Item 1.01. Entry into a Material Definitive Agreement.
On May 10, 2022, US Foods Holding Corp., a Delaware corporation (the "Company"),
announced entry into a cooperation agreement (the "Cooperation Agreement") with
Sachem Head Capital Management LP, a Delaware limited partnership, and certain
of its affiliates (collectively, "Sachem Head").
Pursuant to the Cooperation Agreement, Sachem Head has agreed to withdraw its
notice of stockholder nomination of its five director candidates and its demand
to inspect books and records, pursuant to Section 220 of the General Corporation
Law of the State of Delaware, and the Company has agreed to, among other things,
(i) increase the size of the Company's board of directors (the "Board") to
thirteen (13) directors immediately following the Company's 2022 annual meeting
of shareholders scheduled to be held on May 18, 2022 (the "2022 Annual
Meeting"), (ii) immediately following the 2022 Annual Meeting, (A) appoint to
the Board Scott Ferguson (the "Sachem Head Director") along with David Toy and
James Barber, Jr. (the "Independent Directors" and, together with the Sachem
Head Director, the "New Directors"); (B) establish a new committee of the Board,
consisting of five directors (such committee, the "Search Committee"), which is
charged with conducting a nationwide search run by a nationally recognized
search firm for a new chief executive officer of the Company among internal and
external candidates; (C) appoint the Sachem Head Director and Mr. Toy to the
Search Committee; and (D) appoint at least one New Director to each standing
committee of the Board; and (iii) following the Company's hiring of a new
permanent Chief Executive Officer of the Company ("CEO"), increase the size of
the Board to fourteen (14) directors and appoint such CEO to the Board.
Under the terms of the Cooperation Agreement, following their appointments to
the Board, Mr. Barber will serve as a member of the Compensation Committee of
the Board, Mr. Ferguson will serve as a member of the Executive Committee and
Nominating and Corporate Governance Committee of the Board and Mr. Toy will
serve as a member of the Audit Committee of the Board. The composition of the
committees of the Board following the appointments of the New Directors and the
departure of Mr. Satriano will be as follows: (i) the Audit Committee will be
comprised of Marla Gottschalk (effective as of May 20, 2022), Carl Andrew "Andy"
Pforzheimer, David M. Tehle (Chair) and David A. Toy; (ii) the Compensation
Committee will be comprised of Cheryl A. Bachelder (Chair), James J. Barber,
Court D. Carruthers, Quentin Roach and David M. Tehle; (iii) the Nominating and
Corporate Governance Committee will be comprised of Scott D. Ferguson, Marla
Gottschalk, Sunil Gupta and Ann E. Ziegler (Chair); and (iv) the Executive
Committee will be comprised of Robert M. Dutkowsky, David M. Tehle, Cheryl A.
Bachelder, Scott D. Ferguson and Ann E. Ziegler.
The Cooperation Agreement further provides, among other things, that:
• the Company represents and warrants that the Board will not take any material
actions between the date of this Agreement and the foregoing appointments of
the New Directors without Sachem Head's consent, unless there is an action
that, in the reasonable determination of the Board, cannot wait until after the
2022 Annual Meeting;
• the Sachem Head Director will deliver an executed irrevocable resignation
letter, which provides that the Sachem Head Director will tender his
resignation as a director if Sachem Head's aggregate net long ownership falls
below the lesser of 50% of its current beneficial ownership of the outstanding
shares of the Company's common stock (the "Common Stock") and 9,717,426 shares
(subject to adjustment for stock splits, reclassifications, combinations and
similar adjustments) (the "Minimum Ownership Condition");
• as long as Sachem Head remains at or above the Minimum Ownership Condition, in
the event any New Director is no longer able to serve as a director of the
Company for any reason, Sachem Head will be permitted to propose a replacement
director, subject to the approval of the Board (which approval shall not be
unreasonably withheld);
• Sachem Head will be subject to customary standstill restrictions, including,
among others, with respect to acquiring beneficial ownership of more than 9.9%
of the shares of Common Stock in the aggregate, proxy solicitation and related
matters, extraordinary transactions and other changes, each of the foregoing
subject to certain exceptions;
• until the Termination Date (as defined below), Sachem Head will vote all shares
of Common Stock beneficially owned by it and over which it has direct or
indirect voting power in accordance with the Board's recommendations with
respect to (i) the election, removal and/or replacement of directors of the
Company and (ii) any other proposal submitted to shareholders; provided,
however, that in the event that Institutional Shareholder Services Inc. ("ISS")
or Glass Lewis & Co., LLC ("Glass Lewis") recommend otherwise with respect to
any proposals (other than the election, removal or replacement of directors),
Sachem Head will be permitted to vote in accordance with the ISS or Glass Lewis
recommendation; and provided, further, that Sachem Head will be permitted to
vote in its sole discretion with respect to any extraordinary transaction;
• each party will not make any public or private disparaging statements about the
other party or sue the other party, subject to certain exceptions;
• the Sachem Head Director will be permitted to share the Company's confidential
information with Sachem Head's employees, advisors and other representatives
pursuant to a confidentiality agreement in a form agreed upon by the parties;
• unless otherwise mutually agreed in writing by each party, the Cooperation
Agreement will remain in effect until the date that is the later of (i) the
earlier of (A) 30 days prior to the nomination deadline for the Company's 2023
annual meeting of shareholders, and (B) 120 days prior to the first anniversary
of the Company's 2022 Annual Meeting and (ii) 15 days following the date that
the Sachem Head Director no longer serves on the Board (the effective date of
such termination, the "Termination Date"); and
• the Company will reimburse Sachem Head for documented out-of-pocket costs, fees
and expenses incurred in connection with its engagement with the Company, the
negotiation and execution of the Cooperation Agreement and related matters.
The foregoing description does not purport to be complete and is qualified in
its entirety by reference to the Cooperation Agreement, a copy of which is
attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
The disclosure set forth in Item 1.01 above is hereby incorporated herein by
reference.
Appointment of Interim Chief Executive Officer
On May 10, 2022, the Company announced that its Chief Executive Officer, Pietro
Satriano, is leaving the Company, effective immediately. The termination of Mr.
Satriano's employment is without "Cause" within the meaning of the Amended and
Restated Executive Severance Agreement, dated as of January 3, 2018, by and
between the Company and Mr. Satriano, and the Company's other compensation and
benefits arrangements. Mr. Satriano will not stand for election to the Board at
the 2022 Annual Meeting. Andrew Iacobucci will be appointed Interim Chief
Executive Officer, effective immediately.
Mr. Iacobucci, age 55, has served as the Company's Executive Vice President and
Chief Commercial Officer since February 2021. He served the Company as Chief
Merchandising Officer from January 2017 to February 2021. Prior to joining the
Company, Mr. Iacobucci served as Executive Vice President, Merchandising of
Ahold USA, Inc., a food retailer, from April 2016 to January 2017. Prior to
joining Ahold, he served from February 2012 to November 2015 in several senior
roles at Loblaw Companies Limited, a Canadian grocery retailer and wholesale
food distributor, including President, Discount Division.
To reflect Mr. Iacobucci's increased responsibilities as interim CEO, his 2022
base salary will be increased from $690,000 to $900,000, his 2022 annual
incentive target amount will be increased from 90% to 150% of his base salary,
and he will receive an equity grant consisting of time-based restricted stock
units with a grant date value of $1,000,000. In connection with his appointment,
the Company entered into a letter agreement with Mr. Iacobucci, which provides,
among other things, that in the event Mr. Iacobucci's employment is terminated
without cause prior to March 31, 2024, his outstanding awards otherwise vesting
in March 2023 and the one-time restricted stock unit award will vest. Mr.
Iacobucci has no interest in any transactions that would require disclosure
pursuant to Item 404(a) of Regulation S-K.
The foregoing summary of the compensation arrangements and letter agreement is
qualified in its entirety by reference to the full text of the Letter Agreement
by and between the Company and Mr. Iacobucci, which is attached as Exhibit 10.2
hereto.
Appointment of Executive Chairman
On May 9, 2022, the Company designated and appointed Robert M. Dutkowsky, who
currently serves as its non-executive Chairman, as Executive Chairman, to serve
in such role until a permanent Chief Executive Officer has been selected.
Mr. Dutkowsky, age 67, has been the Company's non-executive Chairman of the
Board since February 2022 and a director since January 2017. He served as
Executive Chairman of Tech Data Corporation, a technology distributor from 2018
to 2020 and as Chief Executive Officer of Tech Data from 2006 to 2018. Prior to
joining Tech Data, Mr. Dutkowsky served as President, Chief Executive Officer
and Chairman of the board of directors of Egenera, Inc., a software company,
from 2004 until 2006, President, Chief Executive Officer, and Chairman of the
Board of Directors of J.D. Edwards & Co., Inc., a software company, from 2002
until 2004 and President, Chief Executive Officer, Chairman of the board of
directors of GenRad, Inc., an electronic equipment manufacturer, from 2000 until
2002. He also served as both Executive Vice President, Markets and Channels from
1997 to 1999 and President, Data General in 1999, at EMC Corporation, a data
storage manufacturer. He began his career at IBM, a technology company, where he
served in several senior management positions. Mr. Dutkowsky serves on the board
of directors of Pitney Bowes Inc., Raymond James Financial, Inc. and The Hershey
Company. Mr. Dutkowsky has substantial senior executive leadership experience.
Compensation Adjustments for Chief Financial Officer
To help retain Dirk Locasio, the Company's Executive Vice President and Chief
Financial Officer, during the period in which the Company searches for a
permanent Chief Executive Officer, Mr. Locasios's 2022 base salary will be
increased from $576,000 to $700,000, his 2022 annual incentive target amount
will be increased from 90% to 100% of his base salary, he will receive a
retention payment of $250,000 and he will be eligible to receive an additional
payment of $1,750,000, subject to his remaining Chief Financial Officer through
March 31, 2023. In connection with these arrangements, the Company has agreed
that in the event he elects to resign, during the period commencing on March 31,
2023 through July 10, 2023, he will be eligible to receive his full severance
benefits.
Appointment of New Directors to Board
Pursuant to the Cooperation Agreement, the Company shall increase the size of
the Board to thirteen (13) directors effective immediately following the 2022
Annual Meeting and appoint James J. Barber, Jr., Scott D. Ferguson and David A.
Toy to the Board.
James J. Barber, Jr., age 61, is the former Chief Operating Officer of United
Parcel Service, Inc. ("UPS") (NYSE: UPS), one of the world's largest package
delivery companies, from March 2018 to January 2020. Mr. Barber began his career
as a package delivery driver for UPS. He then spent over thirty years at UPS
holding roles of increasing responsibility including as President of UPS
International, from May 2013 to February 2018, President of UPS Europe, from
July 2011 to April 2013, District Manager, from January 2006 to July 2011,
Region and District Controller, from June 1993 to December 2005, Accounting
Manager, from January 1989 to May 1993, and Accounting Billing Supervisor, from
June 1984 to December 1989. Mr. Barber previously served as a trustee for The
UPS Foundation, and on the boards of UNICEF and the Folks Center for
International Business at the University of South Carolina. He earned his
Bachelor's degree in Finance from Auburn University.
Scott D. Ferguson, age 48, is the founder and managing partner of Sachem Head
Capital Management LP, an investment management firm based in New York, which he
started in 2012. Prior to starting Sachem Head Capital, Mr. Ferguson spent nine
years as an investment professional at Pershing Square Capital Management, L.P.,
an investment advisory firm. Prior to that, Mr. Ferguson served as a Vice
President at American Industrial Partners LLC, a private equity firm, from 1999
to 2001, and as a business analyst at McKinsey & Company, a management
consulting firm, from 1996 to 1999. Mr. Ferguson has served on the boards of
directors of Elanco Animal Health Incorporated (NYSE: ELAN), an animal
healthcare company, since December 2020, and Olin Corporation (NYSE: OLN), a
chemical products manufacturer and distributor, since February 2020, and
previously served as a director of Autodesk, Inc. (NASDAQ: ADSK), a design and
engineering software company, from March 2016 to June 2017. Mr. Ferguson
received his A.B. in Public Policy from Stanford University and his M.B.A. from
Harvard Business School.
David A. Toy, age 55, currently serves as the Chief Executive Officer of
. . .
Item 7.01 Regulation FD Disclosure.
A copy of the press release announcing the Chief Executive Officer transition
and entry into the Cooperation Agreement is furnished as Exhibit 99.1 to this
Current Report on Form 8-K and is incorporated herein by reference.
The information in this Current Report on Form 8-K under Item 7.01 and Exhibit
99.1 attached hereto shall not be deemed "filed" for purposes of Section 18 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
otherwise subject to the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as expressly set forth by specific
referencing in such filing.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Cooperation Agreement, dated as of May 9, 2022, between US Foods
Holding Corp. and Sachem Head.
10.2 Letter Agreement by and between the Company and Andrew Iacobucci,
dated May 9, 2022.
99.1 Press Release dated May 10, 2022.
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document).
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