | | — | | | | May 13, 2019 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 5,768 | | | $ | 112,534 | | | | — | | | | — | | Brandon F. Lombardi
| | March 4, 2014 | | | 12,383 | | | | — | | | | — | | | $ | 39.0116.47 | | | | March 4, 20219, 2027 | | | | — | | | | — | | | | — | | | | — | | | | March 11, 2015 | | | 25,732 | | | | — | | | | — | | | $ | 34.33 | | | | March 11, 2022 | | | | — | | | | — | | | | — | | | | — | | | | March 4, 2016 | | | 7,683 | | | | — | | | | — | | | $ | 28.21 | | | | March 4, 2023 | | | | — | | | | — | | | | — | | | | — | | | | March 3, 2017(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,388 | | | $ | 124,630 | | | | — | | | | — | | | | March 3, 2017 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,713 | | | $ | 228,521 | | | | — | | | | — | | | | March 5, 2018(6)9, 2020(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,508101,351 | | | $ | 126,9712,037,155 | | | | March 5, 20189, 2020 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,33850,675 | | | $ | 84,6341,018,568 | | | | — | | | | — | | Denise A. Paulonis | | March 9, 2020 | | | — | | | | 33,468 | | | | — | | | $ | 16.47 | | | | March 9, 2027 | | | | — | | | | — | | | | — | | | | — | | | | March 4, 2019(7)9, 2020(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,00319,963 | | | $ | 156,139401,256 | | | | March 4, 20199, 2020 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,00356,050 | | | $ | 156,139 | | | | — | | | | — | | | | March 4, 2019 | | | — | | | | 12,451 | | | | — | | | $ | 23.12 | | | | March 4, 2026 | | | | — | | | | —1,126,605 | | | | — | | | | — | | Dan J. SandersGilliam D. Phipps
| | March 4, 2016May 12, 2020 | | | 2,405— | | | | —15,569 | | | | — | | | $ | 28.2125.58 | | | | March 4, 2023May 12, 2027 | | | | — | | | | — | | | | — | | | | — | | | | March 3, 2017(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,388 | | | $ | 124,630 | | | | — | | | | — | | | | March 3, 2017 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 11,713 | | | $ | 228,521 | | | | — | | | | — | | | | March 5, 2018(6)May 12, 2020(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 6,50811,389 | | | $ | 126,971228,919 | | | | March 5, 2018May 12, 2020 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,33823,917 | | | $ | 84,634 | | | | — | | | | — | | | | March 4, 2019(7) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,518 | | | $ | 146,676 | | | | March 4, 2019 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,518 | | | $ | 146,676 | | | | — | | | | — | | | | March 4, 2019 | | | — | | | | 11,697 | | | | — | | | $ | 23.12 | | | | March 4, 2026 | | | | — | | | | —480,732 | | | | — | | | | — | | David M. McGlinchey | | March 5, 2018 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 4,6892,344 | | | $ | 91,48247,114 | | | | — | | | | — | | | | March 4, 2019(7)2019(4) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,076 | | | $ | 138,053 | | | | — | | | | —142,228 | | | | March 4, 2019 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 7,0764,717 | | | $ | 138,05394,812 | | | | — | | | | — | | | | March 4. 2019 | | | —3,670 | | | | 11,0097,339 | | | | — | | | $ | 23.12 | | | | March 4, 2026 | | | | — | | | | — | | | | — | | | | — | | James L. Nielsen
| | March 4, 20149, 2020 | | | 33,771— | | | | —84,958 | | | | — | | | $ | 39.0116.47 | | | | March 4, 20219, 2027 | | | | — | | | | — | | | | — | | | | — | | | | March 11, 2015 | | | 33,439 | | | | — | | | | — | | | $ | 34.33 | | | | March 11, 2022 | | | | — | | | | — | | | | — | | | | — | | | | March 4, 2016 | | | 45,838 | | | | — | | | | — | | | $ | 28.21 | | | | March 4, 2023 | | | | — | | | | — | | | | — | | | | — | | | | May 23, 2016(8) | | | 33,439 | | | | — | | | | — | | | $ | 24.48 | | | | August 11, 2022 | | | | — | | | | — | | | | — | | | | — | | | | March 3, 2017(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | 17,970 | | | $ | 350,595 | | | | — | | | | — | | | | March 3, 2017 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 26,676 | | | $ | 520,449 | | | | — | | | | — | | | | March 5, 2018(6)9, 2020(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 24,88513,820 | | | $ | 485,506277,782 | | | | March 5, 20189, 2020 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 16,5906,910 | | | $ | 323,671138,891 | | | | — | | | | — | | J. Scott Neal | | Dec. 26, 2018(9)Aug. 10, 2020 | | | 6,667— | | | | 13,3339,691 | | | | — | | | $ | 23.2124.77 | | | | December 26, 2025August 10, 2027 | | | | — | | | | — | | | | — | | | | — | | | | March 4, 2019(7)Aug. 10, 2020(5) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,1175,762 | | | $ | 587,583115,816 | | | | | March 4, 2019Aug. 10, 2020 | | | — | | | | — | | | | — | | | | — | | | | — | | | | 30,11733,615 | | | $ | 587,583675,662 | | | | — | | | | — | |
| (1) | Options are to acquire shares of common stock. Options generally expire seven years from the grant date. Time-vested options granted prior to 2016 generally vest over 12 quarters. Time-vested options granted subsequent to 2016date and vest annually over three years on each anniversary of the grant date. |
| | | | | 40 2020 Proxy Statement | | | | Sprouts Farmers Market |
| (2) | Except as otherwise indicated, representsRepresents unvested RSUs or restricted stock awards (referred to as “RSAs”).RSUs. The RSUs and RSAs generally vest in three equal installments on each of the first three anniversaries of the grant date, assuming continued employment through the applicable vesting date.
|
| (3) | The market value of unvested awards is calculated by multiplying the number of unvested awards held by the applicable named executive officer by the closing market price of our common stock on the Nasdaq Global Select Market on the last trading day of fiscal 2019,2020, December 27, 2019,31, 2020, which was $19.51$20.10 per share. |
| (4) | Option and stock awards granted to Mr. Molloy were in connection with his service as a member of our board of directors and not in consideration of his service as our Interim Chief Financial Officer.
|
(5) | Stock awards granted on March 3, 2017 represent unvested performance share awards. The remaining performance shares vest on March 3, 2020, assuming continued service through the applicable vesting date. Subsequent to fiscal 2017year-end, the compensation committee determined that the conditions for such performance share awards were achieved at the maximum performance level.
|
(6) | These stock awards granted on March 5, 2018 represent unvested performance share awards. Amounts reflect the number of shares that may be earned under the performance share awards upon achievement of target performance; actual number of shares earned will be based on the fiscal 2020 Plan EBIT goals. The performance shares that are earned will cliff vest on March 5, 2021, assuming 2020 Plan EBIT performance conditions are achieved and continued service through the applicable vesting date.
|
(7) | These stock awards granted on March 4, 2019 for all executives except Mr. Sinclair, who received his grant on June 24, 2019 in connection with his appointment as Chief Executive Officer, representRepresents unvested performance share awards. Amounts reflect the number of shares that may be earned under the performance share awards upon achievement of target performance; actual number of shares earned will be based on the fiscal 2021 Plan EBIT goals. The performance shares that are earned will cliff vest on March 4, 2022, assuming 2021 Plan EBIT performance conditions are achieved and continued service through the applicable vesting date.
|
(8)(5) | OptionsStock awards granted to Mr. Nielsenon March 9, 2020 for all executives except Messrs. Phipps and Neal who received their grants on May 23, 2016 are related to his promotion to12, 2020 and August 10, 2020 in connection with their appointments as Senior Vice President, Chief Marketing Officer and Chief OperatingFresh Merchandising Officer, in 2015.
|
(9) | Options grantedrespectively, represent unvested performance share awards. Amounts reflect the number of shares that may be earned under the performance share awards upon achievement of target performance; actual number of shares earned will be based on December 26, 2018 to Mr. Nielsenthe fiscal 2022 Plan EBT goals. The performance shares will cliff vest on March 9, 2023, assuming three-year Plan EBT performance conditions are related to his promotion to InterimCo-Chief Executive Officer, effective December 31, 2018. The options vestachieved and become exercisable in three equal installments on December 26, 2019, December 26, 2020 and December 26, 2021, assuming continued employmentservice through the applicable vesting date.
|
| | | | | | 42 2021 Proxy Statement | | | | Sprouts Farmers Market |
Option Exercises and Stock Vested NoneOther than Mr. Molloy, none of our named executive officers exercised options during fiscal 2019.2020. The following table details RSU RSA and PSAperformance share vesting during fiscal 20192020 for each of our named executive officers.
| | | | Stock Awards | | | Option Awards | | | Stock Awards | | | Name | | Number of Shares
Acquired on
Vesting | | | Value
Realized on
Vesting(1) | | | Number of Shares
Acquired on
Exercise | | | Value
Realized on
Exercise | | | Number of Shares
Acquired on
Vesting | | | Value
Realized on
Vesting(1) | | | Jack L. Sinclair | | | — | | | $ | — | | | | — | | | $ | — | | | | 59,326 | | | $ | 1,400,094 | | | Denise A. Paulonis | | | | — | | | $ | — | | | | — | | | $ | — | | | Gilliam D. Phipps | | | | — | | | $ | — | | | | — | | | $ | — | | | David M. McGlinchey | | | | — | | | $ | — | | | | 4,704 | | | $ | 80,130 | | | J. Scott Neal | | | | — | | | $ | — | | | | — | | | $ | — | | | Lawrence P. Molloy | | | 4,268 | | | $ | 91,719 | | | | 2,778 | | | $ | 19,946 | | | | 5,768 | | | $ | 147,661 | | | Brandon F. Lombardi | | | 21,142 | | | $ | 490,251 | | | | Dan J. Sanders | | | 21,089 | | | $ | 489,026 | | | | David M. McGlinchey | | | 2,345 | | | $ | 54,216 | | | | James L. Nielsen | | | 52,943 | | | $ | 1,227,614 | | | Bradley S. Lukow | | | 41,471 | | | $ | 961,155 | | |
| (1) | The value realized on vesting is determined by multiplying the number of vested shares by the closing price of our company’s common stock on the vesting date. |
Employment Agreements Messrs. Sinclair, Molloy, Sanders and McGlinchey do notNone of our named executive officers have an employment agreement. On January 23, 2012, we entered into an employment agreement with Mr. Lombardi, as amended from time to time, that provides for compensation and severance terms as well as confidentiality andnon-competition obligations. In connection with Mr. Nielsen’s transition to Senior Advisor, we entered into an employment transition agreement on August 1, 2019 that provides for, among other things, continuation of Mr. Nielsen’s current base salary, payment of a specified 2019 bonus, and eligibility to continue to vest in his outstanding stock-based awards and to participate in our benefit plans for so long as he serves as Senior Advisor.
| | | | | Sprouts Farmers Market | | | | 2020 Proxy Statement 41 |
agreements. We and each named executive officer may terminate the officer’s employment at any time. In the event of termination of employment, amounts payable to our named executive officers are reflected in the “”Potential Payments Upon Termination or Change in Control”Control” section below. Potential Payments Upon Termination or Change in Control On November 4, 2015, our board of directors adopted an Executive Severance and Change in Control Plan (referred to as the “Plan”) to provide benefits and payments to certain of our senior executive officers if their employment is terminated under certain circumstances. The Plan was subsequently amended and restated in December 2018 and February 2020 and covers senior executive officers as defined in the Plan and designated by the compensation committee of our board of directors, including our named executive officers that do not otherwise have employment agreements which specifically provide for severance. In addition, if one of our senior executive officers designated for participation in the Plan has an employment agreement and his or her employment is terminated in connection with a change in control (as defined in the Plan) under circumstances providing for change in control severance benefits under the Plan (as described below), the senior executive officer is eligible to receive change in control severance benefits under the Plan, rather than severance benefits under the applicable employment agreement, unless the severance terms of the applicable employment agreement are more favorable to the executive in which case the terms of the employment agreement shall govern.officers. In the event that a Plan participant’s employment is terminated by us without cause or due to elimination of job position, reduction in force or restructuring, or by a participant due to relocation, and such termination does not constitute a termination in connection with a change in control described below and is not within 12 months of the participant’s date of hire, (a) our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer will be eligible to receive continued payments of base salary for two years and COBRA premium reimbursement for two years (or, if earlier, until the participant is no longer eligible for COBRA coverage), the aggregate amount of the annual bonus amounts received in respect of the prior two completed fiscal years, and a prorated bonus based on actual performance for the fiscal year in which termination occurs; and (b) other Plan participants will be eligible to receive continued payments of base salary for one year and COBRA premium reimbursement for one year (or, if earlier, until the participant is no longer eligible for COBRA coverage), an amount equal to the participant’s target bonus at the time of termination, and a prorated bonus based on actual performance for the fiscal year in which termination occurs.. In the event that a Plan participant’s employment is terminated by us without cause or by the participant for good reason (each as defined by the Plan) upon or during the24-month period following a change in control, Plan participants other than our Chief Executive Officer will be eligible to receive continued payments of base salary for two years and COBRA premium reimbursement for two years (or, if earlier, until the participant is no longer eligible for COBRA coverage), as well as an amount equal to the participant’s target bonus at the time of termination. Our Chief Executive Officer will be eligible to receive continued payments of base salary for three years and COBRA premium reimbursement for three years (or, | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 43 |
if earlier, until he is no longer eligible for COBRA coverage), as well as an amount equal to his annual bonuses paid in respect of the past three completed fiscal years. The tables below reflect the amount of compensation to our named executive officers in the event of termination of such officer’s employment or upon a change in control pursuant to the Plan or the respective named executive officer’s employment agreement.Plan. Mr. Molloy was not eligible to participate in the Plan while serving as our Interim Chief Financial Officer. Mr. Nielsen transitioned to Senior Advisor on August 1, 2019 and was not an executive officer at December 29, 2019. Mr. Lukow did not receive compensation upon his resignation on June 20, 2019. The amount of compensation payable to each named executive officer upon voluntary (other than for good reason) or for cause termination, involuntary for good reason or involuntary not for cause termination, and in the event of disability or death of the executive or uponin connection with a change in control of our company is shown below. The amounts shown assume that such termination or change in control was effective as of December 29, 2019,January 3, 2021, and thus include amounts earned through such time and are estimates of the amounts which would be paid out to the executives upon their termination. The actual amounts to be | | | | | 42 2020 Proxy Statement | | | | Sprouts Farmers Market |
paid out can only be determined at the time of such officer’s separation from our company. Certain of our equity award agreements granted prior to 2015 provide for the immediate vesting of the award upon a qualifying change in control transaction, while otherOur equity award agreements provide for the vesting of the award only if not assumed by an acquiror or after the executive is terminated by an acquiror without cause or by the executive for good reason within 24 months of a qualifying change in control transaction. Jack L. Sinclair | | Executive Benefits and Payments | | Voluntary or
For Cause
Termination
on
12/29/19 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
12/29/19 | | | Death or
Disability
on
12/29/19 | | | Change of
Control with
No Termination
on
12/29/19 | | | Change of
Control with
Termination
within 24 months
of
12/29/19 | | | Voluntary or
For Cause
Termination
on Jan. 3, 2021 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
Jan. 3, 2021 | | | Death or
Disability
on Jan. 3, 2021 | | | Change in
Control with
No Termination
on
Jan. 3, 2021 | | | Change in
Control with
Qualifying
Termination
within 24 months
of
Jan. 3, 2021 | | Compensation: | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | $ | 946,000 | | | | — | | | | — | | | $ | 1,375,000 | | | | — | | | $ | 4,946,000 | | | | — | | | | — | | | $ | 2,750,000 | | Cash severance | | | — | | | $ | 2,200,000 | | | | — | | | | — | | | $ | 3,300,000 | | | | — | | | $ | 2,200,000 | | | | — | | | | — | | | $ | 3,300,000 | | Health and welfare benefits | | | — | | | $ | 41,101 | | | | — | | | | — | | | $ | 61,652 | | | | — | | | $ | 42,127 | | | | — | | | | — | | | $ | 63,191 | | Equity treatment(1)(2) | | | — | | | | — | | | | — | | | | — | | | $ | 4,935,542 | | | | — | | | | — | | | | — | | | | — | | | $ | 7,564,866 | | | | | | | | | | | Total | | | — | | | $ | 3,187,101 | | | | — | | | | — | | | $ | 9,672,194 | | | | — | | | $ | 7,188,127 | | | | — | | | | — | | | $ | 13,678,057 | |
| (1) | The amount shown represents the market value of unvested stock options, RSUs and performance shares that would become fully vested following a qualifying change in control transaction on December 27, 2019,31, 2020, the last trading day of fiscal 2019.2020. |
| (2) | All outstanding and unvested equity awards will only vest upon a change in control if not assumed by acquiror or employment is terminated by the company without cause or by the team member for good reason within 24 months of change in control. |
Lawrence P. MolloyDenise Paulonis
| | Executive Benefits and Payments | | Voluntary or
For Cause
Termination
on
12/29/19 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
12/29/19 | | | Death or
Disability
on
12/29/19 | | | Change of
Control with
No Termination
on
12/29/19 | | | Change of
Control with
Termination
within 24 months
of
12/29/19 | | | Voluntary or
For Cause
Termination
on
Jan. 3, 2021 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
Jan. 3, 2021(1) | | | Death or
Disability
on
Jan. 3, 2021 | | | Change in
Control with
No Termination
on
Jan. 3, 2021 | | | Change in
Control with
Qualifying
Termination
within 24 months
of
Jan. 3, 2021 | | Compensation: | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 487,500 | | Cash severance | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 650,000 | | | | — | | | | — | | | $ | 1,300,000 | | Health and welfare benefits | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | $ | 5,587 | | | | — | | | | — | | | $ | 11,174 | | Equity treatment(1)(2)(3) | | | — | | | | — | | | | — | | | | — | | | $ | 112,534 | | | Equity treatment(2)(3) | | | | — | | | | — | | | | — | | | | — | | | $ | 1,649,350 | | | | | | | | | | | Total | | | — | | | | — | | | | — | | | | — | | | $ | 112,534 | | | | — | | | $ | 655,587 | | | | — | | | | — | | | $ | 3,448,024 | |
| (1) | The amount shown representsBecause Ms. Paulonis would not have been employed by us for 12 months as of January 3, 2021, she would not have been entitled to any cash severance or benefits under the market value of unvested RSUs that would become fully vested following a qualifying change in control transaction on December 27, 2019, the last trading day of fiscal 2019.
|
(2) | All outstanding and unvested equity awards will only vest uponPlan absent a change in control termination. The amount included here is what Ms. Palounis would have been entitled to if not assumedshe had been employed by acquiror or employment or board service is terminated by the company without cause or by the individualus for good reason within 24at least 12 months as of change in control.
|
(3) | Equity awards granted to Mr. Molloy were in connection with his service as a member of our board of directors and not in consideration of his service as our Interim Chief Financial Officer.January 3, 2021.
|
| | | | | 44 Sprouts Farmers Market2021 Proxy Statement | | | | 2020 Proxy StatementSprouts Farmers Market 43 |
Brandon F. Lombardi
| | | | | | | | | | | | | | | | | | | | | | Executive Benefits and Payments | | Voluntary or
For Cause
Termination
on
12/29/19 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
12/29/19(1) | | | Death or
Disability
on
12/29/19(1) | | | Change of
Control with
No Termination
on
12/29/19 | | | Change of
Control with
Termination
within 24 months
of
12/29/19 | | Compensation: | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | $ | 404,041 | | | $ | 194,095 | | | | — | | | $ | 285,000 | | Cash severance | | | — | | | $ | 475,000 | | | $ | 237,500 | | | | — | | | $ | 950,000 | | Health and welfare benefits | | | — | | | $ | 6,368 | | | | — | | | | — | | | $ | 12,736 | | Equity treatment(2)(3) | | | — | | | | — | | | | — | | | | — | | | $ | 877,033 | | | | | | | Total | | | — | | | $ | 885,409 | | | $ | 431,595 | | | | — | | | $ | 2,124,769 | |
(1) | The amounts shown represent amounts payable pursuant to Mr. Lombardi’s employment agreement.
|
| (2) | The amount shown represents the market value of unvested stock options, RSUs, RSAs and performance shares that would become fully vested following a qualifying change in control transaction. Options granted on March 4, 2019 are not included because the closing price of our common stock of $19.51transaction on December 27, 2019,31, 2020, the last trading day of fiscal 2019, was less than the exercise price of $23.12.2020. |
| (3) | All outstanding and unvested equity awards will only vest upon a change in control if not assumed by acquiror or employment is terminated by the company without cause or by the team member for good reason within 24 months of change in control. |
Dan J. SandersGilliam D. Phipps
| | Executive Benefits and Payments | | Voluntary or
For Cause
Termination
on
12/29/19 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
12/29/19 | | | Death or
Disability
on
12/29/19 | | | Change of
Control with
No Termination
on
12/29/19 | | | Change of
Control with
Termination
within 24 months
of
12/29/19 | | | Voluntary or
For Cause
Termination
on
Jan. 3, 2021 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
Jan. 3, 2021(1) | | | Death or
Disability
on
Jan. 3, 2021 | | | Change in
Control with
No Termination
on
Jan. 3, 2021 | | | Change in
Control with
Qualifying
Termination
within 24 months
of
Jan. 3, 2021 | | Compensation: | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | $ | 267,750 | | | | — | | | | — | | | $ | 267,750 | | | | — | | | | — | | | | — | | | | — | | | $ | 300,000 | | Cash severance | | | — | | | $ | 446,250 | | | | — | | | | — | | | $ | 892,500 | | | | — | | | $ | 500,000 | | | | — | | | | — | | | $ | 1,000,000 | | Health and welfare benefits | | | — | | | $ | 14,279 | | | | — | | | | — | | | $ | 28,558 | | | | — | | | $ | 21,064 | | | | — | | | | — | | | $ | 42,127 | | Equity treatment(2)(3) | | | — | | | | — | | | | — | | | | — | | | $ | 858,108 | | | | — | | | | — | | | | — | | | | — | | | $ | 709,651 | | | | | | | | | | | Total | | | — | | | $ | 728,279 | | | | — | | | | — | | | $ | 2,046,916 | | | | — | | | $ | 521,064 | | | | — | | | | — | | | $ | 2,051,778 | |
| (1) | Because Mr. Phipps would not have been employed by us for 12 months as of January 3, 2021, he would not have been entitled to any cash severance or benefits under the Plan absent a change in control termination. The amount included here is what Mr. Phipps would have been entitled to if he had been employed by us for at least 12 months as of January 3, 2021. |
| (2) | The amount shown represents the market value of unvested stock options, RSUs and performance shares that would become fully vested following a qualifying change in control transaction on December 31, 2020, the last trading day of fiscal 2020. |
| (3) | All outstanding and unvested equity awards will only vest upon a change in control if not assumed by acquiror or employment is terminated by the company without cause or by the team member for good reason within 24 months of change in control. |
David M. McGlinchey | | | | | | | | | | | | | | | | | | | | | | Executive Benefits and Payments | | Voluntary or
For Cause
Termination
on
Jan. 3, 2021 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
Jan. 3, 2021 | | | Death or
Disability
on
Jan. 3, 2021 | | | Change in
Control with
No Termination
on
Jan. 3, 2021 | | | Change in
Control with
Qualifying
Termination
within 24 months
of
Jan. 3, 2021 | | Compensation: | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | | — | | | | — | | | | — | | | $ | 270,000 | | Cash severance | | | — | | | $ | 450,000 | | | | — | | | | — | | | $ | 900,000 | | Health and welfare benefits | | | — | | | $ | 21,064 | | | | — | | | | — | | | $ | 42,127 | | Equity treatment(1)(2) | | | — | | | | — | | | | — | | | | — | | | $ | 1,009,224 | | | | | | | Total | | | — | | | $ | 471,064 | | | | — | | | | — | | | $ | 2,221,351 | |
| (1) | The amount shown represents the market value of unvested stock options, RSUs RSAs and performance shares that would become fully vested following a qualifying change in control transaction. Options granted on March 4, 2019 are not included because the closing price of our common stock of $19.51transaction on December 27, 2019,31, 2020, the last trading day of fiscal 2019, was less than the exercise price of $23.12.2020. |
| (2) | All outstanding and unvested equity awards will only vest upon a change in control if not assumed by acquiror or employment is terminated by the company without cause or by the team member for good reason within 24 months of change in control. |
| | | | | 44 2020 Proxy StatementSprouts Farmers Market | | | | Sprouts Farmers Market2021 Proxy Statement 45 |
David M. McGlincheyJ. Scott Neal
| Executive Benefits and Payments | | Voluntary or
For Cause
Termination
on
12/29/19 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
12/29/19 | | | Death or
Disability
on
12/29/19 | | | Change of
Control with
No Termination
on
12/29/19 | | | Change of
Control with
Termination
within 24 months
of
12/29/19 | | | Voluntary or
For Cause
Termination
on
Jan. 3, 2021 | | | Voluntary
for
Good Reason
or Involuntary
Not for Cause
Termination
on
Jan. 3, 2021(1) | | | Death or
Disability
on
Jan. 3, 2021 | | | Change in
Control with No Termination
on
Jan. 3, 2021 | | | Change in
Control with
Qualifying Termination
within 24 months
of
Jan. 3, 2021 | | Compensation: | | | | | | | | | | | | | | | | | | | | | Bonus | | | — | | | $ | 252,000 | | | | — | | | | — | | | $ | 252,000 | | | | — | | | | — | | | | — | | | | — | | | $ | 450,000 | | Cash severance | | | — | | | $ | 420,000 | | | | — | | | | — | | | $ | 840,000 | | | | �� | | | $ | 600,000 | | | | — | | | | — | | | $ | 1,200,000 | | Health and welfare benefits | | | — | | | $ | 20,551 | | | | — | | | | — | | | $ | 41,102 | | | | — | | | $ | 21,064 | | | | — | | | | — | | | $ | 42,127 | | Equity treatment(2)(3) | | | — | | | | — | | | | — | | | | — | | | $ | 367,588 | | | | — | | | | — | | | | — | | | | — | | | $ | 791,478 | | | | | | | | | | | Total | | | — | | | $ | 692,551 | | | | — | | | | — | | | $ | 1,500,690 | | | | — | | | $ | 621,064 | | | | — | | | | — | | | $ | 2,483,605 | |
| (1) | Because Mr. Neal would not have been employed by us for 12 months as of January 3, 2021, he would not have been entitled to any cash severance or benefits under the Plan absent a change in control termination. The amount included here is what Mr. Neal would have been entitled to if he had been employed by us for at least 12 months as of January 3, 2021. |
| (2) | The amount shown represents the market value of unvested stock options, RSUs and performance shares that would become fully vested following a qualifying change in control transaction. Options granted on March 4, 2019 are not included because the closing price of our common stock of $19.51transaction on December 27, 2019,31, 2020, the last trading day of fiscal 2019, was less than the exercise price of $23.12.2020. |
(2)(3) | All outstanding and unvested equity awards will only vest upon a change in control if not assumed by acquiror or employment is terminated by the company without cause or by the team member for good reason within 24 months of change in control. |
Pension Benefits and Nonqualified Deferred Compensation We do not offer a pension plan for any of our team members. In fiscal 2019,2020, we did not offer a nonqualified deferred compensation plan for any of our team members. Team members meeting certain requirements may participate in our 401(k) plan. Team Member Benefit and Stock Plans We have twoone team member benefit and stock plansplan under which we have issued equity to our team members andnon-employee members of the board, our 2011 Option Plan and 2013 Incentive Plan. CEO Pay Ratio SEC rules require us to disclose the total annual compensation of our Chief Executive Officer (referred to as “CEO”), the median of the total annual compensation of all employees other than the CEO, as well as their ratio to each other (referred to as the “CEO pay ratio”). Total compensation for Jack Sinclair and our median compensated employee is calculated in accordance with SEC rules applicable to the Summary Compensation Table. For our 20192020 fiscal year, these amounts were as follows: CEO’s annualized total compensation: $6,780,744$8,465,476 Our median compensated employee’s total compensation: $21,181$23,432 Ratio of CEO’s total compensation to our median compensated employee’s total compensation: 320:361:1 In determining the median compensated employee, we chose December 29, 2019January 3, 2021 as the determination date, and used the same methodology we employed in the prior year as our median compensated employee for fiscal 20182019 no longer works for our company. As of this date, we employed 28,70232,131 total team members (excluding Mr. Sinclair). We annualized compensation for Mr. Sinclair, as he joined our company on June 24, 2019, as well as permanent employees who were not employed by us for the full 20192020 year. In determining our median compensated employee and computing the CEO pay ratio, we did not use any of the exemptions permitted under SEC rules, nor did we rely on any material assumptions, adjustments (i.e.,cost-of-living adjustments) or estimates (i.e., statistical sampling). | | | | | 46 Sprouts Farmers Market2021 Proxy Statement | | | | 2020 Proxy StatementSprouts Farmers Market 45 |
We believe that the CEO pay ratio set forth above is a reasonable estimate for fiscal 2019,2020, calculated in a manner consistent with SEC rules. The SEC rules for identifying the median compensated employee and calculating the CEO pay ratio based on that employee’s total annual compensation allow companies to adopt a variety of methodologies, to apply certain exclusions and to make reasonable estimates and assumptions that reflect their compensation practices. As such, the CEO pay ratio reported by other companies may not be comparable to the CEO pay ratio reported for us, as other companies may have different employment and compensation practices and may utilize different permitted methodologies, exclusions, estimates and assumptions in calculating their own CEO pay ratios. | | | | | 46 Sprouts Farmers Market | | | | 20202021 Proxy Statement 47 |
| Equity Compensation Plan Information |
EQUITY COMPENSATION PLAN INFORMATION As of January 3, 2021, the following table shows the number of securities to be issued upon exercise of outstanding equity awards under our equity compensation plans. | | | | | | | | | | | | | | Plan Category | | Number of
Securities to
Be Issued
Upon
Exercise of
Outstanding
Equity
Awards
(a) | | | Weighted-
Average
Exercise
Price of
Outstanding
Equity
Awards
(b) | | | Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
(c) | | Equity Compensation Plans Approved by Stockholders(1) | | | 2,547,567 | (2) | | $ | 19.19 | (3) | | | 4,433,820 | | Equity Compensation Plans Not Approved by Stockholders | | | — | | | $ | — | | | | — | | | | | | | Total | | | 2,547,567 | | | $ | 19.19 | | | | 4,433,820 | |
| (1) | Represents our 2013 Incentive Plan. |
| (2) | Includes 901,958 shares of common stock issuable upon vesting of outstanding RSUs, 315,401 shares of common stock issuable upon vesting of outstanding performance shares (assuming target performance) and 1,330,208 shares of common stock issuable upon exercise of outstanding stock options granted under the 2013 Incentive Plan. |
| (3) | The weighted-average exercise price does not include the shares issuable upon vesting of RSUs or performance share awards that have no exercise price. |
| | | | | | 48 2021 Proxy Statement | | | | Sprouts Farmers Market |
| Equity Compensation Plan Information
|
EQUITY COMPENSATION PLAN INFORMATION
As of December 29, 2019, the following table shows the number of securities to be issued upon exercise of outstanding equity awards under our equity compensation plans.
| | | | | | | | | | | | | | Plan Category | | Number of
Securities to
Be Issued
Upon
Exercise of
Outstanding
Equity
Awards
(a) | | | Weighted-
Average
Exercise
Price of
Outstanding
Equity
Awards
(b) | | | Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
(Excluding
Securities
Reflected in
Column (a))
(c) | | Equity Compensation Plans Approved by Stockholders(1) | | | 1,571,141 | (3) | | $ | 29.68 | (4) | | | 5,911,063 | | Equity Compensation Plans Not Approved by Stockholders(2) | | | — | | | $ | — | | | | — | | | | | | | Total | | | 1,571,141 | | | $ | 29.68 | | | | 5,911,063 | |
(1) | Represents our 2013 Incentive Plan.
|
(2) | No awards remain outstanding under our 2011 Option Plan.
|
(3) | Includes 754,257 shares of common stock issuable upon vesting of outstanding RSUs, 55,053 shares of common stock issuable upon vesting of outstanding RSAs, 224,773 shares of common stock issuable upon vesting of outstanding performance shares and 537,058 shares of common stock issuable upon exercise of outstanding stock options granted under the 2013 Incentive Plan.
|
(4) | The weighted-average exercise price does not include the shares issuable upon vesting of RSUs, RSAs or performance share awards that have no exercise price.
|
| | | | | Sprouts Farmers Market | | | | 2020 Proxy Statement 47 |
| Report of the Audit Committee |
REPORT OF THE AUDIT COMMITTEE At the end of fiscal 2019,2020, the audit committee consisted of Doug G. Rauch (chairperson), Joel D. Anderson and Kristen E. Blum4.Blum. All of the members of the committee are “independent” of our company and management, as independence is defined in applicable rules of the SEC and the NASDAQ Stock Market. Our board has also determined that Mr. Anderson is an “audit committee financial expert” within the meaning of SEC regulations, and that each member of our audit committee can read and understand fundamental financial statements in accordance with audit committee requirements. In arriving at this determination, the board has examined each audit committee member’s scope of experience in financial roles and the nature of their employment. The purpose of the audit committee is to provide oversight of the company’s accounting and financial reporting processes, audits of the financial statements of the company and compliance with applicable legal requirements and regulations. The primary responsibilities of the committee include reviewing andpre-approving the engagement of our independent registered public accounting firm, reviewing our annual and quarterly financial statements and reports, discussing the statements and reports with our independent registered public accounting firm and management and reviewing and monitoring our accounting principles, accounting policies, financial and accounting controls and compliance with legal and regulatory requirements. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The independent auditor is responsible for auditing the financial statements and expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles. Our board of directors has adopted a written charter for our audit committee, available atinvestors.sprouts.com, that reflects, among other things, requirements of the Sarbanes-Oxley Act of 2002, rules adopted by the SEC, and rules of the NASDAQ Stock Market. The inclusion of our website address in this proxy statement does not include or incorporate by reference the information on or accessible through our website into this proxy statement. In fulfilling its oversight responsibilities, the committee reviewed and discussed with management and the independent auditor the audited financial statements at January 3, 2021 and December 29, 2019 and December 30, 2018 and for each of the years in the three-year period ended December 29, 2019.January 3, 2021. The committee discussed with the independent auditor the matters required to be discussed by Public Company Accounting Oversight Board (PCAOB) AS 1301: “Communications with Audit Committees”, and other applicable regulations. This included a discussion of the independent auditor’s judgments as to the quality, not just the acceptability, of our company’s accounting principles and such other matters as are required to be discussed with the committee under generally accepted auditing standards. In addition, the committee received from the independent auditor written disclosures and the letter required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the audit committee concerning independence. The committee also discussed with the independent auditor the independent auditor’s independence from management and our company, including the matters covered by the written disclosures and letter provided by the independent auditor. The committee discussed with our independent auditor the overall scope and plans for its audit. The committee meets with the independent auditor, with and without management present, to discuss the results of the independent auditor’s examinations, its evaluations of our company, the internal controls, and the overall quality of the financial reporting. The committee held four meetings during fiscal 2019.2020. Based on the reviews and discussions referred to above, the committee recommended to the board of directors, and the board approved, that the audited financial statements be included in the Annual Report on Form10-K for the fiscal year ended December 29, 2019January 3, 2021 for filing with the Securities and Exchange Commission. 4 Mr. Rauch joined the audit committee as chairperson upon his appointment to the board of directors on February 25, 2020, subsequent to the audit committee’s approval of the foregoing report.
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| Report of the Audit Committee |
The report has been furnished by the audit committee to our board of directors. Doug G. Rauch, Chairperson Joel D. Anderson Kristen E. Blum The information contained in the “Report of the Audit Committee” is not considered to be “soliciting material,” “filed” or incorporated by reference in any past or future filing by the company under the Exchange Act or the Securities Act of 1933 unless and only to the extent that the company specifically incorporates it by reference. | | | | | 50 Sprouts Farmers Market2021 Proxy Statement | | | | 2020 Proxy StatementSprouts Farmers Market 49 |
| Proposal 2: Advisory Vote on Executive Compensation(“Say-on-Pay”) |
PROPOSAL 2: ADVISORY VOTE ON EXECUTIVE COMPENSATION(“SAY-ON-PAY”) Background The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 enables our stockholders to vote to approve, on an advisory(non-binding) basis, the compensation of our named executive officers as disclosed in this proxy statement in accordance with SEC rules. Summary We are asking our stockholders to provide advisory approval of the compensation of our named executive officers (which consist of individuals serving as our Chief Executive Officer and Chief Financial Officer, as well as our three other most highly compensated executive officers during our fiscal year ended December 29, 2019)January 3, 2021), as such compensation is described in the“Executive Compensation – Compensation Discussion and Analysis” section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure set forth in this proxy statement, beginning on page 23.25. We urge our stockholders to review the completeExecutive Compensation section included in this proxy statement for more information. Our executive compensation program is designed to promote the creation of long-term stockholder value by paying for performance, attracting and retaining valuable team members and aligning the interests of our named executive officers with those of our stockholders. Our fiscal 20192020 executive officer compensation program generally consisted of base salary, annual performance-based cash bonus, equity awards in the form of restricted stock awards,units, stock options and performance share awards that are earned upon the achievement of EBITEBT targets over a three-year performance period, benefits generally available to all of our salaried team members and limited perquisites. The fixed components (base salary and benefits) of our named executive officer compensation are designed to be competitive in order to induce talented executives to join our company. The variable cash bonus is tied specifically to the achievement of company-wide objectives and is designed so that above-average performance is rewarded with above-average rewards but capped to avoid windfall payments. The equity awards are subject to both performance and time-based vesting, which will provide retention value and reward sustained performance that is aligned with long-term stockholder interests. By tying a large portion of executive compensation to achievement of our operational goals, we seek to closely align the interests of our named executive officers with the interests of our stockholders. Consistent with ourpay-for-performance philosophy, our strong performance during 20192020 resulted in short-term incentive awards at 68.8%300% of the target levels and long-term incentives that may yet be achieved based on our three-year performance period for performance shares granted in fiscal 2019.2020. Our board of directors believes that the information provided above and within the “Executive Compensation” section of this proxy statement demonstrates that our executive compensation program is designed appropriately and is working to ensure that management’s interests are aligned with our stockholders’ interests to support long-term value creation. In accordance with the requirements of Section 14A of the Exchange Act and the related rules of the SEC, our board of directors will request your advisory vote on the following resolution at the Annual Meeting: RESOLVED, that the compensation paid to the company’s named executive officers for the fiscal year ended December 29, 2019,January 3, 2021, as disclosed in this proxy statement pursuant to the SEC’s executive compensation disclosure rules (which disclosure includes the Compensation Discussion and Analysis, the compensation tables and the narrative discussion that accompanies the compensation tables), is hereby approved. | | | | | 50 2020 Proxy Statement | | | | Sprouts Farmers Market |
| Proposal 2: Advisory Vote on Executive Compensation(“Say-on-Pay”)
|
Required Vote Thesay-on-pay proposal requires the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 51 |
| Proposal 2: Advisory Vote on Executive Compensation (“Say-on-Pay”) |
Thesay-on-pay vote is advisory, and therefore not binding on our company, our compensation committee or our board of directors. Althoughnon-binding, the vote will provide information to our compensation committee and our board of directors regarding investor sentiment about our executive compensation philosophy, policies and practices, which our compensation committee and our board of directors will be able to consider when determining executive compensation for the years to come. Recommendation of the Board OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” ADOPTION OF THE RESOLUTION APPROVING THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS FOR THE FISCAL YEAR ENDED DECEMBER 29, 2019,JANUARY 3, 2021, AS DESCRIBED IN THE“EXECUTIVE COMPENSATION – COMPENSATION DISCUSSION AND ANALYSIS” SECTION AND THE RELATED TABULAR AND NARRATIVE DISCLOSURE SET FORTH IN THIS PROXY STATEMENT. | | | | | Sprouts Farmers Market52 | | | | 2020 Proxy Statement 51 |
| Proposal 3: Advisory Vote on Determining the Frequency ofSay-on-Pay Votes(“Say-on-Frequency”)
|
PROPOSAL 3: ADVISORY VOTE ON DETERMINING THE FREQUENCY OFSAY-ON-PAY VOTES
(“SAY-ON-FREQUENCY”)
Background
The Dodd-Frank Act enables our stockholders to indicate how frequently they believe we should seek asay-on-pay vote. Stockholders have the option of recommending asay-on-pay vote every year, every two years or every three years or abstaining from making a recommendation.
Summary
We currently conduct asay-on-pay vote every year. Our board of directors has considered the advantages and disadvantages of the annual frequency of thesay-on-pay vote. Based on its analysis and feedback from our stockholders, our board of directors believes that continuing to ask our stockholders to vote on executive compensation each year would be the most meaningful for our board of directors and our compensation committee and best serve the interests of our company and its stockholders. Our board of directors believes an annualsay-on-pay advisory vote will continue to provide the most timely feedback on executive compensation arrangements, plans, programs and policies as executive compensation disclosures are made annually.
Stockholders should recognize, however, that it may not be appropriate or feasible to change compensation programs already in place for the year in which the vote occurs since the advisory vote on executive compensation will take place after the beginning of the compensation year. Stockholders also should recognize that their recommendation may be modified in the future if an annual frequency vote becomes burdensome or otherwise proves to be less helpful than originally expected.
Required Vote
Thesay-on-frequency proposal requires a plurality of the shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. Therefore, the frequency option (one year, two years or three years) that receives the greatest number of votes shall be passed.
Thesay-on-frequency vote is advisory, and therefore not binding on our company, our compensation committee or our board of directors. We will consider stockholders to have expressed a preference for the frequency that receives the largest number of favorable votes. Our board of directors also may from time to time decide that it is in the best interests of our company and its stockholders to hold the frequency vote more or less frequently than thenon-binding option preferred by our stockholders.
Recommendation of the Board
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “ONE YEAR” ON THE PROPOSAL TO DETERMINE THE FREQUENCY OFSAY-ON-PAY VOTES.
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| Proposal 4:3: Ratification of Appointment of Independent Registered Public Accounting Firm |
PROPOSAL 4:3: RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Our audit committee has appointed PricewaterhouseCoopers LLP, an independent registered public accounting firm (referred to as “PwC”), to audit the consolidated financial statements of our company for the fiscal year ending January 3, 2021,2, 2022 and recommends that stockholders vote in favor of the ratification of such appointment. In the event of a negative vote on such ratification, the audit committee will reconsider its selection. We anticipate that representatives of PwC will be present at the Annual Meeting, will have the opportunity to make a statement if they desire, and will be available to respond to appropriate questions. Aggregate fees billed to our company for the fiscal years ended January 3, 2021 and December 29, 2019 and December 30, 2018 by PwC, our independent registered public accounting firm, are as follows: | | | | 2019 | | | 2018 | | | 2020 | | | 2019 | | Audit fees(1) | | $ | 1,400,000 | | | $ | 1,546,100 | | | $ | 1,415,000 | | | $ | 1,425,000 | | Audit-related fees | | $ | — | | | $ | — | | | $ | — | | | $ | — | | Tax fees(2) | | $ | — | | | $ | 9,600 | | | $ | 49,000 | | | $ | — | | All other fees(3) | | $ | 2,700 | | | $ | 1,800 | | | $ | 2,700 | | | $ | 2,700 | | | | | | | | | | | Total | | $ | 1,402,700 | | | $ | 1,557,500 | | | $ | 1,466,700 | | | $ | 1,427,700 | |
| (1) | Audit fees include (i) fees associated with (i) the audits of our consolidated financial statements and the effectiveness of our internal control over financial reporting, (ii) reviews of our interim quarterly consolidated financial statements and (iii) consents and other items related to SEC matters. |
| (2) | Tax fees for 2018 consist of consulting work related to home delivery2020 include fees associated with tax compliance and tax planning services. |
| (3) | All other fees consist of licensing fees for PwC’s accounting research software. |
Audit CommitteePre-Approval Policies and Procedures Our audit committee has adopted policies and procedures for thepre-approval of audit services, internal control-related services and permittednon-audit services rendered by our independent registered public accounting firm.Pre-approval may also be given as part of our audit committee’s approval of the scope of the engagement of the independent registered public accounting firm or on an individual,case-by-case basis before the independent registered public accounting firm is engaged to provide each service. The chairman of the audit committee has been delegated the authority topre-approve any engagement for audit services or permittednon-audit services (other than internal control-related services, which must bepre-approved by the full audit committee), provided the chairman must present any decisions made under the auspices of this authority to the full committee at the next scheduled meeting. All of the services provided by PwC described above were approved by our audit committee pursuant to our audit committee’spre-approval policies. Vote Required Ratification of the appointment of PwC to audit the consolidated financial statements of our company for the fiscal year ending January 3, 20212, 2022 will require the affirmative vote of a majority of shares present in person or represented by proxy at the meeting and entitled to vote on the proposal. Recommendation of the Board OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE RATIFICATION OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM OF OUR COMPANY FOR THE FISCAL YEAR ENDING JANUARY 3, 2021.2, 2022. | | | | | | Sprouts Farmers Market | | | | 20202021 Proxy Statement 53 |
| Security Ownership of Certain Beneficial Owners and Management |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information regarding the beneficial ownership of our common stock as of the record date, March 2, 2020,29, 2021, by the following: each of our directors and named executive officers; all of our directors and executive officers as a group; and each person, or group of affiliated persons, who is known by us to beneficially own more than 5% of our common stock. For further information regarding material transactions between us and certain of our stockholders, see “Certain Relationships and Related Party Transactions.” Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including options, restricted stock and restricted stock units that are currently exercisable or exercisable within 60 days of the record date, March 2, 2020.29, 2021. Shares issuable pursuant to options are deemed outstanding for computing the percentage of the person holding such options, but are not outstanding for computing the percentage of any other person. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose. Our calculation of the percentage of beneficial ownership is based on 117,543,668118,194,576 shares of common stock outstanding as of March 2, 2020.29, 2021. Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Sprouts Farmers Market, Inc., 5455 East High Street, Suite 111, Phoenix, Arizona 85054.
| | | | | | | | | | Name of Beneficial Owner | | Shares
Beneficially
Owned(1) | | | Percentage
Beneficially
Owned | | Named Executive Officers and Directors: | | | | | | | | | Jack L. Sinclair(2) | | | — | | | | — | | Denise A. Paulonis(3) | | | — | | | | — | | Brandon F. Lombardi(4) | | | 72,887 | | | | * | | Dan J. Sanders(5) | | | 43,771 | | | | * | | David M. McGlinchey(6) | | | 13,374 | | | | * | | Joel D. Anderson(7) | | | 10,400 | | | | * | | Kristen E. Blum(8) | | | 16,981 | | | | * | | Joseph Fortunato(9) | | | 30,525 | | | | * | | Terri Funk Graham(10) | | | 30,803 | | | | * | | Lawrence P. Molloy(11) | | | 50,803 | | | | * | | Joseph O’Leary(12) | | | 6,854 | | | | * | | Doug G. Rauch(13) | | | — | | | | * | | All directors and executive officers as a group (13 persons) | | | 342,371 | | | | * | | 5% Stockholders: | | | | | | | | | T. Rowe Price Associates, Inc.(14) | | | 13,771,533 | | | | 11.7 | % | BlackRock, Inc.(15) | | | 12,447,459 | | | | 10.6 | % | The Vanguard Group(16) | | | 11,167,396 | | | | 9.5 | % | Renaissance Technologies LLC(17) | | | 7,477,220 | | | | 6.4 | % |
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| Security Ownership of Certain Beneficial Owners and Management |
Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Sprouts Farmers Market, Inc., 5455 East High Street, Suite 111, Phoenix, Arizona 85054. | | | | | | | | | | Name of Beneficial Owner | | Shares
Beneficially Owned(1) | | | Percentage
Beneficially
Owned | | Named Executive Officers and Directors: | | | | | | | | | Jack L. Sinclair(2) | | | 99,106 | | | | * | | Denise A. Paulonis(3) | | | 21,481 | | | | * | | Gilliam D. Phipps(4) | | | 13,163 | | | | * | | David M. McGlinchey (5) | | | 27,976 | | | | * | | J. Scott Neal(6) | | | — | | | | * | | Joel D. Anderson(7) | | | 24,253 | | | | * | | Kristen E. Blum(8) | | | 31,193 | | | | * | | Joseph Fortunato(9) | | | 48,792 | | | | * | | Terri Funk Graham(10) | | | 33,292 | | | | * | | Lawrence P. Molloy(11) | | | 61,070 | | | | * | | Joseph O’Leary(12) | | | 18,316 | | | | * | | Doug G. Rauch(13) | | | 5,694 | | | | * | | All directors and executive officers as a group (14 persons) | | | 491,753 | | | | * | | 5% Stockholders: | | | | | | | | | The Vanguard Group(14) | | | 12,087,470 | | | | 10.2 | % | BlackRock, Inc.(15) | | | 10,374,989 | | | | 8.8 | % | Renaissance Technologies LLC(16) | | | 7,599,820 | | | | 6.4 | % |
| * | Less than 1% of the outstanding shares of common stock |
| (1) | Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of our common stock subject to options or restricted stock units held by that person that are currently exercisable or exercisable within 60 days of the record date, March 2, 2020,29, 2021, are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities. |
| (2) | The amount listed includes (a) 42,467 shares of common stock and (b) 56,639 shares issuable upon exercise of stock options that are currently vested or will become vested within 60 days after March 29, 2021. |
| (3) | The amount listed includes (a) 10,325 shares of common stock and (b) 11,156 shares issuable upon exercise of stock options that are currently vested or will become vested within 60 days after March 29, 2021. |
| (4) | The amount listed includes (a) 5,190 shares issuable upon exercise of stock options that are currently vested or will become vested within 60 days after March 29, 2021 and (b) 7,973 shares of restricted stock that will become vested within 60 days of March 29, 2021. |
| (5) | The amount listed includes (a) 12,912 shares of common stock and (b) 15,064 shares issuable upon exercise of stock options that are currently vested or will become vested within 60 days after March 29, 2021. |
| (6) | Mr. SinclairNeal was appointed as our Chief ExecutiveFresh Merchandising Officer on June 24, 2019,15, 2020, and none of his outstanding equity awards are currently vested or exercisable or will become vested or exercisable within 60 days of the record date, March 2, 2020. |
(3) | Ms. Paulonis was appointed as our Chief Financial Officer on February 21, 2020, and none of her outstanding equity awards are currently vested or exercisable or will become vested or exercisable within 60 days of the record date, March 2, 2020.
|
(4) | The amount listed includes (a) 22,938 shares of restricted stock that become vested or will become vested within 60 days of March 2, 2020 and (b) 49,949 shares issuable upon exercise of stock options that are currently vested or will become vested within 60 days after March 2, 2020.
|
(5) | The amount listed includes (a) 14,691 shares of common stock, (b) 22,776 shares of restricted stock that become vested or will become vested within 60 days of March 2, 2020 and (c) 6,304 shares issuable upon exercise of stock options that are currently vested or will become vested within 60 days after March 2, 2020.
|
(6) | The amount listed includes (a) 5,000 shares of common stock, (b) 4,704 shares of restricted stock that become vested or will become vested within 60 days of March 2, 2020 and (c) 3,670 shares issuable upon exercise of stock options that are currently vested or will become vested within 60 days after March 2, 2020.29, 2021.
|
| (7) | The amount listed includes 10,400(a) 18,559 shares of common stock.stock and (b) 5,694 shares of restricted stock that will become vested within 60 days of March 29, 2021. |
| (8) | The amount listed includes 16,981(a) 25,499 shares of common stock.stock and (b) 5,694 shares of restricted stock that will become vested within 60 days of March 29, 2021. |
| (9) | The amount listed includes (a) 20,70739,475 shares of common stock, and (b) 9,8183,623 shares issuable upon exercise of stock optionsoption that are currently vested or will become vested with 60 days of March 29, 2021, and (c) 5,694 shares of restricted stock that become |
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| Security Ownership of Certain Beneficial Owners and Management |
| vested of will become vested within 60 days afterof March 2, 2020.29, 2021. Of such shares of common stock, 15,000 shares are held by Fortunato 2020 Irrevocable Trust, an entity established by Mr. Fortunato for estate planning purposes; Mr. Fortunato (i) may be deemed to have beneficial ownership of the shares owned of record thereby, and (ii) has sole voting and investment power with respect to such shares. |
| (10) | The amount listed includes (a) 18,20723,975 shares of common stock, and (b) 12,5963,623 shares issuable upon exercise of stock optionsoption that are currently vested or will become vested with 60 days of March 29, 2021, and (c) 5,694 shares of restricted stock that will become vested within 60 days afterof March 2, 2020.29, 2021. |
| (11) | The amount listed includes (a) 38,20751,753 shares of common stock, and (b) 12,5963,623 shares issuable upon exercise of stock optionsoption that are currently vested or will become vested with 60 days of March 29, 2021, and (c) 5,694 shares of restricted stock that will become vested within 60 days afterof March 2, 2020.29, 2021. |
| (12) | The amount listed includes 6,854(a) 12,622 shares of common stock.stock and (b) 5,694 shares of restricted stock that will become vested within 60 days of March 29, 2021. |
| (13) | Mr. Rauch was appointed to our board on February 25, 2020, and holds no outstanding equity asThe amount listed includes 5,694 shares of the record date,restricted stock that will become vested within 60 days of March 2, 2020.29, 2021.
|
| (14) | Based upon information contained in Schedule 13G/A filed by the beneficial owner with the SEC on February 14, 2020. Consists of 13,771,53310, 2021. The Vanguard Group reports shared voting power with respect to 92,480 shares, of common stock of which T. Rowe Price Associates, Inc. (“Price Associates”) has sole dispositive power including 5,051,985with respect to 11,898,863 shares of common stock of which Price Associates has sole votingand shared dispositive power and 6,007,400 shares of common stock of which T. Rowe PriceMid-Cap Growth Fund, Inc. has sole voting power.with respect to 188,607 shares. The address of Price Associates and T. Rowe PriceMid-Cap Growth Fund, Inc.The Vanguard Group is 100 E. Pratt Street, Baltimore, Maryland 21202.Vanguard Blvd., Malvern, PA 19355. |
| (15) | Based upon information contained in Schedule 13G/A filed by the beneficial owner with the SEC on February 10, 2020.1, 2021. Includes 12,062,0989,976,971 shares of which Blackrock, Inc. has sole voting power and 12,447,45910,374,989 shares of which Blackrock, Inc. has sole dispositive power as a parent holding company. The address of BlackRock, Inc. is 55 East 52nd Street, New York, New York, 10055. |
| (16) | Based upon information contained in Schedule 13G/A filed by the beneficial owner with the SEC on February 12, 2020. The Vanguard Group reports sole voting power with respect to 67,888 shares, sole dispositive power with respect to 11,097,196 shares, shared voting power with respect to 19,025 shares and shared dispositive power with respect to 70,200 shares. As the parent holding company, The Vanguard Group, Inc. reports that its wholly-owned subsidiary, Vanguard Fiduciary Trust Company is the beneficial owner of 51,175 shares as a result of its serving as investment manager of collective trust accounts, and its wholly-owned subsidiary, Vanguard Investments Australia, Ltd. is the beneficial owner of 35,738 shares as a result of its serving as investment manager of Australian investment offerings. The address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. |
(17) | Based upon information contained in Schedule 13G filed by the beneficial owner with the SEC on February 12, 2020.11, 2021. Renaissance Technologies LLC and Renaissance Technologies Holdings Corporation report sole voting power with respect to 7,356,9627,549,220 shares and sole dispositive power with respect to 7,392,541 shares and shared dispositive power with respect to 84,6797,599,820 shares as an investment adviser. The address of Renaissance Technologies LLC is 800 Third Avenue, New York, New York 10022.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Other than compensation arrangements, we describe below transactions and series of similar transactions during our last three fiscal years to which we were a party or will be a party, in which: the amounts involved exceeded or will exceed $120,000; and any of our directors, executive officers, or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest. Compensation arrangements for our directors and named executive officers are described elsewhere in this proxy statement. CV Sciences We purchased certainbotanical-based products for resale from CV Sciences, Inc., a company in which Terri Funk Graham has served on the board of directors since August 2019. Our purchases from this company in fiscal 20192020 totaled $0.3$0.1 million. Ms. Graham does not have a direct or indirect interest in such transactions. Indemnification of Officers and Directors Our certificate of incorporation and bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted by Delaware law. In addition, we entered into indemnification agreements with each of our directors and executive officers. Policies and Procedures for Related Party Transactions We have adopted a policy that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, and any members of the immediate family of any of the foregoing persons, are not permitted to enter into a related person transaction with us without the prior consent of our audit committee. Any request for us to enter into a transaction with an executive officer, director, nominee for election as a director, beneficial owner of more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, in which the amount involved exceeds $120,000 and such person would have a direct or indirect interest, must first be presented to our audit committee for review, consideration, and approval. In approving or rejecting any such proposal, our audit committee is to consider the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related person’s interest in the transaction. All of the transactions described above were entered into after presentation, consideration and approval by our audit committee. DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS Pursuant to Rule14a-8 under the Exchange Act, any proposal that a stockholder of our company wishes to have included in the proxy statement in connection with our 20212022 annual meeting of stockholders must be submitted to us no later than November 16, 2020.December 10, 2021. All such stockholder proposals must comply with the procedures outlined in Rule14a-8. In accordance with our current bylaws, stockholder proposals, including stockholder nominations for candidates for election as directors, that are intended to be presented by stockholders at the 20212022 annual meeting of stockholders but not submitted for inclusion in the proxy statement for our 2021 Annual Meeting2022 annual meeting of Stockholdersstockholders pursuant to Rule14a-8, must be received by us no earlier than November 29, 2020December 27, 2021 and no | | | | | | Sprouts Farmers Market | | | | 2021 Proxy Statement 57 |
later than December 29, 2020,January 26, 2022, unless we change the date of our 20212022 annual meeting more than 30 days before or more than 70 days after April 28, 2020,May 26, in which case stockholder proposals must be received by | | | | | 56 2020 Proxy Statement | | | | Sprouts Farmers Market |
us no earlier than the close of business on the 150th day prior to such annual meeting and not later than the close of business on the later of (x) the 120th day prior to such annual meeting or (y) the 10th day following the day on which we first make a public announcement of the date of such meeting. These time limits also apply in determining whether notice is timely for purposes of rules adopted by the SEC relating to the exercise of discretionary voting authority. All such stockholder proposals must include the specified information described in our bylaws. Proposals and other items of business should be directed to the attention of our Corporate Secretary at our principal executive offices, 5455 East High Street, Suite 111, Phoenix, Arizona 85054. DIRECTOR NOMINATIONS FOR INCLUSION IN OUR 20212022 PROXY MATERIALS (PROXY ACCESS) Under our proxy access bylaw, if a stockholder (or a group of up to 20 stockholders) who has owned at least 3% of our shares for at least three years and has complied with the other requirements set forth in our bylaws wants us to include director nominees (up to the greater of two nominees or 20% of the Board) in our 20212022 proxy materials for election at our 2021 Annual Meeting2022 annual meeting of Stockholders,stockholders, the nominations must be directed to the attention of our Corporate Secretary at our principal executive offices, 5455 East High Street, Suite 111, Phoenix, Arizona 85054, no earlier than November 29, 2020December 27, 2021 and no later than December 29, 2020.January 26, 2022. Any stockholder considering a proxy access nomination should carefully review our bylaws, which were included as Exhibit 3.2 to our Current Report on Form8-K, filed with the SEC on January 30, 2017. OTHER MATTERS We know of no other matters to be submitted at the meeting. If any other matters properly come before the meeting, it is the intention of the persons named in the enclosed proxy card to vote the shares they represent as our board of directors may recommend. Dated: March 16, 2020April 9, 2021 | | | | | 58 Sprouts Farmers Market2021 Proxy Statement | | | | 2020 Proxy StatementSprouts Farmers Market 57 |
APPENDIX A RECONCILIATION OFNON-GAAP FINANCIAL MEASURES This proxy statement contains financial measures, EBITDA, adjusted EBITDA, adjusted EBIT, adjusted net income and adjusted diluted earnings per share in discussing our company’s financial performance, as well as Plan EBITDAEBIT and Plan EBIT,EBT, that were used as performance targets in certain of our performance-based compensation items during 2019.2020. These measures are not calculated in accordance with accounting principles generally accepted in the United States of America (referred to as “GAAP”). We define EBITDA as net income before interest expense, provision for income tax, and depreciation, amortization and accretion and adjusted EBITDA as EBITDA excluding the impact of special items we do not consider representative of our ongoing financial performance. Plan EBIT and Plan EBITDA may contain further adjustments, as determined by our compensation committee.items. We define adjusted EBIT, adjusted net income and adjusted diluted earnings per share by adjusting the applicable GAAP measure to remove the impact of these special items. Plan EBIT and Plan EBT may contain further adjustments, as determined by our compensation committee. We believe the presentation of EBITDA, adjusted EBITDA, adjusted EBIT, adjusted net income and adjusted diluted earnings per share aids in the understanding of our business performance, but is not intended to be an alternative to GAAP measures. For the fiscal year ended December 29, 2019,January 3, 2021, there were no further adjustments used by our compensation committee to determine Plan EBIT and Plan EBITDA for purposes of certain of our performance-based compensation items; thus only adjusted EBIT and adjusted EBITDA are presented below. Thesenon-GAAP measures are intended to provide additional information only and do not have any standard meaning prescribed by GAAP. Use of these terms below may differ from similar measures reported by other companies. Because of their limitations, thesenon-GAAP measures should not be considered as measures of discretionary cash available to use to reinvest in growth of our business, or as measures of cash that will be available to meet our obligations. Thesenon-GAAP measures have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. The following table shows a reconciliation of EBITDA and adjusted EBITDA to net income for the fifty-three weeks ended January 3, 2021 and for the fifty-two weeks ended December 29, 2019 and December 30, 2018 and a reconciliation of EBIT, net income and diluted earnings per share to adjusted EBIT, adjusted net income and adjusted diluted earnings per share for the fifty-three weeks ended January 3, 2021 and for the fifty-two weeks ended December 29, 2019 and December 30, 2018.2019: | | | | | | Sprouts Farmers Market | | | | 20202021 Proxy Statement A-1 |
SPROUTS FARMERS MARKET, INC. AND SUBSIDIARIES NON-GAAP MEASURE RECONCILIATION (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) | | | | Fifty-two Weeks Ended
December 29,
2019 | | | Fifty-two Weeks Ended
December 30,
2018 | | | Fifty-three Weeks Ended
January 3,
2021 | | | Fifty-two Weeks Ended
December 29,
2019 | | Net income | | $ | 149,629 | | | $ | 158,536 | | | $ | 287,450 | | | $ | 149,629 | | Income tax provision (1) | | | 46,539 | | | | 37,260 | | | | 89,428 | | | | 46,539 | | Interest expense, net | | | 21,192 | | | | 27,435 | | | | 14,787 | | | | 21,192 | | | | | | | | | | | | | | | Earnings before interest and taxes (EBIT) | | | 217,360 | | | | 223,231 | | | | 391,665 | | | | 217,360 | | Depreciation, amortization and accretion | | | 122,804 | | | | 110,749 | | | | 126,508 | | | | 122,804 | | | | | | | | | | | | | | | Earnings before interest, taxes, depreciation and amortization (EBITDA) | | $ | 340,164 | | | $ | 333,980 | | | $ | 518,173 | | | $ | 340,164 | | | | | | | | | | | | | | | Special Items: | | | | | | | | | Executive compensation (2) | | $ | 508 | | | $ | 3,618 | | | Strategic initiatives (1) | | | $ | 8,835 | | | $ | — | | Store closures (3)(2) | | | — | | | | 7,961 | | | | — | | | | 508 | | | | | | | | | | | | | | | Total Special Items - pre tax | | | 508 | | | | 11,579 | | | | 8,835 | | | | 508 | | | | | | | | | | | | | | | Adjusted EBITDA | | $ | 340,672 | | | $ | 345,559 | | | $ | 527,008 | | | $ | 340,672 | | | | | | | | | | | | | | | | | | | | | | | | Net income | | $ | 149,629 | | | $ | 158,536 | | | $ | 287,450 | | | $ | 149,629 | | Special Items: | | | | | | | | | Executive compensation, net of tax (2) | | | — | | | | 5,652 | | | Strategic initiatives, net of tax (1) | | | | 6,565 | | | | — | | Store closures, net of tax (3)(2) | | | 377 | | | | 5,921 | | | | — | | | | 377 | | | | | | | | | | Adjusted Net income beforeone-time tax benefits | | $ | 150,006 | | | $ | 170,109 | | | Income tax benefit related to Tax Act and otherone-time tax benefits (4) | | | — | | | | (2,573 | ) | | | | | | | | | | | | | | | Adjusted Net income | | $ | 150,006 | | | $ | 167,536 | | | $ | 294,015 | | | $ | 150,006 | | | | | | | | | | | | | | | | | | | | | | | | Diluted earnings per share | | $ | 1.25 | | | $ | 1.22 | | | $ | 2.43 | | | $ | 1.25 | | Adjusted diluted earnings per share | | $ | 1.25 | | | $ | 1.29 | | | $ | 2.45 | | | $ | 1.25 | | | | | | | | | | | Diluted weighted average shares outstanding | | | 119,742 | | | | 129,776 | | | | 118,224 | | | | 119,742 | |
| (1) | Income tax provision includes approximately a $12 million (or $0.10 per diluted share) benefit during thefifty-two weeks ended December 30, 2018 in excess federal and state tax for share based compensation primarily associated with the exercise of expiringpre-IPO options.
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(2) | During thefifty-two weeks ended December 30, 2018, we recordedone-timepre-tax compensation charges of $4 million associated with the resignation of our former CEO. Theafter-tax impact includes incremental tax expense associated with certain nondeductible executive compensation costs.
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(3) | During thefifty-two weeks ended December 30, 2018, in connection with the closure of two stores, we recordedone-timenon-cashpre-tax charges of $8 million primarilyIncludes professional fees related to the estimated fair value of the lease termination obligations and asset impairments.our ongoing strategic initiatives. After-tax impact includes the tax benefit on thepre-tax charge.
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(4)(2) | DuringIncludes the direct costs associated with store closures and relocation. fifty-twoAfter-tax weeks ended December 30, 2018, we adopted a tax calculation method change forimpact includes the accelerated deduction of certain items, resulting in a discrete tax benefit of $3 million.on the pre-tax charge.
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| | | | | A-2 20202021 Proxy Statement | | | | Sprouts Farmers Market |
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SPROUTS FARMERS MARKET, INC.
5455 East High Street, Suite 111
PHOENIX, AZ 85054
| | VOTE BY INTERNET - www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 04/27/2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically
SPROUTS FARMERS MARKET, INC. 5455 EAST HIGH STREET, SUITE 111 PHOENIX, AZ 85054
VOTE BY INTERNET
Before The Meeting - Go to www.proxyvote.com
Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 p.m. Eastern Time on May 25, 2021. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form.
During The Meeting - Go to www.virtualshareholdermeeting.com/SFM2021
You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions.
VOTE BY PHONE - 1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 p.m. Eastern Time on May 25, 2021. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge,
51 Mercedes Way, Edgewood, NY 11717.
e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE -1-800-690-6903
Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET on 04/27/2020. Have your proxy card in hand when you call and then follow the instructions.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.
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TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
D45342-P49288 KEEP THIS PORTION FOR YOUR RECORDS
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DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. DETACH AND RETURN THIS PORTION ONLY
SPROUTS FARMERS MARKET, INC.
The Board of Directors recommends you vote FOR the following Class II director nominees:
1. Election of Directors
Nominees:
01) Joseph Fortunato 02) Lawrence P. Molloy 03) Joseph D. O’Leary
For Withhold For All To withhold authority to vote for any individual All All Except nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
The Board of Directors recommends you vote FOR proposals 2 and 3.
2. To vote on a non-binding advisory resolution to approve the compensation paid to our named executive officers for fiscal 2020 (“say-on-pay”).
3. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending January 2, 2022.
NOTE: In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof.
For Against Abstain
Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
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All | | Withhold
All | | For All
Except
| | | | To withhold authority to vote for any individual nominee(s), mark “For All Except” and write the number(s) of the nominee(s) on the line below.
| | | | | | | | | | | The Board of Directors recommends you vote FOR the following Class I director nominees: | | | | | | ☐
| | ☐
| | ☐
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1. Election of Directors
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nominees
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 01) Joel D. Anderson 02) Terri Funk Graham 03) Doug G. Rauch | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR the following proposal:
| | | | | | | | | | For | | Against | | Abstain | | | | | | | 2. To vote on a non-binding advisory resolution to approve the compensation paid to our named executive officers for fiscal 2019 (“say-on-pay”).
| | | | | | ☐
| | ☐
| | ☐
| | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote 1 YEAR on the following proposal:
| | | | | | | | 1 year | | 2 years | | 3 years | | Abstain | | | | | | | 3. To vote on a non-binding advisory proposal on the frequency of future say-on-pay votes (“say-on-frequency”).
| | | | ☐
| | ☐
| | ☐
| | ☐
| | | | | | | | | | | | | | | | | | The Board of Directors recommends you vote FOR the following proposal:
| | | | | | | | | | For | | Against | | Abstain | | | | | | | 4. To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending January 03, 2021.
| | | | | | ☐
| | ☐
| | ☐
| | | | | | | | | | | | | | | | NOTE:In their discretion, the proxies are authorized to vote upon such other business as may properly come before the meeting or any adjournment or postponement thereof. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 
| | | | | | | | | | | | | | Yes
| | No
| | | | | | | | | | | | | | | | | | | | | | | | | | Please indicate if you plan to attend this meeting | | ☐ | | ☐ | | | | | | | | | | | | | | | | | | | | | | | | | | Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Signature [PLEASE SIGN WITHIN BOX]
| | Date | | | | | | | | | | | | | | | | Signature (Joint Owners) | | | | | | | | Date | | | | | | | | |
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting:
The Annual Report and Notice and Proxy Statement are available at www.proxyvote.com.
www.proxyvote.comD45343-P49288
SPROUTS FARMERS MARKET, INC. Annual Meeting of Stockholders May 26, 2021 8:00 AM Pacific Time
This proxy is solicited on behalf of the Board of Directors
The undersigned stockholder of SPROUTS FARMERS MARKET, INC., a Delaware corporation, hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and Proxy Statement, each dated April 9, 2021, and hereby appoints Denise A. Paulonis and Brandon F. Lombardi and each of them, proxies and attorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2021 Annual Meeting of Stockholders of SPROUTS FARMERS MARKET, INC., to be held on Wednesday, May 26, 2021, at 8:00 AM Pacific Time, via webcast at www.virtualshareholdermeeting.com/SFM2021, and at any adjournment or postponement thereof, and to vote all shares of common stock of SPROUTS FARMERS MARKET, INC. held of record by the undersigned at the close of business on March 29, 2021 as hereinafter specified upon the proposals set forth on the reverse side of this proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE THREE CLASS II DIRECTOR NOMINEES (PROPOSAL 1), “FOR” PROPOSAL 2, “FOR” PROPOSAL 3, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, “FOR” THE ELECTION OF THE THREE CLASS II DIRECTOR NOMINEES (PROPOSAL 1), “FOR” PROPOSAL 2, “FOR” PROPOSAL 3, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING. A majority of such proxies or substitutes as shall be present and shall act at said meeting or any adjournment or postponements thereof (or if only one shall be present and act, then that one) shall have and may exercise all of the powers of said proxies hereunder.
Continued and to be signed on reverse side — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — — —
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| | SPROUTS FARMERS MARKET, INC.
Annual Meeting of Stockholders
April 28, 2020 8:00 AM Local Time
This proxy is solicited on behalf of the Board of Directors
The undersigned stockholder of SPROUTS FARMERS MARKET, INC., a Delaware corporation, hereby acknowledges receipt of the notice of Annual Meeting of Stockholders and proxy statement, each dated March 16, 2020, and hereby appoints Denise A. Paulonis and Brandon F. Lombardi and each of them, proxies andattorneys-in-fact, with full power to each of substitution, on behalf and in the name of the undersigned, to represent the undersigned at the 2020 Annual Meeting of Stockholders of SPROUTS FARMERS MARKET, INC., to be held onTuesday, April 28, 2020, at 8:00 AM Local Time, at the Sprouts Farmers Market Store Support Office located at 5455 East High Street, Suite 111, Phoenix, Arizona 85054, and at any adjournment or postponement thereof, and to vote all shares of common stock of SPROUTS FARMERS MARKET, INC. held of record by the undersigned at the close of business on March 2, 2020 as hereinafter specified upon the proposals set forth on the reverse side of this proxy card.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE ELECTION OF THE THREE CLASS I DIRECTOR NOMINEES (PROPOSAL 1), “FOR” PROPOSAL 2, “1 YEAR” ON PROPOSAL 3, “FOR” PROPOSAL 4, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, “FOR” THE ELECTION OF THE THREE CLASS I DIRECTOR NOMINEES (PROPOSAL 1), “FOR” PROPOSAL 2, “1 YEAR” ON PROPOSAL 3, “FOR” PROPOSAL 4, AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY COME BEFORE THE MEETING. A majority of such proxies or substitutes as shall be present and shall act at said meeting or any adjournment or postponements thereof (or if only one shall be present and act, then that one) shall have and may exercise all of the powers of said proxies hereunder.
Continued and to be signed on reverse side
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