CVGW Calavo Growers Inc

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549  

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SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )  

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Filed by the Registrant  ⌧    

Filed by a party other than the Registrant  ◻

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Check the appropriate box:

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Calavo Growers, Inc.

(Name of Registrant as Specified In Its Charter)

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

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Payment of Filing Fee (Check the appropriate box):

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The First Name in Avocados

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LETTER TO OUR SHAREHOLDERS:

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To Our Shareholders:

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Fiscal 2021 was a year of tremendous change for Calavo Growers, including the company’s leadership. I am writing you today as the new Chairman of the Board of Calavo Growers, and I am very pleased to introduce our new President and Chief Executive Officer Brian Kocher. Brian and I began our new roles February 1, 2022. While Brian is new to Calavo, I have a long history with the company, having served on the board since 2008, and I recently served as interim CEO. We also have a new Chief Financial Officer and Calavo’s first ever Chief Human Resources Officer with Mariela Matute and Graciela Montgomery, respectively, joining the rest of our great team in October.

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Calavo is a 98-year-old company with a proud heritage and a long track record of success. The past two years, however, have been difficult due in part to the ongoing COVID-19 pandemic. Labor shortages and supply chain bottlenecks carried over from 2020. These difficulties eased throughout the year, but they did not disappear. In addition, increased freight costs, sub-optimal fruit mix, and higher fruit pricing weighed on our performance in fiscal 2021.

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Committed to the Dividend

Despite the tough circumstances, the Board of Directors remained committed to Calavo’s annual dividend and paid out $1.15 per share in November, which was at the same level as 2020. As a company that has paid a dividend since becoming public in 2002, we believe it was important to continue this tradition and benefit to shareholders, and it reflects our belief that Calavo is fundamentally strong and poised to return to historical levels of profitability in the near term.

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To accelerate our return to historic levels of profitability, we are methodically and urgently addressing key priorities. We began by hiring Teneo, an advisory firm, to help us assess our opportunities and accelerate transitioning our business to succeed in this new operating environment. In that effort we began Project Uno, a comprehensive profit improvement project with initial focus on pricing initiatives, SKU rationalization, plant optimization and unified procurement, freight and back-office activities across all business units.

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Project Uno

Under the umbrella of Project Uno we have:

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There is more to do, but we are off to a strong start, and we are confident these efforts will get us back on track and lead to long-term, sustainable profitable growth.

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In July we published our third annual sustainability report. In it, we reviewed materiality results using the “five factor test” from the Sustainability Accounting Standards Board; reported on our first assessment of our carbon footprint by calculating direct and indirect greenhouse gas emissions, which now serves as our baseline; and highlighted our Uruapan, Mexico facility for receiving the Clean Industry Distinction for the 10^th consecutive year. In 2021, we committed more than $4 million for waste reduction, water conservation, recycling, and energy control projects over the next four years. With an average payback time of two years, this investment once again demonstrates that doing the right thing for the environment is the right thing to do for business.

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In Conclusion

Our new team is in place, we are on the right path, and we are ready to do the hard work ahead to bring Calavo back to the level of performance established over nine decades. We appreciate the work of our 4,000 employees who keep the company going. We appreciate our customers who are the reason we exist. We appreciate the members of our Board of Directors for their support and their guidance. We appreciate our shareholders for your continued belief in the success of Calavo Growers. Thank you.

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Sincerely,

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/s/ Steven Hollister

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Steven Hollister

Chairman of the Board

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The First Name in Avocados

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LETTER TO OUR SHAREHOLDERS:

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To Our Shareholders:

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It is my privilege to address you as the new President & Chief Executive Officer of Calavo Growers, and I could not be more enthusiastic about our future as a company. First, I would like to thank Steve Hollister for his leadership as interim CEO. We are fortunate that he will continue as Calavo’s Chairman of the Board where he will help guide our strategy and vision. His knowledge and experience are invaluable, and I look forward to working with him to drive Calavo to greater heights.

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Legacy of Leadership & Innovation

Calavo has a legacy of leadership and innovation. I have been in the produce industry for 17 years, and I can say with confidence that Calavo is well-positioned and well-respected within the industry. Our products are healthy, sustainable, convenient, and a great value – exactly what our customers and consumers desire.

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Fresh avocado consumption continues to grow rapidly as more and more consumers understand the nutritional benefits of this superfood. The prepared products from our Foods and RFG segments hit the sweet spot for people who want convenient, healthy foods – and that makes our products relevant to our customers. We will constantly strive to know where our customers are headed so that we can lead by providing great products and great service at a fair price. If we do that, we will be positioned to grow for decades to come.

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In fact, the combination of great products; strong and accelerating consumer trends for health, wellness and convenience; and an operating infrastructure that sustainably benefits not only our current consumers but those consumers for years to come is exactly the reason I decided to join Calavo.

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Clarity, Teamwork, Adapting, Understanding

My role as CEO, as I see it, is to bring clarity to our organization through a common purpose, with goals and objectives that help us to operate better, make better decisions, and focus on the things that matter to us and to our customers. We will relentlessly execute this focus and the financial discipline necessary to drive operational and financial improvements.  Clarity of purpose, teamwork, adapting to customers and understanding consumers is a winning formula in any industry, and I believe that is how we put Calavo back on a path of sustainable profitable growth and how we generate shareholder value.  Our employees are dedicated and passionate about our vision forward, and I am so excited to team with my colleagues and drive success.  

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Calavo Growers has a wonderful history and a bright future. I am honored and humbled to lead this great company and 4,000 strong team of colleagues for many years ahead.

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Sincerely,

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/s/: Brian Kocher

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Brian W. Kocher

President & Chief Executive Officer

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1141-A Cummings Road

Santa Paula, California 93060

(805) 525-1245

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QUESTIONS AND ANSWERS ABOUT THE PROXY MATERIALS AND THE ANNUAL MEETING

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Proxy Materials

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Why am I receiving these materials?

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The Board of Directors (the “Board”) of Calavo Growers, Inc. (“Calavo,” the “Company,” “we,” our” or “us”), a California corporation, is providing these proxy materials for you in connection with our annual meeting of shareholders, which will take place on April 27, 2022. As a shareholder, you are invited to virtually attend the annual meeting and are entitled to, and requested to, vote on the items of business described in this proxy statement. This proxy statement includes information that we are required to provide to you under the rules of the U.S. Securities and Exchange Commission (the “SEC”) and that is designed to assist you in voting your shares. Due to the COVID-19 pandemic, the Annual Meeting will be held in a partially virtual format to provide a safe alternative for our shareholders and employees.

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Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?

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In accordance with the rules adopted by the SEC, we may furnish proxy materials, including this proxy statement and our 2021 Annual Report, to our shareholders by providing access to such documents on the Internet instead of mailing printed copies. Most shareholders will not receive printed copies of the proxy materials unless they request them. Instead, the Notice of Internet Availability of Proxy Materials, which we will begin mailing to our shareholders on or about March 7, 2022, will instruct you as to how you may access and review all of the proxy materials over the Internet. The notice also instructs you as to how you may submit your proxy on the Internet. If you would like to receive a paper or email copy of our proxy materials, you should follow the instructions for requesting such materials in the Notice.

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What is included in the proxy materials?

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The proxy materials include:

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What information is contained in this proxy statement?

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The information included in this proxy statement relates to the proposals to be voted on at the annual meeting, the voting process, our Board and Board committees, the compensation of our directors and current executive officers, and other required information.

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How may I obtain a copy of Calavo’s 2021 Annual Report to Shareholders, Form 10-K and/or other financial information?

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A copy of our 2021 Annual Report to Shareholders, which includes our 2021 Form 10-K, is available without charge at http://ir.calavo.com/financial-information or by emailing 2022proxy@calavo.com.

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How may I request multiple sets of the Notice of Internet Availability of Proxy Materials or proxy materials if two or more shareholders reside in my household?

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We have adopted a procedure called "householding." Under this procedure, we may deliver a single copy of the Notice of Internet Availability of Proxy Materials and, if you requested printed versions by mail, this proxy statement and the 2021 Annual Report to multiple shareholders who share the same address unless we have received contrary instructions from one or more of the shareholders. This procedure reduces the environmental impact of our annual meetings and reduces our printing and mailing costs. Shareholders who participate in householding will continue to receive separate proxy cards. Upon written or oral request, we will deliver promptly a separate copy of the Notice of Internet Availability of Proxy Materials and, if you requested printed versions by mail, this proxy statement and the 2021 Annual Report to any shareholder that elects not to participate in householding. Requests for additional copies of the Notice of Internet Availability of Proxy Materials, and if you requested printed version by mail, this proxy statement and 2021 Annual Report, and requests that in the future separate documents be sent to shareholders who share an address, should be directed by emailing 2022proxy@calavo.com. In addition, you can call (805)525-1245, or write to 1141-A Cummings Road, Santa Paula, Ca 93060.

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How may I request a single Notice of Internet Availability of Proxy Materials or set of proxy materials for my household?

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If you share an address with another shareholder and have received multiple copies of our Notice of Internet Availability of Proxy Materials or, if you requested printed versions by mail, proxy materials, you may write us at the email address set forth in the preceding paragraph to request delivery of a single copy of these materials.

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What should I do if I receive more than one set of voting materials?

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You may receive more than one set of voting materials, including multiple copies of Notice of Internet Availability of Proxy Materials and, if you requested printed versions by mail, this proxy statement and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you may receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a shareholder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete each Calavo proxy card and voting instruction card that you receive.

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Voting Information

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What items of business will be voted on at the annual meeting?

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The items of business scheduled to be voted on at the annual meeting are:

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We also will consider any other business that properly comes before the annual meeting. See “What is the deadline to propose actions for consideration at next year’s annual meeting of shareholders?” below.

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What happens if additional matters are presented at the annual meeting?

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Other than the three items of business described in this proxy statement, we are not aware of any other business to be acted upon at the annual meeting. If you grant a proxy, the persons named as proxy holders, J. Link Leavens and Steven Hollister, will have the discretion to vote your shares on any additional matters properly presented for a vote at the

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meeting. If for any reason any of our nominees are not available as candidates for directors, the persons named as proxy holders will vote your proxy for such other candidate or candidates as may be nominated by the Board.

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How does the Board recommend that I vote?

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Our Board recommends that you vote your shares FOR each of the ten nominees for election to the Board, FOR the ratification of our independent registered public accounting firm for the 2022 fiscal year, and FOR the approval of the compensation of Calavo’s named executive officers.

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What is the difference between holding shares as a shareholder of record and as a beneficial owner?

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Many Calavo shareholders hold their shares through a broker, or other nominee, rather than directly in their own names. As summarized below, there are some distinctions between shares held of record and those owned beneficially.

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Shareholder of Record

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If your shares are registered directly in your name with our transfer agent, Computershare, you are considered, with respect to those shares, the shareholder of record, and we are sending the Notice of Internet Availability of Proxy Materials or the proxy materials directly to you. As the shareholder of record, you have the right to grant your voting proxy directly to us or to vote in person at the meeting.

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Beneficial Owner

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If your shares are held in a brokerage account, or by another nominee, you are considered the beneficial owner of shares held in street name, and the Notice of Internet Availability of Proxy Materials or the proxy materials are being forwarded to you by your broker, trustee or nominee together with a voting instruction card. As the beneficial owner, you have the right to direct your broker, trustee or nominee how to vote and are also invited to attend the annual meeting.

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Since a beneficial owner is not the shareholder of record, you may not vote these shares at the meeting, unless you obtain a "legal proxy" from the broker, trustee or nominee that holds your shares, giving you the right to vote the shares at the meeting. Your broker, trustee or nominee should provide voting instructions for you to use in directing the broker, trustee or nominee how to vote your shares.

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What shares can I vote?

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Each share of Calavo common stock issued and outstanding as of the close of business on February 28, 2022, the Record Date for the annual meeting, is entitled to be voted on all items being voted upon at the annual meeting. You may vote all shares owned by you as of this time, including (1) shares held directly in your name as the shareholder of record, and (2) shares held for you as the beneficial owner through a broker, trustee or other nominee such as a bank. On the Record Date, we had approximately 17.7 million shares of common stock issued and outstanding.

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How can I vote my shares in person at the meeting?

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Shares held in your name as the shareholder of record may be voted in person at the annual meeting.  Shares held beneficially in street name may be voted in person at the annual meeting only if you obtain a legal proxy from the broker, trustee or nominee that holds your shares giving you the right to vote the shares.  Even if you plan to attend the annual meeting, we recommend that you also submit your proxy or voting instructions as described below so that your vote will be counted if you later decide not to attend the meeting. 

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How can I vote my shares without attending the annual meeting?

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Whether you hold shares directly as the shareholder of record or beneficially in street name, you may direct how your shares are voted without attending the annual meeting. If you are a shareholder of record, you may vote by submitting a proxy. If you hold shares beneficially in street name, you may vote by submitting voting instructions to your broker, trustee or nominee. For directions on how to vote, please refer to the instructions below and those included on the Notice of Internet Availability of Proxy Materials or, for shares held beneficially in street name, the voting instructions provided by your broker, trustee or nominee.

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Shareholders of record of Calavo common stock may submit proxies by following the instructions set forth in the Notice of Internet Availability of Proxy Materials or completing, signing and dating their proxy cards and mailing them in the accompanying pre-addressed envelopes, as applicable.

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What is the deadline for voting my shares?

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If you hold shares as the shareholder of record, your vote by proxy must be received before the polls close at the annual meeting on April 27, 2022 at 1:00 p.m. pacific time.

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If you are the beneficial owner of shares held through a broker, trustee or other nominee, please follow the voting instructions provided by your broker, trustee or nominee.

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May I change my vote?

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You may change your vote at any time prior to the vote at the annual meeting on April 27, 2022 at 1:00 p.m. pacific time. If you are the shareholder of record, you may change your vote at any time before it is voted at the meeting by transmitting a new proxy bearing a later date (which automatically revokes the earlier proxy), by sending a written notice of revocation to the Corporate Secretary for receipt prior to the meeting at the email address shown under the question below titled, “What is the deadline to propose actions for consideration at next year's annual meeting of shareholders?”. For shares you hold beneficially in the name of a broker, trustee or other nominee, you may change your vote by submitting new voting instructions to your broker, trustee or nominee.

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Is my vote confidential?

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Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within Calavo or to third parties, except: (1) as necessary to meet applicable legal requirements, (2) to allow for the tabulation of votes and certification of the vote, and (3) to facilitate a successful proxy solicitation. Occasionally, shareholders provide on their proxy card written comments, which are then forwarded to Calavo management.

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How may I vote on each proposal?

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In the election of directors, you may vote "FOR" or "WITHHOLD AUTHORITY" with respect to each of the nominees.

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In the election of directors, you also may cumulate your votes as described in the question below titled, "Is cumulative voting permitted for the election of directors?"

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You may vote "FOR," "AGAINST" or "ABSTAIN" with respect to the proposal to ratify the appointment of our independent registered public accounting firm for the 2022 fiscal year.

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You may vote "FOR," "AGAINST" or "ABSTAIN" with respect to the advisory vote on executive compensation.

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If you provide specific instructions with regard to certain items, your shares will be voted as you instruct on such items. If you vote online or sign and return a proxy card or voting instruction card without giving specific instructions, your shares will be voted in accordance with the recommendations of the Board (FOR all of our nominees to the Board, FOR ratification of the appointment of our independent registered public accounting firm, and FOR the advisory approval of the compensation of Calavo’s named executive officers.

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What happens if a director nominee receives a greater number of “WITHHELD” votes than “FOR” votes?

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If a director nominee in an uncontested election receives a greater number of votes “WITHHELD” from his or her election than votes “FOR” that director’s election, the nominee must promptly offer his or her resignation to the Board. A committee consisting of the Board’s independent directors (which will specifically exclude any director who is required to offer his or her own resignation) will consider all relevant factors and decide on behalf of the Board the action to be taken with respect to such offered resignation and will determine whether to accept the resignation or take other action. The Company will publicly disclose the Board’s decision with regard to any resignation offered under these circumstances with an explanation of how the decision was reached, including, if applicable, the reasons for rejecting the offered resignation.

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What is the voting requirement to approve each of the proposals?

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In the election of directors, the ten director candidates receiving the highest number of affirmative votes will be elected. Approval to ratify the appointment of our independent registered public accounting firm for the 2022 fiscal year, and approval of the advisory vote on executive compensation each requires the affirmative vote of a majority of those shares present in person or represented by proxy and voting on that proposal at the annual meeting.

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If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of various national and regional securities exchanges, the organization that holds your shares may generally vote your shares on routine matters, but cannot vote your shares on non-routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not have the authority to vote on this matter with respect to your shares. This is generally referred to as a “broker non-vote.”

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Broker non-votes and abstentions will not affect the outcome of any of the proposals to be voted upon.

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Which ballot measures are considered “routine” or “non-routine”?

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The ratification of the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2022 (Proposal No. 2) is considered routine under applicable rules. A broker or other nominee may generally vote on routine matters, and therefore no broker non-votes are expected to exist in connection with Proposal No. 2.

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The election of directors (Proposal No. 1), and the advisory vote on executive compensation (Proposal No. 3) are considered non-routine under applicable rules. A broker or other nominee cannot vote without instructions on non-routine matters and, as a result, there may be broker non-votes on Proposals Nos. 1 and 3.

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Is cumulative voting permitted for the election of directors?

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In the election of directors, you may elect to cumulate your vote. Cumulative voting will allow you to allocate among the director nominees, as you see fit, the total number of votes equal to the number of director positions to be filled multiplied by the number of shares you hold. For example, if you own 100 shares of stock and there are 10 directors to be elected at the annual meeting, you may allocate 1,000 "FOR" votes (10 times 100) among as few or as many of the 10

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nominees to be voted on at the annual meeting as you choose. You may not cumulate your votes against a nominee. The ten nominees receiving the highest number of votes will be elected.

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If you are a shareholder of record and choose to cumulate your votes, you will need to submit a proxy card or, if you vote in person at the annual meeting, submit a ballot and make an explicit statement of your intent to cumulate your votes, either by so indicating in writing on the proxy card or by indicating in writing on your ballot when voting at the annual meeting. Note that online voting does not support cumulative voting for directors by shareholders of record. Note also that cumulative voting for directors will not be allowed via the live webcast.  Shareholders who wish to vote cumulatively for directors should provide proxy instructions before the Annual Meeting at www.proxyvote.com.  Shareholders will be able to vote cumulatively for directors in person at the Annual Meeting, but there will be no difference in the tallying of cumulative votes for directors provided through instructing a proxy in advance at www.proxyvote.com compared to voting in person at the Annual Meeting. Shareholders therefore need not attend the Annual Meeting in person simply to vote cumulatively for directors. If you hold shares beneficially through a broker, trustee or other nominee and wish to cumulate votes, you should contact your broker, trustee or nominee.

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If you vote online or by signing and returning a proxy card or voting instruction card with no further instructions, J. Link Leavens and Steven Hollister, as proxy holders, may cumulate and cast your votes in favor of the election of some or all of the applicable nominees in their sole discretion, except that none of your votes will be cast for any nominee as to whom you withhold your vote.

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Cumulative voting applies only to the election of directors. For all other matters, each share of common stock outstanding as of the close of business on February 28, 2022, the record date for the annual meeting, is entitled to one vote.

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Who will serve as inspector of elections?

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The inspector of elections will be a representative from investor communication company American Election Services, LLC.

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Who will bear the cost of soliciting votes for the annual meeting?

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We are making this solicitation and will pay substantially all of the costs of preparing, assembling, printing, mailing and distributing these proxy materials and soliciting votes. We have retained Broadridge Financial Solutions, to assist with the distribution and tabulation of proxies from the shareholders of record. We will also reimburse banks, brokers or other nominees for their costs of sending our proxy materials to beneficial owners. Directors, officers or other employees of ours may also solicit proxies from shareholders in person, by telephone, facsimile transmission or other electronic means of communication without additional compensation.

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Where can I find the voting results of the annual meeting?

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We intend to announce preliminary voting results at the annual meeting and publish final results on a Form 8-K filed with the SEC shortly after our annual meeting.

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What if I have questions for Calavo’s transfer agent?

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Please contact our transfer agent, contact information listed below, with questions concerning stock certificates, dividend checks, transfer of ownership or other matters pertaining to your stock account.

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Computershare Trust Company, N.A.

PO Box 505000

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Louisville, KY 40233-5000

Overnight Delivery:

462 South 4^th Street Suite 1600

Louisville, KY 40202

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(800) 962-4284

Foreign Holders: (781) 575-3120

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Shareholder website: www.computershare.com/investor

Shareholder online inquiries: www-us.computershare.com/Investor/Contact

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Annual Meeting Information

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What is the purpose of the annual meeting?

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At our annual meeting, shareholders will act upon the matters outlined in the notice of meeting on the cover page of this proxy statement, including the election of directors, the ratification of our independent registered public accounting firm, and an advisory vote on executive compensation.

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Who can attend the meeting?

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All shareholders as of the record date, or their duly appointed proxies, may attend the meeting. Due to the COVID-19 pandemic, the Annual Meeting will be held in a partially virtual format to provide a safe alternative for our shareholders and employees.

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For any shareholders who plan to attend the meeting in person, the Company will, to the extent practical, employ “social distancing” and limit physical interaction as recommended by public health authorities. Please contact 2022proxy@calavo.com if you plan on attending in person.

How many shares must be present or represented to conduct business at the annual meeting?

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The quorum requirement for holding the annual meeting and transacting business is that holders of a majority of shares of our common stock entitled to vote must be present in person or represented by proxy. Both abstentions and broker non-votes described previously in the question above titled, “What is the voting requirement to approve each of the proposals?” are counted for the purpose of determining the presence of a quorum.

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proxy statement for next year’s annual meeting, as well as any director nominations by a shareholder, must be delivered to our Corporate Secretary at the address specified in the preceding paragraph not earlier than the close of business on December 28, 2022 and not later than the close of business on January 27, 2023. Each such notice must be made by a shareholder of record and must also contain the information specified in our bylaws for director nominations and other shareholder proposals.

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How may I recommend or nominate individuals to serve as directors?

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You may propose director candidates for consideration by the Board's Nominating and Corporate Governance Committee. Any such recommendations should include the nominee's name and qualifications for Board membership and should be directed to our Corporate Secretary at the address of our principal executive offices set forth above.

In addition, our bylaws permit a shareholder to nominate directors for election at an annual shareholders’ meeting, but only if the shareholder complies with the procedures that are set forth in the bylaws. See “What is the deadline to propose actions for consideration at next year's annual meeting of shareholders?” above.

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How may I obtain a copy of Calavo’s Bylaw provisions regarding shareholder proposals and director nominations?

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Please email 2022proxy@calavo.com for a copy of the relevant bylaw provisions regarding the requirements for nominating director candidates and making shareholder proposals. In addition, our bylaws are included as an exhibit in our filed form 10-K filed with the SEC on December 21, 2021.

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How may I communicate with Calavo's Board of Directors?

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You may submit an e-mail to our Board at boardmembers@calavo.com. All directors have access to this e-mail address.

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CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS

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We are committed to having sound corporate governance principles. Having such principles is essential to running our business efficiently and to maintaining our integrity in the marketplace. We have adopted a code of business conduct and ethics that applies to all of our directors, officers and employees. Copies of our code of business conduct and ethics and our Board committee charters are posted on our website at http://www.calavo.com under “Investor Relations – Corporate Governance”.

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Shareholders may request free printed copies of our code of business conduct and ethics and our Board committee charters by emailing 2022proxy@calavo.com.

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Board Structure, Independence of Directors and Committee Composition

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As of the date of this proxy statement, our Board has ten directors. The Board has recommended the election of the ten director nominees who are identified in this proxy statement, each of whom currently is a director of Calavo.

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The Board has determined that each of the following eight non-employee directors standing for election is independent under applicable NASDAQ rules: Marc L. Brown, Michael A. DiGregorio, James Helin, Kathleen Holmgren, Adriana Mendizabal, Steven Hollister, Farha Aslam and John M. Hunt.

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The Board has the following five committees: (1) Executive, (2) Audit, (3) Nominating and Corporate Governance, (4) Compensation, and (5) Sustainability and Corporate Responsibility Committee. The membership during the last fiscal year and through the date of this proxy statement, and the function of each of the committees, are described below. During fiscal year 2021, the Board held 8 meetings. Each director attended at least 75% of all Board and applicable Committee meetings for which he or she served as a Committee member during the period of time that each such director was a member of the Board. Directors are encouraged by the Board to attend the annual meetings of Calavo’s shareholders, and all of our directors attended the 2021 annual meeting of shareholders in person or virtually.

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The Board has determined that each current member of the Audit Committee, Nominating and Corporate Governance Committee, Compensation Committee, and Sustainability and Corporate Responsibility Committee is independent within the meaning of applicable NASDAQ rules, and that each current member of the Audit Committee is independent within the meaning of applicable rules of the SEC and NASDAQ regarding the independence of audit committee members and meets NASDAQ’s financial knowledge and sophistication requirement. The Board has also determined that each member of the Compensation Committee is a “non-employee director” within the meaning of applicable SEC rules and is independent within the meaning of applicable NASDAQ rules regarding the independence of compensation committee members.

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*   Member.

** Chair.

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Executive Committee. The Executive Committee exercises the authority of the Board of Directors when the Board is not in session, as permitted by law.

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Audit Committee. The Audit Committee assists the Board and management in fulfilling their responsibilities for generally overseeing our financial reporting processes and the audit of our financial statements, including the integrity of our financial statements, our compliance with legal and regulatory requirements, the qualifications and independence of the independent registered public accounting firm, and the performance of our internal audit function and the independent registered public accounting firm. Among other things, the Audit Committee prepares the Audit Committee report for inclusion in the annual proxy statement; appoints, evaluates and determines the compensation of the independent registered public accounting firm; reviews and approves the scope of the annual audit, the audit fee and the financial statements; reviews our disclosure controls and procedures, internal controls, internal audit function, and corporate policies with respect to financial information and earnings guidance; oversees investigations into complaints concerning financial matters; reviews other risks that may have a significant impact on our financial statements; and reviews transactions with related persons. The Audit Committee works closely with management, as well as the independent registered public accounting firm.

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The Board has determined that Michael A. DiGregorio is an audit committee financial expert as defined by SEC rules and applicable listing standards.

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The report of the Audit Committee of the Board of Directors is included in the proxy statement on page 58. The charter of the Audit Committee is on our website at www.calavo.com under “Investor Relations – Corporate Governance”.

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Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee recommends candidates to be nominated for election as directors at our annual meeting, consistent with criteria approved by the Board; develops and reviews corporate governance principles and related policies for approval by the Board; periodically assesses the size and composition of the Board, including developing and reviewing director qualifications for approval by the Board; considers director candidates proposed by shareholders; reviews proposed changes to our Articles of Incorporation and Bylaws; and reviews shareholder proposals in conjunction with the Chairman of the Board and recommends Board responses.

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The charter of the Nominating and Corporate Governance Committee is on our website at www.calavo.com under “Investor Relations – Corporate Governance”.

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Compensation Committee. The Compensation Committee reviews and approves the Compensation Committee report required by the SEC for inclusion in the annual proxy statement and has authority to retain compensation consultants. Other specific duties and responsibilities of the Compensation Committee include reviewing and approving objectives relevant to executive officer compensation; determining the compensation of executive officers in accordance with those objectives; approving severance arrangements and other applicable agreements for executive officers; overseeing our equity-based and incentive compensation plans for executive officers; and recommending compensation policies and practices for service on the Board and its committees. For a description of the processes and procedures used by the Compensation Committee for the consideration and determination of executive and director compensation, see “Executive Compensation - Compensation Discussion and Analysis.”

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The charter of the Compensation Committee is posted on our website at www.calavo.com under “Investor Relations – Corporate Governance”.

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Sustainability and Corporate Responsibility Committee. The Sustainability and Corporate Responsibility Committee was created by the Board at the beginning of fiscal 2021. Calavo believes sustainable practices support long term ecological balance, environmental soundness and social equity. The Sustainability and Corporate Responsibility Committee reviews and approves sustainability goals and progress towards those goals and reviews the Company’s annual published sustainability report. Calavo’s sustainability policies and annual sustainability report is posted on our website at www.calavo.com under “sustainability”. The charter of the Sustainability and Corporate Responsibility Committee is posted on our website at http://ir.calavo.com/corporate-governance/governance-policies-and-documents/default.aspx.

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Board Operations

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Board Leadership Structure

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The leadership structure of the Board of Directors is centered on the concept of an appropriate balance between management and the Board of Directors.  The Board believes that it is in the best interest of Calavo and its shareholders for the Board to make a periodic determination regarding whether or not to separate the roles of Chairman and Chief Executive Officer based upon applicable facts and circumstances.  The Board believes that it is the best interest of Calavo and its shareholders that the positions of Chairman of the Board and Chief Executive Officer be separated.  The Board believes that this separation is desirable because it will allow the newly appointed Chief Executive Officer, Brian Kocher, to focus on the operations of Calavo while our new Chairman of the Board, Steven Hollister, focuses on long-range strategic issues and corporate governance.

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Board Refreshment

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The Board recognizes the importance of Board refreshment, and we accordingly allow for annual elections of all directors. The Nominating and Corporate Governance Committee evaluates the qualifications and performance of each incumbent director before recommending his or her nomination each year. With Scott Van Der Kar’s decision to not stand for re-election, the Board identified and appointed Ms. Adriana Mendizabal to the Board, effective December 1, 2021. Ms. Mendizabal brings to the Board extensive experience with leading business turnarounds and igniting new businesses to achieve sustainable growth. Ms. Mendizabal’s nomination demonstrates the Board’s commitment to refreshment with independent nominees who provide perspectives and experience to advance our near- and long-term business strategy.

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Self-Evaluations

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The Board and each committee other than the Executive Committee have historically informally conducted annual self-evaluations. Beginning in 2021 the Nominating and Corporate Governance Committee implemented and oversaw a formalized process of self-evaluations, which includes interviews, discussions and written questionnaires.

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The self-evaluations cover the following topics, among others:

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Sustainability

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Sustainability has become increasingly important to our customers, employees, and business strategy, and we are focused on operating our business in a sustainable manner. Sustainability is a key topic of conversation in all material aspects of our business. Our sustainability strategy includes:

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At the beginning of fiscal 2021, we established a new Sustainability & Corporate Responsibility Committee to oversee our initiatives relating to sustainability and corporate social responsibility.

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See our website’s sustainability section, including our annual sustainability report, for more information. The information on our website is not part of this Proxy Statement.

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Director Orientation and Continuing Education

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New directors participate in an orientation program and receive materials and briefings to acquaint the director with our business, strategies and governance policies and other documents. Continuing education is provided for all directors through board materials and presentations, discussions with management, visits to our facilities and our membership in NACD (National Association of Corporate Directors).

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Risk Oversight

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The Board provides oversight of our risk management processes. The Board performs this function as a whole and by delegating to its key committees, each of which meets regularly and reports back to the Board. The committees’ responsibilities are summarized below. While the Board and its committees oversee risk management, management is charged with managing enterprise risks. The Board recognizes that it is neither possible nor desirable to eliminate all risk; rather, the Board views appropriate risk taking as essential to our long-term success and seeks to understand and oversee critical business risks in the context of our business strategy, the magnitude of the particular risks and the proper allocation of our risk management and mitigation resources.

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Audit Committee

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Compensation Committee

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Nominating and Corporate Governance Committee

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Sustainability & Corporate Responsibility Committee

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Our internal control environment facilitates the identification and management of risks and regular communications with the Board. The Board and its committees receive regular reports from senior managers on areas of material risk, including operational, financial, strategic, competitive, reputational, legal and regulatory risks, and how those risks are managed. These reports are informed by such things as an annual information security audit by certified information security auditors. We further have training and compliance programs to prepare staff to identify and escalate risks, for example with regard to information security. Each Board committee has access to outside counsel and may engage independent counsel.

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Anti-Hedging / Anti-Pledging Policy

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We maintain a policy that prohibits our directors and officers, members of our leadership team and other designated employees, if any, from entering into derivative or hedging transactions in our securities, pledging our securities as collateral for a loan or short-selling our securities, absent an exception granted by the Board of Directors or the Chair of the Nominating and Governance Committee for positions that predated this policy or in unusual circumstances that do not violate the spirit and intent of this policy. No such exception will be granted for short sales that would violate Section 16(c) if the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

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Director Nominees

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Shareholder Nominees

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The Nominating and Corporate Governance Committee will consider shareholder nominations for candidates for membership on the Board. In evaluating such nominations, the Nominating and Corporate Governance Committee seeks to achieve a balance of knowledge, experience and capability on the Board. Any shareholder nominations proposed for consideration by the Nominating and Corporate Governance Committee should include the nominee's name and qualifications for Board membership and should be emailed to 2022proxy@calavo.com.

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In addition, our bylaws permit shareholders to nominate directors for consideration at an annual shareholders’ meeting by following the procedures set forth in our bylaws. See "Questions and Answers— What is the deadline to propose actions for consideration at next year's annual meeting of shareholders?” above.

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Director Qualifications

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The Nominating and Corporate Governance Committee believes that members of the Board should have the highest professional and personal ethics and values, consistent with longstanding Calavo values and standards. They should have broad experience at the policy-making level in business, government, education, technology or public interest. They should be committed to enhancing shareholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on other boards of public companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of all shareholders.

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Neither the Nominating and Corporate Governance Committee nor the Board has a written policy regarding the consideration of diversity in identifying director nominees. However, in recommending candidates for appointment or election to the Board, the Nominating and Corporate Governance Committee seeks to have a Board consisting of directors with diverse backgrounds, skills, experiences and expertise and considers factors such as industry experience, unique expertise, gender diversity and other background diversity and prior business leadership and board positions. The Board and the Nominating and Corporate Governance Committee will endeavor to nominate candidates in compliance with applicable federal or state laws and rules regarding board diversity.

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Among our ten nominees for election to the Board, three self-identify as women, and three self-identify as an individual from an underrepresented community (meaning, an individual who self-identifies as Black, African American, Hispanic, Latino, Asian, Pacific Islander, Native American, or Alaska Native, or who self-identifies as gay, lesbian, bisexual, or transgender).

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Identifying and Evaluating Nominees for Director

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The Nominating and Corporate Governance Committee utilizes a variety of methods for identifying and evaluating nominees for director. The Nominating and Corporate Governance Committee will periodically assess the appropriate size of the Board and whether any vacancies on the Board are expected due to retirement or otherwise. In the event that vacancies are anticipated, or otherwise arise, the Nominating and Corporate Governance Committee will consider various potential candidates for director. Candidates may come to the attention of the Nominating and Corporate Governance Committee through current Board members, professional search firms, shareholders or other persons. These candidates will be evaluated at regular or special meetings of the Nominating and Corporate Governance Committee and may be considered at any point during the year. As described above, the Nominating and Corporate Governance Committee considers shareholder nominations for candidates for the Board. If any materials are provided by a shareholder in connection with the nomination of a director candidate, such materials will be forwarded to the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee will also review materials provided by professional search firms or other parties in connection with a nominee who is not proposed by a shareholder.

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Members of our Board self-identify as set forth in the table below:

*- One director identifies as both White and Latino.

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The Board of Directors unanimously recommends that you vote your shares “FOR” each of the ten nominees named above for election to the Board.

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COMMON STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

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The following table sets forth information, as of January 31, 2022, concerning beneficial ownership by:

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The information provided in the table is based on Calavo's records, information filed with the SEC and information provided to Calavo.

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The number of shares beneficially owned by each entity or individual is determined under SEC rules, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares as to which the entity or individual has sole or shared voting power or investment power and also any shares that the entity or individual has the right to acquire (within 60 days) through the exercise of any stock option or other right. Unless otherwise indicated, each person has sole voting and investment power (or shares such powers with his or her spouse) with respect to the shares set forth in the following table.

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*    Less than 1.0%.

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DELINQUENT SECTION 16(a) REPORTS

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Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors, executive officers and holders of more than 10% of our common stock to file with the SEC reports regarding their ownership and changes in ownership of our securities. We believe that, during fiscal year 2021, our directors, executive officers and 10% shareholders complied with all Section 16(a) filing requirements, with the following exceptions: for fiscal year 2021, James Gibson (late on two Form 4s representing four transactions), Scott Van Der Kar (late on one Form 4 representing two transactions), Dionisio Ortiz (late on one Form 4 representing one transaction), Joel Silva (late on one Form 4 representing one transaction), Kevin Manion (late on one Form 4 representing one transaction), Mark Lodge (late on one Form 4 representing one transaction), Michael DiGregorio (late on one Form 4 representing one transaction), and Farha Aslam (late on one Form 4 representing one transaction). In making this statement, we have relied upon our examination of the copies of Forms 3, 4 and 5, and amendments thereto, provided to us and the written representations of our directors, executive officers and 10% shareholders.

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TRANSACTIONS WITH RELATED PERSONS

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Calavo has adopted a written policy for approval of transactions between Calavo and its directors, director nominees, executive officers, beneficial owners of more than 5% of our common stock, and their respective immediate family members where the amount involved in the transaction exceeds or is expected to exceed $120,000 in a single calendar year.

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The policy provides that the Audit Committee reviews transactions subject to the policy and decides whether or not to approve or ratify those transactions. In doing so, the Audit Committee determines whether the transaction is in the best interests of Calavo. In making that determination, the Audit Committee takes into account, among other factors it deems appropriate:

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The Audit Committee has delegated authority to the chair of the Audit Committee to pre-approve or ratify transactions where the aggregate amount involved is expected to be less than $200,000. A summary of any new transactions pre-approved by the chair is provided to the full Board of Directors for its review in connection with the Board’s regularly scheduled meetings.

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The Audit Committee has adopted standing pre-approvals under the policy for limited transactions with related persons. Pre-approved transactions include:

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Two of our current directors and two directors, Scott Van Der Kar and Harold Edwards, both of whom retired on January 3, 2022, and February 1, 2022, respectively, are controlling shareholders, partners, executive officers and/or employees of entities that marketed in excess of $120,000 per year of avocados through us pursuant to customary marketing agreements during the 2021 fiscal year. During the fiscal year ended October 31, 2021, we paid the following amounts to each of those four directors or to an entity affiliated with the director with respect to avocados marketed through us:

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We did not have any amounts due to Board members as of October 31, 2021.

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During fiscal years 2021, we received $0.5 million as dividend income from Limoneira. In addition, we lease office space from Limoneira for our corporate office. Rent to Limoneira amounted to approximately $0.3 million for fiscal years 2021. Harold Edwards, who served on our Board during fiscal 2021 and resigned on February 1, 2022, is the Chief Executive Officer of Limoneira. We have less than 10% ownership interest in Limoneira. Calavo has an interest free loan outstanding of $0.2 million to a family member of a director of Limoneira. In February 2022, Limoneira terminated its marketing agreement with Calavo. Limoneira may still elect to market avocados through Calavo.

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FreshRealm is a start-up company, engaged in activities relating to the marketing of food products directly to consumers or other entities. On February 3, 2021, Calavo and FreshRealm entered into a Limited Liability Company Member Separation and Release Agreement (the Separation Agreement). Prior to the Separation Agreement, we had an equity investment in FreshRealm representing approximately 37% ownership of FreshRealm. We recorded an impairment of 100% of this equity investment, or $2.8 million, in the third quarter of fiscal 2020. We had a note receivable and trade receivables of approximately $34.5 million at October 31, 2020 (which includes accrued interest) from FreshRealm. We recorded a reserve of $34.5 million on this balance in the third quarter of fiscal 2020.

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Pursuant to the Separation Agreement among other terms: (i) Calavo terminated its limited liability company interest and equity ownership in FreshRealm; (ii) Calavo and FreshRealm simultaneously entered into an Amended and Restated Senior Secured Loan Agreement and Promissory Note (the “Amended Note”), which amended and restated the Prior

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Note; (iii) FreshRealm issued an additional Secured Promissory Note to Calavo in the amount of approximately $5 million that is subordinated to the Amended Note (the “Second Note”, together with the Amended Note, the “Notes”); (iv) in the event FreshRealm pays Calavo the sum of $6 million (the “Loan Payoff Amount”) by March 31, 2022, the Notes are deemed paid in full; (v) the parties agreed to a mutual release of any claims; and (vi) the parties agreed to indemnify each other from any subsequent third party claims.

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In July 2021, FreshRealm paid Calavo the Loan Payoff Amount of $6.0 million. Therefore, the Notes have been deemed paid in full.

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EXECUTIVE COMPENSATION

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COMPENSATION DISCUSSION AND ANALYSIS

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Overview

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This Compensation Discussion and Analysis explains the material elements of the compensation that was awarded to, earned by, or paid to each of our executive officers who is named below in the Summary Compensation Table during our 2021 fiscal year. Those executive officers are referred to below as the “named executive officers.”

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At the 2021 annual meeting of the shareholders, shareholders approved by 94% of the shares voting on an advisory basis the compensation of the named executive officers of Calavo as disclosed in Calavo’s 2021 proxy statement.

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Brian Kocher joined Calavo has President and Chief Executive Officer in February 2022. Prior to joining Calavo, Mr. Kocher has served as the President and Chief Executive Officer of the Castellini Group of Companies from January 2017 through January 2022, one of the largest distributors of fresh produce in the United States. Prior to his promotion to CEO, Mr. Kocher served as the company’s Chief Operating Officer from May 2015 through January 2017. Before his time at Castellini, Mr. Kocher held several executive roles, including Interim CEO, at Chiquita Brands International, a leading producer and distributor of bananas and other produce

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Steven Hollister has served as our Interim Chief Executive Officer since September 2021 and through January 2022. Prior to his recent appointment as Interim Chief Executive Officer, Mr. Hollister has been a Managing Member of Rocking Spade, LLC, a diversified investor and developer with interests in ranching and commercial properties, since 2001. Previously Mr. Hollister was Vice President of Sunrise Mortgage & Investment Company, General Manager of Niven Family Wine Estates, Chief Operating Officer of Fess Parker Winery & Vineyard and Santa Barbara County Wine Center, and Senior Vice President of Central Coast Farm Credit. Mr. Hollister has served on our board of directors for the last 13 years.

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Mariela Matute has served as our Chief Financial Officer since October 2021. Prior to her recent appointment as Chief Financial Officer, Ms. Matute has served as Director of Finance and Operations for Amazon Business, the business-to-business (B2B) online procurement division of Amazon.com, Inc. (NYSE: AMZN) from February 2017, where she managed a team of professionals across controllership, financial planning, pricing analytics, sales and operations planning, tech roadmap and payments. Also at Amazon, she served as Director of Finance and Operations for its Amazon Fresh division. From October 2015 to February 2017, she was Vice President, Finance and Chief Financial Officer of The Americas Region for Driscoll’s Inc., a global market leader of fresh berries, where she was responsible for treasury, finance, IT, real estate and procurement.

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Mark Lodge has served as our Chief Operations Officer since August 2020. From October 2019 to August 2020, Mr. Lodge has served as Executive Vice President of RFG Business Operations. Prior to joining Calavo, Mr. Lodge held the role of Executive Vice President from May 2017 to October 2019 for Revolution Foods supplying all-natural school meals across the United States.  Prior to Revolution Foods, Mr. Lodge was President of True Fresh HPP and True Food Innovations from January 2016 to February 2017 and was previously instrumental in the identification and implementation of the Fresh & Easy manufacturing business in the United States for Tesco, plc.

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Robert Wedin has served as our Executive Vice President since August 2020, and prior was Vice President since 1993. Mr. Wedin joined us in 1973 at our then Santa Barbara packinghouse. Beginning in 1990, Mr. Wedin served as a director of the California Avocado Commission for a period of ten years. Mr. Wedin currently is a board member of Producesupply.org and serves as a member of that organization's executive committee.

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Ronald Araiza has served as our Vice President since January 2017. Mr. Araiza served as Vice President at Del Rey Avocado from January 2015 to January 2016. He also served as Vice President at Mission Produce from January 1997 to May of 2015.

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Compensation Program Objectives and Philosophy

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The Compensation Committee of our Board of Directors oversees the design and administration of the compensation program for our executive officers. The Compensation Committee’s primary objectives in structuring and administering our executive officer compensation program are to:

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To achieve these goals, the Compensation Committee maintains compensation plans that tie a portion of executive officers’ overall compensation to key strategic goals, including financial and operational performance. The Compensation Committee evaluates individual executive performance with a goal of setting compensation at levels the Committee believes are comparable with those of executive officers at other public companies having a similar size and, generally, line of business, while taking into account our relative performance and our own strategic goals.

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The principal elements of our executive compensation program are base salaries, annual cash bonus awards, restricted stock grants, restricted stock unit grants and other benefits and perquisites, which are based upon the achievement of objective performance goals. Our other benefits and perquisites consist of life, disability and health insurance benefits, a qualified 401(k) savings plan and automobile allowances. The Compensation Committee also awards discretionary cash and/or stock-based bonuses in appropriate circumstances.

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We view these components of compensation as related, but distinct. Although the Compensation Committee does review total compensation, we do not believe that significant compensation derived from one component of compensation should negate or offset compensation from other components. We determine the appropriate level for each compensation component based in part, but not exclusively, on competitive benchmarking consistent with our recruiting and retention goals, our view of internal equity and consistency, and other considerations we deem relevant, such as rewarding extraordinary performance.

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Determination of Compensation Awards

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The Compensation Committee typically performs an annual strategic review of our executive officers’ compensation to determine whether such compensation provides adequate incentives and motivation to our executive officers and whether

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it adequately compensates our executive officers relative to comparable officers in other similarly situated companies. The Compensation Committee’s most recent review occurred in January 2022.

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From time to time, the Compensation Committee’s meetings involve, for all or a portion of each meeting, the Committee members, our Chief Executive Officer, our Chief Financial Officer, a recording secretary and/or other Board members. For compensation decisions relating to executive officers other than our Chief Executive Officer, the Compensation Committee considers recommendations from our Chief Executive Officer.

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When determining compensation for our Chief Executive Officer, the Compensation Committee considers such factors as competitive industry salaries, an assessment of the Chief Executive Officer’s contributions made during the preceding year and his industry expertise. Our Chief Executive Officer does not attend the portion of the Compensation Committee’s meetings regarding his compensation.

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Prior to the Tax Cuts and Jobs Act of 2017 (“TCJA”), Section 162(m) of the Internal Revenue Code generally disallowed a tax deduction to publicly held companies for compensation paid to certain executive officers in excess of $1 million per officer in any year that did not qualify as performance-based. Under the TCJA, the performance-based exception has been repealed and the $1 million deduction limit now applies to anyone serving (or who has served) as the chief executive officer or the chief financial officer at any time during a fiscal year and the top three other highest compensated executive officers serving at any fiscal year-end.

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Review of Compensation Surveys

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The Compensation Committee believes that it is important when making its compensation-related decisions to be informed as to the current practices of similarly situated companies. As a result, the Compensation Committee, from time to time, reviews broad-based third-party surveys and other information collected from public and private sources regarding the compensation for executive officers of comparably sized companies. The Compensation Committee considers the information in these surveys in connection with establishing the base salaries, performance-compensation awards, equity awards and other benefits and perquisites for our named executive officers.

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During fiscal 2021, the Compensation Committee retained an independent management consulting company, Korn Ferry. The Compensation Committee received from Korn Ferry reports that provided analyses and recommendations regarding compensation for Calavo’s non-employee directors and executive officers, including information about compensation for peer group companies, updates on executive compensation market trends and recommendations regarding short-term and long-term executive compensation incentive programs.

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Pursuant to applicable SEC and NASDAQ rules, the Compensation Committee assessed the independence of Korn Ferry and determined that it is an independent compensation consultant.

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The Compensation Committee analyzed whether Korn Ferry has any conflict of interest, taking into consideration the following factors: (i) the provision of other services to Calavo by Korn Ferry; (ii) the amount of fees paid by Calavo to Korn Ferry as a percentage of the firm’s total revenue; (iii) Korn Ferry’s policies and procedures that are designed to prevent conflicts of interest; (iv) any business or personal relationship of Korn Ferry or the individual compensation advisors employed by the firm with an executive officer of Calavo; (v) any business or personal relationship of the individual compensation advisors with any member of the Compensation Committee; and (vi) any stock of Calavo owned by Korn Ferry or the individual compensation advisors employed by the firm. The Committee has determined, based on its analysis of the above factors, that the work of Korn Ferry and the individual compensation advisors employed by Korn Ferry as compensation consultants to Calavo has not created any conflict of interest.

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The Compensation Committee does not believe that the compensation of our named executive officers should be established solely by reference to the compensation programs of other companies or that the compensation of our named executive officers should be set as a specified percentage of the average compensation that is paid to executive officers of other companies. However, the Compensation Committee believes that collecting and reviewing this compensation

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survey information is a useful resource in providing information about current compensation practices and in confirming that Calavo’s executive compensation program remains competitive.

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Base Salaries

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We provide our named executive officers with base salaries that we believe enable us to hire and retain individuals in a competitive environment and to reward individual performance and contribution to our overall business goals, while taking into account the unique circumstances of our company. We review base salaries for our named executive officers annually, and increases are based on Company as well as individual performance.

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On June 16, 2021, Kevin Manion resigned from his position as Chief Financial Officer. Farha Aslam, a member of Calavo’s Board of Directors, was appointed to serve as Chief Financial Officer of Calavo on an interim basis. Ms. Aslam was paid $26,000 per month for her services as interim Chief Financial Officer and also continued to earn compensation as a non-employee director. Ms. Aslam resigned from the position of Interim Chief Financial Officer effective September 9, 2021.

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On September 9, 2021, James E. Gibson retired from his position as Chief Executive Officer. Steven Hollister, a member of Calavo’s Board of Directors, was appointed to serve as Chief Executive Officer and Chief Financial Officer of Calavo on an interim basis. From September 9, 2021 through January 31, 2022, Mr. Hollister was paid $50,000 per month for his services as interim Chief Executive Officer and interim Chief Financial Officer and also continued to earn compensation as a non-employee director

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On September 13, 2021, Mariela Matute, and Calavo entered into an employment agreement and she was appointed to serve as Chief Financial Officer of Calavo, with such service commencing on October 11, 2021. Ms. Matute received an initial annual base salary of $430,000. Ms. Matute is also eligible to participate in other compensation and benefit programs that are available to Calavo’s executive officers, including Calavo’s management incentive plan for executive officers that currently provides executive officers with annual cash and restricted stock awards in amounts that are based on the satisfaction of specified performance criteria.

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On December 20, 2021, Brian Kocher and Calavo entered into an employment agreement and he was appointed to serve as Chief Executive Officer of Calavo, with such service commencing on February 1, 2022. Mr. Kocher received an initial annual base salary of $800,000. Mr. Kocher is also eligible to participate in other compensation and benefit programs that are available to Calavo’s executive officers, including Calavo’s management incentive plan for executive officers that currently provides executive officers with annual cash and restricted stock awards in amounts that are based on the satisfaction of specified performance criteria.

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On August 2, 2021, Calavo promoted Ronald Ariza to Executive Vice President of Foods and RFG sales. Upon such promotion, Mr. Ariza’s annual base salary increased to $430,000.

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Our named executive officers’ base salaries for the 2021 fiscal year were as follows:

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Annual Performance-Based Bonus Awards

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During each fiscal year, the Compensation Committee evaluates our bonus compensation practices in light of the objectives of the compensation program. As a result of this evaluation, the Compensation Committee determined that it was appropriate for our named executive officers to be eligible to receive performance-based compensation upon the achievement of specified performance goals. During the 2021 fiscal year, the performance-based goal was based upon our adjusted net income (Adjusted net income is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) non-cash net losses recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items). For each named executive officer, the Compensation Committee provided that the executive officer would receive a percentage of our adjusted net income if we achieved a threshold adjusted net income of $30,000,000.

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The Compensation Committee believes that basing bonuses on the achievement of specified levels of adjusted net income provides a correlation between executive compensation and company performance. A named executive officer has no entitlement to a performance-based payment in the event of the named executive officer’s termination of employment before payment.

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For fiscal 2021, the percentage of our adjusted net income that each named executive officer was entitled to receive as a performance-based bonus was as follows:

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We had a loss of $11.8 million for fiscal 2021. Excluding certain items as directed by the Compensation Committee, adjusted net income in fiscal 2021 was $6.2 million. The Compensation Committee concluded cash bonuses should not be paid under the above performance plan for fiscal 2021 and instead used its discretion to grant certain restricted stock awards discussed below. Steven Hollister, Farha Aslam, and Mariela Matute were not eligible for the above fiscal 2021 performance-based bonuses.

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In December 2021, the Compensation Committee paid discretionary restricted stock bonuses to the following named executive officers:

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These shares have full voting rights and participate in dividends as if unrestricted.  The grant date fair value of restricted stock granted in December 2021 for the above named executive officers was computed in accordance with FASB ASC Topic 718, was $112,000. The closing share price of our common stock at the grant date of December 13, 2021 was $40.53. These shares vest annually in one-half increments, starting December 13, 2022.

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In December 2021, the Compensation Committee paid a discretionary cash bonus to Rob Wedin of $65,000.

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On October 11, 2021, as part of the employment agreement, Mariela Matute our newly appointed Chief Financial Officer was granted 8,199 restricted shares, based on the date of when she became Chief Financial Officer. The closing price of our stock on such date was $36.59. These shares vest annually in one-third increments, starting on October 1, 2022.

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In September 2021, our Board of Directors approved the issuance of options to acquire a total of 5,000 shares of our common stock to Steven Hollister, our former Interim Chief Executive Officer.  Such grant vests annually in equal increments over a two-year period and has an exercise price of $39.20 per share.  Vested options have an exercise period of five years from the vesting date.  The market price of our common stock at the grant date was $39.20.  

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The estimated grant date values for the above stock option awards were computed in accordance with FASB ASC Topic 718.  These amounts reflect our financial accounting expense for these awards in accordance with FASB ASC Topic 718 and will not necessarily reflect the actual value that may be realized by the grantees with respect to these awards.  The estimated grant date fair value for stock options is calculated based on a lattice-based option valuation model for each award, determined under FASB ASC 718 incorporating the following assumptions: expected life 2 years; weighted

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average volatility 41%; risk free interest rate 2.2%; and expected dividend yield 2%. We used historical stock prices as the basis for the volatility assumptions. The risk free interest rate was based on U.S. Treasury rates in effect at the time of grant. Further discussion and assumptions utilized with respect to these valuations are set forth in Note 12 (Stock-Based Compensation) to our consolidated financial statements contained in our Annual Report on Form 10-K filed on December 21, 2021 for the fiscal year ended October 31, 2021. 

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NEW COMPENSATION ARRANGEMENTS FOR FISCAL 2022

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In January 2022, the Compensation Committee determined to separate the annual performance-based awards into two plans: a Short-Term Incentive Plan and a Long-Term Incentive Plan. The Compensation Committee believes that by having separate plans it will be better able to structure incentives that align with shareholder interests and support retention.

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Short-Term Incentive Plan (STIP)

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The newly established Short-Term Incentive Plan includes several design changes for fiscal year 2022 compared to the prior year’s annual incentive awards as follows:

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¹ The non-GAAP measures adjusted EBITDA is not prepared in accordance with U.S. generally accepted accounting principles, or “GAAP.”

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EBITDA is defined as net income (loss) attributable to Calavo Growers, Inc. excluding (1) interest income and expense, (2) income tax (benefit) provision, (3) depreciation and amortization and (4) stock-based compensation expense. Adjusted EBITDA is EBITDA with further adjustments for (1) non-cash net losses recognized from unconsolidated entities, (2) goodwill impairment, (3) write-off of long-lived assets, (4) acquisition-related costs, (5) restructuring-related costs, including certain severance costs, (6) certain litigation and other related costs, and (7) one-time items. Adjusted EBITDA is a primary metric by which management evaluates the operating performance of the business, on which certain operating expenditures and internal budgets are based. The adjustments to calculate EBITDA and adjusted EBITDA are items recognized and recorded under GAAP in particular periods but might be viewed as not necessarily coinciding with the underlying business operations for the periods in which they are so recognized and recorded.

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Items are considered one-time in nature if they are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years, in accordance with SEC rules.

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The way the Company measures EBITDA, adjusted EBITDA, and adjusted net income may not be comparable to similarly titled measures presented by other companies and may not be identical to corresponding measures used in Company agreements.

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For the 2022 fiscal year, each executive officer listed below is eligible to receive a performance-based cash bonus according to the following schedule:

* Brian Kocher has a $400,000 minimum guarantee for 2022.

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Illustration of Potential STIP Payout at Various Performance Levels

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Long-Term Incentive Plan (LTIP)

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In January 2022, the Compensation Committee determined that restricted stock units should be awarded as part of a separate long-term incentive plan rather than as part of the above noted annual incentive plan. Design changes in this new LTIP as compared to the equity component of the prior year’s annual incentive plan include:

² Return on Invested Capital (ROIC) is a ratio based on both GAAP and non-GAAP financial measures. ROIC is defined as Net Operating Profit After Tax (NOPAT) divided by average Total Capital (average of the current and prior periods’ ending Total Capital balances). NOPAT is defined as EBIT less tax (the tax provision [expected to be] recorded on the Company’s GAAP financial statements). EBIT is defined as Operating income (loss) (as recorded in the Company’s GAAP financial statements) adjusted for one-time items (those items which are non-recurring, infrequent or unusual and have not occurred in the past two years or are not expected to recur in the next two years). Total Capital is defined as Total Debt (total borrowings including finance leases and excluding operating leases) plus Total Shareholder’s Equity.

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LTIP restricted stock units (PRSUs and RSUs) are awarded annually according to the target percentages (percentages of base salary noted below) determined by the Compensation Committee according to job band and each named executive officer’s contribution to Company performance at the time of grant.

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Mix of Long-Term Incentive Awards (at Target Performance)

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The number of PRSUs and RSUs granted will be based on the closing price per share of the Company’s common stock on the grant date. If PRSU awards are earned, as determined by the Compensation Committee, the PRSUs will be paid out upon vesting in shares of Company common stock on a one-share to one-unit basis. While LTIP awards vest as noted above, certain events, such as death or a change in control, may cause awards to vest immediately.

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Named Executive Officers’ Benefits and Perquisites

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We provide the opportunity for our named executive officers and other executives to receive certain perquisites and general health and welfare benefits. In fiscal 2021, we changed our 401(k) to a safe harbor plan that allows for immediate participation and vesting. This plan matches 100% of the first 3% contributed and 50% of the next 2% for a maximum of 4% of compensation. General health and welfare benefits and our defined contribution 401(k) plan are

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provided to substantially all of our full-time U.S. employees. In addition, we provide a car allowance to each of our named executive officers. We provide these benefits to create additional incentives for our named executive officers and to remain competitive in the general marketplace for executive talent.

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The following table shows information concerning the annual compensation for services provided to us by each person who served as our Chief Executive Officer (including interim Chief Executive Officer) during the 2021 fiscal year, by each person who served as our Chief Financial Officer (including interim Chief Financial Officer) during the 2021 fiscal year, and by our three other most highly compensated executive officers during the three preceding fiscal years.

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