<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
United Natural Foods, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE>
UNITED NATURAL FOODS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 19, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Stockholders of United
Natural Foods, Inc., a Delaware corporation (the "Company"), will be held on
Friday, December 19, 1997 at 10:00 a.m. at the Westin Providence Hotel, One
West Exchange Street, Providence, Rhode Island 02903 (the "Meeting") for the
purpose of considering and voting upon the following matters:
1. To elect three Class I Directors for the ensuing three years and one
Class II Director for the ensuing year;
2. To ratify the appointment of KPMG Peat Marwick LLP as the Company's
independent public accountants for the current fiscal year; and
3. To transact such other business, if any, as may properly come before
the Meeting or any adjournment thereof.
The Board of Directors has no knowledge of any other business to be
transacted at the Meeting.
The Board of Directors has fixed the close of business on Monday, November
24, 1997 as the record date for the determination of stockholders entitled to
notice of and to vote at the Meeting and at any adjournments thereof. A list
of the Company's stockholders is open for examination to any stockholder at
the principal executive offices of the Company, 260 Lake Road, Dayville,
Connecticut 06241 and will be available at the Meeting.
A copy of the Company's Annual Report to Stockholders for the fiscal year
ended July 31, 1997, which contains consolidated financial statements and
other information of interest to stockholders, accompanies this Notice and the
enclosed Proxy Statement.
By Order of the Board of Directors,
Norman A. Cloutier,
Chairman of the Board and Chief
Executive Officer
November 25, 1997
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. NO
POSTAGE NEED BE AFFIXED IF THE PROXY CARD IS MAILED IN THE UNITED STATES.
<PAGE>
UNITED NATURAL FOODS, INC.
260 LAKE ROAD
DAYVILLE, CONNECTICUT 06241
----------------
PROXY STATEMENT
----------------
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 19, 1997
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of United Natural Foods, Inc, a Delaware corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders to be
held on Friday, December 19, 1997 at 10:00 a.m. at the Westin Providence
Hotel, One West Exchange Street, Providence, Rhode Island 02903 and at any
adjournments thereof (the "Meeting").
All proxies will be voted in accordance with the instructions of the
stockholder. If no choice is specified, the proxies will be voted in favor of
the matters set forth in the accompanying Notice of Meeting. Any proxy may be
revoked by a stockholder at any time before its exercise by delivery of a
written revocation to the Secretary of the Company. Attendance at the Meeting
will not itself be deemed to revoke a proxy unless the stockholder gives
affirmative notice at the Meeting that the stockholder intends to revoke the
proxy and vote in person.
On November 24, 1997, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote
an aggregate of 17,356,705 shares of common stock of the Company, $.01 par
value per share (the "Common Stock"). Each share entitles the record holder to
one vote on each of the matters to be voted upon at the Meeting.
THE NOTICE OF MEETING, THIS PROXY STATEMENT, THE ENCLOSED PROXY CARD AND THE
COMPANY'S ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED JULY 31,
1997 ARE BEING MAILED TO STOCKHOLDERS ON OR ABOUT NOVEMBER 25, 1997. THE
COMPANY WILL, UPON WRITTEN REQUEST OF ANY STOCKHOLDER, FURNISH WITHOUT CHARGE
A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JULY 31,
1997, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT EXHIBITS.
PLEASE ADDRESS ALL SUCH REQUESTS TO THE COMPANY, ATTENTION OF JOHN BREGGIA,
CONTROLLER, UNITED NATURAL FOODS, INC., 260 LAKE ROAD, DAYVILLE, CONNECTICUT
06241. EXHIBITS WILL BE PROVIDED UPON WRITTEN REQUEST AND PAYMENT OF AN
APPROPRIATE PROCESSING FEE.
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of shares of Common Stock as of October 31, 1997 by (i) each person
or entity known to the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each of the Company's directors and
director nominees, (iii) the Chief Executive Officer and the three other most
highly compensated executive officers during the fiscal year ended July 31,
1997 (collectively, the "Named Executive Officers") and (iv) all directors,
director nominees and executive officers as a group.
<TABLE>
<CAPTION>
SHARES PERCENTAGE OF
BENEFICIALLY SHARES BENEFICIALLY
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED OWNED (1)
- ------------------------------------ -------------- --------------------
<S> <C> <C>
5% STOCKHOLDERS
Norman A. Cloutier(2)....................... 3,380,841 19.3%
c/o United Natural Foods, Inc.
260 Lake Road
Dayville, CT 06241
Michael S. Funk(3).......................... 3,208,600 18.4%
c/o Mountain People's Warehouse
Incorporated
12745 Earhart Avenue
Auburn, CA 95602
Funk Family 1992 Revocable Living Trust(4).. 3,093,100 17.8%
c/o Michael S. Funk
Mountain People's Warehouse Incorporated
12745 Earhart Avenue
Auburn, CA 95602
Richard S. Youngman......................... 2,448,468 14.1%
c/o Stow Mills, Inc.
Stow Drive
Chesterfield, NH 03443
Employee Stock Ownership Trust(5)........... 2,091,432 12.0%
Robert G. Huckins, Trustee
15342 Sky High Road
Escondido, CA 92025
Barclay McFadden, III....................... 2,025,576 11.7%
c/o Stow Mills, Inc.
Stow Drive
Chesterfield, NH 03443
OTHER NAMED EXECUTIVE OFFICERS AND OTHER
DIRECTORS
Richard J. Williams(6)...................... 665,730 3.8%
Steven H. Townsend(7)....................... 154,250 *
Daniel V. Atwood(8)......................... 98,900 *
Andrea R. Hendricks......................... 0 0
Kevin T. Michel............................. 0 0
Thomas B. Simone............................ 0 0
All executive officers, directors and
director nominees, as a group
(10 persons)(9)............................ 11,982,365 67.3%
</TABLE>
2
<PAGE>
- --------
* Less than 1%
(1) The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, beneficial ownership includes any shares
as to which the individual has sole or shared voting power or investment
power and also any shares which the individual has the right to acquire
within 60 days after October 31, 1997 through the exercise of any stock
option or other right. The inclusion herein of such shares, however, does
not constitute an admission that the named stockholder is a direct or
indirect beneficial owner of such shares. Unless otherwise indicated, each
person or entity named in the table has sole voting power and investment
power (or shares such power with his or her spouse) with respect to all
shares of capital stock listed as owned by such person or entity.
(2) Includes 178,750 shares issuable within the 60-day period following
October 31, 1997 pursuant to the exercise of stock options. Does not
include 31,016 shares held by the United Natural Employee Stock Ownership
Trust ("ESOT") and allocated to Mr. Cloutier under the Employee Stock
Ownership Plan ("ESOP").
(3) Includes 3,093,100 shares held by the Funk Family 1992 Revocable Living
Trust, of which Michael and Judith Funk are the Co-Trustees. Includes
115,500 shares issuable within the 60-day period following October 31,
1997 pursuant to the exercise of stock options.
(4) Michael S. Funk and his wife Judith A. Funk are Co-Trustees of the Funk
Family 1992 Revocable Living Trust and share investment and voting control
of the shares held by the trust.
(5) ESOP participants are entitled to direct Robert G. Huckins, the trustee of
the ESOT (the "Trustee"), as to how to vote shares allocated to their ESOP
accounts under the ESOP. In accordance with the provisions of the ESOP,
the Trustee is directed to vote unallocated shares of Common Stock, and
allocated shares for which no voting direction has been received, in the
same proportion as participants have directed the Trustee to vote their
allocated shares of Common Stock.
(6) Consists of 665,730 shares held by Triumph-Connecticut Limited Partnership
("Triumph"), of which Triumph-Connecticut Capital Advisors, L.P. ("Capital
Advisors") is the sole general partner. The six general partners of
Capital Advisors, who share voting and investment control with respect to
the stockholdings of Triumph, are Frederick W. McCarthy, Frederick S.
Moseley, E. Mark Noonan, Thomas W. James, John M. Chapman and Richard J.
Williams. The general partners of Capital Advisors disclaim beneficial
ownership of all the shares, except to the extent of their proportionate
pecuniary interests therein.
(7) Includes 58,000 shares transferred to Marjolaine M. Townsend, wife of Mr.
Townsend. Includes 96,250 shares issuable within the 60-day period
following October 31, 1997 pursuant to the exercise of stock options. Does
not include 21,589 shares held by the ESOT and allocated to Mr. Townsend
under the ESOP.
(8) Includes 66,000 shares issuable within the 60-day period following October
31, 1997 pursuant to the exercise of stock options. Does not include
21,036 shares held by the ESOT and allocated to Mr. Atwood under the ESOP.
(9) Includes 456,500 shares issuable within the 60-day period following
October 31, 1997 pursuant to the exercise of stock options.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors, executive officers and
holders of more than 10% of the Company's Common Stock ("Reporting Persons")
to file with the Securities and Exchange Commission initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Based solely on its review of copies of reports
filed by the Reporting Persons furnished to the Company, the Company believes
that during the fiscal year ended July 31, 1997 the Reporting Persons complied
with all Section 16(a) filing requirements, except as set forth below.
The Funk Family 1992 Revocable Living Trust filed its Statement of Changes
in Beneficial Ownership of Securities on Form 4, which reflected the sale of
shares of Common Stock in September 1997, six days after the required filing
date.
3
<PAGE>
VOTES REQUIRED
The holders of a majority of the shares of Common Stock issued and
outstanding and entitled to vote at the Meeting shall constitute a quorum for
the transaction of business at the Meeting. Shares of Common Stock present in
person or represented by proxy (including shares which abstain or do not vote
with respect to one or more of the matters presented for stockholder approval)
will be counted for purposes of determining whether a quorum exists at the
Meeting.
The affirmative vote of the holders of a plurality of the votes cast by the
stockholders entitled to vote at the Meeting is required for the election of
directors. The affirmative vote of the holders of a majority of the shares of
Common Stock present or represented by proxy and voting on the matter is
required for the ratification of the selection of KPMG Peat Marwick LLP as the
Company's independent public accountants for the current fiscal year.
Shares which abstain from voting as to a particular matter, and shares held
in "street name" by brokers or nominees who indicate on their proxies that
they do not have discretionary authority to vote such shares as to a
particular matter, will not be counted as votes in favor of such matter, and
will also not be counted as votes cast or shares voting on such matter.
Accordingly, abstentions and "broker non-votes" will have no effect on the
voting on a matter that requires the affirmative vote of a certain percentage
of the votes cast or shares voting on a matter.
PROPOSAL 1--ELECTION OF DIRECTORS
DIRECTORS AND NOMINEES FOR DIRECTOR
The Company has a classified Board of Directors currently consisting of
three Class I directors (Daniel V. Atwood, Kevin T. Michel and Thomas B.
Simone), two Class II directors (Steven H. Townsend and Andrea R. Hendricks),
and three Class III directors (Norman A. Cloutier, Michael S. Funk and Richard
J. Williams). The Class I, Class II and Class III directors were elected to
serve until the annual meeting of stockholders to be held in 1997, 1998 and
1999, respectively, and until their respective successors are elected and
qualified. At each annual meeting of stockholders, directors are elected for a
full term of three years to succeed those whose terms are expiring.
The persons named in the enclosed proxy will vote to elect, as Class I
directors, Barclay McFadden, III, Kevin T. Michel and Richard S. Youngman,
unless the proxy is marked otherwise. Mr. Michel is currently a director of
the Company. Mr. Daniel V. Atwood, a current Class I director of the Company,
is not standing for re-election to the Board of Directors. Thomas B. Simone, a
current Class I director of the Company, is not standing for re-election as a
Class I director but is standing for election as a Class II director to fill
the seat currently held by Andrea R. Hendricks, who is resigning as a Class II
director prior to the Meeting. The persons named in the enclosed proxy will
vote to elect, as a Class II director, Thomas B. Simone, unless the proxy is
marked otherwise.
Each Class I director will be elected to hold office until the year 2000
annual meeting of stockholders and until his successor is elected and
qualified. The Class II director will be elected to hold office until the 1998
annual meeting of stockholders and until his successor is elected and
qualified. Each of the nominees has indicated his willingness to serve, if
elected; however, if any nominee should be unable to serve, the person acting
under the proxy may vote the proxy for a substitute nominee. The Board of
Directors has no reason to believe that any of the nominees will be unable to
serve if elected.
For each member of the Board of Directors continuing in office after the
Meeting, including those who are nominees for election as Class I and Class II
directors, there follows information given by each concerning his principal
occupation and business experience for the past five years, the names of other
publicly held companies of which he serves as a director and his age and
length of service as a director of the Company.
4
<PAGE>
NORMAN A. CLOUTIER, age 43, founded the Company in 1978. Mr. Cloutier has
been Chairman of the Board and Chief Executive Officer of the Company since
its inception. Mr. Cloutier served as President of the Company from its
inception until October 1996. Mr. Cloutier previously operated a natural
products retail store in Coventry, Rhode Island from 1977 to 1978.
MICHAEL S. FUNK, age 43, has been Vice Chairman of the Board of the Company
since February 1996 and President of the Company since October 1996. Mr. Funk
served as Executive Vice President of the Company from February 1996 until
October 1996. Since its inception in July 1976, Mr. Funk has been President of
Mountain People's Warehouse Incorporated, a wholly owned subsidiary of the
Company ("Mountain People's"). Mr. Funk has served on the Board of Directors
since February 1996.
BARCLAY MCFADDEN, III, age 47, served as the Chief Executive Officer and a
director of Stow Mills, Inc., a wholly owned subsidiary of the Company
("Stow"), and Stow's predecessor company from 1976 to October 1997. Mr.
McFadden also serves on the Board of Directors of First Vermont Bank and a
number of charitable organizations.
KEVIN T. MICHEL, age 40, has been the Executive Vice President of Mountain
People's since January 1995. From January 1992 until January 1995, Mr. Michel
held several different accounting and finance positions at Mountain People's.
From March 1991 until December 1991, Mr. Michel was the sole proprietor of a
restaurant. Mr. Michel has served on the Board of Directors since February
1996.
THOMAS B. SIMONE, age 55, has served on the Board of Directors since October
1996. Since April 1994, Mr. Simone has served as President and Chief Executive
Officer of Simone & Associates, a healthcare and natural products investment
and consulting company. Mr. Simone has also, since November 1976, been
Chairman and Chief Executive Officer of IBV Technologies, Inc., a developer of
a proprietary pharmaceutical compliance system. From February 1991 to April
1994, Mr. Simone was President of McKesson Drug Company, a leading distributor
of pharmaceuticals and other healthcare products. Mr. Simone also serves on
the Board of Directors of ECO-DENT International, Inc. and two charitable
organizations.
STEVEN H. TOWNSEND, age 44, has been Vice President-Finance and
Administration of the Company since 1983 and Chief Financial Officer of the
Company since August 1988. From 1980 to 1983, Mr. Townsend was Director of
Finance for the Town of Mansfield, Connecticut. From 1976 to 1980, Mr.
Townsend was an Accounting Supervisor at Harris Corporation, a manufacturer of
printing presses and related products. Mr. Townsend has served on the Board of
Directors since August 1988. It is expected that Mr. Townsend will resign his
position as Vice President-Finance and Administration on or about December 1,
1997 but will continue to serve as a Director after that date.
RICHARD J. WILLIAMS, age 36, has been a Managing Director of Triumph Capital
Group, Inc. ("Triumph Capital") since March 1990. Mr. Williams has served on
the Board of Directors since November 1993.
RICHARD S. YOUNGMAN, age 46, has been the President and a director of Stow
and its predecessor company since 1979. In October 1997, Mr. Youngman became
Chief Executive Officer of Stow and President of the Company's Eastern Region.
On October 31, 1997, the Company completed its acquisition of Stow pursuant
to an Agreement and Plan of Reorganization, dated as of June 23, 1997, and as
amended and restated as of August 8, 1997 (the "Merger Agreement"), among the
Company, Stow, GEM Acquisition Corp., a wholly owned subsidiary of the Company
(the "Merger Subsidiary"), Barclay McFadden, III and Richard S. Youngman.
Pursuant to the Merger Agreement, the Merger Subsidiary was merged with and
into Stow (the "Merger"), whereupon Stow became a wholly owned subsidiary of
the Company. In connection with the consummation of the Merger, Norman A.
Cloutier, Michael S. Funk, the Funk Family 1992 Revocable Trust and Triumph
(collectively, the "Principal United Natural Stockholders") entered into a
Board Election Securityholder Voting Agreement with Barclay McFadden, III and
Richard S. Youngman in which the Principal United Natural Stockholders agreed
to vote in favor of the election of Messrs. McFadden and Youngman for three-
year terms on the Company's Board of
5
<PAGE>
Directors. THE PRINCIPAL UNITED NATURAL STOCKHOLDERS AND MESSRS. MCFADDEN AND
YOUNGMAN EXERCISE VOTING CONTROL WITH RESPECT TO 11,434,965 SHARES OF COMMON
STOCK (APPROXIMATELY 65.9% OF THE OUTSTANDING SHARES OF COMMON STOCK AS OF THE
RECORD DATE OF THE MEETING), AND, CONSEQUENTLY, THE AFFIRMATIVE VOTE OF THE
PRINCIPAL UNITED NATURAL STOCKHOLDERS AND MESSRS. MCFADDEN AND YOUNGMAN WILL
BE SUFFICIENT TO ELECT MESSRS. MCFADDEN AND YOUNGMAN TO THE COMPANY'S BOARD OF
DIRECTORS.
Under a Note and Warrant Purchase Agreement, dated November 17, 1993 (the
"Warrant Agreement"), between the Company and Triumph, Triumph loaned
$6,500,000 to the Company and received a warrant to purchase up to 1,166,660
shares of the Company's Common Stock at an exercise price of $0.01 per share,
subject to certain repurchase rights held by the Company. See "Certain
Transactions." Mr. Williams, a Managing Director of Triumph Capital, was
elected to the Company's Board of Directors pursuant to the Warrant Agreement.
The provisions of the Warrant Agreement relating to the election of a director
nominated by Triumph terminated upon the closing of the Company's initial
public offering.
Michael S. Funk, Andrea R. Hendricks and Kevin T. Michel were elected to the
Company's Board of Directors in connection with the Company's merger with
Mountain People's in February 1996.
For information relating to shares of Common Stock owned by each of the
directors, see "Stock Ownership of Certain Beneficial Owners and Management."
BOARD AND COMMITTEE MEETINGS
The Board of Directors of the Company met four times (including by telephone
conference) during fiscal 1997. All directors attended at least 75% of the
meetings of the Board of Directors and of the committees on which they served.
The Board of Directors has a Compensation Committee, which makes
recommendations concerning salaries and incentive compensation for employees
and consultants to the Company and administers and grants stock options
pursuant to the Company's 1996 Stock Option Plan. The Compensation Committee
held one meeting during fiscal 1997. The current members of the Compensation
Committee are Messrs. Simone and Williams.
The Board of Directors has an Audit Committee, which reviews the results and
scope of the audit and other services provided by the Company's independent
public accountants. The Audit Committee held two meetings during fiscal 1997.
The current members of the Audit Committee are Messrs. Cloutier, Simone and
Williams.
The Board of Directors has a Nominating Committee which nominates candidates
for election to the Board of Directors. The Nominating Committee held no
meeting during fiscal 1997. The Nominating Committee met on October 30, 1997
to nominate directors for election at the Meeting. The current members of the
Nominating Committee are Messrs. Cloutier and Funk. The Nominating Committee
will consider nominees recommended by stockholders of the Company. The names
of proposed nominees should be forwarded in writing, within the time period of
stockholder proposals generally, to Norman A. Cloutier, Chairman of the Board
and Chief Executive Officer, United Natural Foods, Inc., 260 Lake Road,
Dayville, Connecticut 06241, who will submit the names of the nominees to the
Nominating Committee for consideration.
DIRECTOR COMPENSATION
The directors are reimbursed for expenses incurred in connection with their
attendance at Board and committee meetings but do not receive any other cash
compensation in connection with their services on the Board.
On October 7, 1996, the Board of Directors awarded a non-statutory stock
option under the Company's 1996 Stock Option Plan to Thomas B. Simone to
purchase 16,500 shares of Common Stock in consideration for his services on
the Company's Board of Directors. The option has an exercise price of $9.64
per share and vests fully three years from the date of grant.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation
The following table sets forth the compensation of the Company's Named
Executive Officers for the twelve-month periods ended July 31, 1996 and 1997.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
--------------- ------------------
AWARDS
SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION(1)
- --------------------------- ---- -------- ------ ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Norman A. Cloutier...... 1997 $135,460 $ 0 0 $22,878
Chairman of the Board 1996 135,460 28,750 178,750 26,616
and Chief Executive
Officer
Michael S. Funk......... 1997 133,450 0 0 11,223
President 1996 98,750 0 115,500 1,103
Steven H. Townsend...... 1997 124,500 1,000 0 15,363
Chief Financial Officer 1996 91,175 19,170 96,260 17,574
and Treasurer
Daniel V. Atwood........ 1997 93,075 16,100 0 15,192
President of Natural 1996 93,040 17,300 66,000 15,106
Retail Group and
Vice President
</TABLE>
- --------
(1) The amounts shown in this column for fiscal 1997 represent the value of
Company contributions to the 401(k) accounts of the Named Executive
Officers ($1,014 for Mr. Cloutier, $975 for Mr. Funk and $675 for Mr.
Townsend) as well as the value of the 2,583 shares allocated to the
accounts of the Named Executive Officers under the Company's ESOP at a
fair market value per share of $24.00 on July 31, 1997 (approximately 911
shares for Mr. Cloutier, 612 shares for Mr. Townsend, 427 shares for Mr.
Funk and 633 shares for Mr. Atwood).
Fiscal Year-End Option Value Table
The following table summarizes certain information regarding the number and
value of unexercised stock options held as of July 31, 1997 by each of the
Named Executive Officers. No stock options were granted to, or exercised by,
the Named Executive Officers during fiscal 1997.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
FISCAL YEAR END AT FISCAL YEAR END
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(1)
- ---- ------------------------------- ----------------------------
<S> <C> <C>
Norman A. Cloutier...... 137,500/0 $2,422,750/$0
Michael S. Funk......... 74,250/0 1,308,285/ 0
Steven H. Townsend...... 89,496/6,754 1,211,375/ 0
Daniel V. Atwood........ 44,000/0 775,280/ 0
</TABLE>
- --------
(1) Value based upon the last sales price per share ($24.00) of the Company's
Common Stock on July 31, 1997, as reported on the Nasdaq National Market,
less the exercise price.
Employment Agreements
The Company is a party to an employment agreement with Michael S. Funk
covering the period commencing February 20, 1996 and ending December 31, 2000,
subject to extension for another five-year term at the election of Mr. Funk.
The agreement provides for Mr. Funk to serve as President of Mountain
People's, Executive Vice President of the Company and Vice Chairman of the
Company's Board of Directors. In October 1996, the Board of Directors elected
Mr. Funk to serve as President of the Company. Under the employment
7
<PAGE>
agreement, Mr. Funk is entitled to base compensation at least equal to that
paid to the Chief Executive Officer of the Company and other compensation in
an amount such that Mr. Funk's total annual compensation is at least equal to
90% of the Chief Executive Officer's total annual compensation. In addition,
in no event can Mr. Funk's annual compensation be less than $130,000.
Mr. Funk may terminate the agreement upon 90 days' written notice to the
Company. The Company may terminate the agreement only for cause or in the
event of Mr. Funk's death or disability. The agreement includes a non-
competition clause under which Mr. Funk agreed that during the term of the
agreement and for three years thereafter he will not, directly or indirectly,
participate in (i) a wholesale distribution business in competition with the
Company or Mountain People's or (ii) a retail business in competition with the
Company or any of its subsidiaries which is located within 15 miles of a
retail store owned by the Company or one of its subsidiaries; provided,
however, that Mr. Funk's management and ownership of an equity interest in
Mountain People's Wine Distributing, Inc. ("MPWD") will not be deemed a breach
of this covenant unless MPWD distributes products east of the Mississippi
River or engages in a business other than the distribution and sale of wine
and alcoholic beverages.
The Company is a party to a non-competition agreement with Norman A.
Cloutier. The non-competition agreement is effective until the earliest to
occur of: (i) November 16, 1998, (ii) the termination of Mr. Cloutier's
employment by the Company without cause or (iii) the first anniversary of (A)
Mr. Cloutier's voluntary termination of employment with the Company or (B) the
termination of Mr. Cloutier's employment by the Company for cause. During the
effective period of this agreement, Mr. Cloutier may not: (i) within 25 miles
of any location in which the Company, or one of its affiliates, is doing
business, operate or participate in any business involving the retail or
wholesale distribution of natural food items or (ii) induce any employee of
the Company to terminate employment with the Company or to engage in a
business which competes with the Company.
In connection with the acquisition of Stow in October 1997, the Company
entered into an employment agreement with Richard S. Youngman pursuant to
which Mr. Youngman is being employed as President and Chief Executive Officer
of Stow and President of the Company's Eastern Region. The employment
agreement provides for an initial term of two years at an annual base salary
of $130,000, plus bonuses and stock options as determined by the Compensation
Committee of the Company's Board of Directors and substantially equivalent to
those provided to other senior executive officers of the Company and its
subsidiaries. The employment agreement provides that, at the end of the
initial two-year term, and each year thereafter, Mr. Youngman's employment
will automatically be renewed unless either party notifies the other party
that he or it elects to terminate the employment agreement. Mr. Youngman's
salary will be reviewed by the Company at the beginning of each of its fiscal
years and, in the sole discretion of the Company, may be increased, but not
decreased, for such year. The employment agreement contains non-disclosure,
non-competition and non-solicitation covenants during the employment term and
for a one-year period thereafter.
CERTAIN TRANSACTIONS
In connection with the establishment of the ESOP in November 1988, Norman A.
Cloutier, Steven H. Townsend, Daniel V. Atwood and Theodore Cloutier
contributed an aggregate of 2,200,000 shares of the Company's Common Stock to
the ESOT in exchange for a note (the "ESOT Note") from the ESOT in the
original amount of $4,080,000, the largest amount of indebtedness outstanding
under the ESOT Note. The Company guarantees payment by the ESOT of the ESOT
Note. The ESOT Note is payable in equal monthly installments of principal and
interest from December 1988 to May 2015. Interest is charged on the ESOT Note
at a rate of 10% per annum. The amount outstanding on the ESOT Note as of
October 31, 1997 was $2,869,600.
Under a Note and Warrant Purchase Agreement, dated November 17, 1993,
Triumph loaned $6,500,000, evidenced by a note (the "Triumph Note"), to the
Company and the Company issued to Triumph a Common Stock Purchase Warrant for
up to 1,166,660 shares of Common Stock of the Company. The aggregate
indebtedness under the Triumph Note was $6,500,000 on November 6, 1996, which
was the largest outstanding
8
<PAGE>
indebtedness on the Triumph Note. Under the Note and Warrant Purchase
Agreement, Triumph had the option, which it exercised, to have a portion of
the proceeds of the Company's initial public offering designated to repay the
Triumph Note. The Triumph Note was repaid in full in November 1996 upon
receipt of the proceeds from the initial public offering. Triumph exercised
stock warrants to purchase 785,730 shares of Common Stock during fiscal 1997
at a price of $.01 per share, with the remaining stock warrants repurchased by
the Company. Mr. Richard Williams, a director of the Company, is a general
partner of Capital Advisors, the sole general partner of Triumph.
In November 1995, Mountain People's loaned $150,000 to Michael Funk. The
loan was not made in connection with a particular transaction. The largest
amount of indebtedness outstanding under the loan was $150,000, and as of July
31, 1997, the indebtedness outstanding under the loan was $106,561. This loan
was evidenced by a promissory note which bore interest at the rate of 7% per
annum. This loan was repaid in full in September 1997.
Steven H. Townsend is a stockholder in three natural products retail stores
Food Farmacy, Ltd. (45% stockholder), Food Farmacy, Inc. (75% stockholder) and
The Farmacy, Inc. (50% stockholder) which, in the aggregate, purchased
approximately $750,000 of natural products from the Company in fiscal 1997 at
published catalog prices.
Pursuant to the Merger Agreement, the Merger Subsidiary was merged with and
into Stow on October 31, 1997, whereupon Stow became a wholly owned subsidiary
of the Company. At that time, each outstanding share of capital stock of Stow
(the "Stow Stock") was converted into 2,711.4817 shares of Common Stock of the
Company, or an aggregate of 4,978,280 shares. Based upon the capitalization of
the Company as of the record date of the Meeting, the 4,978,280 shares of
Common Stock of the Company issued to the holders of Stow Stock represent
approximately 28.7% of the outstanding shares of Common Stock of the Company.
The issuance of shares of Common Stock of the Company in connection with the
Merger was approved by the Board of Directors and the stockholders of the
Company, and the Merger Agreement and the Merger were approved by the Board of
Directors and the stockholders of Stow. The terms of the Merger Agreement and
the Merger were determined on the basis of arm's-length negotiations. Prior to
the execution of the Merger Agreement, neither the Company nor any of its
affiliates, nor any director or officer of the Company or any associate of any
such director or officer, had any material relationship with Stow. Under the
terms of a Securityholder Voting Agreement, dated as of June 23, 1997, Norman
A. Cloutier, Michael S. Funk, the Funk Family 1992 Revocable Trust and Triumph
agreed to vote all shares over which they exercised voting control for
approval of the issuance of Common Stock in connection with the Merger.
In connection with the Merger, the Principal United Natural Stockholders
entered into a Board Election Securityholder Voting Agreement in which they
agreed to elect Barclay McFadden, III and Richard S. Youngman to three-year
terms on the Company's Board of Directors. The Company, Norman A. Cloutier,
Michael S. Funk, Triumph and the stockholders of Stow, including Richard S.
Youngman, Barclay McFadden, III, the Barclay McFadden Family Trust, and Mr.
McFadden's children, Thomas Morrison Carnegie McFadden, George Stillman
McFadden and Barclay McFadden IV, entered into a Registration Rights Agreement
pursuant to which the Company will provide such stockholders with certain
registration rights with respect to the Company's Common Stock issued to them
in connection with the Merger.
Prior to the consummation of the Merger, each of Barclay McFadden, III and
Richard S. Youngman assigned his 1% interest in RB Acquisition, L.L.C., a
majority-owned subsidiary of Stow, to Stow in exchange for shares of Stow
Common Stock, leaving Stow as the sole owner of RB Acquisition. In addition,
the following subordinated promissory notes by and between Stow, as maker, and
the following lenders were contributed to the capital of Stow in exchange for
shares of Stow Common Stock: (i) a note in the amount of $3,021,548.50 in
favor of Richard S. Youngman, (ii) a note in the amount of $2,601,548.50 in
favor of Barclay McFadden, III, (iii) a note in the amount of $140,000 in
favor of Thomas Morrison Carnegie McFadden, (iv) a note in the amount of
$140,000 in favor of George Stillman McFadden and (v) a note in the amount of
$140,000 in favor of
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<PAGE>
Barclay McFadden, IV. The Company also entered into an employment agreement
with Richard Youngman. See "Compensation of Executive Officers--Employment
Agreements."
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
Overview and Philosophy
The Compensation Committee of the Company's Board of Directors (the
"Committee") is responsible for making recommendations concerning salaries and
incentive compensation for employees of the Company, including the Company's
Chief Executive Officer and other executive officers, and administering the
Company's 1996 Stock Option Plan. The Committee currently consists of Messrs.
Simone and Williams. Prior to the formation of the Committee in October 1996,
decisions relating to executive compensation were made by the Company's Board
of Directors. This report addresses the Company's compensation policies for
fiscal 1997 as they affected the Chief Executive Officer and the Company's
other executive officers.
The objectives of the Company's executive compensation program are to:
. Attract and retain key executives critical to the long-term success of
the Company;
. Align the executive officers' interests with the interests of
stockholders and the success of the Company; and
. Recognize and reward individual performance and responsibility.
Compensation Program
General. The Company's executive compensation program consists of base
salary and long-term incentive compensation in the form of stock options.
Executives also participate in benefit programs that are generally available
to employees of the Company, including medical benefits, the Employee Stock
Ownership Plan and the Company's 401(k) Plan.
All compensation decisions are determined following a review of many factors
that the Committee believes are relevant, including comparable-company
compensation data, the Company's achievements over the past year, the
individual's contributions to the Company's success, any significant changes
in role or responsibility, and the internal equity of compensation
relationships.
In general, the Committee intends that the overall total compensation
opportunities provided to the executive officers should reflect competitive
compensation for executives with corresponding responsibilities in comparable
firms providing similar products and services. To the extent determined to be
appropriate, the Committee also considers general economic conditions, the
Company's financial performance and individual merit in setting compensation
policies for its executive officers.
For fiscal 1997, management of the Company recommended the executive
compensation packages, subject to approval and oversight by the Committee. In
the future, however, the Committee intends to review the appropriate mix
between salary and other forms of compensation and set annual compensation
guidelines for the Company's executives.
Base Compensation. Norman A. Cloutier, the Company's Chief Executive
Officer, had his salary for fiscal 1997 based primarily on subjective factors,
including his leadership skills and his contributions to the Company's growth
(both internally and through acquisitions) and overall performance over the
past several years. In light of the Company's recent initial public offering
and its position as one of only two national distributors of natural foods and
related products in the United States, the Committee believes that the Chief
Executive Officer's base salary of $135,460 in fiscal 1997 was relatively
modest. The Committee intends to assess the Chief Executive Officer's salary
from time to time to assure that it remains competitive within the natural
foods industry.
Michael S. Funk, the Company's Vice Chairman of the Board and President, and
Richard S. Youngman, the President and Chief Executive Officer of Stow and the
President of the Company's Eastern Region, are
10
<PAGE>
parties to multi-year employment agreements with the Company that fix each
executive's base salary. The employment agreement with Mr. Funk was entered
into in February 1996 in connection with the Company's merger with Mountain
People's. Under the employment agreement, Mr. Funk is entitled to base
compensation at least equal to that paid to the Chief Executive Officer and
other compensation in an amount such that Mr. Funk's total annual compensation
is at least equal to 90% of the Chief Executive Officer's total annual
compensation. Accordingly, Mr. Funk received base compensation of $133,450 in
fiscal 1997. The employment agreement with Mr. Youngman was entered into in
October 1997 in connection with the Company's merger with Stow. Under the
agreement, Mr. Youngman is entitled to an annual base salary of $130,000, plus
bonuses and stock options as determined by the Committee and substantially
equivalent to those provided to other senior executives of the Company. The
Committee believes that the comparable base salaries of Messrs. Cloutier, Funk
and Youngman are appropriate in light of the executive responsibilities and
significant equity positions in the Company of these three individuals. Each
of these individuals owns a significant number of shares of the Company's
Common Stock. This ownership helps align their efforts with the entire
stockholder group. See "Compensation of Executive Officers--Employment
Agreements."
For fiscal 1997, compensation for other executive officers was set within
the range of compensation for executives with comparable qualifications,
experience and responsibilities at other companies in the same or similar
businesses, based on the determination of management and approved by the
Committee. Base compensation was also determined in light of a particular
individual's contribution to the Company as a whole, including the ability to
motivate others, develop the necessary skills to grow as the Company matures,
recognize and pursue new business opportunities and initiate programs to
enhance the Company's growth and success.
Long-Term Incentive Compensation. Long-term incentives for executive
officers and key employees are provided through individual stock ownership and
the Company's Employee Stock Ownership Plan and 1996 Stock Option Plan. The
objectives of these plans are to align executive and stockholder long-term
interests by creating a strong and direct link between executive compensation
and stockholder return, and to enable executives to develop and maintain a
significant, long-term stock ownership position in the Company's Common Stock.
Stock options are granted at an option price equal to the fair market value
(110% of fair market value for options granted to stockholders owning in
excess of 10% of the Company's Common Stock) of the Company's Common Stock on
the date of grant and will only have value if the Company's stock price
increases. In selecting executives eligible to receive option grants and
determining the amount and frequency of such grants, the Company evaluates a
variety of factors, including (i) the job level of the executive, (ii) option
grants awarded by competitors to executives at a comparable job level, and
(iii) past, current and prospective service to the Company rendered, or to be
rendered, by the executive. The Company did not grant options to any of its
Named Executive Officers during fiscal 1997.
Section 162(m). Section 162(m) of the Internal Revenue Code, enacted in
1993, generally disallows a tax deduction to public companies for compensation
over $1 million paid to its Chief Executive Officer or any of its Named
Executive Officers. Qualifying performance-based compensation is not subject
to the deduction limit if certain requirements, such as stockholder approval
of a compensation plan, are met. Although the Committee is considering the
limitations on the deductibility of executive compensation imposed by Section
162(m) in designing the Company's executive compensation programs, the
Committee believes that it is unlikely that such limitation will affect the
deductibility of the compensation to be paid to the Company's executive
officers in the near term. The Committee will, however, continue to monitor
the impact of Section 162(m) on the Company.
Thomas B. Simone, Chairman
Richard J. Williams
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Company's Compensation Committee are Messrs.
Simone and Williams. No executive officer of the Company has served as a
director or member of the compensation committee (or other committee serving
an equivalent function) of any other entity, one of whose executive officers
served as a director of or member of the Compensation Committee of the
Company. Prior to the formation of the Compensation Committee in October 1996,
decisions relating to executive compensation were made by the Company's Board
of Directors.
COMPARATIVE STOCK PERFORMANCE
The graph below compares the cumulative total stockholder return on the
Common Stock of the Company for the period from November 1, 1996 (the date of
the Company's initial public offering) through July 31, 1997 with the
cumulative total return on (i) the Index of Food Service Providers and (ii)
the Nasdaq (Composite Index). The comparison assumes the investment of $100 on
November 1, 1996 in the Company's Common Stock and in each of the indices and,
in each case, assumes reinvestment of all dividends. The Index of Food Service
Providers includes JP Foodservice Inc., Rykoff-Sexton Inc., SYSCO Corporation
and Performance Food Group Co., and the returns of each component company in
the index are weighted according to the respective company's stock market
capitalization at the beginning of each period for which a return is
indicated. Prior to November 1996, the Company's Common Stock was not
registered under the Exchange Act.
[GRAPH APPEARS HERE]
<TABLE>
Index of Nasdaq
United Food Service (Composite
Measurement period Natural Providers Index)
- --------------------- -------- -------- --------
<S> <C> <C> <C>
Measurement PT -
11/01/96 $ 100 $ 100 $ 100
12/27/96 $ 106 $ 103 $ 106
01/31/97 $ 102 $ 99 $ 113
02/28/97 $ 107 $ 106 $ 107
03/28/97 $ 117 $ 106 $ 102
04/25/97 $ 119 $ 105 $ 99
05/30/97 $ 117 $ 107 $ 115
06/27/97 $ 159 $ 113 $ 118
07/31/97 $ 178 $ 117 $ 130
</TABLE>
12
<PAGE>
PROPOSAL 2--RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG Peat Marwick LLP as independent
public accountants of the Company for the fiscal year ending July 31, 1998,
subject to ratification by stockholders at the Meeting. If the stockholders do
not ratify the selection of KPMG Peat Marwick LLP, the Board of Directors will
reconsider the matter. A representative of KPMG Peat Marwick LLP, which served
as independent public accountants for the fiscal year ended July 31, 1997, is
expected to be present at the Meeting to respond to appropriate questions, and
to make a statement if he or she so desires.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Any proposal that a stockholder intends to present at the 1998 Annual
Meeting of Stockholders must be submitted to the Secretary of the Company at
its offices, 260 Lake Road, Dayville, Connecticut 06241, no later than July
28, 1998 in order to be considered for inclusion in the Proxy Statement
relating to that meeting.
OTHER MATTERS
The Board of Directors knows of no other business which will be presented
for consideration at the Meeting other than that described above. However, if
any other business should come before the Meeting, it is the intention of the
persons named in the enclosed Proxy to vote, or otherwise act, in accordance
with their best judgment on such matters.
The Company will bear the costs of soliciting proxies. In addition to
solicitations by mail, the Company's directors, officers and regular employees
may, without additional remuneration, solicit proxies by telephone, facsimile
and personal interviews. The Company will also request brokerage houses,
custodians, nominees and fiduciaries to forward copies of the proxy material
to those persons for whom they hold shares and request instructions for voting
the Proxies. The Company will reimburse such brokerage houses and other
persons for their reasonable expenses in connection with this distribution.
THE BOARD OF DIRECTORS HOPES THAT STOCKHOLDERS WILL ATTEND THE MEETING.
WHETHER OR NOT YOU PLAN TO ATTEND, YOU ARE URGED TO COMPLETE, SIGN, DATE, AND
RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING ENVELOPE. PROMPT RESPONSE
WILL GREATLY FACILITATE ARRANGEMENTS FOR THE MEETING AND YOUR COOPERATION IS
APPRECIATED. STOCKHOLDERS WHO ATTEND THE MEETING MAY VOTE THEIR STOCK
PERSONALLY EVEN THOUGH THEY HAVE SENT IN THEIR PROXY CARDS.
By Order of the Board of Directors,
Norman A. Cloutier,
Chairman of the Board and Chief
Executive Officer
November 25, 1997
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<PAGE>
PROXY UNITED NATURAL FOODS, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS--DECEMBER 19, 1997
Those signing on the reverse side, revoking any prior proxies, hereby
appoint(s) Norman A. Cloutier, Daniel V. Atwood and E. Colby Cameron, or each
of them, with full power of substitution, as proxies for those signing on the
reverse side to attend the Annual Meeting of Stockholders of United Natural
Foods, Inc. to be held at the Westin Providence Hotel, One West Exchange
Street, Providence, Rhode Island 02903 at 10:00 a.m. (local time) on December
19, 1997, and at any adjournments or postponements thereof, and there to vote
and act as indicated upon all matters referred to on the reverse side and
described in the Proxy Statement for the Meeting, and, in their discretion,
upon any other matters which may properly come before the Meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER(S). IF NO OTHER INDICATION IS MADE, THE PROXIES SHALL
VOTE "FOR" THE PROPOSALS.
PLEASE VOTE, DATE AND SIGN ON THE OTHER SIDE AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE.
IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENTS OR
POSTPONEMENTS THEREOF.
Please sign this proxy exactly as your name appears hereon. Joint owners
should each sign personally. Trustees and other fiduciaries should indicate the
capacity in which they sign. If a corporation or partnership, the signature
should be that of an authorized officer who should state his or her title.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE>
[X] PLEASE MARK VOTE AS IN THIS EXAMPLE
1. To elect the following three Class I Directors for the ensuing three years
and the following Class II Director for the ensuing year (except as marked
below):
Class I Nominees:Kevin T. Michel, Barclay McFadden, III and Richard S.
Youngman; Class II Nominee: Thomas B. Simone
[_] FOR all nominees [_] WITHHELD from all nominees
FOR, except vote withheld from the following nominee(s):
--------------------
2. To ratify the appointment of KPMG Peat Marwick LLP as independent public
accountants of the Corporation for the current fiscal year.
FOR [_] AGAINST [_] ABSTAIN [_]
A VOTE FOR PROPOSALS NUMBER 1 AND 2 IS RECOMMENDED BY THE UNITED NATURAL
FOODS, INC. BOARD OF DIRECTORS.
---------------------------------
Stockholder sign here
---------------------------------
Co-owner sign here
Date: __________________________
[_] Mark box at left if comments
or address change has been noted
on the reverse side of this
card.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY.
