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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.          )

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

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Soliciting Material under §240.14a-12

 

Smart & Final Stores, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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GRAPHIC

600 Citadel Drive
Commerce, CA 90040

March 26, 2015

Dear Stockholder,

        You are cordially invited to attend the Annual Meeting of Stockholders of Smart & Final Stores, Inc. (the "Company") to be held on Thursday, May 14, 2015 at 10:00 A.M. Pacific Time at the Omni Los Angeles Hotel at California Plaza, Crocker Room, 251 South Olive Street, Los Angeles, California 90012.

        The agenda for the Annual Meeting includes:

        The Company's Board of Directors recommends a vote FOR the election of the two Class I directors, FOR the ratification of the appointment of Ernst & Young LLP as our independent auditors, FOR the approval, on an advisory basis, of compensation paid to our named executive officers described herein, and to recommend holding the say-on-pay vote ONCE EVERY YEAR.

        Your interest in the Company and your vote are very important to us. The enclosed proxy materials contain detailed information regarding the business that will be considered at the Annual Meeting. It is important that all stockholders participate in the affairs of the Company, regardless of the number of shares owned. Accordingly, we encourage you to read the proxy materials and vote your shares as soon as possible. You may vote your proxy via the Internet or telephone or, if you received a paper copy of the proxy materials, by mail by completing and returning the proxy card.

        On behalf of the Company, I would like to express our appreciation for your ongoing interest in Smart & Final Stores, Inc.

    Very truly yours,

 

 

David G. Hirz
President and Chief Executive Officer

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SMART & FINAL STORES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 14, 2015

TIME   10:00 A.M. Pacific Time on Thursday, May 14, 2015

PLACE

 

Omni Los Angeles Hotel at California Plaza
251 South Olive Street
Los Angeles, California 90012

ITEMS OF BUSINESS

 

(1)

 

To elect two Class I directors for three-year terms expiring at the 2018 Annual Meeting of Stockholders once their respective successors have been duly elected and qualified or until their earlier resignation or removal (Proposal 1).

 

 

(2)

 

To ratify the appointment of Ernst & Young LLP as independent auditors for our 2015 fiscal year (Proposal 2).

 

 

(3)

 

To approve, by non-binding vote, the compensation paid to our named executive officers in 2014, as disclosed in these proxy materials (commonly known as a "say-on-pay" proposal) (Proposal 3).

 

 

(4)

 

To recommend, by non-binding vote, the frequency of future advisory votes on executive compensation (commonly known as a "say-on-frequency" proposal) (Proposal 4).

 

 

(5)

 

To transact such other business as may properly be brought before the Annual Meeting or any adjournment or postponement thereof.

RECORD DATE

 

You are entitled to vote only if you were a stockholder of record at the close of business on March 17, 2015.

PROXY VOTING

 

It is important that your shares be represented and voted at the Annual Meeting. Whether or not you plan to attend the Annual Meeting, we urge you to vote online at www.proxyvote.com or via telephone by calling 1-800-690-6903, or to complete and return a proxy card (no postage is required).

        Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 14, 2015: As permitted by rules adopted by the Securities and Exchange Commission, rather than mailing a full paper set of these proxy materials, we are mailing to many of our stockholders only a notice of internet availability of proxy materials containing instructions on how to access these proxy materials and submit their respective proxy votes online. This proxy statement, our 2014 Annual Report on Form 10-K and the proxy card are available at www.proxyvote.com. You will need your notice of internet availability or proxy card to access these proxy materials.

March 26, 2015   Donald G. Alvarado
Secretary

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TABLE OF CONTENTS

 
  Page  

Introduction

       

Proposal 1: Election of Two Class I Directors

    5  

Other Board Information

    9  

Certain Relationships and Related Transactions

    12  

Proposal 2: Ratification of Appointment of Auditors

    14  

Audit Committee Report

    15  

Executive Officers

    16  

Executive Compensation

    18  

Introduction

    18  

Fiscal Year 2014 Compensation

    18  

Tax Considerations

    26  

Compensation Risk Assessment

    26  

Role of Executive Officers in Determining Compensation for Our Executive Officers

    26  

Role of the Compensation Committee in Executive Compensation

    26  

Compensation Committee Interlocks and Insider Participation

    27  

Compensation Committee Report

    27  

Compensation of our Named Executive Officers

    27  

Summary Compensation Table for Fiscal Year 2014

    27  

Grants of Plan-Based Awards Table

    29  

Outstanding Equity Awards at Fiscal Year-End Table

    30  

Option Exercises and Stock Vested

    31  

Pension Benefits Table

    32  

Nonqualified Deferred Compensation Table

    33  

Potential Payments upon Termination or Change in Control

    34  

Director Compensation

    37  

Proposal 3: Advisory Vote on Executive Compensation

    39  

Proposal 4: Advisory Vote on Say-on-Frequency Vote

    40  

Security Ownership of Certain Beneficial Owners and Management

    41  

Section 16(a) Beneficial Ownership Reporting Compliance

    44  

2016 Annual Meeting

    44  

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GRAPHIC

600 Citadel Drive
Commerce, California 90040

PROXY STATEMENT

        The Board of Directors (the "Board") of Smart & Final Stores, Inc., a Delaware corporation (the "Company," "we," "us" or "our"), has prepared this document to solicit your proxy to vote upon certain matters at the Company's 2015 Annual Meeting of Stockholders (the "Annual Meeting").

        These proxy materials contain information regarding the Annual Meeting, to be held on May 14, 2015, beginning at 10:00 A.M. Pacific Time at the Omni Los Angeles Hotel at California Plaza, Crocker Room, 251 South Olive Street, Los Angeles, California 90012, and at any adjournment or postponement thereof. As permitted by the rules adopted by the Securities and Exchange Commission (the "SEC"), rather than mailing a full paper set of these proxy materials, we are mailing to many of our stockholders only a notice of internet availability of proxy materials (the "Notice") containing instructions on how to access and review these proxy materials and submit their respective proxy votes online. If you receive the Notice and would like to receive a paper copy of these proxy materials, you should follow the instructions for requesting such materials located at www.proxyvote.com.


QUESTIONS ABOUT THE ANNUAL MEETING AND THESE PROXY MATERIALS

        It is anticipated that we will begin mailing this proxy statement, the proxy card, our 2014 Annual Report on Form 10-K (the "Annual Report") and the Notice, and that these proxy materials will first be made available online to our stockholders, on or about March 26, 2015. The information regarding stock ownership and other matters in this proxy statement is as of March 17, 2015 (the "Record Date"), unless otherwise indicated.

What may I vote on?

        You may vote on the following proposals:

        THE BOARD RECOMMENDS A VOTE FOR THE ELECTION OF THE TWO CLASS I DIRECTORS, FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG AS THE INDEPENDENT AUDITORS, FOR THE APPROVAL, ON AN ADVISORY BASIS, OF COMPENSATION PAID TO THE NAMED EXECUTIVE OFFICERS IN 2014 ("SAY-ON-PAY") AND TO RECOMMEND HOLDING THE SAY-ON-PAY VOTE ONCE EVERY YEAR ("SAY-ON-FREQUENCY").

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Who may vote?

        Stockholders of record of our common stock, par value $0.001 per share ("common stock"), at the close of business on the Record Date are entitled to receive the Notice and these proxy materials and to vote their respective shares at the Annual Meeting. Each share of common stock is entitled to one vote on each matter that is properly brought before the Annual Meeting. As of the Record Date, 73,771,652 shares of common stock were outstanding.

How do I vote?

        We encourage you to vote your shares via the Internet. How you vote will depend on how you hold your shares of common stock.

        If your common stock is registered directly in your name with our transfer agent, Wells Fargo Shareowner Services, you are considered a stockholder of record with respect to those shares, and a full paper set of these proxy materials is being sent directly to you. As a stockholder of record, you have the right to vote by proxy.

        You may vote by proxy in any of the following three ways:

        Internet.    Go to www.proxyvote.com to use the Internet to transmit your voting instructions and for electronic delivery of information. Have your proxy card in hand when you access the website.

        Phone.    Call 1-800-690-6903 using any touch-tone telephone to transmit your voting instructions. Have your proxy card in hand when you call.

        Mail.    Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided, or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717.

        Voting by any of these methods will not affect your right to attend the Annual Meeting and vote in person. However, for those who will not be voting in person at the Annual Meeting, your final voting instructions must be received by no later than 11:59 p.m. on May 13, 2015.

        Most of our stockholders hold their shares through a stockbroker, bank or other nominee, rather than directly in their own names. If you hold your shares in one of these ways, you are considered the beneficial owner of shares held in street name, and the Notice is being forwarded to you by your broker, bank or nominee who is considered, with respect to those shares, the stockholder of record. As the beneficial owner, you have the right to direct your broker, bank or nominee on how to vote. Your broker, bank or nominee has enclosed a voting instruction form for you to use in directing the broker, bank or nominee on how to vote your shares. If you hold your shares through a New York Stock Exchange ("NYSE") member brokerage firm, such member brokerage firm has the discretion to vote shares it holds on your behalf with respect to Proposal 2 (the ratification of Ernst & Young as independent auditors for our 2015 fiscal year), but not with respect to Proposal 1 (the election of two Class I directors), Proposal 3 (the say-on-pay proposal) or Proposal 4 (the say-on-frequency proposal), as more fully described under "What is a broker 'non-vote?"' below.

Can I change my vote?

        Yes. If you are the stockholder of record, you may revoke your proxy before it is exercised by doing any of the following:

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        Beneficial owners should contact their broker, bank or nominee for instructions on changing their votes.

How many votes must be present to hold the Annual Meeting?

        A "quorum" is necessary to hold the Annual Meeting. A quorum is a majority of the votes entitled to be cast by the stockholders entitled to vote at the Annual Meeting. They may be present at the Annual Meeting or represented by proxy. Abstentions and broker "non-votes" are counted as present and entitled to vote for purposes of determining a quorum.

How many votes are needed to approve the proposals?

        At the Annual Meeting, a "FOR" vote by a majority of votes cast is required for Proposal 1 (the election of two Class I directors), Proposal 2 (the ratification of Ernst & Young as independent auditors for our 2015 fiscal year) and Proposal 3 (the say-on-pay proposal). With respect to Proposal 4 (the say-on-frequency proposal), the alternative receiving the greatest number of votes (every one year, two years or three years) will be the frequency that our stockholders will approve, by non-binding vote, the say-on-pay proposal.

        A "FOR" vote by a "majority of votes cast" means that the number of shares voted "FOR" exceeds the number of shares voted "AGAINST."

What is an abstention?

        An abstention is a properly signed proxy card that is marked "abstain." Abstentions do not constitute votes "FOR" or votes "AGAINST."

What is a broker "non-vote?"

        A broker "non-vote" occurs when a nominee holding shares for a beneficial owner does not vote on a particular proposal because the nominee does not have discretionary voting power for that particular item and has not received timely instructions from the beneficial owner. Under current applicable rules, Proposal 2 (the ratification of Ernst & Young as independent auditors for our 2015 fiscal year) is a "discretionary" item upon which NYSE member brokerage firms that hold shares as nominee may vote on behalf of the beneficial owners if such beneficial owners have not furnished voting instructions by the tenth day before the Annual Meeting.

        However, NYSE member brokerage firms that hold shares as a nominee may not vote on behalf of the beneficial owners on the following proposals unless you provide voting instructions: Proposal 1 (the election of two Class I directors), Proposal 3 (the say-on-pay proposal) and Proposal 4 (the say-on-frequency proposal). Therefore, if an NYSE member brokerage firm holds your common stock as a nominee, please instruct your broker how to vote your common stock on each of these proposals. This will ensure that your shares are counted with respect to each of these proposals.

Will any other matters be acted on at the Annual Meeting?

        If any other matters are properly presented at the Annual Meeting or any adjournment or postponement thereof, the persons named in the proxy will have discretion to vote on those matters. As of March 1, 2015, the date by which any proposal for consideration at the Annual Meeting submitted by a stockholder must have been received by us to be presented at the Annual Meeting, and as of the

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date of these proxy materials, we did not know of any other matters to be presented at the Annual Meeting.

Who pays for this proxy solicitation?

        We will pay the expenses of soliciting proxies. In addition to solicitation by mail, proxies may be solicited in person or by telephone or other means by our directors or associates. We will reimburse brokerage firms and other nominees, custodians and fiduciaries for costs incurred by them in mailing these proxy materials to the beneficial owners of common stock held of record by such persons.

Whom should I contact with other questions?

        If you have additional questions about these proxy materials or the Annual Meeting, please contact: Smart & Final Stores, Inc., 600 Citadel Drive, Commerce, California, 90040, Attention: Donald G. Alvarado, Telephone: (323) 869-7500.

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ELECTION OF TWO CLASS I DIRECTORS (PROPOSAL 1)

Board Structure and the Nominees

        The Board is comprised of eight directors. Pursuant to our Amended and Restated Certificate of Incorporation, the Board is divided into three classes. The members of each class serve for staggered, three-year terms. Upon the expiration of the term of a class of directors, the Nominating and Corporate Governance Committee of the Board (the "Nominating Committee") will recommend to the Board for its approval the slate of director nominees to be nominated for election for three-year terms at the Annual Meeting of Stockholders in the year in which the term of a class of directors expires.

        In connection with the Annual Meeting, the Board, upon the recommendation of the Nominating Committee, has nominated each of Norman H. Axelrod and Dennis T. Gies (together, the "Nominees") for reelection as a Class I director, for a three-year term expiring at our 2018 annual meeting of stockholders once their respective successors have been duly elected and qualified or until their earlier resignation or removal.

        Set forth below is information concerning our directors, and the key experience, qualifications and skills they bring to the Board.

The Nominees

        Norman H. Axelrod, 62, has served as a member of our board of directors since March 2013. Beginning in 1988, Mr. Axelrod served as Chief Executive Officer and a member of the board of directors of Linens 'n Things, Inc., a retailer of home textiles, housewares and decorative home accessories, was appointed as Chairman of its board of directors in 1997, and served in such capacities until its acquisition in February 2006. Mr. Axelrod is also the Chairman of the boards of directors of the parent entities of Guitar Center, Inc., a musical instruments retailer, and Floor and Decor Outlets of America, Inc., a specialty retailer of hard surface flooring and related accessories, and serves on the boards of directors of the parent entities of 99 Cents Only Stores LLC, a deep-discount retailer, and Jaclyn, Inc., a handbags and apparel company. Mr. Axelrod has also previously served as the Chairman of the board of directors of GNC Holdings, Inc., a specialty retailer of health and wellness products, National Bedding Company LLC, a mattress and bedding product manufacturer, and Simmons Company, a mattress and bedding product manufacturer, and as a member of the board of directors of Reebok International Ltd., a leading worldwide designer and marketer of sports, fitness and casual footwear, apparel and equipment, and Maidenform Brands, Inc., an intimate apparel retailer. Mr. Axelrod has provided consulting services to certain Ares Management, L.P. ("Ares Management") entities. Mr. Axelrod received a B.S. in Management and Marketing from Lehigh University where he graduated summa cum laude and an M.B.A. from New York University. Mr. Axelrod's vast experience in the retail industry led to the conclusion that he should serve as a member of our board of directors.

        Dennis T. Gies, 35, has served as a member of our directors since November 2012. Mr. Gies is a Principal in the Private Equity Group of Ares Management, our principal stockholder. Mr. Gies joined Ares Management in 2006 from UBS Investment Bank where he participated in the execution of a variety of transactions including leveraged buyouts, mergers and acquisitions, dividend recapitalizations and debt and equity financings. Mr. Gies currently serves on the boards of directors of the parent entities of 99 Cents Only Stores LLC, a deep-discount retailer, and Sotera Defense Solutions, Inc., a national defense information technology contractor. Mr. Gies graduated with a MS in Electrical Engineering from University of California, Los Angeles and magna cum laude with a BS in Electrical Engineering from Virginia Tech. Mr. Gies brings to our board of directors financial expertise, as well as experience as a private equity investor evaluating and managing investments in companies across various industries.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE ELECTION OF THE TWO NOMINEES AS CLASS I DIRECTORS.

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Directors Remaining in Office until Our 2016 Annual Meeting of Stockholders

        Richard A. Anicetti, 57, has served as member of our board of directors since May 2014. Mr. Anicetti is currently the President and Founder of From One To Many Leadership Consulting LLC focusing on leadership, strategic planning, process redesign and organizational change management consulting. Mr. Anicetti served as Interim President and Chief Executive Officer of the parent entity of 99 Cents Only Stores LLC, a deep-discount retailer, from January 2013 until September 2013, as an Executive Vice President of Delhaize Group, an international food retailer, from September 2002 to May 2010. Mr. Anicetti also served as the Chief Executive Officer of Delhaize America Shared Services from January 2010 to May 2010. He served as the President and COO of Food Lion, LLC, a grocery store chain and a subsidiary of Delhaize America Inc., from September 2001 to October 2002 and Chief Executive Officer of Food Lion from October 2002 to December 2010. Mr. Anicetti joined Food Lion in August 2000. He is also a member of a US Advisory Board for Brambles Ltd, a logistics company based in Sydney, Australia, a member of the board of trustees for Bennett College for Women and a member of the National Advisory Board for Duke Children's Hospital. Mr. Anicetti currently serves as a member of the board of directors of the parent entity of 99 Cents Only Stores LLC and was previously a member of the board of directors of A&P Supermarkets, a grocery store chain. With his more than 30 years' experience and strong record of performance in the food retail industry, Mr. Anicetti brings to our board of directors extensive knowledge and expertise in the industries in which the Company operates.

        Andrew A. Giancamilli, 64, has served as a member of our board of directors since March 2013. Mr. Giancamilli served as President and Chief Executive Officer of Katz Group Canada Ltd., the Canadian subsidiary of the Katz Group of Companies, operators of over 1,800 traditional drug stores in Canada, from October 2003 to February 2012. Prior to joining Katz Group Canada, Mr. Giancamilli was with Canadian Tire Corporation Ltd., a Canadian retail conglomerate, from 2001 to 2003. Mr. Giancamilli also held several positions, including President and Chief Operating Officer, at Kmart Corporation, a discount retailer, from 1995 to 2001. From 1993 to 1995 he served as President and Chief Operating Officer of Perry Drug Stores, Inc., a U.S. based drug store chain. He began his career at Perry Drug Stores in 1975. Mr. Giancamilli currently serves as a director of the parent entity of 99 Only Stores LLC, a deep-discount retailer. Mr. Giancamilli also has served as a member of the board of GS1 Canada, and as a member of the board of directors, and Chairman of the National Association of Chain Drug Stores (NACDS), the Canadian Association of Chain Drug Stores, the Canadian Opera Company and Sacred Heart Rehabilitation Center, and has served as a Trustee of the Detroit Opera House. With his more than 30 years of experience and strong record of performance in the retail industry, Mr. Giancamilli brings to the board extensive knowledge and expertise in the industries in which the Company operates.

        Adam L. Stein, 38, has served as a member of our board of directors since November 2012. Mr. Stein is a Partner in the Private Equity Group of Ares Management, our principal stockholder. Prior to joining Ares Management in 2000, Mr. Stein was a member of the Global Leveraged Finance Group at Merrill Lynch & Co. where he participated in the execution of leveraged loan, high yield bond and mezzanine financing transactions across various industries. Mr. Stein serves on the boards of directors of the parent entities of Floor and Decor Outlets of America, Inc., a specialty retailer of hard surface flooring and related accessories, The Neiman Marcus Group LLC, a luxury retailer, 99 Cents Only Stores LLC, a deep-discount retailer, and Guitar Center, Inc., a musical instruments retailer. Mr. Stein previously served on the board of directors of Maidenform Brands, Inc., an intimate apparel retailer. Mr. Stein also serves on the Advisory Board of the Los Angeles Food Bank. Mr. Stein graduated with distinction from Emory University's Goizueta Business School, where he received a BA in Business Administration with a concentration in Finance. Mr. Stein's experience working with and serving as a director of various companies in the retail industry controlled by private equity sponsors led to the conclusion that he should serve as a member of our board of directors.

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Directors Remaining in Office until Our 2017 Annual Meeting of Stockholders

        David G. Hirz, 59, has served as a member of our board of directors since January 2012, has served as our President and Chief Executive Officer since January 2012, and previously served as our President and Chief Operating Officer from April 2010 to January 2012. Additionally, Mr. Hirz has served as a member of our board of directors since January 2012. Prior to joining us in April 2010, Mr. Hirz was an executive with divisions of The Kroger Company, one of the world's largest supermarket operators, including President of Food4Less, a national warehouse grocery store chain of The Kroger Company, from 1999 to 2004 and from September 2007 to April 2010, and President of the Ralphs Grocery Company, the largest supermarket chain in Southern California, from March 2004 to September 2007. Previously, he held store and operations management positions with several retail grocery companies. Mr. Hirz is a graduate of California State University, Fullerton. Mr. Hirz brings significant senior leadership and both operational and industry experience to our board of directors, along with an extensive knowledge of the food retail and foodservice industries.

        David B. Kaplan, 47, has served as our Chairman of the Board since November 2012. Mr. Kaplan is a Co-Founder of Ares Management, our principal stockholder, and a Director and Senior Partner of Ares Management GP LLC, Ares Management's general partner. He is a Senior Partner of Ares Management, Co-Head of its Private Equity Group and a member of its Management Committee. He additionally serves on several of the Investment Committees for the Ares private equity funds. Mr. Kaplan joined Ares Management in 2003 from Shelter Capital Partners, LLC, where he was a Senior Principal from June 2000 to April 2003. From 1991 through 2000, Mr. Kaplan was affiliated with, and a Senior Partner of, Apollo Management, L.P. and its affiliates, during which time he completed multiple private equity investments from origination through exit. Prior to Apollo Management, L.P., Mr. Kaplan was a member of the Investment Banking Department at Donaldson, Lufkin & Jenrette Securities Corp., an investment banking and securities firm. Mr. Kaplan currently serves as Chairman of the boards of directors of the parent entities of The Neiman Marcus Group LLC, a luxury retailer, and 99 Cents Only Stores LLC, a deep-discount retailer, and as a member of the board of directors of ATD Corporation, a replacement tire distributor, and the parent entities of Guitar Center, Inc., a musical instruments retailer, and Floor and Decor Outlets of America, Inc., a hard surface flooring and related accessories retailer. Mr. Kaplan's previous public company board of directors experience includes Maidenform Brands, Inc., an intimate apparel retailer, where he served as the company's Chairman, GNC Holdings, Inc., a specialty retailer of health and wellness products, Dominick's Supermarkets, Inc., a grocery store retailer, Stream Global Services, Inc., a business process outsourcing provider, Orchard Supply Hardware Stores Corporation, a home improvement retailer, and Allied Waste Industries Inc., a waste services company. Mr. Kaplan also serves on the Board of Directors of Cedars-Sinai Medical Center, is a Trustee of the Center for Early Education, is a Trustee of the Marlborough School and serves on the President's Advisory Group of the University of Michigan. Mr. Kaplan graduated with High Distinction, Beta Gamma Sigma, from the University of Michigan, School of Business Administration with a B.B.A. concentrating in Finance. Mr. Kaplan's over 20 years of experience managing investments in, and serving on the boards of directors of, companies operating in various industries led to the conclusion that he should serve as chairman of our board of directors.

        Joseph S. Tesoriero, 61, has served as a member of our board of directors since July 2014. Mr. Tesoriero was most recently engaged as a financial advisor for Dole Asia Holding, Ltd. Pte, a wholly owned subsidiary of ITOCHU Corporation, from April 2013 to October 2013. Prior to this consulting engagement, Mr. Tesoriero served as Executive Vice President and Chief Financial Officer of Dole Food Company, Inc. ("Dole"), a producer, marketer and distributor of fresh fruits, fresh vegetables and packaged food products, from February 2010 until April 2013, and as Vice President and Chief Financial Officer from August 2004 until February 2010 and Vice President of Tax from September 2002 until August 2004. While serving as a principal financial officer at Dole, Mr. Tesoriero

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was responsible for overseeing the financial performance of Dole in preparing and evaluating its financial statements. Mr. Tesoriero holds a B.S. in Accounting from Villanova University, a J.D. from New York Law School and an L.L.M. in Taxation from Boston University. He has been a member of the New York State Bar since 1978. Mr. Tesoriero brings to the board of directors over 30 years of experience working for publicly held companies, including significant experience as a senior financial executive in the food industry, engaged in globally sourcing, manufacturing, distributing and marketing a wide variety of branded and private label fresh produce and grocery items.

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OTHER BOARD INFORMATION

Board Meetings in 2014

        The Board held five meetings during our fiscal year ended December 28, 2014.

Director Attendance

        During our fiscal year ended December 28, 2014, each of our directors attended at least 75% of the total number of meetings of the Board and committees on which he or she served that were held during the period he or she served as a director or committee member, as applicable.

        The Annual Meeting will be our first Annual Meeting of Stockholders since we completed our initial public offering (the "IPO") in September 2014. We encourage, but do not require, our directors to attend our Annual Meetings of Stockholders.

Director Independence

        The Board is comprised of Richard A. Anicetti, Norman H. Axelrod, Andrew A. Giancamilli, Dennis T. Gies, David G. Hirz, David B. Kaplan, Adam L. Stein and Joseph S. Tesoriero. The Board, upon the findings of the Nominating Committee, has determined that each of Messrs. Anicetti, Axelrod, Giancamilli, Gies, Kaplan, Stein and Tesoriero is "independent" within the meaning of Rule 303A.02 of the NYSE Listed Company Manual.

        Our common stock has been listed for trading on the NYSE under the symbol "SFS" since September 24, 2014. Prior to the consummation of the IPO, we had no securities listed for trading on a national securities exchange or in an automated inter-dealer quotation system of a national securities association that required a majority of the Board to be independent.

Leadership Structure

        The Board has no policy with respect to the separation of the offices of Chief Executive Officer and Chairman of the Board. It is the Board's view that rather than having a rigid policy, the Board, with the advice and assistance of the Nominating Committee, and upon consideration of all relevant factors and circumstances, will determine, as and when appropriate, whether it is in the best interests of the Company and its stockholders for such offices to be separate or combined.

        Currently, our leadership structure separates the offices of Chief Executive Officer and Chairman of the Board, with Mr. Hirz serving as our Chief Executive Officer and Mr. Kaplan as Chairman of the Board. We believe this is appropriate, as it provides Mr. Hirz with the ability to focus on our day-to-day operations while Mr. Kaplan focuses on oversight of the Board.

Risk Oversight

        The Board plays an active role in overseeing management of our risks. The Board regularly reviews information regarding our credit, liquidity and operations, as well as the risks associated with each. The Audit Committee of the Board ("Audit Committee") is responsible for overseeing the management of financial risks. The Compensation Committee of the Board (the "Compensation Committee" and, collectively with the Audit Committee and the Nominating Committee, the "Committees") is responsible for overseeing the management of risks relating to our executive compensation policies and arrangements, and for managing risks relating to our director compensation policies and arrangements. The Nominating Committee is responsible for reviewing the independence of the Board and other corporate governance matters. While each of the Committees is responsible for evaluating certain risks and overseeing the management of such risks, the Board as a whole is regularly informed of the conclusions of such evaluations through reports of the Committees.

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Board Committees

        Each of the Committees is a standing committee of the Board. The Board has adopted a written charter for each of the Committees, which are available, along with the Code of Business Conduct and Ethics and Corporate Governance Guidelines, on the Corporate Governance page of the Investors section of our website located at www.smartandfinal.com.

        The Audit Committee held eight meetings during our fiscal year ended December 28, 2014 and consists of Andrew A. Giancamilli, Dennis T. Gies and Joseph S. Tesoriero, who acts as its chair. The Board has determined that each of Messrs. Giancamilli, Gies and Tesoriero is independent as independence is defined under the applicable section of the NYSE rules, and that each of Messrs. Giancamilli and Tesoriero is independent as independence is defined under Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Board has also determined that each of Messrs. Giancamilli, Gies and Tesoriero qualifies as an "audit committee financial expert."

        The principal duties and responsibilities of the Audit Committee are as follows:

        The Audit Committee has the power to investigate any matter brought to its attention within the scope of its duties. It also has the authority to retain counsel and advisors to fulfill its responsibilities and duties.

        The Compensation Committee held one meeting during our fiscal year ended December 28, 2014 and consists of Messrs. Richard A. Anicetti, Dennis T. Gies and Adam L. Stein, who acts as its chair.

        The principal duties and responsibilities of the Compensation Committee are as follows:

        Compensation Committee Interlocks and Insider Participation.    For our fiscal year ended December 28, 2014, (i) no member of the Compensation Committee has (a) served as one of our officers or employees or (b) had any relationship requiring disclosure under Item 404 of

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Regulation S-K, and (ii) none of our executive officers served as a director or member of the compensation committee of another entity whose executive officers served on the Board or the Compensation Committee.

        The Nominating Committee was formed in September 2014 in connection with the IPO and did not hold any meetings during our fiscal year ended December 28, 2014. The Nominating Committee consists of Richard A. Anicetti, Joseph S. Tesoriero and Adam L. Stein, who acts as its chair.

        The principal duties and responsibilities of the Nominating Committee are as follows:

        Director Qualifications; Nominating Committee Process.    The Nominating Committee's policy is to identify potential nominees from any properly submitted nominations, including any properly submitted nominations from our stockholders, and subsequently evaluate each potential nominee. To properly submit a nomination, our stockholders must provide timely notice of such nomination in accordance with Section 1.10 of our Second Amended and Restated Bylaws (the "Bylaws").

        The Nominating Committee conducts the appropriate and necessary inquiries (as determined by the Nominating Committee) with respect to the backgrounds and qualifications of any potential nominees, without regard to whether a potential nominee has been recommended by our stockholders, and, upon consideration of all relevant factors and circumstances, recommends to the Board for its approval the slate of director nominees to be nominated for election at our Annual Meeting of Stockholders. The Nominating Committee considers potential nominees without regard to race, color, creed, religion, national origin, age, gender, sexual orientation or disability. The Nominating Committee has not adopted a formal policy with respect to diversity. In general, the Company seeks a Board that includes a diversity of perspectives and includes individuals that possess backgrounds, skills, expertise and attributes that allow them to function collaboratively and effectively together in their oversight of the Company.

Stockholder Communications

        The Board welcomes communications from our stockholders. Stockholders may send communications to the Board, or to any particular director, to the following address: Smart & Final Stores, Inc., 600 Citadel Drive, Commerce, California, 90040, Attention: Secretary. Stockholders should indicate clearly the director or directors to whom the communication is being sent so that each communication may be forwarded directly to the appropriate director(s).

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Term Loan Facility

        Smart & Final Stores, Inc. was formed by funds affiliated with Ares Management in connection with the Purchase and Sale Agreement, dated October 9, 2012, pursuant to which we acquired all of the outstanding stock of Smart & Final Holdings Corp., the former ultimate parent company of all of our operating subsidiaries (the "Ares Acquisition"). Upon the closing of the Ares Acquisition, Smart & Final Stores LLC (an indirect wholly-owned subsidiary of the Company) entered into a first lien term loan facility (the "Term Loan Facility"), under which various funds affiliated with Ares Corporate Opportunities Fund III, L.P. ("ACOF III") and Ares Corporate Opportunities Fund IV, L.P. ("ACOF IV"), our principal stockholders, are lenders. As of December 28, 2014, these affiliated funds had term loans of Smart & Final Stores LLC in the amount of $58.5 million. As of December 28, 2014, $594.9 million was outstanding under the Term Loan Facility. In addition, in fiscal year 2014, an aggregate of $11.9 million in principal and $3.1 million in interest was paid to affiliates of Ares in respect of amounts borrowed under the Term Loan Facility. As of December 28, 2014, borrowings under the Term Loan Facility accrue interest at a weighted average rate of 4.75% per year.

Registration Rights Agreement

        Pursuant to the terms of our registration rights agreement (the "Registration Rights Agreement"), our pre-IPO stockholders, including Ares and certain of our executive officers and directors, are entitled to various rights with respect to the registration of their shares under the Securities Act of 1933, as amended (the "Securities Act"). Registration of any of these shares under the Securities Act would result in such shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration statement, except for shares purchased by affiliates.

Demand Registration Rights

        Subject to certain conditions and restrictions contained in the Registration Rights Agreement, ACOF III and ACOF IV can make an unlimited number of demands for us to register their shares of our common stock under the Securities Act.

Piggyback Registration Rights

        In the event of a demand registration or if we propose to register any of our own securities under the Securities Act in a public offering, we will be required to provide notice to those holders of our common stock with registration rights under the Registration Rights Agreement and provide them with the right to include their shares in the registration statement, subject to certain conditions and exceptions contained in the Registration Rights Agreement.

Expenses

        We will be required to bear the registration expenses, other than underwriting discounts and commissions and transfer taxes, associated with any registration of shares of our common stock held by the holders of our common stock with registration rights under the Registration Rights Agreement.

Management Services Agreements

        In connection with the Ares Acquisition, on November 15, 2012, we entered into Management Services Agreements with certain affiliates of Ares Management (the "Management Services Agreements"). Each Management Services Agreement provides for reimbursement of the applicable manager's and its affiliates' out-of-pocket expenses in connection with the management services

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provided thereunder. For the year ended December 28, 2014, $93,100 was reimbursed in accordance with the terms of the Management Services Agreements. No fees are payable under the Management Services Agreements.

        Each Management Services Agreement also provides that we will indemnify the applicable manager and its affiliates against all losses, claims, damages and liabilities arising in connection with the management and financial services provided by such manager thereunder.

Indemnification of Officers and Directors

        Our certificate of incorporation and bylaws provide that we will indemnify each of our directors and officers to the fullest extent permitted by Delaware law. In addition, we have entered into indemnification agreements with each of our directors and executive officers.

Purchases of Products in the Ordinary Course of Business

        Certain of our related persons may, either directly or through their respective affiliates, enter into commercial transactions with us from time to time in the ordinary course of business, primarily for the purchase of products. We believe that none of the transactions with such persons is significant enough to be considered material to such persons or to us.

Policies and Procedures for Related Party Transactions

        The Audit Committee is charged with reviewing for approval or ratification all transactions with "related persons" (as defined in paragraph (a) of Item 404 Regulation S-K) that are brought to the Audit Committee's attention. This policy was adopted in September 2014 and, as a result, the transactions described under this section were not reviewed under such policies, but rather were entered into after presentation to and consideration and approval by the Board of Directors.

        We also maintain certain compensation agreements and other arrangements with certain of our executive officers, which are described under "Executive and Director Compensation" elsewhere in this proxy statement.

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RATIFICATION OF APPOINTMENT OF AUDITORS (PROPOSAL 2)

        In accordance with the Audit Committee's charter, the Audit Committee is responsible for the appointment and retention of our independent auditors. In our fiscal years ended December 28, 2014 and December 29, 2013, all audit and non-audit services were pre-approved by the Audit Committee.

        The Audit Committee has appointed Ernst & Young to serve as our independent auditors for our fiscal year ended January 3, 2016, subject to ratification by our stockholders. Representatives of Ernst & Young will be present at the Annual Meeting to answer questions and will also have the opportunity to make a statement if they desire to do so. If the proposal to ratify Ernst & Young's appointment is not approved, other certified public accountants will be considered by the Audit Committee. Even if the proposal is approved, the Audit Committee, in its discretion, may direct the appointment of new independent auditors at any time during the year if it believes that such a change would be in the best interest of the Company and its stockholders.

Fees Paid to Ernst & Young LLP

        The fees incurred by us for professional services rendered by Ernst & Young for our fiscal years ended December 28, 2014 and December 29, 2013 were as follows:

 
  2014   2013  

Audit Fees(1)

  $ 2,779,329   $ 835,000  

Audit-Related Fees(2)

         

Tax Fees(3)

        18,000  

All Other Fees(4)

         

  $ 2,779,329   $ 853,000  

                                            

(1)
Includes fees for services (i) associated with the audit of our consolidated financial statements, (ii) reviews of our interim quarterly consolidated financial statements, (iii) services rendered in connection with our Registration Statement on Form S-1 filings related to our initial public offering and (iv) comfort letters, consents and other services related to Securities and Exchange Commission matters.

(2)
Not applicable.

(3)
Includes services related to federal and state tax planning and advice.

(4)
Not applicable.

        The Audit Committee has concluded that the provision of the foregoing services is compatible with maintaining Ernst & Young's independence.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG AS INDEPENDENT AUDITORS FOR OUR FISCAL
YEAR ENDED JANUARY 3, 2016.

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AUDIT COMMITTEE REPORT

        The Board has determined that each of Messrs. Giancamilli, Gies and Tesoriero is independent as independence is defined under the applicable section of the NYSE rules, and that each of Messrs. Giancamilli and Tesoriero is independent as independence is defined under Rule 10A-3(b)(1) under the Exchange Act. The Board has also determined that each of Messrs. Gies, Giancamilli and Tesoriero qualifies as an "audit committee financial expert."

        The Audit Committee discussed the auditors' review of our quarterly financial information with the auditors prior to the release of such information and the filing of our quarterly reports with the SEC. The Audit Committee also met and held discussions with management and the independent auditors with respect to our audited year-end financial statements.

        Further, the Audit Committee discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 16, as amended (Communications With Audit Committees), received the written disclosures and the letter from the independent auditors required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant's communications with the Audit Committee concerning independence and discussed with the auditors the auditors' independence. The Audit Committee also discussed with the auditors and our financial management matters related to our internal control over financial reporting. Based on these discussions and the written disclosures received from the independent auditors, the Audit Committee recommended that the Board include the audited financial statements in the Annual Report.

        This audit committee report is not deemed filed under the Securities Act of 1933 or the Exchange Act, and is not incorporated by reference into any filings that we may make with the SEC.

    AUDIT COMMITTEE
Joseph S. Tesoriero (Chairperson)
Andrew A. Giancamilli
Dennis T. Gies

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EXECUTIVE OFFICERS

        Set forth below is information concerning our executive officers.

Name
  Age   Position

David G. Hirz

    59   President, Chief Executive Officer and Director

Richard N. Phegley

    59   Senior Vice President and Chief Financial Officer

Donald G. Alvarado

    60   Senior Vice President and General Counsel

Scott R. Drew

    53   Executive Vice President, Operations, Smart & Final

Eleanor E. Hong

    38   Senior Vice President and Chief Marketing Officer

Michael M. Laddon

    61   Senior Vice President and Chief Information Officer

Richard A. Link

    60   Group Vice President and Controller, Chief Accounting Officer

Michael A. Mortensen

    59   Senior Vice President, Sales and Merchandising, Smart & Final

Eugene M. Smith

    47   Vice President and Treasurer

Martin J. Trtek

    60   President, Cash & Carry

Jeffrey D. Whynot

    58   Senior Vice President, Human Resources

        The biography for Mr. Hirz is set forth above under "Election of Directors (Proposal 1)—Directors Remaining in Office until Our 2017 Annual Meeting of Stockholders."

        Richard N. Phegley joined us in September 1996 as Vice President and Treasurer and has served as our Senior Vice President and Chief Financial Officer since May 2001. Prior to joining us, Mr. Phegley served in senior treasury, strategic planning and financial management positions with Atlantic Richfield Company, an international oil and gas company. He holds a Master's degree in Business Administration from the University of Southern California and is a graduate of Humboldt State University. Mr. Phegley is an associate member of the American Institute of Certified Public Accountants.

        Donald G. Alvarado joined us in 1987, was named our General Counsel and Corporate Secretary in 1991, and additionally as a Senior Vice President in 1996. Prior to joining us, Mr. Alvarado served in the legal department of a regional grocer that is now a division of Safeway Inc., one of North America's largest food and drug retailers. He holds a law degree from the University of Southern California and is a graduate of Loyola Marymount University. Mr. Alvarado is a member of the California Bar Association.

        Scott R. Drew joined us in March 2010 and was named Executive Vice President, Operations of our Smart & Final stores in March 2015. From December 2010 to March 2015, Mr. Drew served as Senior Vice President, Store Operations of our Smart & Final stores, and from March 2010 to December 2010, Mr. Drew served as Vice President and General Manager of a group of our stores. Prior to joining us, Mr. Drew served for 31 years in various store management positions with The Kroger Company, including as Vice President of Store Operations for Kroger's Indiana division.

        Eleanor E. Hong joined us as Senior Vice President and Chief Marketing Officer in February 2014. Prior to joining us, Ms. Hong served as Senior Vice President of marketing for Kohl's Corporation, a national department store retailer, from May 2011 to February 2014, as Vice President of Marketing for Toys "R" Us, a leading dedicated toy and baby products retailer, and its Babies "R" Us division, from March 2007 to April 2011, and in marketing positions with Time Consumer Marketing, a publishing company. Ms. Hong holds a Master's degree in Business Administration from Columbia University and the London Business School, and is a graduate of the University of Pennsylvania.

        Michael M. Laddon joined us in January 2011 as our Senior Vice President and Chief Information Officer, and he also has responsibility for our logistics operations. From March 2003 to October 2008, Mr. Laddon was Senior Vice President and Chief Information Officer of Longs Drug Stores Corp., a

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regional drugstore chain and pharmacy benefit company, a part of CVS Caremark Corp. Previously he held management positions in retail grocery, software sales and internet companies, including group vice president and chief information officer for Ralphs Grocery Company, a division of The Kroger Company.

        Richard A. Link joined us in October 2001 as Vice President and Controller and in December 2001 was designated as our Chief Accounting Officer. In January 2008 he was appointed Group Vice President. From September 1988 through February 2001, Mr. Link served in various positions, including chief financial officer and chief accounting officer, with Maxicare Health Plans, Inc., an operator of health maintenance organizations. Mr. Link previously served as a senior audit manager with Price Waterhouse & Co., a professional services firm now named PricewaterhouseCoopers LLP. He holds a Master's degree in Business Administration and an undergraduate degree from the University of Southern California.

        Michael A. Mortensen joined us in July 2010 as our Senior Vice President of Sales and Merchandising of our Smart & Final stores. From 1994 to July 2010, Mr. Mortensen held a variety of positions including Vice President of Grocery with Food4Less, a national warehouse grocery store division of The Kroger Company. Previously, he held store management and procurement positions with a Food4Less predecessor company. Mr. Mortensen is a graduate of California State University, Long Beach.

        Eugene M. Smith joined us in July 1996 and has served as our Vice President and Treasurer since March 2013. Prior to his current position, Mr. Smith served us in a variety of roles including Director of Financial Services and Director of Internal Audit. He holds a Master's degree in Business Administration from Loyola Marymount University and is a graduate of the University of Connecticut. Mr. Smith is an associate member of the American Institute of Certified Public Accountants.

        Martin J. Trtek joined us in May 1998 upon the acquisition of our Cash & Carry stores, and has served as the President of Cash & Carry since October 2008. Prior to his current position, Mr. Trtek served in various store management positions with the Cash & Carry stores, including Vice President of Operations and District Manager.

        Jeffrey D. Whynot joined us in January 2000 as our Senior Vice President of Human Resources. Previously, Mr. Whynot served as Vice President of Human Resources for Dames & Moore Group, an engineering consulting firm, and in various capacities including Vice President of Human Resources for Knott's Berry Farm, an entertainment company. He holds a Master's degree in Human Resources and Organizational Development from University of San Francisco and is a graduate of California State University, Northridge.

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EXECUTIVE COMPENSATION

COMPENSATION DISCUSSION AND ANALYSIS

Introduction

        In this Compensation Discussion and Analysis, we address our philosophy, programs and processes related to the compensation paid or awarded for fiscal year 2014 to our named executive officers listed in the Summary Compensation Table for Fiscal Year 2014 that follows this discussion.

        Our named executive officers for fiscal year 2014, which consist of our principal executive officer, our principal financial officer and our three other most highly compensated executive officers for fiscal year 2014, are:

Fiscal Year 2014 Compensation

Compensation Philosophy and Objectives

        Prior to our IPO, we were a private company and did not historically have a formal compensation philosophy. Our fiscal year 2014 compensation philosophy was established when we were a private company and intended to appropriately incentivize our named executive officers to achieve short- and long-term company success. Our Compensation Committee has worked with Hay Group, our compensation consultant, to develop and formalize such a philosophy and to implement compensation arrangements that reflect that philosophy. Our compensation philosophy reflects the following general principles:

Determination of Compensation

        During fiscal year 2014, our board of directors and Compensation Committee made compensation decisions with respect to our named executive officers. In making executive compensation determinations for fiscal year 2014, we relied on the significant experience of our directors in establishing compensation across many companies in multiple industries, as well as the input of our

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chief executive officer, who has many years of experience in our industry. In addition, Hay Group was retained by the Company in connection with the IPO, and by the Compensation Committee following the IPO, as a compensation consultant to provide advice on compensation for a public company. Other than serving as our compensation consultant, Hay Group does not provide any additional services to the Company. As a private company, we did not historically use a specific peer group in developing compensation packages for our named executive officers. In connection with the IPO, the Compensation Committee analyzed market data for executive compensation focusing on retail and foodservice companies with $1.5 billion to $8 billion in annual revenue. The Compensation Committee reviewed compensation data from the public filings for the following companies:

Big Lots   The Pantry
Casey's General Stores   SpartanNash
Core-Mark Holdings   Sprouts Farmers Market
Fresh Market   Ulta Salon
GNC Holdings   United Natural Foods
Ingles Market   Village Super Market
Roundy's   Weis Market
Sally Beauty    

        In connection with the IPO, the Compensation Committee reviewed our named executive officer compensation against this peer group to ensure that our named executive officer compensation is competitive and sufficient to recruit and retain our named executive officers. While the Compensation Committee considered this data in evaluating named executive officer compensation, we did not seek to benchmark our named executive compensation to any particular level.

        The Compensation Committee expects to periodically review and update this peer group and to utilize Hay Group for benchmarking and peer group analysis in determining and developing compensation packages for our named executive officers.

Elements of Our Executive Compensation Program

        Historically, and for fiscal year 2014, our executive compensation program consisted of the following elements:

        We do not have formal policies relating to the allocation of total compensation among the various elements of our compensation program.

Base Salaries

        The base salaries of our named executive officers are an important part of their total compensation package, and are intended to reflect their respective positions, duties and responsibilities. Base salary is a visible and stable foundation of our "competitive compensation" program. On a prospective basis, we will continue to evaluate the mix of base salary, short-term incentive compensation and long-term incentive compensation to appropriately align the interests of our named

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executive officers with those of our stockholders. As of the end of fiscal year 2014, our named executive officers were entitled to the following base salaries:

Named Executive Officer
  Base Salary  

David G. Hirz

  $ 850,000  

Richard N. Phegley

  $ 435,625  

Eleanor E. Hong

  $ 400,000  

Michael M. Laddon

  $ 373,244  

Martin J. Trtek

  $ 300,000  

        In March 2014, Mr. Hirz approved merit-based increases in the base salaries of the following named executive officers in the following percentages: Mr. Phegley, 2.5%; Mr. Laddon, 2.5%; and Mr. Trtek, 9.8%. Mr. Trtek's base salary increase included an adjustment to more closely align his base salary with the prevailing market practices. Mr. Hirz's and Ms. Hong's base salaries did not change in fiscal year 2014.

        In addition, in March 2015, the Compensation Committee, at the recommendation of Mr. Hirz, approved merit-based increases in the base salaries of the following named executive officers in the following percentages: Mr. Phegley, 4.0%; Ms. Hong, 3.0%; Mr. Laddon, 3.5%; and Mr. Trtek, 33.3%. Mr. Trtek's base salary increase included an adjustment to more closely align his base salary with the prevailing market practices.

Cash Incentive Program

        We consider annual cash incentive bonuses to be an important component of our "performance incentives." We consider annual cash incentive bonuses to be "at-risk" compensation. As "at-risk" compensation, we increase the size of the target bonus, as a percentage of base compensation, proportionate to the positions and responsibilities of our executive officers. Historically, including in fiscal year 2014, our named executive officers participated in our annual cash incentive bonus program at the following target percentages of base salary:

Named Executive Officer
  Target
Percentage
 

David G. Hirz

    100 %

Richard N. Phegley

    75 %

Eleanor E. Hong

    60 %

Michael M. Laddon

    60 %

Martin J. Trtek

    60 %

        Our annual cash incentive bonus program for fiscal year 2014 was known as the Smart & Final Annual Incentive Program (the "2014 Cash Incentive Program"). Each named executive officers' target incentive bonus was the percentage of base salary set forth above, with the potential for greater or smaller payments in the event of performance above or below the target performance goals. For performance at threshold levels, the named executive officer was entitled to receive 50% of the target incentive bonus, and for performance at or above the maximum, the named executive officer was entitled to receive 150% of the target incentive bonus. Each named executive officer received an amount calculated using linear interpolation for performance between the threshold and the target, and for performance between the target and the maximum. For the 2014 Cash Incentive Program, the performance goals were based on a mix of Management Incentive EBITDA (as defined below), comparable store sales versus budget and new store sales versus pro forma sales (as described below). We believe that the use of Management Incentive EBITDA and sales growth (both comparable store and new store sales) provides consistency and comparability with our past financial performance and is

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consistent with our objective of tying annual incentives to metrics that support increasing stockholder value.

        For Messrs. Hirz, Phegley and Laddon and Ms. Hong, Management Incentive EBITDA and comparable store sales versus budget under the 2014 Cash Incentive Program were measured at the Company level. The target Management Incentive EBITDA performance was $177.3 million, with an actual performance of $181.1 million. The target comparable store sales versus budget was 4.05% with an actual performance of 6.27%. For Mr. Trtek, target comparable store sales versus budget was measured at the level of our Cash & Carry segment, with a target performance of 4.50% and an actual performance of 10.02%.

        For all of our named executive officers other than Mr. Trtek, we established pro forma sales goals in a manner intended to ensure the viability of such new stores when entering new markets. We believe such goals were ambitious and they were intended to be difficult to achieve and necessary to ensure the success of the Company as it grows. For Mr. Trtek, we established segment-level Management Incentive EBITDA goals in a manner intended to increase stockholder value and maintain the growth of the business so that such goals were obtainable in a manner intended to reward outstanding performance. In recent years, the Company has outperformed the performance goals for Management Incentive EBITDA, however the incentive plan was realigned in fiscal year 2013 to add new store sales versus pro forma sales as a performance goal and reduce the maximum bonus payment. Our Cash & Carry banner stores achieved 148% of the Management Incentive EBITDA goal in 2011, 103% of the Management Incentive EBITDA goal in 2012 and 144% of the Management Incentive EBITDA goal in 2013. The weight of each performance objective and the percentage of each target achieved is set forth in the charts below.

        Messrs. Hirz, Phegley and Laddon and Ms. Hong.    The cash incentive bonuses for Messrs. Hirz, Phegley and Laddon and Ms. Hong for fiscal year 2014 were calculated based on the performance objectives applicable to corporate-level executives as outlined in the chart below:

 
  Weight   Percentage
of Target
Achieved
  Bonus Payout
Percentage
 

Management Incentive EBITDA

    65 %   102.1 %   108.5 %

Comparable Store Sales vs. Budget

    20 %   154.9 %   150.0 %

Smart & Final New Store Sales vs. Pro Forma Sales

    15 %   95.2 %   70.2 %

Weighted Total

                111.0 %

        Mr. Trtek.    The cash incentive bonus for Mr. Trtek for fiscal year 2014 was calculated based on the performance objectives applicable only to Cash & Carry banner-level executives as outlined in the chart below:

 
  Weight   Percentage
of Target
Achieved
  Bonus Payout
Percentage
 

Cash & Carry Management Incentive EBITDA

    80 %   109.0 %   143.7 %

Cash & Carry Comparable Store Sales vs. Budget

    20 %   222.7 %   150.0 %

Weighted Total

                145.0 %

        "Management Incentive EBITDA" means earnings before interest, income tax, depreciation and amortization (inclusive of share-based compensation), but excluding accruals for administrative incentive bonuses and the expense or income effect of certain unusual items, such as strategic transaction costs, discontinued operations and closed store costs, non-cash rent expense or income, non-cash benefit plan expenses, severance costs, asset dispositions including impairment charges, extinguishment of debt, unusual legal charges, expenses associated with business optimization programs

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and other extraordinary or non-recurring items. However, our Management Incentive EBITDA does include "pre-opening expenses," meaning expenses applicable to projects under development, including among other expenses, pre-opening labor (including payroll taxes and fringe benefits), travel expenses, advertising expenses, rent, common area maintenance expenses, utilities and distribution costs. "Pro forma sales" refers to the anticipated sales used to calculate the anticipated return on capital when a new store was approved. Our annual cash incentive bonus program for fiscal year 2015 is substantially similar to the 2014 Cash Incentive Program, except that the maximum bonus opportunity has been increased from 150% of the target incentive bonus to 200% of the target incentive bonus.

Signing Bonus

        In connection with the start of her employment with the Company in February 2014, Ms. Hong became entitled to receive a $200,000 signing bonus paid in four equal installments: on or shortly after her start date; on the 6 month anniversary of her start date; on the one-year anniversary of her start date; and on the 18-month anniversary of her start date. In connection with the IPO, we accelerated Ms. Hong's $50,000 bonus otherwise payable at the one-year anniversary of her start date. Ms. Hong must be employed by the Company on each payment date to be eligible for such payment, other than as described below in "—Potential Payments Upon Termination or Change in Control."

Equity-Based Compensation

        We view equity-based compensation as a critical component of our balanced total compensation program. Equity-based compensation creates an ownership culture among our employees that provides an incentive to contribute to the continued growth and development of our business and aligns interests of executives and managers with those of our stockholders. We maintain the SF CC Holdings, Inc. 2012 Stock Incentive Plan (the "2012 Incentive Plan"), pursuant to which we have granted stock options to our named executive officers. In connection with the IPO, we adopted the Smart & Final Stores, Inc. 2014 Stock Incentive Plan (the "2014 Incentive Plan"), and amended the 2012 Incentive Plan so that no new awards are available to be granted under such plan.

Mr. Hirz

        In connection with the IPO, we amended the stock options previously granted to Mr. Hirz under the 2012 Incentive Plan on February 1, 2013 to provide for certain acceleration as follows: (i) if Mr. Hirz's employment is terminated by the Company without Cause or by Mr. Hirz for Good Reason (each as defined in his employment agreement) within 60 days prior to or any time following a Change in Control (as defined in the 2012 Incentive Plan), the stock options will accelerate and vest; and (ii) if Mr. Hirz remains employed by the Company following a Change in Control, the stock options will accelerate and vest (A) on the 24-month anniversary of the Change in Control if such Change in Control occurs within the 24 months following the date of grant or (B) on the 13-month anniversary of the Change in Control if such Change in Control occurs more than 24 months after the date of grant.

        In addition, in connection with the IPO, we granted Mr. Hirz an option to purchase 555,556 shares of common stock pursuant to the 2014 Incentive Plan. This stock option vests over five years at a rate of 10% on the first anniversary of the grant date, 10% on the second anniversary of the grant date, 20% on the third anniversary of the grant date, 20% on the fourth anniversary of the grant date, and 40% on the fifth anniversary of the grant date; provided that if Mr. Hirz's employment is terminated by the Company without Cause or by Mr. Hirz for Good Reason, other than in connection with a Change in Control, a portion of the stock option will vest so that Mr. Hirz is vested in the same portion of the stock option that would have vested if the original vesting of the stock option was in equal installments over five years. Also, in connection with a Change in Control (as defined in the 2014 Incentive Plan), such option will be treated in the same manner as the amended stock options described above.

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Mr. Phegley

        In connection with the IPO, we granted Mr. Phegley an option to purchase 83,333 shares of common stock pursuant to the 2014 Incentive Plan. This stock option vests over five years at a rate of 10% on the first anniversary of the grant date, 10% on the second anniversary of the grant date, 20% on the third anniversary of the grant date, 20% on the fourth anniversary of the grant date, and 40% on the fifth anniversary of the grant date. We also granted Mr. Phegley an option to purchase 345,362 shares of common stock with an exercise price at the IPO price and 153,008 shares of restricted stock, each of which vests on the earlier of (i) May 30, 2017, (ii) a Change in Control (as defined in the 2012 Incentive Plan) and (iii) the earliest date on or after May 30, 2016 when Ares Management no longer owns 50% or more of the voting power of the Company.

        At the time of the Ares Acquisition, Mr. Phegley rolled a stock option in our predecessor into an option to purchase our common stock. In May 2014, Mr. Phegley exercised such option immediately prior to its expiration via net exercise. We granted Mr. Phegley certain stock options pursuant to the 2012 Incentive Plan to account for the shares he surrendered via net settlement that were subsequently cancelled immediately prior to the IPO.

Eleanor Hong

        In connection with the IPO, we granted Ms. Hong an option to purchase 83,333 shares of common stock pursuant to the 2014 Incentive Plan. This stock option vests in equal installments on each of the first five anniversaries of the grant date. We also granted Ms. Hong an option to purchase 181,250 shares of common stock with an exercise price at the IPO price and 56,250 shares of restricted stock, each of which vests in five equal installments from March 3, 2014. Additionally, if Ms. Hong terminates her employment from the Company for Good Reason (as defined in her offer letter), she has 90 days to exercise the vested portion of such stock options following her date of termination. Immediately prior to the IPO, we cancelled an earlier grant of stock options to Ms. Hong.

Michael Laddon and Martin Trtek

        In connection with the IPO, we granted each of Messrs. Laddon and Trtek an option to purchase 83,333 shares of common stock pursuant to the 2014 Incentive Plan. These options vest in equal installments on each of the first five anniversaries of the grant date, except that, in March 2015, all of Mr. Laddon's outstanding, unvested options, including two awards granted in February 2013, were amended so that each tranche that was scheduled to vest in either November or September 2016, as applicable, vests on April 1, 2016.

Perquisites

        Our named executive officers are provided with limited perquisites to aid in the performance of their respective duties and to provide "competitive compensation" with executives with similar positions and levels of responsibilities. Our named executive officers are provided with a combination of a car allowance or Company car, a gas card, auto insurance for one vehicle and a cell phone for use in connection with the performance of their respective duties, as their positions require that the executive officers be available for consultation outside the office. The car and cell phones are also used for limited personal use. Mr. Hirz is provided with a car allowance of $1,500 per month; Messrs. Phegley and Laddon are each provided with a car allowance of $950 per month; and Mr. Trtek is provided with a car allowance of $800 per month. In addition, Messrs. Hirz and Trtek may use a Company-provided gas card for business and personal use, but are only reimbursed for gas card expenses if they file a business expense reimbursement form. Any amounts for which no business expense reimbursement form is submitted are reported as income. For fiscal year 2014, the following was reported as income related to gas cards: Mr. Hirz, $7,122; and Mr. Trtek $5,135.

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        In addition, our named executive officers participate in a grandfathered executive medical insurance plan that provides for reimbursement of out-of-pocket medical expenses.

        In connection with Ms. Hong's hiring, we provided her with temporary housing in Los Angeles, California, with a value of $34,597. We also reimbursed Ms. Hong $53,150, in the aggregate, for costs and losses associated with selling her previous residence and purchasing a residence in Los Angeles, California. We provided a tax "gross-up" for such costs to Ms. Hong equal to $89,859.

401(k) Plan

        We maintain a tax-qualified retirement plan (the "401(k) Plan") that provides eligible employees with an opportunity to save for retirement on a tax-advantaged basis. Eligible employees are able to participate in the 401(k) Plan as of the first day of the month following the date they meet the 401(k) Plan's eligibility requirements, and participants are able to defer up to 100% of their eligible compensation subject to applicable annual limits under the Internal Revenue Code of 1986, as amended (the "Code"). All participants' interests in their deferrals are 100% vested when contributed. The 401(k) Plan permits us to make matching contributions and profit sharing contributions to eligible participants. We match contributions at a 50% rate, up to a cap of 6% of base salary. We have not made any profit sharing contributions to date.

Supplemental Deferred Compensation Plan

        The Code imposes limits on highly compensated employees with respect to tax-qualified defined contribution retirement plans. This limitation reduces the retirement benefits for our named executive officers. Accordingly, as part of our total compensation benefits that we provide in order to maintain competitive compensation, we maintain a nonqualified deferred contribution plan (the "Supplemental Deferred Compensation Plan") in which a select group of our highly compensated employees, including all of our named executive officers, are eligible to participate. The Supplemental Deferred Compensation Plan allows employees to defer compensation into future years, including until retirement. The Supplemental Deferred Compensation Plan is partially funded in a rabbi trust.

        In fiscal year 2014, the following named executive officers participated in the Supplemental Deferred Compensation Plan in the following amounts: Mr. Hirz deferred $23,000; Mr. Phegley deferred $99,831; Ms. Hong deferred $19,385 and Mr. Laddon deferred $92,160. Mr. Trtek did not make any deferrals thereunder in fiscal year 2014. Amounts deferred under the Supplemental Deferred Compensation Plan are then credited to each respective named executive officer's account based on his individual selections from a portfolio of available investments.

        See "—Nonqualified Deferred Compensation Table" for further information regarding the Supplemental Deferred Compensation Plan.

Pension Plan

        We maintain a defined benefit pension plan (the "Pension Plan") that was frozen in June 2008 for all participants and for benefit accruals, other than with respect to employees in our subsidiary, Commerce Distribution Company LLC or certain non-management employees in our warehouse or transportation departments. Messrs. Phegley and Trtek were participants in the Pension Plan prior to the Pension Plan being frozen and have fully vested benefits therein. The Pension Plan is not an ongoing element of our compensation philosophy, but is considered when reviewing whether the total compensation of our executives is balanced.

        No payments were made to any named executive officer in fiscal year 2014 under the Pension Plan. The following were the present values of the accounts of our named executive officers under the Pension Plan as of the end of fiscal year 2014: Mr. Phegley, $273,170; and Mr. Trtek, $242,940. All

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present values in the participants' Pension Plan accounts increased between the end of fiscal year 2013 and the end of fiscal year 2014. The respective incremental increases in the present value of the accounts between the end of fiscal year 2013 and the end of fiscal year 2014 were as follows: Mr. Phegley, $46,062; and Mr. Trtek, $39,277.

        See "—Pension Benefits Table" for further information regarding the Pension Plan.

Supplemental Executive Retirement Plan

        We maintain the Supplemental Executive Retirement Plan (the "SERP"), which is a non-qualified defined benefit plan for our senior executives. The SERP is not an ongoing element of our compensation philosophy, but is considered when reviewing whether the total compensation of our executives is balanced. The SERP is partially funded in a rabbi trust. The SERP was frozen to all participants and benefit accruals in January 2008. However, all of our named executive officers who are eligible to receive benefits pursuant to the Pension Plan are entitled to receive benefits equal to a certain percentage of their compensation, less the amounts payable under the Pension Plan.

        Messrs. Phegley and Trtek were participants in the Pension Plan prior to the SERP being frozen and have vested benefits in the SERP. No payments were made to any named executive officer in fiscal year 2014 under the SERP. The following were the present values of the accounts under the SERP as of the end of fiscal year 2014: Mr. Phegley, $2,079,988; and Mr. Trtek, $1,128,879. All present values in the participants' SERP accounts increased between the end of fiscal year 2013 and the end of fiscal year 2014. The respective incremental increase in the present value of the accounts between the end of fiscal year 2013 and the end of fiscal year 2014 were as follows: Mr. Phegley, $377,357; and Mr. Trtek, $199,517.

        See "—Pension Benefits Table" for further information regarding the SERP.

Severance

        We entered into an amended and restated employment agreement with Mr. Hirz in connection with the IPO that provides for severance under certain circumstances. We also executed an offer letter with Ms. Hong that provides for severance under certain circumstances. We maintain a severance plan for our senior executives, including all of our named executive officers other than Mr. Hirz and Ms. Hong. We believe that providing severance is a necessary element of "competitive compensation," and is in line with current market practices. Severance protection also enhances our ability to retain capable executive officers and can create management stability during periods of uncertainty.

        See "—Potential Payments Upon Termination or Change in Control" for information regarding benefits under Mr. Hirz's employment agreement, Ms. Hong's offer letter and the Severance Plan.

        Employment Agreement with David G. Hirz.    On September 23, 2014, we entered into an amended and restated employment agreement with Mr. Hirz pursuant to which he agreed to continue to be our President and Chief Executive Officer. The employment agreement is for a three-year term, provided that on the first anniversary of the effective date, and on each anniversary thereafter, the term of the employment agreement extends for an additional year unless either party provides 60 days' written notice prior to any such anniversary.

        Mr. Hirz is also subject to a Fair Competition Agreement with us, pursuant to which he is subject to certain non-competition and non-solicitation restrictions while employed and for a limited time after the termination of his employment. In addition, Mr. Hirz is subject to confidentiality and non-disparagement restrictions.

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        Eleanor Hong Offer Letter.    On January 27, 2014, we executed an offer letter with Ms. Hong pursuant to which she agreed to be our Senior Vice President and Chief Marketing Officer.

        Ms. Hong is also subject to a Fair Competition Agreement with us, pursuant to which she is subject to certain non-competition and non-solicitation restrictions while employed and certain non-solicitation provisions for a limited time after the termination of her employment. In addition, Ms. Hong is subject to confidentiality and non-disparagement restrictions.

Tax Considerations

        As a general matter, our board of directors and the Compensation Committee review and consider the various tax and accounting implications of compensation programs we utilize.

        Section 162(m) of the Code ("Section 162(m)") generally disallows public companies a tax deduction for compensation in excess of $1,000,000 paid to their chief executive officers and the three other most highly compensated executive officers (excluding the chief financial officer) unless certain performance and other requirements are met. Our intent generally is to design and administer executive compensation programs in a manner that will preserve the deductibility of compensation paid to our named executive officers, and we believe that a substantial portion of our current executive compensation program (including the stock options and other awards that may be granted to our named executive officers as described above) satisfies the requirements for exemption from the $1,000,000 deduction limitation. We intend to comply with applicable laws in order to rely on the transition rules under Section 162(m) for newly public companies. To the extent the transition rules under Section 162(m) apply to us, the $1,000,000 deduction limitation would not apply. However, we reserve the right to design programs that recognize a full range of performance criteria important to our success, even where the compensation paid under such programs may not be deductible.

Compensation Risk Assessment

        Management has conducted a risk assessment of our compensation plans and practices and concluded that our compensation programs do not create risks that are reasonably likely to have a material adverse effect on the Company. The Compensation Committee has reviewed and agrees with management's conclusion.

Role of Executive Officers in Determining Compensation for Our Executive Officers

        Mr. Hirz determined merit increases in base salaries for executive officers, including named executive officers (other than himself), as described above under "—Fiscal Year 2014 Compensation—Elements of Our Executive Compensation Program—Base Salaries." Otherwise, none of our executive officers played a role in determining compensation for our executive officers.

Role of the Compensation Committee in Executive Compensation

        During fiscal year 2014, with the exception of the merit increase in base salary for certain of our executive officers determined by Mr. Hirz as described above with respect to named executive officers under "—Fiscal Year 2014 Compensation—Elements of Our Executive Compensation Program—Base Salaries," our Compensation Committee made all decisions regarding the compensation of our executive officers; provided that the full board of directors approved the equity awards for our named executive officers. It is the Compensation Committee's responsibility to: oversee the design of our executive compensation programs, policies and practices; determine the types and amounts of most compensation for executive officers; and review and approve the adoption, termination and amendment of, and to administer and, as appropriate, make recommendations to our board of directors regarding, our incentive compensation and stock option plans. The Compensation Committee considered and approved the payments under the 2014 Cash Incentive Program. Our human resources department

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supports the Compensation Committee's work, and in some cases acts under delegated authority to administer compensation programs. In addition, as described above, the Compensation Committee has directly engaged Hay Group to assist in its review of compensation for our executive officers.

Compensation Committee Interlocks and Insider Participation

        In fiscal year 2014, none of our executive officers served as a director or member of the compensation committee of another entity whose executive officers served on our board of directors or the Compensation Committee.


COMPENSATION COMMITTEE REPORT

        The Compensation Committee has reviewed and discussed with management the above Compensation Discussion and Analysis. Based on our review and discussions with management, the Compensation Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Report.

  COMPENSATION COMMITTEE

 

Adam L. Stein (Chairperson)
Richard A. Anicetti
Dennis T. Gies


COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS

Summary Compensation Table for Fiscal Year 2014

        The following table contains information about the compensation paid to or earned by each of our named executive officers during our most recently completed fiscal year.

Name and Principal Position
  Fiscal
Year
  Salary
($)
  Bonus
($)
  Stock
awards
($)
  Option
awards
($)(1)
  Non-equity
incentive plan
compensation
($)
  Change in
pension
value and
nonqualified
deferred
compensation
earnings
($)(2)
  All other
compensation
($)(3)
  Total
($)
 

David G. Hirz

    2014     850,000             3,802,231 (4)   943,670         40,542     5,636,425  

President and Chief

    2013     850,000             5,039,781     694,875     81,948     39,671     6,706,275  

Executive Officer

                                                       

Richard N. Phegley

   
2014
   
433,582
   
   
1,836,096
   
2,392,010

(4)
 
362,723
   
423,419
   
26,820
   
5,474,650
 

Senior Vice President

    2013     425,000             1,714,141     260,578     980,078     26,670     3,406,467  

and Chief Financial

                                                       

Officer

                                                       

Eleanor E. Hong

   
2014
   
330,769
   
150,000

(6)
 
675,000
   
1,122,754
   
266,448
   
   
191,405
   
2,736,376
 

Senior Vice President

                                                       

and Chief Marketing

                                                       

Officer(5)

                                                       

Michael M. Laddon

   
2014
   
371,493
   
   
   
370,891
   
248,625
   
   
26,820
   
1,017,829
 

Senior Vice President

    2013     362,767             504,092     178,611         26,670     1,072,140  

and Chief Information

                                                       

Officer

                                                       

Martin J. Trtek

   
2014
   
294,859
   
   
   
370,891
   
260,946
   
238,794
   
30,155
   
1,195,645
 

President, Cash & Carry

    2013     271,986             655,776     192,736         27,482     1,147,980  

(1)
The amounts shown for option awards are based on the grant date fair value of awards calculated in accordance with FASB ASC Topic 718. The assumptions used in determining the amounts in this column are set forth in Note 13, Share-Based Compensation, to our consolidated financial statements for fiscal year 2014. For information regarding the number of shares underlying stock option grants awarded in fiscal year 2014 and other features of those grants, see the "—Grants of Plan-Based Awards Table" below.

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(2)
The amounts reported in the Change in Pension Value and Nonqualified Deferred Compensation Earnings column for 2014 are comprised of changes between December 31, 2013 and December 31, 2014 in the actuarial present value of the accumulated pension benefits for Messrs. Phegley and Trtek, who participate in our frozen Pension Plan and SERP. Pension values may fluctuate significantly from year to year depending on a number of factors, including age, years of service, average annual earnings and the assumptions used to determine the present value, such as the discount rate. The assumptions used by the Company in calculating the change in pension value are described below in "Pension Benefits Table." The change in actuarial present value of accumulated pension benefits for 2014 was significantly greater than the change in 2013 primarily due to a lower discount rate and revised mortality assumptions for 2014. The revised mortality assumptions were derived from the mortality tables and the mortality improvement scales published by the Society of Actuaries in October 2014. For 2013, $0 is reported with respect to changes in pension values because there was a decrease in the actuarial present value of the pension values for Messrs. Phegley and Trtek in 2013.

(3)
The amounts shown as All Other Compensation include: matching contributions under the 401(k) Plan of $7,800 for each named executive officer except Ms. Hong, who received a matching contribution of $4,223; matching contributions under the Supplemental Deferred Contribution Plan of $1,956 for Ms. Hong; an annual car allowance of $18,000 and personal care and gasoline expenses of $7,122 for Mr. Hirz, $11,400 for each of Messrs. Phegley and Laddon, and $9,600 for Mr. Trtek; the unreimbursed use of the Company-provided gas card; the cost of the grandfathered executive medical plan, in an amount equal to $7,620, for each named executive officer; temporary housing for Ms. Hong in an amount equal to $34,597; reimbursement for Ms. Hong for costs and losses associated with selling her previous primary residence and purchasing a primary residence in Los Angeles, California, in an aggregate amount of $53,150; and a tax "gross-up" for the taxes associated with Ms. Hong's temporary housing and home buying and selling costs in an amount equal to $89,859.

(4)
The amounts shown for options awards for Messrs. Hirz and Phegley include the value of a modification of the repurchase rights for awards granted pursuant to the 2012 Incentive Plan. Such rights expired in connection with the IPO. The value of the modification for Mr. Hirz was $1,126,466 and for Mr. Phegley was $383,137.

(5)
Ms. Hong was hired as our Senior Vice President and Chief Marketing Officer in February 2014.

(6)
Represents the first three installments of Ms. Hong's signing bonus.

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Employment Agreement and Offer Letter

        We entered into an amended and restated employment agreement with Mr. Hirz on September 23, 2014 in connection with the IPO. We executed an offer letter with Ms. Hong on January 27, 2014 relating to Ms. Hong's employment as our Senior Vice President and Chief Marketing Officer, establishing her position and providing for compensatory terms. No other named executive officer is party to an employment agreement with the Company.

        See "Compensation of Our Named Executive Officers" and "—Potential Payments upon Termination or Change in Control" for discussions of the current compensatory terms applicable to each named executive officer and a description of the terms of Mr. Hirz's employment agreement and Ms. Hong's offer letter.

Grants of Plan-Based Awards Table

        The following table contains information about each grant of an award made to our named executive officers under any incentive plan in fiscal year 2014:

 
   
   
   
   
  All Other
Stock
Awards:
Number of
Shares of
Stock or
Units
(#)(3)
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)
   
   
 
 
   
  Estimated Future Payouts Under
Non-Equity Incentive Plan
Awards(2)
   
  Grant Date
Fair Value
of Stock
and Option
Awards
($)
 
 
   
  Exercise or
Base Price
of Option
Awards
($/share)
 
Name
  Grant
Date(1)
  Threshold
($)
  Target
($)
  Maximum
($)
 

David G. Hirz

        425,000     850,000     1,275,000                  

    9/23/14                     555,556 (4)   12.00     2,675,765  

Richard N. Phegley

   
   
163,360
   
326,719
   
490,079
   
   
   
   
 

    9/23/14                     83,333 (4)   12.00     401,363  

    9/23/14                     345,362 (5)   12.00     1,607,510  

    9/23/14                 153,008             1,836,096  

Eleanor E. Hong

   
   
120,000
   
240,000
   
360,000
   
   
   
   
 

    9/23/14                     181,250 (6)   12.00     751,863  

    9/23/14                     83,333 (7)   12.00     370,891  

    9/23/14                 56,250             675,000  

Michael M. Laddon

   
   
111,973
   
223,946
   
335,919
   
   
   
   
 

    9/23/14                     83,333 (8)   12.00     370,891  

Martin J. Trtek

   
   
90,000
   
180,000
   
270,000
   
   
   
   
 

    9/23/14                     83,333 (7)   12.00     370,891  

(1)
For information regarding the timing of stock option grants, see "—Equity Based Compensation—2014 Incentive Plan."

(2)
Constitutes threshold, target and maximum award opportunities for our named executive officers under the 2014 Cash Incentive Program. See "—Fiscal Year 2014 Compensation—Elements of Our Executive Compensation Program—Cash Incentive Program" for information regarding the criteria applied in determining amounts payable under the awards. The actual amounts paid with respect to these awards are included in the "Non-Equity Incentive Plan Compensation" column in the Summary Compensation Table for Fiscal Year 2014.

(3)
The amounts shown in this column represent restricted stock granted under the 2014 Incentive Plan. Shares awarded to Mr. Phegley vest on the earlier of (i) May 30, 2017, (ii) a Change in Control and (iii) the first day on or after May 30, 2016 on which Ares Management no longer holds 50% or more of the voting power of the Company, subject to earlier termination upon the occurrence of specified events. Shares awarded to Ms. Hong vest at a rate of 20% per year on each of March 3, 2015, 2016, 2017, 2018 and 2019, subject to earlier termination upon the occurrence of specified events.

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(4)
These options each vest at a rate of 10%/10%/20%/20%/40% on each of September 23, 2015, 2016, 2017, 2018 and 2019, subject to earlier termination upon the occurrence of specified events.

(5)
These options vest on the earlier of (i) May 30, 2017, (ii) a Change in Control and (iii) the first day on or after May 30, 2016 on which Ares Management no longer holds 50% or more of the voting power of the Company, subject to earlier termination upon the occurrence of specified events.

(6)
These options vest at a rate of 20% per year on each of March 3, 2015, 2016, 2017, 2018 and 2019, subject to earlier termination upon the occurrence of specified events.

(7)
These options vest at a rate of 20% per year on each of September 23, 2015, 2016, 2017, 2018 and 2019, subject to earlier termination upon the occurrence of specified events.

(8)
These options vest at a rate of 20% per year. They originally vested on each of September 23, 2015, 2016, 2017, 2018 and 2019, but were amended in March 2015 to vest on September 23, 2015, April 1, 2016, September 23, 2017, September 23, 2018 and September 23, 2019.

Outstanding Equity Awards at Fiscal Year-End Table

        The following table contains information concerning unexercised options for each named executive officer outstanding as of the end of fiscal year 2014 (after giving effect to the 190-for-one stock split of our common stock effected on September 19, 2014):

 
  Option Awards   Stock Awards  
Name
  Number of
Securities
Underlying
Unexercised
Options
Exercisable
  Number of
Securities
Underlying
Unexercised
Options
Unexercisable
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Market value of
shares or
units of stock
that have not
vested ($)
  Number of
shares or units
of stock that
have not
vested
 

David G. Hirz

    1,081,290 (1)       2.09     4/6/17          

    959,500 (1)       2.51     1/1/19          

    335,844 (2)   503,766     5.27     2/1/23          

    335,844 (2)   503,766     7.90     2/1/23          

        555,556 (3)   12.00     9/23/24          

Richard N. Phegley

   
114,228

(2)
 
171,342
   
5.27
   
2/1/23
   
   
 

    114,228 (2)   171,342     7.90     2/1/23          

        83,333 (3)   12.00     9/23/24          

        345,362 (4)   12.00     9/23/24          

                      2,356,323     153,008 (4)

Eleanor E. Hong

   
   
181,250

(5)
 
12.00
   
9/23/24
   
   
 

        83,333 (6)   12.00     9/23/24          

                      866,250     56,250 (5)

Michael M. Laddon

   
33,592

(2)
 
50,388
   
5.27
   
2/1/23
   
   
 

    33,592 (2)   50,388     7.90     2/1/23          

        83,333 (6)   12.00     9/23/24          

Martin J. Trtek

   
43,700

(2)
 
65,550
   
5.27
   
2/1/23
   
   
 

    43,700 (2)   65,550     7.90     2/1/23          

        83,333 (6)   12.00     9/23/24          

(1)
Represents options that were rolled over in connection with the Ares Acquisition from options in our former parent company. All options that were rolled over were fully vested as of the time of the rollover. The number of shares of common stock subject to such options and the applicable exercise prices were equitably adjusted in connection with the rollover.

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(2)
Represents options granted on February 1, 2013 that vest at a rate of 20% per year on each of November 15, 2013, 2014, 2015, 2016 and 2017, subject to earlier termination upon the occurrence of specified events. In March 2015, all of Mr. Laddon's outstanding, unvested options were amended so that each tranche that was scheduled to vest on November 15, 2016 vests on April 1, 2016.

(3)
Represents options granted on September 23, 2014 that each vest at a rate of 10%/10%/20%/20%/40% on each of September 23, 2015, 2016, 2017, 2018 and 2019, subject to earlier termination upon the occurrence of specified events.

(4)
Represents awards granted on September 23, 2014 that vest on the earlier of (i) May 30, 2017, (ii) a Change in Control and (iii) the first day on or after May 30, 2016 on which Ares Management no longer holds 50% or more of the voting power of the Company, subject to earlier termination upon the occurrence of specified events.

(5)
Represents awards granted on September 23, 2014 that vest at a rate of 20% per year on each of March 3, 2015, 2016, 2017, 2018 and 2019, subject to earlier termination upon the occurrence of specified events.

(6)
Represents awards granted on September 23, 2014 that vest at a rate of 20% per year on each of September 23, 2015, 2016, 2017, 2018 and 2019, subject to earlier termination upon the occurrence of specified events. In March 2015, all of Mr. Laddon's outstanding, unvested options were amended so that the tranche that was scheduled to vest on September 23, 2016 vests on April 1, 2016.

        Market value of shares that have not yet vested was calculated using a price of $15.40 per share, which was the closing price on the last trading day prior to the end of the fiscal year.

Option Exercises and Stock Vested

        The following table describes, for the named executive officers, the number of shares acquired on the exercise of options and the value realized on exercise of options during fiscal 2014 (after giving effect to the 190-for-one stock split of our common stock effected on September 19, 2014).

 
  Option awards  
Name
  Number of
shares
acquired on
exercise
  Value
realized on
exercise
($)
 

David G. Hirz

         

Richard N. Phegley

    924,730 (1)   5,762,333 (2)

Eleanor E. Hong

         

Michael M. Laddon

         

Martin J. Trtek

         

(1)
The Company reduced the number of shares Mr. Phegley received upon exercise by 177,650 shares in partial satisfaction of the exercise price, and by 320,910 shares in satisfaction of the withholding taxes.

(2)
The value realized is computed as the difference between the fair market value of the underlying shares on the date of exercise and the exercise price times the number of options exercised.

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Pension Benefits Table

        We maintain the Pension Plan that was frozen in June 2008. Messrs. Phegley and Trtek were participants in the Pension Plan prior to the Pension Plan being frozen and have fully vested benefits therein.

        Our named executive officers who participate in the Pension Plan may retire and begin receiving normal benefits at age 65. A participant is eligible to receive early retirement benefits under the Pension Plan after reaching age 55 and providing 10 years of service. Normal retirement benefits consist of a monthly benefit equal to a participant's final average earnings multiplied by 1.5% times years of service prior to 1992 plus 1.0% times years of service after 1992, minus any benefits received under any other pension plan related to the participant's service to us for which the participant receives benefits (e.g., a union pension plan). If a participant elects to receive early retirement benefits, such benefit will consist of the normal retirement benefits, reduced by 0.5% for each month the early retirement precedes the normal retirement date.

        We engaged the services of Towers Watson to determine the present value of annual accrued and actual benefits under the Pension Plan. The change in actuarial present value of accumulated pension benefits for 2014 was significantly greater than the change in 2013 primarily due to a lower discount rate (4.25%) and revised mortality assumptions for 2014. The revised mortality assumptions were derived from the mortality tables and the mortality improvement scales published by the Society of Actuaries in October 2014. All other assumptions regarding forms of payment, married percentages and ages of spouses remained the same.

        In addition, we maintain the SERP. The SERP was frozen to all participants and benefit accruals in January 2008. However, all of our named executive officers who are eligible to receive benefits pursuant to the Pension Plan are entitled to receive benefits equal to a certain percentage of their compensation, less the amounts payable under the Pension Plan. Messrs. Phegley and Trtek were participants in the SERP prior to the SERP being frozen and have fully vested benefits under the SERP.

        We determine the present value of assets held in the SERP by each participant as of the end of each fiscal year. The calculations were performed on a person-by-person basis. Each participant's present value differs based on his individual election under the SERP. For example, participants could elect SERP benefits as single-life annuities, 15-year terms certain, joint-and-survivor or other applicable terms. Each election would have its own associated mortality assumption, if applicable. As a result of Mr. Phegley and Mr. Trtek moving closer to retirement eligibility, the present value of accumulated benefits increased by $70,489 for Mr. Phegley and $38,476 for Mr. Trtek. Other changes to the present value of accumulated benefits are generally the result of changes in interest rates and mortality assumptions. Also, there is no estimated rate of return on assets because the SERP is a nonqualified plan. The discount rate used to calculate the present value of SERP assets was 4.14% for 2013 and 3.42% for 2014.

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        The following table contains information about our plans that provides for payments or other benefits at, following, or in connection with retirement.

Name
  Plan Name   Number of
Years
Credited
Service
(#)
  Present Value of
Accumulated
Benefit
($)
  Payments
During
Last Fiscal
Year
($)
 

David G. Hirz

               

Richard N. Phegley

 

Pension Plan

   
11
   
273,170
   
 

  Supplemental Executive Retirement Plan     15     2,079,988      

Eleanor E. Hong

 

   
   
   
 

Michael M. Laddon

 

   
   
   
 

Martin J. Trtek

 

Pension Plan

   
10
   
242,940
   
 

  Supplemental Executive Retirement Plan     15     1,128,879      

Nonqualified Deferred Compensation Table

        We maintain the Supplemental Deferred Compensation Plan for a select group of our highly compensated employees, in which all our named executive officers are eligible to participate. Participants are entitled to defer up to 100% of their base compensation and incentive bonus in the Supplemental Deferred Compensation Plan.

        Deferred amounts are paid in accordance with the participant's elections under the Supplemental Deferred Compensation Plan. In the event of the participant's termination of employment, deferred amounts are generally paid within 90 days following termination of employment, except in the event of the participant's retirement or disability, in which case deferred amounts are paid, at the participant's prior election, within 90 days following retirement or disability, or the fifth, tenth or fifteenth anniversary of such retirement or disability. We provide a matching contribution to participants in the Supplemental Deferred Compensation Plan equal to the match such participant would have received under the 401(k) Plan, except to the extent such contributions are subject to limits imposed by qualified plans.

        Participants in the Supplemental Deferred Compensation Plan, including named executive officers, allocate their contributions and plan account balances among investment alternatives which track the performance of investment funds. The alternatives that named executive officers may elect to track include a money market fund, S&P 500 Index fund, a growth fund, a value fund, a mid-cap growth fund, a small-mid cap value fund, an international fund, a total return fund, a small-mid cap growth series, a small-cap value series, a small-cap index, a global bond, and an index fund that generally tracks the value of the common stock of Sprouts Farmers Market, Inc.

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        The following table contains information regarding nonqualified defined contribution and other nonqualified deferred compensation plans.

Name
  Executive
Contributions
in Last FY
($)
  Registrant
Contributions
in Last FY
($)
  Aggregate
Earnings in
Last FY
($)
  Aggregate
Withdrawals/
Distributions
($)
  Aggregate
Balance at
Last FYE
($)
 

David G. Hirz

    23,000         (23,637 )   13,559     394,136  

Richard N. Phegley

    99,831         (333,289 )   13,559     4,704,074  

Eleanor E. Hong

    19,385     1,956     365         25,928  

Michael M. Laddon

    92,160         14,482         151,469  

Martin J. Trtek

                     

Potential Payments upon Termination or Change in Control

        In this section, we describe payments that may be made to our named executive officers upon several events of termination, assuming the termination event occurred on the last day of fiscal year 2014 (except as otherwise noted).

        The information in this section does not include information relating to the following:

Employment Agreement with David G. Hirz

        On September 23, 2014, we entered into an amended and restated employment agreement with Mr. Hirz that provides for severance in the event that Mr. Hirz's employment is terminated by the Company without Cause or by Mr. Hirz for Good Reason. In the event of either such termination, Mr. Hirz will be entitled to receive:

        In addition, in the event that Mr. Hirz's employment is terminated within 60 days prior to or within one-year following a Change in Control (as defined in the 2014 Incentive Plan), he will be entitled to receive additional severance equal to two times his target annual bonus. In connection with such termination, to the extent permitted by Section 409A of the Code, any severance payable to Mr. Hirz will be paid in a lump sum.

        "Good Reason" generally means the occurrence of any of the following events by the Company, without Mr. Hirz's consent: (i) a material diminution of Mr. Hirz's authority, responsibility or duties, including if Mr. Hirz no longer reports directly to our board of directors; (ii) relocation to a principal place of employment that is 25 miles further (one-way) from Mr. Hirz's current residence than the current headquarters in Commerce, California is from such residence; or (iii) failure by the Company

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to comply with any material obligation imposed by the employment agreement. However, the Company may reduce Mr. Hirz's base salary in connection with a Company-wide reduction in salary or a reduction in salary of the Company's executive officers generally, and any such reduction shall not be deemed to be "Good Reason," provided that the percentage of any such reduction is no greater than the percentage reduction of any other officer.

        "Cause" generally means the occurrence of any of the following events by Mr. Hirz: (i) a breach of any material provision of the employment agreement or a breach of any provision of the Fair Competition Agreement between Mr. Hirz and the Company; (ii) (A) the commission of any felony or (B) the conviction or plea of nolo contendere to any misdemeanor, in each case, that causes or is likely to cause material harm or embarrassment to the Company or any of its subsidiaries or any of its affiliates; (iii) theft, embezzlement or fraud in connection with the performance of Mr. Hirz's duties; (iv) the misappropriation of any material business opportunity of the Company or any of its subsidiaries by Mr. Hirz; (v) any material failure by Mr. Hirz to comply with, observe or carry out the Company's written rules, regulations, policies and codes of ethics and/or conduct applicable to its employees generally; (vi) any material failure by Mr. Hirz to comply with, observe or carry out the written rules, regulations, policies, directions, codes of ethics and/or conduct and restrictions for senior executives of the Company; and (vii) substance abuse or use of illegal drugs that (A) materially impairs performance of Mr. Hirz's duties or (B) causes or is likely to cause material harm or embarrassment to the Company or any of its subsidiaries.

        In the event that Mr. Hirz's employment is terminated as a result of his death or disability, Mr. Hirz, his personal representative or guardian, as the case may be, is entitled to receive:

Eleanor Hong Offer Letter

        In January 2014, we executed an offer letter with Ms. Hong that provides for severance in the event that Ms. Hong's employment is terminated by the Company without Cause or by Ms. Hong for Good Reason. In the event of either such termination, Ms. Hong will be entitled to receive:

        "Good Reason" generally means the occurrence of any of the following events by the Company, without Ms. Hong's consent: (i) a material diminution of Ms. Hong's responsibility or duties, as in effect on her start date; (ii) relocation to a principal place of employment that is 25 miles further (one-way) from Ms. Hong's current residence than the current headquarters in Commerce, California is from such residence; or (iii) failure by the Company to comply with any material obligation imposed by the offer letter or any documents relating to her option awards. However, the Company may reduce Ms. Hong's base salary in connection with a Company-wide reduction in salary or a reduction in salary of the Company's executive officers generally, and any such reduction shall not be deemed to be "Good Reason," provided that the percentage of any such reduction is no greater than the percentage reduction of any other officer.

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        "Cause" generally means the occurrence of any of the following events by Ms. Hong: (i) the commission of any felony or a crime of moral turpitude; (ii) the commission of an act of gross negligence or fraud in connection with the performance of her duties; (iii) material violation of any policy of the Company; (iv) failure by or refusal of Ms. Hong to substantially perform her material employment duties or to implement the reasonable directives of the Company; and (v) willful engagement in misconduct that is materially injurious to the Company that is materially injurious to the Company.

Severance Plan

        The Company maintains the Severance Plan, in which all of our named executive officers other than Mr. Hirz and Ms. Hong participate.

        In the event that the employment of any named executive officer who participates in the Severance Plan is involuntarily terminated by the Company for any reason other than on account of Cause (as defined below), death or disability, such named executive officer is entitled to receive the following severance benefits:

        "Cause" generally means a finding by the Compensation Committee that the participant has (i) committed a felony or a crime involving moral turpitude, (ii) committed any act of gross negligence or fraud, (iii) failed, refused or neglected to substantially perform his or her employment duties (other than by reason of a physical or mental impairment) or to implement the reasonable directives of the Company (that is not cured within 30 days), (iv) violated any material policy of the Company (that is

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not cured within 30 days), or (v) engaged in fraud or misconduct that is materially injurious to the Company, monetarily or otherwise.

Name
  Cash
Payments
($)
  Continuation
of Welfare
Plans
($)(1)
  Outplacement
Services
($)(2)
 

David G. Hirz

                   

Termination Without Cause/Resignation for Good Reason/Death/Disability (other than in connection with a Change in Control)

    2,643,670 (3)        

Termination Without Cause/Resignation for Good Reason in connection with a Change in Control

    4,343,670 (4)        

Richard N. Phegley

   
 
   
 
   
 
 

Termination Without Cause

    798,348 (5)   29,532     11,500  

Eleanor E. Hong

   
 
   
 
   
 
 

Termination Without Cause/Resignation for Good Reason                        

    716,448 (5)   29,493     11,500  

Michael M. Laddon

   
 
   
 
   
 
 

Termination Without Cause

    621,868 (5)   29,470     11,500  

Martin J. Trtek

   
 
   
 
   
 
 

Termination Without Cause

    560,946 (5)   23,117     11,500  

(1)
Reflects the cost of 12 months' continuation of medical, dental and vision insurance premium payments.

(2)
Reflects the cost of 12 months of executive outplacement services.

(3)
Reflects 24 months' continuation of base salary and a prorated bonus based on actual performance.

(4)
Reflects 24 months' base salary, two times target annual bonus, and a prorated bonus based on actual performance.

(5)
Reflects 12 months' continuation of base salary, a prorated bonus based on actual performance and the unpaid portion of the sign-on bonus.


DIRECTOR COMPENSATION

        Our board of directors maintains a compensation program, pursuant to which each of our independent directors is entitled to the following fees and awards:

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        Directors who are not independent directors do not receive any compensation for their services as directors.

        In connection with the IPO, pursuant to our 2014 Incentive Plan, each of Messrs. Anicetti and Tesoriero was granted an option to purchase 25,500 shares of our common stock, which vests ratably on each of the first four anniversaries of the grant date.

        We also reimburse each of our directors for reasonable out-of-pocket expenses incurred in connection with the performance of their duties as directors, including travel expenses in connection with their attendance in person at board of directors and committee meetings.

Director Compensation Table for Fiscal Year 2014

        The following table contains information concerning the compensation of our non-employee directors in fiscal year 2014.

Name
  Fees Earned
or Paid in
Cash ($)
  Option
Awards
($)(1)
  Total ($)  

Richard A. Anicetti

    34,000     109,835     143,835  

Norman H. Axelrod

    42,750         42,750  

Robert A. Eckert(2)

    22,500         22,500  

Andrew A. Giancamilli

    67,250         67,250  

Dennis T. Gies

    17,000         17,000  

David B. Kaplan

    14,000         14,000  

Adam L. Stein

    19,500         19,500  

Joseph S. Tesoriero

    39,500     109,835     143,835  

(1)
The amounts shown for option awards relate to stock options granted under the 2014 Incentive Plan. These amounts are based upon the grant date fair value of awards calculated in accordance with FASB ASC Topic 718. The assumptions used in determining the amounts in this column are set forth in Note 13, Share-Based Compensation, to our consolidated financial statements for fiscal year 2014. Each of Mr. Anicetti and Mr. Tesoriero was granted an option to purchase 25,500 shares of common stock with an exercise price of $12.00 per share. The stock option grants to Messrs. Anicetti and Tesoriero vest at a rate of 25% on each of September 23, 2015, 2016, 2017 and 2018.

(2)
Resigned from our board of Directors in July 2014.

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ADVISORY VOTE ON EXECUTIVE COMPENSATION (PROPOSAL 3)

        In accordance with Section 14A of the Exchange Act, which was added by The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank") and the related SEC rules promulgated thereunder, we are providing our stockholders the opportunity to cast a non-binding advisory vote to approve the compensation of the named executive officers. This proposal, commonly known as a "say-on-pay" proposal, gives our stockholders the opportunity to express their views on the compensation of our named executive officers.

        As described in the "Compensation Discussion and Analysis" section of these proxy materials, the primary objectives of our executive compensation program are to (i) offer balanced total compensation in an effort to satisfy our stockholder, Company and individual executive goals, (ii) attract and retain high caliber executives and key personnel by offering competitive compensation, (iii) align the compensation of executives with the goals of the Company by offering performance incentives and (iv) increase, when appropriate, the percentage of total compensation that is "at risk" proportionate to executives' overall responsibilities, position and compensation. The foregoing objectives are applicable to the compensation of our named executive officers. We urge our stockholders to review the Executive Compensation above and the compensation tables and narrative discussion included therein for more information.

        We believe that our executive compensation program achieves these objectives by balancing multiple compensation elements, while keeping an appropriate portion of compensation "at risk," which has enabled us to successfully motivate and reward the named executive officers. We believe such program is appropriate in light of our overall compensation philosophy and objectives and has played an essential role in our continued growth and financial success by aligning the long-term interests of the named executive officers with the long-term interests of our stockholders.

        For these reasons, the Board recommends a vote in favor of the following resolution:

        "RESOLVED, that the compensation paid to the Company's named executive officers for the Company's fiscal year ended December 28, 2014, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby APPROVED."

        As an advisory vote, this proposal is not binding upon us. Notwithstanding the advisory nature of this vote, the Compensation Committee values the opinions expressed by stockholders in their vote on this proposal, and will consider the outcome of the vote when making future compensation decisions for our named executive officers. Furthermore, stockholders are welcome to bring any specific concerns regarding executive compensation to the attention of the Board at any time throughout the year. Please refer to "Other Board Information—Stockholder Communications" above for information about communicating with the Board.

        The affirmative vote of the holders of a majority of the votes cast by our stockholders in person or represented by proxy and entitled to vote is required to approve this Proposal 3.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE APPROVAL, ON AN ADVISORY BASIS, OF THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS FOR THE COMPANY'S FISCAL YEAR ENDED DECEMBER 28, 2014, AS DISCLOSED IN THESE PROXY MATERIALS.

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ADVISORY VOTE ON SAY-ON-FREQUENCY VOTE (PROPOSAL 4)

        In accordance with Dodd-Frank and the related SEC rules promulgated thereunder, we are seeking the input of our stockholders on the frequency with which we will hold a non-binding, advisory vote by our stockholders to approve the compensation of our named executive officers (commonly known as a "say-on-frequency" vote). In voting on this Proposal 4, stockholders are provided with four choices: stockholders may indicate their preference as to whether the advisory vote to approve the compensation of the named executive officers should occur every year, every two years or every three years or stockholders may abstain from making a recommendation.

        After careful consideration, it is the opinion of the Board that an annual advisory stockholder vote on the compensation of our named executive officers is the most appropriate option for us because it will allow our stockholders to provide more frequent, direct input on our compensation policies and practices, and the resulting compensation for our named executive officers. Stockholders will have the opportunity to consider our most recent compensation decisions in the context of our pay for performance policy and focus on increasing long-term stockholder value, and to provide feedback to us in a timely way. Finally, the Board believes an annual advisory stockholder vote promotes corporate transparency.

        While the Board has determined that the say-on-frequency vote shall be held annually, stockholders are not voting to approve or disapprove of the Board's determination. Rather, stockholders are being provided with the opportunity to cast an advisory vote through the resolution set forth above. As an advisory vote, the result of the vote is not binding. However, the Board values the opinions of our stockholders in their vote on this matter, and will consider the outcome of the vote when making a determination as to the frequency of future advisory votes to approve executive compensation.

        The alternative receiving the greatest number of votes (once every one year, two years or three years) will be the resulting recommendation, on an advisory basis, of our stockholders.

THE BOARD RECOMMENDS THAT THE STOCKHOLDERS VOTE, ON AN ADVISORY BASIS, TO RECOMMEND HOLDING THE SAY-ON-FREQUENCY VOTE ONCE EVERY YEAR.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table below sets forth information regarding the beneficial ownership of our common stock as of February 27, 2015 by (i) each person, or group of affiliated persons, known by us to beneficially own more than five percent of our common stock; (ii) the Named Executive Officers; (iii) each of our directors and nominees for director; and (iv) all of our directors and executive officers as a group.

        Beneficial ownership is determined in accordance with the Exchange Act and includes voting and investment power with respect to our common stock. The following table includes common stock issuable within 60 days of February 27, 2015 upon the exercise of all options and other rights beneficially owned by the indicated stockholders on that date. Percentage of beneficial ownership is based on 73,771,652 shares of common stock outstanding at February 27, 2015. Except as otherwise noted below, each person or entity named in the following table has sole voting and investment power with respect to all shares of our common stock that he, she or it beneficially owns.

        Unless otherwise indicated, the address of each beneficial owner listed below is c/o Smart & Final Stores, Inc., 600 Citadel Drive, Commerce, California 90040.

 
  Shares Beneficially
Owned(1)
 
Name of Beneficial Owner
  Shares   Percentage  

Named Executive Officers and Directors:

             

David G. Hirz

    2,737,478 (3)   3.58 %

Richard N. Phegley

    1,068,884 (4)   1.44 %

Eleanor Hong

    101,999 (5)   *  

Martin J. Trtek

    201,400 (6)   *  

Michael M. Laddon

    202,684 (7)   *  

David B. Kaplan

         

Richard A. Anicetti

    8,000 (8)   *  

Norman H. Axelrod

    120,080 (9)   *  

Andrew A. Giancamilli

    63,080 (10)   *  

Dennis T. Gies

         

Adam L. Stein

         

Joseph S. Tesoriero

    1,000 (11)   *  

All directors and executive officers as a group (18 persons)

    5,893,085     7.56 %

5% Stockholders:

             

Ares Corporate Opportunities Fund III, L.P.(2)

    27,550,000     37.34 %

Ares Corporate Opportunities Fund IV, L.P.(2)

    27,550,000     37.34 %

*
Less than 1%.

(1)
Beneficial ownership is determined in accordance with the rules of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of our common stock subject to options or warrants held by that person that are currently exercisable or exercisable within 60 days are deemed outstanding, but are not deemed outstanding for computing the percentage ownership of any other person. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to such securities.

(2)
Shares of our common stock are held directly by ACOF III and ACOF IV. The manager of ACOF III is ACOF Operating Manager III, LLC ("ACOF Operating Manager III"), and the sole member of ACOF Operating Manager III is Ares Management LLC

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    ("Ares Management LLC"). The manager of ACOF IV is ACOF Operating Manager IV, LLC ("ACOF Operating Manager IV"), and the sole member of ACOF Operating Manager IV is Ares Management LLC.

    The sole member of Ares Management LLC is Ares Management Holdings L.P. ("Ares Management Holdings") and the general partner of Ares Management Holdings is Ares Holdings Inc. ("Ares Holdings"), whose sole stockholder is Ares Management. The general partner of Ares Management is Ares Management GP LLC ("Ares Management GP") and the sole member of Ares Management GP is Ares Partners Holdco LLC ("Ares Partners" and, together with ACOF III, ACOF IV, ACOF Operating Manager III, ACOF Operating Manager IV, Ares Management LLC, Ares Management Holdings, Ares Holdings, Ares Management, and Ares Management GP, the "Ares Entities"). Ares Partners is managed by a board of managers, which is composed of Michael Arougheti, David Kaplan, John Kissick, Antony Ressler and Bennett Rosenthal. Decisions by Ares Partners' board of managers generally are made by a majority of the members, which majority, subject to certain conditions, must include Antony Ressler. Each of the Ares Entities (other than each of ACOF III and ACOF IV with respect to the shares held directly by it) and the members of Ares Partners' board of managers and the other directors, officers, partners, stockholders, members and managers of the Ares Entities expressly disclaims beneficial ownership of the shares of our common stock. The address of each Ares Entity is 2000 Avenue of the Stars, 12th Floor, Los Angeles, California 90067.

(3)
Consists of (i) 25,000 shares directly held by Mr. Hirz and (ii) 2,712,478 shares issuable upon the exercise of options that are currently exercisable or that will become exercisable within 60 days of February 27, 2015. Mr. Hirz is our President and Chief Executive Officer and a member of our board of directors.

(4)
Consists of (i) 687,420 shares directly held by Mr. Phegley, (ii) 153,008 shares of restricted stock with restrictions that lapse on May 30, 2017 and (iii) 228,456 shares issuable upon the exercise of options that are currently exercisable or that will become exercisable within 60 days of February 27, 2015. Mr. Phegley is our Senior Vice President and Chief Financial Officer.

(5)
Consists of (i) 9,500 shares directly held by Ms. Hong, (ii) 56,250 shares of time-vested restricted stock and (iii) 36,249 shares issuable upon the exercise of options that are currently exercisable or that will become exercisable within 60 days of February 27, 2015. Ms. Hong is Senior Vice President and Chief Marketing Officer.

(6)
Consists of (i) 114,000 shares directly held by Mr. Trtek and (ii) 87,400 shares issuable upon the exercise of options that are currently exercisable or that will become exercisable within 60 days of February 27, 2015. Mr. Trtek is President of our Cash & Carry stores.

(7)
Consists of (i) 135,500 shares directly held by Mr. Laddon and (ii) 67,184 shares issuable upon the exercise of options that are currently exercisable or that will become exercisable within 60 days of February 27, 2015. Mr. Laddon is our Senior Vice President and Chief Information Officer.

(8)
Consists of 8,000 shares directly held by Mr. Anicetti. Mr. Anicetti is a member of our board of directors.

(9)
Consists of (i) 95,000 shares directly held by Mr. Axelrod and (ii) 25,080 shares issuable upon the exercise of options that are currently exercisable or that will become exercisable within 60 days of February 27, 2015. Mr. Axelrod is a member of our board of directors.

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(10)
Consists of (i) 38,000 shares directly held by Mr. Giancamilli and (ii) 25,080 shares issuable upon the exercise of options that are currently exercisable or that will become exercisable within 60 days of February 27, 2015. Mr. Giancamilli is a member of our board of directors.

(11)
Consists of 1,000 shares directly held by Mr. Tesoriero. Mr. Tesoriero is a member of our board of directors.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Our directors, executive officers and holders of more than 10% of our common stock are subject to the reporting requirements of Section 16(a) of the Exchange Act, which requires them to file reports with the SEC on Forms 3, 4 and 5 with respect to their ownership and change of ownership of our common stock. Based solely upon a review of the copies of these forms or written representations that no Form 5 was required, which we have received from such persons or entities for transactions in our common stock and their common stock holdings for our fiscal year ended December 28, 2014, we believe that all reporting requirements under Section 16(a) for such fiscal year were met in a timely manner by our directors, executive officers and holders of more than 10% of our common stock.


2016 ANNUAL MEETING

        Stockholder proposals submitted pursuant to Rule 14a-8 of the Exchange Act for our 2016 annual meeting of stockholders (the "2016 Annual Meeting") must be received by us no later than November 27, 2015 to be presented at the 2016 Annual Meeting or to be eligible for inclusion in the proxy materials related thereto under the SEC's proxy rules. Such proposals can be sent to us at Smart & Final Stores, Inc., 600 Citadel Drive, Commerce, California 90040, Attention: Donald G. Alvarado, Secretary.

        In addition, pursuant to Section 1.11 of the Bylaws, any stockholder proposal other than those submitted pursuant to Rule 14a-8 of the Exchange Act must be timely to be properly brought before the 2016 Annual Meeting. To be timely, such stockholder proposal shall be received by our secretary at our principal executive offices at 600 Citadel Drive, Commerce, California 90040 between the opening of business on January 14, 2016 and the close of business on February 13, 2016. Such stockholder proposals must also be in compliance with the additional requirements set forth in the Bylaws. However, if the date of the 2016 Annual Meeting is more than 30 days before or more than 60 days after May 14, 2016, to be timely, such stockholder proposals must be received not earlier than the 120th day prior to the date of the 2016 Annual Meeting and not later than (i) the close of business on the 90th day prior to the date of the 2016 Annual Meeting or (ii) the tenth day following the day on which the public announcement of the date of the 2016 Annual Meeting is first made.

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GRAPHIC

THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: Signature (Joint Owners) Signature [PLEASE SIGN WITHIN BOX] Date Date 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0000238948_1 R1.0.0.51160 SMART & FINAL STORES, INC. 600 CITADEL DRIVE COMMERCE, CA 90040 VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS If you would like to reduce the costs incurred by our company in mailing proxy materials, you can consent to receiving all future proxy statements, proxy cards and annual reports electronically via e-mail or the Internet. To sign up for electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 11:59 P.M. Eastern Time the day before the cut-off date or meeting date. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. The Board of Directors recommends you vote FOR the following: For Against Abstain 1. Election of Directors 1a. Norman H. Axelrod 1b. Dennis T. Gies The Board of Directors recommends you vote FOR proposals 2 and 3. For Against Abstain 2. Ratify the appointment of Ernst & Young LLP as independent auditors for fiscal 2015. 3. To approve, by non-binding vote, the compensation paid to the Company's named executive officers. The Board of Directors recommends you vote 1 YEAR : 1 year 2 years 3 years Abstain 4. To recommend, by non-binding vote, the frequency of advisory votes on executive compensation. NOTE: To vote and otherwise represent the undersigned on such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name, by authorized officer.

 


GRAPHIC

0000238948_2 R1.0.0.51160 Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report is/ are available at www.proxyvote.com . PROXY THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SMART & FINAL STORES, INC. The undersigned hereby appoints Richard N. Phegley and Donald G. Alvarado, and each of them, with power to act without the other and with the power of substitution, as proxies and attorneys-in-fact and hereby authorizes them to represent and vote, as provided on the other side, all the shares of Smart & Final Stores, Inc. common stock which the undersigned is entitled to vote and, in their discretion, to vote upon such other business as may properly come before the Annual Meeting of Stockholders of the Company to be held May 14, 2015 or any adjournments thereof, with all powers which the undersigned would possess if present at the Meeting. THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE BUT THE CARD IS SIGNED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES UNDER PROPOSAL 1, FOR PROPOSAL 2, FOR PROPOSAL 3, AND FOR 1 YEAR FOR PROPOSAL 4 AND IN THE DISCRETION OF THE PROXIES WITH RESPECT TO SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. Continued and to be signed on reverse side

 

 


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