Sprouts Farmers Market, Inc. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures under the Exchange Act as of January 1, 2023, the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of January 1, 2023, our disclosure controls and procedures were effective. Management’s Annual Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of January 1, 2023, using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013 Framework). Based on this assessment, our management has concluded that our internal control over financial reporting was effective as of January 1, 2023. PricewaterhouseCoopers LLP, our independent registered public accounting firm, assessed the effectiveness of our internal control over financial reporting as of January 1, 2023, as stated in the firm’s report which is included with the consolidated financial statements in Item 8 of this Annual Report on Form 10-K. Changes in Internal Control Over Financial Reporting There were no changes in our internal control over financial reporting that occurred during the quarterly period ended January 1, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 98 Table of Contents Item 9B. Other Information Second Amended and Restated Bylaws On February 28, 2023, our board adopted and approved the second amended and restated bylaws (the “Bylaws”), effective February 28, 2023, to: • Require any stockholder delivering a director nomination notice to comply with Rule 14a-19(a) under the Exchange Act, certify that such stockholder has met the requirements of Rule 14a-19(a) and deliver reasonable evidence of such compliance to the Company; • Require that the information provided in any director nomination notice or notice for any other business be updated and supplemented, if necessary, to be true and correct as of (i) the record date of the stockholder meeting and (ii) the date that is ten business days prior to the date of the stockholder meeting; • Require stockholders nominating director candidates and any proposed nominee, or stockholders proposing other business, to furnish any additional information as may be reasonably required for the Board’s review within ten business days after it has been requested by the Board; • Clarify that, if after a stockholder delivers a director nomination notice, such stockholder subsequently fails either (i) to comply with the requirements of Rule 14a-19 or (ii) provide satisfactory evidence of compliance to the Company, then such stockholder’s nomination(s) will be deemed null and void; • Require that a stockholder directly or indirectly soliciting proxies from other stockholders use a proxy card color other than white; and • Reflect updates to requirements about adjournment procedures and stockholder lists at stockholder meetings, consistent with recent amendments to the Delaware General Corporation Law. The foregoing description of the Bylaws does not purport to be complete and is qualified in its entirety by reference to the complete text of the Bylaws, filed as Exhibit 3.2 to this Annual Report on Form 10-K and incorporated herein by reference. Annual Bonus Plan On February 28, 2023, the Compensation Committee of our board (the “Compensation Committee”) approved the Sprouts Farmers Market, Inc. Annual Bonus Plan (the “Cash Plan”). The Cash Plan provides a means of rewarding employees designated as Participants with cash awards based on the performance of the Company and, where appropriate, a Participant’s personal performance (“Awards”). A copy of the Cash Plan is being filed as Exhibit 10.12 to this Annual Report on Form 10-K, and the following summary is qualified in its entirety by the provisions of the Cash Plan. Capitalized terms used without definition have the meanings set out in the Cash Plan. 99 Table of Contents The Cash Plan shall be administered by, for each Participant that is an executive officer, the Compensation Committee, and for other Participants, the Chief Executive Officer of the Company or other executive designated by the Chief Executive Officer (the “Administrator”). The Administrator shall determine the Participants for each Performance Period, each Participant’s Target Award and the applicable Performance Goals. Performance Periods under the Cash Plan shall be the fiscal year of the Company or any other period designated by the Administrator with respect to which an Award may be earned. For any Performance Period, the Performance Goals selected by the Administrator may be goals of the Company or the Participant, measured either individually, alternatively or in any combination, and measured on an absolute basis or relative to one or more peer companies or indices or any combination thereof. The criteria for the Performance Goals may include one or more of the criteria included in the Cash Plan or such other criteria selected by the Administrator. A Participant will be eligible to earn an Award for a Performance Period based on his or her Target Award and the level of achievement of the Performance Goals; provided that the Administrator may increase or decrease the amount payable pursuant to an Award in its sole discretion. The Administrator shall determine achievement of the Performance Goals and the Award, if any, that will be paid by the Company to each Participant, as soon as practicable following the final determination of the Company’s financial results for the relevant Performance Period. Payment of the Awards determined by the Administrator shall be made in or around March of the calendar year immediately following the last day of the relevant Performance Period. The Administrator may permit a Participant to defer receipt of an Award, consistent with the applicable requirements of Section 409A of the Code. No Participant shall have any right to receive payment of an Award under the Cash Plan for a Performance Period unless the Participant remains in the employ of the Company through the payment date for the Award unless otherwise determined by the Administrator. The Cash Plan is an unfunded incentive compensation plan and has no set expiration date. The Compensation Committee may amend or terminate the Cash Plan at any time. Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection Not Applicable. 100 Table of Contents PART III Item 10. Directors, Executive Of ficers and Corporate Governance The information required by this item will be contained in our definitive Proxy Statement to be filed with the SEC in connection with our 2023 Annual Meeting of Stockholders (referred to as the “Proxy Statement”), which is expected to be filed not later than 120 days after the end of our fiscal year ended January 1, 2023, and is incorporated herein by reference. We have adopted a Code of Ethics – Principal Executive Officer and Senior Financial Officers (referred to as the “Code”) that applies to our principal executive officer, principal financial officer and principal accounting officer and controller. The Code is publicly available on our website at https://investors.sprouts.com/esg/governance-documents/ . We will provide disclosure of future updates, amendments or waivers from the Code by posting them to our investor relations website located at investors.sprouts.com . The information contained on or accessible through our website is not incorporated by reference into this Annual Report on Form 10-K. Item 11. Executi ve Compensation The information required by this Item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Ow ners and Management and Related Stockholder Matters The information required by this Item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this Item will be set forth in the Proxy Statement and is incorporated herein by reference. Item 14. Principal Accou ntant Fees and Services The information required by this Item will be set forth in the Proxy Statement and is incorporated herein by reference. PART IV Item 15. Exhibits and Finan cial Statement Schedules (a) Documents filed as part of this report: 1. Financial Statements: The information concerning our financial statements and Report of Independent Registered Public Accounting Firm required by this Item is incorporated by reference herein to the section of this Annual Report on Form 10-K in Item 8, titled “Financial Statements and Supplementary Data.” 2. Financial Statement Schedules: No schedules are required. 3. Exhibits: See Item 15(b) below. 101 Table of Contents (b) Exhibits: Exhibit Number Description 2.1 Plan of Conversion of Sprouts Farmers Markets, LLC (1) 3.1 Certificate of Incorporation of Sprouts Farmers Market, Inc. (1) 3.2 Second Amended and Restated Bylaws of Sprouts Farmers Market, Inc. 4.1 Description of Sprouts Farmers Market, Inc. Securities 10.1* Sprouts Farmers Market, Inc. 2013 Incentive Plan, amended as of May 1, 2015 (2) 10.1.1* Form of Stock Option Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan (3) 10.1.2(a)* Form of Restricted Stock Unit Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan (3) 10.1.2(b)* 2019 Form of Restricted Stock Unit Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan for Chief Executive Officer (4) 10.1.2(c)* 2021 Form of Restricted Stock Unit Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan for Chief Financial Officer (5) 10.1.2(d)* 2022 Form of Restricted Stock Unit Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan for President and Chief Operating Officer (6) 10.1.3(a)* 2018 Form of Performance Share Award Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan (7) 10.1.3(b)* 2019 Form of Performance Share Award Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan (8) 10.1.3(c)* 2019 Form of Performance Share Award Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan for Chief Executive Officer (4) 10.1.3(d)* 2020 Form of Performance Share Award Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan (9) 10.1.3(e)* 2021 Form of Performance Share Award Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan (10) 10.1.3(f)* 2022 Form of Performance Share Award Agreement under Sprouts Farmers Market, Inc. 2013 Incentive Plan (11) 10.1.4* Form Notice of Amendment to Outstanding Awards granted under the Sprouts Farmers Market, Inc. 2013 Incentive Plan (12) 10.2* Offer Letter, dated August 31, 2021, from Sprouts Farmers Market, Inc. to Lawrence “Chip” Molloy (13) 10.2.1* Severance Agreement, dated September 19, 2021, by and between Sprouts Farmers Market, Inc. and Lawrence “Chip” Molloy (5) 10.3† Distribution Agreement, dated as of July 18, 2018, by and between SFM, LLC dba Sprouts Farmers Market and KeHE Distributors, LLC (14) 10.4* Form of Indemnification Agreement by and between Sprouts Farmers Market, Inc. and its directors and officers (15) 102 Table of Contents 10.5 Credit Agreement, dated as of March 25, 2022, among Sprouts Farmers Market, Inc., Sprouts Farmers Markets Holdings, LLC, the lenders named therein, Bank of America, N.A., as administrative agent, issuing bank and swingline lender, JPMorgan Chase Bank, N.A., as sustainability structuring agent, BMO Capital Markets Corp., JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC as syndication agents, Truist Bank and PNC Bank, N.A. as documentation agents, and BofA Securities, Inc., BMO Capital Markets Corp., JPMorgan Chase Bank, N.A. and Wells Fargo Securities, LLC as joint bookrunners and joint lead arrangers (16) 10.6* Form of Confidentiality, Non-Competition, and Non-Solicitation Agreement (17) 10.7* Amended and Restated Executive Severance and Change in Control Plan (18) 10.8† Deli, Cheese, and Bakery Distribution Agreement, dated as of February 12, 2016, by and between SFM, LLC dba Sprouts Farmers Market and KeHE Distributors, LLC (19) 10.9* Offer Letter from Sprouts Farmers Market, Inc., to Nicholas Konat, dated January 25, 2022 (6) 10.10* Letter Agreement between Sprouts Farmers Market, Inc. and Gil Phipps, dated February 18, 2022 (6) 10.10.1* Letter Agreement, dated May 25, 2022, by and between Sprouts Farmers Market and Gil Phipps (12) 10.11* Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (12) 10.11.1(a)* Form of Restricted Stock Unit Agreement under the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (12) 10.11.1(b)* Form of Restricted Stock Unit Agreement under the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan for Board of Directors 10.11.2* 2022 Form of Performance Share Award Agreement under the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan (12) 10.11.13* Form of Stock Option Award Agreement under the Sprouts Farmers Market, Inc. 2022 Omnibus Incentive Compensation Plan(12) 10.12* Sprouts Farmers Market, Inc. Annual Bonus Plan 21.1 List of subsidiaries 23.1 Consent of PricewaterhouseCoopers LLP, independent registered accounting firm 31.1 Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2 Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 103 Table of Contents 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL document) † Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment previously submitted separately to the SEC. * Management contract or compensatory plan or arrangement. (1) Filed as an exhibit to Amendment No. 4 to the Registrant’s Registration Statement on Form S-1 (File No. 333-188493) filed with the SEC on July 29, 2013, and incorporated herein by reference. (2) Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on May 5, 2015, and incorporated herein by reference. (3) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 7, 2015, and incorporated herein by reference. (4) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 1, 2019, and incorporated herein by reference. (5) Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on September 22, 2021, and incorporated herein by reference. (6) Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on February 24, 2022, and incorporated herein by reference (7) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 3, 2018, and incorporated herein by reference. (8) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 2, 2019, and incorporated herein by reference. (9) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 5, 2020, and incorporated herein by reference. (10) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 6, 2021, and incorporated herein by reference. (11) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 4, 2022, and incorporated herein by reference. (12) Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on May 27, 2022, and incorporated herein by reference. (13) Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on August 31, 2021, and incorporated herein by reference. (14) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q/A filed with the SEC on April 1, 2019, and incorporated herein by reference. (15) Filed as an exhibit to the Registrant’s Registration Statement on Form S-1 (File No. 333-188493) filed with the SEC on May 9, 2013, and incorporated herein by reference. (16) Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on March 25, 2022, and incorporated herein by reference. (17) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 6, 2015, and incorporated herein by reference. (18) Filed as an exhibit to the Registrant’s Current Report on Form 8-K filed with the SEC on February 28, 2020, and incorporated herein by reference. (19) Filed as an exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 4, 2016, and incorporated herein by reference. Item 16. Form 10-K Summary None. 104 Table of Contents SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SPROUTS FARMERS MARKET, INC. Date: March 2, 2023 By: /s/ Lawrence P. Molloy Name: Lawrence P. Molloy Title: Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Jack L. Sinclair Jack L. Sinclair Director and Chief Executive Officer (Principal Executive Officer) March 2, 2023 /s/ Lawrence P. Molloy Lawrence P. Molloy Chief Financial Officer (Principal Financial Officer) March 2, 2023 /s/ Stacy W. Hilgendorf Stacy W. Hilgendorf Vice President, Controller (Principal Accounting Officer) March 2, 2023 /s/ Joseph Fortunato Joseph Fortunato Chairman of the Board March 2, 2023 /s/ Joel D. Anderson Joel D. Anderson Director March 2, 2023 /s/ Hari K. Avula Hari K. Avula Director March 2, 2023 /s/ Kristen E. Blum Kristen E. Blum Director March 2, 2023 /s/ Terri Funk Graham Terri Funk Graham Director March 2, 2023 /s/ Joseph D. O’Leary Joseph D. O’Leary Director March 2, 2023 /s/ Douglas G. Rauch Douglas G. Rauch Director March 2, 2023 105