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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☒ | Definitive Proxy Statement |
☐ | Definitive Additional Materials |
☐ | Soliciting Material Pursuant to §240.14a-12 |
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☒ | | | No fee required. | |||
☐ | | | Fee paid previously with preliminary materials. | |||
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7700 West Sunrise Boulevard
Plantation, FL 33322
May 24, 2024
Dear Stockholders:
WHAT: | | | 2024 Annual Meeting of Stockholders of Chewy, Inc. (the “Annual Meeting”). | |||
WHEN: | | | Thursday, July 11, 2024, at 10:00 a.m., Eastern Time. | |||
WHERE: | | | Our Annual Meeting will be held virtually, conducted via live audio webcast, a format designed to increase stockholder access, reduce the environmental impact of a physical meeting, and save Chewy and our stockholders time and money. This meeting format also provides stockholders the opportunity to hear all portions of the official Annual Meeting, submit written questions during the Annual Meeting, and vote online during the open poll section of the Annual Meeting. You are invited to attend the live webcast of our meeting, vote your shares, and submit questions at https://www.virtualshareholdermeeting.com/CHWY2024. To join the meeting, you will need the 16-digit control number that is printed on your Notice of Internet Availability of Proxy Materials (the “Notice”). When accessing our Annual Meeting, please allow ample time for online check-in, which will begin at 9:45 a.m., Eastern Time, on Thursday, July 11, 2024. If a bank, brokerage firm, or other nominee holds your shares, you should contact that organization for additional information. | |||
WHY: | | | We are holding the Annual Meeting for the following purposes, as more fully described in our proxy statement: | |||
| | | 1. | | | to elect to our Board of Directors four director nominees for three-year terms (Proposal No. 1); | |
| | | 2. | | | to ratify the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending February 2, 2025 (Proposal No. 2); | |
| | | 3. | | | to approve, on a non-binding, advisory basis, the compensation of our named executive officers (Proposal No. 3); | |
| | | 4. | | | to approve the Chewy, Inc. 2024 Omnibus Incentive Plan, including an increase in the number of shares reserved for issuance by 80,000,000 shares (Proposal No. 4); | |
| | | 5. | | | to approve an amendment to the Certificate of Incorporation to provide for the exculpation of certain officers as permitted by recent amendments to Delaware law (Proposal No. 5); and | |
| | | 6. | | | to transact such other business as may properly be presented at the Annual Meeting or any adjournments or postponements thereof. | |
RECORD DATE: | | | Stockholders of record as of the close of business on May 13, 2024 (the “Record Date”) are entitled to the Notice and to vote at the Annual Meeting or at any adjournment or postponement that takes place. | |||
PROXY VOTING: | | | On or about May 24, 2024, we will mail to stockholders of record as of the Record Date (other than those who previously requested electronic or paper delivery on an ongoing basis) a Notice with instructions for accessing our proxy materials and voting instructions over the Internet, by telephone, or by mail. We expect that our proxy statement and other proxy materials will be available to stockholders on this same date. | |||
| | | Your vote is very important. Whether or not you plan to attend our Annual Meeting, we encourage you to read our proxy materials and submit your proxy or voting instructions as soon as possible. | ||||
Thank you for your ongoing support, and we hope you can join us at our Annual Meeting.
Sincerely,
 | | | |
Da-Wai Hu | | | |
General Counsel & Secretary | | |
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1. | Why am I receiving these materials? |
The Board of Directors (the “Board”) of Chewy, Inc., a Delaware corporation (the “Company” or “Chewy”), is providing these proxy materials to you in connection with our 2024 Annual Meeting of Stockholders (the “Annual Meeting”), which will take place via live audio webcast on Thursday, July 11, 2024, at 10:00 a.m., Eastern Time. As a stockholder, you are invited to attend the Annual Meeting and requested to vote on the items of business described in this proxy statement. However, you do not need to attend the Annual Meeting to vote your shares. Instead, you may follow the instructions below to submit your proxy over the Internet, by telephone, or by mail.
2. | How do I attend and participate in the Annual Meeting? |
Our Annual Meeting will be conducted via live audio webcast, a format designed to improve stockholder access, reduce the environmental impact of a physical meeting, and save Chewy and our stockholders time and money. This meeting format also provides stockholders the opportunity to hear all portions of the official Annual Meeting and vote online during the open poll section of the Annual Meeting. You may attend the Annual Meeting by visiting https://www.virtualshareholdermeeting.com/CHWY2024. You will need the 16-digit control number that is printed on your Notice Regarding the Availability of Proxy Materials (the “Notice”). Please allow ample time for online check-in, which will begin at 9:45 a.m., Eastern Time, on Thursday, July 11, 2024. If a bank, brokerage firm, or other nominee holds your shares, you should contact that organization for additional information.
You may submit a question in advance of the Annual Meeting at www.proxyvote.com after logging in with your 16-digit control number. Questions may be submitted during the Annual Meeting through https://www.virtualshareholdermeeting.com/CHWY2024.
3. | Who may vote at the Annual Meeting? |
Stockholders who own shares of our common stock as of the close of business on May 13, 2024 (the “Record Date”), or their valid proxy holders, are entitled to vote at the Annual Meeting. As of the Record Date, we had 137,046,700 shares of Class A common stock outstanding and 298,863,356 shares of Class B common stock outstanding. Holders of Class A common stock are entitled to one vote per share on any matter that is submitted to a vote of stockholders. Holders of Class B common stock are entitled to ten votes per share on any matter that is submitted to a vote of stockholders. Holders of Class A and holders of Class B common stock vote together as a single class on any matter (including the election of directors) that is submitted to a vote of our stockholders, unless otherwise required by law or our amended and restated certificate of incorporation. Stockholders are not permitted to cumulate votes with respect to the election of directors.
We will make available a list of stockholders of record as of the Record Date for inspection by any stockholder for any purpose germane to the Annual Meeting for a period of 10 days ending on the day before the Annual Meeting, during ordinary business hours at our principal executive office. If you wish to inspect the list, please submit your request and proof of ownership by email to ir@chewy.com.
4. | How can I access the proxy materials over the Internet? |
An electronic copy of the proxy materials is available at www.proxyvote.com. You can also access the materials at https://investor.chewy.com.
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5. | How can I request a paper or email copy of the proxy materials? |
If you want to receive a paper or email copy of the proxy materials, you must request one. There is no charge for requesting a copy. However, please submit your request on or before June 26, 2024 to facilitate timely delivery. You may request a copy by choosing one of the following methods:
• | By Internet: www.proxyvote.com |
• | By telephone: 1-800-579-1639 |
• | By email: sendmaterial@proxyvote.com (follow instructions on the Notice) |
6. | What matters are being voted on at the Annual Meeting? |
Stockholders will vote on five proposals at the Annual Meeting:
• | Proposal 1: To elect to the Company’s Board of Directors four director nominees for three-year terms; |
• | Proposal 2: To ratify the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 2, 2025; |
• | Proposal 3: To approve, on a non-binding, advisory basis, the compensation of the Company’s named executive officers; |
• | Proposal 4: To approve the Chewy, Inc. 2024 Omnibus Incentive Plan (the “2024 Plan”), including an increase in the number of shares reserved for issuance by 80,000,000 shares; and |
• | Proposal 5: To approve an amendment to the Certificate of Incorporation to provide for the exculpation of certain officers as permitted by recent amendments to Delaware law. |
Additionally, stockholders are entitled to vote on such other business as may properly be presented at the Annual Meeting or any adjournment or postponement thereof.
We are not aware of any matters to be voted on by stockholders at the Annual Meeting other than those included in the proxy materials. If any matter is properly presented at the meeting, your executed proxy gives your proxy holder discretionary authority to vote your shares in accordance with their best judgment with respect to the matter.
7. | How does our Board recommend that stockholders vote on the proposals? |
Our Board recommends that you vote your shares:
• | “FOR” the election of all of the Board’s director nominees for three-year terms, as described in Proposal 1; |
• | “FOR” the ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 2, 2025, as described in Proposal 2; |
• | “FOR” approval, on a non-binding, advisory basis, of the compensation of the Company’s named executive officers, as described in Proposal 3; |
• | “FOR” approval of the 2024 Plan, including an increase in the number of shares reserved for issuance by 80,000,000 shares, as described in Proposal 4; and |
• | “FOR” approval of the amendment to the Certificate of Incorporation to provide for the exculpation of certain officers as permitted by recent amendments to Delaware law, as described in Proposal 5. |
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8. | What vote is required to approve each of the proposals? |
Proposal 1: Each director is elected by a plurality of the votes of the shares present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. “Plurality” means that the four nominees who receive the largest number of votes cast “For” such nominees are elected as directors. You may vote “For” or “Withhold” authority to vote for each of the nominees. Any shares voted “Withhold” and broker non-votes are not considered votes cast for the foregoing purpose and will have no effect on the outcome of the election.
Proposal 2: The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending February 2, 2025 requires the affirmative vote of a majority of the voting power of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. This means that, of the shares represented at the Annual Meeting and entitled to vote, a majority of them must vote “For” the proposal for it to be approved. You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal and will have the same effect as a vote “Against” this proposal. If you are a beneficial owner and your shares are held by a broker, your broker has discretionary voting authority under New York Stock Exchange (“NYSE”) rules to vote your shares on this proposal even if the broker does not receive voting instructions from you. Therefore, no broker non-votes are expected in connection with this proposal.
Proposal 3: The approval, on an advisory basis, of the compensation of our named executive officers requires the affirmative vote of a majority of the voting power of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. This means that, of the shares represented at the Annual Meeting and entitled to vote, a majority of them must vote “For” the proposal for it to be approved. You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal and will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.
Proposal 4: The approval of the 2024 Plan requires the affirmative vote of a majority of the voting power of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. This means that, of the shares represented at the Annual Meeting and entitled to vote, a majority of them must vote “For” the proposal for it to be approved. You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal and will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.
Proposal 5: The approval requires the affirmative vote of the holders of a majority of the voting power of our issued and outstanding common stock entitled to vote thereon. This means that, of the shares represented at the Annual Meeting and entitled to vote, a majority of them must vote “For” the proposal for it to be approved. You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal and will have the same effect as a vote “Against” this proposal. Broker non-votes will have the same effect as a vote “Against” this proposal. Accordingly, your failure to vote or the failure to instruct your broker, bank, trustee or other nominee to vote will have the effect of a vote “Against” this proposal.
9. | As a controlled company, how does the voting power of our principal stockholders affect approval of the proposals being voted on at the Annual Meeting? |
Affiliates of funds advised by BC Partners Advisers LP (together with its affiliates, “BC Partners”) currently beneficially own a majority of our outstanding common stock and have the power to approve any action requiring a majority vote of the combined voting power of our outstanding Class A common stock and Class B common stock. As of the Record Date, BC Partners beneficially owned, in aggregate, approximately 68.6% of the outstanding shares of our common stock, representing approximately 95.6% of the total voting power of all outstanding series of common stock.
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10. | How do I vote? |
If you are a “stockholder of record” on the Record Date, then you may attend the Annual Meeting and submit your vote or vote by proxy over the telephone, through the Internet, or by using a proxy card that you may request. To vote your shares at the Annual Meeting, please see Question 12. To vote your shares without attending the meeting, please see Question 13 or the instructions on your Notice.
If you are a “beneficial owner” on the Record Date, you have the right to instruct your bank, brokerage firm, or other nominee on how to vote the shares in your account. In order for your shares to be voted in the way you would like, you must provide voting instructions to your bank, brokerage firm, or other nominee by the deadline provided in the proxy materials you receive from such organization.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, you are encouraged to submit a proxy or voting instructions before the Annual Meeting to ensure your vote is represented.
11. | What is the difference between a “stockholder of record” and a “beneficial owner”? |
Whether you are a “stockholder of record” or a “beneficial owner” with respect to your shares of our common stock depends on how you hold your shares:
• | Stockholder of record: If your shares are registered directly in your name with our transfer agent, Equiniti Trust Company, LLC, you are considered, with respect to those shares, the stockholder of record and the Notice was sent to you directly. As the stockholder of record, you have the right to grant your proxy directly to Chewy or to vote during the Annual Meeting. |
• | Beneficial owner: If your shares are held by your bank, brokerage firm, or other nominee, you are considered the beneficial owner of shares held in street name, and the Notice was forwarded to you by that organization. As the beneficial owner, you have the right to direct your bank, brokerage firm, or other nominee regarding how to vote your shares. Since a beneficial owner is not the stockholder of record, you may not vote your shares at the Annual Meeting unless you obtain a legal proxy from your bank, brokerage firm, or other nominee that holds your shares, giving you the right to vote the shares at the Annual Meeting. |
12. | How do I vote my shares during the Annual Meeting? |
If you hold shares of our common stock as the stockholder of record, you have the right to vote those shares at the Annual Meeting. If you are a beneficial owner and hold shares of our common stock in street name, you may vote the shares you beneficially own under a legal proxy from your bank, brokerage firm, or other nominee. Please contact such organization for instructions on obtaining a proxy. Please follow the instructions at https://www.virtualshareholdermeeting.com/CHWY2024 in order to vote your shares during the Annual Meeting, whether you are a stockholder of record or a beneficial owner. You will need the 16-digit control number that is printed on your Notice to attend the Annual Meeting. Please allow ample time for online check-in, which will begin at 9:45 a.m., Eastern Time, on Thursday, July 11, 2024.
13. | How do I vote my shares without attending the Annual Meeting? |
• | Vote by Internet by going to www.proxyvote.com at any time until 11:59 p.m., Eastern Time, on July 10, 2024. Please have your Notice or proxy card in hand when you access the website and then follow the instructions. |
• | Vote by telephone at 1-800-690-6903 at any time until 11:59 p.m., Eastern Time, on July 10, 2024. Please have your Notice or proxy card in hand when you call and then follow the instructions. |
• | Vote by mail if you requested and received a proxy card. Please mark, sign, and date your proxy card and return it in the postage-paid envelope we provided with it or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. Proxy cards returned by mail must be received no later than the close of business on July 10, 2024. |
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14. | What is the effect of giving a proxy? |
Our Board is soliciting proxies for use at the Annual Meeting and any adjournment or postponement thereof. David Reeder and Da-Wai Hu have been designated as proxy holders by our Board. When proxies are properly dated, executed, and returned, the shares represented by such proxies will be voted at the Annual Meeting in accordance with the instructions of the stockholder. If the proxy is dated and signed, but no specific instructions are given, the shares will be voted in accordance with the recommendations of our Board, as described in Question 7. If any matter not described in this proxy is properly presented at the Annual Meeting, the proxy holders will use their own judgment to determine how to vote the shares. If the Annual Meeting is adjourned or postponed, proxy holders can vote the shares on the new Annual Meeting date as well, unless their proxy instructions have been properly revoked.
15. | If I fail to provide specific voting instructions on my proxy, how will my shares be voted? |
The effect of submitting a proxy or voting instruction form without providing specific voting instructions depends on how you hold your shares.
• | If you are a stockholder of record, your shares will be voted in accordance with the recommendations of our Board described in Question 7. |
• | If you are a beneficial owner and you do not provide instructions to your bank, brokerage firm, or other nominee holding your shares, the organization that holds such shares on your behalf will be entitled to vote those shares on matters that are “routine” in nature. Proposal 2 (ratification of independent registered public accounting firm) is the only proposal to be acted on at the Annual Meeting that would be considered “routine.” A bank, brokerage firm, or other nominee is not entitled to vote shares it holds for a beneficial owner on any proposals that are “non-routine” and the absence of a vote on those matters will be considered “broker non-votes.” Proposal 1 (election of directors), Proposal 3 (advisory vote on named executive officer compensation), Proposal 4 (approval of the 2024 Plan), and Proposal 5 (amendment to the Certificate of Incorporation to provide for the exculpation of certain officers as permitted by recent amendments to Delaware law) are each considered “non-routine” and may not be voted on at the Annual Meeting by a bank, brokerage firm, or other nominee that holds your shares in the absence of your instructions. |
16. | May I revoke my proxy or voting instructions before my shares are voted at the Annual Meeting? |
Stockholders generally have the right to revoke their proxy or voting instructions before their shares are voted at the Annual Meeting, subject to the voting deadlines described in Question 13.
• | Stockholders of record: If you are a stockholder of record, you may revoke a proxy by: |
○ | completing and returning a later-dated proxy card; |
○ | completing and delivering a new proxy by Internet or telephone; |
○ | delivering a signed revocation letter to our General Counsel & Secretary at our principal executive office, bearing a date later than the proxy and stating the proxy is revoked; or |
○ | voting your shares online at the Annual Meeting. |
• | Beneficial owners: If you are a beneficial owner of shares held in street name, you must follow the instructions for changing or revoking your proxy provided by your broker, bank, or other nominee. |
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17. | Are a certain number of shares required to be present at the Annual Meeting? |
To conduct any business at the Annual Meeting, a quorum must be present virtually or represented by valid proxies. The holders of record of issued and outstanding shares of our common stock representing a majority of the voting power of all issued and outstanding shares of common stock entitled to vote at the Annual Meeting, present virtually or represented by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions, withheld votes, and broker non-votes are counted as shares present virtually and entitled to vote for purposes of determining a quorum. See Questions 8 and 15 for explanations of broker non-votes, abstentions, and votes withheld and their effect.
18. | Why did some people receive a Notice instead of a full set of printed proxy materials? |
We are furnishing proxy materials to our stockholders primarily via the Internet, instead of mailing printed copies of materials to each stockholder. The Notice provides instructions on how to view proxy materials online. If you received a Notice by mail, you will not receive a paper or e-mail copy of proxy materials unless you request one. To request a printed or e-mail copy of proxy materials (free of charge), you should follow the instructions included in the Notice.
Some stockholders, including stockholders who previously requested to receive paper copies of proxy materials, will receive paper copies of such materials instead of a Notice. In addition, stockholders who previously elected delivery of such materials electronically will receive a Notice by e-mail. Those stockholders should have received an e-mail containing a link to the website where the proxy materials are available and a link to the proxy voting website.
19. | What does it mean if I receive more than one Notice? |
If you receive more than one Notice, your shares may be registered in more than one name or in different accounts. Please follow the instructions in each Notice to ensure all your shares are voted.
20. | I share an address with another stockholder. What do I do if we received only one paper copy of the proxy materials and want additional copies or we received multiple copies and want only one? |
Pursuant to Securities and Exchange Commission (“SEC”) rules regarding “householding,” we intend to deliver a single copy of the Notice, our annual report, and proxy materials to multiple stockholders who share the same address, unless we received contrary instructions from one or more of such stockholders. This procedure eliminates unnecessary mailings, reduces our printing and mailing costs and other fees, and also helps protect the environment. Stockholders will continue to access and receive separate proxy cards. Upon written or oral request, we will promptly deliver a separate copy of the Notice, our annual report, and proxy materials to any stockholder of record at a shared address to whom we delivered a single copy of any of these materials. To receive a separate copy, such stockholder of record may contact Investor Relations via email at ir@chewy.com, by calling (844) 980-2073, or by writing to Investor Relations at Chewy, Inc., 7700 West Sunrise Boulevard, Plantation, FL 33322. Beneficial holders may contact their bank, brokerage firm, or other nominee to request information about householding.
Conversely, if stockholders of record living at the same address received multiple copies of our Notice, annual report, and proxy materials, you may request delivery of a single copy by contacting Investor Relations as set forth above. Beneficial holders may contact their bank, brokerage firm, or other nominee to request a single copy of the Notice, annual report, and proxy materials.
21. | Who bears the cost of this proxy solicitation? |
All expenses associated with this solicitation will be borne by us. We will reimburse banks, brokerage firms, or other nominees for reasonable expenses that they incur in sending our proxy materials to you if such organization holds shares of our common stock on your behalf. In addition, our directors and employees may also solicit proxies in person, by telephone, or by other means of communication without receiving any additional compensation.
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22. | Who will count the votes? |
Broadridge Financial Solutions, Inc., or a representative or agent of Broadridge Financial Solutions, Inc., will tabulate and certify the votes as the inspector of election for the Annual Meeting.
23. | Where can I find the voting results of the Annual Meeting? |
We will announce preliminary voting results at the Annual Meeting. We will also report the voting results by filing a Current Report on Form 8-K with the SEC within four business days of the Annual Meeting. If the final voting results are not known when we file our report, we will amend the initial report to disclose the final voting results within four business days after those results become known.
24. | When are stockholder proposals for inclusion in our proxy materials for the 2025 annual meeting of stockholders due? |
Stockholders wishing to present a proposal for inclusion in our proxy materials for such annual meeting pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), must timely submit their proposals so that they are received by our General Counsel & Secretary at our principal executive office no later than January 24, 2025. The submission of a stockholder proposal does not guarantee that it will be included in our proxy statement and any such proposal must comply with the requirements of Rule 14a-8 to be considered for inclusion in our proxy materials for the 2025 annual meeting of stockholders (the “2025 Annual Meeting”).
25. | When are other proposals and director nominations for the 2025 Annual Meeting due? |
Stockholders wishing to nominate a candidate for election to our Board or propose other business at the 2025 Annual Meeting (other than pursuant to Rule 14a-8 of the Exchange Act) must deliver a written notice to our General Counsel & Secretary at our principal executive office no earlier than the close of business on March 13, 2025, nor later than the close of business on April 11, 2025. If the 2025 Annual Meeting is scheduled to be held on a date that is more than 30 days before or more than 70 days after the first anniversary of the Annual Meeting (July 11, 2025), then the notice must be submitted not earlier than the close of business on the 120th day prior to the 2025 Annual Meeting and not later than the close of business on the later of the 90th day prior to the 2025 Annual Meeting or the 10th day following the day on which public announcement of the 2025 Annual Meeting is first made. If the notice is not received during the applicable timeframe, the notice will be deemed untimely. Notwithstanding the foregoing, if the number of directors to be elected to our Board at an annual meeting is increased, effective after the time period for which nominations would otherwise be due, and there is no public announcement naming all of the nominees for the additional directorships or specifying the size of the increased Board at least 10 days prior to the applicable deadline described above, then a stockholder’s notice shall also be considered timely (but only with respect to nominees for any new positions created by such increase) if it is received by our General Counsel & Secretary at the Company’s principal executive office in writing not later than the close of business on the 10th day following the day on which such public announcement is first made.
Any such notice of stockholder proposals or director nominations must comply with the timing, disclosure, procedural, and other requirements as set forth in our amended and restated bylaws (the “Bylaws”) and must include all the information required by our Bylaws (including, for a notice of director nominations, the information required by Rule 14a-19(b) under the Exchange Act). A copy of our Bylaws is available in the Governance section of our website at https://investor.chewy.com.
26. | What is the address of Chewy’s principal executive office? |
The mailing address of Chewy’s principal executive office is 7700 West Sunrise Boulevard, Plantation, FL 33322.
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Our Board’s responsibility is to oversee, on behalf of our stockholders, the conduct of our Company’s business, provide advice and counsel to our Chief Executive Officer and senior management, protect our Company’s best interests, and foster the creation of long-term value for our stockholders. Our Board currently consists of twelve directors, divided into three classes with staggered three-year terms. Each class consists of one-third of the total number of directors. Until such time as the Class B common stock represents less than 50% of the combined voting power of Class A and Class B common stock, any newly-created directorship on our Board that results from an increase in the number of directors and any vacancy occurring on our Board shall be filled by (i) a majority of the directors then in office, even if less than a quorum, (ii) a sole remaining director, or (iii) the stockholders. A director elected by our Board to fill a vacancy in a class, including vacancies created by an increase in the number of directors, shall serve for the remainder of the full term of that class or until the director’s successor is duly elected and qualified, or until their earlier death, resignation, retirement, disqualification, or removal.
Our Board believes that the Board should possess a combination of skills, experiences, and backgrounds that are relevant to the key strategic and operational issues that the Board will oversee. Our Board is composed of a diverse group of individuals, with complementary skills, backgrounds, experiences, and perspectives to serve and guide our Company. Our directors are evaluated and selected based on, among other things, their integrity and character, independent judgment, track record of accomplishment in leadership roles, as well as their professional and corporate expertise, skills, and experience. Our Board is composed of directors that have collective backgrounds in finance and accounting, business operations, e-commerce, strategy, growth and transformation, corporate governance and compliance, technology and cybersecurity, retail and customer service, customer engagement and marketing, risk management, human capital management, healthcare, and other relevant areas to oversee our key strategic and operational issues. Many of our directors have experience serving on boards and board committees of other public companies and have an understanding of corporate governance practices and trends and different business processes, challenges, and strategies.
The following chart reflects our directors’ current service on board and board committees of other public companies as of May 20, 2024.
Director Name | | | Public Company | | | Public Company |
Fahim Ahmed | | | Appgate, Inc. | | | |
Martin H. Nesbitt | | | American Airlines, Inc.(1)(4) | | | CenterPoint Energy, Inc. |
Lisa Sibenac | | | Appgate, Inc. | | | |
Sumit Singh | | | Booking Holdings, Inc.(2) | | | |
James A. Star | | | Equity Commonwealth(2)(3) | | | |
Raymond Svider | | | Altice USA, Inc.(1)(2) | | | GFL Environmental Inc. |
(1) | Audit Committee Member |
(2) | Compensation Committee Member |
(3) | Nominating and Corporate Governance Committee Member |
(4) | Corporate Governance & Public Responsibility Committee Member |
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The following charts reflect our Board’s gender and ethnic diversity and age mix as of May 20, 2024.
Gender / Ethnic Diverse Directors | | | Age Mix |
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The following table sets forth select director information as of May 20, 2024:
Name | | | Age | | | Class | | | Director Since | | | Current Term Expires | | | Position | | | Committee Membership | ||||||
| | AC | | | CC | | | NCGC | |||||||||||||||||
Marco Castelli(1) | | | 42 | | | I | | | 2022 | | | 2026 | | | Director | | | | | | | |||
James Nelson(2) | | | 74 | | | I | | | 2021 | | | 2026 | | | Director | | | ☆ | | | | | ||
Martin H. Nesbitt(3) | | | 61 | | | I | | | 2020 | | | 2026 | | | Director | | | | | | | |||
Raymond Svider(4) | | | 61 | | | I | | | 2019 | | | 2026 | | | Chairperson | | | | | ☆ | | | ☆ | |
Fahim Ahmed(5) | | | 45 | | | II | | | 2019 | | | 2024 | | | Director | | | | | ✓ | | | ✓ | |
Michael Chang(6) | | | 47 | | | II | | | 2019 | | | 2024 | | | Director | | | | | | | ✓ | ||
Kristine Dickson(7) | | | 46 | | | II | | | 2021 | | | 2024 | | | Director | | | ✓ | | | | | ||
James A. Star(8) | | | 63 | | | II | | | 2019 | | | 2024 | | | Director | | | ✓ | | | | | ||
Mathieu Bigand(9) | | | 33 | | | III | | | 2022 | | | 2025 | | | Director | | | | | | | |||
David Leland(10) | | | 49 | | | III | | | 2019 | | | 2025 | | | Director | | | | | | | |||
Lisa Sibenac(11) | | | 43 | | | III | | | 2019 | | | 2025 | | | Director | | | | | | | |||
Sumit Singh(12) | | | 44 | | | III | | | 2019 | | | 2025 | | | Director and CEO | | | | | | | |||
Number of fiscal year 2023 meetings | | | | | | | | | | | | | 4 | | | 4 | | | 2 | |||||
AC: Audit Committee | ☆ Committee Chairperson |
CC: Compensation Committee | ✓ Committee Member |
NCGC: Nominating and Corporate Governance Committee
(1) | Elected to our Board effective May 23, 2022. |
(2) | Elected to our Board effective July 19, 2021, and appointed as Chairperson of our Audit Committee effective September 8, 2021. |
(3) | Elected to our Board effective September 21, 2020. |
(4) | Elected as Chairperson of our Board effective April 29, 2019, and appointed as Chairperson of both our Compensation and Nominating and Corporate Governance Committees effective June 13, 2019. |
(5) | Elected to our Board effective April 29, 2019, and appointed as member of both our Compensation and Nominating and Corporate Governance Committees effective June 13, 2019. |
(6) | Elected to our Board effective April 29, 2019, and appointed as member of our Nominating and Corporate Governance Committee effective June 13, 2019. |
(7) | Elected to our Board and as a member of our Audit Committee effective July 14, 2021. |
(8) | Elected to our Board effective June 13, 2019, and appointed as a member of our Audit Committee effective May 29, 2020. |
(9) | Elected to our Board effective September 14, 2022. |
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(10) | Elected to our Board effective September 10, 2019. |
(11) | Elected to our Board effective April 29, 2019. |
(12) | Elected to our Board effective April 29, 2019. |
Nominees for Election to a Three-Year Term Expiring at the 2027 Annual Meeting
Fahim Ahmed. Mr. Ahmed currently serves as Partner at BC Partners, an international investment firm that specializes in the investment of assets under management in private equity, private debt, and real estate, where he also serves as the Chief Operating Officer and is a member of the Management Committee. Before joining BC Partners in 2006, Mr. Ahmed served as a consultant at Boston Consulting Group, a management consulting company, from 2004 to 2006 and from 2000 to 2002. Mr. Ahmed currently serves on the boards of Appgate, Inc. (“Appgate”), a technology company; Presidio Inc. (“Presidio”), an information technology services company; and PetSmart LLC (“PetSmart”), a pet products and services retailer. He previously served as a director of Cyxtera Technologies, Inc. (“Cyxtera Technologies”), a technology company, from 2021 to 2024; and Suddenlink Communications, a telecommunications company from November 2012 to June 2016. Mr. Ahmed holds a Bachelor of Arts degree from Harvard University and a Master of Philosophy degree in economics from Oxford University, where he was a Rhodes Scholar. Mr. Ahmed’s individual qualifications and background as a director include extensive accounting, compensation, and finance experience, and in-depth knowledge of the retail, telecommunications, and technology industries.
Michael Chang. Mr. Chang currently serves as Partner at BC Partners. Before joining BC Partners in 2009, Mr. Chang served as Principal of JLL Partners, LLC, a private equity firm, from 1999 to 2009. Mr. Chang currently serves on the boards of Zest Dental Solutions, a dental products manufacturer; Women’s Care Enterprises, LLC (“Women’s Care Enterprises”), a health services company; CeramTec GmbH, a manufacturer and supplier of technical ceramics; and PetSmart. Mr. Chang holds a Master of Business Administration degree from the Harvard Business School and a Bachelor of Arts degree in economics from The Wharton School of the University of Pennsylvania. Mr. Chang’s individual qualifications and background as a director include extensive finance experience, and in-depth knowledge of the healthcare and retail industries.
Kristine Dickson. Ms. Dickson currently serves as Chief Financial Officer of Lead Bank, a commercial bank, since September 2022. From 2016 to 2022, Ms. Dickson served as Chief Financial Officer of Lehman Brothers Holdings Inc. (“LBH”), a financial services company, and from 2012 to 2015, Ms. Dickson served as Chief Administrative Officer of LBH. From 2001 to 2012, Ms. Dickson served in roles of increasing responsibility at Willis Towers Watson PLC (“WTW”), a professional consulting and services company, including as Northeast Regional Financial Officer from 2008 to 2012, Director of Financial Planning & Analysis from 2006 to 2008, and Mergers & Acquisitions from 2001 to 2006. Prior to WTW, Ms. Dickson served in the Mergers & Acquisitions and Telecom Investment Banking groups at Citigroup, Inc. (“Citigroup”), a financial services company. Ms. Dickson holds a Bachelor of Science degree in computer systems engineering from Stanford University. Ms. Dickson’s individual qualifications and background as a director include knowledge of accounting, finance, human resources, risk management, and transactional experience, and in-depth knowledge of the financial services industry.
James A. Star. Mr. Star previously served as Executive Chairman of Longview Asset Management LLC (“Longview”), a multi-strategy investment firm that invests on behalf of individuals, trusts, and charitable foundations from 2019 until his retirement in October 2023. From 2003 to 2019, he served as President and Chief Executive Officer of Longview. Mr. Star also served as Vice President of Henry Crown and Company, a private family office affiliated with Longview, from 1994 to October 2023. Mr. Star currently serves as a trustee of Equity Commonwealth, a publicly-traded real estate investment trust, where he chairs the nominating and governance committee and is a member of the compensation committee. He is a director of the Atreides Foundation Fund Ltd and V-Square Quantitative Management LLC, each an asset management firm. From 2016 to 2018, Mr. Star served as a director of Allison Transmissions Holdings Inc., a manufacturer for vehicle products, and from 2014 to 2019, as a director of the holding company of PetSmart. He also serves, or has served, as a director or trustee of pension funds, registered mutual funds, private companies, and a private trust company. Mr. Star holds
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a Bachelor of Arts degree from Harvard University, a Juris Doctor degree from Yale Law School, and a Master of Management degree from Kellogg Graduate School of Management at Northwestern University. Mr. Star’s individual qualifications and background as a director include extensive accounting, compliance, corporate governance, finance, and investment experience, and in-depth knowledge of the e-commerce and retail industries.
Directors Continuing in Office Until the 2025 Annual Meeting
Mathieu Bigand. Mr. Bigand currently serves as Director at BC Partners. Before joining BC Partners in 2019, Mr. Bigand served in the Investment Banking division at Goldman Sachs Group, Inc., a financial services company, from 2014 to 2019, where he focused on the technology, media, and telecommunications spaces. Mr. Bigand also currently serves on the board of Women's Care Enterprises and Presidio. Mr. Bigand holds a Master in Management degree from HEC Paris and Bachelor in Mathematics degree from Paris 1 Panthéon-Sorbonne University. Mr. Bigand’s individual qualifications and background as a director include extensive accounting, international, and venture capital experience, and experience with e-commerce, healthcare, and retail industries.
David Leland. Mr. Leland currently serves as Partner and Head of Capital Markets at BC Partners. Since 2019, Mr. Leland has also served as Chief Executive Officer of BC Partners Securities LLC, a registered broker dealer in the United States. Before joining BC Partners in 2018 and from 2000 to 2018, Mr. Leland served at Citigroup with a focus on leveraged finance, most recently as Managing Director in the Capital Markets Originations Group. Mr. Leland also currently serves on the board of GardaWorld Corporation (“GardaWorld”), a security services company. Mr. Leland holds a Bachelor of Business Administration degree with a concentration in finance from The George Washington University. Mr. Leland’s individual qualifications and background as a director include extensive accounting, compliance, and finance experience.
Lisa Sibenac. Ms. Sibenac currently serves as Managing Director at BC Partners in Portfolio Operations. Before joining BC Partners in 2017, Ms. Sibenac served in various management positions at Amazon, Inc. (“Amazon”), an international retailer, from 2012 to 2017. Prior to that, she served in technical and commercial leadership roles at Lockheed Martin Corporation, a security and aerospace company, from 2003 to 2010. Ms. Sibenac currently serves on the board of Appgate since May 2022 and Madison Logic, Inc. (“Madison Logic”), a digital marketing company, since November 2023, and previously served on the board of GFL Environmental Inc. (“GFL Environmental”), a waste management company, from 2018 to 2020. Ms. Sibenac holds a Bachelor of Science degree in mechanical engineering from the University of Notre Dame and a Master of Business Administration degree from Harvard Business School. Ms. Sibenac’s individual qualifications and background as a director include knowledge of business operations, customer engagement, and technology, and in-depth knowledge of the e-commerce and retail industries.
Sumit Singh. Mr. Singh currently serves as Chief Executive Officer of Chewy since March 2018 and as director since April 2019. He also served as Chief Operating Officer of Chewy from September 2017 to March 2018. In 2020, he was inducted into the Bloomberg 50 List of Global Leaders. Prior to joining Chewy, Mr. Singh held senior leadership positions at Amazon from 2013 to 2017. Prior to Amazon, Mr. Singh served in senior management positions at Dell Technologies, Inc., a technology company. Mr. Singh has served on the board of directors of Booking Holdings Inc., a provider of online travel and related services, since April 2022 and on its compensation committee since June 2023. Mr. Singh holds a Bachelor of Technology degree from Punjab Technical University and a Master degree in Engineering from the University of Texas at Austin, where he was inducted into the Academy of Distinguished Alumni for outstanding achievement in 2019, and now serves on the University of Texas Engineering Advisory Board. He also holds a Master of Business Administration degree from the University of Chicago, Booth School of Business. Mr. Singh’s individual qualifications and background as a director include in-depth knowledge of our challenges and opportunities, the e-commerce and retail sectors, and extensive operational and strategic experience.
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Directors Continuing in Office Until the 2026 Annual Meeting
Marco Castelli. Mr. Castelli currently serves as Partner at BC Partners. Before joining BC Partners in 2006, Mr. Castelli served as a management consultant at Bain & Company, a management consulting company, from January 2005 to August 2006. Mr. Castelli currently serves on the boards of Forno d’Asolo S.p.A., a manufacturing company; DentalPro, a dental care and services company; and Cigierre – Compagnia Generale Ristorazione S.p.A., a restaurant developer. Mr. Castelli holds a Master of Business Administration degree from the University of Chicago, Booth School of Business and a degree in Business Administration from Bocconi University in Italy. Mr. Castelli’s individual qualifications and background as a director include extensive finance, investments, and venture capital experience.
James Nelson. Mr. Nelson currently serves as Senior Advisor of MGM Resorts International, an entertainment and hospitality company since March 2024. He previously served as Chief Executive Officer of Global Net Lease, Inc. (“GNL”), a publicly-traded real estate investment trust, from July 2017 to March 2024, where he also served as a director of GNL from March 2017 to March 2024. Mr. Nelson previously served as a member of GNL’s audit committee from March 2017 until July 2017. Mr. Nelson was Chairman and Chief Executive Officer of Eaglescliff Corporation, a specialty investment banking, consulting, and wealth management company, from 1986 until 2009. From 1998 to 2003, he was Chairman and Chief Executive Officer of Orbit Aviation, Inc., a company engaged in the acquisition of Boeing business jets for private and corporate clients, and from 1995 to 1999, Mr. Nelson was Chief Executive Officer and Co-Chairman of Orbitex Management, Inc., a financial services company. From 2021 to 2023, Mr. Nelson served as a director of Xerox Holdings Corporation (“Xerox”), a technology product and services company, and as Chairman of Xerox from 2022 to 2023. Mr. Nelson previously served on the board of directors of other publicly-traded companies including Roman DBDR Tech Acquisition Corp, a special purpose acquisition company, from 2020 to 2021; Herbalife Nutrition Ltd., a nutritional products retailer, from 2014 to 2021; Caesars Entertainment, Inc., a hotel and casino entertainment company, from 2019 to 2020; Icahn Enterprises G.P. Inc., the general partner of Icahn Enterprises L.P., a diversified holding company, from 2001 to 2019; and New York REIT, Inc., a real estate investment trust, from 2015 to 2017. Mr. Nelson’s individual qualifications and background as a director include public company board experience and extensive accounting, compliance, environmental, finance, risk management, technology, and operational and strategic experience as chief executive officer of various companies.
Martin H. Nesbitt. Mr. Nesbitt currently serves as Co-Chief Executive Officer of The Vistria Group, LLC (“Vistria”), an investment firm focused on the education, healthcare, and financial services industries, a position he has held since 2012. From 1996 to 2012, Mr. Nesbitt was cofounder and Chief Executive Officer of TPS Parking Management, LLC (“TPS Parking”), an owner and operator of off-airport parking facilities. Prior to TPS Parking, Mr. Nesbitt served as an officer of the Pritzker Realty Group, L.P. and as Investment Manager at LaSalle Partners, each a commercial real estate firm. Mr. Nesbitt currently serves on the board of directors of American Airlines Group Inc., a network air carrier that provides air transportation for passengers and cargo, since 2015 (where he serves as a member of the audit committee and the corporate governance and public responsibility committee); and CenterPoint Energy, Inc., an electric and natural gas utility, since 2018. From 2011 to 2021, Mr. Nesbitt served as a director of Jones Lang LaSalle Incorporated, a commercial real estate services company; and from 2013 to 2018, he was a director of Norfolk Southern Corp., a transportation company. Mr. Nesbitt currently serves as a trustee of Chicago Museum of Contemporary Art and is the former chairman of the board of the Chicago Housing Authority and a former board member of the Chicago 2016 Olympic Committee. Mr. Nesbitt holds a Master of Business Administration degree from the University of Chicago, Booth School of Business, and a Bachelor of Science degree and honorary doctorate from Albion College. Mr. Nesbitt’s individual qualifications and background as a director include public company board experience and extensive accounting, compliance, environmental, finance, risk management, and operational and strategic experience as chief executive officer and founder of various companies.
Raymond Svider. Mr. Svider currently serves as Partner and Chairman of BC Partners and as Chairman of the Executive Committee of BC Partners. Since Mr. Svider joined BC Partners in 1992, he has led investments in various sectors, including consumer and retail, technology, media and telecom,
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healthcare, industrials, and business services. He currently holds the role of Non-Executive Chairman of PetSmart since March 2015; Chairman of the board of Valtech SE, a technology company, since October 2021; Chairman of the board of Keter Group Holding Sarl, a resin-based outdoor furniture manufacturing company, since November 2022; and Chairman of the of the board of Madison Logic, since December 2022. He serves on the boards of Altice USA, Inc., a technology company, since 2017 (where he chairs the compensation committee and is a member of the audit committee); EAB Global, Inc., an educational technology company, since June 2017; GardaWorld since October 2019; GFL Environmental since 2020; NAVEX Global, Inc., a technology company, since May 2018; and the board of the holding company of Presidio since December 2019. Mr. Svider previously served as a director of Appgate; Intelsat S.A.; Accudyne Industries LLC; Cyxtera Technologies; Teneo Global; Office Depot, Inc.; Multiplan, Inc.; Unity Media Group; Neuf Cegetel; Polyconcept; Neopost; Nutreco; UTL; and Chantemur. Mr. Svider holds a Master of Business Administration degree from the University of Chicago, Booth School of Business, and Master of Science degrees in engineering from Ecole Polytechnique, France and Ecole Nationale Superieure des Telecommunications, France. Mr. Svider’s individual qualifications and background as a director include business acumen and leadership experience and make him particularly well-suited for the roles of Chairperson of our Board and Chairperson of our Compensation and Nominating and Corporate Governance Committees.
We are a “controlled company” within the meaning of the corporate governance standards of the NYSE. Under these rules, a listed company for which more than 50% of the voting power is held by an individual, group, or another company is a “controlled company.” As a result, we qualify for exemption from certain independence requirements, including the requirements that within one year of completion of our initial public offering (“IPO”) at least a majority of our Board is composed of independent directors, and each of our Compensation and Nominating and Corporate Governance Committees are composed entirely of independent directors. Even though we are a controlled company, we are required to comply with the SEC and the NYSE rules relating to the membership, qualifications, and operations of our Audit Committee.
Based on information provided by each director or director nominee concerning their background, employment, and affiliations, our Board has affirmatively determined that each of Ms. Dickson, Mr. Nelson, Mr. Nesbitt, and Mr. Star satisfy the independence requirements under the corporate governance standards of the NYSE, and none of them have a relationship that would interfere with the exercise of their independent judgment in carrying out the responsibilities of a director. In determining the independence of Mr. Star, our Board considered Longview’s minority, non-controlling interest in Argos Holdings L.P. (“Argos Holdings”). Our Board also affirmatively determined that each of Ms. Dickson, Mr. Nelson, Mr. Nesbitt, and Mr. Star satisfy the independence requirements of Rule 10A-3 of the Exchange Act.
Mr. Svider serves as Chairperson of our Board and Mr. Singh serves as Chief Executive Officer of our Company. The Chief Executive Officer is responsible for setting the Company’s strategic direction and managing the Company’s operations and performance, while the Chairperson provides guidance to the Chief Executive Officer, sets the agenda for Board meetings, and presides over meetings of the Board. We believe that the separation of these positions supports the independence of our Board in its oversight of the Company’s business and affairs. In addition, we believe the separation of the two positions creates an environment that is more conducive to objective evaluation and oversight of management’s performance, increasing management accountability and improving the ability of our Board to monitor whether management’s actions are in the best interests of our Company and stockholders. As a result, we believe that such separation can enhance the effectiveness of our Board as a whole. We believe that the leadership structure of our Board is appropriate and enhances its ability to effectively carry out its roles and responsibilities on behalf of our stockholders.
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The Nominating and Corporate Governance Committee leads the Board and each committee through an annual self-evaluation to assess whether the Board and its committees are functioning effectively. As part of the self-evaluation process, each Board and committee member provides feedback on topics relevant to the performance and effectiveness of the Board and the applicable committee. The Nominating and Corporate Governance Committee is responsible for overseeing the self-evaluation process. In addition, each committee evaluates the performance of its duties under its charter and reports to the Board on such self-evaluation. The Nominating and Corporate Governance Committee reviews the evaluations and determines whether to propose any modifications or alterations in Board or committee practices, procedures, or charters.
Our Board has established three standing committees - an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. Each committee has the authority to engage legal counsel or other experts or consultants as it deems appropriate to carry out its responsibilities. Our Board has adopted written charters for each committee and each charter is available on our website at https://investor.chewy.com. The composition and overview of the responsibilities of each committee are described below. Members serve on these committees as determined by our Board or until earlier resignation or death.
Audit Committee
Our Audit Committee currently consists of Mr. Nelson (Chairperson), Ms. Dickson, and Mr. Star. Our Audit Committee assists our Board with oversight of our corporate accounting and financial reporting process, our compliance with legal and regulatory requirements, and our risk assessment and risk management policies, guidelines, and processes. Our Audit Committee is responsible for, among other things:
(i) | managing the appointment, retention, compensation, oversight, and termination of our independent registered public accounting firm; |
(ii) | overseeing the pre-approval process governing audit and permitted non-audit and tax services provided by our independent registered public accounting firm; |
(iii) | reviewing and approving the function and scope of our internal audit department, including its purpose, authority, organization, responsibilities, budget, staffing, audit plans, and performance; |
(iv) | assisting the Board with overseeing external financial reporting, including periodic reports, earnings releases, and earnings guidance; |
(v) | overseeing the adequacy and effectiveness of our internal controls over financial reporting and disclosure controls and procedures; |
(vi) | reviewing risks (including cybersecurity, data privacy, business continuity, and other operational risks), and the policies, guidelines, and processes used by management to assess, manage, monitor, and control such risks; |
(vii) | monitoring legal and regulatory compliance, including compliance with our Code of Conduct and Ethics; |
(viii) | reviewing and approving related party transactions in accordance with our related party transactions policy; |
(ix) | overseeing procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or auditing matters; and |
(x) | reviewing our policies and processes for tax planning and compliance. |
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Our Board has determined that all current members of our Audit Committee satisfy the independence requirements of Rule 10A-3 of the Exchange Act and the corporate governance standards of the NYSE, and meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NYSE. Our Board has determined that Mr. Nelson is an “audit committee financial expert,” as such term is defined in the regulations promulgated under the Exchange Act and each of Ms. Dickson, Mr. Nelson, and Mr. Star has the requisite financial sophistication, as defined under the applicable NYSE rules and regulations.
Our Audit Committee has adopted, and periodically reviews compliance with, the Company’s Guidelines for Hiring Employees or Former Employees of the Independent Auditor and the Audit Committee Pre-Approval Policy (the “Pre-Approval Policy”), each of which further ensures that the independence of the independent registered public accounting firm is not impaired.
The formal report of our Audit Committee with respect to the fiscal year ended January 28, 2024 (“Fiscal Year 2023”), is set forth below under the heading Audit Committee Report.
Compensation Committee
Our Compensation Committee consists of Mr. Svider (Chairperson) and Mr. Ahmed. Our Compensation Committee assists our Board with oversight of our compensation policies, plans, and programs. Our Compensation Committee is responsible for, among other things:
(i) | reviewing and approving corporate goals and objectives applicable to our Chief Executive Officer and other executive officers, evaluating performance in light of such objectives, and approving compensation; |
(ii) | reviewing director compensation and benefits for service on our Board, and making recommendations for modification; |
(iii) | reviewing and approving incentive compensation and equity-based plans, and overseeing the administration of those plans on behalf of executive officers; and |
(iv) | monitoring the effectiveness of non-equity-based benefit plan offerings, and approving any material new employee benefit plan or change to an existing plan that creates a material financial commitment for our Company. |
Compensation Committee Interlocks and Insider Participation
During Fiscal Year 2023, Mr. Ahmed and Mr. Svider served as members of our Compensation Committee. Neither of these individuals currently are, or have been, an officer or employee of Chewy. None of our named executive officers currently serve, or in the past year have served, as a member of the board of directors or compensation committee (or other board committee performing equivalent functions) of any entity that has one or more of its named executive officers serving on our Board or Compensation Committee.
Nominating and Corporate Governance Committee
Our Nominating and Corporate Governance Committee consists of Mr. Svider (Chairperson), Mr. Ahmed, and Mr. Chang. Our Nominating and Corporate Governance Committee is responsible for, among other things:
(i) | determining the qualifications, qualities, skills, and other expertise necessary to serve on our Board; |
(ii) | identifying and evaluating candidates, and making recommendations to our Board for director nominees; |
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(iii) | assessing the size, structure, and composition of our Board and committees, and making recommendations to our Board regarding the appointment of directors to serve as members of each committee and committee chairperson annually; |
(iv) | overseeing periodic evaluations of our Board’s performance, including Board committees; |
(v) | reviewing, assessing the adequacy of, and proposing changes to our Board regarding our certificate of incorporation, Bylaws, Code of Conduct and Ethics, Corporate Governance Guidelines, and other corporate governance policies; |
(vi) | monitoring corporate governance trends and developments, and recommending changes to our Board; and |
(vii) | developing a Chief Executive Officer succession plan and evaluating potential Chief Executive Officer candidates. |
Considerations in Evaluating Director Nominations
Directors may be nominated by the Board or by our stockholders in accordance with our Bylaws. Our Nominating and Corporate Governance Committee is responsible for identifying and screening candidates and recommending director nominees for election to our Board. When formulating recommendations, our Nominating and Corporate Governance Committee considers proposals and suggestions from stockholders, management, and others it deems appropriate, and also takes into account the performance of incumbent directors in determining whether to recommend them to stand for reelection at the annual meeting of stockholders.
In evaluating director candidates, our Nominating and Corporate Governance Committee considers the current size, composition, organization, and governance of our Board and the needs of our Board and committees. Our Nominating and Corporate Governance Committee seeks individuals with the judgment, diversity, skills, experience, and background important to our strategic direction and operational focus. While our Board does not have specific director criteria requirements, our Nominating and Corporate Governance Committee considers, among other things:
(i) | the independence, judgment, strength of character, reputation in the business community, ethics, and integrity of the individual; |
(ii) | the business and other relevant experience, skill, and knowledge the individual may have that will enable them to provide effective oversight of our business; |
(iii) | the fit of the individual’s skill set and personality with those of the other directors so as to build a Board that works together effectively and constructively; and |
(iv) | the individual’s ability to devote sufficient time to carry out their responsibilities as a director. |
Our Board does not have a formal policy on diversity, but in evaluating director candidates our Nominating and Corporate Governance Committee and Board consider gender, nationality, ethnicity, and age, among other factors deemed appropriate, including functional areas of business and financial expertise and educational and professional background.
Our Nominating and Corporate Governance Committee will consider director candidates recommended by stockholders based upon the guidelines set forth in the Nominating and Corporate Governance Committee’s charter and subject to compliance with procedures set forth in our Bylaws. Please see Question 25 above under the heading General Information About Our Annual Meeting for more information. Committee oversight of director nominations does not apply in cases where the right to nominate a director legally belongs to a third party. In addition, so long as the outstanding shares of our
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Class B common stock represent 50% or more of the combined voting power of our outstanding Class A common stock and Class B common stock, holders of shares of Class B common stock are not subject to the notice procedures set forth in our Bylaws with respect to any annual or special meeting of stockholders.
Management is responsible for the day-to-day oversight and management of financial, governance, people, quality, safety, technology, operational, and strategic risks, while our Board, as a whole and through its committees, is responsible for the oversight of our risk management framework, which aligns with our disclosure controls and procedures. Our Board regularly evaluates enterprise risk management and related policies and practices. We have a disclosure committee comprised of senior management that prepares and reviews risks, and considers whether there are any compliance or disclosure issues. Consistent with this approach, management regularly reviews risks with our Board and Audit Committee at their regular meetings as part of management presentations that focus on particular business functions, operations, or strategies, and presents steps taken by management to control, eliminate, or mitigate such risks. While our Board is ultimately responsible for the risk oversight of our Company, our Audit Committee has primary responsibility for the management and mitigation of risks facing our Company, including the oversight of the measures initiated by management to monitor and control such risks. Our process identifies new or emerging risks that could impact the organization and we assess the likelihood and impact of the identified risks, while considering strategic business objectives to understand and assess the risks. Our Audit Committee also monitors compliance with legal and regulatory requirements and reviews and approves or disapproves any related party transactions. Our Compensation Committee has responsibility to review the risks arising from our compensation policies and practices applicable to all employees, including executive officers, and evaluate policies and practices that could mitigate any such risk. Our Nominating and Corporate Governance Committee has responsibility to review risks relating to our corporate governance practices. These committees provide regular reports on our risk management practices to our Board. Our Board believes Chewy’s current Board, committee, and management structure supports its risk oversight function.
To learn more about certain of the risks we face, please refer to the section titled “Risk Factors” included under Part I, Item 1A of our Annual Report on Form 10-K for Fiscal Year 2023 and in other filings with the SEC.
During our Fiscal Year 2023, our Board had four meetings, our Audit Committee had four meetings, our Compensation Committee had four meetings, and our Nominating and Corporate Governance Committee had two meetings. Each director attended at least 75% of the aggregate of (i) the total number of meetings of our Board held during the period for which they served as a director and (ii) the total number of meetings held by all committees of our Board on which such director served (held during the period of such director’s committee service). Our non-employee directors, as well as our independent directors, meet in regularly scheduled sessions, typically following a scheduled Board meeting. Our Board has not formally selected a director to preside at executive sessions of non-employee directors or executive sessions of independent directors. Instead, the participating directors designate a presiding director for the session.
Although we do not have a formal policy regarding attendance by Board members at annual meetings of stockholders, we encourage our directors to attend such meetings. Nine of our current directors who served at the time of our 2023 annual meeting of stockholders (the “2023 Annual Meeting”) attended that meeting.
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We annually review the amount of annual compensation for Board and committee service for our independent directors. Pursuant to our Director Compensation and Educational Expense Reimbursement Policy, the amount of annual compensation for our independent directors is as follows:
• | $250,000 for service as a Board member payable 25% in cash and 75% in time-based restricted stock units (“Director RSUs”); |
• | $20,000 for service as a committee chairperson, payable in cash; and |
• | $10,000 for service as a committee member, payable in cash. |
Each independent director who serves as the chairperson of a committee receives an annual service fee as a committee member and as the chairperson. Fees paid in cash are generally paid in arrears. Director RSUs are granted to each independent director after our Company’s annual stockholder meeting and vest the earlier of (i) the date of our next annual stockholder meeting or (ii) one year from the date of grant, each subject to the independent director’s continued service as a director on our Board through the vesting date. Directors that join our Board on a date other than our annual stockholder meeting receive a pro-rated amount of the annual cash compensation and Director RSUs.
The Board occasionally establishes committees of limited duration for special purposes. When a special committee is established, the Board will determine whether to provide non-employee directors with additional compensation for service on such committee based on the expected duties of the committee, the anticipated number and length of any committee meetings, and other factors the Board may deem relevant.
We reimburse our directors for reasonable travel expenses relating to Board meetings and up to $7,000 for director educational expenses for each twelve-month period between annual stockholder meetings. We also extend our employee discount to our directors, allowing them to receive a 20% discount on most Chewy orders. Our Director Compensation and Educational Expense Reimbursement Policy was designed to attract and retain high quality independent directors and is periodically reviewed by our Compensation Committee and Nominating and Corporate Governance Committee.
Our independent directors are subject to stock ownership requirements as set forth below under section entitled “Stock Ownership Guidelines.”
2023 Director Compensation
The following table provides information regarding compensation of our independent directors for their service as a director for Fiscal Year 2023. Non-independent directors received no compensation for their service as a director. Mr. Singh serves as a director and as Chief Executive Officer of the Company. His compensation is shown in the table entitled “Summary Compensation Table” and the related tables under the section entitled “Compensation Tables”.
Name | | | Fees Earned or Paid in Cash ($) | | | Stock Awards ($)(1)(2) | | | Total ($) |
Kristine Dickson(3) | | | 122,500 | | | 184,952 | | | 307,452 |
James Nelson(4) | | | 292,500 | | | 184,952 | | | 477,452 |
Martin H. Nesbitt(5) | | | 112,500 | | | 184,952 | | | 297,452 |
James A. Star(6) | | | 72,500 | | | 184,952 | | | 257,452 |
(1) | The amounts reflected in this column represent the grant date fair value of the awards made in Fiscal Year 2023, as computed in accordance with Topic 718, Compensation—Stock Compensation, of the Accounting Standards Codification of the Financial Accounting Standards Board (“ASC 718”). For a discussion of the assumptions used in the calculation of the grant date fair value, refer to Part II, Item 8 “Financial Statements and Supplementary Data–Note 11 – Share-Based Compensation” of our Annual Report on Form 10-K for Fiscal Year 2023. |
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(2) | Amounts shown do not reflect compensation actually received by the director, and there can be no assurance that these amounts will ever be realized by the director. Each independent director received a grant of Director RSUs in an amount equal to 75% of their annual retainer divided by the 20-day average closing price of the Company’s Class A common stock for the 20 trading days immediately preceding the grant date, rounded to the nearest whole share. |
(3) | Ms. Dickson was granted 4,880 Director RSUs in Fiscal Year 2023, settlement of which will be deferred until the first to occur of (i) her termination of service, (ii) her death or disability, or (iii) a Change in Control, as defined in our 2022 Omnibus Incentive Plan (the “2022 Plan”). The Director RSUs vest on the date of the Annual Meeting, subject to her continued service with the Company. Ms. Dickson received a cash fee of $50,000 for her service on a special committee. |
(4) | Mr. Nelson was granted 4,880 Director RSUs in Fiscal Year 2023. The Director RSUs vest on the date of the Annual Meeting, subject to his continued service with the Company. Mr. Nelson received a cash fee of $200,000 for his service on a special committee. |
(5) | Mr. Nesbitt was granted 4,880 Director RSUs in Fiscal Year 2023. The Director RSUs vest on the date of the Annual Meeting, subject to his continued service with the Company. Mr. Nesbitt received a cash fee of $50,000 for his service on a special committee. |
(6) | Mr. Star was granted 4,880 Director RSUs in Fiscal Year 2023. The Director RSUs vest on the date of the Annual Meeting, subject to his continued service with the Company. |
Deferral of Director RSUs
Independent directors may generally elect to defer receipt of their Director RSUs by making such election prior to the end of the calendar year preceding the year in which such Director RSUs are granted. Directors who make a deferral election will have no rights as a stockholder of the Company with respect to Director RSUs until such Director RSUs are settled. Settlement of any deferred Director RSUs in shares of fully vested Company common stock will occur at the time specified in the director’s deferral election, but no later than as soon as practicable following the first to occur of the director’s termination of Board service, the director’s death or disability, or a change in control.
Indemnification
We have entered into indemnification agreements with each of our directors and anticipate that we will enter into similar agreements with any future directors. Generally, the indemnification agreements are designed to provide the maximum protection permitted by Delaware law with respect to indemnification of a director. The indemnification agreements provide that we will pay certain amounts incurred by a director in connection with any civil or criminal action or proceeding, specifically including actions by or in our name (i.e., derivative suits) where the individual’s involvement is by reason of the fact that the director is or was a director or officer. Such amounts include, to the maximum extent permitted by law, attorney’s fees, judgments, civil or criminal fines, settlement amounts, and other expenses reasonably incurred in connection with legal proceedings. Under the indemnification agreements, a director will receive indemnification unless they are adjudged not to have acted in good faith and in a manner reasonably believed to be in, or not opposed to, the best interest of our Company and, in the case of a criminal proceeding, had no reasonable cause to believe that the conduct was unlawful.
Stockholders and other interested parties may communicate with our Board or any of our directors individually (including the Chairperson of the Board), or our non-management or independent directors as a group, by sending written communications addressed to Chewy’s General Counsel & Secretary at Chewy, Inc., 7700 West Sunrise Boulevard, Plantation, FL 33322. Each communication will be reviewed by our General Counsel & Secretary to determine whether it is appropriate for presentation to our Board or the applicable director(s). The purpose of this screening is to allow our Board to avoid having to consider irrelevant or inappropriate communications (such as advertisements, solicitations, and product inquiries). See Questions 24 and 25 above under the heading General Information About Our Annual Meeting for more information.
Our Board has adopted Corporate Governance Guidelines that address items such as the qualifications and responsibilities of our directors and director candidates and corporate governance policies and standards applicable to us in general. We also have a Code of Conduct and Ethics that applies to our directors, officers, and employees, including our Chief Executive Officer, Chief Financial Officer, and
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Chief Accounting Officer. Our Corporate Governance Guidelines and our Code of Conduct and Ethics are each posted on our website at https://investor.chewy.com. We will post amendments to our Code of Conduct and Ethics or any waivers thereto for directors and named executive officers on the same website or in filings under the Exchange Act.
Our mission is to be the most trusted and convenient destination for pet parents and partners everywhere. Our commitment extends to improving our impact, both internally and externally. We are working hard to ensure alignment with the evolving standards required by sustainability rules and regulations, and to uphold corporate citizenship and enhance long-term shareholder value.
Environmental Sustainability
We are pursuing efforts to reduce our environmental impact by promoting sustainability throughout our operations. Our recent efforts focus on reducing the environmental impact of our packaging processes and transportation network. We are actively exploring strategies to continue improving our supply chain by promoting responsible sourcing practices for our products and materials.
We are collecting and analyzing detailed operational data and applying advanced emissions factors to accurately assess our greenhouse gas emissions. We are also assessing climate-related risks and their potential impacts relevant to our business.
Community and Employee Engagement
Our employees are key to fulfilling our mission of being the most trusted and convenient destination for pet parents and partners everywhere. We strive to further our mission by offering competitive compensation and benefits, focusing on employee safety, sharing opportunities for positive societal impact through participation in philanthropic endeavors, and fostering a workplace in which everyone feels empowered to do their best work. We provide our employees with support resources and programs that advance employee engagement, communication, and feedback, including annual and quarterly surveys. These tools enable us to continually assess and improve our practices. Additionally, we invest in the education, training, and development of employees by providing learning opportunities through courses and programs and our custom-learning platform, Chewy University.
We recognize the importance of a diverse and inclusive workforce and fostering safe working environments in which our employees can be their authentic and best selves. Our diversity, equity, and inclusion (“DEI”) mission is to hire, retain, and promote exceptional talent that values and is inclusive of diverse backgrounds and perspectives. We are focused on this mission through a variety of initiatives and programs, including assessments of current processes and policies. During Fiscal Year 2023, we expanded our DEI course offerings, and offered five team member resource groups in support of our DEI mission.
Our passion for pets and dedication to improving our impact drives us to improve their lives and those of pet parents everywhere. Through Chewy Gives Back, we support animal welfare with volunteer work, donations, and our Wish List tool that empowers eligible non-profit shelters or rescues to create lists of needed items, which our customers can easily order for delivery to the organization. We recently broadened our focus to include wildlife sanctuaries and conservatory efforts. In Fiscal Year 2023, we donated approximately $55 million in products and supplies through Chewy Gives Back.
We have also adopted Ethics and Integrity Principles (the “Principles”) for our vendors, suppliers, and contractors. The Principles encompass various aspects, including business integrity, anti-bribery and anti-corruption measures, fair dealing practices, trade ethics, labor and human rights, prevention of harassment and discrimination, and considerations for environmental and community impacts.
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Corporate Governance and Accountability
We are committed to upholding high standards of corporate governance, emphasizing ethics and compliance, and we have implemented policies and procedures to ensure compliance with applicable laws and regulations. More information regarding our governance is described under the heading Corporate Governance Guidelines and Code of Conduct and Ethics.
Related Party Transactions Policy
We have a written related party transactions policy (the “Related Party Policy”), which is administered by our Audit Committee and includes procedures for the review, approval, ratification, modification, or termination of related party transactions. Pursuant to the Related Party Policy, a related party transaction includes transactions in which Chewy is a participant, the aggregate amount involved will or may be expected to exceed $120,000, and a “related party” has or will have a direct or an indirect material interest. Related parties of Chewy include directors (including nominees for election as director), executive officers, stockholders that are known to beneficially own more than 5% of Chewy’s voting securities, any immediate family members of the foregoing, and any entity with which such related party is employed, is a general partner, principal, or in a similar position, or in which such person has a 10% or greater beneficial interest.
Except for transactions that have been pre-approved in accordance with the Related Party Policy, once a related party transaction has been identified, our Audit Committee will review the relevant facts and circumstances and approve or disapprove entry into the transaction. In determining whether to approve or ratify a related party transaction, our Audit Committee takes the following considerations into account, among other factors it deems appropriate:
(i) | whether the transaction was undertaken in the ordinary course of our business; |
(ii) | whether the transaction was initiated by us or the related party; |
(iii) | the availability of other sources of comparable products or services; |
(iv) | whether the transaction is proposed to be, or was, entered on terms no less favorable to us than terms that could have been reached with an unrelated third party; |
(v) | the purpose of, and the potential benefits of, the transaction; |
(vi) | the approximate dollar value of the amount involved in the transaction, particularly as it relates to the related party; |
(vii) | the related party’s interest in the transaction; and |
(viii) | any other information regarding the transaction or the related party that would be material to investors in light of the circumstances of the particular transaction. |
Our Audit Committee may approve the transaction only if it determines in good faith that, under all the circumstances, the transaction is in, or not inconsistent with, the best interests of our Company and stockholders.
If we become aware of a related party transaction that has not been approved under the Related Party Policy, such transaction is reviewed in accordance with the procedures set out in the Related Party Policy. If our Audit Committee determines it to be appropriate, the transaction is ratified. Where our Audit Committee determines not to ratify a related party transaction that has been commenced without approval, our Audit Committee may direct additional actions including, but not limited to, immediate discontinuation or rescission of the transaction or modification of the transaction to make it acceptable for ratification.
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Certain Related Party Transactions
Described below are transactions with related parties in which the amounts involved exceeded $120,000 since the beginning of our last fiscal year or may be expected to exceed such amount in the foreseeable future. Other than as described in this section and in the Compensation Discussion and Analysis section below, there were no transactions with related parties in Fiscal Year 2023, and no transactions are currently proposed, that would require disclosure under Item 404 of Regulation S-K.
BC Partners and its Affiliates
Transactions with BC Partners and/or its affiliates:
• | On October 30, 2023 (the “Closing Date”), Chewy entered into certain transactions (the “Transactions”) with affiliates of BC Partners pursuant to an Agreement and Plan of Merger (the “Merger Agreement”). The Transactions resulted in, among other things, such affiliates restructuring their ownership interests in Chewy and Chewy Pharmacy KY, LLC (“Chewy KY”) becoming an indirect wholly-owned subsidiary of Chewy. On the Closing Date, affiliates of BC Partners transferred $1,937,093,765 to Chewy to be used to fund: (i) tax obligations of its affiliates that were inherited by Chewy as a result of the Transactions and (ii) expenses incurred by Chewy in connection with the Transactions. |
• | In connection with our IPO, Chewy entered into a master transaction agreement (the “MTA”) with PetSmart. The MTA was amended in February 2021 in connection with PetSmart’s distribution of all of its Chewy stock to reflect our previous contractual relationship with PetSmart. The MTA governed the provision of certain administrative and support services provided by PetSmart to Chewy and fees payable by Chewy to PetSmart for guaranteeing certain of Chewy’s lease related obligations. From the beginning of Fiscal Year 2023 through the Closing Date no payments were made or received related to the MTA. The MTA was terminated on the Closing Date in connection with the Transactions. |
• | Certain of our pharmacy operations are conducted through Chewy KY, which was a wholly-owned subsidiary of PetSmart prior to the Closing Date. Prior to the Closing Date, we entered into a services agreement with Chewy KY that provided for the payment of a management fee to us for providing services to Chewy KY. Pursuant to the terms of this agreement, Chewy received $3,772,389 from Chewy KY from the beginning of Fiscal Year 2023 through the Closing Date. Chewy KY became an indirect wholly-owned subsidiary of Chewy on the Closing Date in connection with the Transactions. |
• | In connection with our IPO, we entered into a tax matters agreement (the “TMA”) with PetSmart and Argos Intermediate Holdco I Inc. that governed the parties’ respective rights, responsibilities, and obligations regarding tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, and other matters regarding taxes. From the beginning of Fiscal Year 2023 through the Closing Date, we paid PetSmart $10,278,837 pursuant to the TMA. The TMA was terminated on the Closing Date in connection with the Transactions. |
• | From time to time, we provide services related to veterinary software to PetSmart Veterinary Services, LLC (“PVS”), a PetSmart subsidiary. From the beginning of Fiscal Year 2023 through the Record Date, we received approximately $100,000 from PVS. |
• | From time to time, we purchase compliance-related and educational training materials and services from Navex, a portfolio company of BC Partners. From the beginning of Fiscal Year 2023 through the Record Date, we paid Navex $141,674. |
• | From time to time, we purchase security solutions and other services from GardaWorld, a portfolio company of BC Partners. From the beginning of Fiscal Year 2023 through the Record Date, we paid GardaWorld $4,753,081. |
• | From time to time, we purchase cybersecurity solutions and other services from Appgate, a portfolio company of BC Partners. From the beginning of Fiscal Year 2023 through the Record Date, we paid Appgate $623,625. |
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The following agreements involving BC Partners and/or an affiliate of BC Partners:
• | Amended and Restated Investor Rights Agreement, dated October 30, 2023, by and among Chewy and certain holders identified therein; and |
• | Stockholders Agreement, dated as of April 17, 2019, by and among Chewy and the other parties named therein. |
Employment
Aseemita Malhotra, our President of Healthcare, is the spouse of our Chief Executive Officer. During Fiscal Year 2023, Ms. Malhotra led our Healthcare vertical and received total cash compensation of $517,850, which includes her base salary and a payment under our short-term incentive (“STI”) program(1) based on Company performance compared to pre-established performance metrics. Ms. Malhotra’s cash compensation was determined based on market data and comparable positions. In April 2023, Ms. Malhotra was granted 87,226 restricted stock units (“RSUs”), subject to time-based vesting, and 16,886 performance-based restricted stock units (“PRSUs”), subject to vesting based on the achievement of certain Company performance conditions. Of the RSUs granted in April 2023, 9,849 RSUs vested on February 1, 2024, 26,960 RSUs vested on April 1, 2024, and the remaining 50,417 RSUs are scheduled to vest in accordance with a specified vesting schedule, subject to Ms. Malhotra’s continued employment through the applicable vesting date. In March 2024, the Company’s Compensation Committee certified the achievement of the performance condition for the April 2023 PRSUs, which resulted in 22,121 PRSUs that vest on February 1, 2026, subject to her continued employment through the vesting date. In January 2024, Ms. Malhotra was granted 21,840 RSUs, subject to time-based vesting. In April 2024, Ms. Malhotra was granted 76,685 RSUs, subject to time-based vesting, and 39,600 PRSUs, subject to vesting based on the achievement of certain Company performance conditions. The RSUs granted in January and April 2024 are scheduled to vest in accordance with a specified vesting schedule, subject to Ms. Malhotra’s continued employment through the applicable vesting date. The PRSUs granted in April 2024 vest on February 1, 2027, subject to the satisfaction of certain Company performance conditions and her continued employment through the vesting date. She will be eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company performance-based vesting conditions are met during Fiscal Year 2024. The grant date fair value of the awards computed in accordance with ASC 718 was $3,665,784, $421,075, and $1,904,748 for the awards granted in April 2023, January 2024, and April 2024, respectively. Ms. Malhotra also had use of the personal security-related services and automobiles described for Mr. Singh in the 2023 Summary Compensation Table.
(1) | For a description of our STI program refer to Annual Short-Term Incentive under the heading Elements of NEO Compensation below. The STI program payment for Fiscal Year 2023 was determined and paid in fiscal year ending February 2, 2025 (“Fiscal Year 2024”). |
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There are four directors in class II with terms of office expiring at our Annual Meeting. Our Nominating and Corporate Governance Committee has recommended, and our Board has approved, Fahim Ahmed, Michael Chang, Kristine Dickson, and James A. Star as nominees for election as directors at the Annual Meeting. Each of the nominees possesses the qualifications, qualities, skills, and other expertise necessary to serve on our Board. If elected at the Annual Meeting, each of these nominees would serve until the 2027 annual meeting of stockholders or until their successor has been duly elected and qualified, or, if sooner, until their earlier death, resignation, retirement, disqualification, or removal. Mr. Ahmed, Mr. Chang, Ms. Dickson, and Mr. Star are currently directors of Chewy, and each of them was appointed by our Board. Additional information regarding these nominees is set forth above under the heading Board of Directors. Each person nominated for election has agreed to serve if elected, and Chewy’s management has no reason to believe that any nominee will be unable to serve.
Each director is elected by a plurality of the votes of the shares present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. “Plurality” means that the four nominees who receive the largest number of votes cast “For” such nominees are elected as directors. You may vote “For” or “Withhold” authority to vote for each of the nominees of the Board. Any shares voted “Withhold” and broker non-votes are not considered votes cast for the foregoing purpose and will have no effect on the outcome of the election. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by the Board.
FOR ✔ | | | OUR BOARD, UPON RECOMMENDATION OF OUR NOMINATING AND CORPORATE GOVERNANCE COMMITTEE, RECOMMENDS A VOTE “FOR” ALL OF THE NOMINEES NAMED ABOVE. |
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The following table sets forth the beneficial ownership of our Class A common stock and Class B common stock as of May 13, 2024 by (i) each director, director nominee, and named executive officer, (ii) all current executive officers and directors of Chewy as a group, and (iii) all those known by Chewy to beneficially own more than 5% of our Class A common stock or Class B common stock.
This table is based upon information supplied by our executive officers, directors, director nominees, and principal stockholders, and Schedules 13D, 13F, and 13G filed with the SEC. Under SEC rules, a person is deemed to be a “beneficial owner” of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security.
Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 137,046,700 shares of Class A common stock and 298,863,356 shares of Class B common stock outstanding on May 13, 2024. We have deemed shares of our common stock issuable pursuant to equity awards, which are subject to vesting and settlement conditions expected to occur within 60 days of May 13, 2024, to be outstanding and beneficially owned by the person holding the equity awards for the purpose of computing the percentage ownership of that person. Such equity awards are not deemed outstanding for the purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all of our current named executive officers and directors as a group.
Unless otherwise indicated, the address for each beneficial owner listed below is c/o Chewy, Inc., 7700 West Sunrise Boulevard, Plantation, FL 33322.
| | | Voting Shares Beneficially Owned | | | % Total Voting Power(1) | ||||||||||
| | | Class A Common Stock | | | Class B Common Stock | | |||||||||
Name of Beneficial Owner | | | Shares | | | % | | | Shares | | | % | | ||
Named Executive Officers | | | | | | | | | | | |||||
Sumit Singh(2) | | | 1,517,374 | | | 1.1 | | | — | | | — | | | * |
Mario Marte | | | 203,023 | | | * | | | — | | | — | | | * |
Stacy Bowman(3) | | | 243,769 | | | * | | | — | | | — | | | * |
Satish Mehta(4) | | | 569,594 | | | * | | | — | | | — | | | * |
Susan Helfrick | | | 55,759 | | | * | | | — | | | — | | | * |
Current Directors | | | | | | | | | | | |||||
Raymond Svider(5) | | | 60,000 | | | * | | | — | | | — | | | * |
Fahim Ahmed(6) | | | 10,000 | | | * | | | — | | | — | | | * |
Mathieu Bigand | | | 0 | | | — | | | — | | | — | | | — |
Marco Castelli | | | 0 | | | — | | | — | | | — | | | — |
Michael Chang(7) | | | 10,000 | | | * | | | — | | | — | | | * |
Kristine Dickson(8) | | | 11,649 | | | * | | | — | | | — | | | * |
David Leland | | | 0 | | | — | | | — | | | — | | | — |
James Nelson(9) | | | 11,632 | | | * | | | — | | | — | | | * |
Martin H. Nesbitt(10) | | | 13,466 | | | * | | | — | | | — | | | * |
Lisa Sibenac(11) | | | 1,000 | | | * | | | — | | | — | | | * |
James A. Star(12) | | | 150,193 | | | * | | | — | | | — | | | * |
Current directors and executive officers as a group(13) | | | 2,857,459 | | | 2.1 | | | — | | | — | | | * |
More Than 5% Security Holders | | | | | | | | | | | |||||
BC Partners Holdings Limited/Argos Holdings GP LLC(14) | | | 0 | | | — | | | 298,863,356 | | | 100.0 | | | 95.6 |
Baillie Gifford & Co(15) | | | 18,482,764 | | | 13.5 | | | — | | | — | | | * |
The Vanguard Group(16) | | | 9,604,698 | | | 7.0 | | | — | | | — | | | * |
* | Represents less than one percent (1%). |
(1) | Percentage total voting power represents voting power with respect to all shares of our Class A common stock and Class B common stock, voting together as a single class. Each holder of Class B common stock is entitled to ten (10) votes per share of Class B common stock, and each holder of Class A common stock is entitled to one (1) vote per share of Class A common |
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stock on all matters submitted to our stockholders for a vote. The Class A common stock and Class B common stock vote together as a single class on all matters submitted to a vote of our stockholders, except as may otherwise be required by law. The Class B common stock is convertible at any time by the holder into shares of Class A common stock on a share-for-share basis upon written notice to the transfer agent.
(2) | Consists of (i) 1,379,100 shares of Class A common stock held by Mr. Singh and (ii) 138,274 shares of Class A common stock held by Mr. Singh’s spouse. This does not include (i) 664,652 shares of Class A common stock issuable to Mr. Singh upon the vesting of RSUs, which are not expected to vest within 60 days of May 13, 2024, (ii) 1,579,016 shares of Class A common stock (which represents the maximum number of shares that may be issued upon the vesting of PRSUs if maximum performance goals are achieved) issuable to Mr. Singh upon the vesting of PRSUs, which are not expected to vest within 60 days of May 13, 2024, (iii) 143,301 shares of Class A common stock issuable to Mr. Singh’s spouse upon the vesting of RSUs, which are not expected to vest within 60 days of May 13, 2024, or (iv) 103,442 shares of Class A common stock (which represents the maximum number of shares that may be issued upon the vesting of PRSUs if maximum performance goals are achieved) issuable to Mr. Singh’s spouse upon the vesting of PRSUs, which are not expected to vest within 60 days of May 13, 2024. |
(3) | Consists of 243,769 shares of Class A common stock held by Ms. Bowman. This does not include (i) 38,085 shares of Class A common stock issuable to Ms. Bowman upon the vesting of RSUs, which are not expected to vest within 60 days of May 13, 2024, or (ii) 23,178 shares of Class A common stock (which represents the maximum number of shares that may be issued upon the vesting of PRSUs if maximum performance goals are achieved) issuable to Ms. Bowman upon the vesting of PRSUs, which are not expected to vest within 60 days of May 13, 2024. |
(4) | Consists of (i) 569,594 shares of Class A common stock held by Mr. Mehta. This does not include (i) 299,048 shares of Class A common stock issuable to Mr. Mehta upon the vesting of RSUs, which are not expected to vest within 60 days of May 13, 2024, or (ii) 318,709 shares of Class A common stock (which represents the maximum number of shares that may be issued upon the vesting of PRSUs if maximum performance goals are achieved) issuable to Mr. Mehta upon the vesting of PRSUs, which are not expected to vest within 60 days of May 13, 2024. |
(5) | Consists of 60,000 shares of Class A common stock held by Mr. Svider. |
(6) | Consists of 10,000 shares of Class A common stock held by Mr. Ahmed. |
(7) | Consists of 10,000 shares of Class A common stock held by Mr. Chang. |
(8) | Consists of (i) 4,880 shares of Class A common stock issuable upon the vesting of RSUs, which will vest on the date of the Annual Meeting, subject to Ms. Dickson’s continued service as a director on the Board through the vesting date, and (ii) 1,624 and 5,145 shares of Class A common stock underlying RSUs that vested on July 14, 2022 and July 14, 2023, respectively and will be settled upon the earlier of (x) the date of Ms. Dickson leaving the Board or (y) a change in control of the Company. |
(9) | Consists of (i) 6,752 shares of Class A common stock held by Mr. Nelson, and (ii) 4,880 shares of Class A common stock held by Mr. Nelson, which will vest on the date of the Annual Meeting, subject to Mr. Nelson’s continued service as a director on the Board through the vesting date. |
(10) | Consists of (i) 1,543 shares of Class A common stock held by Mr. Nesbitt, (ii) 4,880 shares of Class A common stock issuable upon the vesting of RSUs, which will vest on the date of the Annual Meeting, subject to Mr. Nesbitt’s continued service as a director on the Board through the vesting date, and (iii) 1,817, 1,624, and 3,602 shares of Class A common stock underlying RSUs that vested on July 14, 2021, July 14, 2022, and July 14, 2023, respectively, and will be settled upon the earlier of (x) the date of Mr. Nesbitt leaving the Board or (y) a change in control of the Company. |
(11) | Consists of 1,000 shares of Class A common stock held by Ms. Sibenac. |
(12) | Consists of (i) 141,790 shares of Class A common stock held by Mr. Star, (ii) 4,880 shares of Class A common stock issuable upon the vesting of RSUs, which will vest on the date of the Annual Meeting, subject to Mr. Star’s continued service as a director on the Board through the vesting date, and (iii) 804 and 2,719 shares of Class A common stock underlying RSUs that vested on July 14, 2020 and July 14, 2021, respectively, and will be settled upon the earlier of (x) the date of Mr. Star leaving the Board or (y) a change in control of the Company. |
(13) | Consists of (i) 820,604 shares of Class A common stock held by our executive officers (i.e., Messrs. Singh, Reeder, and Mehta) and directors, (ii) 19,520 shares of Class A common stock issuable upon the vesting of RSUs within 60 days of May 13, 2024, and (iii) 17,335 shares of Class A common stock underlying RSUs that have vested for which settlement has been deferred. |
(14) | Based solely on a Schedule 13G/A filed on February 12, 2024, Argos Holdings GP LLC (“GP LLC”) is the general partner of Argos Holdings L.P. (“Argos”). Argos is the sole common equity holder of Citrus Intermediate Holdings L.P. (“Citrus”), which indirectly is the sole equity holder of Citrus Intermediate Topco LLC and Buddy Chester Sub LLC, the direct holders of the reported shares of Class B common stock. GP LLC is the general partner of Citrus. CIE Management IX Limited controls a majority of the equity interests of GP LLC and has the power to appoint members to the board of directors of GP LLC who may exercise majority voting power at meetings of the board of directors of GP LLC. BC Partners Holdings Limited is the controlling shareholder of CIE Management IX Limited. The business address of each of these entities is 650 Madison Avenue, New York, NY 10022. |
(15) | Based solely on a Schedule 13G/A filed on January 30, 2024. Baillie Gifford & Co. exercises sole voting power with respect to 15,723,741 shares of Class A Common Stock and sole dispositive power with respect to 18,482,764 shares of Class A Common stock. The business address of Baillie Gifford & Co. is Calton Square, 1 Greenside Row, Edinburgh EH1 3AN, Scotland, United Kingdom. |
(16) | Based solely on a Schedule 13G/A filed on February 13, 2024. The Vanguard Group exercises shared voting power with respect to 43,176 shares of Class A Common Stock, sole dispositive power with respect to 9,455,981 shares of Class A Common Stock and shared dispositive power with respect to 148,717 shares of Class A common stock. The business address of The Vanguard Group is 100 Vanguard Blvd., Malvern, PA 19355. |
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Certain affiliates of BC Partners have granted a security interest in certain shares of our Class B common stock beneficially owned by them to secure certain indebtedness, including indebtedness of PetSmart, which includes customary default provisions. In the event of a default under any such credit facility or the applicable indenture, the secured parties may foreclose upon any and all shares of Class B common stock pledged to them and may seek recourse against the obligors under the relevant credit facilities and indentures. Any such action could result in a change in control of Chewy.
Section 16(a) of the Exchange Act requires that our directors, named executive officers, and stockholders that own more than 10% of our common stock report to the SEC and us certain changes in ownership and ownership information within specified periods. Based solely on a review of the reports furnished to us or filed with the SEC and upon information furnished by these parties, we believe that during Fiscal Year 2023 all of our directors and officers timely filed all reports they were required to file under Section 16(a) of the Exchange Act.
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Deloitte & Touche LLP served as our independent registered public accounting firm for Fiscal Year 2023. The following table sets forth all fees for professional services rendered by Deloitte & Touche LLP for the fiscal years ended January 28, 2024 and January 29, 2023:
| | | January 28, 2024 | | | January 29, 2023 | |
Audit Fees(1) | | | $2,466,000 | | | $2,289,000 |
Audit-Related Fees(2) | | | 300,000 | | | 15,000 |
Tax Fees | | | — | | | — |
All Other Fees | | | — | | | — |
Total Fees | | | $2,766,000 | | | $2,304,000 |
(1) | Audit fees consist of fees for services rendered and expenses billed in connection with the annual audit of our consolidated financial statements, the review of our quarterly condensed consolidated financial statements, and consultations on accounting matters directly related to the audit. |
(2) | Audit-related fees include fees for assurance and related services that are traditionally performed by the independent registered accounting firm. In Fiscal Year 2023, this includes services rendered in connection with the submission of a Registration Statement on Form S-3, transactions with affiliates of BC Partners pursuant to the Merger Agreement and filing an amended Form 10-K for Fiscal Year 2022. In Fiscal Year 2022, this includes services rendered in connection with the submission of a Registration Statement on Form S-8. |
Our Audit Committee charter requires our Audit Committee to (i) pre-approve all audit and permitted non-audit and tax services that may be provided by our independent registered public accounting firm and (ii) establish, and periodically review, policies and procedures for its pre-approval of permitted services in compliance with applicable SEC rules. Our Audit Committee has adopted the Pre-Approval Policy setting forth the requirements pursuant to which all audit and permitted non-audit and tax services to be performed by our independent registered public accounting firm may be pre-approved. The Pre-Approval Policy is intended to clarify the scope of engagements to be pre-approved by the Audit Committee, and sets forth the procedures and conditions pursuant to which such services may be pre-approved. Prior to adoption of the Pre-Approval Policy, work performed by our independent registered public accounting firm was pre-approved by our Audit Committee on an engagement-by-engagement basis.
The purpose of our Audit Committee is to assist our Board with oversight of the (i) integrity of the Company’s financial statements, (ii) effectiveness of the Company’s internal controls, (iii) Company’s compliance with legal and regulatory requirements, (iv) qualifications, independence, and performance of the Company’s independent auditor, and (v) performance of the Company’s internal audit function. Our Audit Committee’s principal responsibility is one of oversight. Our management is responsible for establishing accounting policies and procedures, determining that our financial statements are complete, accurate, and in accordance with applicable generally accepted accounting principles and other applicable reporting and disclosure standards, and establishing satisfactory internal controls over financial reporting. Our independent auditor is responsible for auditing our financial statements and the effectiveness of our internal controls over financial reporting. Our internal and outside counsel are responsible for assuring our compliance with laws and regulations and our corporate governance policies.
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In performing its oversight function, our Audit Committee has:
• | reviewed and discussed the audited financial statements with management and Deloitte & Touche LLP; |
• | discussed with Deloitte & Touche LLP the matters required to be discussed by the applicable requirements issued by the Public Company Accounting Oversight Board (the “PCAOB”) and the SEC; and |
• | received the written disclosures and the letter from Deloitte & Touche LLP required by applicable requirements of the PCAOB regarding the independent accountant’s communications with the Audit Committee concerning independence and has discussed with Deloitte & Touche LLP its independence. |
Based on these reviews and discussions, the Audit Committee recommended to our Board the inclusion of the audited financial statements in the Company’s Annual Report on 10-K for the fiscal year ended January 28, 2024, as filed with the SEC on March 20, 2024.
THE AUDIT COMMITTEE
James Nelson, Chair
Kristine Dickson
James A. Star
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Public Accounting Firm
Our Audit Committee has selected Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending February 2, 2025, subject to execution of a mutually agreeable engagement letter. Deloitte & Touche LLP has served as our auditor since 2017. Representatives of Deloitte & Touche LLP are expected to be present at the Annual Meeting. They will have an opportunity to make a statement if they so desire and will be available to respond to appropriate questions.
Although our Audit Committee charter and current law, rules, and regulations require our Audit Committee to engage, retain, and supervise our independent registered public accounting firm, our Board and Audit Committee value the opinions of our stockholders and consider the selection of such firm to be an important matter of stockholder concern. The selection of Deloitte & Touche LLP is accordingly submitted for ratification of stockholders as a matter of good corporate practice. If the stockholders fail to ratify this selection, our Board and Audit Committee will consider the outcome of the vote in determining whether to retain this firm for the fiscal year ending February 2, 2025. Even if the selection is ratified, our Audit Committee in its discretion may direct the appointment of different independent auditors at any time during the year if it determines that such a change would be in the best interests of our Company and stockholders.
The ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for our fiscal year ending February 2, 2025 requires the affirmative vote of a majority of the voting power of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon (meaning that, of the shares represented at the meeting and entitled to vote, a majority of them must vote “for” the proposal for it to be approved). You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal, and, thus, will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.
FOR ✔ | | | OUR BOARD, UPON RECOMMENDATION OF OUR AUDIT COMMITTEE, RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF DELOITTE & TOUCHE LLP AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING FEBRUARY 2, 2025. |
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This Compensation Discussion and Analysis (“CD&A”) describes the material elements of our executive compensation program for Fiscal Year 2023 and provides an overview of our compensation philosophy and objectives for our named executive officers (“NEOs”).
Our executive compensation program is designed to align total compensation with Company performance, while enabling us to attract, retain, and motivate individuals who can achieve sustained long-term growth and strong financial performance for our stockholders. Our executive compensation program (i) provides our NEOs with total compensation to avoid the disruption and expense associated with unintended departures, (ii) motivates and rewards our NEOs for our success in dynamic and competitive markets, and (iii) aligns the interests of our NEOs with those of our stockholders. Our pay-for-performance compensation philosophy and practices are intended to increase stockholder value. As a result, NEO compensation is heavily weighted towards providing equity awards that incentivize long-term stock price appreciation. Our long-term incentive (“LTI”) plan provides equity awards that may be subject to a service-based vesting condition (the “Service Condition”), a performance-based vesting condition (the “Performance Condition”), or both a Performance Condition and Service Condition to promote long-term stockholder value creation (equity awards subject to a Service Condition, “Service RSUs” and equity awards subject to a Performance Condition and Service Condition, “Performance RSUs”). Our STI program focuses on annual strategic metrics to grow sales and improve profitability. Two of our NEOs who facilitated our IPO retired in Fiscal Year 2023 and our executive compensation program contributed to executive succession planning. Our executive compensation for Fiscal Year 2023 was determined in the first quarter of 2023, with the exception of the CEO’s compensation, which was determined in January 2024.
Our NEOs for Fiscal Year 2023 were the following:
Name | | | Age | | | Title |
Sumit Singh | | | 44 | | | Chief Executive Officer |
Mario Marte(1) | | | 48 | | | Former Chief Financial Officer |
Stacy Bowman(2) | | | 45 | | | Former Chief Financial Officer and Current Chief Accounting Officer |
Satish Mehta | | | 59 | | | Chief Technology Officer |
Susan Helfrick(3) | | | 57 | | | Former General Counsel & Secretary |
Michael Morant(4) | | | 48 | | | Former General Counsel & Secretary |
(1) | Mr. Marte voluntarily resigned as the Chief Financial Officer effective July 28, 2023. |
(2) | Ms. Bowman was appointed as the Chief Financial Officer effective July 29, 2023 and resigned as the Chief Financial Officer effective February 14, 2024 following the appointment of David Reeder as the Chief Financial Officer. |
(3) | Ms. Helfrick voluntarily resigned as the General Counsel & Secretary effective June 20, 2023. |
(4) | Mr. Morant was appointed as the General Counsel & Secretary effective June 21, 2023 and passed away on August 25, 2023. |
Oversight of Executive Compensation
Our Compensation Committee is responsible for oversight of our executive compensation policies, plans, and programs, which are regularly reviewed and discussed with management to ensure alignment with our short-term and long-term goals given the dynamic nature of our business and the market in which we compete for talent. Our Compensation Committee reviews and makes recommendations to our Board regarding the compensation and other terms of employment of our executive officers, including the NEOs. Our Compensation Committee also reviews and approves the corporate goals and objectives applicable to the compensation and other terms of employment of the CEO and determines and approves the CEO’s compensation.
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Role of Compensation Committee
Our Compensation Committee is primarily responsible for establishing executive compensation. It does so with the goals of motivating NEOs to achieve our business objectives and enhance long-term stockholder value by aligning the interests of our NEOs with those of our stockholders, while rewarding our NEOs for their contributions. Our Compensation Committee considers the interests of stockholders and Company performance in establishing the compensation program. Our Compensation Committee and management team reference national surveys and publicly available executive officer data from e-commerce, retail, and technology organizations as an input for compensation decisions.
Peer Group
The Compensation Committee reviews publicly available compensation information from peer companies when establishing compensation levels for our NEOs. In developing our peer group compensation decisions, we seek to include organizations that are similarly positioned as Chewy, with an emphasis on e-commerce, retail, and technology organizations. The peer group companies are selected using certain criteria including, maintaining operations in the United States, trading equity on a stock exchange, and maintaining revenue within 50% to 200% of Chewy. The following companies comprised our peer group for purposes of setting our executive compensation for Fiscal Year 2023:
Airbnb, Inc. | | | Expedia Group, Inc. |
Bath & Body Works, Inc. | | | Netflix, Inc. |
Best Buy Co., Inc. | | | Spotify Technology S.A. |
Booking Holdings, Inc. | | | Tractor Supply Company |
Carvana Co. | | | ULTA Beauty, Inc. |
DICK’s Sporting Goods, Inc. | | | Wayfair Inc. |
DoorDash, Inc. | | | Zoom Video Communications, Inc. |
eBay Inc. | | |
Role of Management
Management assists our Compensation Committee in establishing NEO compensation by providing information on Company and individual performance, market data, and business needs and objectives. Our Compensation Committee also considers our Chief Executive Officer’s recommendations regarding adjustments to NEO compensation components, including an evaluation of each executive officer’s performance, the Company’s overall performance, and comparable compensation paid to similar executive officers in comparable companies (other than with respect to his own compensation, for which he recuses himself from all discussions and recommendations).
Role of Compensation Consultant
Management has engaged Willis Towers Watson PLC (“WTW”) as its independent compensation consultant to provide advice regarding compensation decisions for our executive officers. WTW assists management in evaluating our compensation objectives, obtaining market information, and designing various aspects of our compensation program. Specific responsibilities for 2023 included benchmarking NEO positions, assistance setting 2023 STI program and LTI plan metrics based on competitive market practices, and validation of Chewy’s peer group. Management has the sole authority to appoint, retain, or replace the independent compensation consultant. In Fiscal Year 2023, WTW was paid approximately $270,000 in aggregate fees for all services provided. WTW’s engagement does not raise any conflict of interest pursuant to SEC rules and the NYSE listing standards.
Say-on-Pay
In the advisory vote held at our 2023 Annual Meeting, stockholders voted overwhelmingly in favor of our Fiscal Year 2022 executive compensation programs for our NEOs. The Compensation Committee considered the voting results with respect to our executive compensation policies and programs. The
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Compensation Committee will continue to review stockholder votes and feedback on our executive compensation programs to ensure alignment with stockholder interests.
Say-on-Frequency
We held an advisory vote on the frequency of future “say-on-pay” advisory votes (referred to as the “say-on-frequency” vote) at our 2020 annual meeting of stockholders, pursuant to which the majority of the advisory votes cast voted to hold our “say-on-pay” votes every year. The Board considered the outcome of this advisory vote and determined that future “say-on-pay” votes will be conducted every year. The Board will re-evaluate this determination after the next stockholder advisory “say-on-frequency” vote, which will be at the Company’s 2026 annual meeting of stockholders unless presented earlier.
Elements of NEO Compensation
Our executive compensation program is comprised of the following key elements:
Element | | | Objective | | | Key Features |
Base Salary | | | Recognizes market factors and individual experience, performance, and level of responsibility. | | | Fixed compensation designed to attract and retain talent. |
Annual Short-Term Incentive | | | Motivates and establishes a strong link between pay and performance. | | | Variable at-risk compensation directly tied to the achievement of financial and strategic annual goals. STI thresholds, targets, and maximums are set as a percentage of base salary. |
Long-Term Equity Incentives | | | Aligns compensation with creating long-term stockholder value and retains talent through multiyear vesting. | | | Variable at-risk compensation in the form of RSUs that vest upon satisfaction of Service Conditions and Performance RSUs that vest upon satisfaction of Service Conditions and Performance Conditions. |
Since a significant portion of our executive compensation is variable, at-risk, and tied directly to measurable performance objectives, we believe our executive compensation program is reasonable, competitive, and appropriately balances the goals of attracting, motivating, rewarding, and retaining individuals while directly aligning their interests with those of our stockholders. The connection between pay and performance is evidenced by our financial performance during Fiscal Year 2023. Highlights of our Fiscal Year 2023 financial performance include:
• | Net sales of $11.1 billion improved 10.2 percent year over year |
• | Gross margin of 28.4 percent expanded 40 basis points year over year |
• | Net income of $39.6 million, including share-based compensation expense and related taxes of $248.5 million |
• | Net margin of 0.4 percent contracted 10 basis points year over year |
• | Basic earnings per share of $0.09, a decrease of $0.03 year over year |
• | Diluted earnings per share of $0.09, a decrease of $0.03 year over year |
• | Adjusted EBITDA(1) of $368.1 million, an increase of $61.3 million year over year |
• | Adjusted EBITDA margin(1) of 3.3 percent expanded 30 basis points year over year |
• | Adjusted net income(1) of $296.2 million, an increase of $69.8 million year over year |
• | Adjusted basic earnings per share(1) of $0.69, an increase of $0.15 year over year |
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• | Adjusted diluted earnings per share(1) of $0.69, an increase of $0.16 year over year |
• | Net cash provided by operating activities of $486.2 million, an increase of $136.4 million year over year |
• | Free cash flow(1) of $342.9 million, an increase of $223.5 million year over year |
(1) | Adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted basic and diluted earnings per share, and free cash flow are non-GAAP financial measures. For a reconciliation of non-GAAP to GAAP financial measures refer to Reconciliation of Non-GAAP Financial Measures in Appendix A. |
Base Salary
Base salary is a standard element of compensation designed to attract and retain talent and provide executives with cash income predictability. Our Compensation Committee reviews and determines base salary adjustments as part of its annual executive officer compensation review. Factors that affect the amount of base salary include experience, market data, role and responsibilities, recruitment and retention considerations, and individual performance. During Fiscal Year 2023, our Compensation Committee determined to increase the base salary of Mr. Morant due to his promotion as General Counsel & Secretary and an assessment of competitive practices at peer companies. The following table sets forth NEO base salaries for Fiscal Year 2023 and the fiscal year ended January 29, 2023 (“Fiscal Year 2022”):
Named Executive Officer | | | FY 2023 Base Salary | | | FY 2022 Base Salary |
Sumit Singh | | | $1,200,000 | | | $1,200,000 |
Mario Marte | | | $595,000 | | | $595,000 |
Stacy Bowman | | | $400,000 | | | $400,000 |
Satish Mehta | | | $475,000 | | | $475,000 |
Susan Helfrick | | | $450,000 | | | $450,000 |
Michael Morant | | | $450,000 | | | $379,400 |
Annual Short-Term Incentive
In Fiscal Year 2023, we continued our annual STI program for our NEOs that is intended to establish a strong link between pay and performance by rewarding the achievement of annual financial and strategic objectives. 100% of the STI payment was based on the achievement of pre-established Company-level performance metrics with no individual performance component. The performance metrics included goals related to net sales and adjusted EBITDA margin. These performance metrics were selected because they provide a balance of both top-line and bottom-line financial goals while also incenting responsible cash utilization. Our NEOs participate in the STI program at a target payout of 75% to 150% of eligible earnings, with a threshold payout of 50% and maximum payout of 200% of target to provide an additional incentive to meet or exceed the maximum threshold and to align our practice with the prevailing market practice. In Fiscal Year 2023, we changed the target payout for certain of our NEOs. This change consisted of a target payout of 150% for Mr. Singh (from 100%) and 75% for Ms. Bowman (from 45%) to better align their targets in their roles with market competitive levels. No STI payment is made if achievement of all performance goals is less than the threshold. In Fiscal Year 2023, we removed free cash flow as a performance metric as recommended by our compensation consultant. The following table shows weighting, achievement level, weighted achievement with respect to each metric, and the total weighted achievement for the Fiscal Year 2023 STI program:
Metric | | | Weighting | | | Achievement (% of Target) | | | Weighted Achievement |
Net Sales Growth | | | 50% | | | 62% | | | 31% |
Adjusted EBITDA Margin | | | 50% | | | 200% | | | 100% |
Total | | | 100% | | | | | 131% |
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Mr. Marte, Ms. Helfrick, and Mr. Morant did not receive a STI payment in Fiscal Year 2023 because of their departures during Fiscal Year 2023. Based on a total weighted achievement of 131% of target, our NEOs received the following STI payments for Fiscal Year 2023:
NEO | | | Eligible Earnings(1) | | | Target % of Eligible Earnings | | | Award at Target | | | Achievement | | | Payout |
Sumit Singh | | | $1,200,000 | | | 150% | | | $1,800,000 | | | 131% | | | $2,358,000 |
Mario Marte | | | $595,000 | | | 100% | | | $595,000 | | | —% | | | $0 |
Stacy Bowman | | | $400,000 | | | 75% | | | $300,000 | | | 131% | | | $393,000 |
Satish Mehta | | | $475,000 | | | 100% | | | $475,000 | | | 131% | | | $622,250 |
Susan Helfrick | | | $450,000 | | | 100% | | | $450,000 | | | —% | | | $0 |
Michael Morant | | | $450,000 | | | 100% | | | $450,000 | | | —% | | | $0 |
(1) | Eligible Earnings means the portion of the NEO’s base salary earned while in a STI eligible position and excludes any one-off bonus or other types of compensation. For Fiscal Year 2023, Eligible Earnings for our NEOs equaled their respective base salary. NEOs that departed the Company during Fiscal Year 2023 did not receive a STI payment. |
STI payments for Fiscal Year 2023 were determined and paid to the NEOs during Fiscal Year 2024 and are included in the Non-Equity Incentive Plan Compensation column of the 2023 Summary Compensation Table.
Long-Term Equity Incentives
We view long-term incentive compensation in the form of equity awards as a critical element of our executive compensation program. As such, most of the total compensation for our NEOs is stock-based compensation designed to create a strong link between pay and performance. The realized value of these equity awards over time has a direct relationship to our stock price and establishes an incentive for our NEOs to create sustainable, long-term value for our stockholders, while retaining our NEOs in a highly competitive market.
As a variable and at-risk component of compensation, the amount realized from equity compensation will vary based on the long-term performance of the Company. Performance RSUs are only earned if the Performance Condition is achieved over the applicable performance periods and Service RSUs are only earned if the NEO satisfies the Service Condition. The Performance RSUs for our NEOs include goals related to net sales, adjusted EBITDA margin, and free cash flow, each with a threshold payment of 50%. The amount of the Performance RSUs are weighted 50% for net sales, 30% for adjusted EBITDA margin, and 20% for free cash flow.
In connection with the consummation of our IPO, some of our NEOs received equity awards including Performance RSUs. The Service Condition was satisfied with respect to 25% of the Performance RSUs on the first anniversary of our IPO and was satisfied on a continuing basis with respect to an additional 12.5% of the Performance RSUs on each six-month anniversary thereafter, subject to the NEO’s continued employment with the Company through the applicable vesting date. The Performance Condition has been satisfied in full based on the achievement of share price hurdles set at the time of grant. Upon satisfaction of the Service Condition, the portion of the NEO’s Performance RSUs that vested was equal to the portion of the Performance RSUs with respect to which the Service Condition was satisfied. These equity awards fully vested in Fiscal Year 2023. Outlined below are additional equity awards received by our NEOs in Fiscal Year 2023 and Fiscal Year 2024 prior to the Record Date.
In January 2024, Mr. Singh was granted 1,342,314 RSUs and 268,078 PRSUs in connection with performance awards and retention purposes. With respect to 1,074,236 RSUs, 41% vested on February 1, 2024, 11% vested on May 1, 2024, 11% will vest on December 1, 2024, 34% will vest on February 1, 2025, and 3% will vest on February 1, 2026. With respect to 268,078 RSUs, 25% vested on February 1, 2024, and 12.5% will vest on each six-month anniversary thereafter, subject to Mr. Singh’s continued employment with the Company through the applicable vesting date. The PRSUs granted in January 2024 will vest on February 1, 2026, subject to the satisfaction of certain Company performance
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conditions and Mr. Singh’s continued employment through the vesting date. Mr. Singh will be eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company Performance Conditions are met during Fiscal Year 2023.
In April 2024, Mr. Singh was granted 829,793 RSUs and 628,661 PRSUs in connection with performance awards and retention purposes. With respect to the RSUs, 18.94% will vest on February 1, 2025, 16.85% will vest on May 1, 2025, 4.74% will vest on August 1, 2025, 4.74% will vest on November 1, 2025, 12.12% will vest on December 1, 2025, 4.74% will vest on February 1, 2026, and 4.74% will vest on each three-month anniversary thereafter, subject to Mr. Singh’s continued employment with the Company through the applicable vesting date. The PRSUs granted in April 2024 will vest on February 1, 2027, subject to the satisfaction of certain Company performance conditions and Mr. Singh’s continued employment through the vesting date. Mr. Singh will be eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company Performance Conditions are met during Fiscal Year 2024.
In April 2023, Mr. Mehta was granted 223,206 RSUs and 54,109 PRSUs in connection with performance awards for retention purposes. With respect to 54,109 of the RSUs, 25% vested on February 1, 2024 and 12.5% will vest on each six-month anniversary thereafter, subject to Mr. Mehta’s continued employment with the Company through the applicable vesting date. With respect to 169,097 of the RSUs, 52% vested on February 1, 2024, 44% will vest on February 1, 2025, and 4% will vest on February 1, 2026, subject to Mr. Mehta’s continued employment with the company through the applicable vesting date. The PRSUs granted in April 2023 vest on February 1, 2026, subject to the satisfaction of certain Company performance conditions and Mr. Mehta’s continued employment through the vesting date. Mr. Mehta will be eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company Performance Conditions are met during Fiscal Year 2023.
In January 2024, Mr. Mehta was granted 41,110 RSUs in connection with retention purposes. 50% of the RSUs will vest on May 1, 2024 and 50% will vest on December 1, 2024.
In April 2024, Mr. Mehta was granted 156,744 RSUs and 126,889 PRSUs in connection with performance awards and retention purposes. With respect to the RSUs, 20.24% will vest on February 1, 2025, 14.58% will vest on May 1, 2025, 5.06% will vest on August 1, 2025, 5.06% will vest on November 1, 2025, 9.52% will vest on December 1, 2025, 5.06% will vest on February 1, 2026 and 5.06% will vest on each three-month anniversary thereafter, subject to Mr. Mehta’s continued employment with the Company through the applicable vesting date. The PRSUs granted in April 2024 vest on February 1, 2027, subject to the satisfaction of certain Company performance conditions and Mr. Mehta’s continued employment through the vesting date. Mr. Mehta will be eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company Performance Conditions are met during Fiscal Year 2024.
In April 2023, Mr. Morant was granted 10,885 RSUs and 2,288 PRSUs in connection with performance awards and retention purposes. With respect to 6,865 RSUs, 25% were scheduled to vest on February 1, 2024 and 12.5% were scheduled to vest on each six-month anniversary thereafter, subject to Mr. Morant’s continued employment with the Company through the applicable vesting date. With respect to 4,020 RSUs, 50% were scheduled to vest on each of February 1, 2024 and February 1, 2025. The PRSUs granted in April 2023 were scheduled to vest on February 1, 2026, subject to the satisfaction of certain Company performance conditions and Mr. Morant’s continued employment through the vesting date. Mr. Morant was eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company performance-based vesting conditions are met during Fiscal Year 2023. In July 2023, Mr. Morant was awarded 95,604 RSUs in connection with his promotion to General Counsel and Secretary. As a result of Mr. Morant’s passing, the Board of Directors approved the acceleration of 51,966 RSUs which vested on August 25, 2023. The remaining 77,695 RSUs were forfeited.
In April 2023, Ms. Bowman was granted 42,616 RSUs and 3,484 PRSUs in connection with performance awards and retention purposes. With respect to 10,453 RSUs 25% vested on February 1, 2024 and 12.5% will vest on each six-month anniversary thereafter, subject to Ms. Bowman’s continued employment with the
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Company through the applicable vesting date. With respect to 32,163 RSUs, 100% vested on April 1, 2024. The PRSUs granted in April 2023 vest on February 1, 2026, subject to the satisfaction of certain Company performance conditions and Ms. Bowman’s continued employment through the vesting date. Ms. Bowman will be eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company Performance Conditions are met during Fiscal Year 2023.
In April 2024, Ms. Bowman was granted 24,518 RSUs and 8,173 PRSUs in connection with performance awards and retention purposes. With respect to the RSUs, 25% will vest on February 1, 2025 and 6.25% will vest on each three-month anniversary thereafter, subject to Ms. Bowman’s continued employment with the Company through the applicable vesting date. The PRSUs granted in April 2024 vest on February 1, 2027, subject to the satisfaction of certain Company performance conditions and Ms. Bowman’s continued employment through the vesting date. Ms. Bowman will be eligible to receive between 0% and 200% of the target PRSUs, depending on the extent to which certain Company Performance Conditions are met during Fiscal Year 2024. Mr. Marte and Ms. Helfrick retired in Fiscal Year 2023 and did not receive any additional equity awards.
Our NEOs are eligible to receive additional equity awards at the discretion of our Compensation Committee, but may or may not receive equity awards on an annual basis and, consequently, their compensation, as reported in the 2023 Summary Compensation Table below, may fluctuate materially from year to year depending on whether a grant was made in a particular year. Equity awards are subject to the provisions of the Company’s Clawback Policy and other policies implemented by the Company and/or in the applicable equity award agreement.
Additional NEO Compensation
401(k) Plan
We have a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements (the “401(k) Plan”). Under the 401(k) Plan, eligible employees may defer receipt of portions of their eligible salaries, subject to certain limitations imposed by the Internal Revenue Code (the “Code”), by making contributions to the 401(k) Plan. This plan provides for matching contributions made by us equal to 50% of the first 6% of an employee’s covered compensation. The employee becomes vested in our matching contribution ratably over a four-year period.
Employee Benefits and Perquisites
Our NEOs are eligible to receive the same employee benefits that are generally available to all of our full-time employees, subject to the satisfaction of certain eligibility requirements. This includes medical, dental, and vision benefits, flexible spending accounts, short-term and long-term disability insurance, life insurance, and accidental death and dismemberment insurance. Our employee benefits programs are designed to be affordable and competitive in the market in which we compete for talent.
In addition, we have provided certain perquisites and other personal benefits in limited circumstances where we believe it is appropriate to assist a NEO in the performance of their duties, to make our NEOs more efficient and effective, for security purposes, and for recruitment, motivation, and retention purposes. During Fiscal Year 2023, none of our NEOs received material perquisites or other personal benefits that are not generally made available to all of our employees, with the exception of personal security-related services and automobiles provided to Mr. Singh, which we have deemed to be necessary and appropriate, and a long-term disability benefit that was provided to Mr. Marte, Ms. Bowman, and Ms. Helfrick.
Non-qualified Deferred Compensation
We introduced a non-qualified deferred compensation plan (the “NQDCP”) in Fiscal Year 2023 and provide eligible employees the opportunity to defer compensation into the NQDCP. There are no employer contributions to the NQDCP. The NQDCP permits eligible employees to defer up to 50% of base salary and up to 80% of STI on a tax-advantaged basis. Amounts contributed by eligible employees to the NQDCP are fully vested at the time of contribution. As part of the NQDCP deferral election, the
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participant decides whether to receive distributions at a set date or upon the earliest of the participant’s death, disability, retirement, or separation from service or a change in control. Distributions from the participant’s account may generally be made either in a lump sum or consecutive annual installments over a period that may be between two years and ten years (or up to fifteen years for retirement-related distributions). The NQDCP is administered by our 401(k) Plan Administrative Committee. Although not legally required, we have chosen to fund the NQDCP liability by means of a rabbi trust. Mr. Mehta participated in the NQDCP in Fiscal Year 2023.
Pension Benefits
Our NEOs did not participate in, or earn any benefits under, any defined benefit pension or retirement plan sponsored by us during Fiscal Year 2023 (other than the 401(k) Plan as described above and in the 2023 Summary Compensation Table below).
Severance Benefits
Mr. Singh’s, Mr. Marte’s, and Ms. Helfrick’s respective employment agreements provide for certain severance benefits upon qualifying terminations. As of the end of Fiscal Year 2023, none of the other NEOs had an employment agreement. The compensation that our NEOs could receive upon a qualifying termination or a change in control is described and quantified in the Potential Payments Upon Termination or Change in Control section below. Other than as described above and in the Employment Agreements and Potential Payments Upon Termination or Change in Control section, our NEOs are not entitled to severance payments or benefits upon a termination of employment.
Other Compensation Policies and Practices
Clawback Policy
The Compensation Committee adopted a clawback policy (the “Clawback Policy”) to adhere to the listing standards of the NYSE and the rules of the SEC implementing Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Clawback Policy requires the Compensation Committee to recoup certain incentive-based compensation paid to current and former executive officers in the event the Company is required to prepare an accounting restatement due to material noncompliance with any financial reporting requirement under the federal securities laws. Under the policy, the Compensation Committee will require recoupment of certain incentive-based compensation paid to current and former executive officers if it determines that such compensation received by a current or former executive officer exceeded the amount of incentive-based compensation that otherwise would have been received, had it been calculated based on the restated amounts. In addition to the Clawback Policy, the STI and LTI plans include “clawback” provisions under which the repayment of awards may be required under certain circumstances.
Stock Ownership Guidelines
Our Stock Ownership Guidelines require our executive officers (including our NEOs) and independent directors to hold an aggregate value of qualifying Company equity for so long as the individual serves as an executive officer or independent director and for ninety (90) days following termination of service. Qualifying Company equity includes our Class A common stock, deferred stock units, unvested restricted stock or RSUs, vested shares in the 401(k) Plan, and common stock beneficially owned in a family trust or by a spouse or minor children. Our stock ownership requirements are:
• | CEO - six (6) times annual base salary |
• | CFO - three (3) times annual base salary |
• | Other officers for purposes of Section 16 of the Exchange Act - three (3) times annual base salary |
• | Independent Director - five (5) times annual equity retainer |
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Our executive officers (including our NEOs) and independent directors are required to achieve the stock ownership requirements within five (5) years after becoming subject to the Stock Ownership Guidelines. If an executive officer or independent director becomes subject to a greater stock ownership requirement, such as due to a promotion or an increase in base salary or annual retainer, the executive officer or independent director is expected to meet the higher stock ownership requirement within three (3) years. Until the stock ownership requirement is satisfied, an executive officer or director is required to retain a minimum of 50% of the net shares received as the result of exercise, vesting, or payment of any equity awards granted by the Company. All NEOs and independent directors have been subject to the Stock Ownership Guidelines for less than five (5) years and are in the transition period for compliance with the Stock Ownership Guidelines.
Insider Trading Policy; Hedging and Pledging Activities
Our Board has adopted an insider trading policy (the “Insider Trading Policy”) to promote compliance with applicable securities laws that prohibit certain persons who are aware of material non-public information about a company from (i) trading in securities of that company; or (ii) providing material non-public information to other persons who may trade on the basis of that information. Under the Insider Trading Policy, our employees, including our NEOs and members of our Board, are prohibited from short-term trading, short sales, derivative transactions, hedging transactions, trading on margin account or pledging, and standing and limit orders, except for very limited duration (i.e., 2-3 days).
Tax Implications of Executive Compensation
Section 162(m) of the Code places a limit of $1 million on the amount of compensation per year that a public company may deduct for federal income tax purposes with respect to certain executive officers. Our pay-for-performance philosophy remains central to our compensation program, even though some compensation could be non-deductible compensation expenses.
Accounting for Stock-Based Compensation
We follow ASC 718 for our stock-based compensation awards. ASC 718 requires us to measure the compensation expense for all share-based payment awards made to our employees and independent members of our Board, including equity awards, based on the grant date fair value. This calculation is performed for accounting purposes and reported in the executive compensation tables required by federal securities laws, even though the recipient of the awards may never realize any value from their awards.
Our Compensation Committee has reviewed our compensation policies and practices to assess whether they encourage our NEOs to take inappropriate risk. Our Compensation Committee believes that the mix and design of the elements of executive compensation, individually or in their entirety, do not encourage NEOs to take inappropriate risks. The mix of fixed and variable compensation prevents undue focus on short-term results and is intended to align the long-term interests of our NEOs with those of our stockholders.
Our Compensation Committee has reviewed and discussed with management this Compensation Discussion and Analysis. Based on that review and discussion, we recommended to our Board that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into Chewy’s Annual Report on Form 10-K for the fiscal year ended January 28, 2024.
THE COMPENSATION COMMITTEE
Raymond Svider, Chair
Fahim Ahmed
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2023 Summary Compensation Table
The following table provides information with respect to the compensation of our NEOs for the fiscal years indicated:
Name and Principal Position | | | Year | | | Salary ($)(1) | | | Stock Awards ($)(2) | | | Non-Equity Incentive Plan Compensation ($)(3) | | | All Other Compensation ($)(4) | | | Total ($) |
Sumit Singh Chief Executive Officer | | | FY23 | | | 1,200,000 | | | 31,048,358 | | | 2,358,000 | | | 579,837 | | | 35,186,195 |
| | FY22 | | | 1,200,000 | | | — | | | 900,000 | | | 381,735 | | | 2,481,735 | ||
| | FY21 | | | 1,200,000 | | | 10,106,250 | | | 900,000 | | | 244,088 | | | 12,450,338 | ||
Mario Marte Former Chief Financial Officer | | | FY23 | | | 320,385 | | | — | | | — | | | 5,498 | | | 325,883 |
| | FY22 | | | 595,000 | | | — | | | 446,250 | | | 11,850 | | | 1,053,100 | ||
| | FY21 | | | 595,000 | | | 2,425,500 | | | 446,250 | | | 7,461 | | | 3,474,211 | ||
Stacy Bowman Former Chief Financial Officer and Current Chief Accounting Officer | | | FY23 | | | 400,000 | | | 1,753,183 | | | 393,000 | | | 9,248 | | | 2,555,431 |
Satish Mehta Chief Technology Officer | | | FY23 | | | 475,000 | | | 10,556,862 | | | 622,250 | | | 8,532 | | | 11,662,644 |
| | FY22 | | | 475,000 | | | — | | | 356,250 | | | 9,150 | | | 840,400 | ||
| | FY21 | | | 475,000 | | | 1,617,000 | | | 356,250 | | | 8,700 | | | 2,456,950 | ||
Susan Helfrick Former General Counsel & Secretary | | | FY23 | | | 193,846 | | | — | | | — | | | 3,825 | | | 197,671 |
| | FY22 | | | 450,000 | | | — | | | 337,500 | | | 9,150 | | | 796,650 | ||
| | FY21 | | | 450,000 | | | — | | | 337,500 | | | 8,585 | | | 796,085 | ||
Michael Morant Former General Counsel & Secretary | | | FY23 | | | 247,054 | | | 4,114,800 | | | — | | | 4,486 | | | 4,366,340 |
(1) | These amounts reflect the actual salary earned by each NEO during fiscal years 2021, 2022, and 2023. |
(2) | These amounts reflect the aggregate grant date fair value of the RSUs, as computed in accordance with ASC 718. For a discussion of the assumptions used in the calculation of the grant date fair value, refer to Part II, Item 8 “Financial Statements and Supplementary Data–Note 11 – Share-Based Compensation” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2024. |
(3) | For Fiscal Year 2023, these amounts reflect payouts for performance under our 2023 STI program. For additional information regarding these amounts refer to Annual Short-Term Incentive in the Elements of NEO Compensation section above. |
(4) | The amounts disclosed for Fiscal Year 2023 reflect the following for each NEO: For Mr. Singh, $4,089 of Company matching contributions made to his account under the 401(k) Plan and $545,344 for the value of certain personal security-related services, which included home security, security employees (including meals and incidentals for the security employees), and certain other security-related services (such as threat and risk monitoring), and $30,404 for two automobiles. For Mr. Marte, $5,498 of Company matching contributions made to his account under the 401(k) Plan. For Ms. Bowman, $9,248 of Company matching contributions made to her account under the 401(k) Plan. For Mr. Mehta, $8,532 of Company matching contributions made to his account under the 401(k) Plan. For Ms. Helfrick, $3,825 of Company matching contributions made to her account under the 401(k) Plan. For Mr. Morant, $4,486 of Company matching contributions made to his account under the 401(k) Plan. A portion of the Company 401(k) match made to each of the NEOs during Fiscal Year 2023 was refunded in March 2024 due to the 401(k) Plan failing nondiscrimination testing, resulting in the Company matching contributions previously described. |
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2023 Grants of Plan-Based Awards
The following table provides certain information with respect to grants of plan-based awards to our NEOs during Fiscal Year 2023.
Name | | | | | Estimated Future Payouts Under Non- Equity Incentive Plan Awards(1) | | | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | | | All Other Stock Awards: Number of Shares of Stock or Units(3) | | | Grant Date Fair Value of Stock Awards(4) | |||||||||||||
| | Grant Date | | | Threshold ($) | | | Target ($) | | | Maximum ($) | | | Threshold (#) | | | Target (#) | | | Maximum (#) | | | (#) | | | ($) | ||
Sumit Singh | | | — | | | $450,000 | | | $1,800,000 | | | $3,600,000 | | | — | | | — | | | — | | | — | | | — |
| | 1/18/2024 | | | — | | | — | | | — | | | — | | | — | | | — | | | 268,078 | | | $5,168,544 | ||
| | 1/18/2024 | | | — | | | — | | | — | | | 26,808 | | | 268,078 | | | 536,156 | | | — | | | $5,168,544 | ||
| | 1/18/2024 | | | — | | | — | | | — | | | — | | | — | | | — | | | 1,074,236 | | | $20,711,270 | ||
Mario Marte | | | — | | | $148,750 | | | $595,000 | | | $1,190,000 | | | — | | | — | | | — | | | — | | | — |
Stacy Bowman | | | — | | | $75,000 | | | $300,000 | | | $600,000 | | | — | | | — | | | — | | | — | | | — |
| | 4/6/2023 | | | — | | | — | | | — | | | — | | | — | | | — | | | 10,453 | | | $397,528 | ||
| | 4/6/2023 | | | — | | | — | | | — | | | 348 | | | 3,484 | | | 6,968 | | | — | | | $132,497 | ||
| | 4/6/2023 | | | — | | | — | | | — | | | — | | | — | | | — | | | 32,163 | | | $1,223,158 | ||
Satish Mehta | | | — | | | $118,750 | | | $475,000 | | | $950,000 | | | — | | | — | | | — | | | — | | | — |
| | 4/6/2023 | | | — | | | — | | | — | | | — | | | — | | | — | | | 54,109 | | | $1,905,178 | ||
| | 4/6/2023 | | | — | | | — | | | — | | | 5,411 | | | 54,109 | | | 108,218 | | | — | | | $1,905,178 | ||
| | 4/6/2023 | | | — | | | — | | | — | | | — | | | — | | | — | | | 169,097 | | | $5,953,905 | ||
| | 1/18/2024 | | | — | | | — | | | — | | | — | | | — | | | — | | | 41,110 | | | $792,601 | ||
Susan Helfrick | | | — | | | $112,500 | | | $450,000 | | | $900,000 | | | — | | | — | | | — | | | — | | | — |
Michael Morant | | | — | | | $105,033 | | | $420,131 | | | $840,262 | | | — | | | — | | | — | | | — | | | — |
| | 4/6/2023 | | | — | | | — | | | — | | | — | | | — | | | — | | | 4,020 | | | $152,881 | ||
| | 4/6/2023 | | | — | | | — | | | — | | | 229 | | | 2,288 | | | 4,576 | | | — | | | $87,013 | ||
| | 4/6/2023 | | | — | | | — | | | — | | | — | | | — | | | — | | | 6,865 | | | $261,076 | ||
| | 7/5/2023 | | | — | | | — | | | — | | | — | | | — | | | — | | | 95,604 | | | $3,613,830 | ||
(1) | These amounts reflect the threshold, target, and maximum payouts under our 2023 STI program. For amounts actually earned by each NEO pursuant to our STI program for Fiscal Year 2023, refer to the Non-Equity Incentive Plan Compensation column in the Summary Compensation Table above. The amounts are based on a percentage of expected eligible earnings at the beginning of Fiscal Year 2023 or, in the case of Ms. Bowman and Mr. Morant, when the individual became a NEO. Mr. Marte, Ms. Helfrick, and Mr. Morant did not receive a STI payment in Fiscal Year 2023 because of their departures during Fiscal Year 2023. For additional information regarding these amounts, refer to Annual Short-Term Incentive in the Elements of NEO Compensation section above. |
(2) | These amounts reflect the threshold, target, and maximum payouts of Performance RSUs under our LTI plan, depending on whether specific performance goals are achieved. Earned awards can range from 0% to 200% of the target grant. For additional information regarding these amounts, refer to Long Term Equity Incentives in the Elements of NEO Compensation section above. |
(3) | These amounts reflect the Service RSUs granted in Fiscal Year 2023. |
(4) | These amounts reflect the aggregate grant date fair value of the RSUs and the PRSUs, as computed in accordance with ASC 718. For Ms. Bowman and for those awards for Mr. Morant granted on April 6, 2023, these amounts are computed using the fair value as of June 26, 2023 as the ASC 718 conditions were satisfied on that date. For a discussion of the assumptions used in the calculation of the grant date fair value, refer to Part II, Item 8 “Financial Statements and Supplementary Data–Note 11 – Share-Based Compensation” of our Annual Report on Form 10-K for the fiscal year ended January 28, 2024. |
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Outstanding Equity Awards at 2023 Fiscal Year-End
The following table provides certain information with respect to outstanding equity awards as of January 28, 2024:
Name | | | Stock Awards | |||||||||
| | Number of Shares or Units of Stock That Have Not Vested (#)(1) | | | Market Value of Shares of Units of Stock That Have Not Vested ($)(2) | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(3) | | | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(2) | ||
Sumit Singh | | | 1,342,314(4) | | | $36,205,348 | | | 268,078(5) | | | $12,183,450 |
Mario Marte | | | 0 | | | $— | | | 0 | | | $— |
Stacy Bowman | | | 54,236(6) | | | $870,491 | | | 3,484(7) | | | $158,393 |
Satish Mehta | | | 264,316(8) | | | $7,053,913 | | | 54,109(9) | | | $2,459,109 |
Susan Helfrick | | | 0 | | | $— | | | 0 | | | $— |
Michael Morant | | | 0 | | | $— | | | 0 | | | $— |
(1) | These amounts reflect (i) Performance RSUs that have met the Performance Condition and are subject to the Service Condition, and (ii) Service RSUs, each as described in the Long-Term Equity Incentives in the Elements of NEO Compensation section above. |
(2) | These amounts reflect the closing price of our Class A common stock on the NYSE on January 26, 2024 (the last trading day of Fiscal Year 2023), which was $19.38. |
(3) | These amounts reflect Performance RSUs as described in the Long-Term Equity Incentives in the Elements of NEO Compensation section above. |
(4) | Consists of (i) 1,074,236 Service RSUs that vest 41% on February 1, 2024, 11% on May 1, 2024, 11% on December 1, 2024, 34% on February 1, 2025, and 3% on February 1, 2026, (ii) 268,078 Service RSUs that vest 25% on February 1, 2024, and 12.5% on each six-month anniversary thereafter, each subject to Mr. Singh’s continued employment through the applicable vesting date. |
(5) | Consists of 268,078 Performance RSUs that vest on February 1, 2026 contingent on the achievement of the Performance Condition and Mr. Singh’s continued employment through the vesting date. |
(6) | Consists of (i) 778 Performance RSUs that vest on March 1, 2024, (ii) 2,267 Performance RSUs that vest on February 1, 2025, (iii) 32,163 Service RSUs that vest on April 1, 2024, (iv) 524 Service RSUs that vest on March 1, 2024, (v) 2,383 Service RSUs that vest 50% on March 1, 2024, 25% on September 1, 2024, and 25% on March 1, 2025, (vi) 5,668 Service RSUs that vest 20% on February 1, 2024 and on each six-month anniversary thereafter, (vii) 10,453 Service RSUs that vest 25% on February 1, 2024 and 12.5% on each six-month anniversary thereafter, each subject to Ms. Bowman’s continued employment through the applicable vesting date. |
(7) | Consists of 3,484 Performance RSUs that vest on February 1, 2026 contingent on the achievement of the Performance Condition and Ms. Bowman’s continued employment through the vesting date. |
(8) | Consists of (i) 41,110 Service RSUs that vest 50% on May 1, 2024 and 50% on December 1, 2024, (ii) 54,109 Service RSUs that vest 25% on February 1, 2024 and 12.5% on each six-month anniversary thereafter, and (iii) 169,097 Service RSUs that vest 52% on February 1, 2024, 44% on February 1, 2025 , and 4% on February 1, 2026, each subject to Mr. Mehta’s continued employment through the applicable vesting date. |
(9) | Consists of 54,109 Performance RSUs that vest on February 1, 2026 contingent on the achievement of the Performance Condition and Mr. Mehta’s continued employment through the vesting date. |
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2023 Option Exercises and Stock Vested
The following table provides certain information with respect to shares acquired by our NEOs upon the vesting of stock awards in Fiscal Year 2023:
| | | Stock Awards | ||||
Name | | | Number of Shares Acquired on Vesting (#)(1) | | | Value Realized on Vesting ($)(2) |
Sumit Singh | | | 435,917 | | | 17,266,032 |
Mario Marte | | | 194,240 | | | 7,694,589 |
Stacy Bowman | | | 77,477 | | | 3,043,930 |
Satish Mehta | | | 144,430 | | | 5,721,517 |
Susan Helfrick | | | 89,620 | | | 3,550,744 |
Michael Morant | | | 70,077 | | | 2,061,237 |
(1) | These amounts reflect Performance RSUs and Service RSUs as described in the Long-Term Equity Incentives in the Elements of NEO Compensation section above. |
(2) | The value realized upon vesting has been calculated by multiplying the gross number of shares acquired on vesting by the closing price of our Class A common stock on the NYSE on the vesting date. Therefore, the amounts shown in this column do not represent the actual amounts paid to or realized by the NEO during Fiscal Year 2023. |
2023 Non-Qualified Deferred Compensation
The following table provides certain information with respect to contributions and earnings credited to the accounts of our NEOs under the non-qualified deferred compensation plan in Fiscal Year 2023:
Name | | | Executive Contributions in Last FY ($)(1) | | | Aggregate Earnings in Last FY ($)(2) | | | Aggregate Balance at Last FYE ($) |
Sumit Singh | | | 0 | | | 0 | | | 0 |
Mario Marte | | | 0 | | | 0 | | | 0 |
Stacy Bowman | | | 0 | | | 0 | | | 0 |
Satish Mehta | | | 228,366 | | | 18,582 | | | 256,152 |
Susan Helfrick | | | 0 | | | 0 | | | 0 |
Michael Morant | | | 0 | | | 0 | | | 0 |
(1) | These amounts are included in the Fiscal Year 2023 compensation in the “Salary” column of the Summary Compensation Table. |
(2) | None of these amounts are included in the Summary Compensation Table because earnings were not above-market or preferential, as credited earnings on NQDCP contributions are tied to changes in the value of publicly traded investment funds. |
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Equity Compensation Plan Information
The following table provides information as of January 28, 2024, with respect to the shares of our Class A common stock that may be issued under our 2022 Plan:
| | | Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants, and Rights | | | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding securities reflected in column (a)) | |
Plan Category | | | (a) | | | (b) | | | (c) |
Equity Compensation Plans Approved by Security Holders(1) | | | 14,961,377(2) | | | N/A(3) | | | 26,033,407 |
Equity Compensation Plans Not Approved by Security Holders | | | N/A | | | N/A | | | N/A |
Total | | | 14,961,377 | | | N/A | | | 26,033,407 |
(1) | Includes issuances under the 2022 Plan. |
(2) | This amount reflects Performance RSUs (at max) and Service RSUs issued under the 2022 Plan. |
(3) | As of fiscal year ended January 28, 2024, no options or other exercisable awards were outstanding under the 2022 Plan. |
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Mr. Singh is eligible for severance payments and benefits described in this section pursuant to his employment agreement. Mr. Singh entered into his employment agreement in May 2018, which was amended and restated in June 2019. Mr. Marte and Ms. Helfrick were each eligible for severance payments and benefits pursuant to their employment agreements and entered into their respective employment agreements in June 2019. Mr. Marte and Ms. Helfrick resigned from the Company in Fiscal Year 2023 and did not receive any severance payments or benefits related to their employment agreements. As of the end of Fiscal Year 2023, each of Ms. Bowman, Mr. Mehta, and Mr. Morant did not have an employment agreement. All severance payments are contingent upon the executive’s timely execution and non-revocation of a general release of claims.
Involuntary Termination of Employment Not Involving a Change in Control
In the event Mr. Singh’s employment is terminated by us without “Cause” or by him for “Good Reason” (each as defined in his employment agreement) (each, a “qualifying termination”) not within three (3) months before or twelve (12) months following a “Change in Control” (as defined in the respective employment agreement), Mr. Singh is entitled to the following (collectively, the “Termination Entitlements”):
• | all accrued but unpaid base salary through the date of termination, including any unpaid or unreimbursed expenses, accrued vacation that the executive has not taken, and any benefits provided under the Company’s employee benefit plans upon a termination of employment; |
• | Twelve (12) months of base salary payable in equal monthly installments over the twelve (12) month period following termination; |
• | an annual bonus earned for any fiscal year completed prior to the date of termination that remains unpaid as of the date of termination, payable at the same time annual bonuses are paid to executives generally for the relevant year; |
• | a pro-rated annual bonus for the year of termination based on actual performance, payable at the same time annual bonuses are paid to executives generally for the relevant year; |
• | an amount equal to eighteen (18) months of premiums for continuation coverage under our group health plans payable in a lump sum payment within thirty (30) days of termination; |
• | 100% of the Target Bonus (as defined in Mr. Singh’s employment agreement), payable in equal monthly installments over the twelve (12) month period following termination; and |
• | nine (9) months of service credit with respect to any time- or service-based equity incentive awards (or if greater, service credit for 40% of the awards). |
Mr. Marte and Ms. Helfrick’s employment agreements included the Termination Entitlements but only in the event their employment was terminated by us without “Cause”(as defined in each of their employment agreements). Mr. Marte and Ms. Helfrick each resigned from their position with the Company and the Termination Entitlements were not provided.
Involuntary Termination of Employment Involving a Change in Control
In the event Mr. Singh experiences a qualifying termination within three (3) months before or twelve (12) months following a “Change in Control,” Mr. Singh is entitled to the following:
• | all accrued but unpaid base salary through the date of termination, including any unpaid or unreimbursed expenses, accrued vacation that the executive has not taken, and any benefits provided under the Company’s employee benefit plans upon a termination of employment; |
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• | twenty-four (24) months of base salary and 200% of the Target Bonus (as defined in Mr. Singh’s employment agreement), both generally payable in a lump sum within thirty (30) days following termination; |
• | an annual bonus earned for any fiscal year completed prior to the date of termination that remains unpaid as of the date of termination, payable at the same time annual bonuses are paid to executives generally for the relevant year; |
• | a pro-rated annual bonus for the year of termination based on actual performance, payable at the same time annual bonuses are paid to executives generally for the relevant year; |
• | an amount equal to twenty-four (24) months of premiums for continuation coverage under our group health plans payable in a lump sum within thirty (30) days of termination; and |
• | nine (9) months of service credit with respect to any time- or service-based equity incentive awards (or if greater, service credit for 40% of the awards). |
Mr. Marte’s and Ms. Helfrick’s employment agreements included the following entitlements if either had experienced a qualifying termination within three (3) months before or twelve (12) months following a “Change in Control”:
• | all accrued but unpaid base salary through the date of termination, including any unpaid or unreimbursed expenses, accrued vacation that the executive has not taken, and any benefits provided under the Company’s employee benefit plans upon a termination of employment; |
• | eighteen (18) months of base salary and 100% of the Target Bonus (as defined in their respective employment agreements), both generally payable in a lump sum within thirty (30) days following termination; |
• | an amount equal to eighteen (18) months of premiums for continuation coverage under our group health plans payable in a lump sum payment within thirty (30) days of termination; and |
• | any earned, but unpaid, annual bonus for the year preceding termination. |
Death or Disability and Restrictive Covenants
In the event Mr. Singh’s employment is terminated due to his death or “Disability” (as defined in his employment agreement), Mr. Singh is entitled to twelve (12) months of service credit with respect to any time- or service-based equity incentive awards (or if greater, service credit for 40% of the awards), in addition to all accrued but unpaid base salary through the date of termination, including any unpaid or unreimbursed expenses, accrued vacation that he has not taken, and any benefits provided under the Company’s employee benefit plans upon a termination of employment.
Mr. Singh’s, Mr. Marte’s, and Ms. Helfrick’s employment agreements also subject each of them to the following restrictive covenants: (i) during the “Restricted Period” (as defined in the respective employment agreement), a non-competition covenant, customer non-solicitation covenant, and an employee non-solicitation covenant and (ii) perpetual confidentiality and mutual non-disparagement covenants.
Each employment agreement includes a Code Section 280G “best-net cutback” provision that provides in the event any payment or benefit provided under the employment agreement or any other arrangement with our Company or its affiliates constitutes “parachute payments” within the meaning of Section 280G of the Code, then such payments and/or benefits will either be (i) provided to the executive in full or (ii) be reduced to the extent necessary to avoid the excise tax imposed by Section 4999 of the Code, whichever results in the executive receiving a greater amount on an after-tax basis.
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Potential Payments Upon Termination or Change in Control Table
The following table discloses estimates of the potential payments and benefits, other than those available generally on a nondiscriminatory basis to all salaried employees, provided upon a Change in Control or termination of employment for each of the NEOs, calculated as if the Change in Control and/or termination of employment occurred on January 28, 2024. Mr. Marte and Ms. Helfrick are not included because neither received any payments or benefits following their departure from the Company during Fiscal Year 2023. Mr. Morant did not receive any payments or benefits, other than the acceleration of 30,593 RSUs which vested on August 25, 2023. The value of these RSUs was $788,076.
Name | | | Involuntary Termination (not for Cause; Good Reason w/ no Change in Control ($)(1) | | | Change in Control no Termination ($)(2) | | | Involuntary Termination (not for Cause) in Connection with a Change in Control ($)(3) | | | Death or Disability ($)(4) |
Sumit Singh | | | | | | | | | ||||
Cash Payments | | | 2,411,853 | | | 0 | | | 4,815,804 | | | 0 |
Accelerated Equity Vesting | | | 12,773,920 | | | 31,209,397 | | | 31,209,397 | | | 15,063,977 |
Total | | | 15,185,773 | | | 31,209,397 | | | 36,025,201 | | | 15,063,977 |
Stacy Bowman | | | | | | | | | ||||
Cash Payments | | | 0 | | | 0 | | | 0 | | | 0 |
Accelerated Equity Vesting | | | 0 | | | 1,118,614 | | | 1,118,614 | | | 0 |
Total | | | 0 | | | 1,118,614 | | | 1,118,614 | | | 0 |
Satish Mehta | | | | | | | | | ||||
Cash Payments | | | 0 | | | 0 | | | 0 | | | 0 |
Accelerated Equity Vesting | | | 0 | | | 6,171,077 | | | 6,171,077 | | | 0 |
Total | | | 0 | | | 6,171,077 | | | 6,171,077 | | | 0 |
All equity amounts in the above table reflect full vesting and a closing stock price of $19.38 as of January 26, 2024 (the last trading day of Fiscal Year 2023).
(1) | For Mr. Singh, this amount includes (i) cash payments and (ii) partial accelerated vesting of the Service Condition for Performance RSUs, both as outlined in Involuntary Termination of Employment Not Involving a Change in Control in the Employment Agreements and Potential Payments Upon Termination or Change in Control section above. |
(2) | These amounts reflect accelerated vesting of the Service Condition upon a Change in Control for each NEO’s respective Performance RSUs as described in Long-Term Equity Incentives in the Elements of NEO Compensation section above. These amounts are single-trigger. |
(3) | For Mr. Singh, this amount includes (i) double-trigger cash payments for termination of employment without cause or for good reason within three (3) months before or twelve (12) months following a “Change in Control,” as described in Involuntary Termination of Employment Not Involving a Change in Control in the Employment Agreements and Potential Payments Upon Termination or Change in Control section above, and (ii) single-trigger accelerated vesting of the Service Condition upon a Change in Control for Performance RSUs as described in Long-Term Equity Incentives in the Elements of NEO Compensation section above. For Ms. Bowman and Mr. Mehta, this amount includes single-trigger accelerated vesting of the Service Condition upon a Change in Control for Performance RSUs as described in Long-Term Equity Incentives in the Elements of NEO Compensation section above. |
(4) | These amounts reflect partial accelerated vesting of the Service Condition for Mr. Singh’s Performance RSUs as described in Death or Disability and Restrictive Covenants in the Employment Agreements and Potential Payments Upon Termination or Change in Control section above. |
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The Company is providing the information below to comply with Item 402(u) of Regulation S-K.
Ratio
For Fiscal Year 2023, the annual total compensation of the employee identified as the median Chewy employee (excluding the CEO) (the “Median Employee”) was $37,606, and the annual total compensation of the CEO was $35,186,195. Based on this information, for Fiscal Year 2023 the ratio of the annual total compensation of the CEO to the Median Employee was 936:1.
Methodology
The following information was used to identify the Median Employee:
• | As of December 31, 2023, there were 18,283 Chewy employees. |
• | To determine the Median Employee, Chewy used W-2 earnings (base pay, cash bonuses, overtime, etc., as applicable) reflected in payroll records of all employees in the United States for the calendar year ended December 31, 2023, as its measure of compensation. In making this determination, Chewy annualized the base pay or monthly wages and annual bonus amounts paid in respect of calendar year 2023 for those full-time and part-time employees who did not work for the entire calendar year. |
• | The Median Employee’s annual total compensation was calculated based on the rules for determining the annual total compensation of our NEOs, which includes base salary, bonus, non-equity incentive plan compensation, and other elements of pay, such as 401(k) employer match, stock awards, or overtime, as applicable. The pay ratio disclosed is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. |
The Median Employee is a forklift operator.
Supplemental CEO Pay Ratio
In order to give additional context to the Fiscal Year 2023 CEO pay ratio reported above and our Chief Executive Officer's annual total compensation for Fiscal Year 2023, we are providing a supplemental pay ratio that compares Mr. Singh’s annual total compensation for Fiscal Year 2023, excluding the Fiscal Year 2023 award granted to him under Chewy’s long-term incentive plan, to the Median Employee’s annual total compensation. For a discussion about this award, refer to the Long Term Equity Incentives in the Elements of NEO Compensation section above. After excluding the value of this award as reported in the Summary Compensation Table, Mr. Singh’s annual total compensation was $4,137,837. The resulting supplemental pay ratio is 110:1.
Evaluating the CEO Pay Ratio Disclosure
Similar to other organizations with sizable distribution and customer service workforces, as well as the flexibility allowed by the SEC in calculating these ratios, Chewy’s ratios may not be comparable to ratios of other companies.
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As required by Section 14A of the Exchange Act, we are providing stockholders with the opportunity to approve, on an advisory basis, the compensation of our NEOs as described in Compensation Discussion and Analysis and the 2023 Summary Compensation Table. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and our executive compensation philosophy and practices, as discussed in this proxy statement. As discussed in those disclosures, our compensation programs are designed to align total executive compensation with Company performance, while enabling us to attract, retain, and motivate executives who can achieve sustained long-term growth and strong financial performance for our stockholders. Our Compensation Committee continually reviews the compensation program for our NEOs to ensure it achieves the desired goals of aligning our executive compensation structure with our stockholder interests.
Although the vote is nonbinding, our Board and Compensation Committee value the opinions of our stockholders and will consider the outcome of the vote when making future compensation decisions for NEOs. The Company’s current policy is to provide stockholders with an opportunity to approve the compensation of our NEOs each year at the annual meeting of stockholders. It is expected that the next such vote will occur at the 2024 Annual Meeting.
The approval, on an advisory basis, of the compensation of our NEOs requires the affirmative vote of a majority of the voting power of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon (meaning that, of the shares represented at the meeting and entitled to vote, a majority of them must vote “For” the proposal for it to be approved). You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal, and, thus, will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.
FOR ✔ | | | OUR BOARD, UPON RECOMMENDATION OF OUR COMPENSATION COMMITTEE, RECOMMENDS THAT STOCKHOLDERS VOTE “FOR,” ON AN ADVISORY BASIS, THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS AS DESCRIBED IN THIS PROXY STATEMENT. |
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Pay Versus Performance
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(v) of Regulation S-K, we are providing the following pay versus performance table to illustrate the relationship between executive compensation actually paid and certain of the Company’s financial performance measures. For information regarding the Company’s pay-for-performance philosophy and how the Company aligns executive compensation with its performance, refer to the Compensation Discussion and Analysis section above.
| | | | | | | | | | | Value of Initial Fixed $100 Investment Based On: | | | | | ||||||||||
Fiscal Year (a) | | | Summary Compensation Table (“SCT”) Total for Principal Executive Officer (“PEO”) (b)1 | | | Compensation Actually Paid (“CAP”) to PEO (c)2 | | | Average SCT Total for non-PEO NEOs (d)1 | | | Average CAP to non-PEO NEOs (e)2 | | | Total Shareholder Return (“TSR”) (f)3 | | | Peer Group TSR (g)4 | | | Net Income (Loss)7 (in thousands) (h)5 | | | Net Sales7 (in thousands) (i)6 |
2023 | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ |
2022 | | | $ | | | $( | | | $ | | | $( | | | $ | | | $ | | | $ | | | $ |
2021 | | | $ | | | $( | | | $ | | | $( | | | $ | | | $ | | | $( | | | $ |
2020 | | | $ | | | $ | | | $ | | | $ | | | $ | | | $ | | | $( | | | $ |
(1) | Included in column (b) are the total compensation amounts reported in the Summary Compensation Table for |
(2) | Included in columns (c) and (e) are CAP and average CAP to the PEO and the non-PEO NEOs, respectively, for each of the fiscal years presented. To calculate CAP and average CAP, amounts in columns (b) and (d) are adjusted in accordance with Item 402(v) of Regulation S-K requirements and are presented in the tables below. These amounts do not reflect the actual amount of compensation earned by or paid to the PEO and our non-PEO NEOs for each of the fiscal years presented. |
PEO SCT to CAP Reconciliation | ||||||||||||
| | | Fiscal Year | ||||||||||
| | | 2023 | | | 2022 | | | 2021 | | | 2020 | |
SCT Total | | | $ | | | $ | | | $ | | | $ |
Less value of Stock Awards reported in SCT | | | ( | | | | | ( | | | ||
Plus year-end fair value of outstanding and unvested equity awards granted in the year | | | | | | | | | ||||
(Less) plus year over year change in fair value of outstanding and unvested equity awards granted in prior years | | | | | | | ( | | | |||
(Less) plus year over year change in fair value of equity awards granted in prior years that vested in the year | | | ( | | | ( | | | ( | | | |
CAP Total | | | $ | | | $( | | | $( | | | $ |
50 | | | | | |
Average of Non-PEO NEOs SCT to CAP Reconciliation | ||||||||||||
| | | Fiscal Year | ||||||||||
| | | 2023 | | | 2022 | | | 2021 | | | 2020 | |
SCT Total | | | $ | | | $ | | | $ | | | $ |
Less value of Stock Awards reported in SCT | | | ( | | | | | ( | | | ||
Plus year-end fair value of outstanding and unvested equity awards granted in the year | | | | | | | | | ||||
(Less) plus year over year change in fair value of outstanding and unvested equity awards granted in prior years | | | ( | | | | | ( | | | ||
(Less) plus year over year change in fair value of equity awards granted in prior years that vested in the year | | | ( | | | ( | | | ( | | | |
Plus fair value as of vesting date of equity awards granted and vested in the year | | | | | | | | | ||||
Less prior year-end fair value for any equity awards forfeited in the year | | | ( | | | | | | | |||
CAP Total | | | $ | | | $( | | | $( | | | $ |
(3) | Based on an initial fixed investment of $100 on January 29, 2021, the last business day of our 2020 fiscal year. |
(4) | Represents the Dow Jones Internet Commerce Index, which we consider to be our peer group under Regulation S-K Item 201(e), as presented in our 2023 Annual Report. Based on an initial fixed investment of $100 on January 29, 2021, the last business day of our 2020 fiscal year. TSR is weighted according to each peer company’s stock market capitalization at the beginning of each period for which a return is indicated. |
(5) | Represents our net income (loss) amounts for each of the years presented as reported in the respective annual report on Form 10-K. |
(6) | We have selected |
(7) | Consistent with the Company’s Annual Report on Form 10-K for Fiscal Year 2023, the Company has updated historical comparative periods to reflect the operations of Chewy Pharmacy KY beginning with the Company’s 2021 Fiscal Year. Any historical comparatives prior to Fiscal Year 2021 are consistent with previously reported financial information. |
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Pay Versus Performance Comparative Disclosure
The following graphs illustrate the relationship between CAP as disclosed in the Pay Versus Performance table and (i) the Company’s cumulative TSR, (ii) the peer group’s cumulative TSR, (iii) the Company’s net income (loss), and (iv) net sales. CAP reflects adjusted values to unvested and vested equity awards during the years shown in the table based on year-end stock prices, grant and vesting date fair values, and projected performance modifiers, but does not reflect actual amounts paid out for those awards. CAP generally fluctuates due to stock price volatility and varying levels of projected and actual achievement of performance goals.
Compensation Actually Paid versus Company TSR and Peer Group TSR
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Tabular List of Performance Measures
The following table lists our most important performance measures used by us to link CAP of our NEOs to the Company’s performance for Fiscal Year 2023. For more information, refer to “Named Executive Officer Compensation – Compensation Discussion and Analysis.” We are providing this list in accordance with Item 402(v) of Regulation S-K to provide information on performance measures used by the Compensation Committee to determine NEO compensation, as more fully described in “Named Executive Officer Compensation – Compensation Discussion and Analysis.”
Most Important Performance Measures |
(1) | Adjusted EBITDA margin and free cash flow are non-GAAP financial measures. For a reconciliation of non-GAAP to GAAP financial measures refer to “Reconciliation of Non-GAAP Financial Measures” in Appendix A. |
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The use of equity-based awards under the 2022 Plan has been a key component of our compensation program since its adoption. The ability to grant equity-based compensation awards is critical to attract, retain and motivate our officers, key employees, consultants and directors and to continue to align the interests of participants to those of the Company’s stockholders.
The Board has determined that approval of the 2024 Plan is necessary to allow us to continue to make our customary annual long-term incentive awards and other equity awards going forward. Accordingly, the Board adopted the 2024 Plan, to be effective upon stockholder approval, in order to increase the number of shares of our common stock available for future grants, as described below. At the Annual Meeting, our stockholders will be asked to approve the 2024 Plan. If approved by our stockholders, up to 83,100,000 shares of our Class A common stock, par value $0.01 per share, (the “Shares”) will be available for awards under the 2024 Plan (subject to the share recycling and adjustment provisions of the 2024 Plan described below). This number includes 80,000,000 Shares newly reserved for issuance under the 2024 Plan, plus an additional number of Shares remaining available for new awards under the 2022 Plan as of the effective date of the 2024 Plan (after counting for outstanding performance-based awards at the maximum payout level), not to exceed 3,100,000 Shares. If the proposed 2024 Plan is not approved by our stockholders, then the 2022 Plan will remain in full force and effect. Whether the 2024 Plan is approved by our stockholders or not, each award granted under the 2022 Plan will continue to be subject to the terms and provisions applicable to such award under the applicable award agreement and the 2022 Plan.
Background and Purpose for Adopting the 2024 Plan
The 2022 Plan authorizes awards to be granted covering up to 41,200,000 Shares, subject to adjustment in accordance with the terms of the 2022 Plan upon certain changes in capitalization and similar events. As of May 21, 2024, there were 3,323,276 Shares remaining available for new awards under the 2022 Plan (after counting outstanding performance-based awards at the maximum payout level).
If the 2024 Plan is approved by our stockholders, up to 83,100,000 Shares will be authorized for issuance thereunder, subject to the share recycling and adjustment provisions of the 2024 Plan. This number includes 80,000,000 Shares newly reserved for issuance under the 2024 Plan, plus an additional number of Shares remaining available for new awards under the 2022 Plan as of the effective date of the 2024 Plan (after counting for outstanding performance-based awards at the maximum payout level), not to exceed 3,100,000 Shares. In the event that our stockholders do not approve the 2024 Plan at the Annual Meeting, awards may continue to be granted under the 2022 Plan.
For additional information regarding equity-based awards previously granted by us under the 2022 Plan, please see Note 8 to our consolidated financial statements filed with our Form 10-K for the fiscal year ended January 28, 2024. As of May 21, 2024, there were 3,323,276 Shares outstanding under the 2022 Plan. The closing price per Share on the New York Stock Exchange on May 21, 2024 was $16.70.
The proposed 2024 Plan is included as Appendix B hereto. If the 2024 Plan is approved by stockholders, we intend to file, pursuant to the Securities Act, a registration statement on Form S-8 to register the Shares available for issuance under the 2024 Plan.
Summary of the 2024 Plan
A summary of the material terms of the 2024 Plan is set forth below. The following summary does not purport to be a complete description of all the provisions of the 2024 Plan and is qualified in its entirety by reference to the 2024 Plan included as Appendix B hereto, which is incorporated by reference into this Proposal No. 4. The purpose of the 2024 Plan is to promote our interests and those of our stockholders by providing participants with cash and equity-based incentive awards to encourage them
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to deliver outcomes and/or continue in the service of the Company. The 2024 Plan provides for potential grants of: (i) options, including incentive stock options and non-qualified stock options, (ii) RSUs, (iii) other share-based awards, including share appreciation rights, phantom stock, restricted shares, performance shares, deferred share units, and share-denominated performance units, (iv) cash awards, (v) substitute awards, and (vi) dividend equivalents (together, the “Awards”).
Key features of the 2024 Plan include:
• | No new Awards will be granted under the 2022 Plan following the Annual Meeting if the 2024 Plan is approved by our stockholders; |
• | No automatic Award grants are promised to any eligible individual; |
• | Certain Shares subject to Awards under the 2024 Plan that are not delivered will again be available for issuance pursuant to new Awards under the 2024 Plan; however, if Shares are withheld to pay the exercise price of an option or base price of a share appreciation right or to satisfy any tax withholding requirement in connection with an option or share appreciation right, both the Shares issued (if any) and the Shares withheld will be deemed delivered; |
• | Awards assumed by a successor in connection with a change in control will not vest solely as a result of the change in control (unless specifically provided otherwise in an Award agreement); |
• | No gross-ups under Section 280G of the Code; |
• | No evergreen for the share reserve; |
• | A ten-year term; |
• | No (i) repricing of any option or share appreciation right, (ii) purchase of underwater options or share appreciation rights from a participant for value in excess of zero, in each case without the approval of the stockholders of Chewy or (iii) granting of any new option, share appreciation right, or other Award in substitution for, or upon the cancellation of, any previously granted option or share appreciation right that has the effect of reducing the exercise price thereof; |
• | Awards are subject to potential recoupment pursuant to any recoupment policy adopted by the Company; |
• | Awards are generally nontransferable; and |
• | Dividends and dividend equivalents are subject to restrictions and risk of forfeiture to the same extent as the Award with respect to which such dividends or dividend equivalents are accrued and will not be paid unless and until such Award has vested. |
Securities Offered
Subject to adjustment in the event of certain transactions or changes of capitalization in accordance with the 2024 Plan, a total of 80,000,000 Shares have been initially reserved for issuance pursuant to awards under the 2024 Plan, plus an additional amount, not to exceed 3,100,000 Shares, remaining available for new awards under the 2022 Plan as of the effective date of the 2024 Plan (after counting for outstanding performance-based awards at the maximum payout level). Out of such aggregate, the maximum number of Shares that may be covered by options that are designated as “incentive stock options” within the meaning of Section 422 of the Code may not exceed 83,100,000 Shares. If Shares are withheld to pay the exercise price of an option or base price of a share appreciation right or to satisfy any tax withholding requirement in connection with an option or share appreciation right, both the Shares issued (if any) and the Shares withheld will be deemed delivered for purposes of determining the number of Shares that are available for delivery under the 2024 Plan. Any Shares subject to an Award under the 2024 Plan or the 2022 Plan that expires or is canceled, forfeited, or terminated without issuance of the full number of Shares to which the Award related will again be available for issuance
56 | | | | | |
under 2024 Plan. Shares subject to an Award under the 2024 Plan or the 2022 Plan will again be made available for issuance or delivery under the 2024 Plan if such Shares are Shares covered by Awards of RSUs or other share-based Awards (other than options and share appreciation rights) that were withheld by the Company to satisfy any tax withholding obligation.
Administration
The 2024 Plan will be administered by a committee of the Board consisting of two or more persons, each of whom qualifies as a “non-employee director” (within the meaning of Rule 16b-3 promulgated under Section 16 of the Exchange Act), and as “independent” to the extent required by the NYSE or any security exchange on which the Shares are listed (the “Committee”). The Committee will have full discretionary authority to administer the 2024 Plan, including discretionary authority to interpret and construe any and all provisions of the 2024 Plan and any Award agreement thereunder, and to adopt, amend and rescind from time to time such rules and regulations for the administration of the 2024 Plan, including rules and regulations related to sub-plans established for the purpose of satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable foreign tax laws, as the Committee may deem necessary or appropriate. Decisions of the Committee will be final, binding and conclusive on all parties. The Committee may exercise all discretion granted to it under the 2024 Plan in a non-uniform manner among participants. Additionally, the Committee may delegate the administration of the 2024 Plan to one or more officers or employees of the Company, though, in no case will any such administrator be authorized (i) to take any action inconsistent with Section 409A of the Code with respect to any Award subject to such provision or (ii) to take any action inconsistent with applicable law.
Eligibility
Employees, consultants and non-employee directors of our Company and its affiliates are eligible to receive awards under the 2024 Plan. Eligible individuals to whom an Award is granted under the 2024 Plan are referred to as “Participants.” The basis for participation in the 2024 Plan, from among those eligible, is within the discretion of the Committee. As of May 21, 2024, the Company and its affiliates have approximately 4,356 employees, 0 consultants, and 11 non-employee directors eligible to participate in the 2024 Plan.
Non-Employee Director Compensation Limits
The sum of the grant date fair value of the Awards and the amount of any cash-based payments that may be granted to a Participant of the 2024 Plan who is eligible to participate in the 2024 Plan solely by virtue of service as a non-employee member of the Board during any calendar year may not exceed $1,000,000.
Types of Awards
Options. An option represents the right to purchase Shares at a fixed exercise price. We may grant options to eligible persons, except that incentive stock options may only be granted to individuals who are employees of the Company, in accordance with Section 422 of the Code. The exercise price of each option granted under the 2024 Plan will be stated in the option agreement and may vary; however, the exercise price per Share covered by any option will be not less than 100% of the fair market value of a Share on the date on which such option is granted, it being understood that the exercise price of an option that is a substitute award may be less than the fair market value per Share on the date such substitute award is assumed, provided that such substitution complies with applicable laws and regulations. The aggregate fair market value of Shares with respect to which “incentive stock options” (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year under the 2024 Plan and any other stock option plan of Chewy or any of its “subsidiaries” (within the meaning of Section 424 of the Code) may not exceed $100,000. Options may be exercised as the Committee determines, but not later than ten years from the date of grant. The Committee determines the methods and form of payment for the exercise price of an option and the methods and forms in which our Shares will be delivered to a Participant.
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No incentive stock option may be granted to an individual if, at the time of the proposed grant, such individual owns stock possessing more than 10% of the total combined “voting power” (within the meaning of Section 422 of the Code) of all classes of stock of Chewy or any of its “subsidiaries” (within the meaning of Section 424 of the Code), unless (i) the exercise price of such incentive stock option is at least 110% of the fair market value of a Share at the time such incentive stock option is granted and (ii) such incentive stock option is not exercisable after the expiration of five years from the date such incentive stock option is granted.
RSUs. A RSU is an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Committee to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions. The Committee may condition the grant or vesting of RSUs upon the attainment of specified performance goals or such other factors as the Committee may determine in its sole discretion. The Committee may determine that a grant of RSUs will provide a participant a right to receive dividend equivalents, which entitles the participant to receive the equivalent value (in cash or Shares) of dividends paid on Shares. Dividend equivalent rights will be credited to an account for the Participant, settled in cash or Shares, and subject to the same restrictions on transferability and forfeitability as the RSUs with respect to which the dividend equivalent rights are granted and subject to other terms and conditions as set forth in the applicable Award agreement.
Share Appreciation Rights. A share appreciation right is the right to receive an amount equal to the excess of the fair market value of one Share on the date of exercise over the grant price of the share appreciation right. The Committee has the discretion to determine other terms and conditions of a share appreciation right award.
Restricted Share Awards. A restricted share award is a grant of Shares subject to the restrictions on transferability and risk of forfeiture imposed by the Committee. Unless otherwise determined by the Committee and specified in the applicable Award agreement, the holder of a restricted share award has rights as a stockholder, including the right to vote the Shares subject to the restricted share award or to receive dividends on the Shares subject to the restricted share award during the restriction period. The Committee may determine on what terms and conditions the participant will be entitled to dividends payable on the shares of restricted shares; provided, however, that such dividends will be payable to the participant only, if, when and to the extent such underlying restricted shares vest.
Other Share-Based Awards. Other share-based awards are awards denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, the value of our Shares. Other share-based awards may be subject to performance-based and/or service-based conditions, be in the form of share appreciation rights, phantom stock, restricted share awards, restricted share units, performance shares, deferred share units or share-denominated performance units (other than RSUs). The Committee may from time to time grant other share-based awards in such amounts and on such terms as it may determine, subject to the terms and conditions set forth in the 2024 Plan.
Cash Awards. Cash awards are Awards payable in cash at such time or times and subject to the terms and conditions as determined by the Committee in its sole discretion. Cash awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions, and if subject to vesting conditions, the Committee may accelerate the vesting of such Awards at any time in its sole discretion.
Substitute Awards. A substitute award is an Award that results from the assumption of, or are in substitution for, outstanding awards previously granted by a company or other entity acquired, directly or indirectly, by Chewy or one of its subsidiaries or with which Chewy or one of its subsidiaries combines.
Certain Transactions
In the event of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of Shares, spin-off or similar corporate change or extraordinary cash dividend, the maximum aggregate number of Shares with respect to which the Committee may grant Awards, the number of
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Shares subject to Awards, the exercise price of any option or base price of any share appreciation right and the applicable performance targets or criteria will be equitably adjusted or substituted by the Committee to prevent enlargement or reduction in rights granted under the Award. In the event of any change in the number of Shares outstanding by reason of any other event or transaction, the Committee will, to the extent deemed appropriate by the Committee, make such adjustments to the type or number of Shares with respect to which Awards may be granted and/or to the number of Shares subject to Awards.
Dividends and Dividend Equivalent Rights
Any dividends or dividend equivalent rights granted with respect to an Award will be payable to the Participant only if, when and to the extent such underlying Award vests. Dividends and dividend equivalent rights granted with respect to Awards that do not vest will be forfeited.
Recoupment
Notwithstanding anything in the 2024 Plan or in any Award agreement to the contrary, the Company will be entitled to the extent required by (i) applicable law, (ii) the requirements of an exchange on which the Company’s Shares are listed for trading or (iii) any policy adopted by the Company, in each case, as in effect from time to time to recoup compensation of whatever kind paid by the Company at any time to a Participant under the 2024 Plan.
Plan Amendment and Termination
The Board may at any time suspend or discontinue the 2024 Plan or revise or amend it in any respect whatsoever; provided, however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires stockholder approval in order for any such revision or amendment to be effective, such revision or amendment will not be effective without such approval. The preceding sentence will not restrict the Committee’s ability to exercise its discretionary authority under the 2024 Plan, which discretion may be exercised without amendment to the 2024 Plan. No grants of Awards may be made under the 2024 Plan after the tenth anniversary of the date upon which the 2024 Plan was approved by the Company’s stockholders.
Material U.S. Federal Income Tax Consequences
The following is a general summary under current law of the principal United States federal income tax consequences related to awards under the 2024 Plan. This summary deals with the general federal income tax principles that apply and is provided only for general information. Some kinds of taxes, such as state, local and foreign income taxes and federal employment taxes, are not discussed. This summary is not intended as tax advice to participants, who should consult their own tax advisors.
Tax Consequences to Participants
Non-Qualified Stock Options. If a participant is granted a non-qualified stock option under the 2024 Plan, the participant should not have taxable income on the grant of the option. Generally, the participant should recognize ordinary income at the time of exercise in an amount equal to the fair market value of the Shares acquired on the date of exercise, less the exercise price paid for the Shares. The participant’s basis in the Shares for purposes of determining gain or loss on a subsequent sale or disposition of such Shares generally will be the fair market value of our Shares on the date the participant exercises such option. Any subsequent gain or loss will be taxable as a long-term or short-term capital gain or loss. Subject to the discussion under “Tax Consequences to the Company” below, the Company or our subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the participant recognizes ordinary income.
Incentive Stock Options. A participant receiving incentive stock options should not recognize taxable income upon grant. Additionally, if applicable holding period requirements are met, the participant should not recognize taxable income at the time of exercise. However, the excess of the fair market value
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of the Shares received over the option exercise price is an item of tax preference income potentially subject to the alternative minimum tax. If Shares acquired upon exercise of an incentive stock option are held for a minimum of two years from the date of grant and one year from the date of exercise and otherwise satisfy the incentive stock option requirements, the gain or loss (in an amount equal to the difference between the fair market value on the date of disposition and the exercise price) upon disposition of the Shares will be treated as a long-term capital gain or loss, and we will not be entitled to any deduction. If the holding period requirements are not met, the incentive stock option will be treated as one that does not meet the requirements of the Code for incentive stock options and the participant will recognize ordinary income at the time of the disposition equal to the excess of the amount realized over the exercise price, but not more than the excess of the fair market value of the Shares on the date the incentive stock option is exercised over the exercise price, with any remaining gain or loss being treated as capital gain or capital loss. Subject to the discussion under “Tax Consequences to the Company” below, the Company or our subsidiaries or affiliates generally are not entitled to a federal income tax deduction upon either the exercise of an incentive stock option or upon disposition of the Shares acquired pursuant to such exercise, except to the extent that the participant recognizes ordinary income on disposition of the Shares.
Other Awards. The current federal income tax consequences of other awards authorized under the 2024 Plan generally follow certain basic patterns: share appreciation rights are taxed and deductible in substantially the same manner as non-qualified stock options; nontransferable restricted stock subject to a substantial risk of forfeiture results in income recognition equal to the excess of the fair market value over the price paid, if any, only at the time the restrictions lapse (unless the recipient elects to accelerate recognition as of the date of grant through a Section 83(b) election); RSUs, dividend equivalents and other stock or cash based awards are generally subject to tax at the time of payment. Subject to the discussion under “Tax Consequences to the Company” below, the Company or our subsidiaries or affiliates generally should be entitled to a federal income tax deduction at the time and for the same amount as the award recipient recognizes ordinary income.
Section 409A of the Code
Certain types of awards under the 2024 Plan may constitute, or provide for, a deferral of compensation subject to Section 409A of the Code. Unless certain requirements set forth in Section 409A of the Code are complied with, holders of such awards may be taxed earlier than would otherwise be the case (e.g., at the time of vesting instead of the time of payment) and may be subject to an additional 20% penalty tax (and, potentially, certain interest, penalties and additional state taxes). To the extent applicable, the 2024 Plan and awards granted under the 2024 Plan are intended to be structured and interpreted in a manner intended to either comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance that may be issued under Section 409A of the Code. To the extent determined necessary or appropriate by the plan administrator, the 2024 Plan and applicable award agreements may be amended to further comply with Section 409A of the Code or to exempt the applicable awards from Section 409A of the Code.
THE DISCUSSION ABOVE IS INTENDED ONLY AS A SUMMARY AND DOES NOT PURPORT TO BE A COMPLETE DISCUSSION OF ALL POTENTIAL TAX EFFECTS RELEVANT TO RECIPIENTS OF AWARDS UNDER THE 2024 PLAN. AMONG OTHER ITEMS THIS DISCUSSION DOES NOT ADDRESS ARE TAX CONSEQUENCES UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN JURISDICTION, OR ANY TAX TREATIES OR CONVENTIONS BETWEEN THE UNITED STATES AND FOREIGN JURISDICTIONS. THIS DISCUSSION IS BASED UPON CURRENT LAW AND INTERPRETATIONAL AUTHORITIES WHICH ARE SUBJECT TO CHANGE AT ANY TIME.
Tax Consequences to the Company
Reasonable Compensation. For the amounts described above to be deductible by the Company, such amounts must constitute reasonable compensation for services rendered or to be rendered and must be ordinary and necessary business expenses.
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Golden Parachute Payments. The Company’s ability (or the ability of one of our subsidiaries) to obtain a deduction for future payments under the Plan could also be limited by the golden parachute rules of Section 280G of the Code, which prevent the deductibility of certain excess parachute payments made in connection with a change in control of an employer-corporation.
Compensation of Covered Employees. Our ability to obtain a deduction for amounts paid under the 2024 Plan could be limited by Section 162(m) of the Code. Section 162(m) of the Code limits our ability to deduct compensation, for federal income tax purposes, paid during any year to a “covered employee” (within the meaning of Section 162(m) of the Code) in excess of $1,000,000.
New Plan Benefits
Grants of Awards under the 2024 Plan to Chewy’s executive officers, non-executive directors and other eligible participants are subject to the discretion of the Committee. Therefore, it is not possible to determine the future benefits that will be received by these participants under the 2024 Plan.
Consequences of Failing to Approve the Proposal
If the 2024 Plan is not approved by stockholders, the 2024 Plan will not become effective and no Awards will be granted under the 2024 Plan, and the 2022 Plan will continue in full force and effect in accordance with its terms. Once the share reserve under the 2022 Plan is exhausted, the Company may elect to provide compensation through other means, such as cash-settled awards or other cash compensation, to assure that the Company and its affiliates can attract and retain qualified personnel.
Vote Required
Approval of Proposal No. 4 requires the affirmative vote of a majority of the voting power of our common stock present virtually or represented by proxy at the Annual Meeting and entitled to vote thereon. This means that, of the shares represented at the Annual Meeting and entitled to vote, a majority of them must vote “For” the proposal for it to be approved. You may vote “For,” “Against,” or “Abstain” with respect to this proposal. Abstentions are considered shares present and entitled to vote on this proposal and will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on the outcome of this proposal.
FOR ✔ | | | OUR BOARD, UPON RECOMMENDATION OF OUR COMPENSATION COMMITTEE, RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE CHEWY, INC. 2024 OMNIBUS INCENTIVE PLAN. |
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PROPOSAL 5: Amendment to the Certificate of Incorporation to provide for the exculpation of certain officers as permitted by recent amendments to Delaware law.
Background
Effective August 1, 2022, Section 102(b)(7) of the General Corporation Law of the State of Delaware (the “DGCL”) was amended to permit Delaware companies to adopt a provision in their certificate of incorporation to eliminate or limit the liability of certain of their officers, in addition to their directors, in limited circumstances. After consideration and upon the recommendation of the Nominating and Corporate Governance Committee, the Board adopted a resolution, subject to the approval of our stockholders, to amend our Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to provide for the exculpation of certain officers to the extent permitted under the DGCL (the “Exculpation Amendment’’). If approved by the stockholders at the Annual Meeting, the Company intends to file the Fifth Amended and Restated Certificate of Incorporation containing the Exculpation Amendment, in the form attached hereto as Appendix C, with the Delaware Secretary of State.
The proposed Exculpation Amendment would only permit the exculpation of certain officers in connection with claims brought by stockholders, including class actions, but would not eliminate such officers’ monetary liability for breach of fiduciary duty claims brought by the Company itself or for derivative claims brought by stockholders in the name of the Company. As is currently the case with respect to directors of the Company, the proposed Exculpation Amendment would also not limit the liability of officers for: (i) any breaches of the duty of loyalty to the Company or its stockholders, (ii) any acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, and (iii) any transaction from which the officer derived an improper personal benefit.
The Board believes that the proposed Exculpation Amendment is reasonable and appropriate, and necessary to continue to attract and retain experienced and qualified officers. As with directors, officers frequently must make decisions in response to time-sensitive opportunities and challenges, which can create substantial risk of investigations, claims, actions, suits or proceedings seeking to impose liability on the basis of hindsight. This is especially the case in the current litigious environment where shareholder plaintiffs have employed a tactic of bringing certain claims against officers that would otherwise be exculpated if brought against directors to avoid dismissal of such claims. The Exculpation Amendment would align the protections for our officers with those protections currently afforded to our directors. The Board believes that in the absence of such protection, qualified officers might be deterred from serving as officers of the Company due to exposure to personal liability and the risk that substantial expense may be incurred in defending lawsuits, regardless of merit. Further, the Board believes that the proposed Exculpation Amendment would help facilitate the exercise of business judgment and not negatively impact stockholder rights, particularly taking into account the narrow class and type of claims for which officers’ liability would be exculpated. We expect that many of our peers incorporated in Delaware, with whom we compete for executive talent, have adopted or will adopt exculpation clauses that limit the personal liability of officers in their certificate of incorporation. Although the proposed amendment is not being proposed in response to any specific resignation, threat of resignation or refusal to serve by any officer, we believe a failure to adopt the proposed amendment could impact our recruitment and retention of exceptional officer candidates who may conclude that, without the protection of exculpation, the potential exposure to liabilities, costs of defense and other risks of proceedings exceeds the benefits of serving as an officer of the Company.
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Proposed Amendment
The proposed Exculpation Amendment will amend and restate Article VII of the Certificate of Incorporation as follows:
LIMITATION OF DIRECTOR AND OFFICER LIABILITY
A. | To the fullest extent permitted by the DGCL as it now exists or may hereafter be amended, a director or officer of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty owed to the Company or its stockholders. |
B. | Neither the amendment nor repeal of this Article VII, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation, nor, to the fullest extent permitted by the DGCL, any modification of law shall eliminate, reduce or otherwise adversely affect any right or protection of a current or former director or officer of the Company existing at the time of such amendment, repeal, adoption or modification. |
The affirmative vote of the holders of a majority of the voting power of our issued and outstanding common stock entitled to vote thereon is required to approve and adopt the proposed Exculpation Amendment. If this proposal to amend the Certificate of Incorporation is approved and adopted by our stockholders, we will file the Fifth Amended and Restated Certificate of Incorporation with the Secretary of State of Delaware shortly after the Annual Meeting that includes the above-described proposed amendment. The Board may, at any time prior to effectiveness, abandon the proposed Exculpation Amendment without further action by the stockholders or the Board (even if the requisite stockholder vote is obtained).
Description of Other Immaterial Changes
The Fifth Amended and Restated Certificate of Incorporation included as Appendix C to this proxy statement also reflects a certain immaterial changes to streamline and modernize our Certificate of Incorporation. These changes, which do not substantively affect stockholders’ rights, include (i) the integration of the prior certificate of amendment to the Certificate of Incorporation, which amended the Certificate of Incorporation to require that, to the fullest extent permitted by law, claims under the Securities Act be brought only in the federal district courts of the United States of America, and (ii) an update to the address for the registered office of the Company.
FOR ✔ | | | OUR BOARD, UPON RECOMMENDATION OF OUR NOMINATING AND CORPORATE GOVERNANCE COMMITTEE, RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” APPROVAL OF THE AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO PROVIDE FOR THE EXCULPATION OF CERTAIN OFFICERS AS PERMITTED BY RECENT AMENDMENTS TO DELAWARE LAW. |
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The Audit Committee Report and Compensation Committee Report included in this proxy statement shall not be deemed soliciting material or filed with the SEC and shall not be deemed incorporated by reference into any prior or future filings made by us under the Securities Act or the Exchange Act, except to the extent we specifically incorporate such information by reference. In addition, this document includes website addresses, which are intended to provide inactive, textual references only. The information on these websites does not form part of this document.
We have filed our Annual Report on Form 10-K for the fiscal year ended January 28, 2024 with the SEC. It is available free of charge at the SEC’s web site at www.sec.gov and on our web site at https://investor.chewy.com. Paper copies of our Annual Report on Form 10-K, including the financial statements and schedules, may be obtained without charge from the Company. Paper copies of exhibits to the Annual Report on Form 10-K are available, but a reasonable fee per page will be charged to the requesting stockholder. Stockholders may make requests in writing to us at Investor Relations, Chewy, Inc., 7700 West Sunrise Boulevard, Plantation, Florida 33322. The Annual Report is not to be regarded as part of the proxy solicitation material.
If you did not receive a printed copy of our proxy materials and you wish to receive a paper proxy card or voting instruction form or other proxy materials for the purposes of the Annual Meeting, you should follow the instructions included in your Notice.
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Our Company maintains a 52- or 53-week fiscal year, with our fiscal year ending each year on the Sunday that is closest to January 31 of that year. Our Fiscal Year 2023 ended January 28, 2024 and included 52 weeks. Our Fiscal Year 2022 ended January 29, 2023 and included 52 weeks.
To provide stockholders with additional information regarding our financial results, we have disclosed adjusted EBITDA, a non-GAAP financial measure that we calculate as net income excluding depreciation and amortization; share-based compensation expense and related taxes; income tax provision; interest income (expense), net; transaction related costs; changes in the fair value of equity warrants; severance and exit costs; and litigation matters and other items that we do not consider representative of our underlying operations. We have provided a reconciliation below of adjusted EBITDA to net income, the most directly comparable GAAP financial measure.
We have included adjusted EBITDA and adjusted EBITDA margin because each is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA and adjusted EBITDA margin facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain variable charges. Accordingly, we believe that adjusted EBITDA and adjusted EBITDA margin provide useful information to stockholders and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
We believe it is useful to exclude non-cash charges, such as depreciation and amortization and share-based compensation expense from our adjusted EBITDA because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude income tax provision; interest income (expense), net; transaction related costs; changes in the fair value of equity warrants; and litigation matters and other items which are not components of our core business operations. We believe it is useful to exclude severance and exit costs because these expenses represent temporary initiatives to realign resources and enhance operational efficiency, which are not components of our core business operations. Adjusted EBITDA has limitations as a financial measure and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future and adjusted EBITDA does not reflect capital expenditure requirements for such replacements or for new capital expenditures; |
• | adjusted EBITDA does not reflect share-based compensation and related taxes. Share-based compensation has been, and will continue to be for the foreseeable future, a recurring expense in our business and an important part of our compensation strategy; |
• | adjusted EBITDA does not reflect interest income (expense), net; or changes in, or cash requirements for, our working capital; |
• | adjusted EBITDA does not reflect transaction related costs and other items which are either not representative of our underlying operations or are incremental costs that result from an actual or planned transaction or initiative and include changes in the fair value of equity warrants, severance and exit costs, litigation matters, integration consulting fees, internal salaries and wages (to the extent the individuals are assigned full-time to integration and transformation activities) and certain costs related to integrating and converging IT systems; and |
• | other companies, including companies in our industry, may calculate adjusted EBITDA differently, which reduces its usefulness as a comparative measure. |
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Because of these limitations, you should consider adjusted EBITDA and adjusted EBITDA margin alongside other financial performance measures, including various cash flow metrics, net income, net margin, and our other GAAP results.
The following table presents a reconciliation of net income to adjusted EBITDA, as well as the calculation of net margin and adjusted EBITDA margin, for each of the periods indicated.
(in thousands, except percentages) | | | Fiscal Year | |||
Reconciliation of Net Income to Adjusted EBITDA | | | 2023 | | | 2022 |
Net income | | | $39,580 | | | $49,899 |
Add (deduct): | | | | | ||
Depreciation and amortization | | | 109,693 | | | 83,440 |
Share-based compensation expense and related taxes | | | 248,543 | | | 163,211 |
Interest (income) expense, net | | | (58,501) | | | (9,290) |
Change in fair value of equity warrants | | | (13,079) | | | 13,340 |
Income tax provision | | | 8,650 | | | 2,646 |
Severance costs | | | 14,348 | | | — |
Exit costs | | | 6,839 | | | — |
Transaction related costs | | | 7,827 | | | 3,953 |
Other | | | 4,168 | | | (460) |
Adjusted EBITDA | | | $368,068 | | | $306,739 |
Net sales | | | $11,147,720 | | | $10,119,000 |
Net margin | | | 0.4% | | | 0.5% |
Adjusted EBITDA margin | | | 3.3% | | | 3.0% |
We define net margin as net income divided by net sales and adjusted EBITDA margin as adjusted EBITDA divided by net sales.
To provide stockholders with additional information regarding our financial results, we have disclosed adjusted net income and adjusted basic and diluted earnings per share, which represent non-GAAP financial measures. We calculate adjusted net income as net income excluding share-based compensation expense and related taxes, changes in the fair value of equity warrants, and severance and exit costs. We calculate adjusted basic and diluted earnings per share by dividing adjusted net income attributable to common stockholders by the weighted-average shares outstanding during the period. We have provided a reconciliation below of adjusted net income to net income, the most directly comparable GAAP financial measure.
We have included adjusted net income and adjusted basic and diluted earnings per share because each is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted net income and adjusted basic and diluted earnings per share facilitates operating performance comparability across reporting periods by removing the effect of non-cash expenses and certain variable gains and losses that do not represent a component of our core business operations. We believe it is useful to exclude non-cash share-based compensation expense because the amount of such expenses in any specific period may not directly correlate to the underlying performance of our business operations. We believe it is useful to exclude changes in the fair value of equity warrants because the variability of equity warrant gains and losses is not representative of our underlying operations. We believe it is useful to exclude severance and exit costs because these expenses represent temporary initiatives to realign resources and enhance
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operational efficiency, which are not components of our core business operations. Accordingly, we believe that these measures provide useful information to stockholders and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Adjusted net income and adjusted basic and diluted earnings per share have limitations as financial measures and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. Other companies may calculate adjusted net income and adjusted basic and diluted earnings per share differently, which reduces their usefulness as comparative measures. Because of these limitations, you should consider adjusted net income and adjusted basic and diluted earnings alongside other financial performance measures, including various cash flow metrics, net income, basic and diluted earnings per share, and our other GAAP results.
The following table presents a reconciliation of net income to adjusted net income, as well as the calculation of adjusted basic and diluted earnings per share, for each of the periods indicated.
(in thousands, except per share data) | | | Fiscal Year | |||
Reconciliation of Net Income to Adjusted Net Income | | | 2023 | | | 2022 |
Net income | | | $39,580 | | | $49,899 |
Add (deduct): | | | | | ||
Share-based compensation expense and related taxes | | | 248,543 | | | 163,211 |
Change in fair value of equity warrants | | | (13,079) | | | 13,340 |
Severance costs | | | 14,348 | | | — |
Exit costs | | | 6,839 | | | — |
Adjusted net income | | | $296,231 | | | $226,450 |
Weighted-average common shares used in computing adjusted earnings per share: | | | | | ||
Basic | | | 429,457 | | | 422,331 |
Effect of dilutive share-based awards | | | 2,583 | | | 5,439 |
Diluted | | | 432,040 | | | 427,770 |
Earnings (loss) per share attributable to common Class A and Class B stockholders | | | | | ||
Basic | | | $0.09 | | | $0.12 |
Diluted | | | $0.09 | | | $0.12 |
Adjusted basic | | | $0.69 | | | $0.54 |
Adjusted diluted | | | $0.69 | | | $0.53 |
To provide stockholders with additional information regarding our financial results, we have also disclosed free cash flow, a non-GAAP financial measure that we calculate as net cash provided by operating activities less capital expenditures (which consist of purchases of property and equipment, capitalization of labor related to our websites, mobile applications, software development, and leasehold improvements). We have provided a reconciliation below of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure.
We have included free cash flow because it is used by our management and board of directors as an important indicator of our liquidity as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to stockholders and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
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Free cash flow has limitations as a financial measure and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP. There are limitations to using non-GAAP financial measures, including that other companies, including companies in our industry, may calculate free cash flow differently. Because of these limitations, you should consider free cash flow alongside other financial performance measures, including net cash provided by operating activities, capital expenditures and our other GAAP results.
The following table presents a reconciliation of net cash provided by operating activities to free cash flow for each of the periods indicated.
(in thousands) | | | Fiscal Year | |||
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow | | | 2023 | | | 2022 |
Net cash provided by operating activities | | | $486,211 | | | $349,777 |
Deduct: | | | | | ||
Capital expenditures | | | (143,282) | | | (230,310) |
Free Cash Flow | | | $342,929 | | | $119,467 |
Free cash flow may be affected in the near to medium term by the timing of capital investments (such as fulfillment centers, pharmacy facilities, veterinary clinics, customer service infrastructure, and corporate offices and purchases of IT and other equipment), fluctuations in our growth and the effect of such fluctuations on working capital, and changes in our cash conversion cycle due to increases or decreases of vendor payment terms as well as inventory turnover.
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2024 OMNIBUS INCENTIVE PLAN
(Effective as of July 11, 2024)
1. | Purpose of the Plan |
The Plan is intended to promote the interests of Chewy and its shareholders by providing Participants with cash and equity-based incentive awards to encourage them to deliver outcomes and/or continue in the service of the Company.
The Plan replaces the Chewy, Inc. 2022 Omnibus Incentive Plan (the “Prior Plan”), for awards granted on or after the Effective Date. Awards may not be granted or awarded under the Prior Plan beginning on the Effective Date; however, awards previously granted under the Prior Plan will remain subject to the terms and conditions of the Prior Plan.
2. | Definitions |
As used in the Plan or in any instrument governing the terms of any Incentive Award, the following definitions apply to the terms indicated below:
(a) | “Affiliate” means, with respect to a specified Person, a Person that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the specified Person. |
(b) | “Award Agreement” means a written or electronic agreement, in a form determined by the Committee from time to time, entered into by each Participant and Chewy, evidencing the grant of an Incentive Award under the Plan. |
(c) | “Beneficial Owner” (including correlative terms) shall have the meaning ascribed to that term in Rule 13d-3 promulgated under the Exchange Act. |
(d) | “Board of Directors” means the Board of Directors of Chewy. |
(e) | “Cash-Based Award” means an Incentive Award granted pursuant to Section 8(b) hereof and payable in cash at such time or times and subject to such terms and conditions as determined by the Committee in its sole discretion. |
(f) | “Cause” means, unless otherwise specified by the Committee in the applicable Award Agreement, with respect to a Participant’s termination of Service, the following: (i) in the case where there is no employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Incentive Award (or where there is such an agreement but it does not define “cause” (or words of like import)), termination due to a Participant’s dishonesty, fraud, moral turpitude, willful misconduct, refusal to perform the Participant’s duties or responsibilities for any reason other than illness or incapacity, or materially unsatisfactory performance of the Participant’s duties for the Company or an Affiliate, as determined by the Company or the Committee, in each case, in its good-faith discretion; or (ii) in the case where there is an employment agreement, consulting agreement, change in control agreement or similar agreement in effect between the Company or an Affiliate and the Participant at the time of the grant of the Incentive Award that defines “cause” (or words of like import), “cause” as defined under such agreement. |
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(g) | “Change in Control” means, unless otherwise defined in the Award Agreement: |
(i) | any one Person, or more than one Person acting as a group (as defined under Treasury Regulation § 1.409A-3(i)(5)(v)(B)), other than Chewy, any employee benefit plan sponsored by Chewy or BC Partners LLP (“BC Partners”) or any of its Affiliates, becomes the Beneficial Owner of stock of Chewy that, together with stock held by such Person or group, constitutes more than 50 percent of the total Voting Power of the stock of Chewy; |
(ii) | a majority of members of the Board of Directors is comprised of directors whose appointment or election is (A) not endorsed by a majority of the members of the Board of Directors before the date of each appointment or election or (B) approved in connection with any actual or threatened contest for election to positions on the Board of Directors; |
(iii) | there is consummated an agreement or series of related agreements for the sale or other disposition, directly or indirectly, by the Company of all or substantially all of the Company’s assets, other than the sale or other disposition by the Company of all or substantially all of the Company’s assets to a Person, at least 50 percent of the total Voting Power of the outstanding Voting Securities of which are Beneficially Owned by the holders of the Voting Securities of Chewy immediately prior to such sale or other disposition; or |
(iv) | a merger, consolidation, reorganization or similar transaction with or into Chewy or in which securities of Chewy are issued, as a result of which the holders of Voting Securities of Chewy immediately before such event own, directly or indirectly, immediately after such event less than 50% of the combined Voting Power of the outstanding Voting Securities of the surviving company or parent corporation resulting from, or issuing its Voting Securities as part of, such event. |
Notwithstanding the foregoing, (1) an event described herein shall be considered a “Change in Control” for distribution or payment purposes only if it constitutes a “change in control event” under Section 409A of the Code, to the extent necessary to avoid adverse tax consequences thereunder and (2) a “Change in Control” shall be deemed not to have occurred as a result of any transaction or series of integrated transactions following which BC Partners or any of its Affiliates possesses, directly or indirectly, whether through the ownership of Voting Securities, by contract or otherwise, the power to elect a majority of the Board of Directors or the board of directors or similar body governing the affairs of any successor to Chewy.
(h) | “Chewy” means Chewy, Inc., a Delaware corporation. |
(i) | “Code” means the Internal Revenue Code of 1986, as amended from time to time, and all regulations, interpretations and administrative guidance issued thereunder. |
(j) | “Committee” means the Compensation Committee of the Board of Directors or such other committee as the Board of Directors shall appoint from time to time to administer the Plan and to otherwise exercise and perform the authority and functions assigned to the Committee under the terms of the Plan. |
(k) | “Company” means Chewy and all of its Subsidiaries, collectively. |
(l) | “Consultant” means any natural person who is an advisor, contractor or consultant to Chewy or any of its Affiliates. |
(m) | “Director” means any non-employee member of the Board of Directors. |
(n) | “Dividend Equivalent Rights” means a right granted to a Participant under the Plan to receive the equivalent value (in cash or Shares) of dividends paid on Shares. |
(o) | “Effective Date” means the date the Plan is approved by the shareholders of the Company. |
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(p) | “Employee” means an employee of Chewy or one of its Affiliates or Subsidiaries. |
(q) | “Exchange Act” means the Securities Exchange Act of 1934, as amended. |
(r) | “Fair Market Value” means, with respect to a Share, as of the applicable date of determination, any of (i) the closing price as reported on the securities exchange/s on which Shares are then listed or admitted to trading (the “Securities Exchange”) on the trading day immediately prior to the date of grant of an Incentive Award, or (ii) the closing price as reported on the Securities Exchange on the date of grant of an Incentive Award. In the event that the price of a Share shall not be so reported, the Fair Market Value of a Share shall be determined by the Committee in its sole discretion taking into account the requirements of Section 409A of the Code. |
(s) | “Incentive Award” means an Option, Restricted Stock Unit, Other Share-Based Award or Cash-Based Award granted pursuant to the terms of the Plan. |
(t) | “Option” means a stock option to purchase Shares granted to a Participant pursuant to Section 6. |
(u) | “Other Share-Based Award” means an award granted to a Participant pursuant to Section 8. |
(v) | “Participant” means an Eligible Person (as defined in Section 5) to whom one or more Incentive Awards have been granted pursuant to the Plan and have not been fully settled or cancelled and, following the death of any such Eligible Person, such Eligible Person’s successors, heirs, executors and administrators, as the case may be. |
(w) | “Person” means a “person” as such term is used in Section 13(d) and 14(d) of the Exchange Act, including any “group” within the meaning of Section 13(d)(3) under the Exchange Act. |
(x) | “Plan” means the Chewy, Inc. 2024 Omnibus Incentive Plan, as it may be amended from time to time. |
(y) | “Prior Plan Award” means an award outstanding under the Prior Plan as of the Effective Date. |
(z) | “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Committee to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions. |
(aa) | “Securities Act” means the Securities Act of 1933, as amended. |
(bb) | “Service” means (i) for an Eligible Person who is an Employee, the period during which such Eligible Person is employed by the Company or an Affiliate, (ii) for an Eligible Person who is a Director, the period during which such Eligible Person is a member of the Board of Directors, and (iii) for an Eligible Person who is a Consultant, the period during which such Eligible Person is providing services to the Company. |
(cc) | “Share” means a share of Class A common stock, par value $0.01 per share, of Chewy, or any other security into which the common stock shall be changed pursuant to the adjustment provisions of Section 9 of the Plan. |
(dd) | “Subsidiary” means any “subsidiary” within the meaning of Rule 405 under the Securities Act. |
(ee) | “Substitute Award” means Incentive Awards that result from the assumption of, or are in substitution for, outstanding awards previously granted by a company or other entity acquired, directly or indirectly, by Chewy or one of its Subsidiaries or with which Chewy or one of its Subsidiaries combines. |
(ff) | “Termination Date” means the date an Eligible Person’s Service terminates. |
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(gg) | “Voting Power” means the number of votes available to be cast (determined by reference to the maximum number of votes entitled to be cast by the holders of Voting Securities upon any matter submitted to shareholders where the holders of all Voting Securities vote together as a single class) by the holders of Voting Securities. |
(hh) | “Voting Securities” means any securities or other ownership interests of an entity entitled, or which may be entitled, to vote on the election of directors, or securities or other ownership interests which are convertible into, or exercisable in exchange for, such Voting Securities, whether or not subject to the passage of time or any contingency. |
3. | Shares Subject to the Plan and Limitations on Incentive Awards |
(a) | The maximum number of Shares that may be covered by Incentive Awards granted under the Plan shall not exceed the aggregate total of (i) eighty million (80,000,000) Shares plus (ii) the number of Shares remaining available for new awards under the Prior Plan as of the Effective Date (after counting for outstanding performance-based awards at the maximum payout level), not to exceed three million one hundred thousand (3,100,000) Shares. Out of such aggregate, the maximum number of Shares that may be covered by Options that are designated as “incentive stock options” within the meaning of Section 422 of the Code shall not exceed eighty-three million one hundred thousand (83,100,000) Shares. The maximum number of Shares referred to in the preceding sentences of this Section 3 shall in each case be subject to adjustment as provided in Section 9 and the following provisions of this Section 3. Any Shares granted under any Incentive Awards shall be counted against the Share limit on a one-for-one basis. Shares issued under the Plan may be either: authorized and unissued shares, treasury shares, shares purchased by the Company in the open market, or any combination of the preceding categories as the Company determines in its sole discretion. The sum of the grant date fair value of the Incentive Awards and the amount of any cash-based payments that may be granted to a Participant who is an Eligible Person solely by virtue of Service as a Director during any calendar year may not exceed one million dollars ($1,000,000). |
(b) | For purposes of the preceding paragraph, Shares covered by Incentive Awards shall only be counted as used to the extent they are actually issued and delivered to a Participant (or such Participant’s permitted transferees as described in Section 19 of the Plan) pursuant to the Plan; provided, however, that if Shares are withheld to pay the exercise price of an Option or base price of a share appreciation right or to satisfy any tax withholding requirement in connection with an Option or share appreciation right, both the Shares issued (if any) and the Shares withheld will be deemed delivered for purposes of determining the number of Shares that are available for delivery under the Plan. Any Shares subject to an Incentive Award or a Prior Plan Award that expires or is canceled, forfeited, or terminated without issuance of the full number of Shares to which the Incentive Award or the Prior Plan Award related will again be available for issuance under the Plan. Notwithstanding anything to the contrary contained herein, Shares subject to an Incentive Award under the Plan or a Prior Plan Award shall again be made available for issuance or delivery under the Plan if such Shares are Shares covered by Incentive Awards of Restricted Stock Units or Other Share-Based Awards (other than Options and share appreciation rights) that were withheld by the Company to satisfy any tax withholding obligation. Any Incentive Award settled in cash shall not count as against the share limitation in Section 3(a). Additionally, Shares covered by Incentive Awards granted pursuant to the Plan in connection with the assumption, replacement, conversion or adjustment of outstanding equity-based awards in the context of a corporate acquisition or merger (within the meaning of Section 303A.08 of the New York Stock Exchange (“NYSE”) Listed Company Manual) shall not count as used under the Plan for purposes of this Section 3. |
4. | Administration of the Plan |
(a) | The Plan shall be administered by a Committee of the Board of Directors consisting of two or more Persons, each of whom qualifies as a “non-employee director” (within the meaning of |
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Rule 16b-3 promulgated under Section 16 of the Exchange Act), and as “independent” as required by the NYSE or any security exchange on which the Shares are listed, in each case if and to the extent required by applicable federal, state, local, or foreign law or necessary to meet the requirements of such rule, section or listing requirement at the time of determination. The Committee shall, consistent with the terms of the Plan, from time to time designate those Eligible Persons who shall be granted Incentive Awards under the Plan and the amount, type and other terms and conditions of such Incentive Awards. All of the powers and responsibilities of the Committee under the Plan may be delegated by the Committee, in writing, to any subcommittee thereof, in which case the acts of such subcommittee shall be deemed to be acts of the Committee hereunder. The Committee may also from time to time authorize a subcommittee consisting of one or more members of the Board of Directors (including members who are employees of the Company) or employees of the Company to grant Incentive Awards to Persons who are not “executive officers” of the Company (within the meaning of Rule 16a-1 under the Exchange Act), subject to such restrictions and limitations as the Committee may specify and to the requirements of applicable law.
(b) | The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and any Award Agreement thereunder, and to adopt, amend and rescind from time to time such rules and regulations for the administration of the Plan, including rules and regulations related to sub-plans established for the purpose of satisfying applicable foreign laws and/or qualifying for preferred tax treatment under applicable foreign tax laws, as the Committee may deem necessary or appropriate. Decisions of the Committee shall be final, binding and conclusive on all parties. For the avoidance of doubt, the Committee may exercise all discretion granted to it under the Plan in a non-uniform manner among Participants. |
(c) | The Committee may delegate the administration of the Plan to one or more officers or employees of the Company, (each, an “Administrator”) and such Administrator(s) may have the authority to execute and distribute Award Agreements, to maintain records relating to Incentive Awards, to process or oversee the issuance of Shares under Incentive Awards, to interpret and administer the terms of Incentive Awards, and to take such other actions as may be necessary or appropriate for the administration of the Plan and of Incentive Awards under the Plan, provided that in no case shall any such Administrator be authorized (i) to take any action inconsistent with Section 409A of the Code with respect to any Incentive Award subject to such provision or (ii) to take any action inconsistent with applicable law. Any action by any such Administrator within the scope of its delegation shall be deemed for all purposes to have been taken by the Committee and, except as otherwise specifically provided, references in the Plan to the Committee shall include any such Administrator. The Committee and, to the extent it so provides, any subcommittee, shall have sole authority to determine whether to review any actions and/or interpretations of any such Administrator, and if the Committee, or subcommittee, shall decide to conduct such a review, any such actions and/or interpretations of any such Administrator shall be subject to approval, disapproval, or modification by the Committee or subcommittee. |
(d) | On or after the date of grant of an Incentive Award under the Plan, the Committee may (i) accelerate the date on which any such Incentive Award becomes vested, exercisable or transferable, as the case may be, (ii) extend the term of any such Incentive Award, including, without limitation, extending the period following a termination of a Participant’s Service during which any such Incentive Award may remain outstanding, (iii) waive any conditions to the vesting, exercisability or transferability, as the case may be, of any such Incentive Award, (iv) provide for the payment of dividends or Dividend Equivalent Rights with respect to any such Incentive Award, or (v) adopt procedures regarding the exercise of Options or share appreciation rights, including establishing “black out” or other periods during which Options or share appreciation rights may not be exercised; provided, that the Committee shall not have any such authority to the extent that the grant of such authority would cause any tax to become due under Section 409A of the Code. Notwithstanding anything herein to the contrary, Chewy |
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shall not (A) reprice (within the meaning of Section 303A.08 of the NYSE Listed Company Manual and any other formal or informal guidance issued by the NYSE) any Option or share appreciation right, (B) purchase underwater Options or share appreciation rights from a Participant for value in excess of zero, in each case without the approval of the shareholders of Chewy or (C) grant any new Option, share appreciation right, or other Incentive Award in substitution for, or upon the cancellation of, any previously granted Option or share appreciation right that has the effect of reducing the exercise price thereof.
(e) | The Company shall pay any amount payable with respect to an Incentive Award in accordance with the terms of such Incentive Award, provided that the Committee may, in its discretion, defer, or give a Participant the election to defer, the payment of amounts payable with respect to an Incentive Award pursuant to a deferred compensation plan. |
(f) | No member of the Committee shall be liable for any action, omission, or determination relating to the Plan, and Chewy shall indemnify and hold harmless each member of the Committee and each other director or employee of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been delegated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Committee) arising out of any action, omission or determination relating to the Plan, unless, in either case, such action, omission or determination was taken or made by such member, director or employee in bad faith and without reasonable belief that it was in the best interests of the Company. |
5. | Eligibility |
The Persons who shall be eligible to receive Incentive Awards pursuant to the Plan shall be those Employees, Consultants, and Directors whom the Committee shall select from time to time, including any person who has received an offer to become an Employee, Consultant or Director, so long as the Incentive Award is contingent on such Person commencing Service (any such Person, an “Eligible Person”). Each Incentive Award granted under the Plan shall be evidenced by an Award Agreement.
6. | Options |
The Committee may from time to time grant Options on such terms as it shall determine, subject to the terms and conditions set forth in the Plan. The Award Agreement shall clearly identify such Option as either an “incentive stock option” within the meaning of Section 422 of the Code or as a non-qualified stock option.
(a) | Exercise Price. The exercise price per Share covered by any Option shall be not less than 100% of the Fair Market Value of a Share on the date on which such Option is granted, it being understood that the exercise price of an Option that is a Substitute Award may be less than the Fair Market Value per Share on the date such Substitute Award is assumed, provided that such substitution complies with applicable laws and regulations. |
(b) | Term and Exercise of Options |
(i) | Each Option shall become vested and exercisable on such date or dates, during such period and for such number of Shares as set forth in the Award Agreement; provided that each Option shall be subject to earlier termination, expiration or cancellation as provided in the Plan or the Award Agreement. Notwithstanding the foregoing, no Option shall be exercisable after the expiration of ten years from the date such Option is granted; provided, however that the expiration of the Option may be tolled while the Participant cannot exercise such Option because an exercise would violate an applicable federal, state, local, or foreign law, or would jeopardize the ability of Chewy to continue as a going concern, |
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provided, further that the period during which the Option may be exercised is not extended more than 30 days after the exercise of the Option first would no longer violate such applicable federal, state, local, or foreign laws or jeopardize the ability of Chewy to continue as a going concern.
(ii) | Each Option shall be exercisable in whole or in part. The partial exercise of an Option shall not cause the expiration, termination or cancellation of the remaining portion thereof. |
(iii) | An Option shall be exercised by such methods and procedures as the Committee determines from time to time, including without limitation through net physical settlement or other method of cashless exercise. |
(c) | Special Rules for Incentive Stock Options |
(i) | The aggregate Fair Market Value of Shares with respect to which “incentive stock options” (within the meaning of Section 422 of the Code) are exercisable for the first time by a Participant during any calendar year under the Plan and any other stock option plan of Chewy or any of its “subsidiaries” (within the meaning of Section 424 of the Code) shall not exceed one hundred thousand dollars ($100,000). Such Fair Market Value shall be determined as of the date on which each such incentive stock option is granted. In the event that the aggregate Fair Market Value of Shares with respect to such incentive stock options exceeds one hundred thousand dollars ($100,000), then incentive stock options granted hereunder to such Participant shall, to the extent and in the order required by regulations promulgated under the Code (or any other authority having the force of regulations), automatically be deemed to be non-qualified stock options, but all other terms and provisions of such incentive stock options shall remain unchanged. In the absence of such regulations (and authority), or in the event such regulations (or authority) require or permit a designation of the Options which shall cease to constitute incentive stock options, incentive stock options granted hereunder shall, to the extent of such excess and in the order in which they were granted, automatically be deemed to be non-qualified stock options, but all other terms and provisions of such incentive stock options shall remain unchanged. |
(ii) | Incentive stock options may only be granted to individuals who are employees of Chewy or any of its “subsidiaries” (within the meaning of Section 424 of the Code). No incentive stock option may be granted to an individual if, at the time of the proposed grant, such individual owns stock possessing more than ten percent of the total combined “voting power” (within the meaning of Section 422 of the Code) of all classes of stock of Chewy or any of its “subsidiaries” (within the meaning of Section 424 of the Code), unless (i) the exercise price of such incentive stock option is at least 110% of the Fair Market Value of a Share at the time such incentive stock option is granted and (ii) such incentive stock option is not exercisable after the expiration of five years from the date such incentive stock option is granted. |
7. | Restricted Stock Units |
The Committee may from time to time grant Restricted Stock Units. The Committee shall determine the Eligible Persons to whom, and the time or times at which, grants of Restricted Stock Units shall be made, the number of shares of Restricted Stock Units to be awarded, the price (if any) to be paid by the Participant, the time or times within which such Restricted Stock Units may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Restricted Stock Units, subject to the terms and conditions set forth in the Plan. The Committee may condition the grant or vesting of Restricted Stock Units upon the attainment of specified performance goals or such other factors as the Committee may determine in its sole discretion. Restricted Stock Units granted under the Plan shall be evidenced by an Award Agreement and subject to the following terms and conditions and shall be in such form and contain such additional terms and conditions not inconsistent with the terms of the Plan, as the Committee shall deem desirable:
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(a) | Settlement. The Committee may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practical after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, in a manner intended to comply with Section 409A of the Code. |
(b) | Dividend Equivalent Rights. If the Committee so provides, a grant of Restricted Stock Units may provide a Participant with the right to receive Dividend Equivalent Rights. Dividend Equivalent Rights will be credited to an account for the Participant, settled in cash or Shares, and subject to the same restrictions on transferability and forfeitability as the Restricted Stock Units with respect to which the Dividend Equivalent Rights are granted and subject to other terms and conditions as set forth in the Award Agreement. |
8. | Other Share-Based Awards and Cash-Based Awards |
(a) | Other Share-Based Awards. The Committee may from time to time grant equity-based or equity-related Incentive Awards not otherwise described herein in such amounts and on such terms as it shall determine, subject to the terms and conditions set forth in the Plan. Without limiting the generality of the preceding sentence, each such Other Share-Based Award may (i) involve the transfer of actual Shares to Participants, either at the time of grant or thereafter, or payment in cash or otherwise of amounts based on the value of Shares, (ii) be subject to performance-based and/or service-based conditions, (iii) be in the form of share appreciation rights, phantom stock, restricted shares, performance shares, deferred share units or share-denominated performance units (other than Restricted Stock Units), and/or (iv) be designed to comply with applicable laws of jurisdictions other than the United States; provided, that each Other Share-Based Award shall be denominated in, or shall have a value determined by reference to, a number of Shares that is specified at the time of the grant of such Incentive Award. |
(b) | Cash-Based Awards. The Committee may from time to time grant Cash-Based Awards to Eligible Persons in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by applicable law, as it shall determine in its sole discretion. Cash-Based Awards may be granted subject to the satisfaction of vesting conditions or may be awarded purely as a bonus and not subject to restrictions or conditions, and if subject to vesting conditions, the Committee may accelerate the vesting of such Cash-Based Awards at any time in its sole discretion. The grant of a Cash-Based Award shall not require a segregation of any of the Company’s assets for satisfaction of the Company’s payment obligation thereunder. |
9. | Adjustment Upon Certain Changes |
Subject to any action by the shareholders of the Company required by law, applicable tax rules or the rules of any exchange on which Shares are listed for trading:
(a) | Shares Available for Grants. In the event of any stock dividend or split, recapitalization, merger, consolidation, combination or exchange of Shares, spin-off or similar corporate change or extraordinary cash dividend, the maximum aggregate number of Shares with respect to which the Committee may grant Incentive Awards, the number of Shares subject to Incentive Awards, the exercise price of any Option or base price of any share appreciation right and the applicable performance targets or criteria shall be equitably adjusted or substituted by the Committee to prevent enlargement or reduction in rights granted under the Incentive Award. In the event of any change in the number of Shares of Chewy outstanding by reason of any other event or transaction, the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments to the type or number of Shares with respect to which Incentive Awards may be granted and/or to the number of Shares subject to Incentive Awards. |
(b) | Increase or Decrease in Issued Shares Without Consideration. In the event of any increase or decrease in the number of issued Shares resulting from a subdivision or consolidation of Shares |
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or the payment of a Share dividend (but only on the Shares), or any other increase or decrease in the number of such Shares effected without receipt or payment of consideration by the Company, the Committee shall, to the extent deemed appropriate by the Committee, adjust the type or number of Shares subject to each outstanding Incentive Award and the exercise price of any Option or base price of any share appreciation right.
(c) | Certain Mergers and Other Transactions. In the event of a dissolution or liquidation of the Company, a sale of all or substantially all of the Company’s assets (on a consolidated basis), or a merger, consolidation or similar transaction involving the Company in which the holders of Shares receive consideration in respect of Shares, including cash, securities and/or other property, other than, or in addition to, shares of the surviving corporation in such transaction, the Committee shall, to the extent deemed appropriate by the Committee, have the power to: |
(i) | cancel, effective immediately prior to the occurrence of such event, each Incentive Award (whether or not then exercisable or vested), and, in full consideration of such cancellation, pay to the Participant to whom such Incentive Award was granted an amount in cash, for each Share subject to such Incentive Award, equal to the value, as determined by the Committee, of such Incentive Award, provided that with respect to any outstanding Option or share appreciation right such value shall be equal to the excess of (A) the value, as determined by the Committee, of the property (including cash) received by the holder of a Share as a result of such event over (B) the exercise price of such Option or base price of such share appreciation right (which, for the avoidance of doubt, may be zero in the case of underwater Options and share appreciation rights); or |
(ii) | provide for the termination of an Incentive Award in (whether or not then exercisable or vested) in exchange for an award with respect to (A) some or all of the cash, securities and/or other property, if any, which a holder of the number of Shares subject to such Incentive Award would have received in such transaction upon the exercise of such Incentive Award or realization of the Participant’s rights as of the date of occurrence of the transaction (and, for the avoidance of doubt, if as of the date of the occurrence of the transaction the Committee determines in good faith that no amount would have been attained upon the exercise of such Incentive Award or realization of the Participant’s rights, then such Incentive Award may be terminated by the Company without payment) or (B) securities of the acquirer or surviving entity, or any combination of the foregoing and, incident thereto, in any case, make an equitable adjustment as determined by the Committee in the exercise price of the Incentive Award, or the number of securities or amount of property subject to the Incentive Award or provide for a payment (in cash or other property) to the Participant to whom such Incentive Award was granted in partial consideration for the exchange of the Incentive Award. |
(d) | Other Changes. In the event of any change in the capitalization of Chewy or corporate change other than those specifically referred to in Sections 9(a), (b) or (c), the Committee shall, to the extent deemed appropriate by the Committee, make such adjustments in the number and class of Shares subject to Incentive Awards outstanding on the date on which such change occurs and in such other terms of such Incentive Awards as the Committee may consider appropriate. |
(e) | No Other Rights. Except as expressly provided in the Plan or any Award Agreement, no Participant shall have any rights by reason of any subdivision or consolidation of Shares of any class, the payment of any dividends or dividend equivalents, any increase or decrease in the number of Shares of any class or any dissolution, liquidation, merger or consolidation of Chewy or any other corporation. Except as expressly provided in the Plan, no issuance by Chewy of Shares of any class, or securities convertible into Shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares or amount of other property subject to, or the terms related to, any Incentive Award. In taking any of the actions permitted under this Section 9, the Committee will not be required to treat all Incentive Awards similarly in the transaction. |
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(f) | Savings Clause. No provision of this Section 9 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code with regard to Incentive Awards subject to Section 409A of the Code. Furthermore, no provision of this Section 9 shall be given effect to the extent such provision would result in short-swing profits liability under Section 16 of the Exchange Act or violate the exemptive conditions of Rule 16b-3 of the Exchange Act. |
10. | Change in Control; Termination of Service |
(a) | Change in Control |
(i) | Subject to the terms of an Award Agreement, in the event of a Change in Control, (A) Incentive Awards that vest based on time-based criteria will not vest on a Change in Control but will vest if the applicable Participant is terminated without Cause within two years after the consummation of a Change in Control and (B) all performance-based Incentive Awards will convert to time-based Incentive Awards that will be subject to clause (A), with the number of Shares to be determined based on assuming either (1) actual performance to date of a Change in Control (extrapolated as appropriate to the end of the performance period), (2) target performance or (3) the higher of (1) or (2), in the discretion of the Committee. |
(ii) | Notwithstanding the foregoing and subject to the terms of an Award Agreement, in the event of a Change in Control, each outstanding Incentive Award shall be treated as the Committee determines, including, without limitation that (A) Incentive Awards may be continued, assumed, or substantially equivalent Incentive Awards may be substituted, by the acquiring or succeeding corporation (or an affiliate thereof) with appropriate adjustments as to the number and kind of shares and prices, (B) Incentive Awards may be terminated in exchange for an amount of cash and/or property, if any, equal to the amount that would have been attained upon the exercise of such Incentive Award or realization of the Participant’s rights as of the date of occurrence of the Change in Control (and, for the avoidance of doubt, if as of the date of the occurrence of the Change in Control the Committee determines in good faith that no amount would have been attained upon the exercise of such Incentive Award or realization of the Participant’s rights, then such Incentive Award may be terminated by the Company without payment) or (C) outstanding Incentive Awards will terminate upon or immediately prior to the consummation of such Change in Control (provided that the Committee provides at least twenty days’ notice to the Participants holding such Incentive Awards and each Participant has had the right to exercise such Incentive Awards in full). |
(b) | Termination of Service |
(i) | The Service of a Participant with the Company shall be deemed to have terminated for all purposes of the Plan if such Person is employed by or provides services to a Person that is a Subsidiary of the Company and such Person ceases to be a Subsidiary of the Company, unless the Committee determines otherwise. Without limiting the generality of the foregoing, the Committee shall determine whether an authorized leave of absence shall constitute termination of Service, provided that a Participant who is an employee will not be deemed to cease Service in the case of any leave of absence approved by the Company. Furthermore, no payment shall be made with respect to any Incentive Awards under the Plan that are subject to Section 409A of the Code as a result of any such authorized leave of absence or absence in military or government service unless such authorized leave of absence constitutes a separation from service for purposes of Section 409A of the Code. Notwithstanding the foregoing provisions of this definition, with respect to any Incentive Award that constitutes a “nonqualified deferred compensation” within the meaning of Section 409A of the Code, a Participant shall not be considered to have experienced a “termination of Service” unless the Participant has experienced a “separation from service” within the meaning of Section 409A of the Code. |
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(ii) | The Award Agreement shall specify the consequences with respect to such Incentive Award of the termination of Service of the Participant holding the Incentive Award. |
11. | Rights Under the Plan |
No Person shall have any rights as a shareholder with respect to any Shares covered by or relating to any Incentive Award until the date of the issuance of such Shares on the books and records of Chewy. Except as otherwise expressly provided in Section 9 hereof or in Participant’s Award Agreement, no adjustment of any Incentive Award shall be made for dividends or other rights for which the record date occurs prior to the date of such issuance. Nothing in this Section 11 is intended, or should be construed, to limit authority of the Committee to cause the Company to make payments based on the dividends that would be payable with respect to any Share if it were issued or outstanding, or from granting rights related to such dividends. The Company shall not have any obligation to establish any separate fund or trust or other segregation of assets to provide for payments under the Plan. To the extent any Person acquires any rights to receive payments hereunder from the Company, such rights shall be no greater than those of an unsecured creditor.
12. | Dividends and Dividend Equivalent Rights |
Any dividends or Dividend Equivalent Rights granted with respect to an Incentive Award shall be payable to the Participant only if, when and to the extent such underlying Incentive Award vests. Dividends and Dividend Equivalent Rights granted with respect to Incentive Awards that do not vest shall be forfeited.
13. | No Special Service Rights; No Right to Incentive Award |
Nothing contained in the Plan or any Award Agreement shall confer upon any Participant any right with respect to the continuation of his or her Service by the Company or interfere in any way with the right of the Company at any time to terminate such Service or to increase or decrease the compensation of the Participant from the rate in existence at the time of the grant of an Incentive Award. No Person shall have any claim or right to receive an Incentive Award hereunder. The Committee’s granting of an Incentive Award to a Participant at any time shall neither require the Committee to grant an Incentive Award to such Participant or any other Participant or other Person at any time nor preclude the Committee from making subsequent grants to such Participant or any other Participant or other Person.
14. | Securities Matters |
(a) | Chewy shall be under no obligation to effect the registration pursuant to the Securities Act of any Shares to be issued hereunder or to effect similar compliance under any applicable federal, state, local, or foreign laws. Notwithstanding anything herein to the contrary, Chewy shall not be obligated to cause to be issued Shares pursuant to the Plan unless and until Chewy is advised by its counsel that the issuance is in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which Shares are traded. The Committee may require, as a condition to the issuance of Shares pursuant to the terms hereof, that the recipient of such Shares make such covenants, agreements and representations, and that any related certificates representing such Shares bear such legends, as the Committee, in its sole discretion, deems necessary or desirable. |
(b) | The exercise or settlement of any Incentive Award (including, without limitation, any Option) granted hereunder shall only be effective unless at such time counsel to Chewy shall have determined that the issuance and delivery of Shares pursuant to such exercise would not be in compliance with all applicable laws, regulations of governmental authority and the requirements of any securities exchange on which Shares are traded. Chewy may, in its sole discretion, defer the effectiveness of any exercise or settlement of an Incentive Award granted hereunder in order to allow the issuance of Shares pursuant thereto to be made pursuant to registration or an exemption from registration or other methods for compliance available under |
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federal or state or local securities laws. Chewy shall inform the Participant in writing of its decision to defer the effectiveness of the exercise or settlement of an Incentive Award granted hereunder. During the period that the effectiveness of the exercise of an Incentive Award has been deferred, the Participant may, by written notice, withdraw such exercise and obtain the refund of any amount paid with respect thereto.
15. | Withholding Taxes |
(a) | Cash Remittance. Whenever withholding tax obligations are incurred in connection with any Incentive Award, Chewy shall have the right to require the Participant to remit to Chewy in cash an amount sufficient to satisfy federal, state and local withholding tax requirements, if any, attributable to such event. In addition, upon the exercise or settlement of any Incentive Award in cash, or the making of any other payment with respect to any Incentive Award (other than in Shares), Chewy shall have the right to withhold from any payment required to be made pursuant thereto an amount sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such exercise, settlement or payment. |
(b) | Share Remittance. At the election of the Participant, subject to the approval of the Committee, whenever withholding tax obligations are incurred in connection with any Incentive Award, the Participant may tender to Chewy a number of Shares that have been owned by the Participant (or such other period as the Committee may determine) having a Fair Market Value at the tender date determined by the Committee to be sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such event. Such election shall satisfy the Participant’s obligations under Section 15(a) hereof, if any. |
(c) | Share Withholding. At the election of the Participant, subject to the approval of the Committee, whenever withholding tax obligations are incurred in connection with any Incentive Award, Chewy shall withhold a number of such shares having a Fair Market Value determined by the Committee to be sufficient to satisfy the federal, state and local withholding tax requirements, if any, attributable to such event. Such election shall satisfy the Participant’s obligations under Section 15(a) hereof, if any. |
16. | Amendment or Termination of the Plan |
The Board of Directors may at any time suspend or discontinue the Plan or revise or amend it in any respect whatsoever; provided, however, that to the extent that any applicable law, tax requirement, or rule of a stock exchange requires shareholder approval in order for any such revision or amendment to be effective, such revision or amendment shall not be effective without such approval. The preceding sentence shall not restrict the Committee’s ability to exercise its discretionary authority hereunder pursuant to Section 4 hereof, which discretion may be exercised without amendment to the Plan. No provision of this Section 16 shall be given effect to the extent that such provision would cause any tax to become due under Section 409A of the Code with regard to Incentive Awards subject to Section 409A of the Code. Except as expressly provided in the Plan, no action hereunder may, without the consent of a Participant, adversely affect in any material respect the Participant’s rights under any previously granted and outstanding Incentive Award. Nothing in the Plan shall limit the right of the Company to pay compensation of any kind outside the terms of the Plan.
17. | Recoupment |
Notwithstanding anything in the Plan or in any Award Agreement to the contrary, the Company will be entitled to the extent required by (i) applicable law (including, without limitation, the Dodd-Frank Wall Street Reform and Consumer Protection Act), (ii) the requirements of an exchange on which the Company’s Shares are listed for trading or (iii) any policy adopted by the Company, in each case, as in effect from time to time to recoup compensation of whatever kind paid by the Company at any time to a Participant under the Plan.
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18. | No Obligation to Exercise |
The grant to a Participant of an Incentive Award shall impose no obligation upon such Participant to exercise such Incentive Award.
19. | Transfers |
Incentive Awards may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of a Participant, only by the Participant; provided, however that the Committee may permit Options to be sold, pledged, assigned, hypothecated, transferred, or disposed of, on a general or specific basis, subject to such conditions and limitations as the Committee may determine. Upon the death of a Participant, outstanding Incentive Awards granted to such Participant may be exercised only by the executors or administrators of the Participant’s estate or by any Person or Persons who shall have acquired such right to exercise by will or by the laws of descent and distribution. No transfer by will or the laws of descent and distribution of any Incentive Award, or the right to exercise any Incentive Award, shall be effective to bind Chewy unless the Committee shall have been furnished with (a) written notice thereof and with a copy of the will and/or such evidence as the Committee may deem necessary to establish the validity of the transfer and (b) an agreement by the transferee to comply with all the terms and conditions of the Incentive Award that are or would have been applicable to the Participant and to be bound by the acknowledgments made by the Participant in connection with the grant of the Incentive Award.
20. | Expenses and Receipts |
The expenses of the Plan shall be paid by Chewy. Any proceeds received by Chewy in connection with any Incentive Award will be used for general corporate purposes.
21. | Relationship to Other Benefits |
No payment with respect to any Incentive Awards under the Plan shall be taken into account in determining any benefits under any pension, retirement, profit sharing, group insurance or other benefit plan of the Company except as otherwise specifically provided in such other plan.
22. | Governing Law |
The Plan and the rights of all Persons under the Plan shall be construed and administered in accordance with the laws of the state of Delaware without regard to its conflict of law principles.
23. | Severability |
If all or any part of the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity shall not serve to invalidate any portion of the Plan not declared to be unlawful or invalid. Any Section or part of a Section so declared to be unlawful or invalid shall, if possible, be construed in a manner that will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
24. | Effective Date and Term of Plan |
The Effective Date of the Plan is July 11, 2024. If the Plan is not approved by the Company’s shareholders, the Plan will not become effective and no Incentive Awards will be granted under the Plan, and the Prior Plan will continue in full force and effect in accordance with its terms. No grants of Incentive Awards may be made under the Plan after the tenth anniversary of the date upon which the Plan was approved by the Company’s shareholders.
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CERTIFICATE OF INCORPORATION
OF
CHEWY, INC.
Chewy, Inc. (the “Company”), a corporation organized and existing under the General Corporation Law of the State of Delaware (“DGCL”), does hereby certify as follows:
(1) The original Certificate of Incorporation of the Company was filed with the office of the Secretary of State of the State of Delaware (the “Secretary”) on March 16, 2016. The original certificate of incorporation was amended and restated by the filing of an amended and restated certificate of incorporation with the Secretary on April 18, 2016. The amended and restated certificate of incorporation was amended by the filing of a certificate of amendment to the amended and restated certificate of incorporation with the Secretary on May 11, 2016. The amended and restated certificate of incorporation was further amended and restated by filing a second amended and restated certificate of incorporation with the Secretary on April 4, 2017. The second amended and restated certificate of incorporation was amended and restated by the filing of a certificate of merger with the Secretary on May 31, 2017 (the “Third Amended and Restated Certificate of Incorporation”). The Third Amended and Restated Certificate of Incorporation was further amended by the filing of an amended and restated certificate of incorporation with the Secretary on June 13, 2019 (the “Fourth Amended and Restated Certificate of Incorporation”). The Fourth Amended and Restated Certificate of Incorporation was further amended by the filing of a certificate of amendment to the Fourth Amended and Restated Certificate of Incorporation with the Secretary on July 14, 2023.
(2) This Fifth Amended and Restated Certificate of Incorporation (as amended or modified from time to time, this “Amended and Restated Certificate of Incorporation”) was duly adopted in accordance with Sections 242 and 245 of the DGCL.
(3) This Amended and Restated Certificate of Incorporation amends restates and integrates the Fourth Amended and Restated Certificate of Incorporation.
(4) Effective as of 11:59 p.m. Eastern Time on July 11, 2024, the text of the Fourth Amended and Restated Certificate of Incorporation hereby is amended, restated and integrated in its entirety to read as follows:
ARTICLE I
NAME
The name of the Company is Chewy, Inc.
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the Company’s registered office in the State of Delaware is 1521 Concord Pike, Suite 201, Wilmington, New Castle County, Delaware 19803. The name of its registered agent at such address is Corporate Creations Network Inc.
ARTICLE III
PURPOSE
The purpose of the Company is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
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ARTICLE IV
CAPITAL STOCK
I. Authorized Capital.
The total number of shares of all classes of capital stock which the Company shall have authority to issue is 1,900,000,000, which shall be divided into three classes as follows: 1,500,000,000 shares of Class A common stock, par value $0.01 per share (“Class A Common Stock”); 395,000,000 shares of Class B common stock, par value $0.01 per share (“Class B Common Stock” and, together with Class A Common Stock, the “Common Stock”); and 5,000,000 shares of preferred stock, par value $0.01 per share (“Preferred Stock”).
The number of authorized shares of Preferred Stock or Common Stock may be increased or decreased (but not below the number of shares thereof then-outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Company entitled to vote thereon irrespective of the provisions of Section 242(b)(2) of the DGCL (or any successor provision thereto), and no vote of the holders of either the Common Stock or the Preferred Stock voting separately as a class shall be required therefor, unless a vote of any such holder is required pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock).
II. Common Stock.
A. Voting Rights.
1. Except as otherwise provided in this Amended and Restated Certificate of Incorporation or otherwise required by applicable law, the holders of shares of Class A Common Stock and Class B Common Stock shall at all times vote together as one class on all matters (including the election of directors) submitted to a vote or for the consent of the stockholders of the Company.
2. Each holder of Class A Common Stock shall be entitled to one vote for each share of Class A Common Stock held as of the applicable record date on any matter that is submitted to a vote or for the consent of the stockholders of the Company.
3. Except as otherwise provided in this Amended and Restated Certificate of Incorporation or otherwise required by applicable law, each holder of Class B Common Stock shall be entitled to ten votes for each share of Class B Common Stock held as of the applicable date on any matter that is submitted to a vote or for the consent of the stockholders of the Company.
B. Dividends. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, the holders of Class A Common Stock and the holders of Class B Common Stock shall be entitled to share equally, on a per share basis, in such dividends and other distributions of cash, property or shares of stock of the Company as may be declared by the Board of Directors of the Company (the “Board”) from time to time with respect to the Common Stock out of assets or funds of the Company legally available therefor; provided, however, that in the event that such dividend is paid in the form of shares of Common Stock or rights to acquire Common Stock, the holders of Class A Common Stock shall receive Class A Common Stock or rights to acquire Class A Common Stock, as the case may be, and the holders of Class B Common Stock shall receive Class B Common Stock or rights to acquire Class B Common Stock, as the case may be. Notwithstanding the foregoing, the Board may pay or make a disparate dividend or distribution per share of Class A Common Stock or Class B Common Stock (whether in the amount of such dividend or distribution payable per share, the form in which such dividend or distribution is payable, the timing of the payment, or otherwise) if such disparate dividend or distribution is approved in advance by the affirmative vote (or written consent) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
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C. Liquidation. Subject to the preferences applicable to any series of Preferred Stock, if any, outstanding at any time, in the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the Company, all assets of the Company of whatever kind available for distribution to the holders of Common Stock shall be divided among and paid ratably to the holders of the Class A Common Stock and the Class B Common Stock treated as a single class unless disparate or different treatment of the shares of each such class with respect to distributions upon any such liquidation, dissolution, distribution of assets or winding up is approved in advance by the affirmative vote (or written consent) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
D. Subdivision, Combination or Reclassification. If the Company in any manner subdivides, combines or reclassifies the outstanding shares of one class of Common Stock, the outstanding shares of the other class of Common Stock will be subdivided, combined or reclassified in the same manner; provided, however, that shares of one such class of Common Stock may be subdivided, combined or reclassified in a different or disproportionate manner if such subdivision, combination or reclassification is approved in advance by the affirmative vote (or written consent) of the holders of a majority of the outstanding shares of Class A Common Stock and Class B Common Stock, each voting separately as a class.
E. Equal Status. Except as expressly provided in this Article IV, Class A Common Stock and Class B Common Stock shall have the same rights and privileges and rank equally (including as to dividends and distributions, and upon any liquidation, dissolution, distribution of assets or winding up of the Company), share ratably and be identical in all respects as to all matters.
F. Conversion of Class B Common Stock.
1. Voluntary Conversion. Each share of Class B Common Stock shall be convertible into one fully paid and nonassessable share of Class A Common Stock at the option of the holder thereof with the prior written consent of the Company. Before any holder of Class B Common Stock shall be entitled voluntarily to convert any shares of such Class B Common Stock, such holder shall surrender the certificate or certificates therefor (if any), duly endorsed, at the principal corporate office of the Company or of any transfer agent for the Class B Common Stock, and shall give written notice to the Company at its principal corporate office of the election to convert the same and shall state therein the name or names (a) in which the certificate or certificates representing the shares of Class A Common Stock into which the shares of Class B Common Stock are so converted are to be issued if such shares are certificated or (b) in which such shares are to be registered in book entry if such shares are uncertificated. The Company shall, as soon as practicable thereafter, issue and deliver at such office to such holder of Class B Common Stock, or to the nominee or nominees of such holder, a certificate or certificates representing the number of shares of Class A Common Stock to which such holder shall be entitled as aforesaid (if such shares are certificated) or register such shares in book-entry form (if such shares are uncertificated). Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Class B Common Stock to be converted following or contemporaneously with the written notice of such holder’s election to convert and the prior written consent of the Company required by this Section II.F.1 of Article IV, and the person or persons entitled to receive the shares of Class A Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Class A Common Stock as of such date. Each share of Class B Common Stock that is converted pursuant to this Section II.F.1 of Article IV shall be retired by the Company and shall not be available for reissuance.
2. Automatic Conversion.
(a) Each share of Class B Common Stock shall automatically, without further action by the holder thereof, be converted into one fully paid and nonassessable share of Class A Common Stock (i) upon the occurrence of a Transfer (as defined below), other than a Permitted Transfer (as defined below), of such share of Class B Common Stock; or (ii) if the holder thereof is not or ceases to be an Affiliate of any of the Sponsors (as defined below).
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(b) All shares of Class B Common Stock shall automatically, without further action by any holder thereof, be converted into an identical number of shares of fully paid and nonassessable Class A Common Stock (i) on the first trading day on or after the date on which the outstanding shares of Class B Common Stock constitutes less than 7.5% of the aggregate number of shares of Common Stock then outstanding, as determined by the Board, or (ii) upon the occurrence of an event, specified by the affirmative vote (or written consent) of the holders of a majority of the then-outstanding shares Class B Common Stock, voting as a separate class (the occurrence of an event described in clause (a) or (b) of this Section II.F.2 of Article IV, a “Conversion Event”).
Each outstanding stock certificate that, immediately prior to a Conversion Event, represented one or more shares of Class B Common Stock subject to such Conversion Event shall, upon such Conversion Event, be deemed to represent an equal number of shares of Class A Common Stock, without the need for surrender or exchange thereof. The Company, or any transfer agent of the Company, shall, upon the request of any holder whose shares of Class B Common Stock have been converted into shares of Class A Common Stock as a result of a Conversion Event and upon surrender by such holder to the Company of the outstanding certificate(s) formerly representing such holder’s shares of Class B Common Stock (if any), issue and deliver to such holder certificate(s) representing the shares of Class A Common Stock into which such holder’s shares of Class B Common Stock were converted as a result of such Conversion Event (if such shares are certificated) or, if such shares are uncertificated, register such shares in book-entry form. Each share of Class B Common Stock that is converted pursuant to this Section II.F.2 of Article IV shall thereupon be retired by the Company and shall not be available for reissuance.
3. The Company may, from time to time, establish such policies and procedures, not in violation of applicable law or the other provisions of this Amended and Restated Certificate of Incorporation, relating to the conversion of the Class B Common Stock into Class A Common Stock, as it may deem necessary or advisable in connection therewith. If the Company has a reasonable basis to believe that a Transfer giving rise to a conversion of shares of Class B Common Stock into Class A Common Stock has occurred but has not theretofore been reflected on the books of the Company, the Company may request in writing that the holder of such shares furnish affidavits or other reasonable evidence to the Company as the Company deems necessary to determine whether a conversion of shares of Class B Common Stock to Class A Common Stock has occurred and if such holder does not, within 30 days after receipt of such written request, furnish reasonable evidence to the Company to enable the Company to determine that no such conversion has occurred, any such shares of Class B Common Stock, to the extent not previously converted, shall be automatically converted into shares of Class A Common Stock and the same shall thereupon be registered on the books and records of the Company. In addition, if the Company has a reasonable basis to believe that a holder of shares of Class B Common Stock is not or has ceased to be an Affiliate of any of the Sponsors giving rise to a conversion of shares of Class B Common Stock into Class A Common Stock, the Company may request in writing that the holder of such shares furnish affidavits or other reasonable evidence to the Company as the Company deems necessary to determine whether the holder of such shares is still an Affiliate of the Sponsors and if such holder does not, within 30 days after receipt of such written request, furnish reasonable evidence to the Company to enable the Company to determine that such holder is still an Affiliate of the Sponsors, any such shares of Class B Common Stock, to the extent not previously converted, shall be automatically converted into shares of Class A Common Stock and the same shall thereupon be registered on the books and records of the Company. In connection with any action of stockholders taken at a meeting or by written consent, the stock ledger of the Company shall be presumptive evidence as to who are the stockholders entitled to vote in person or by proxy at any meeting of stockholders or in connection with any such written consent and the class or classes or series of shares held by each such stockholder and the number of shares of each class or classes or series held by such stockholder.
4. Reservation of Stock. The Company shall at all times reserve and keep available out of its authorized but unissued shares of Class A Common Stock, solely for the purpose of effecting the conversion of the shares of Class B Common Stock, such number of shares of Class A Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Class B Common Stock into shares of Class A Common Stock.
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5. Protective Provisions. The Company shall not, whether by merger, consolidation or otherwise, amend, alter, repeal or waive this Section II of Article IV (or adopt any provision inconsistent therewith), unless such action is first approved by the affirmative vote (or written consent) of the holders of a majority of the then-outstanding shares of Class B Common Stock, voting as a separate class, in addition to any other vote required by applicable law, this Amended and Restated Certificate of Incorporation or the Bylaws (as defined in Article V hereof), and the holders of Class A Common Stock shall have no right to vote thereon.
G. Definitions. For purposes of this Article IV:
1. “Affiliate” means, with respect to any Person, any Person directly or indirectly controlling, controlled by or under common control with such Person.
2. “control” (including the terms “controlled by” and “under common control with”), with respect to the relationship between or among two or more Persons, means the possession, directly or indirectly, of the power to direct or cause the direction of the affairs or management of a Person, whether through the ownership of voting securities, by contract or otherwise.
3. “Permitted Transfer” means any of the following:
(i) any Transfer of shares of Class B Common Stock to a broker or other nominee; provided that the transferor, immediately following such Transfer, retains (1) Voting Control, (2) control over the disposition of such shares, and (3) the economic consequences of ownership of such shares;
(ii) any Transfer of shares of Class B Common Stock to a Sponsor or any Affiliate of a Sponsor; and
(iii) any Transfer approved by a majority of the shares of Class B Common Stock.
4. “Person” means any individual, corporation, limited liability company, limited or general partnership, joint venture, association, joint-stock company, trust, unincorporated organization or other entity, whether domestic or foreign.
5. “Sponsors” means BC Partners LLP, La Caisse de dépôt et placement du Québec, GIC Private Limited, Longview Asset Management LLC or StepStone Group LP and each of their respective Affiliates.
6. “Transfer” (including the term “Transferred”) of a share of Class B Common Stock means, directly or indirectly, any sale, assignment, transfer, conveyance, hypothecation or other transfer or disposition of such share or any legal or beneficial interest in such share, whether or not for value and whether voluntary or involuntary or by operation of law (including by merger, consolidation or otherwise), including, without limitation, the transfer of, or entering into a binding agreement with respect to, Voting Control over such share, by proxy or otherwise. Notwithstanding the foregoing, the following shall not be considered a “Transfer” within the meaning of this Article IV:
(i) the granting by a stockholder of a proxy to (y) officers or directors of the Company at the request of the Board, or (z) a representative of such stockholder, in connection with actions to be taken at an annual or special meeting of stockholders or in connection with any action by written consent of the stockholders;
(ii) the pledge of shares of Class B Common Stock by a stockholder that creates a mere security interest in such shares pursuant to a bona fide loan or indebtedness transaction for so long as such stockholder continues to exercise Voting Control over such pledged shares; provided, however, that a foreclosure on such shares or other similar action by the pledgee shall constitute a “Transfer” unless such foreclosure or similar action qualifies as a “Permitted Transfer” at such time; or
(iii) any change in the trustees or the Person(s) acting as a fiduciary with respect to a Sponsor having or exercising Voting Control over shares of Class B Common Stock of a Sponsor.
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7. “Voting Control” means, with respect to a share of Class B Common Stock, the power (whether exclusive or shared) to vote or direct the voting of such share by proxy, voting agreement or otherwise.
III. Preferred Stock.
A. Preferred Stock may be issued from time to time by the Company for such consideration as may be fixed by the Board. The Board is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for one or more series of Preferred Stock and, with respect to each such series, to fix, without further stockholder approval, the designation of such series, the powers (including voting powers), preferences and relative, participating, optional and other special rights, and the qualifications, limitations or restrictions thereof, of such series of Preferred Stock and the number of shares of such series, and as may be permitted by the DGCL. The powers, preferences and relative, participating, optional and other special rights of, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding.
B. Except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) or pursuant to the DGCL.
C. Except as otherwise required by law, holders of any series of Preferred Stock shall be entitled to only such voting rights, if any, as shall expressly be granted thereto by this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to such series of Preferred Stock).
ARTICLE V
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
A. | Notwithstanding anything contained in this Amended and Restated Certificate of Incorporation to the contrary, after the date on which the outstanding shares of Class B Common Stock represent less than 50% of the combined voting power of Class A Common Stock and Class B Common Stock, the following provisions in this Amended and Restated Certificate of Incorporation may be amended, altered, repealed or rescinded, in whole or in part, or any provision inconsistent therewith or herewith may be adopted, only by the affirmative vote of the holders of at least 75% in voting power of all the then-outstanding shares Class A Common Stock and Class B Common Stock entitled to vote thereon, voting together as a single class: Article V, Article VI, Article VII, Article VIII, Article IX and Article X. For the purposes of this Amended and Restated Certificate of Incorporation, beneficial ownership of shares shall be determined in accordance with Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (except, for the avoidance of doubt, holders of Class B Common Stock will not be deemed to be beneficial owners of Class A Common Stock). |
B. | The Board is expressly authorized to make, repeal, alter, amend and rescind, in whole or in part, the amended and restated bylaws of the Company (as in effect from time to time, the “Bylaws”) without the assent or vote of the stockholders in any manner not inconsistent with the laws of the State of Delaware or this Amended and Restated Certificate of Incorporation. Notwithstanding anything to the contrary contained in this Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote of the stockholders, after the date on which the outstanding shares of Class B Common Stock represent less than 50% of the combined voting power of Class A Common Stock and Class B Common Stock, in addition to any vote of the holders of any class or series of capital stock of the Company required herein (including any certificate of designation relating to any series of Preferred Stock), the Bylaws or applicable law, the affirmative |
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vote of the holders of at least 75% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class, shall be required in order for the stockholders of the Company to alter, amend, repeal or rescind, in whole or in part, any provision of the Bylaws or to adopt any provision inconsistent therewith.
ARTICLE VI
BOARD OF DIRECTORS
A. | Except as otherwise provided in this Amended and Restated Certificate of Incorporation or the DGCL, the business and affairs of the Company shall be managed by or under the direction of the Board. Except as otherwise provided for or fixed pursuant to the provisions of Article IV hereof (including any certificate of designation with respect to any series of Preferred Stock) and this Article VI relating to the rights of the holders of any series of Preferred Stock to elect additional directors, the total number of directors shall be determined from time to time by resolution adopted by the Board or the stockholders of the Company. The directors (other than those directors elected by the holders of any series of Preferred Stock, voting separately as a series or together with one or more other such series, as the case may be) shall be divided into three classes designated Class I, Class II and Class III. Each class shall consist, as nearly as possible, of one-third of the total number of such directors. Class I directors shall initially serve for a term expiring at the first annual meeting of stockholders following the date the Common Stock is first publicly traded (the “IPO Date”), Class II directors shall initially serve for a term expiring at the second annual meeting of stockholders following the IPO Date and Class III directors shall initially serve for a term expiring at the third annual meeting of stockholders following the IPO Date. At each succeeding annual meeting, successors to the class of directors whose term expires at that annual meeting shall be elected for a term expiring at the third succeeding annual meeting of stockholders. If the number of such directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director. Any such director shall hold office until the annual meeting at which his or her term expires and until his or her successor shall be elected and qualified, or his or her death, resignation, retirement, disqualification or removal from office. The Board is authorized to assign members of the Board to their respective class. |
B. | Subject to the rights granted to the holders of any one or more series of Preferred Stock then outstanding, any newly-created directorship on the Board that results from an increase in the number of directors and any vacancy occurring in the Board (whether by death, resignation, retirement, disqualification, removal or other cause) shall be filled by a majority of the directors then in office, even if less than a quorum, by a sole remaining director or by the stockholders; provided, however, that after the date on which the outstanding shares of Class B Common Stock represent less than 50% of the combined voting power of Class A Common Stock and Class B Common Stock, any newly-created directorship on the Board that results from an increase in the number of directors and any vacancy occurring on the Board shall be filled only by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director (and not by the stockholders). Any director elected to fill a vacancy or newly created directorship shall hold office until the next election of the class for which such director shall have been chosen and until his or her successor shall be elected and qualified, or until his or her earlier death, resignation, retirement, disqualification or removal. |
C. | Any or all of the directors (other than the directors elected by the holders of any series of Preferred Stock of the Company, voting separately as a series or together with one or more other such series, as the case may be) may be removed at any time either with or without cause by the affirmative vote of a majority in voting power of all outstanding shares of Common Stock entitled to vote thereon, voting as a single class; provided, however, that after the date on which the outstanding shares of Class B Common Stock represent less than 50% of the combined voting power of Class A Common |
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Stock and Class B Common Stock, any such director or all such directors may be removed only for cause and only by the affirmative vote of the holders of at least 662/3% in voting power of all the then-outstanding shares of stock of the Company entitled to vote thereon, voting together as a single class.
D. | Elections of directors need not be by written ballot unless the Bylaws shall so provide. |
E. | During any period when the holders of any series of Preferred Stock, voting separately as a series or together with one or more series, have the right to elect additional directors, then upon commencement and for the duration of the period during which such right continues: (i) the then otherwise total authorized number of directors of the Company shall automatically be increased by such specified number of directors, and the holders of such Preferred Stock shall be entitled to elect the additional directors so provided for or fixed pursuant to said provisions, and (ii) each such additional director shall serve until such director’s successor shall have been duly elected and qualified, or until such director’s right to hold such office terminates pursuant to said provisions, whichever occurs earlier, subject to his or her earlier death, resignation, retirement, disqualification or removal. Except as otherwise provided by the Board in the resolution or resolutions establishing such series, whenever the holders of any series of Preferred Stock having such right to elect additional directors are divested of such right pursuant to the provisions of such stock, the terms of office of all such additional directors elected by the holders of such stock, or elected to fill any vacancies resulting from the death, resignation, disqualification or removal of such additional directors, shall forthwith terminate and the total authorized number of directors of the Company shall be reduced accordingly. |
ARTICLE VII
LIMITATION OF DIRECTOR AND OFFICER LIABILITY
A. | To the fullest extent permitted by the DGCL as it now exists or may hereafter be amended, a director or officer of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty owed to the Company or its stockholders. |
B. | Neither the amendment nor repeal of this Article VII, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation, nor, to the fullest extent permitted by the DGCL, any modification of law shall eliminate, reduce or otherwise adversely affect any right or protection of a current or former director or officer of the Company existing at the time of such amendment, repeal, adoption or modification. |
ARTICLE VIII
CONSENT OF STOCKHOLDERS IN LIEU OF MEETING;
ANNUAL AND SPECIAL MEETINGS OF STOCKHOLDERS
A. | For as long as the outstanding shares of Class B Common Stock represent 50% or more of the combined voting power of Class A Common Stock and Class B Common Stock, any action required or permitted to be taken at any annual or special meeting of stockholders of the Company may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Company by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Company having custody of the books in which proceedings of meetings of stockholders are recorded. Delivery made to the Company’s registered office shall be made by hand, overnight courier or by certified or registered mail, return receipt requested. Once no shares of Class B Common Stock remain outstanding, any action required or permitted to be taken by the stockholders of the Company must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders; provided, however, |
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that any action required or permitted to be taken by the holders of Preferred Stock, voting separately as a series or separately as a class with one or more other such series, may be taken without a meeting, without prior notice and without a vote, to the extent expressly so provided by the applicable certificate of designation relating to such series of Preferred Stock.
B. | Except as otherwise required by law and subject to the rights of the holders of any series of Preferred Stock, special meetings of the stockholders of the Company for any purpose or purposes may only be called in the manner provided in the Bylaws. |
C. | An annual meeting of stockholders for the election of directors to succeed those whose terms expire and for the transaction of such other business as may properly come before the meeting, shall be held at such place, if any, on such date, and at such time as shall be fixed in the manner provided in the Bylaws. |
ARTICLE IX
COMPETITION AND CORPORATE OPPORTUNITIES
A. | In recognition and anticipation that (i) certain directors, principals, members, officers, associated funds, employees and/or other representatives of one or more of the Sponsors and their respective Affiliates (as defined below) may serve as directors, officers or agents of the Company, (ii) one or more of the Sponsors and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Company, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Company, directly or indirectly, may engage, and (iii) members of the Board who are not employees of the Company (“Non-Employee Directors”) and their respective Affiliates may now engage and may continue to engage in the same or similar activities or related lines of business as those in which the Company, directly or indirectly, may engage and/or other business activities that overlap with or compete with those in which the Company, directly or indirectly, may engage, the provisions of this Article IX are set forth to regulate and define the conduct of certain affairs of the Company with respect to certain classes or categories of business opportunities as they may involve any of the Sponsors, the Non-Employee Directors or their respective Affiliates and the powers, rights, duties and liabilities of the Company and its directors, officers and stockholders in connection therewith. |
B. | None of (i) the Sponsors or any of their respective Affiliates or (ii) any Non-Employee Director (including any Non-Employee Director who serves as an officer of the Company in both his or her director and officer capacities) or his or her Affiliates (the Persons (as defined below) identified in (i) and (ii) above being referred to, collectively, as “Identified Persons” and, individually, as an “Identified Person”) shall, to the fullest extent permitted by law, have any duty to refrain from directly or indirectly (1) engaging in the same or similar business activities or lines of business in which the Company or any of its Affiliates now engages or proposes to engage or (2) otherwise competing with the Company or any of its Affiliates, and, to the fullest extent permitted by law, no Identified Person shall be liable to the Company or its stockholders or to any Affiliate of the Company for breach of any fiduciary duty solely by reason of the fact that such Identified Person engages in any such activities. To the fullest extent permitted by law, the Company hereby renounces any interest or expectancy in, or right to be offered an opportunity to participate in, any business opportunity which may be a corporate opportunity for an Identified Person and the Company or any of its Affiliates, except as provided in Section D of this Article IX. Subject to Section D of this Article IX, in the event that any Identified Person acquires knowledge of a potential transaction or other matter or business opportunity which may be a corporate opportunity for itself, herself or himself and the Company or any of its Affiliates, such Identified Person shall, to the fullest extent permitted by law, have no fiduciary duty or other duty (contractual or otherwise) to communicate, present or offer such transaction or other business opportunity to the Company or any of its Affiliates and, to the fullest extent permitted by law, shall not be liable to the Company or its stockholders or to any Affiliate of the Company for breach of any fiduciary duty or other duty (contractual or otherwise) as a stockholder, director or officer of the Company solely by reason of the |
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fact that such Identified Person pursues or acquires such corporate opportunity for itself, herself or himself, offers or directs such corporate opportunity to another Person, or does not present such corporate opportunity to the Company or any of its Affiliates.
C. | The Company and its Affiliates do not have any rights in and to the business ventures of any Identified Person, or the income or profits derived therefrom, and the Company agrees that each of the Identified Persons may do business with any potential or actual customer or supplier of the Company or may employ or otherwise engage any officer or employee of the Company. |
D. | The Company does not renounce its interest in any corporate opportunity offered to any Non-Employee Director (including any Non-Employee Director who serves as an officer of the Company) if such opportunity is expressly offered to such person in writing solely in his or her capacity as a director or officer of the Company, and the provisions of Section B of this Article IX shall not apply to any such corporate opportunity. |
E. | In addition to and notwithstanding the foregoing provisions of this Article IX, a corporate opportunity shall not be deemed to be a potential corporate opportunity for the Company if it is a business opportunity that (i) the Company is neither financially or legally able, nor contractually permitted to undertake, (ii) from its nature, is not in the line of the Company’s business or is of no practical advantage to the Company or (iii) is one in which the Company has no interest or reasonable expectancy. |
F. | For purposes of this Article IX, (i) “Affiliate” shall mean (a) in respect of any Sponsor, any Person that, directly or indirectly, is controlled by such Sponsor, controls such Sponsor or is under common control with such Sponsor and shall include any principal, member, director, partner, stockholder, officer, employee or other representative of any of the foregoing (other than the Company and any entity that is controlled by the Company), (b) in respect of a Non-Employee Director, any Person that, directly or indirectly, is controlled by such Non-Employee Director (other than the Company and any entity that is controlled by the Company) and (c) in respect of the Company, any Person that, directly or indirectly, is controlled by the Company; and (ii) “Person” shall mean any individual, corporation, general or limited partnership, limited liability company, joint venture, trust, association or any other entity. |
G. | To the fullest extent permitted by law, any Person purchasing or otherwise acquiring any interest in any shares of capital stock of the Company shall be deemed to have notice of and to have consented to the provisions of this Article IX. Neither the alteration, amendment, addition to or repeal of this Article IX, nor the adoption of any provision of this Amended and Restated Certificate of Incorporation (including any certificate of designation relating to any series of Preferred Stock) inconsistent with this Article IX, shall eliminate or reduce the effect of this Article IX in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article IX, would accrue or arise, prior to such alteration, amendment, addition, repeal or adoption. |
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ARTICLE X
DGCL SECTION 203
A. | The Company hereby expressly elects not to be governed by Section 203 of the DGCL. |
ARTICLE XI
MISCELLANEOUS
A. | If any provision or provisions of this Amended and Restated Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Amended and Restated Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Amended and Restated Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Company to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Company to the fullest extent permitted by law. |
B. | Unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, or other employee or stockholder of the Company to the Company or the Company’s stockholders, creditors or other constituents, (iii) any action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the DGCL or this Amended and Restated Certificate of Incorporation or the Bylaws (as either may be amended and/or restated from time to time) or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware. |
C. | Unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. |
D. | To the fullest extent permitted by law, any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Company shall be deemed to have notice of and consented to the provisions of Section B and Section C of Article XI. |
IN WITNESS WHEREOF, Chewy, Inc. has caused this Fifth Amended and Restated Certificate of Incorporation to be executed by its duly authorized officer on this 11th day of July, 2024.
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