<PAGE>
As filed with the Securities and Exchange
Commission on November 22, 1999
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
[X] Definitive Proxy Statement (as permitted by Rule 14a-
6(e)(2))
[_] 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 22, 1999
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
Wednesday, December 22, 1999 at 9:00 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 two Class III Directors for the ensuing three years;
2. To ratify the appointment of KPMG 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 Tuesday, November
16, 1999 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, 1999, 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 23, 1999
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 22, 1999
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 Wednesday, December 22, 1999 at 9:00 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 16, 1999, the record date for determination of stockholders
entitled to vote at the Meeting, there were outstanding and entitled to vote
an aggregate of 18,249,305 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,
1999 are being mailed to stockholders on or about November 23, 1999. 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,
1999, as filed with the Securities and Exchange Commission, without exhibits.
Please address all such requests to the Company, Attention of John Breggia,
Corporate 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 September 30, 1999 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 executive
officers named in the Summary Compensation Table below, and (iv) all
directors, director nominees and executive officers as a group.
<TABLE>
<CAPTION>
Shares Percentage of
Beneficially Shares Beneficially
Name of Beneficial Owner Owned Owned (1)
- ------------------------ ------------ -------------------
<S> <C> <C>
5% Stockholders
Norman A. Cloutier(2)........................ 2,988,332 16.2%
c/o United Natural Foods, Inc.
260 Lake Road
Dayville, CT 06241
Employee Stock Ownership Trust(3) ........... 1,936,847 10.6%
Robert G. Huckins, Trustee
19404 Camino Del Aguila
Escondido, CA 92025
Michael S. Funk(4)........................... 1,805,982 9.8%
c/o Mountain People's Warehouse
Incorporated
12745 Earhart Avenue
Auburn, CA 95602
Richard S. Youngman(5)....................... 1,774,511 9.7%
c/o United Natural Foods, Inc.
Stow Mills Drive
Chesterfield, NH 03443
Funk Family 1992 Revocable Living Trust(6)... 1,694,000 9.3%
c/o Michael S. Funk
Mountain People's Warehouse Incorporated
12745 Earhart Avenue
Auburn, CA 95602
T. Rowe Price Associates, Inc.(7)............ 1,017,400 5.6%
100 E. Pratt Street
Baltimore, MD 21202
Wellington Management Company, LLP(8)........ 954,700 5.2%
75 State Street
Boston, MA 02109
Other Named Executive Officers and Other
Directors
Gordon D. Barker............................. 0 0%
Joseph M. Cianciolo.......................... 0 0%
Robert T. Cirulnick(9)....................... 33,333 *
Kevin T. Michel(10).......................... 10,373 *
Thomas B. Simone (11)........................ 16,500 *
Richard J. Williams(12)...................... 16,500 *
All executive officers, directors and
director nominees, as a group
(11 persons)(13)............................ 6,645,531 35.7%
</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 September 30, 1999 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 186,241 shares issuable within the 60-day period following
September 30, 1999 pursuant to the exercise of stock options. Does not
include 32,460 shares held by the United Natural Foods Stock Ownership
Trust ("ESOT") and allocated to Mr. Cloutier under the Employee Stock
Ownership Plan ("ESOP").
(3) 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. The ESOT disclaims beneficial
ownership of the allocated shares to the extent that the beneficial
ownership of such shares is attributable to participants in the ESOP.
(4) Includes 1,694,000 shares held by the Funk Family 1992 Revocable Living
Trust, of which Michael and Judith Funk are the Co-Trustees. Includes
111,982 shares issuable within the 60-day period following September 30,
1999 pursuant to the exercise of stock options. Does not include 1,779
shares held by the ESOT and allocated to Mr. Funk under the ESOP.
(5) Consists of 1,774,511 shares held by the Richard S. Youngman Revocable
Trust. Does not include 522 shares held by the ESOT and allocated to Mr.
Youngman under the ESOP.
(6) 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.
(7) T. Rowe Price Associates, Inc. ("Price Associates") is an investment
adviser registered under the Investment Advisers Act of 1940. Price
Associates, in its capacity as investment adviser, may be deemed to
beneficially own 1,017,400 shares of the Company which are held of record
by clients of Price Associates. Price Associates has sole voting power
with respect to 54,600 shares and sole dispositive power with respect to
1,017,400 shares. This information is derived solely from a Schedule 13G
filed with the Securities and Exchange Commission on February 12, 1999.
(8) Wellington Management Company, LLP ("WMC") is an investment adviser
registered under the Investment Advisers Act of 1940. WMC, in its
capacity as investment adviser, may be deemed to beneficially own 954,700
shares of the Company which are held of record by clients of WMC. WMC has
shared voting power with respect to 730,900 shares and shared dispositive
power with respect to 954,700 shares. This information is derived solely
from a Schedule 13G/A filed with the Securities and Exchange Commission
on February 10, 1999.
(9) Consists of 33,333 shares issuable within the 60-day period following
September 30, 1999 pursuant to the exercise of stock options. Mr.
Cirulnick resigned as the Company's Chief Financial Officer and Treasurer
in August 1999.
(10) Consists of 10,373 shares issuable within the 60-day period following
September 30, 1999 pursuant to the exercise of stock options. Does not
include 1,453 shares held by the ESOT and allocated to Mr. Michel under
the ESOP.
(11) Consists of 16,500 shares issuable within the 60-day period following
September 30, 1999 pursuant to the exercise of stock options.
(12) Consists of 16,500 shares issuable within the 60-day period following
September 30, 1999 pursuant to the exercise of stock options.
(13) Includes 374,929 shares issuable within the 60-day period following
September 30, 1999 pursuant to the exercise of stock options.
3
<PAGE>
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, 1999 the Reporting Persons complied
with all Section 16(a) filing requirements other than a late Form 4 filing by
Mr. Cloutier covering two transactions.
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 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 (Joseph M. Cianciolo, Kevin T. Michel and Richard S.
Youngman), two Class II directors (Gordon D. Barker and Thomas B. Simone), and
three Class III directors (Norman A. Cloutier, Michael S. Funk and
Richard J. Williams). The Class I, Class II and Class III directors will serve
until the annual meeting of stockholders to be held in 2000, 2001 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 Norman A.
Cloutier and Michael S. Funk as Class III directors, unless the proxy is
marked otherwise. Messrs. Cloutier and Funk are currently Class III directors
of the Company. Richard J. Williams, a current Class III director of the
Company, is not standing for re-election to the Board of Directors.
The Class III directors will be elected to hold office until the 2002 annual
meeting of stockholders and until their successors are elected and qualified.
Each of Messrs. Cloutier and Funk has indicated his willingness to serve, if
elected; however, if any of Messrs. Cloutier and Funk 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 Messrs. Cloutier
and Funk will be unable to serve if elected.
4
<PAGE>
For each member of the Board of Directors, including the nominees for
election as Class III 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.
Gordon D. Barker, age 53, was elected by the Board of Directors in September
1999 to fill the seat left vacant by Steven H. Townsend. Mr. Barker was
employed for 30 years at PayLess Drug Stores (subsequently known as
ThriftyPayLess Drug Stores). While at PayLess, Mr. Barker rose from
pharmacist, through several levels of management and ultimately became its
Chief Executive Officer and President. Currently, Mr. Barker is serving on the
following Boards of Directors: Gart/Sportsmart Sporting Goods, Infinity
Towers, NuMedics Inc. and Allure Inc.
Joseph M. Cianciolo, age 60, was elected by the Board of Directors in
September 1999 to fill the seat left vacant by Barclay McFadden III. Mr.
Cianciolo was the Managing Partner of the Providence office of KPMG LLP from
June 1990 until June 1999. Prior to his appointment as managing partner, Mr.
Cianciolo served as engagement partner from 1970 to 1999 for manufacturing,
distribution, health and beauty companies and restaurant chains, and a
manufacturer of electronic devices.
Norman A. Cloutier, age 46, 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 45, 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.
Kevin T. Michel, age 42, has served as interim Chief Financial Officer of
the Company since August 1999. From March 1998 to March 1999, Mr. Michel
served as President of the Company' Central Region. Mr. Michel served as Chief
Financial Officer of Mountain People's from January 1995 until March 1998.
From January 1992 until January 1995, Mr. Michel held several different
accounting and finance positions at Mountain People's. Mr. Michel has served
on the Board of Directors since February 1996.
Thomas B. Simone, age 57, has served as President and Chief Executive
Officer of Simone & Associates, a healthcare and natural products investment
and consulting company, since April 1994. From February 1991 to April 1994,
Mr. Simone was President of McKesson Drug Company. Mr. Simone serves on the
Board of Directors of ECO-DENT International, Inc. Mr. Simone has served on
the Board of Directors since October 1996.
Richard J. Williams, age 38, has been a Managing Director of Triumph Capital
Group, Inc. since March 1990. Mr. Williams has served on the Board of
Directors since November 1993. Mr. Williams also serves on the Board of
Directors of Outsource International, Inc.
Richard S. Youngman, age 48, was the President and a director of Stow Mills
and its predecessor company from 1979 until October 1997. In October 1997, Mr.
Youngman became Chief Executive Officer of Stow Mills. Mr. Youngman served as
President of the Company's Eastern Region from October 1997 to March 1999.
Mr. Youngman became Vice President of Business Development for the Company in
March 1999. Mr. Youngman was elected to the Company's Board of Directors in
December 1997 in connection with the Company's merger with Stow Mills in
October 1997.
For information relating to shares of Common Stock owned by each of the
directors, see "Stock Ownership of Certain Beneficial Owners and Management."
5
<PAGE>
Board and Committee Meetings
The Board of Directors of the Company met ten times (including by telephone
conference) during fiscal 1999. 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 recommends grants of stock
options pursuant to the Company's Amended and Restated 1996 Stock Option Plan.
The Compensation Committee held two meetings during fiscal 1999. The members
of the Compensation Committee in fiscal 1999 were Messrs. Simone and Williams.
Mr. Barker replaced Mr. Williams as a member of the Compensation Committee at
the beginning of fiscal 2000. Mr. Cianciolo became a member of the
Compensation Committee at the beginning of fiscal 2000.
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 1999.
The members of the Audit Committee during fiscal 1999 were Messrs. Simone and
Williams. The current members of the Audit Committee are Messrs. Cianciolo,
Barker, 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 two
meetings during fiscal 1999. 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 Company's non-employee directors receive $1,500 for attendance at each
quarterly Board meeting, $500 for attendance at each telephonic Board meeting
and $500 for attendance at each Board Committee meeting. The directors are
reimbursed for expenses incurred in connection with their attendance at Board
and committee meetings.
6
<PAGE>
Compensation of Executive Officers
Summary Compensation
The following table sets forth compensation information for the fiscal years
ended July 31, 1999, 1998 and 1997 with respect to the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company who were serving as executive officers on July 31,
1999 (the "Named Executive Officers").
<TABLE>
<CAPTION>
Long-Term
Compensation
------------------
Annual Compensation Awards
-------------------------------- ------------------
Name and Principal Other Annual Securities All Other
Position Year Salary Bonus Compensation(1) Underlying Options Compensation(2)
- ------------------ ---- -------- ------- --------------- ------------------ ---------------
<S> <C> <C> <C> <C> <C> <C>
Norman A. Cloutier...... 1999 $135,300 $ 0 $ 0 0 $ 4,144
Chairman of the Board
and Chief Executive
Officer 1998 135,200 0 0 71,009 149,479
1997 135,460 0 0 0 22,878
Michael S. Funk......... 1999 132,500 0 0 0 38,850
Vice Chairman of the
Board and President 1998 135,950 0 0 30,000 51,124
1997 133,450 0 0 0 11,223
Robert T. Cirulnick(3).. 1999 225,004 75,100 0 0 0
Former Chief Financial
Officer and Treasurer 1998 108,175 0 12,700 100,000 0
Richard S. Youngman..... 1999 129,996 0 0 0 3,900
Vice President of
Business Development 1998 127,497 0 0 30,000 17,818
Kevin T. Michel......... 1999 115,997 11,351 0 0 3,495
Interim Chief Financial
Officer and Treasurer 1998 84,219 53,451 24,000 5,000 15,456
</TABLE>
- --------
(1) The amounts shown in this column represent travel and temporary living
expenses paid by the Company in connection with the relocation of the
Named Executive Officer.
(2) The amounts in this column for fiscal 1999 represent the value of Company
contributions to the 401(k) accounts of the Named Executive Officers
($4,144 for Mr. Cloutier, $1,050 for Mr. Funk, $3,900 for Mr. Youngman and
$3,495 for Mr. Michel) and an executive life insurance premium in the
amount of $37,800 for Mr. Funk. The amounts in this column for fiscal 1999
do not include the fair market value of shares allocated to the accounts
of the Named Executive Officers under the Company's ESOP as the number of
shares allocated are not available as of the date hereof.
The amounts in this column for fiscal 1998 represent the value of Company
contributions to the 401(k) accounts of the Named Executive Officers ($2,028
for Mr. Cloutier, $975 for Mr. Funk, $3,300 for Mr. Youngman and $2,968 for
Mr. Michel), the fair market value of shares allocated to the accounts of
the Named Executive Officers under the Company's ESOP ($14,518 for Mr.
Cloutier, $12,349 for Mr. Funk, $14,518 for Mr. Youngman and $12,488 for Mr.
Michel), an executive life insurance premium in the amount of $37,800 for
Mr. Funk and $132,933 paid to Mr. Cloutier as a "make whole" payment in
connection with the Company's acquisition of a retail store prior to the
Company's initial public offering.
The amounts 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 and $975 for Mr. Funk) and the fair market value of shares
allocated to the accounts of the Named Executive Officers under the
Company's ESOP ($21,864 for Mr. Cloutier and $10,248 for Mr. Funk).
7
<PAGE>
(3) Mr. Cirulnick joined the Company as Chief Financial Officer and Treasurer
in February 1998 and resigned from his positions in August 1999.
Option Grant Table
The following table sets forth certain information regarding options granted
during the fiscal year ended July 31, 1999 by the Company to the Named
Executive Officers. The Company did not grant any stock appreciation rights
("SARs") to Named Executive Officers during the fiscal year ended July 31,
1999.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Percent of Stock Price
Number of Total Options Appreciation
Securities Granted to Exercise or for Option
Underlying Employees in Base Price Expiration ---------------------
Name Options Granted Fiscal Year Per Share Date 5% 10%
---- --------------- ------------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Norman A. Cloutier...... 0 -- -- -- -- --
Michael S. Funk ........ 0 -- -- -- -- --
Robert T. Cirulnick .... 0 -- -- -- -- --
Richard S. Youngman .... 0 -- -- -- -- --
Kevin T. Michel......... 0 -- -- -- -- --
</TABLE>
Fiscal Year-End Option Value Table
The following table summarizes certain information regarding stock options
held as of July 31, 1999 by each of the Named Executive Officers. No options
or SARs were exercised by Named Executive Officers during the fiscal year
ended July 31, 1999, and no SARs were held by Named Executive Officers at
fiscal year end.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options at Fiscal In-The-Money Options
Year End at Fiscal Year End(1)
Name Exercisable(#)/Unexercisable(#) Exercisable($)/Unexercisable($)
---- ------------------------------- -------------------------------
<S> <C> <C>
Norman A. Cloutier...... 186,241/63,518 $2,008,391/$28,672
Michael S. Funk......... 111,982/33,518 1,225,988/28,672
Robert T. Cirulnick..... 33,333/66,667 0/0
Richard S. Youngman..... 0/30,000 0/0
Kevin T. Michel......... 10,373/15,252 94,498/93,396
</TABLE>
- --------
(1) Value based upon the last sales price per share ($18.75) of the Company's
Common Stock on July 31, 1999, 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 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.
8
<PAGE>
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.
In connection with the acquisition of Stow Mills, Inc. in October 1997, the
Company entered into an employment agreement with Richard S. Youngman pursuant
to which Mr. Youngman was employed as President and Chief Executive Officer of
Stow Mills and President of the Company's Eastern Region. Effective March 22,
1999, Mr. Youngman became Vice President of Business Development of the
Company. 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.
The Company entered into an employment agreement with Robert T. Cirulnick
commencing on February 3, 1998 and continuing until terminated on not less
than thirty days' written notice by either party, or immediately upon written
notice by the Company at any time for cause. The employment agreement provided
for Mr. Cirulnick's employment as Chief Financial Officer of the Company at an
annual base salary of $225,000, plus bonuses and stock options to acquire an
aggregate of 100,000 shares of the Company's Common Stock. The employment
agreement contained confidentiality covenants during the employment term and
non-competition and non-solicitation covenants during the employment term and
for a two-year period thereafter. Mr. Cirulnick resigned as Chief Financial
Officer of the Company in August 1999. The Company entered into an agreement
with Mr. Cirulnick on August 2, 1999 pursuant to which Mr. Cirulnick's
employment agreement was terminated except for the non-competition and non-
solicitation covenants. The agreement provides that Mr. Cirulnick will provide
consulting and advisory services to the Company's Board of Directors, the
Audit Committee of the Company's Board of Directors and KPMG LLP until the
completion of the Company's fiscal 1999 audit (the "Completion Date"). The
agreement provides that Mr. Cirulnick will be paid a consulting fee of
$19,687.50 per month, and be entitled to all benefits made available to him
under his employment agreement, for each month he renders consulting and
advisory services to the Company and for a period of six months following the
Completion Date.
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
September 30, 1999 was $2,556,800.
On April 14, 1998, the Company lent $100,000 to Kevin Michel in connection
with Mr. Michel's relocation from California to Colorado. On July 15, 1998,
Mr. Michel issued the Company a note (which will not bear
9
<PAGE>
interest as long as Mr. Michel remains an employee of the Company) due April
14, 2013. Mr. Michel repaid this loan in full in June 1999.
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 Amended and Restated 1996 Stock Option Plan. The Committee currently
consists of Messrs. Cianciolo, Barker and Simone. This report addresses the
Company's compensation policies for fiscal 1999 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 generally 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 ESOP 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 third-party 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 1999, the Committee recommended the executive compensation
packages, subject to approval and oversight by the Board of Directors. 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 1999 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 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 $135,300 in fiscal 1999 was well below market. 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, Vice President of Business Development, are 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,
10
<PAGE>
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 $132,500 in fiscal 1999. The employment agreement with
Mr. Youngman was entered into in October 1997 in connection with the Company's
merger with Stow Mills. 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 not appropriate in
light of the executive responsibilities and the Committee intends to review
the base salaries of Messrs. Cloutier, Funk and Youngman during Fiscal 2000.
However, 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."
Robert T. Cirulnick, the Company's former Chief Financial Officer, was a
party to an employment agreement with the Company that fixed his base salary.
Under the employment agreement, Mr. Cirulnick was entitled to an annual base
compensation of $225,000, plus bonuses and stock options to acquire 100,000
shares of the Company's common stock. Mr. Cirulnick resigned as the Company's
Chief Financial Officer in August 1999. See "Compensation of Executive
Officers--Employment Agreements."
For fiscal 1999, 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,
the Company's Employee Stock Ownership Plan and Amended and Restated 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, or, in the case of owners of 10% or more of the
Company's Common Stock, 10% above the fair market value, 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.
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 dollars 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
Gordon D. Barker
Joseph M. Cianciolo
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<PAGE>
Compensation Committee Interlocks and Insider Participation
The current members of the Company's Compensation Committee are Messrs.
Simone, Barker and Cianciolo. 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.
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, 1999 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., 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.
[UNITED NATURAL FOODS GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
11/1/96 7/31/97 7/31/98 7/31/99
------- ------- ------- -------
<S> <C> <C> <C> <C>
United Natural............................ $100 $178 $206 $139
Index of Food Service Products............ $100 $133 $145 $184
Nasdaq Composite Index.................... $100 $130 $153 $216
</TABLE>
12
<PAGE>
PROPOSAL 2--RATIFICATION OF THE APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has selected KPMG LLP as independent public
accountants of the Company for the fiscal year ending July 31, 2000, subject
to ratification by stockholders at the Meeting. If the stockholders do not
ratify the selection of KPMG LLP, the Board of Directors will reconsider the
matter. A representative of KPMG LLP, which served as independent public
accountants for the fiscal year ended July 31, 1999, is expected to be present
at the Meeting to respond to appropriate questions, and to make a statement if
he or she so desires.
The Board of Directors believes the ratification of the appointment of KPMG
LLP is in the best interests of the Company and its stockholders and
recommends a vote FOR such ratification.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
Any proposal that a stockholder of the Company wishes to be considered for
inclusion in the Company's proxy statement and proxy card for the Company's
2000 Annual Meeting of Stockholders (the "2000 Annual Meeting") must be
submitted to the Secretary of the Company at its offices, 260 Lake Road,
Dayville, Connecticut 06241, no later than July 26, 2000.
If a stockholder of the Company wishes to present a proposal before the 2000
Annual Meeting, but does not wish to have the proposal considered for
inclusion in the Company's proxy statement and proxy card, such stockholder
must also give written notice to the Secretary of the Company at the address
noted above. The Secretary must receive such notice not less than 60 days nor
more than 90 days prior to the 2000 Annual Meeting; provided that, in the
event that less than 70 days' notice or prior public disclosure of the date of
the 2000 Annual Meeting is given or made, notice by the stockholder must be
received not later than the close of business on the 10th day following the
date on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. If a stockholder fails to provide
timely notice of a proposal to be presented at the 2000 Annual Meeting, the
proxies designated by the Board of Directors of the Company will have
discretionary authority to vote on any such proposal.
13
<PAGE>
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 23, 1999
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<PAGE>
PROXY UNITED NATURAL FOODS, INC. PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
ANNUAL MEETING OF STOCKHOLDERS--December 22, 1999
Those signing on the reverse side, revoking any prior proxies, hereby
appoint(s) Norman A. Cloutier, E. Colby Cameron and Kenneth R. Lepage, 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 9:00 a.m. (local time) on December
22, 1999, 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>
To elect the following two Class III Directors for the ensuing three years
(except as marked below):
Class III Nominees: Norman A. Cloutier and Michael S. Funk
[_] FOR both nominees [_] WITHHELD from both nominees
FOR, except vote withheld from the following nominee:[_]_______________________
To ratify the appointment of KPMG 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.
