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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant ý Filed by a Party other than the Registrant o
Check the appropriate box:
o | Preliminary Proxy Statement | |
o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
ý | Definitive Proxy Statement | |
o | Definitive Additional | |
o | Soliciting Material Pursuant to Section 240.14a-12 |
HD SUPPLY HOLDINGS, INC. | ||||
(Name of Registrant as Specified in Its Charter) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
(1) | Title of each class of securities to which transaction applies: | |||
(2) | Aggregate number of securities to which transaction applies: | |||
(3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11: | |||
(4) | Proposed maximum aggregate value of transaction: | |||
(5) | Total fee paid: | |||
o | Fee paid previously with preliminary materials. | |||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||
(1) | Amount previously paid: | |||
(2) | Form, Schedule or Registration Statement No.: | |||
(3) | Filing Party: | |||
(4) | Date Filed: | |||
31003400 Cumberland Boulevard, Atlanta, Georgia 30339
March 31, 201630, 2018
Dear Stockholder:
It is my pleasure to invite you to attend HD Supply Holdings, Inc.'s annual meeting of stockholders to be held at 11:00 a.m. (Eastern Daylight Time) on May 18, 2016.17, 2018. The meeting will be held at HD Supply's headquarters, located at Cumberland Center II, 31003400 Cumberland Boulevard, Atlanta, Georgia 30339.
The accompanying notice of meeting and proxy statement contain important information, including a description of the business that will be acted upon at the meeting, as well as the voting procedures and general information about the meeting. At the meeting, wemanagement will also report onbe available to respond to any questions you may have regarding the Company's performance and operations and respondor to your questions.other questions you may have.
Your vote is important. Whether you plan to attend the annual meeting or not, you may access electronic voting via the Internet, which is described on your enclosed proxy card, or, if you received a proxy card by mail, you may sign, date and return the proxy card in the envelope provided. If you plan to attend the annual meeting you may vote in person. Returning the proxy does not deprive you of your right to attend the annual meeting and vote your shares in person for the matters acted on at the meeting.
Registration and seating will begin at 10:00 a.m. (Eastern Daylight Time). Each stockholder will be asked to present an admittance ticket (the Notice of Internet Availability that you received by mail) and valid government-issued picture identification. Stockholders holding stock in brokerage accounts will need to bring a copy of a brokerage statement reflecting stock ownership as of the March 21, 20162018 record date. Cameras and recording devices are not permitted at the meeting. All bags, briefcases, and packages will be held at registration and will not be allowed in the meeting.
Thank you for your support of HD Supply. We look forward to seeing you at the annual meeting.
Sincerely, | ||
/s/ JOSEPH J. DEANGELO | ||
Joseph J. DeAngelo Chairman, President and Chief Executive Officer |
31003400 Cumberland Boulevard, Atlanta, Georgia 30339
NOTICE OF 20162018 ANNUAL MEETING OF STOCKHOLDERS
Date and Time: | Thursday, May | |||
Place: | HD Supply's headquarters, located at | |||
Record Date: | March 21, | |||
Who May Vote: | Stockholders as of the close of business on March 21, | |||
Items of Business: | 1. | To approve an amendment to our Certificate of Incorporation and Bylaws to declassify our board and provide for the annual election of directors; | ||
2. | To elect as directors the | |||
3. | To ratify the appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending | |||
4. | ||||
To transact any other business as may properly come before the Annual Meeting. | ||||
A copy of this proxy statement and our annual report on Form 10-K for our fiscal year ended January | ||||
To attend the meeting in person, please bring your admittance ticket (the Notice of Internet Availability of Proxy Materials that you received by mail), proof of your share ownership as of the record date (such as a brokerage statement), and government-issued photo identification (such as a driver's license). | ||||
A Notice of Internet Availability of Proxy Materials or this proxy statement is first being mailed to stockholders on or about April 5, 2018. | ||||
Date of Mailing: | March |
Your vote is important. Please vote as soon as possible by usingvia the Internet or, if you received a proxy card by mail, by signing and returning the proxy card. Instructions for your voting options are described on the proxy card.
By Order of the Board of Directors | ||
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Atlanta, Georgia
March 30, 2018
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GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING
HD SUPPLY HOLDINGS, INC.
3100 Cumberland Boulevard, Atlanta, Georgia 30339
This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
2016 Annual Meeting Information:
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 1
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
HD Supply Holdings, Inc. (the "Company") currently has eight directors divided into three classes: three directors in each of Class I and Class III, and two directors in Class II. The term of office of the three Class III directors expires at the Annual Meeting.
The three nominees for election as Class III directors are listed below. If elected, the nominees for election as Class III directors will serve for a term of three years and until their successors are elected and qualify. If you sign and return the accompanying proxy card, your shares will be voted for the election of the three Class III nominees recommended by the board of directors unless you choose to withhold from voting for any of the nominees. If for any reason any nominee is unable to serve or will not serve, such proxies may be voted for a substitute nominee designated by the board of directors as the proxy holder may determine. The board is not aware of any nominee who will be unable to or will not serve as a director. There is no cumulative voting.
A nominee must receive the vote of a plurality of the votes validly cast at the Annual Meeting represented either in person or by proxy at the Annual Meeting to be elected. Therefore, the three nominees who receive the most "FOR" votes (among votes properly cast in person, electronically or by proxy) will be elected. Notwithstanding such election, each of the three nominees for election as Class III directors has agreed to tender to the board his resignation as a director promptly following the certification of election results in the event such nominee receives a greater number of votes "withheld" from his election than votes "for" his election (see "Majority Voting Policy – Director Nominees" below for details regarding the board's majority voting policy). Proxies cannot be voted for a greater number of persons than the number of nominees named. The Class III nominees are as follows:
Name | Age | Director Since | Occupation | Board Committees | Other Public Company Boards | Independent | ||||||||
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Joseph J. DeAngelo | | 54 | | 2007 | Chairman/CEO, HD Supply | None | 0 | No | ||||||
Patrick R. McNamee | 56 | 2013 | CEO, Health Insurance Innovations | Audit; Compensation | 0 | Yes | ||||||||
Charles W. Peffer | | 68 | | 2013 | Retired Partner of KPMG LLP | Audit Chair | 3 | Yes | ||||||
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Additional qualifications, experience, and other information about the three director nominees, as well as our current board of directors who will continue to serve after the Annual Meeting, is provided on pages 16-18.
Majority Voting Policy – Director Nominees
The full text of the board's majority voting policy for director nominees is set forth in the Company's Corporate Governance Guidelines, available on the corporate governance section of our investor relations website athttp://ir.hdsupply.com/governance.cfm.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 2
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
Each of the three nominees for election as Class III directors has agreed to tender to the board his resignation as a director promptly following the certification of election results in the event such nominee receives a greater number of votes "withheld" from his election than votes "for" his election (a "Majority Withheld Vote"). Neither abstentions nor broker non-votes are deemed to be votes for or withheld from a director's election. The Nominating and Corporate Governance Committee will consider any tendered resignation and recommend to the board whether to accept or reject it. The board will act on each tendered resignation, taking into account the Nominating and Corporate Governance Committee's recommendation, at its next regularly scheduled board meeting following the certification of the election results. The Nominating and Corporate Governance Committee, when making its recommendation, and the board, when making its decision, may consider any factors or other information that it considers appropriate, including, without limitation, the reasons (if any) given by stockholders as to why they withheld their votes, the qualifications of the tendering director, his contributions to the board and the Company, and the results of the most recent evaluation of the tendering director's performance by the Nominating and Corporate Governance Committee and other board members.
The board will promptly and publicly disclose (1) its decision whether to accept or reject the director's tendered resignation, and (2) if rejected by the board, the board's reasons for rejecting the tendered resignation. Any director who tenders his resignation will not participate in the Nominating and Corporate Governance Committee recommendation or board action regarding whether to accept or reject the tendered resignation. If a director's tendered resignation is rejected by the board, the director will continue to serve for the remainder of his term and until his successor is duly elected, or his earlier death, resignation or removal. If a director's tendered resignation is accepted by the board, then the board, in its sole discretion, may fill any resulting vacancy or may decrease the number of directors comprising the board, in each case pursuant to the provisions of, and to the extent permitted by, the Company's Third Amended and Restated By-Laws (the "Bylaws").
The board will consider as candidates for nomination for election or re-election to the board, or to fill vacancies and new directorships on the board, only those individuals who agree to tender, promptly following their election, re-election or appointment, an irrevocable resignation that will be effective upon (i) the occurrence of a Majority Withheld Vote for that director and (ii) acceptance of the tendered resignation by the board. Each of the Class III director nominees have signed such an irrevocable resignation.
Ratification of the Appointment of the Independent Registered Public Accounting Firm
The board is asking you to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the 2016 fiscal year ending January 29, 2017. Set forth below is summary information with respect to the fees billed to us by
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 3
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
PricewaterhouseCoopers LLP for services provided to us during the fiscal years ended January 31, 2016 and February 1, 2015. For more information, see pages 48-49 and page 51.
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Stockholder Proposal on Greenhouse Gas Emissions
You are being asked to vote on a stockholder proposal, filed by Calvert Investments, regarding greenhouse gas emissions if it is properly presented at the Annual Meeting. For more information, see pages 63-64.
Pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), stockholder proposals submitted for inclusion in the proxy statement for our annual meeting of stockholders expected to be held in May 2017 must be received by us by December 1, 2016. For more information, see page 65.
Why am I receiving these proxy materials?
The accompanying proxy materials have been furnished to you because the Company is soliciting your proxy to vote your shares at the Annual Meeting. This proxy statement describes issues on which we would like you to vote at our Annual Meeting. It also gives you information on these issues so that you can make an informed decision.
The proxy materials include the notice and proxy statement for the Annual Meeting, our annual report on Form 10-K for the fiscal year ended January 31, 2016, the proxy card for the Annual Meeting and directions on attending the Annual Meeting. The Company has made these proxy materials available to you by Internet or, upon your request, has delivered printed versions of these materials to you by mail, because you owned shares of the Company's common stock at the close of business on March 21, 2016.
When you vote by using the Internet or by signing and returning the proxy card, you appoint Dan S. McDevitt and James F. Brumsey as your representatives at the Annual Meeting, with full power of substitution. They will vote your shares at the Annual Meeting as you have instructed them or, if an issue that is not on the proxy card comes up for vote, in accordance with their best judgment. This way, your shares will be voted whether or not you attend the Annual Meeting. Even if you plan to attend the Annual Meeting, we encourage you to vote in advance by using the Internet, or if you received your proxy card by mail, by signing and returning your proxy card. If you vote by Internet, you do not need to return your proxy card.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 4
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
Why did I receive a one-page notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials?
In accordance with rules adopted by the U.S. Securities and Exchange Commission, the Company uses the Internet as the primary means of furnishing proxy materials to stockholders. Accordingly, the Company is sending a Notice of Internet Availability of Proxy Materials (the "Notice") to the Company's stockholders. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or request a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or how to request a printed copy may be found in the Notice. In addition, stockholders may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. The Company encourages stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the environmental impact of its annual meetings and reduce the cost to the Company of physically printing and mailing materials.
Who is entitled to vote?
Holders of our common stock at the close of business on March 21, 2016 are entitled to vote. March 21, 2016 is referred to as the record date. In accordance with Delaware law, a list of stockholders entitled to vote at the Annual Meeting will be available in electronic form at the place of the Annual Meeting on May 18, 2016 and will be accessible in electronic form for ten days before the meeting at our principal place of business, 3100 Cumberland Boulevard, Atlanta, Georgia 30339 between the hours of 9:00 a.m. and 5:00 p.m.
Each share of common stock is entitled to how many votes?
Holders of common stock are entitled to one vote per share. On the record date, there were 200,610,355 shares of our common stock outstanding and entitled to vote.
How do I vote?
If you are a registered stockholder, which means you hold your shares (including any restricted shares) in certificate form or through an account with our transfer agent, American Stock Transfer & Trust Company, LLC, you have the following options for voting before the Annual Meeting:
If you are a beneficial holder, meaning you hold your shares in "street name" through an account with a bank or broker, your ability to vote over the Internet or by telephone depends on the voting procedures of your bank or broker. Please follow the directions on the voting instruction form that your bank or broker provides.
Stockholders may also attend the Annual Meeting and vote in person. The method you use to vote will not limit your right to vote at the Annual Meeting if you decide to attend in person. Written
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 5
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
ballots will be passed out to anyone who wants to vote at the Annual Meeting. If you hold your shares in "street name," you must obtain a proxy, executed in your favor, from the holder of record to be able to vote in person at the Annual Meeting. Please refer to the notice and voting instruction form, or other information forwarded by your bank or broker, for details on how to request a proxy.
Is my vote confidential?
Confidential voting applies to individual stockholders but not to corporate and institutional stockholders. Our confidential voting policy is set forth in our Corporate Governance Guidelines available athttp://ir.hdsupply.com/governance.cfm.
What if I change my mind after I return my proxy?
You may revoke your proxy and change your vote at any time before the polls close at the Annual Meeting. Registered stockholders may do this by:
If you hold shares through a bank or broker, please refer to your voting instruction form, or other information forwarded by your bank or broker, to see how you can revoke your proxy and change your vote.
Attendance at the meeting will not, by itself, revoke a proxy.
How many votes do you need to hold the Annual Meeting?
The presence, in person or by proxy, of the holders of a majority of the votes entitled to be cast at the Annual Meeting will constitute a quorum. If a quorum is present, we can hold the Annual Meeting and conduct business.
On what items am I voting?
You are being asked to vote on three items:
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 6
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
No cumulative voting rights are authorized, and dissenters' rights are not applicable to these matters.
How does the board of directors recommend that I vote?
The board recommends that you vote:
How may I vote in the election of directors, and how many votes must the nominees receive to be elected?
With respect to the election of directors, you may:
The Company's Bylaws provide for the election of directors by a plurality of the votes cast. This means that the three individuals nominated for election to the board of directors who receive the most "FOR" votes (among votes properly cast in person, electronically or by proxy) will be elected. Notwithstanding such election, each of the three nominees for election as Class III directors has agreed to tender to the board his resignation as a director promptly following the certification of election results if he receives a greater number of votes "withheld" from his election than votes "for" his election (see "Majority Voting Policy – Director Nominees" on pages 2-3 for details regarding the board's majority voting policy).
What happens if a nominee is unable to stand for election?
If a nominee is unable to stand for election, the board may either:
If the board designates a substitute nominee, shares represented by proxies voted for the nominee who is unable to stand for election will be voted for the substitute nominee.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 7
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
How may I vote for the proposal to ratify the appointment of our independent registered public accounting firm, and how many votes must this proposal receive to pass?
With respect to this proposal, you may:
To pass, the proposal must receive the affirmative vote of a majority in voting power of the shares entitled to vote at the Annual Meeting by the holders who are present in person, electronically or by proxy. If you abstain from voting on the proposal, it will have the same effect as a vote against the proposal.
How may I vote for the stockholder proposal regarding greenhouse gas emissions, and how many votes must this proposal receive to pass?
With respect to this proposal, you may:
To pass, the proposal must receive the affirmative vote of a majority in voting power of the shares entitled to vote at the Annual Meeting by the holders who are present in person, electronically or by proxy. If you abstain from voting on the proposal, it will have the same effect as a vote against the proposal. If your broker is unable to vote your shares because you have not provided voting instructions (broker non-votes), the shares are not counted as voting power present and, therefore, will have no effect on the outcome of this proposal.
What happens if I sign and return my proxy card but do not provide voting instructions?
If you return a signed card but do not provide voting instructions, your shares will be voted as follows:
Will my shares be voted if I do not vote by using the Internet, telephone, by signing and returning my proxy card, or by attending the Annual Meeting and voting in person?
If you do not vote by using the Internet, by telephone (certain beneficial stockholders), by signing and returning your proxy card, or by attending the Annual Meeting and voting in person, then your shares will not be voted and will not count in deciding the matters presented for stockholder consideration at the Annual Meeting.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 8
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
Under certain circumstances and in accordance with NASDAQ rules that govern banks and brokers, if your shares are held in street name through a bank or broker, your bank or broker may vote your shares if you do not provide voting instructions before the Annual Meeting. These circumstances include voting your shares on "routine matters," such as the ratification of the appointment of our independent registered public accounting firm described in this proxy statement. With respect to this proposal, therefore, if you do not vote your shares, your bank or broker may vote your shares on your behalf or leave your shares unvoted.
The remaining two proposals, namely the election of director nominees and the stockholder proposal regarding greenhouse gas emissions, are not considered routine matters under the NASDAQ rules relating to voting by banks and brokers. When a proposal is not a routine matter and the brokerage firm has not received voting instructions from the beneficial owner of the shares with respect to that proposal, the brokerage firm cannot vote the shares on that proposal. This is called a "broker non-vote." Broker non-votes that are represented at the Annual Meeting will be counted for purposes of establishing a quorum, but will have no effect on the outcome of the non-routine matters at the Annual Meeting.
We encourage you to provide instructions to your bank or brokerage firm by voting your proxy. This action ensures your shares will be voted at the meeting in accordance with your wishes.
What is the vote required for each proposal to pass, and what is the effect of abstentions and uninstructed shares on the proposals?
Our Bylaws provide for the election of directors by a plurality of the votes cast. This means that the three individuals nominated for election to the board of directors who receive the most "FOR" votes (among votes properly cast in person, electronically or by proxy) will be elected. Notwithstanding such election, each of the three nominees for election as Class III directors has agreed to tender his resignation as a director to the board promptly following the certification of election results if he receives a greater number of votes "withheld" from his election than votes "for" his election (see "Majority Voting Policy – Director Nominees" on pages 2-3 for details regarding the board's majority voting policy). For each of the other proposals to pass in accordance with our Bylaws, the proposal must receive the affirmative vote of a majority in voting power of the shares present in person, electronically or by proxy at the Annual Meeting and entitled to vote. The following table summarizes the board's recommendation on each proposal, the vote required for each proposal to pass, and the
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 9
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
effect abstentions or uninstructed shares (proxy card returned, but voting instructions not provided) have on each proposal.
What do I need to attend the Annual Meeting in person?
You must bring your admittance ticket (the Notice of Internet Availability of Proxy Materials that you received in the mail), proof of your share ownership as of March 21, 2016 (such as a brokerage statement or letter from your broker), and government-issued photo identification (such as a driver's license). If you do not have an admittance ticket, proof of ownership, or a valid photo identification, you will not be admitted to the Annual Meeting. Cameras and recording devices are not permitted at the meeting. All bags, briefcases and packages will be held at registration and will not be allowed in the meeting.
Can I receive future proxy materials and annual reports electronically?
Yes. This proxy statement and our annual report on Form 10-K for our fiscal year ended January 31, 2016 are available by accessing the website located athttp://www.astproxyportal.com/ast/18392/. Instead of receiving paper copies in the mail, stockholders can elect to receive an email that provides a link to our future annual reports and proxy materials on the Internet. Opting to receive your proxy materials electronically will save us the cost of producing and mailing documents to your home or business, will reduce the environmental impact of our annual meetings, and will give you an automatic link to the proxy voting site.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 10
GENERAL INFORMATION ABOUT THE 2016 ANNUAL MEETING (continued)
If you are a stockholder of record and wish to enroll in the electronic proxy delivery service for future meetings, you may do so by going tohttp://www.astproxyportal.com/ast/18392/ and following the prompts. If you hold shares through a bank or broker, please refer to the notice and voting instruction form, or other information forwarded by your bank or broker, to see how you can enroll for electronic proxy delivery for future meetings.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 11
OUR EXECUTIVE OFFICERS
The following table sets forth certain information concerning our executive officers. The respective age of each individual in the table below is as of March 31, 2016.
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Joseph J. DeAngelo has served asChairman, President and Chief Executive Officer since March 2015, President and Chief Executive Officer since January 2005, and has been a member of our board since August 2007. Mr. DeAngelo served as Executive Vice President and Chief Operating Officer of The Home Depot from January 2007 through August 2007. From August 2005 to December 2006, he served as Senior Vice President — HD Supply. From January 2005 to August 2005, Mr. DeAngelo served as Senior Vice President — Home Depot Supply, Pro Business and Tool Rental, and from April 2004 through January 2005, he served as Senior Vice President — Pro Business and Tool Rental. Mr. DeAngelo previously served as Executive Vice President of The Stanley Works, a tool manufacturing company, from March 2003 through April 2004. From 1986 until April 2003, Mr. DeAngelo held various positions with General Electric ("GE"). His final position with GE was President and Chief Executive Officer of General Electric TIP/Modular Space, a division of General Electric Capital. Mr. DeAngelo holds a bachelor's degree in accounting and economics from the State University of New York at Albany. Mr. DeAngelo currently serves on the CEO Advisory Council of the Cristo Rey Atlanta Jesuit High School. He will serve on the board of trustees of the Shepherd Center Foundation, a 501(c)(3) charitable organization, effective May 2016.
Evan J. Levitt has served asSenior Vice President, Chief Financial Officer since December 2013. Prior to his appointment as Chief Financial Officer, he served as Vice President and Corporate Controller of HD Supply since 2007 when he joined the Company from The Home Depot, where he was the Assistant Controller and Director of Financial Reporting from 2004 to 2007. He also served in various management roles at Payless ShoeSource from 1999-2004, including Vice President of Accounting and Reporting. Prior to Payless ShoeSource, he held the role of Audit Manager with Arthur Andersen. Mr. Levitt has a bachelor of science in business administration from Washington University and is a Certified Public Accountant.
Stephen O. LeClair has served asPresident, HD Supply Waterworks since August 2011, and served as Chief Operating Officer, HD Supply Waterworks from March 2008 through August 2011. He served as President of HD Supply Lumber and Building Materials from April 2007 until its divestiture to ProBuild Holdings in March 2008. Mr. LeClair joined the HD Supply team in October 2005 as Senior Director of Operations and served in that role through April 2007. Before joining HD Supply, he served as Senior Vice President at GE Equipment Services. He also held various roles at GE Appliances and Power Generation in distribution, manufacturing and sales. Mr. LeClair is a graduate of GE Power Generation's Manufacturing Management Program. He is a member of the Saint Louis University's International Business School Advisory Board. He holds a bachelor's degree in Mechanical Engineering from Union College and an M.B.A. degree from the University of Louisville.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 12
OUR EXECUTIVE OFFICERS (continued)
Dan S. McDevitt has served asGeneral Counsel and Corporate Secretary since January 2015. He joined HD Supply's legal department in 2010 and was promoted to Vice President in 2012. Prior to joining HD Supply, Mr. McDevitt was a partner at the law firm King & Spalding, where he practiced law for thirteen years, primarily focused on securities and corporate governance litigation and related investigations. Before joining King & Spalding, Mr. McDevitt served as a judicial clerk for the Honorable G. Ernest Tidwell on the United States District Court, Northern District of Georgia, and before then was an associate at Sullivan, Hall, Booth, & Smith. Mr. McDevitt received a B.B.A. degree in finance from the University of Notre Dame and a J.D. and LL.M. from the University of Notre Dame Law School.
Margaret M. Newman joined HD Supply in April 2007 and has served asSenior Vice President, Human Resources since July 2008. Prior to HD Supply, Ms. Newman held senior human resources leadership roles at Conseco Insurance Group from August 2005 to April 2007, and at Sears Roebuck and Company from September 1997 to August 2005. She has more than 20 years of business experience in the manufacturing industry, building her expertise in organizational effectiveness; acquisition and integration; benefits design; talent acquisition and management; leadership development and employee engagement. Ms. Newman holds a bachelor's degree in psychology from Coe College and a master's degree in sociology from the University of Wisconsin.
John A. Stegeman joined HD Supply in April 2010 asExecutive President and focused on building the specialty construction and safety business as thePresident of HD Supply Construction and Industrial – White Cap. Prior to joining HD Supply, Mr. Stegeman was President and Chief Executive Officer of Ferguson Enterprises, headquartered in Newport News, Virginia from 2005 to 2009. He began his career with Ferguson in 1985 as a management trainee and advanced through the company holding various management positions in three of Ferguson's five business groups: Waterworks, Plumbing, and Heating and Air Conditioning. As part of the Ferguson Waterworks business group, Mr. Stegeman served as Senior Vice President before being named Chief Operating Officer of Ferguson in May 2005. Mr. Stegeman received a bachelor's degree from Virginia Tech and has attended advanced management programs at Wharton School of Business, IMD, Duke University's Fuqua School of Business, University of Virginia Darden School of Business, and Columbia University.
The following senior leadership team employees are not executive officers, but are expected to make significant contributions to our business:
Bradford A. Cowles, age 45, has served asChief Information Officer for HD Supply since January 2015, and Vice President of Information Technology (IT) for the HD Supply Waterworks business unit since June 2013. Since joining the HD Supply team in 2005, Mr. Cowles has held roles of increasing responsibility, including managing the enterprise-wide IT infrastructure and merger & acquisition IT teams and leading the HD Supply Interior Solutions IT organization and the HD Supply Lumber & Building Materials IT organization. Mr. Cowles has more than 20 years of engineering, manufacturing, and IT experience. Prior to joining HD Supply, he spent 10 years with the Michelin Tire Corporation in various leadership roles in research and development, manufacturing, and quality in both the United States and France. Mr. Cowles holds a master's degree in gas dynamics and a bachelor's degree in mechanical engineering from the University of Florida.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 13
OUR EXECUTIVE OFFICERS (continued)
Joseph C. Izganics, age 54, has served asSenior Vice President andPresident ofInterior Solutions and Home Improvement Solutions since March 2010. Prior to joining HD Supply, Mr. Izganics served as Division President for The Home Depot, where he was responsible for 800 stores across the eastern United States. He joined The Home Depot in 1989 as an assistant manager in training and worked his way up through various leadership positions to Division President. With more than 25 years of experience, Mr. Izganics served as store manager, district manager, regional vice president and division president for The Home Depot. From 2005 to 2007, he served as Senior Vice President of Pro Business and Tool Rental of The Home Depot and served as its Senior Vice President of Services from 2002 to 2005. From 1994 through December 2002, Mr. Izganics held various management and executive level positions with The Home Depot. Prior to joining The Home Depot, he was involved in starting a garden center business and also held management positions with Mr. Goodbuys Home Center.
Steven N. Margolius, age 57, has served asChief Operating Officer for HD Supply Facilities Maintenance since September 2015. Prior to his current role, he served as Chief Executive Officer and President of HD Supply Power Solutions from December 2013 to September 2015, having served as its President since April 2013. Prior to that, he served as HD Supply Power Solutions Chief Operating Officer and HD Supply Chief Commercial Officer from March 2011 through March 2013. Prior to re-joining HD Supply in March 2011, he served as Executive Vice President and Chief Operating Officer of United Sporting Companies from April 2010 until March 2011. He was President of HD Supply Electrical from April 2006 to March 2010 and President, HD Supply Plumbing/HVAC from July 2009 to March 2010. Prior to joining HD Supply, Mr. Margolius served for five years as Vice President of Finance and Support Services for Arrow Electronics, North American Components Division. In addition to his financial role at Arrow, he led the logistics organization and served as the leader for the global lean sigma initiative. He spent 15 years with GE, most recently serving as the General Manager for Pricing at GE Appliances. While with GE, he held multiple financial leadership roles in the areas of global financial planning and analysis, sales and marketing and manufacturing. Mr. Margolius has a bachelor's degree from State University of New York and has attended advanced management programs at Harvard Business School and the Stanford Graduate School of Business.
William P. Stengel, age 38, has served asSenior Vice President, Chief Commercial Officer of HD Supply since January 2016 and as Senior Vice President, Strategic Business Development and Investor Relations from July 2013 through January 2016. In his current role, Mr. Stengel has responsibility for merchandising and global sourcing, marketing and e-business execution at HD Supply Facilities Maintenance in addition to his previous responsibilities. He joined HD Supply in July 2005 and has since taken on increasing leadership responsibilities at the Company including mergers and acquisitions, strategic planning, strategic initiatives, supply chain operations, real estate, investor and public relations, communications, and corporate marketing. Mr. Stengel and his teams have responsibility to drive strategic growth and operational excellence. He has more than 15 years of experience in finance and growth strategy. In addition, he has led numerous acquisition and divestiture transactions including his leadership role in the initial public offering of HD Supply in June 2013. Prior to HD Supply, Mr. Stengel worked for Stonebridge Associates, an investment banking firm focused on merger and acquisition, divestiture, private placement, and strategic financial advisory services to middle-market companies across a range of consumer, technology, and industrial sectors. He also worked in corporate and investment banking with Bank of America Merrill Lynch. Mr. Stengel holds a bachelor's degree in economics from Trinity College and an M.B.A. degree with a concentration in strategy and finance from Vanderbilt University's Owen Graduate School of Management.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 14
OUR BOARD OF DIRECTORS
The Company'sGOVERNANCE OF OUR COMPANY
Selecting Nominees for Director
Board Refreshment
Director Independence
Executive Sessions of our Non-Management Directors
Board Self-Evaluation Process
Board Leadership Structure
Board's Role in Risk Oversight
Corporate Governance Guidelines, Committee Charters and Code of Business Conduct and Ethics
Committees of the Board of Directors
Compensation Committee Interlocks and Insider Participation
Compensation Practices and Risk Management
Meetings of the Board of Directors and Attendance at the Annual Meeting
Succession Planning and Management Development
Policies and Procedures for Related Person Transactions
Related Person Transactions
Communicating with our Board of Directors
Policy Regarding Certain Transactions in Company Securities
OWNERSHIP OF SECURITIES
DIRECTOR COMPENSATION
2017 Director Compensation
2017 Stock Awards
Narrative Discussion
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
Summary Compensation Table
Pay Ratio Disclosure
Grants of Plan-Based Awards Table
Outstanding Equity Awards Table
Option Exercises and Stock Vested Table
Pension Benefits and Nonqualified Deferred Compensation
Potential Payments Upon Termination or Change in Control
COMPENSATION COMMITTEE REPORT
AUDIT COMMITTEE REPORT
AUDIT MATTERS
Principal Accounting Firm Fees
PROPOSAL 1 — AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BYLAWS TO DECLASSIFY BOARD OF DIRECTORS
PROPOSAL 2 — ELECTION OF DIRECTORS
PROPOSAL 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
OTHER INFORMATION FOR STOCKHOLDERS
Section 16(a) Beneficial Ownership Reporting Compliance
Solicitation of Proxies
Stockholder Proposals or Stockholder Nominations for Director at 2019 Annual Meeting
2017 Annual Report on Form 10-K
Other Business
GENERAL INFORMATION ABOUT THE 2018 ANNUAL MEETING |
HD SUPPLY HOLDINGS, INC.
3400 Cumberland Boulevard, Atlanta, Georgia 30339
This summary highlights information contained elsewhere in this proxy statement. It does not contain all of the information that you should consider, and you should read the entire proxy statement carefully before voting.
2018 Annual Meeting Information:
Date: | Thursday, May 17, 2018 | |
Time: | 11:00 a.m. Eastern Daylight Time | |
Location: | HD Supply's headquarters, located at 3400 Cumberland Boulevard, Atlanta, Georgia 30339 (the reception desk will provide directions to the Annual Meeting room when you register) | |
Record Date: | March 21, 2018 | |
Admission: | To attend the meeting in person, you will need your admittance ticket (the Notice of Internet Availability of Proxy Materials that you received by mail), proof of your share ownership as of the record date (such as a brokerage statement), and government-issued photo identification (such as a driver's license). |
OUR BOARD OF DIRECTORS (continued) |
The proposed amendment also provides that any director elected to fill a vacancy will hold office for the term that remains for that director, and any director elected to fill a vacancy that resulted from an increase in the size of the board will be elected to serve until the next annual meeting.
Directors are elected by a plurality. Therefore, the four nominees who receive the most "FOR" votes will be elected. Notwithstanding such election, each of the four nominees for election as Class II directors has agreed to tender to the board his or her resignation as a director promptly following the certification of election results if he or she receives a greater number of votes "withheld" from his or her election than votes "for" his or her election (see "Majority Voting Policy – Director Nominees" on pages 5-6 for details regarding the board's majority voting policy).
Proxies cannot be voted for a greater number of persons than the number of nominees named. There is no cumulative voting. If you sign and return the accompanying proxy card, your shares will be voted for the election of the four nominees recommended by the board unless you choose to withhold from voting for any of the nominees. If a nominee is unable to serve or will not serve for any reason, proxies may be voted for such substitute nominee as the proxy holder may determine. The Company is not aware of any nominee who will be unable to or will not serve as a director.
Set forth below is biographical information as well as background information relating to each nominee's and continuing director's business experience, qualifications, attributes, and skills and why the board and Nominating and Corporate Governance Committee believe each individual is a valuable member of our board. The persons who have been nominated for election and are to be voted upon at the Annual Meeting are listed first, with continuing directors following thereafter.
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OUR BOARD OF DIRECTORS (continued) |
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Joseph J. DeAngelo
| Age 56 | Class III — term expiring at 2019 annual meeting Board Chairman | Director since 2007 | |||||
Background: Mr. DeAngelo has served as chairman of
since August 2007. Mr. DeAngelo served as executive vice president and chief operating officer of The Home Depot from January 2007 through August 2007. From August 2005 to December 2006, he served as executive vice president, HD Supply. From January 2005 to August 2005, Mr. DeAngelo served as senior vice president, Home Depot Supply, Pro Business and Tool Rental and from April 2004 through January 2005, he served as senior vice president, Pro Business and Tool Rental. Mr. DeAngelo previously served as executive vice president of The Stanley Works, a tool manufacturing company, from March 2003 through April 2004. From 1986 until April 2003, Mr. DeAngelo held various positions with GE. His final position with GE was president and chief executive officer of General Electric TIP/Modular Space, a division of General Electric Capital. Mr. DeAngelo holds a bachelor's degree in accounting and economics from the State University of New York at Albany. Mr. DeAngelo serves on the board of trustees of the Shepherd Center Foundation, the Advisory Board of the Combat Marine Outdoors, and the CEO Advisory Council of the Cristo Rey Atlanta Jesuit High School. Mr. DeAngelo served on the board of directors of Owens-Illinois, Inc. from May 2016-July 2017. | ||||||||
Director Qualifications: | ||||||||
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Patrick R. McNamee, Former Chief Executive Officer, Health Insurance Innovations, Inc. | Age 58 | Class III — term expiring at 2019 annual meeting Committees: Compensation | Director since 2013 | |||||
Background:
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Director Qualifications: Mr. McNamee brings public company CEO experience, as well as strategic and operational expertise to the board,
industries. | ||||||||
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Charles W. Peffer,Retired Partner of KPMG LLP | Age 70 | Class III — term expiring at 2019 annual meeting Financial Expert | Director since 2013 | |||||
Committees: Audit (Chair) | ||||||||
Background: Mr. Peffer retired as a partner of KPMG LLP in 2002 after 32 years with KPMG in its Kansas City office. He served as partner in charge of audit from 1986 to 1993, with overall responsibility for audits of financial statements from 1979 to 2002. He was managing partner of the Kansas City office from 1993 to 2000. He currently serves as the audit committee chairman on the board of directors of Garmin Ltd., Sensata Technologies Holding N.V., and the Commerce Funds, a family of eight mutual funds. He served on the board of directors of NPC International from 2006 through 2017. Mr. Peffer holds a bachelor's degree in business administration from the University of Kansas and a master's degree in business administration from Northwestern University. | ||||||||
Director Qualifications: Mr. Peffer brings to the board extensive practical and management experience in public accounting and corporate finance, including significant experience with KPMG and its predecessor firms dealing with generally accepted accounting principles, auditing standards, internal controls, preparation of financial statements, financial reporting rules and evaluating financial results, and financial reporting processes of large companies. Mr. Peffer also brings leadership expertise through his directorship roles in other public companies, including service on audit committees. | ||||||||
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 21 |
GOVERNANCE OF OUR COMPANY |
The following sections provide an overview of our corporate governance structure and processes. Among other topics, we describe how we select directors, how we consider the independence of our directors, and key aspects of our board operations.
Selecting Nominees for Director
Our board has delegated to the Nominating and Corporate Governance Committee the responsibility for reviewing and recommending nominees for director to the board. In accordance with our Corporate Governance Guidelines, and on recommendation of the Nominating and Corporate Governance Committee, our board has adopted criteria for the selection of new directors based on the strategic needs of the Company and the board. The Nominating and Corporate Governance Committee will periodically review the criteria adopted by the board and, if deemed desirable, recommend changes to the criteria.
Pursuant to the criteria adopted by our board, the board seeks members from diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. Individuals are considered for nomination to the board based on their business and professional experience, judgment, oversight roles held, age, skills, and background. The board also considers the candidate's availability, absence of conflicts, and any applicable independence or experience requirements. The Nominating and Corporate Governance Committee considers diversity in identifying nominees for director, including personal characteristics such as race and gender, as well as diversity in experience and skills relevant to the board's performance of its responsibilities in the oversight of the business. For each of the nominees to the board, the biographies shown above highlight the experiences and qualifications that were among the most important to the Nominating and Corporate Governance Committee in concluding that the nominee should serve as a director of the Company.
The Nominating and Corporate Governance Committee is responsible for recommending to the board nominees for election to the board at each annual meeting of stockholders and for identifying one or more candidates to fill any vacancies that may occur on the board. New candidates may be identified through recommendations from independent directors or members of management, search firms, discussions with other persons who may know of suitable candidates to serve on the board, and stockholder recommendations. Evaluations of prospective candidates typically include a review of the candidate's background and qualifications by the Nominating and Corporate Governance Committee, interviews with the committee as a whole, one or more members of the committee, or one or more other board members, and discussions of the committee and the full board. The committee then recommends candidates to the full board, with the full board selecting the candidates to be nominated for election by the stockholders or to be elected by the board to fill a vacancy.
In accordance with the board's majority voting policy, the board will consider as candidates for nomination for election or reelection to the board, or to fill vacancies and new directorships on the board, only those individuals who agree to tender, promptly following their election, reelection or appointment, an irrevocable resignation that will be effective upon (i) the occurrence of the nominee receiving a greater number of votes "withheld" from his or her election to the board than votes "for" his or her election and (ii) acceptance of the tendered resignation by the board (see "Majority Voting Policy — Director Nominees" on pages 5-6 for details regarding the board's majority voting policy).
The Nominating and Corporate Governance Committee will consider director candidates proposed by stockholders on the same basis as recommendations from other sources. Any stockholder
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 22 | | |
GOVERNANCE OF OUR COMPANY (continued)
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who wishes to recommend a prospective candidate for the board for consideration by the Nominating and Corporate Governance Committee may do so by submitting the name and qualifications of the prospective candidate in writing to the following address: Dan S. McDevitt, General Counsel and Corporate Secretary, HD Supply Holdings, Inc., 3400 Cumberland Boulevard, Atlanta, Georgia 30339. Any such submission should also describe the experience, qualifications, attributes and skills that make the prospective candidate a suitable nominee for the board. Our Bylaws set forth the requirements for director nomination by a stockholder of persons for election to the board. These requirements are described under "Other Information for Stockholders" on page 72 of this proxy statement.
The board reviewed director independence during fiscal 2015 and considered whether there were any relationships between each director or any member of his or her immediate family and the Company. The board also examined whether there were any relationships between an organization of which a director is a partner, stockholder or executive officer and the Company. The purpose of this review was to determine whether any such relationships were inconsistent with a determination that a director is independent. No director is deemed independent unless the board has made an affirmative determination that such director has no relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. When conducting its analysis, the board specifically considered all transactions discussed in "Related Party Transactions" on pages 26-29 of this proxy statement. As a result of this review, the board affirmatively determined that all of its current non-employee directors are independent, and all current directors serving on the standing committees of the board satisfy the independence requirements of the NASDAQ and the U.S. Securities and Exchange Commission (the "SEC") relating to directors and Audit, Compensation and Nominating and Corporate Governance Committee members. James G. Berges, who served as Lead Director and as a member of the Nominating and Corporate Governance and Corporate Development and Finance Committees until his resignation on November 20, 2015, was also determined to be an independent director. The board previously determined Paul B. Edgerley, who served on the Nominating and Corporate Governance and Corporate Development and Finance Committees until his resignation on August 14, 2015, to be an independent director.
Executive Sessions of our Non-Management Directors
The chairman of the board, or the independent lead director if the chairman is not independent, and the full board separately, have authority to require the board to meet in executive sessions outside the presence of management. The independent directors meet at regularly scheduled executive sessions without management at least twice per year. In the absence of an independent chairman, the independent lead director will act as chair at such meetings, and if no lead director has been appointed or if the lead director also is not present, the Nominating and Corporate Governance Committee chairperson shall preside over executive sessions and other meetings of the independent directors. The independent directors met in executive session outside the presence of management three times during fiscal 2015.
There are no agreements or arrangements between third parties and any of our directors, including the nominees, which provide for compensation or other payment in connection with the director's candidacy or service as a director.
The Nominating and Corporate Governance Committee periodically assesses the composition of our board, including whether any vacancies are expected on our board due to retirement or otherwise. In connection with this review in fiscal 2017, four new independent directors, Peter A. Dorsman, Lionel Nowell, Scott D. Ostfeld and Lauren Taylor Wolfe, joined our board in 2017, bringing fresh and diverse perspectives. Mr. Dorsman brings extensive experience in leading large supply chain and customer service organizations. Mr. Nowell's extensive financial background brought knowledge to the board in the areas of corporate finance, credit and treasury, financial reporting, accounting and controls and risk oversight. Mr. Ostfeld brings extensive experience investing in companies and engaging with them to help improve stockholder value, as well as with capital allocation strategy and governance. Ms. Taylor Wolfe's diverse knowledge and experience across various industry verticals and expertise in capital allocation and long-term value investing brings valuable insight to the board. The age, gender, and thought diversity that these new independent directors bring to the board also further enhances the diversity of experience, backgrounds and opinions represented on the board. We believe the addition of these new directors, combined with our directors who have experience with us, provides a strong balance of deep, historical understanding of our Company and new perspectives, resulting in strong guidance and oversight to our executive management team.
Pursuant to our age 75 mandatory retirement policy, John W. Alden retired from board service in May 2017. Peter Leav and Lionel Nowell resigned from board service in July and September 2017, respectively.
The board reviewed director independence during fiscal 2017 and considered whether there were any relationships between each director or any member of his or her immediate family and the Company. The board also examined whether there were any relationships between an organization of which a director is a partner, stockholder or executive officer and the Company. The purpose of this review was to determine whether any such relationships were inconsistent with a determination that a director is independent. No director is deemed independent unless the board has made an affirmative determination that such director has no relationship which would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. When conducting its analysis, the board specifically considered all transactions discussed in "Related Person Transactions" on pages 29-30 of this proxy statement. As a result of this review, the board affirmatively determined that
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| | HDS Notice of Annual Meeting and |
all of its non-employee directors are independent, and all directors serving on the standing committees of the board satisfy the independence requirements of NASDAQ and the U.S. Securities and Exchange Commission (the "SEC") relating to directors and Audit, Compensation and Nominating and Corporate Governance Committee members. Board Leadership Structure
As noted in our Corporate Governance Guidelines, the board has no policy with respect to the separation of the offices of chairman of the board and chief executive officer. The board believes that it is important to retain its flexibility to allocate the responsibilities of the offices of the chairman and chief executive officer in any way that is in the best interests of the Company at a given point in time. As part of its annual self-evaluation process, the board evaluates whether the board leadership structure provides the optimal structure for the Company.
Currently, our chief executive officer, Joseph J. DeAngelo, serves as chairman of the board, and James A. Rubright serves as the independent lead director of the board. Our board believes that having a combined chairman/chief executive officer, independent members and chairs for each of our board committees, and an independent lead director currently provides the best board leadership structure for the Company. This structure, together with our other corporate governance practices, provides strong independent oversight of management while ensuring clear strategic alignment throughout the Company. Our lead director is an independent non-employee director who is appointed by the independent directors of the board.
Our board appointed Mr. DeAngelo to serve as chairman of the board based on the leadership qualities, management capability, knowledge of the business and industry, and long-term, strategic perspective he has demonstrated as our chief executive officer. The independent directors unanimously supported appointment of Mr. Rubright as our independent lead director. They believe Mr. Rubright possesses the characteristics and qualities critical for an independent lead director. As a former chairman and chief executive officer of a public company, Mr. Rubright has the qualities and experience desired for an independent lead director — high personal integrity, significant experience in public company management and board leadership, and a deep understanding of operations, strategy, and risk management that provide valuable insight to our board.
In implementing our board's current leadership structure, the board amended our Corporate Governance Guidelines to require the chairman either to be independent or, if not, to be complemented by an independent lead director. A critical element for our board in supporting the current board leadership structure is the simultaneous adoption of robust and transparent duties for the independent lead director. These duties help facilitate our board's independent, objective, effective and efficient oversight of our Company. Our board believes that an executive chairman working with an independent lead director who has strong, well-defined duties gives our board a strong leadership and corporate governance structure that best serves the needs of the Company today. The respective roles and responsibilities of the chairman of the board and independent lead director are set forth in the Company's Corporate Governance Guidelines, available on the corporate governance section of our investor relations website athttp://ir.hdsupply.com/governance.cfm.
Board's Role in Risk Oversight
Our board is responsible for overseeing our risk management. Under its charter, the Audit Committee is responsible for reviewing and discussing the Company's risk management practices, including the effectiveness of the systems and policies for risk assessment and risk management, the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, any unusual material transactions and management, internal auditor and independent auditor reviews of the Company's Foreign Corrupt Practices Act policies, procedures and monitoring.
Executive Sessions of our Non-Management Directors
The chairman of the board, or the independent lead director if the chairman is not independent, and the full board separately, have authority to require the board to meet in executive sessions outside the presence of management. The independent directors meet at regularly scheduled executive sessions without management at least twice per year. In the absence of an independent chairman, the independent lead director will act as chair at such meetings, and if no lead director has been appointed or if the lead director also is not present, the Nominating and Corporate Governance Committee chairperson shall preside over executive sessions and other meetings of the independent directors. The independent directors met in executive session outside the presence of management five times during fiscal 2017.
The Nominating and Corporate Governance Committee leads the annual board and board committee self-evaluation. For fiscal 2017, the process was conducted by survey at the May meetings, with each director completing a detailed questionnaire providing for quantitative ratings in key areas such as overseeing personnel development and succession plans, financials, strategy, risk and governance issues and board dynamics, and seeking subjective comment in each of those areas, to determine their effectiveness and opportunities for improvement. The survey feedback is discussed with the chairman, independent lead director, and the chair of each board committee to ensure that actionable items are appropriately handled. In addition, our independent lead director led a discussion regarding the feedback with the full board. The committee periodically reviews the self-evaluation process in an effort to continually improve board effectiveness.
As noted in our Corporate Governance Guidelines, the board has no policy with respect to the separation of the offices of chairman of the board and chief executive officer. The board believes that it is important to retain its flexibility to allocate the responsibilities of the offices of the chairman and chief executive officer in any way that is in the best interests of the Company at a given point in time. As part of its annual self-evaluation process, the board evaluates whether the board leadership structure provides the optimal structure for the Company.
Currently, our chief executive officer, Joseph J. DeAngelo, serves as chairman of the board, and Kathleen J. Affeldt serves as the independent lead director of the board. Our board believes that having a combined chairman/chief executive officer, independent members and chairs for each of our board committees, and an independent lead director currently provides the best board leadership structure for the Company. This structure, together with our other corporate governance practices, provides strong independent oversight of management while ensuring clear strategic alignment throughout the Company. Our lead director is an independent, non-employee director who is appointed by the independent directors of the board.
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GOVERNANCE OF OUR COMPANY (continued)
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Our board appointed Mr. DeAngelo to serve as chairman of the board based on the leadership qualities, management capability, knowledge of the business and industry, and long-term, strategic perspective he has demonstrated as our chief executive officer. The independent directors supported the appointment of Ms. Affeldt as our independent lead director, as she possesses the characteristics and qualities critical for an independent lead director. Having served as chairman of the board of BTE Technologies and as chair of the compensation of public companies, and having significant public board experience, Ms. Affeldt has the qualities and experience desired for an independent lead director — high personal integrity, significant board leadership experience, strong business acumen and operations history, and public company experience.
Our Corporate Governance Guidelines require the chairman either to be independent or, if not, to be complemented by an independent lead director. A critical element for our board in supporting the current board leadership structure is the simultaneous adoption of robust and transparent duties for the independent lead director. These duties help facilitate our board's independent, objective, effective, and efficient oversight of our Company. Our board believes that an executive chairman working with an independent lead director who has strong, well-defined duties gives our board a strong leadership and corporate governance structure that best serves the needs of the Company today. The respective roles and responsibilities of the chairman of the board and independent lead director are set forth in the Company's Corporate Governance Guidelines, available on the corporate governance section of our investor relations website athttp://ir.hdsupply.com/governance.cfm.
Board's Role in Risk Oversight
Our board has overall responsibility for overseeing our risk management. Under its charter, the Audit Committee is responsible for reviewing and discussing the Company's risk management practices, including the effectiveness of the systems and policies for risk assessment and risk management, the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, any unusual material transactions and management, internal auditor and independent auditor reviews of the Company's Foreign Corrupt Practices Act policies, procedures and monitoring. The Audit Committee also oversees our corporate compliance and ethics programs, as well as the internal audit function. The board's other committees oversee risks associated with their respective areas of responsibility. For example, the Compensation Committee oversees the potential risks associated with our compensation policies and practices.
In addition to the committees' work in overseeing risk management, our full board regularly engages in discussions of the most significant risks that the Company is facing and how these risks are being managed. The board also receives reports on risk management from senior officers of the Company and from the committee chairs. The board reviews periodic assessments from the Company's ongoing enterprise risk management process that are designed to identify potential events that may affect the achievement of the Company's objectives.
The Company's general counsel reports directly to our chief executive officer, providing him with visibility into the Company's risk profile. The Company's internal audit staff regularly reports to the Audit Committee, and our general counsel and our vice president of internal audit, have regularly scheduled private sessions with the Audit Committee. The board believes that the work undertaken by the committees of the board, together with the work of the full board and our chief executive officer, enables the board to oversee effectively the Company's risk management function.
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GOVERNANCE OF OUR COMPANY (continued)
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Corporate Governance Guidelines, Committee Charters, and Codes of Business Conduct and Ethics
Our board of directors has three committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance ("N&CG") Committee. The Executive Committee was dissolved, and replaced by the Corporate Development and Finance ("CD&F") Committee, on March 12, 2015. The CD&F Committee was dissolved on November 20, 2015. Each current board committee has adopted a charter, available on the corporate governance section of our investor relations website athttp://ir.hdsupply.com/governance.cfm.
The following table shows the current members of each committee and the number of meetings held during fiscal 2015. Mr. DeAngelo is chairman of the board but does not serve on any board committee.
Our Corporate Governance Guidelines are available on the corporate governance section of our investor relations website athttp://ir.hdsupply.com/governance.cfm. The charters for each of the Audit, Compensation, and Nominating and Corporate Governance Committees are also available on our investor relations website.
We have a long-standing commitment to conduct our business in accordance with the highest ethical principles. Our Code of Business Conduct and Ethics is applicable to all the representatives of our enterprise, including our executive officers and all other employees and agents of our Company and our subsidiary companies, as well as to our directors. A copy of our code is available on the corporate governance section of our investor relations website. Under this code of ethics, our associates are encouraged to talk to supervisors, managers, or other appropriate personnel when in doubt about the best course of action in a particular situation. Any violation will be subject to appropriate discipline, up to and including dismissal from the Company or prosecution under the law.
Our Code of Ethics for Senior Executive and Financial Officers, also available on our investor relations website, applies to our chief executive officer, chief financial officer, chief accounting officer, and any other senior executive or financial officer performing similar functions. Under this code of ethics, our executives are required, among other things, to act with honesty and integrity, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; to provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Company files with, or submits to, the SEC, and in other public communications made by the Company; to comply with applicable laws, governmental rules and regulations, including insider trading laws; and to promote the prompt internal reporting of potential violations or other concerns related to the code of ethics to the chair of the Audit Committee. We have also adopted a policy providing procedures by which our in-house and outside attorneys are to report material violations of applicable U.S. federal or state laws, or a material breach of a fiduciary duty, as required by SEC rules.
Committees of the Board of Directors
Our board has three committees: the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance ("N&CG") Committee. Each current board committee has adopted a charter, available on the corporate governance section of our investor relations website athttp://ir.hdsupply.com/governance.cfm.
Director | Board | Audit | Compensation | N&CG | Executive (dissolved 03-12-2015) | CD&F (dissolved 11-20-2015) | |||||||||||||
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Kathleen J. Affeldt | | ü | | | | ü | * | | | | | | | ||||||
John W. Alden | ü | ü | |||||||||||||||||
Betsy S. Atkins | | ü | | | | ü | | ü | * | | | | | ||||||
Joseph J. DeAngelo | ü | * | |||||||||||||||||
Peter A. Leav | | ü | | ü | | | | ü | | | | | |||||||
Patrick R. McNamee | ü | ü | ü | ||||||||||||||||
Charles W. Peffer | | ü | | ü | * | | | | | | | | | ||||||
James A. Rubright | ü | ** | ü | ü | * | ||||||||||||||
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Number of Meetings | | 6 | | 8 | | 4 | | 4 | | 0 | | 4 | |||||||
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ü = current board/committee member; * = chair; **independent lead director
Audit Committee. The Audit Committee has oversight responsibility for, among other things, assisting the board of directors in reviewing our financial reporting and other internal control processes, our financial statements, the independent auditors' qualifications and independence, the performance of our internal audit function and independent auditors, and our compliance with legal and regulatory requirements and our code of business conduct and ethics.
During fiscal 2015, the Audit Committee held eight meetings. Each member of our Audit Committee meets the independence requirements of the NASDAQ and the SEC, and each is financially literate. Our board has determined that Charles W. Peffer is an audit committee financial expert as defined by the SEC.
Compensation Committee. The Compensation Committee has oversight responsibility for, among other things, executive succession planning, the compensation of our executive officers and directors, approving equity grants and other incentive arrangements, and authorizing employment-related agreements for our executive officers.
During fiscal 2015, the Compensation Committee held four meetings. All directors serving on the Compensation Committee meet the NASDAQ independence requirements, the "non-employee director" requirements of SEC Rule 16b-3, and are outside directors under Section 162(m) of the Internal Revenue Code. For additional information about the Compensation Committee's processes
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GOVERNANCE OF OUR COMPANY (continued)
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The following table shows the current members of each committee and the number of meetings held during fiscal 2017. Mr. DeAngelo is chairman of the board but does not serve on any board committee.
Director | Board | Audit | Compensation | N&CG | ||||
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Kathleen J. Affeldt | ü** | | ü* | | ||||
Betsy S. Atkins | ü | ü* | ||||||
Joseph J. DeAngelo | ü* | | | | ||||
Peter A. Dorsman | ü | ü | ü | |||||
Scott D. Ostfeld | ü | | ü | | ||||
Patrick R. McNamee | ü | ü | ||||||
Charles W. Peffer | ü | ü* | | | ||||
James A. Rubright | ü | ü | ü | |||||
Lauren Taylor Wolfe | ü | ü | | ü | ||||
| | | | | | | | |
Number of Meetings | 8 | 8 | 4 | 5 | ||||
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ü = current board/committee member; * = chair; ** = independent lead director;
Audit Committee. The Audit Committee has oversight responsibility for, among other things, assisting the board in reviewing our financial reporting and other internal control processes, our financial statements, the independent auditors' qualifications and independence, the performance of our internal audit function and independent auditors, and our compliance with legal and regulatory requirements and our code of business conduct and ethics.
During fiscal 2017, the Audit Committee held eight meetings. Each member of our Audit Committee meets the independence requirements of NASDAQ and the SEC, and each is financially literate. Our board has determined that Charles W. Peffer is an audit committee financial expert as defined by the SEC.
Compensation Committee. The Compensation Committee has oversight responsibility for, among other things, executive succession planning, the compensation of our executive officers and directors, approving equity grants and other incentive arrangements, and authorizing employment-related agreements for our executive officers.
During fiscal 2017, the Compensation Committee held four meetings. All directors serving on the Compensation Committee meet NASDAQ independence requirements, the "non-employee director" requirements of SEC Rule 16b-3, and were outside directors under Section 162(m) during fiscal 2017 (which will not be not applicable after 2017 under the Tax Cuts and Jobs Act). For additional information about the Compensation Committee's processes and the role of executive officers and compensation consultants in determining compensation, see "Compensation Discussion and Analysis" beginning on page 38 of this proxy statement.
Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee has the responsibility for identifying and recommending candidates for election to the board, reviewing the composition of the board and its committees, developing and recommending to the board corporate governance guidelines that are applicable to us, and overseeing board evaluations.
During fiscal 2017, the Nominating and Corporate Governance Committee held five meetings. All directors serving on the Nominating and Corporate Governance Committee meet NASDAQ independence requirements for nominating and corporate governance committees.
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GOVERNANCE OF OUR COMPANY (continued)
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Compensation Committee Interlocks and Insider Participation
Our board of directors held six meetings during fiscal 2015. Each of our directors, other than Mr. McNamee, attended 100% of the total number of meetings of the board and any committees of which he or she was a member. Mr. McNamee missed one special board meeting during fiscal 2015 due to a schedule conflict. Directors are encouraged to attend our annual meetings and eight of the ten individuals who were directors at the time attended the 2015 annual meeting.
Succession Planning and Management Development
We are focused on talent development at all levels within our organization. Among the Compensation Committee's key responsibilities is the responsibility to ensure that management establishes and the committee oversees an effective executive succession plan. The board regularly reviews the succession plans that support our overall business strategy, with a focus on key positions at the senior officer level. The board recognizes that succession planning and talent management are closely connected to risk management. Potential leaders are given exposure and visibility to board members through formal presentations and informal events. More broadly, the board is regularly updated on key talent indicators for the overall workforce, including through diversity, recruiting and development programs.
Policies and Procedures for Related Person Transactions
We have adopted a related person transactions policy under which related persons, namely our executives, directors, and principal stockholders, and each of their immediate family members, are not permitted to enter into certain transactions, or materially modify or amend an ongoing transaction, with the Company in an amount exceeding $120,000, without the consent of our Audit Committee or a designated member of the Audit Committee. Any request for us to enter into or materially modify or
Kathleen J. Affeldt, John W. Alden (before his retirement in May 2017), Betsy S. Atkins (through September 2017), Peter A. Dorsman (from March 2017), Scott D. Ostfeld (from September 2017), and Patrick R. McNamee were members of the Compensation Committee of our board during fiscal 2017. None of these directors is or was an employee or former employee of the Company.
None of our executive officers serves as a member of a board or compensation committee of any entity that has one or more executive officers who serve on the board or Compensation Committee.
Compensation Practices and Risk Management
During fiscal 2017, management and the Compensation Committee conducted a comprehensive assessment and evaluation of the potential risks associated with our compensation policies and practices with respect to both executive compensation and compensation generally. Based on our approach of compensating our associates for the financial success of the Company as a whole and other elements of our compensation program, we concluded that our compensation policies and practices do not encourage undue risk-taking and do not create any risk that is reasonably likely to have a material adverse effect on the Company. We believe that our compensation practices provide a balanced mix of cash and equity, annual and longer-term incentives, and performance metrics that mitigate excessive risk-taking that could diminish our value.
Meetings of the Board of Directors and Attendance at the Annual Meeting
The board held eight meetings during fiscal 2017. Each of our directors, other than Mr. Alden, attended 75% or more of the total number of meetings of the board during fiscal 2017. Mr. Alden missed one of the two board meetings held before his retirement in May 2017 due to a scheduling conflict. All directors attended all meetings of the committees of which he or she was a member during fiscal 2017, other than Mr. McNamee, who missed one Audit Committee meeting, Mr. Leav who missed one Nominating and Corporate Governance Committee meeting, and Mr. Alden who missed
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GOVERNANCE OF OUR COMPANY (continued)
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one Compensation Committee meeting, all due to scheduling conflicts. Directors are encouraged to attend our annual meetings and seven of the nine individuals who were directors at the time attended the 2017 annual meeting.
Succession Planning and Management Development
We are focused on talent development at all levels within our organization. Among the Compensation Committee's key responsibilities is the responsibility to ensure that management establishes and the committee oversees an effective executive succession process. The board regularly reviews the succession plans that support our overall business strategy, with a focus on key positions at the senior officer level. The board recognizes that succession planning and talent management are closely connected to risk management. Potential leaders are given exposure and visibility to board members through formal presentations and informal events. More broadly, the board is regularly updated on key talent indicators for the overall workforce, including through diversity, recruiting, and development programs.
Policies and Procedures for Related Person Transactions
We have adopted a written related person transactions policy under which related persons, namely our executives, directors, and principal stockholders, and each of their immediate family members, are not permitted to enter into certain transactions, or materially modify or amend an ongoing transaction, with the Company in an amount exceeding $120,000, without the consent of our Audit Committee or a designated member of the Audit Committee. Any request for us to enter into or materially modify or amend such transactions is required to be presented to our Audit Committee for review, consideration, and approval. All of our directors and executive officers are required to report to our Audit Committee any such related person transaction. In approving or rejecting the proposed transaction, our Audit Committee will take into account, among other factors it deems appropriate, whether the proposed related person transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances, the extent of the related person's interest in the transaction, and, if applicable, the impact on a director's independence. Under the policy, if we should discover related person transactions that have not been approved, our Audit Committee will be notified and will determine the appropriate action, including ratification, rescission, or amendment of the transaction.
We have entered into an indemnification agreement with each of our directors. The indemnification agreements provide our directors with contractual rights to the indemnification and expense advancement rights provided under our Bylaws, as well as contractual rights to additional indemnification as provided in the indemnification agreement.
On August 30, 2007, investment funds associated with Clayton, Dubilier & Rice, LLC, The Carlyle Group and Bain Capital Partners, LLC entered into a stock purchase agreement with The Home Depot, Inc. ("Home Depot") pursuant to which Home Depot agreed to sell to the Company, or
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to a wholly-owned subsidiary of the Company, certain intellectual property and all of the outstanding common stock of HD Supply, Inc., our primary operating company and a wholly-owned subsidiary of the Company ("HDS") and a Canadian subsidiary, CND Holdings, Inc. On August 30, 2007, through a series of transactions, the Company's direct wholly-owned subsidiary, HDS Holding Corporation, acquired direct control of HDS and the Canadian subsidiary, CND Holdings, Inc. (the "2007 Transaction"). Registration Rights Agreement
During a portion of fiscal 2015, we were a party to an amended and restated registration rights agreement (as amended, the "Registration Rights Agreement") with certain of our stockholders, including Bain. The Registration Rights Agreement granted to Bain the right to cause us, at our own expense, to use our reasonable best efforts to register securities held by Bain for public resale, subject to certain limitations. In the event we registered any of our common stock, certain of our stockholders, including Bain, also had the right to require us to use our reasonable best efforts to include in such registration statement shares of our common stock held by them, subject to certain limitations, including as determined by the underwriters. The Registration Rights Agreement also provided for us to indemnify certain of our stockholders and their affiliates in connection with the registration of our common stock. The Registration Rights Agreement terminated when Bain sold its remaining shares of the Company's common stock on July 28, 2015.
In connection with the 2007 Transaction, we entered into indemnification agreements among HDS and the Equity Sponsors under which, following the completion of the 2007 Transaction, we agreed to indemnify the Equity Sponsors, their respective managers, administrative members, and the administrative members or general partners of any other investment vehicle that is our stockholder and is managed by such manager or its affiliates and their respective successors and assigns, and the respective directors, officers, stockholders, partners, members, employees, agents, advisors, consultants, representatives and controlling persons of each of them, or of their partners, stockholders or members in their capacity as such, against certain liabilities arising out of performance of the 2007 Transaction, the performance of consulting agreements that were terminated in fiscal 2013, securities offerings by us and certain other claims and liabilities. We also entered into a similar indemnification agreement with Home Depot providing for indemnification of Home Depot, its affiliates, directors, officers, stockholders, partners, members, employees, agents, representatives and controlling persons against certain liabilities arising from securities offerings by us.
We have also entered into an indemnification agreement with each of our directors. The indemnification agreements provide our directors with contractual rights to the indemnification and expense advancement rights provided under our Bylaws, as well as contractual rights to additional indemnification as provided in the indemnification agreement.
In connection with the 2007 Transaction, Home Depot agreed to be responsible for and pay any taxes that were reportable in a tax return that included Home Depot or any subsidiary of Home Depot and also included HDS or any of its subsidiaries, except for taxes relating to a period before HDS or its subsidiary was acquired, directly or indirectly, by Home Depot. The Internal Revenue Service disallowed certain deductions claimed by us and issued a formal Revenue Agent's Report challenging certain of the cash refunds resulting from our carryback of NOLs to taxable years during which we were a member of Home Depot's U.S. federal consolidated tax group. The carryback of the NOLs was made in accordance with (and subject to the terms of) a tax cooperation agreement between the Company and Home Depot. Pursuant to the tax cooperation agreement, if the IRS were ultimately successful with respect to the proposed adjustments, we would be required to reimburse Home Depot an amount equal to the disallowed refunds plus related interest.
Certain guarantees, surety bonds and letters of credit that Home Depot and/or its affiliates entered into prior to the closing of the 2007 Transaction (other than HDS, HD Supply Canada, Inc. and their respective affiliates) relate to our and our subsidiaries' obligations to landlords, customers and suppliers, and remained in place immediately after the closing of the 2007 Transaction. The Company agreed in the purchase and sale agreement to fully indemnify Home Depot and its affiliates from any losses that arise out of these obligations. The Company also agreed to use its reasonable best efforts to cause itself and/or HD Supply to be substituted for Home Depot and/or its affiliates and to have Home Depot and its affiliates released in respect of certain such obligations.
Transactions with Other Related Parties
In May 2015, James A. Rubright, an independent director, acquired a 24.5% interest in MPC Partnership Holdings, LLC (d/b/a Carroll Organization), which is the managing member of, and owns a minority interest in, affiliated apartment community owners. The Company had a preexisting relationship with the Carroll Organization pursuant to which its affiliated apartment community owners purchased products from the Company. On a consolidated basis, the Carroll Organization's affiliated apartment community owners purchased products from the Company of $3.14 million in fiscal 2017, $3.71 million in fiscal 2016, and $3.67 million in fiscal 2015. These transactions were conducted in the ordinary course of business on an arm's-length basis on terms and at prices management believes an unrelated third party would pay.
Gail T. DeAngelo, who is the sister of our chief executive officer, was a senior business manager for the Company from January 2008 through her December 2017 termination date. During fiscal 2017, Ms. DeAngelo received an aggregate of $113,391 in base compensation, as well as customary employee benefits. As a senior manager, Ms. DeAngelo was not eligible to participate in our equity compensation plan, but was a participant in our associate stock purchase plan, which provides a 5% discount on purchased stock ($179 benefit for fiscal 2017). In connection with closing our Schenectady, New York office and related termination of Ms. DeAngelo's employment with the Company, the Audit Committee approved severance payments of $44,259 for Ms. DeAngelo, representing 12 weeks of base compensation and a prorated fiscal 2017 bonus payment, in exchange for a release of claims, confidentiality and noncompetition covenants. Ms. DeAngelo's compensation and severance payments are within the established range paid to our senior managers.
Communicating with our Board of Directors
Any stockholder or interested party who wishes to communicate directly with our board, or with any individual director of our board, may do so by writing to Dan S. McDevitt, General Counsel and Corporate Secretary, HD Supply Holdings, Inc., 3400 Cumberland Boulevard, Atlanta, Georgia 30339 or by email atboardcommunications@hdsupply.com. Please specify to whom your letter should be directed. Once the communication is received and reviewed by the Corporate Secretary, it will be promptly forwarded to the addressee, as appropriate. Communications that are not related to the
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HDS Notice of Annual Meeting and | | |
GOVERNANCE OF OUR COMPANY (continued)
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duties and responsibilities of the board, including advertisements, junk mail and mass mailings, solicitations for business, routine customer service complaints, new product or service suggestions, opinion survey pools, requests for employment, requests for contributions, or other inappropriate material will not be forwarded to our directors. Any communication alleging legal, ethical, or compliance issues by management or any other matter deemed by the General Counsel and Corporate Secretary to be potentially material to the Company will be promptly forwarded to the chairman of the Audit Committee.
Policy Regarding Certain Transactions in Company Securities
We prohibit our directors, officers and employees from engaging in short sales of the Company's securities, and prohibit transactions in puts, calls or other derivative securities with respect to Company securities. We strongly discourage, but do not prohibit, our directors, officers and employees from engaging in short-term trading of Company securities or from hedging their ownership of Company stock. Any such transaction must be pre-cleared with our general counsel and, to date, no transactions of that kind have been approved.
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OWNERSHIP OF SECURITIES |
Securities Ownership of Certain Beneficial Owners and Management
The following tables set forth information as of March 15, 2018 with respect to the beneficial ownership of our common stock by (i) each person known to own beneficially more than five percent of our common stock; (ii) each director; (iii) each of the named executive officers; and (iv) all directors and executive officers as a group. We are not aware of any pledges of our common stock which may at a subsequent date result in a change in control of the Company.
The amounts and percentages of shares beneficially owned are reported on the basis of SEC rules and regulations governing the determination of beneficial ownership of securities. Under those rules and regulations, a person is deemed to be a "beneficial owner" of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days of the determination date, which in the case of the following table is May 14, 2018. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person's ownership percentage, but not for purposes of computing any other person's percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.
The percentage of beneficial ownership is based on 185,530,038 shares of our common stock outstanding as of March 15, 2018.
Except as otherwise indicated in the footnotes to this table, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.
The following table sets forth information with respect to any person known to us to be the beneficial owner of more than five percent of our common stock, based on information in Schedule 13Gs filed with the SEC and Company records:
Name | Number of Shares Beneficially Owned | Percent | ||
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FMR LLC(1) | 19,200,526 | 10.35 | ||
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The VanGuard Group, Inc.(2) | 14,627,627 | 7.88 | ||
T. Rowe Price Associates, Inc.(3) | 12,616,378 | 6.8 | ||
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HDS Notice of Annual Meeting and | | |
owned directly by the various investment companies registered under the Investment Company Act ("Fidelity Funds") advised by Fidelity Management & Research Company, a wholly owned subsidiary of FMR, which power resides with the Fidelity Funds' Boards of Trustees. Fidelity Management & Research Company carries out the voting of the shares under written guidelines established by the Fidelity Funds' Boards of Trustees. FMR's address is 245 Summer Street, Boston, Massachusetts 02210. Securities Ownership of Certain Beneficial Owners and Management
The following tables set forth information as of March 21, 2016 with respect to the beneficial ownership of our common stock by (i) each person known to own beneficially more than five percent of our common stock; (ii) each director; (iii) each of the named executive officers; and (iv) all directors and executive officers as a group. We are not aware of any pledges of our common stock which may at a subsequent date result in a change in control of the Company.
The amounts and percentages of shares beneficially owned are reported on the basis of SEC rules and regulations governing the determination of beneficial ownership of securities. Under those rules and regulations, a person is deemed to be a "beneficial owner" of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days of the determination date, which in the case of the following table is March 21, 2016. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person's ownership percentage, but not for purposes of computing any other person's percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.
The percentage of beneficial ownership is based on 200,610,355 shares of our common stock outstanding as of March 21, 2016.
Except as otherwise indicated in the footnotes to this table, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock.
The following table sets forth information with respect to any person known to us to be the beneficial owner of more than five percent of our common stock, based on information in Schedule 13Gs filed with the SEC and Company records:
The following table sets forth the beneficial ownership of our common stock as of March 15, 2018 by our current directors and nominees and named executive officers, calculated in accordance with SEC rules and regulations, and all of our directors and executive officers as a group. Unless otherwise indicated, the address for each individual listed below is c/o HD Supply Holdings, Inc., 3400 Cumberland Boulevard, Atlanta, Georgia 30339.
Directors and Executive Officers | Shares Owned Directly | Stock Options Exercisable Within 60 Days | Vested Deferred Stock Units(1) | Total Shares Beneficially Owned | Percent | ||||||
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Kathleen J. Affeldt | – | – | 9,794 | 9,794 | * | ||||||
Betsy S. Atkins | 7,480 | – | 3,686 | 11,166 | * | ||||||
Peter A. Dorsman | – | – | 3,991 | 3,991 | * | ||||||
Patrick R. McNamee | 21,762 | – | – | 21,762 | * | ||||||
Scott D. Ostfeld | – | – | – | – | * | ||||||
Charles W. Peffer | 17,725 | – | – | 17,725 | * | ||||||
James A. Rubright | 12,150 | – | – | 12,150 | * | ||||||
Lauren Taylor Wolfe | – | – | 4,009 | 4,009 | * | ||||||
Joseph J. DeAngelo | 382,618 | 205,093 | – | 587,711 | * | ||||||
Evan J. Levitt | 51,452 | 147,495 | – | 198,947 | * | ||||||
Stephen O. LeClair(2) | 19,807 | – | – | 19,807 | * | ||||||
Dan S. McDevitt | 8,697 | 62,961 | – | 71,658 | * | ||||||
John A. Stegeman | 66,368 | 128,256 | – | 194,624 | * | ||||||
William P. Stengel II | 32,112 | 147,222 | – | 179,334 | * | ||||||
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Shares held by all directors and executive officers as a group (14 persons) | 620,171 | 691,027 | 21,480 | 1,332,678 | 0.72% | ||||||
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Name | Number of Shares Beneficially Owned | Percent | ||
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FMR LLC(1) | 20,819,169 | 10.38% | ||
The VanGuard Group Inc.(2) | 13,368,000 | 6.66% | ||
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OWNERSHIP OF SECURITIES (continued)
form a controlling group with respect to FMR. The address of FMR is 245 Summer Street, Boston, Massachusetts 02210.
The following table sets forth the beneficial ownership of our common stock as of March 21, 2016 by our current directors and nominees and named executive officers, calculated in accordance with SEC rules and regulations, and all of our directors and executive officers as a group. Unless otherwise indicated, the address for each individual listed below is c/o HD Supply Holdings, Inc., 3100 Cumberland Boulevard, Atlanta, Georgia 30339.
Directors and Executive Officers | Shares Owned Directly | Stock Options Exercisable Within 60 Days | Restricted Stock Units Vesting Within 60 Days(1) | Vested Deferred Stock Units(2) | Total Shares Beneficially Owned | Percent | |||||||
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Kathleen J. Affeldt | – | – | 3,686 | 2,496 | 6,182 | * | |||||||
John W. Alden | 10,595 | – | 3,686 | – | 14,281 | * | |||||||
Betsy S. Atkins | 6,964 | – | 3,686 | – | 10,650 | * | |||||||
Peter A. Leav | 2,106 | – | 3,686 | – | 5,792 | * | |||||||
Patrick R. McNamee | 14,464 | – | 3,686 | – | 18,150 | * | |||||||
Charles W. Peffer | 10,427 | – | 3,686 | – | 14,113 | * | |||||||
James A. Rubright | 2,106 | – | 4,626 | – | 6,732 | * | |||||||
Joseph J. DeAngelo(3) | 210,682 | 1,163,345 | – | – | 1,374,027 | * | |||||||
Evan J. Levitt | 14,950 | 78,729 | – | – | 93,679 | * | |||||||
Stephen O. LeClair | 19,807 | – | – | 19,807 | * | ||||||||
Margaret M. Newman | 11,145 | 200,201 | – | | 211,346 | * | |||||||
John A. Stegeman | 46,140 | 18,826 | – | – | 64,966 | * | |||||||
Anesa T. Chaibi | 17,484 | – | – | – | 17,484 | * | |||||||
Jerry L. Webb | 8,007 | 57,200 | – | – | 65,207 | * | |||||||
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Shares held by all directors and executive officers as a group (15 persons) | 377,556 | 1,551,301 | 26,742 | 2,496 | 1,958,095 | * | |||||||
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The following table sets forth the compensation earned or paid to our non-employee directors in fiscal 2017.
Name | Fees earned or paid in cash(1) ($) | Stock Awards(2) ($) | Total ($) | |||||||
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Kathleen J. Affeldt | | 108,542 | | 129,988 | | 238,530 | ||||
John W. Alden | 27,708 | — | 27,708 | |||||||
Betsy S. Atkins | | 182,083 | | 189,964 | | 372,047 | ||||
Peter A. Dorsman | 120,660 | 155,096 | 275,756 | |||||||
Peter A. Leav | | 43,750 | | 129,988 | | 173,738 | ||||
Patrick R. McNamee | 102,188 | 129,988 | 232,176 | |||||||
Lionel L. Nowell | | 35,590 | | 129,609 | | 165,199 | ||||
Scott D. Ostfeld | 34,445 | 82,123 | 116,568 | |||||||
Charles W. Peffer | | 113,542 | | 129,988 | | 243,530 | ||||
James A. Rubright | 111,146 | 129,988 | 241,134 | |||||||
Lauren Taylor Wolfe | | 120,812 | | 155,096 | | 275,908 | ||||
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DIRECTOR COMPENSATION
The following table sets forth the compensation earned or paid to our non-employee directors in fiscal 2015.
Name | Fees earned or paid in cash ($)(1) | Stock Awards ($)(3) | Total ($) | |||||||
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Kathleen J. Affeldt | | 105,000 | | 119,979 | | 224,979 | ||||
John W. Alden | 95,000 | 119,979 | 214,979 | |||||||
Betsy S. Atkins | | 105,938 | | 119,979 | | 225,917 | ||||
James G. Berges | 131,354 | 179,969 | 311,323 | |||||||
Paul B. Edgerley(2) | | 57,292 | | 119,979 | | 177,271 | ||||
Peter A. Leav | 99,063 | 119,979 | 219,042 | |||||||
Patrick R. McNamee | | 107,500 | | 119,979 | | 227,479 | ||||
Charles W. Peffer | 110,000 | 119,979 | 229,979 | |||||||
James G. Rubright(4) | | 118,125 | | 148,903 | | 267,028 | ||||
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HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 32
DIRECTOR COMPENSATION (continued)
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The aggregate number of stock awards made under our Board of Directors Compensation Policy and outstanding as of January 28, 2018 for each of our non-employee directors in fiscal 2017 are set forth below.
Name | Restricted Stock Units (#) | |||
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Kathleen J. Affeldt | | 3,290 | ||
Betsy S. Atkins | 4,808 | |||
Peter A. Dorsman(1) | | 3,868 | ||
Patrick R. McNamee | 3,290 | |||
Scott D. Ostfeld | | 2,273 | ||
Charles W. Peffer | 3,290 | |||
James A. Rubright | | 3,290 | ||
Lauren Taylor Wolfe(1) | 3,868 | |||
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The following is a narrative discussion of the material factors we believe are necessary to understand the information disclosed in the director compensation table.
The Compensation Committee is responsible for reviewing and recommending to the board the compensation of our non-employee directors. Our board establishes non-employee director compensation after considering recommendations made by the Compensation Committee. The Compensation Committee and the board review the compensation level of our non-employee directors on a biennial basis. Since 2009, the Company has engaged Pearl Meyer to provide input with respect to our non-employee director compensation, including a market review of the competitiveness of total compensation. For further information, see "Compensation Consultant and Use of Comparator Data" on pages 44-45. During fiscal 2017, based on Pearl Meyer's input and peer group benchmarking, the Compensation Committee recommended, and the board approved, a $5,000 increase to the annual cash retainer and a $10,000 increase in the annual equity retainer effective May 17, 2017. We believe that the compensation paid to our non-employee directors is reasonable and appropriate, in line with market practice, and is in the best interests of the Company and our stockholders because it allows us to attract and retain highly qualified non-employee directors which is critical to our long-term success.
Director compensation is provided pursuant to our Board of Directors Compensation Policy. Mr. DeAngelo, Chairman, President and Chief Executive Officer, does not receive any compensation for service as a director. The director compensation year runs from the date of each annual stockholders meeting. As a matter of good corporate governance, the Omnibus Incentive Plan approved by our stockholders in May 2017 provides a maximum limit of $750,000 on director compensation (both cash and equity awards) for any board compensation year. The elements of our director compensation program are discussed in more detail below.
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The following is a narrative discussion of the material factors we believe are necessary to understand the information disclosed in the director compensation table.
The Compensation Committee is responsible for reviewing and recommending to the board the compensation of our non-employee directors. Our board establishes non-employee director compensation after considering recommendations made by the Compensation Committee. The Compensation Committee and the board review the compensation level of our non-employee directors on an annual basis. Since 2009, the Company has engaged Pearl Meyer to provide input with respect to our non-employee director compensation, including a market review of the competitiveness of total compensation. For further information, see "Compensation Consultant and Use of Comparator Data" on pages 39-40.
Director compensation is provided pursuant to our Board of Directors Compensation Policy. Mr. DeAngelo does not receive any compensation for service as a director. The director compensation year runs from the date of each annual stockholders meeting. No changes to the Board of Directors Compensation Policy has been made since our 2015 proxy statement. The elements of our director compensation program are discussed in more detail below.
Equity Compensation
Each non-employee director receives an annual equity award in the form of restricted stock units under the Company's 2013 Omnibus Incentive Plan. The number of restricted stock units is determined by dividing $120,000 ($180,000 for the independent lead director) by the closing stock price of a share of Company common stock on the grant date, which is the date of our annual stockholders meeting. Each restricted stock unit represents the contingent right to receive one share of Company common stock, par value $0.01 per share. The restricted stock units vest on the earliest of: (1) the one-year anniversary of the grant date, (2) the Company's next annual stockholders meeting, or (3) a change in
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DIRECTOR COMPENSATION (continued)
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Equity compensation is prorated for directors who serve less than the full compensation year. Except as described above for terminations due to death, disability, or age 75 retirement, restricted stock units are forfeited on termination of board service before the awards have vested. In recognition of his long period of exceptional service as board chairman and independent lead director, the board elected to vest Mr. Berges' outstanding restricted stock units on termination of his board service in November 2015.
Cash Compensation
Each non-employee director is paid an annual cash fee for board service of $85,000, payable in installments at each quarterly board meeting. In addition, each non-employee director appointed to serve as a member of a standing board committee receives an annual cash retainer as follows: $12,500 for Audit Committee members; $10,000 for Compensation Committee members; and $7,500 for Nominating and Corporate Governance and Corporate Development and Finance Committee members. Committee chairs are not eligible to receive the committee retainer, but instead receive a committee chair retainer as follows: $25,000 for the Audit Committee chair; $20,000 for the Compensation Committee chair and $15,000 for the Nominating and Corporate Governance and Corporate Development and Finance Committee chairs. The non-employee board chairman receives an annual cash retainer of $25,000, and the independent lead director receives an annual cash retainer of $75,000, in each case, that is in addition to the other cash retainers. Cash fees are prorated for directors who serve less than the full compensation year. The Corporate Development and Finance Committee was dissolved in November 2015.
Directors may elect to convert their cash fees into Company stock in the form of deferred stock units. Each deferred stock unit represents the right to receive one share of the Company's common stock, par value $0.01 per share. The deferred stock units are fully vested and will be settled upon termination of the director's board service.
Travel Expense Reimbursements
Directors are reimbursed for their reasonable expenses related to board membership, including first-class airfare on a commercial airline for travel to board meetings or for other Company business.
Stock Ownership Guidelines
Our independent directors are expected to own shares of Company common stock valued at three times the annual cash board retainer (or $255,000) within five years of their appointment or election to the board, pursuant to the terms of the Stock Ownership Guidelines adopted by the Compensation Committee. Directors are required to hold 50% of their vested stock awards until the ownership guidelines are satisfied. Certain directors have elected to defer settlement of their vested restricted stock units and deferred stock units until termination of board service. These deferred vested stock units are deemed owned for purposes of the stock ownership guidelines. All our directors satisfy the stock ownership guidelines other than the following more recently appointed directors: Ms. Affeldt and Atkins and Messrs. Leav and Rubright.
Each non-employee director receives an annual equity award in the form of restricted stock units under the Company's Omnibus Incentive Plan. The number of restricted stock units is determined by dividing $130,000 ($190,000 for the independent lead director) by the closing stock price of a share of our common stock on the grant date, which is the date of our annual stockholders meeting. Each restricted stock unit represents the contingent right to receive one share of our common stock, par value $0.01 per share. The restricted stock units vest on the earliest of: (1) the one-year anniversary of the grant date, (2) the Company's next annual stockholders meeting, or (3) a change in control, and will be settled upon vesting unless the director elects to defer settlement until termination of board service. A pro rata portion of the award vests upon termination of the director's service due to death, disability, or age 75 retirement based on the number of days of service during the year of termination. Equity compensation is prorated for directors who serve less than the full compensation year. Except as described above for terminations due to death, disability, or age 75 retirement, restricted stock units are forfeited on termination of board service before the awards have vested.
Cash Compensation
Each non-employee director is paid an annual cash fee for board service of $90,000, payable in installments at each quarterly board meeting. In addition, each non-employee director appointed to serve as a member of a standing board committee receives an annual cash retainer as follows: $12,500 for Audit Committee members; $10,000 for Compensation Committee members; and $7,500 for Nominating and Corporate Governance Committee members. Committee chairs are not eligible to receive the committee retainer, but instead receive a committee chair retainer as follows: $25,000 for the Audit Committee chair; $20,000 for the Compensation Committee chair and $15,000 for the Nominating and Corporate Governance Committee chair. Any non-employee board chairman would receive an annual cash retainer of $25,000, and the independent lead director receives an annual cash retainer of $75,000, in each case, that is in addition to the other cash retainers. Cash fees are prorated for directors who serve less than the full compensation year.
Directors may elect to convert their cash fees into Company stock in the form of deferred stock units. Each deferred stock unit represents the right to receive one share of our common stock, par value $0.01 per share. The deferred stock units are fully vested and will be settled upon termination of the director's board service.
Travel Expense Reimbursements
Directors are reimbursed for their reasonable expenses related to board membership, including first-class airfare on a commercial airline for travel to board meetings or for other Company business.
Stock Ownership Guidelines and Holding Period Requirements
We amended our Stock Ownership Guidelines in 2017 to increase the required ownership level for our independent directors from three to five times the annual cash board retainer. Our independent directors are now expected to own shares of our common stock valued at five times the annual cash board retainer (or $450,000) within five years of their appointment or election to the board, under the terms of the Stock Ownership Guidelines adopted by the Compensation Committee. Directors are required to hold 50% of their vested stock awards until the ownership guidelines are satisfied. Certain
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DIRECTOR COMPENSATION (continued) |
directors have elected to defer settlement of their vested restricted stock units and deferred stock units until termination of board service. These deferred vested stock units are deemed owned for purposes of the stock ownership guidelines.
All directors, other than the directors who joined the board during 2017, satisfied the prior guidelines of three times the annual cash board retainer as of the May 2017 annual meeting date. Assuming a stock price of at least $34.50, all directors, other than the directors who joined the board during 2017, will satisfy the increased ownership guidelines of five times the annual cash board retainer by the 2018 annual meeting date.
Director Orientation and Continuing Education
We provide orientation for new directors, and provide our directors with materials or briefing sessions on subjects that we believe will assist them in discharging their duties. We also engage third parties to provide either in-boardroom or dinner meeting education to our directors. To supplement the education we provide, we encourage our directors to attend external programs and reimburse up to $5,000 annually for the costs of attending such programs.
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EXECUTIVE COMPENSATION
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The following Compensation Discussion and Analysis provides information regarding the material elements of our fiscal 2017 compensation program for our "named executive officers," also referred to as our "NEOs." The named executive officers for fiscal 2017 are as follows:
The Compensation Committee (for purposes of this Compensation Discussion and Analysis, the "Committee"), pursuant to its charter, is responsible for establishing, implementing, and reviewing on an annual basis our compensation programs and the compensation paid to our NEOs.
2017 Executive Compensation Changes
In 2017, 97.23%, of the say-on-pay votes cast were in favor of our executive compensation program. During fiscal 2017, with input from the Committee's independent consultant, and taking into consideration the Company's say-on-pay vote outcome, the Committee approved the following primary changes for fiscal 2017.
Named Executive Officer | Target % (expressed as a % of base salary) | Target AIP-Adjusted EBITDA ($ millions) | Actual AIP-Adjusted EBITDA ($ millions) | AIP-Adjusted EBITDA payout % earned | Target AIP-Adjusted Working Capital % | Actual AIP-Adjusted Working Capital % | AIP-Adjusted Working Capital Payout % Earned | Aggregate AIP Payment ($) | |||||||||||||||||
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Joseph J. DeAngelo | | 150 | % | | 952.0 | | 936.1 | | 87.49 | % | | 15.5 | | 15.4 | | 103.80 | % | | 1,361,280 | ||||||
Evan J. Levitt | 60 | % | 952.0 | 936.1 | 87.49 | % | 15.5 | 15.4 | 103.80 | % | 211,844 | ||||||||||||||
Stephen O. LeClair | | 60 | % | | 233.5 | | 222.2 | | 63.69 | % | | 13.7 | | 14.0 | | 83.54 | % | | 162,310 | ||||||
Margaret M. Newman | 60 | % | 952.0 | 936.1 | 87.49 | % | 15.5 | 15.4 | 103.80 | % | 211,624 | ||||||||||||||
John A. Stegeman (White Cap) | | 100 | % | | 136.9 | | 151.5 | | 154.88 | % | | 20.9 | | 19.7 | | 144.80 | % | | 1,116,970 | ||||||
(Canada) | | 100 | % | | 7.4 | * | | 10.9 | * | | 195.84 | % | | 24.6 | | 24.2 | | 112.59 | % | | 68,912 | ||||
Anesa T. Chaibi | 100 | % | 553.5 | 534.2 | 65.12 | % | 18.4 | 18.4 | 100.00 | % | 426,067 | ||||||||||||||
Jerry L. Webb | | 60 | % | | 233.5 | | 222.2 | | 63.69 | % | | 13.7 | | 14.0 | | 83.54 | % | | 159,189 | ||||||
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EXECUTIVE COMPENSATION (continued) |
After giving effect to these changes, the following charts reflect the target pay mix for the CEO and the other NEOs for fiscal 2017:
CEO 2017 TARGET TOTAL DIRECT COMPENSATION MIX | OTHER NEOs 2017 TARGET TOTAL DIRECT COMPENSATION MIX | |
2017 Company Performance Results
Despite a challenging year, the Company achieved the following results in fiscal 2017:
In addition to the above performance highlights, the Company accomplished significant debt reduction and ongoing interest savings objectives during the year. In December 2017, we reduced the U.S. borrowing capacity on our Senior ABL Facility by $500 million. In September 2017, we used a portion of the net proceeds from the sale of our Waterworks business to redeem all of the outstanding
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EXECUTIVE COMPENSATION (continued) |
$1,250 million aggregate principal of our 5.25% Senior Secured First Priority Notes due 2021. In April 2017, we used cash and available borrowings under the Senior ABL Facility to repay $100 million aggregate principal of our Term B-1 Loans. Debt refinancing activities in fiscal 2017 will reduce cash interest payments by approximately $75 million annually.
The Company supplements its reporting of net income with non-GAAP measurements, including adjusted EBITDA, adjusted net income (loss), adjusted net income per diluted share and net debt. This supplemental information should not be considered in isolation or as a substitute for the GAAP measurements. Additional information regarding adjusted EBITDA, adjusted net income and adjusted net income per diluted share referred to herein, including a reconciliation, if available, to the most comparable GAAP measurement, is included under Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Adjusted EBITDA and Adjusted Net Income (Loss) in the annual report on Form 10-K filed by the Company on March 13, 2018.
2017 Executive Compensation and Pay-for-Performance Results
Our fiscal 2017 financial results led to the following executive compensation and pay-for-performance results with respect to fiscal 2017:
With respect to CEO pay, the following illustrates target versus realizable pay for fiscal 2017:
CEO 2017 Target vs. Realizable Compensation
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EXECUTIVE COMPENSATION (continued) |
The following definitions were used for realizable pay:
None of the equity value shown in the chart above was vested as of year-end, which the Committee believes provides strong ongoing performance and retention strength.
In evaluating fiscal 2017 performance and pay results, the Committee believes it reflects strong alignment between pay and performance, while also allowing the Company to attract and retain talent. The Committee also believes that the Company has sound overall governance processes, practices, and policies, as evidenced by the following:
What We Do (Best Practices) | What We Don't Do or Allow | |||||||||||||||||||||||||||||||||||||||||
✓ executive sessions without management ✓ independent compensation consultant ✓ review of total compensation tally sheets ✓ annual compensation risk assessment ✓ significant amount of pay "at risk" ✓ significant use of equity-based pay ✓ four year vesting on ✓ capped incentive opportunities ✓ clawback policy upon a restatement ✓ robust stock ownership requirements ✓ performance award added for 2018 | ✗ excessive severance ✗ single trigger equity acceleration on a change in ✗
Addition of Performance Award to Grant Mix For 2018 During 2017, the Committee, with the assistance of its independent compensation consultant, conducted a thorough review of the Company's short-term and long-term incentive plans. Based on this review, the Committee approved a change to the long-term incentive program for 2018. The primary change was to add performance award stock units to the annual grant mix for the named executive officers, with the grant mix for 2018 being 50% stock options, 25% restricted stock, and 25% performance award. The performance award is tied to cumulative adjusted earnings per share and free cash flow over a three-year period (fiscal 2018-fiscal 2020), with a payout opportunity ranging from 50% to 200% of target assuming a threshold level of performance is achieved. The Committee believes that this change increases the pay-for-performance nature of the long-term incentive program while creating additional focus and accountability for achieving and sustaining long-term adjusted earnings per share and free cash flow growth. The Committee will continue to evaluate the long-term incentive plan design each year to ensure alignment with business priorities and market practices, and may approve further changes to the plan design in subsequent years.
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EXECUTIVE COMPENSATION (continued)
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Determining Executive Compensation
Our Company and our aspiration to be "First Choice" are built on the mission of "One Team, Driving Customer Success and Value Creation," a philosophy we believe is best embodied by our SPIRIT values:
The Committee oversees and directs our executive compensation process and plan designs. Working under the guidance and direction of the Committee and its independent compensation consultant, our human resources team develops and implements programs that we believe are aligned with the strategies and philsophies embraced by the Committee and our Company. Our finance team heavily supports the process by providing financial analysis and input and review of program design. Except with respect to his own compensation, our CEO has final management-level review of any compensation program before it is sent to the Committee for consideration and approval. The Committee has the task of evaluating and approving our material compensation programs, including our equity compensation program. Management frequently consults with the Committee during the design process to obtain its direction and feedback on how the design of our executive compensation programs support the overall strategy of the Company. As described below, data from outside consultants are also used during the design process to obtain further insight into the features of our compensation program.
We consider the cost (including aggregate share usage and dilution) of the various components of our compensation program in evaluating the overall balance and reasonableness of our executives' total direct compensation packages. We review total compensation levels for executive officers at least annually through the use of tally sheets that quantify each element of direct and indirect compensation provided to individual executives and the portion of the executive's total compensation represented by each element of compensation. This annual review of tally sheets also includes information on the value of executives' unexercised stock options (if any) and outstanding stock awards, as well as an evaluation of the payments and benefits that would be paid to executive officers in the event of termination of employment, including retirement or following a change in control of the Company. While providing additional context to us in making compensation decisions, the information from the tally sheets regarding unexercised stock options (if any), outstanding stock awards and termination payments and benefits generally does not affect our compensation decisions for the NEOs. This reflects our view that an executive's compensation level should be based on the Company's performance, the executive's performance, and the executive's contribution to the Company's performance.
Our CEO provides the Committee with a performance assessment for each of the other current NEOs. Our CEO, chief financial officer, chief people officer, and general counsel generally attend regularly scheduled quarterly Committee meetings, but are not present for the executive sessions or for any discussion of his or her own compensation. The Committee approves the amount and form of each element of compensation (including base salary, annual cash incentive compensation, equity-based incentive compensation, benefits and perquisites) for the CEO and approves each element of compensation for our other executive officers after considering performance assessments and compensation recommendations made by management. The Committee may not delegate its authority for approval of executive officer compensation.
Since 2009, the Company has engaged Pearl Meyer, a leading executive compensation advisor, to provide input with respect to our executive compensation programs, including a market review of the competitiveness of total compensation of our executives and a review of our equity program. A representative from Pearl Meyer attends our Committee meetings. For further information, see "Compensation Consultant and Use of Comparator Data" on pages 44-45
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EXECUTIVE COMPENSATION (continued)
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Our Company and our aspiration to be "First Choice" are built on the mission of "One Team, Driving Customer Success and Value Creation," a philosophy we believe is best embodied by our SPIRIT values:
Help our customers succeed by delivering exceptional service and the best | ||
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| Exceed our commitments every day to our | |
Integrity: | Always do the right thing and always take the high road | |
Respect: | Treat team members the way you would like you and your family to be treated | |
Innovation: | Seek new and creative ways to build a | |
Teamwork: | Win together by creating an environment where every individual puts the
team first |
The Committee and our management believe that fostering these values requires a performance culture geared toward customer success and sustainable, long-term profitability. The Company's compensation programs are designed to reward achievement of these goals, thereby attracting and retaining talent that will contribute to such a culture. In particular, our executive compensation programs are intended to meet the following objectives:
In addition, we intend that our compensation programs will be aligned with:
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EXECUTIVE COMPENSATION (continued)
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Compensation Consultant and Use of Comparator Data
During fiscal 2017, the Company requested and received information from Pearl Meyer with respect to potential conflicts of interest, including the following factors: (1) other services provided to us by the consultant; (2) fees paid by us as a percentage of the consulting firm's total revenue; (3) policies and procedures maintained by the consulting firm that are designed to prevent a conflict of interest; (4) any business or personal relationships between the individual consultants involved in the engagement and a member of the Committee; (5) any Company stock owned by the individual consultants involved in the engagement; (6) any business or personal relationships between our executive officers and the consulting firm or the individual consultants involved in the engagement. Based on an assessment of these factors, including information gathered from directors and executive officers addressing business or personal relationships with the consulting firm or the individual consultants, the Compensation Committee concluded that the work of Pearl Meyer did not raise any conflict of interest.
In general, neither the Company nor the Committee has exclusively relied on any of the data or advice received from Pearl Meyer as to the amount of any particular item of compensation. Pearl Meyer provides input which the Company and Committee take into consideration, as the case may be, on the particular element of compensation under consideration.
The Committee reviews compensation levels and practices at comparator companies in setting the compensation of our NEOs and when reviewing or establishing the Company's compensation programs for other associates. The information is used to help the Committee better understand the competitive market and how executives are compensated at other companies that are similar in size or industry or with whom we compete for talent.
We seek comparators that share a similar industrial distribution model or are a direct competitor to a specific business unit. Companies are, therefore, included in the comparator group because they (1) operate in the same business as the Company or one of our business units (industrial distribution of building supplies), (2) operate in a similar business (distribution of any product), or (3) operate in a similar business model (business to business). The comparator group was developed by management and the Committee, with input from Pearl Meyer, and has been used to provide input into both the value of total compensation for executives as well as the relative value of each component of compensation. We do not rely on percentile rankings of compensation within the comparator group to determine specific compensation amounts for the NEOs; rather, the comparator group is used to identify programs and levels of pay which management and the Committee consider when evaluating our own programs.
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EXECUTIVE COMPENSATION (continued)
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For fiscal 2017 compensation decisions, the following comparator group has been used, consisting of companies in the same or similar business or having a similar business model:
The Company believes that the compensation programs it maintains are important in achieving the compensation goals described above. For fiscal 2017, the principal components of compensation for the NEOs were base salary, annual cash incentives, annual equity incentives, and benefits and perquisites.
While our NEOs do not have employment agreements with the Company, each of our NEOs is party to an at-will employment offer letter which may contain certain employment arrangements, including severance payments. Each of our NEOs is also party to a change in control agreement. These arrangements are discussed more fully under "Potential Payments upon Termination or Change in Control" on pages 59-62
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EXECUTIVE COMPENSATION (continued) |
The design of each component of compensation fits into the overall executive pay program and supports the philosophy and objectives previously discussed in the following manner:
Pay Component | Objective of Pay Component | Key Measures | ||
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Base salary | • Provides competitive pay while managing fixed costs • Rewards an executive for exemplary achievements against non-financial goals | • Individual performance and contribution • Scope of responsibilities • Experience • Achievement of non-financial goals | ||
Annual cash incentives | • Focuses on short-term operational metrics that drive and support our long-term strategy • Where applicable, creates incentives for performance based on performance of individual NEO's business unit | • Achievement of agreed upon operating plan goals in profitability and working capital • Achievement of agreed upon performance goals of individual business unit | ||
Annual equity incentives | • Aligns executive interests to stockholder interests by rewarding long-term focus on profitability and value creation for the enterprise • Assists in the retention of key talent • Creates an "ownership culture" | • Growth in stock value • Employment retention through the vesting period of equity awards | ||
Benefits and perquisites | • Benefits provide a safety net of protection in the case of illness, disability, or death • Perquisites generally enable the executive to perform their duties efficiently and minimize distractions | • Benefits are provided to executives on the same basis as provided to our salaried associates • Perquisites are valued by our executives at minimal cost to us | ||
Change in control benefits | • Focuses management on acting in the best interests of our stockholders in a change in control context | • Double trigger — benefits paid upon occurrence of a change in control and involuntary or constructive termination | ||
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Each of the components of compensation for the NEOs is discussed below, including a discussion of the factors considered in determining the applicable amount payable or achievable under each component.
Base Salary
Base salaries are established at levels designed to attract and retain top executive talent while managing fixed costs at an appropriate level. The determination of any particular executive's base salary is based on personal performance and contribution, experience in the role, changes to the scope of responsibilities, market rates of pay, and internal equity. The fiscal 2017 salary increases were based on these factors, but were primarily focused on bringing base salary closer to market rates of pay based on peer group benchmarking for the position. Mr. Stegeman did not receive a merit increase for fiscal 2017 since his salary was determined to be market competitive for his position. Mr. Stengel received a 10% merit increase effective in March and an additional 11% increase in June in connection with his appointment as President and Chief Executive Officer of HD Supply Facilities Maintenance based on peer group benchmarking for the new position. Our CEO declined to receive a merit increase for fiscal 2017. Each year, the chief executive officer,our CEO, with input from Human Resources,human resources, proposes base salary increases, if any, for all NEOs, excluding himself, based on the foregoing factors and the Company's merit increase budget prepared by management. His proposal is subject to review and approval (with or without
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EXECUTIVE COMPENSATION (continued) |
modifications) by the Committee after consideration of these factors. Our Human Resources team works directly with the Committee with respect to any changes to Mr. DeAngelo's base salary, and any changes are approved by the Committee, after the board conducts our chief executive officer'sCEO's annual performance review. Our chief executive officerCEO is not present during voting or deliberations on his compensation.
In order to ensure thatThe following summarizes the base salary amounts remain competitive for key leaders for 2015, Mr. Levitt received a salary increase of 9.5%, Ms. Chaibi, Ms. Newman and Mr. Stegeman received a salary increase of 3%, and the other NEOs, other than Mr. DeAngelo, received a salary increase of 2%. Mr. DeAngelo waived any merit increaseincreases for fiscal 2015.2017 for each NEO:
Name | 2016 | 2017 | $ Increase | % Increase | ||||
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Joseph J. DeAngelo (CEO) | 1,000,000 | 1,000,000 | 0 | 0 | ||||
Evan J. Levitt (CFO) | 475,001 | 522,501 | 47,500 | 10 | ||||
Dan S. McDevitt | 330,000 | 351,450 | 21,450 | 6.5 | ||||
John A. Stegeman | 792,227 | 792,227 | 0 | 0 | ||||
William P. Stengel, II | 410,063 | 500,000 | 89,937 | 22 | ||||
Stephen O. LeClair | 450,000 | 463,500 | 13,500 | 3 | ||||
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The meritsalary increase is effective for the 12-month period beginning in March of each year; the salary reported in the Summary Compensation Table on page 4953 is base salary earned for the relevant fiscal year.
Annual Cash Incentives
Annual cash incentives are designed to focus the NEOs on producing superior results against key financial metrics relevant to the Company as a whole or to the individual business unit(s) that the NEO leads. By tying a significant portion of the executive's total annual cash compensation to annual variable pay, we reinforce our "pay for performance" culture and focus our executives on critical short-term financial and operational objectives which also support our long-term financial goals.
Annual Incentive Plan
All of our NEOs participate in the AIP, which provides cash-based incentives dependent on annual results against the key financial metrics described below. AIP target payouts to our NEOs are expressed as a percentage of base salary. Annually, these percentage targets are reviewed against comparator data and adjusted, if necessary, based on the Committee's estimation of what level of targeted payouts is necessary to retain, motivate and reward our executives.
For fiscal 2015,2017, the AIP performance payout weighting was based on an 80% AIP-adjustedadjusted earnings before interest, taxes, depreciation, and amortization target ("Adjusted EBITDA") and on a 20% average working capital as a percentage of sales target. For purposes of the AIP, stock-based compensation costs are excluded from AIP-adjusted EBITDA, both as to the targets and as to AIP-adjusted EBITDA as ultimately determined. The measures utilized in establishing performance goals under the AIP generally exclude extraordinary or other nonrecurring or unusual items, restructuring or impairment charges and changes in accounting.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 42
EXECUTIVE COMPENSATION (continued)
For fiscal 2015, we viewed AIP-adjusted EBITDA as the key operating metric that would drive business profitability. The AIP-Working Capital measure is intended to increase the focus on cash management across the Company, to avoid creating disincentives for investment in growth, and to reward teams for incremental annual improvements in working capital while continuing to grow EBITDA.
The AIP-adjusted EBITDA goal provides a threshold level (at which 25% of the target percentage of base salary is earned, except for Facilities Maintenance where threshold level performance earns 50% of the target percentage), a target (or "("planAIP-Working Capital") level (at which 100%. Adjusted EBITDA for the fiscal 2017 AIP performance payout is Adjusted EBITDA as defined in the Company's fiscal 2017 annual report on Form 10-K. Additional information regarding Adjusted EBITDA referred to herein is included under Management's Discussion and Analysis of Financial Condition and Results of Operations—Key Business Metrics—Adjusted EBITDA and Adjusted Net Income (Loss) in the target percentage of base salary is earned), a 150% level (at which 150% ofannual report on Form 10-K filed by the target percentage of base salary may be earned), and a maximum level for superior results (at which 200% of the target percentage of base salary may be earned).
Company on March 13, 2018. AIP-Working Capital is computed by averaging the ending gross working capital at the end of each fiscal month divided by the fiscal year sales. Gross working capital was selected to focus on operational working capital and to mitigate any incentive to alter results through adjustments to accruals or reserves.
For fiscal 2017, we viewed Adjusted EBITDA as the key operating metric that would drive business profitability. The AIP-Working Capital goal provides a threshold level (at which 50% of the target percentage of base salarymeasure is earned), a target (or "plan") level (at which 100% of the target percentage of base salary is earned), a 150% level (at which 150% of the target percentage of base salary may be earned), and a maximum level for superior results (at which 200% of the target percentage of base salary may be earned).
For the NEOs participation in the AIP, the following percentages applied:
| AIP-Adjusted EBITDA Facilities Maintenance | AIP-Adjusted EBITDA Construction and Industrial | AIP-Adjusted EBITDA Waterworks | AIP-Adjusted EBITDA Global Support Center | ||||||||||||||||||
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| Performance Required | Payout % Earned | Performance Required | Payout % Earned | Performance Required | Payout % Earned | Performance Required | Payout % Earned | ||||||||||||||
Threshold | 95% of Plan | 50% | 90% of Plan | 25% | 90% of Plan | 25% | 90% of Plan | 25% | ||||||||||||||
Plan | 100% of Plan | 100% | 100% of Plan | 100% | 100% of Plan | 100% | 100% of Plan | 100% | ||||||||||||||
150% Payout | 104% of Plan | 150% | 110% of Plan | 150% | 110% of Plan | 150% | 107% of Plan | 150% | ||||||||||||||
200% Payout | 107% of Plan | 200% | 117% of Plan | 200% | 117% of Plan | 200% | 117% of Plan | 200% |
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Payout = (Base Salary × Target % of Base Salary × 80% × EBITDA Payout % Earned) +(Base Salary × Target % of Base Salary × 20% × Working Capital Payout % Earned)
The target percentages of base salary for our NEOs' AIP payout for fiscal 2015 was 150% for Mr. DeAngelo, 100% for Mr. Stegeman and Ms. Chaibi and 60% for our other NEOs. The target percentage of base salary amount was determined based on benchmarking data for bonus compensation and total compensation, using the compensation comparator group set forth on page 40. The benchmarking data serves as a general guideline for managing overall pay decisions relative to market
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 43
EXECUTIVE COMPENSATION (continued)
benchmarks, with actual pay decisions also based on experience, performance, long-term potential, internal pay equity, tenure, and retention value.
For fiscal 2015, the AIP goal for the Global Support Center was an AIP-adjusted EBITDA of $952 million. The Committee, in approving the plan goals in March 2015, viewed this level as appropriate in order to keep the primary focus on adjusted EBITDA. Our AIP-adjusted EBITDA for fiscal 2015 was $936.1 million. As a result, Messrs. DeAngelo and Levitt and Ms. Newman earned an incentive award of 87.49% of the target AIP-adjusted EBITDA award. For fiscal 2015, the AIP-Working Capital goal for the Global Support Center was 15.5%. The Committee, in approving the plan goals in March 2015, viewed this level as appropriate in orderintended to increase the focus on cash management across the Company. Our AIP-Working CapitalCompany, to avoid creating disincentives for fiscal 2015 was 15.4%. As a result, Messrs. DeAngeloinvestment in growth, and Levitt and Ms. Newman earned an incentive award of 103.8% of the target AIP-Working Capital award. Even though Mr. DeAngelo assumed responsibilities during fiscal 2015 for leading our HD Supply Facilities Maintenance business, his fiscal 2015 bonus award is based solely on Global Support Center performance.to
As President of HD Supply Construction and Industrial — White Cap and HD Supply Construction and Industrial — Canada, Mr. Stegeman's AIP payout is based on the financial performance of Construction and Industrial — White Cap and HD Supply Construction and Industrial — Canada. For fiscal 2015, Construction and Industrial — White Cap's financial goal was an AIP-adjusted EBITDA of $136.9 million and Construction and Industrial — Canada's financial goal was an AIP-adjusted EBITDA of $7.4 million (CAD). White Cap's AIP-adjusted EBITDA was $151.5 million and Canada's AIP-adjusted EBITDA was $10.9 million (CAD). As a result, Mr. Stegeman earned an incentive award of 154.88% of the target AIP-adjusted EBITDA award for White Cap and 195.84% of the target AIP-adjusted EBITDA award of Canada. For fiscal 2015, the AIP-Working Capital goal for White Cap was 20.9%, and was 24.6% for Canada. The Committee, in approving the plan goals in March 2015, viewed this level as appropriate in order to increase the focus on cash management across the Company. White Cap's AIP-Working Capital for fiscal 2015 was 19.7% and Canada's AIP-Working Capital for fiscal 2015 was 24.2%. As a result, Mr. Stegeman earned an incentive award of 144.8% of the target AIP-Working Capital award for White Cap and 112.59% of the target AIP-Working Capital award for Canada.
As President of HD Supply Waterworks, Mr. LeClair's AIP payout is based on the financial performance of Waterworks. For fiscal 2015, Waterworks' financial goal was an AIP-adjusted EBITDA of $233.5 million. Waterworks' AIP-adjusted EBITDA was $222.2 million. As a result, Mr. LeClair earned an incentive award of 63.69% of the target AIP-adjusted EBITDA award. For fiscal 2015, the AIP-Working Capital goal for Waterworks was 13.7%. The Committee, in approving the plan goals in March 2015, viewed this level as appropriate in order to increase the focus on cash management across the Company. Waterwork's AIP-Working Capital for fiscal 2015 was 14%. As a result, Mr. LeClair earned an incentive award of 83.54% of the target AIP-Working Capital award. As former chief executive officer of Waterworks, Mr. Webb's AIP payout is also based on the financial performance of Waterworks, and he received the same percentage payouts as Mr. LeClair.
As former President of HD Supply Facilities Maintenance, Ms. Chaibi's AIP payout is based on the financial performance of Facilities Maintenance. For fiscal 2015, Facilities Maintenance's financial goal was an AIP-adjusted EBITDA of $553.5 million. Facilities Maintenance's AIP-adjusted EBITDA was $534.2 million. As a result, Ms. Chaibi earned an incentive award of 65.12% of the target AIP-adjusted EBITDA award. For fiscal 2015, the AIP-Working Capital goal for Facilities Maintenance
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 44
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EXECUTIVE COMPENSATION (continued) |
EXECUTIVE COMPENSATION (continued)reward teams for incremental annual improvements in working capital while continuing to grow EBITDA.
was 18.4%. These results were measured at various levels for each NEO based on their role and responsibilities, as follows:
The following are the performance and payout scales that were approved by the Committee in approvingFebruary 2017, and adjusted in August 2017 to reflect the plandivestiture of the Company's Waterworks business, for the fiscal 2017 annual cash incentives for NEOs, as well as the actual performance results for 2017. The AIP targets for the GSC were adjusted by the Committee to reflect the divestiture by the Company's of its Waterworks business unit in August 2017 and related loss of EBITDA and working capital for the remainder of the fiscal year after closing the transaction.
| Adjusted EBITDA(80% Weight) | | | AIP-Working Capital % of Sales (20% Weight) | | | ||||||||||||||||||
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($ in millions) | GSC ($) | C&I White Cap ($) | C&I Canada (CAN$) | Facilities Maintenance ($) | HIS ($) | Payout % of Target | GSC (%) | C&I White Cap (%) | C&I Canada (%) | Facilities Maintenance % | HIS (%) | Payout % of Target | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
Threshold | 804.9 | 196.7 | 12.9 | 522.53 | 27.1 | 25 | 17.7 | 19.5 | 24.2 | 18.9 | 12.3 | 50 | ||||||||||||
Target | 884.5 | 218.6 | 14.3 | 564.2 | 28.6 | 100 | 16.7 | 18.4 | 22.9 | 17.8 | 11.6 | 100 | ||||||||||||
Stretch | 919.0 | 240.5 | 15.7 | 586.2 | 30.6 | 150 | 15.7 | 17.3 | 21.5 | 16.7 | 10.9 | 150 | ||||||||||||
Maximum | 946.4 | 256.6 | 21.4 | 603.7 | 32.9 | 200 | 14.7 | 16.2 | 20.1 | 15.7 | 10.2 | 200 | ||||||||||||
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Actual Performance | 846.7 | 214.0 | 14.8 | 534.9 | 29.0 | | 16.7 | 18.3 | 21.2 | 17.9 | 12.4 | | ||||||||||||
Payout % of Target | 64.40 | 84.17 | 116.20 | 47.33 | 110.31 | 99.98 | 106.30 | 160.71 | 97.40 | 0 | ||||||||||||||
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Based on the pre-approved goals in March 2015, viewed this level as appropriate in orderand payout ranges, and actual results, the following summarizes the actual amounts earned by each NEO under the fiscal 2017 AIP:
| | Target AIP Opportunity | | | ||||||
---|---|---|---|---|---|---|---|---|---|---|
| | Weighted Avg Payout % of Target | | |||||||
Name | Base Salary | % Salary | $ Value | Actual AIP Award(1) | ||||||
| | | | | | | | | | |
Joseph J. DeAngelo (CEO) | 1,000,000 | 150 | 1,500,000 | 71.52 | 1,072,770 | |||||
Evan J. Levitt (CFO) | 522,501 | 75 | 391,876 | 71.52 | 280,261 | |||||
Dan S. McDevitt | 351,450 | 50 | 175,725 | 71.52 | 125,675 | |||||
John A. Stegeman | 792,227 | 100 | 792,227 | 90.39 | 716,066 | |||||
William P. Stengel, II | 500,000 | 75 | 362,303 | 57.34 | 207,759 | |||||
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Fiscal 2015 performance resulted in the following payments being made to our NEOs under the AIP:
Named Executive Officer | Target % (expressed as a % of base salary) | Target AIP-Adjusted EBITDA ($ millions) | Actual AIP-Adjusted EBITDA ($ millions) | AIP-Adjusted EBITDA payout % earned | Target AIP-Adjusted Working Capital % | Actual AIP-Adjusted Working Capital % | AIP-Adjusted Working Capital Payout % Earned | Aggregate AIP Payment ($) | |||||||||||||||||
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| | | | | | | | | | | | | | | | | | | | | | | | | |
Joseph J. DeAngelo | | 150 | % | | 952.0 | | 936.1 | | 87.49 | % | | 15.5 | | 15.4 | | 103.80 | % | | 1,361,280 | ||||||
Evan J. Levitt | 60 | % | 952.0 | 936.1 | 87.49 | % | 15.5 | 15.4 | 103.80 | % | 211,844 | ||||||||||||||
Stephen O. LeClair | | 60 | % | | 233.5 | | 222.2 | | 63.69 | % | | 13.7 | | 14.0 | | 83.54 | % | | 162,310 | ||||||
Margaret M. Newman | 60 | % | 952.0 | 936.1 | 87.49 | % | 15.5 | 15.4 | 103.80 | % | 211,624 | ||||||||||||||
John A. Stegeman (White Cap) | | 100 | % | | 136.9 | | 151.5 | | 154.88 | % | | 20.9 | | 19.7 | | 144.80 | % | | 1,116,970 | ||||||
(Canada) | 100 | % | 7.4 | * | 10.9 | * | 195.84 | % | 24.6 | 24.2 | 112.59 | % | 68,912 | ||||||||||||
Anesa T. Chaibi | | 100 | % | | 553.5 | | 534.2 | | 65.12 | % | | 18.4 | | 18.4 | | 100.00 | % | | 426,067 | ||||||
Jerry L. Webb | 60 | % | 233.5 | 222.2 | 63.69 | % | 13.7 | 14.0 | 83.54 | % | 159,189 | ||||||||||||||
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* CAD |
Annual Equity Incentive CompensationIncentives
Our NEOs participate in the Company's long-term incentive plan, which provides annual equity grants to our NEOs under the Company's Omnibus Incentive Plan that was approved by our stockholders in May 2017 (the "Omnibus Plan"). The Omnibus Plan is an amendment and restatement of the Company's 2013 Omnibus Stock Incentive Plan (the "Omnibus Stock2013 Plan"). The Omnibus Stock Plan was approved by the board and stockholders on June 26, 2013 and, which replaced and succeeded the HDS Investment Holding, Inc. Stock Incentive Plan ("Pre-IPO StockPrior Plan") that was adopted by the board
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 48 | | |
EXECUTIVE COMPENSATION (continued) |
shortly following our separation from Home Depot in 2007 (collectively, the Omnibus StockPlan, 2013 Plan and the Pre-IPO StockPrior Plan are referred to as the "Stock Plan"). Upon adoption of the Omnibus Stock2013 Plan, the Pre-IPO StockPrior Plan terminated and no future awards willmay be made under that plan. However, awards previously granted under the Pre-IPO StockPrior Plan are unaffected by the termination of Pre-IPO Stock Plan.its termination.
The Company believes that granting equity awards under the Stock Plan is an effective way to align executive performance to our key goal of increasing value for the Company's stockholders. The view of our boardthe Committee is that, assuming that our management is successful in increasing the value of the Company, equity awards under the Stock Plan will have the a high potential value for all participants as a percentage of total compensation. The vesting component is intended to maximize the retentive effect of the equity grants.
In 2014, the Committee determined to move from up-front grants of stock options to routine annual equity grants going forward in order to more closely align our compensation practices with those of comparable post-IPO companies. Similar to 2014, theThe Committee made an annual equity grant to our NEOs in March 2015February 2017 in the form of nonqualified stock options (75% of grant value, 50% of value for Mr. McDevitt) and restricted stock awards (25% of grant value, 50% of grant value for Mr. McDevitt) that vest in four equal annual installments on each of the first through fourth anniversaries of the grant date, subject to continued employment through the vesting dates.date. The equity grants in March 2015February 2017 were based on the following
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 45
EXECUTIVE COMPENSATION (continued)
percentages of each NEO's base salary in effect on the last day of our prior2016 fiscal year (February 1, 2015, the last day of our fiscal 2014).end base salary.
Name | Salary at 2016 FYE | |
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| | |
Joseph J. DeAngelo | ||
Evan J. Levitt | ||
Dan S. McDevitt | 75 | |
John A. Stegeman | 100 | |
William P. Stengel | 300 | |
Stephen O. LeClair | ||
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ThisSeventy-five percent of this amount (50% for Mr. McDevitt) was then divided by the per option Black-Scholes value on the grant date to determine the number of nonqualified stock options granted, and 25% of this amount (50% for Mr. McDevitt) was then divided by the per share closing stock price on the grant date to determine the number of restricted shares granted. The percentage of base salary amount and the allocation percentage between restricted stock and stock options was determined based on benchmarking data for equity grants and total compensation, using the compensation comparator group set forth on page 40,45, and prorated for time in the position. The benchmarking data serves as a general guideline for managing overall pay decisions relative to market benchmarks, with actual pay decisions also based on experience, performance, long-term potential, internal pay equity, tenure, and retention value.
In MarchThe addition of stock options to the annual grant mix in fiscal 2016 was intended to significantly enhance the pay-for-performance orientation of the long-term incentive plan and to create even stronger stockholder alignment. This is accomplished by having a component of the annual equity grant that will only deliver value to executives if value is delivered to stockholders through stock price appreciation. Although the Committee reviewed and considered various means of strengthening performance linkage, including the use of performance shares, stock options were believed to be the best choice at the time given the challenges associated with creating appropriate performance measures for multi-year performance periods in light of recent significant divestitures and related business model changes.
However, the Committee is committed to periodically reviewing the equity award mix to ensure that it remains aligned with the objectives of the program going forward. During 2017, the Committee,
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 49 |
EXECUTIVE COMPENSATION (continued) |
with the assistance of its independent compensation consultant, conducted a thorough review of the Company's short-term and long-term incentive plans. Based on this review, the Committee approved a change to the followinglong-term incentive program for 2018. The primary change was to add performance award stock units to the annual grant mix for the named executive officers, with the grant mix for 2018 being 50% stock options, 25% restricted stock, and nonqualified stock option grants25% performance award. The performance award is tied to cumulative adjusted earnings per share and free cash flow over a three-year period (fiscal 2018-fiscal 2020), with a payout opportunity ranging from 50% to 200% of target assuming a threshold level of performance is achieved. The Committee believes that this change increases the pay-for-performance nature of the long-term incentive program while creating additional focus and accountability for achieving and sustaining long-term adjusted earnings per share and free cash flow growth. The Committee will continue to evaluate the NEOs. The percentage of base salary amount was determined based on benchmarking data for equity grantslong-term incentive plan design each year to ensure alignment with business priorities and total compensation, usingmarket practices, and may approve further changes to the compensation comparator group set forth on page 40, and prorated for timeplan design in the position. The benchmarking data serves as a general guideline for managing overall pay decisions relative to market benchmarks, with actual pay decisions also based on experience, performance, long-term potential, internal pay equity, tenure, and retention value. These grants will be reported in our 2017 proxy statement.subsequent years.
Name | Percent of Base Salary at 2015 FYE | Restricted Stock (#) | Stock Options (#) | |||
---|---|---|---|---|---|---|
| | | | | | |
Joseph J. DeAngelo | 425% | 38,109 | 300,424 | |||
Evan J. Levitt | 300% | 12,777 | 100,730 | |||
Stephen O. LeClair | 150% | 6,052 | 47,714 | |||
Margaret M. Newman | 168% | 6,478 | 51,072 | |||
John A. Stegeman | 150% | 10,655 | 84,001 | |||
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Benefits and Perquisites
The benefits provided to our NEOs are the same as those generally provided to our other salaried associates and include medical, dental and vision insurance, basic life insurance and accidental death and dismemberment insurance, short and long-term disability insurance, and a 401(k) plan. Our NEOs are also eligible to participate in the Company's broad-based employee stock purchase plan, which provides a 5% discount off the market price of Company stock at the time of purchase.
Our executives participate in a limited number of perquisite programs. We maintain these programs because they are valued by our NEOs but impose relatively little cost to us.
HDS Notice Based on Pearl Meyer's input and peer group benchmarking, the cost of Annual Meeting and 2016 Proxy Statement - Page 46
Tablethe perquisites provided to our CEO is positioned below the median of Contentsour peers.
EXECUTIVE COMPENSATION (continued)
All of the NEOs participate in the Executive Basic Life Insurance Plan.executive basic life insurance plan. Under this plan, the beneficiary of a participant who dies while employed by us is entitled to a lump sum payment of $500,000. The participant owns the insurance policy, and the Company pays the premium on his or her behalf. The value of the premium rangesfor fiscal 2017 ranged from $900$600 to $3,190$2,580 and was taxable to the executive. For fiscal 2017, one NEO was eligible to purchase a 20-year term supplemental life insurance policy that is fully taxable.owned by the participant. The Company pays the premiums on the participant's behalf. The participant's financial planning benefit is reduced by the amount of premiums paid for supplemental life insurance. The value of the premium for supplemental life insurance for fiscal 2017 was $2,290 and was taxable to the executive. At the end of the year, each participant receives an additional payment equal to the gross amount of taxes paid on theany life insurance benefit. This additional payment is also fully taxable to the executive and is grossed up. The supplemental life insurance benefit has been discontinued and no officers are eligible for this benefit going forward.
Other benefits provided to our NEOs include use of a Companycompany car, the purchase of a Companycompany car for less than market value, and reimbursement for financial planning services. The value of providing Companycompany cars and reimbursement for financial planning services is taxable to the executive and is grossed up to avoid reducing the value of the benefits. Each of our NEOs received a financial planning services benefit for fiscal 20152017 ranging from $12,710 to $18,000. Our NEOs received a Companycompany car benefit for fiscal 20152017 ranging from $4,486$5,269 to $18,401.$32,410. At the end of the year, each participant receives an additional payment equal to the gross amount of taxes paid on the financial planning and car benefits. This additional payment is also fully taxable to the executive and is grossed up.
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 50 | | |
EXECUTIVE COMPENSATION (continued) |
Because the Company's business continuity is best facilitated by avoiding any prolonged or unexpected absences by members of its senior management team, all NEOs are strongly encouraged to take advantage of comprehensive executive physical examinations paid for by the Company. The value of executive physical examinations for our NEOs for fiscal 20152017 ranged from $0 to $2,271.$3,546.
One officer received an $502 benefit for passport renewal and expediting fees that were required for business purposes but that also had a potential personal benefit. Another officer received an $836 benefit for spousal air travel to attend a Company business event.
The tax gross-up perquisite received by our NEOs for fiscal 2017 ranged from $13,761 to $39,386.
Based on Pearl Meyer's input and peer group benchmarking, the cost of the perquisites provided to our CEO is positioned below the median of our peers.
Change in Control Agreements
To focus management on acting in the best interests of our stockholders in a change in control context, consistent with peer benchmarking with respect to executive level change in control agreements, the Committee approved agreements for our executive officers that generally provide for a lump sum cash payment to the executive equal to two times the executive's base salary and target bonus opportunity and $100,000 in lieu of continued healthcare and other benefits. Payout is triggered on an involuntary or constructive termination of the executive's employment within two years of a change in control, other than a termination for death, disability, or cause (as defined in the agreement). We believe that providing this protection to our senior executives aids retention and minimizes any disincentive to pursue a transaction that would be good for our stockholders but potentially bad for individual executives due to job loss. Benefits are predicated upon a "double trigger" (employment termination and consummation of a change in control) and no excise tax gross-ups are provided to the executives, thereby protecting the interests of our stockholders. See "Potential Payments Upon Termination or Change in Control" on pages 59-62 for a summary of the material provisions of these agreements.
Risk Assessment
During fiscal 2017, management and the Committee conducted a comprehensive assessment and evaluation of the potential risks associated with our compensation policies and practices with respect to both executive compensation and compensation generally. Based on our approach of compensating our associates for the financial success of the Company as a whole and other elements of our compensation system, we concluded that our compensation policies and practices do not encourage undue risk-taking and do not create any risk that is reasonably likely to have a material adverse effect on the Company. See page 28 for additional details.
Policy on Recovering Incentive Compensation in the Event of a Restatement
The board adopted a clawback policy that provides us with the ability to require reimbursement or cancellation of any bonus or other incentive-based compensation, including stock-based compensation, awarded or paid to any current or former executive officer of the Company during the three-year period prior to a restatement if the incentive compensation was predicated upon the
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EXECUTIVE COMPENSATION (continued) |
achievement of financial results that were subsequently the subject of restatement, the executive officer engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and a lower award would have been made to the executive officer based upon the restated financial results. The policy applies to incentive compensation awarded, vesting, or paid to an executive officer after the effective date of the policy on July 2, 2013. The policy is in addition to the requirements of applicable law and other legal remedies available to the Company.
Stock Ownership Guidelines and Holding Period Requirements
Our CEO (Mr. DeAngelo) is required to own shares having a value equal to five times base salary, three times base salary for our chief financial officer (Mr. Levitt) and business unit leaders (Messrs. Stegeman and Stengel), and one times base salary for our functional leaders (Mr. McDevitt), within the later of five years from the 2013 effective date of the policy or the date he or she becomes an executive officer. Our NEOs must hold 50% of vested shares (except for shares withheld or sold to pay required tax withholding and the exercise price for options) until they are in compliance with the guidelines. Our stock ownership guidelines count the following types of ownership: shares owned outright; shares owned directly by a spouse, domestic partner, or minor child; shares owned indirectly through beneficial trust ownership; vested shares or vested stock units held in any Company plan; and the in-the-money value of vested stock option awards. Compliance is evaluated annually by the Committee as of the end of each fiscal year, using a thirty-day closing stock price average to mitigate the impact of short-term price variations. The guidelines further our core philosophy that our NEOs should also be owners of our Company. The guidelines are based on our expectation that each NEO will maintain a targeted level of investment in our stock so that the interests of our NEOs and our stockholders are closely aligned, and our NEOs have a strong incentive to provide effective management. All of our NEOs satisfied the targeted ownership guidelines as of the end of fiscal 2017.
Policy Regarding Certain Transactions in Company Securities
We prohibit our directors, officers and employees from engaging in short sales of the Company's securities, and prohibit transactions in puts, calls or other derivative securities with respect to Company securities. We strongly discourage, but do not prohibit, our directors, officers and employees from engaging in short-term trading of Company securities or from hedging their ownership of Company stock. Any such transaction must be pre-cleared with our general counsel and, to date, no transactions of that kind have been approved.
Deductibility of Compensation
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on the amount of compensation that we may deduct in any one year with respect to certain "covered employees,employees." unless certain specificBeginning in 2018, the Tax Cuts and detailed criteria are satisfied. Under applicable Treasury regulations,Jobs Act repealed the performance-based compensation exception to Section 162(m) does not apply to, making previously deductible performance-based compensation paid or stock options or restricted stock granted under the compensation agreements and plans described in our initial public offering prospectus during the reliance transition period ending on the earlier of the date the agreement or plan is materially modified or the first stockholders meeting at which directors are elected during 2017. Compensation paid to our NEOs is, therefore, notnow subject to the deductibility restrictions$1 million limit. In making its compensation decisions, the Committee considers the impact of Section 162(m) at this time.
Risk Assessment
During fiscal 2015, management, along with other relevant factors (see foregoing Compensation Discussion and Analysis discussion), and provides compensation that it believes is consistent with the Committee conducted a comprehensive assessment and evaluation of the potential risks associated with our compensation policies and practices with respect to both executive compensation and compensation generally. Based on our approach of compensating our associates for the financial successbest interests of the Company as a whole and other elements of ourits stockholders. Such compensation system, we concluded that our compensation policies and practices domay not encourage undue risk-taking and do not create any risk that is reasonably likely to have a material adverse effect on the Company.
Policy on Recovering Incentive Compensation in the Event of a Restatement
The board adopted a clawback policy that provides us with the ability to require reimbursement or cancellation of any bonus or other incentive-based compensation, including stock-based compensation, awarded or paid to any current or former executive officer of the Company during the three-year period prior to a restatement if the incentive compensation was predicated upon the achievement of financial results that were subsequently the subject of restatement, the executive officer
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 47
EXECUTIVE COMPENSATION (continued)
engaged in fraud or intentional misconduct that was a substantial contributing cause to the need for the restatement, and a lower award would have been made to the executive officer based upon the restated financial results. The policy applies to incentive compensation awarded, vesting, or paid to an executive officer after the effective date of the policy on July 2, 2013. The policy is in addition to the requirements of applicable law and other legal remedies available to the Company.
Stock Ownership Guidelines
We amended our stock ownership guidelines during fiscal 2015 to require our chief executive officer (Mr. DeAngelo) to own shares having a value equal to five times base salary, three times base salary for our chief financial officer (Mr. Levitt) and business unit leaders (Messrs. LeClair and Stegeman), and one times base salary for our functional leaders (Ms. Newman), within five years of becoming subject to the guidelines in fiscal 2013. Mr. LeClair has five years from the date of his appointment as an executive officer in November 2015 to comply. Our NEOs must hold 50% of vested shares (except for shares sold to pay requiredbe tax withholding and the exercise price for options) until they are in compliance with the guidelines. Our stock ownership guidelines count the following types of ownership: shares owned outright; shares owned directly by a spouse, domestic partner, or minor child; shares owned indirectly through beneficial trust ownership; vested shares or vested stock units held in any Company plan; and the in-the-money value of vested stock option awards. Compliance is evaluated annually by the Committee as of the end of each fiscal year, using a thirty-day closing stock price average to mitigate the impact of short-term price variations. The guidelines further our core philosophy that our NEOs should also be owners of our Company. The guidelines are based on our expectation that each NEO will maintain a targeted level of investment in our stock so that the interests of our NEOs and our stockholders are closely aligned, and our NEOs have a strong incentive to provide effective management. All of our NEOs other than Messrs. LeClair and Stegeman satisfied the targeted ownership guidelines as of the end of fiscal 2015.deductible.
Policy Regarding Certain Transactions in Company Securities
We prohibit our directors, officers and employees from engaging in short sales of the Company's securities, and prohibit transactions in puts, calls or other derivative securities with respect to Company securities. We strongly discourage, but do not prohibit, our directors, officers and employees from engaging in short-term trading of Company securities or from hedging their ownership of Company stock. Any such transaction must be pre-cleared with our general counsel and, to date, no transactions of that kind have been approved.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 48
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EXECUTIVE COMPENSATION (continued) |
Summary Compensation Table for Fiscal 20152017
The following table sets forth the compensation of our chief executive officer, chief financial officer, and the three other most highly compensated executive officers and two former executive officers, for fiscal 2015.2017.
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||||||||||||||||||||||||||||||||||||
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Joseph J. DeAngelo | | 2017 | | 1,000,000 | | – | | 1,062,487 | | 3,187,488 | | 1,072,770 | | 47,601 | | 6,370,346 | |||||||||||||||||||||||||||||||||||
Chief Executive Officer | | 2016 | | 1,000,000 | | – | | 1,062,479 | | 3,187,499 | | – | | 55,263 | | 5,305,241 | |||||||||||||||||||||||||||||||||||
| | 2015 | | 1,000,000 | | – | | 3,999,976 | | – | | 1,361,280 | | 43,799 | | 6,405,055 | |||||||||||||||||||||||||||||||||||
Evan J. Levitt | 2017 | 515,193 | – | 356,212 | 1,068,745 | 280,261 | 64,250 | 2,284,661 | |||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2016 | 461,778 | – | 356,223 | 1,068,745 | 236,607 | 57,553 | 2,180,906 | |||||||||||||||||||||||||||||||||||||||||||
2015 | 383,861 | – | 710,597 | – | 211,844 | 56,464 | 1,362,766 | ||||||||||||||||||||||||||||||||||||||||||||
Dan S. McDevitt | | 2017 | | 348,150 | | – | | 123,711 | | 123,739 | | 125,675 | | 73,745 | | 795,020 | |||||||||||||||||||||||||||||||||||
General Counsel and Corporate Secretary | | 2016 | | 325,385 | | – | | 123,731 | | 123,744 | | 109,586 | | 36,729 | | 719,175 | |||||||||||||||||||||||||||||||||||
| | 2015 | | 300,000 | | – | | 194,972 | | – | | 136,128 | | 14,389 | | 645,489 | |||||||||||||||||||||||||||||||||||
John A. Stegeman | 2017 | 792,227 | – | 198,015 | 594,158 | 716,066 | 54,653 | 2,355,119 | |||||||||||||||||||||||||||||||||||||||||||
President, Construction & Industrial | 2016 | 788,677 | – | 297,061 | 891,251 | 1,133,660 | 141,224 | 3,251,873 | |||||||||||||||||||||||||||||||||||||||||||
2015 | 765,706 | – | 1,120,113 | – | 1,185,882 | 51,138 | 3,122,839 | ||||||||||||||||||||||||||||||||||||||||||||
William P. Stengel | | 2017 | | 476,753 | | | | 307,536 | | 922,630 | | 207,759 | | 94,651 | | 2,009,329 | |||||||||||||||||||||||||||||||||||
President and CEO, Facilities Maintenance | | 2016 | | 396,593 | | – | | 432,515 | | 1,297,558 | | 204,261 | | 57,214 | | 2,388,141 | |||||||||||||||||||||||||||||||||||
| | 2015 | | 333,275 | | – | | 609,892 | | – | | 185,145 | | 61,384 | | 1,189,695 | |||||||||||||||||||||||||||||||||||
Stephen O. LeClair | 2017 | 229,673 | 675,000 | 112,488 | 337,488 | – | 46,852 | 1,401,501 | |||||||||||||||||||||||||||||||||||||||||||
Former President, Waterworks | 2016 | 442,280 | – | 168,730 | 506,246 | 232,747 | 56,455 | 1,406,458 | |||||||||||||||||||||||||||||||||||||||||||
Name and Principal Position | Year | Salary ($) | Bonus ($)(1) | Stock Awards ($)(2) | Option Awards ($)(3) | Non-Equity Incentive Plan Compensation ($)(4) | All Other Compensation ($)(5) | Total ($) | 2015 | 398,612 | – | 587,963 | – | 162,310 | 60,919 | 1,209,804 | |||||||||||||||||||||||||||||||||||
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Joseph J. DeAngelo | | 2015 | | 1,000,000 | | – | | 3,999,976 | | – | | 1,361,280 | | 43,799 | | 6,405,055 | |||||||||||||||||||||||||||||||||||
Chief Executive Officer | | 2014 | | 1,000,000 | | – | | 3,999,994 | | – | | 1,525,350 | | 50,161 | | 6,575,505 | |||||||||||||||||||||||||||||||||||
| | 2013 | | 975,961 | | – | | – | | 1,525,200 | | 1,304,539 | | 44,589 | | 3,850,289 | |||||||||||||||||||||||||||||||||||
Evan J. Levitt | 2015 | 383,861 | – | 710,597 | – | 211,844 | 56,464 | 1,362,766 | |||||||||||||||||||||||||||||||||||||||||||
Chief Financial Officer | 2014 | 352,946 | 120,000 | 1,509,983 | – | 216,783 | 51,873 | 2,251,585 | |||||||||||||||||||||||||||||||||||||||||||
2013 | 283,269 | 160,000 | – | – | 108,256 | 4,503 | 556,028 | ||||||||||||||||||||||||||||||||||||||||||||
Stephen O. LeClair | | 2015 | | 398,612 | | – | | 587,963 | | – | | 162,310 | | 60,919 | | 1,209,804 | |||||||||||||||||||||||||||||||||||
President, Waterworks | | 2014 | | 389,659 | | – | | 376,891 | | – | | 176,861 | | 61,880 | | 1,005,291 | |||||||||||||||||||||||||||||||||||
| | 2013 | | 375,135 | | 50,000 | | – | | 586,300 | | 152,153 | | 58,360 | | 1,221,948 | |||||||||||||||||||||||||||||||||||
Margaret M. Newman | 2015 | 386,907 | 75,000 | 565,977 | – | 211,624 | 56,932 | 1,296,440 | |||||||||||||||||||||||||||||||||||||||||||
Senior Vice President, | 2014 | 374,565 | – | 539,031 | – | 230,223 | 70,996 | 1,214,815 | |||||||||||||||||||||||||||||||||||||||||||
Human Resources | 2013 | 355,143 | 75,000 | – | 586,300 | 187,520 | 62,490 | 1,266,453 | |||||||||||||||||||||||||||||||||||||||||||
John A. Stegeman | | 2015 | | 765,706 | | – | | 1,120,113 | | – | | 1,185,882 | | 51,138 | | 3,122,839 | |||||||||||||||||||||||||||||||||||
President, Construction | | 2014 | | 743,404 | | – | | 724,984 | | – | | 943,295 | | 45,364 | | 2,457,047 | |||||||||||||||||||||||||||||||||||
and Industrial | | 2013 | | 725,000 | | 160,000 | | – | | 586,300 | | 276,105 | | 127,296 | | 1,874,701 | |||||||||||||||||||||||||||||||||||
Anesa T. Chaibi | 2015 | 474,675 | – | 1,434,385 | 756,365 | 426,067 | 1,337,252 | 4,428,744 | |||||||||||||||||||||||||||||||||||||||||||
Former Pres. & CEO, | 2014 | 570,364 | – | 1,103,375 | – | 549,145 | 54,664 | 2,277,548 | |||||||||||||||||||||||||||||||||||||||||||
Facilities Maintenance | 2013 | 546,639 | – | – | 889,700 | 560,801 | 197,648 | 2,194,788 | |||||||||||||||||||||||||||||||||||||||||||
Jerry L. Webb | | 2015 | | 326,358 | | – | | 384,426 | | 518,032 | | 159,189 | | 666,339 | | 2,054,344 | |||||||||||||||||||||||||||||||||||
Former Chief Executive | | 2014 | | 383,281 | | 71,000 | | 565,336 | | – | | 173,460 | | 41,185 | | 1,234,262 | |||||||||||||||||||||||||||||||||||
Officer, Waterworks | | 2013 | | 365,135 | | 100,000 | | – | | 586,300 | | 152,153 | | 47,758 | | 1,251,346 | |||||||||||||||||||||||||||||||||||
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HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 49
EXECUTIVE COMPENSATION (continued)
2013 option award for 57,200 shares for Mr. Webb and 86,800 shares for Ms. Chaibi to accelerate or continue vesting of the award on employment separation and extension of the exercise period with respect to such award), asawards computed in accordance with FASB ASC Topic 718, which is718. Information about the fairassumptions used to value at the date of modification minus the fair value of the original award at the date of modification. Seethese awards can be found Part II, Item 7, Management's Discussion Andand Analysis Ofof Financial Condition Andand Results Of Operations, Critical Accounting Policies,accounting policies, Stock-Based Compensation, and Note 9 "Stock-Based8—Stock-Based Compensation and Employee Benefit Plans"Plans to our audited consolidated financial statements included in our Annual Reportannual report on Form 10-K for the fiscal year ended January 31, 2016.
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 53 |
EXECUTIVE COMPENSATION (continued) |
cost of other perquisites and personal benefits is based on actual cost to the Company. The following identifiesperquisites and other personal benefits were provided in fiscal 2017.
Name | Car ($) | Financial Planning ($) | Life Insurance ($) | Executive Physical ($) | 401(k) Match ($) | Tax Gross-Up ($) | Other ($) | TOTAL ($) | |||||||||||||||||
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Joseph J. DeAngelo | | 5,269 | | 18,000 | | 2,580 | | 3,491 | | 4,500 | | 13,761 | | – | | 47,601 | |||||||||
Evan J. Levitt | 16,397 | 15,000 | 900 | 2,686 | 4,582 | 24,685 | – | 64,250 | |||||||||||||||||
Dan S. McDevitt | | 28,843 | | 15,000 | | 900 | | – | | 4,537 | | 23,963 | | 502 | | 73,745 | |||||||||
John A. Stegeman | 11,002 | 15,000 | 2,580 | 2,821 | 4,500 | 17,914 | 836 | 54,653 | |||||||||||||||||
William P. Stengel | | 32,410 | | 15,000 | | 600 | | 3,546 | | 3,709 | | 39,386 | | – | | 94,651 | |||||||||
Stephen O. LeClair | 9,511 | 12,710 | 3,190 | – | 3,721 | 17,720 | – | 46,852 | |||||||||||||||||
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Based on Pearl Meyer's input and peer group benchmarking, the cost of the perquisites for fiscal 2015 that are requiredprovided to be quantified by SEC rules.our CEO is positioned below the median of our peers.
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The All Other Compensation amount for Ms. Chaibi and Mr. Webb includes compensation the Company is obligated to make to Ms. Chaibi in connection her employment separation on October 9, 2015, and to Mr. Webb in connection with his employment separation on November 2, 2015, which expenses were paid or accrued by the Company during fiscal 2015. The following table identifies All Other Compensation related to recent separations:
Name | Severance(1) | Employee Benefits(2) | Company Car(3) | Tax Gross-Ups(4) | |||||||||
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Anesa T. Chaibi | | 1,181,943 | | 18,955 | | 28,527 | | 59,547 | |||||
Jerry L. Webb | 588,194 | 18,455 | – | 17,001 | |||||||||
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HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 50
EXECUTIVE COMPENSATION (continued) |
EXECUTIVE COMPENSATION (continued)Pay Ratio Disclosure
Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($) | Total ($) | |||||||||||||||||
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Chief Executive Officer | | 2017 | | 1,000,000 | | – | | 1,062,487 | | 3,187,488 | | 1,072,770 | | 47,601 | | 6,370,346 | |||||||||
Median Employee | 2017 | 46,674 | – | – | – | 827 | 516 | 48,017 | |||||||||||||||||
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RATIO OF CEO TO MEDIAN EMPLOYEE TOTAL COMPENSATION: 133:1 | |||||||||||||||||||||||||
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Our CEO's annual total compensation is 133 times that of the median of the annual total compensation of all our U.S. employees. The pay ratio is a reasonable estimate calculated in a manner consistent with Item 402(u). We used the following methodology in calculating the ratio:
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 55 |
EXECUTIVE COMPENSATION (continued) |
Grants of Plan-Based Awards for Fiscal 20152017
The following table provides information concerning awards granted to our NEOs in fiscal 20152017 under any plan.
| | | | | | | All other option awards: Number of securities underlying options(2) (#) | | | |||||||||||||||||||||||||||||||||||||||
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| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | | | | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | All other stock awards: Number of shares of stock or units(2) (#) | | Grant date fair value of stock and option awards ($) | |||||||||||||||||||||||||||||||||||||||
| | All other stock awards: Number of shares of stock or units (#) | | | All other option awards: Number of securities underlying options(2) (#) | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | 150% ($) | Maximum ($) | Name | Grant Date | Threshold ($) | Target ($) | 150% ($) | Maximum ($) | |||||||||||||||||||||||||||||||||||||
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Joseph J. DeAngelo | | | | | | Joseph J. DeAngelo | | | | | | | | | ||||||||||||||||||||||||||||||||||
2015 AIP (EBITDA) | | 03/10/2015 | | 300,000 | | 1,200,000 | | 1,800,000 | | 2,400,000 | – | 2017 AIP (EBITDA) | | 02/28/2017 | | 300,000 | | 1,200,000 | | 1,800,000 | | 2,400,000 | | – | | – | | – | | – | ||||||||||||||||||
2015 AIP (Working Capital) | | 03/10/2015 | | 150,000 | | 300,000 | | 450,000 | | 600,000 | | 2017 AIP (Working Capital) | | 02/28/2017 | | 150,000 | | 300,000 | | 450,000 | | 600,000 | | – | | – | | – | | – | ||||||||||||||||||
Omnibus Incentive Plan | | 03/10/2015 | | – | | – | | – | | – | 139,178 | Omnibus Incentive Plan | | 02/28/2017 | | – | | – | | – | | – | | 24,709 | | 219,524 | | 43.00 | | 4,249,975 | ||||||||||||||||||
Evan J. Levitt | Evan J. Levitt | |||||||||||||||||||||||||||||||||||||||||||||||
2015 AIP (EBITDA) | 03/10/2015 | 46,686 | 186,746 | 280,119 | 373,491 | 2017 AIP (EBITDA) | 02/28/2017 | 78,375 | 313,500 | 470,250 | 627,001 | – | – | – | – | |||||||||||||||||||||||||||||||||
2015 AIP (Working Capital) | 03/10/2015 | 23,343 | 46,686 | 70,030 | 93,373 | 2017 AIP (Working Capital) | 02/28/2017 | 39,188 | 78,375 | 117,563 | 156,750 | – | – | – | – | |||||||||||||||||||||||||||||||||
Omnibus Incentive Plan | 03/10/2015 | 24,725 | Omnibus Incentive Plan | 02/28/2017 | – | – | – | – | 8,284 | 73,605 | 43.00 | 1,424,957 | ||||||||||||||||||||||||||||||||||||
Stephen O. LeClair | | | | | | Dan S. McDevitt | | | | | | | | | | |||||||||||||||||||||||||||||||||
2015 AIP (EBITDA) | | 03/10/2015 | | 47,978 | | 191,913 | | 287,869 | | 383,826 | – | 2017 AIP (EBITDA) | | 02/28/2017 | | 35,145 | | 140,580 | | 210,870 | | 281,160 | | – | | – | | – | | – | ||||||||||||||||||
2015 AIP (Working Capital) | | 03/10/2015 | | 23,989 | | 47,978 | | 71,967 | | 95,956 | | 2017 AIP (Working Capital) | | 02/28/2017 | | 17,573 | | 35,145 | | 52,718 | | 70,290 | | – | | – | | – | | – | ||||||||||||||||||
Omnibus Incentive Plan | | 03/10/2015 | | | | | | | | | 20,458 | Omnibus Incentive Plan | | 02/28/2017 | | – | | – | | – | | – | | 2,877 | | 8,522 | | 43.00 | | 247,450 | ||||||||||||||||||
Margaret M. Newman | John A. Stegeman | |||||||||||||||||||||||||||||||||||||||||||||||
2015 AIP (EBITDA) | 03/10/2015 | 46,638 | 186,551 | 279,827 | 373,103 | – | 2017 AIP (EBITDA) | 02/28/2017 | 158,445 | 633,782 | 950,672 | 1,267,563 | – | – | – | – | ||||||||||||||||||||||||||||||||
2015 AIP (Working Capital) | 03/10/2015 | 23,319 | 46,638 | 69,957 | 93,276 | 2017 AIP (Working Capital) | 02/28/2017 | 79,223 | 158,445 | 237,668 | 316,891 | – | – | – | – | |||||||||||||||||||||||||||||||||
Omnibus Incentive Plan | 03/10/2015 | 19,693 | Omnibus Incentive Plan | 02/28/2017 | – | – | – | – | 4,605 | 40,920 | 43.00 | 792,173 | ||||||||||||||||||||||||||||||||||||
John A. Stegeman | | | | | | William P. Stengel | | | | | | | | | | |||||||||||||||||||||||||||||||||
2015 AIP (EBITDA) | | 03/10/2015 | | 153,831 | | 615,322 | | 922,983 | | 1,230,644 | – | 2017 AIP (EBITDA) | | 02/28/2017 | | 72,461 | | 289,842 | | 434,763 | | 579,684 | | – | | – | | – | | – | ||||||||||||||||||
2015 AIP (Working Capital) | | 03/10/2015 | | 76,915 | | 153,831 | | 230,746 | | 307,661 | | 2017 AIP (Working Capital) | | 02/28/2017 | | 36,230 | | 72,461 | | 108,691 | | 144,921 | | – | | – | | – | | – | ||||||||||||||||||
Omnibus Incentive Plan | | 03/10/2015 | | | | | | | | | 38,974 | Omnibus Incentive Plan | | 02/28/2017 | | – | | – | | – | | – | | 7,152 | | 63,542 | | 43.00 | | 1,230,166 | ||||||||||||||||||
Anesa T. Chaibi | Stephen O. LeClair | |||||||||||||||||||||||||||||||||||||||||||||||
2015 AIP (EBITDA) | 03/10/2015 | 236,389 | 472,777 | 709,166 | 945,555 | – | 2017 AIP (EBITDA) | 02/28/2017 | 69,525 | 278,100 | 417,150 | 556,200 | – | – | – | – | ||||||||||||||||||||||||||||||||
2015 AIP (Working Capital) | 03/10/2015 | 59,097 | 118,194 | 177,292 | 236,389 | 2017 AIP (Working Capital) | 02/28/2017 | 34,763 | 69,525 | 104,288 | 139,050 | – | – | – | – | |||||||||||||||||||||||||||||||||
Omnibus Incentive Plan | 03/10/2015 | 49,909 | Omnibus Incentive Plan | 02/28/2017 | – | – | – | – | 2,616 | 23,243 | 43.00 | 449,976 | ||||||||||||||||||||||||||||||||||||
Jerry L. Webb | | | | | | |||||||||||||||||||||||||||||||||||||||||||
2015 AIP (EBITDA) | | 03/10/2015 | | 47,056 | | 188,222 | | 282,333 | | 376,444 | – | |||||||||||||||||||||||||||||||||||||
2015 AIP (Working Capital) | | 03/10/2015 | | 23,528 | | 47,056 | | 70,583 | | 94,111 | | |||||||||||||||||||||||||||||||||||||
Omnibus Incentive Plan | | 03/10/2015 | | – | | – | | – | | – | 13,376 | |||||||||||||||||||||||||||||||||||||
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HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 51
EXECUTIVE COMPENSATION (continued)
Narrative disclosure to summary compensation table and grants of plan-based awards table
Stock Plan
Equity-based awards granted to our executive officers are determined based on the intended dollar value to be delivered to provide market competitive grants and Companykeyed to the Company's stock price. The equity grants in March 2015February 2017 were in the form of nonqualified stock options (75% of grant value, 50% of value for Mr. McDevitt) and restricted stock awards (25% of grant value, 50% of grant value for Mr. McDevitt) that vest in four equal annual installments on each of the first through fourth
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 56 | | |
EXECUTIVE COMPENSATION (continued) |
anniversaries of the grant date. The February 2017 grants were based on the following percentages of each NEO's fiscal 2016 base salary in effect on the last day of our prior fiscal year (February 1, 2015, the last day of our fiscal 2014).salary.
Base Salary at 2016 FYE | ||
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Evan J. Levitt | ||
Dan S. McDevitt | 75 | |
John A. Stegeman | 100 | |
William P. Stengel | 300 | |
Stephen O. LeClair | ||
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ThisSeventy-five percent of this amount (50% for Mr. McDevitt) was then divided by the per option Black-Scholes value on the grant date to determine the number of nonqualified stock options granted, and 25% of this amount (50% for Mr. McDevitt) was then divided by the per share closing stock price on the grant date to determine the number of restricted shares granted. The percentage of base salary amount and the allocation percentage between restricted stock and stock options was determined based on benchmarking data for equity grants and total compensation, using the compensation comparator group set forth on page 40,45, and prorated for time in the position. The benchmarking data serves as a general guideline for managing overall pay decisions relative to market benchmarks, with actual pay decisions also based on experience, performance, long-term potential, internal pay equity, tenure, and retention value.
The Stock Plan and astock option or restricted stock oragreement governs each stock option agreement govern eachand restricted stock and option award and provide, among other things, the vesting provisions of the award. The holder of a restricted stock award has rights as a stockholder with respect to the shares subject to such award, including voting rights and the right to receive dividends or dividend equivalents. The Company does not currently pay dividends on its common stock. The stock option and restricted stock grantgrants on March 10, 2015 vestsFebruary 28, 2017 vest in four equal annual installments on each of the first through fourth anniversaries of the grant date, subject to continued employment through such date. See "Potential Payments Upon Termination or Change in Control" on page 5459-62 for information regarding the cancellation or acceleration of vesting of stock option and restricted stock awards upon an option holder's termination of employment or a change in control of the Company.
Employment Offer Letters and Change in Control Agreements
EachWhile our NEOs do not have employment agreements with the Company, each of our named executive officers hasNEOs is party to an at-will employment offer letter from the Company.which may contain certain employment arrangements, including severance payments. Each of our NEOs is also party to a change in control agreement. See "Potential Payments Upon Termination or Change in Control" on page 54pages 59-62 for a summary of the material provisions of these offer letters.arrangements.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 52
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 57 |
EXECUTIVE COMPENSATION (continued) |
Outstanding Equity Awards at Fiscal 20152017 Year End
The following table sets forth the unexercised and unvested option and stock awards held by our named executive officers at fiscal 20152017 year end. Each equity grant is shown separately for each named executive officer.
| Option Awards(1) | | Stock Awards(2) | | Option Awards(1) | | Stock Awards(2) | |||||||||||||||||||||||||||||||||||||
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Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option exercise price ($) | Option expiration date | | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) | Name | Number of securities underlying unexercised options (#) exercisable | Number of securities underlying unexercised options (#) unexercisable | Option exercise price ($) | Option expiration date | | Number of shares or units of stock that have not vested (#) | Market value of shares or units of stock that have not vested ($) | |||||||||||||||||||||||||||||
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Joseph J. DeAngelo | | – | | 148,800 | $ | 18.00 | | 06/26/2023 | | | 263,145 | | 6,912,819 | Joseph J. DeAngelo (CEO) | | – | | 219,524 | | 43.00 | | 02/28/2027 | | | – | | – | |||||||||||||||||
| | 110,595 | | – | $ | 8.30 | | 04/10/2021 | | | | | | | | 75,106 | | 225,318 | | 27.88 | | 03/09/2026 | | | 164,203 | | 6,509,007 | |||||||||||||||||
| | 126,500 | | – | $ | 8.30 | | 02/03/2020 | | | | | | Evan J. Levitt (CFO) | – | 73,605 | 43.00 | 02/28/2027 | – | – | ||||||||||||||||||||||||
| | 926,250 | | – | $ | 20.00 | | 02/03/2020 | | | | | | 25,182 | 75,548 | 27.88 | 03/09/2026 | – | – | |||||||||||||||||||||||||
Evan J. Levitt | 34,562 | – | $ | 8.30 | 04/10/2021 | 71,522 | 1,878,883 | 34,562 | – | 8.30 | 04/10/2021 | – | – | |||||||||||||||||||||||||||||||
11,667 | – | $ | 8.30 | 02/03/2020 | 11,667 | – | 8.30 | 02/03/2020 | – | – | ||||||||||||||||||||||||||||||||||
32,500 | – | $ | 20.00 | 02/03/2020 | 32,500 | – | 20.00 | 02/03/2020 | 45,829 | 1,816,662 | ||||||||||||||||||||||||||||||||||
Stephen O. LeClair | | – | | 57,200 | $ | 18.00 | | 06/26/2023 | | | 32,139 | | 844,292 | Dan S. McDevitt | | – | | 8,522 | | 43.00 | | 02/28/2027 | | | – | | – | |||||||||||||||||
Margaret M. Newman | – | 57,200 | $ | 18.00 | 06/26/2023 | 36,399 | 956,202 | | | 2,915 | | 8,748 | | 27.88 | | 03/09/2026 | | | – | | – | |||||||||||||||||||||||
45,826 | – | $ | 8.30 | 02/03/2020 | | | 22,000 | | – | | 12.40 | | 11/08/2022 | | | – | | – | ||||||||||||||||||||||||||
154,375 | – | $ | 20.00 | 02/03/2020 | | | 33,000 | | – | | 20.00 | | 11/08/2022 | | | 10,904 | | 432,235 | ||||||||||||||||||||||||||
John A. Stegeman | | – | | 57,200 | $ | 18.00 | | 06/26/2023 | | | 61,443 | | 1,614,108 | John A. Stegeman | – | 40,920 | 43.00 | 02/28/2027 | – | – | ||||||||||||||||||||||||
| | 18,826 | | – | $ | 8.30 | | 04/10/2021 | | | | | | 21,000 | 63,001 | 27.88 | 03/09/2026 | – | – | |||||||||||||||||||||||||
Anesa T. Chaibi | – | 86,800 | $ | 18.00 | 09/24/2016 | – | – | 57,200 | – | 18.00 | 06/26/2023 | – | – | |||||||||||||||||||||||||||||||
�� | 18,826 | – | 8.30 | 04/10/2021 | 39,574 | 1,568,713 | ||||||||||||||||||||||||||||||||||||||
William P. Stengel | | – | | 63,542 | | 43.00 | | 02/28/2027 | | | – | | – | |||||||||||||||||||||||||||||||
| | 6,658 | | 19,975 | | 36.93 | | 11/10/2026 | | | – | | – | |||||||||||||||||||||||||||||||
| | 21,739 | | 65,220 | | 27.88 | | 03/09/2026 | | | – | | – | |||||||||||||||||||||||||||||||
| | 21,700 | | – | | 18.00 | | 06/26/2023 | | | – | | – | |||||||||||||||||||||||||||||||
| | 19,916 | | – | | 8.30 | | 04/10/2021 | | | – | | – | |||||||||||||||||||||||||||||||
| | 8,334 | | – | | 8.30 | | 11/03/2020 | | | – | | – | |||||||||||||||||||||||||||||||
| | 31,250 | | – | | 20.00 | | 11/03/2020 | | | 42,896 | | 1,700,397 | |||||||||||||||||||||||||||||||
Jerry L. Webb | | 57,200 | | – | $ | 18.00 | | 11/01/2016 | | | – | | – | Stephen O. LeClair | – | – | – | – | – | – | ||||||||||||||||||||||||
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 58 | | |
EXECUTIVE COMPENSATION (continued) |
Option Exercises and Stock Vested for Fiscal 20152017
The following table sets forth the stock vested and options exercised by the named executive officers during fiscal 2015.2017.
| Option Awards | Stock Awards | Option Awards | Stock Awards | ||||||||||||||||||||||
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Name | Number of shares acquired on exercise (#) | Value realized on exercise ($) | Number of shares acquired on vesting (#) | Value realized on vesting ($) | Number of shares acquired on exercise (#) | Value realized on exercise ($) | Number of shares acquired on vesting (#) | Value realized on vesting ($) | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Joseph J. DeAngelo | | 582,250 | | 14,267,525 | | 41,322 | | 1,199,164 | | 1,312,145 | | 30,327,624 | | 85,644 | | 3,647,177 | ||||||||||
Evan J. Levitt | – | – | 15,599 | 452,683 | – | – | 24,974 | 1,067,933 | ||||||||||||||||||
Stephen O. LeClair | | 443,082 | | 8,358,654 | | 3,893 | | 112,975 | ||||||||||||||||||
Margaret M. Newman | – | – | 5,568 | 161,583 | ||||||||||||||||||||||
Dan S. McDevitt | | – | | – | | 4,110 | | 174,133 | ||||||||||||||||||
John A. Stegeman | | 427,667 | | 7,370,578 | | 7,489 | | 217,331 | – | – | 19,896 | 844,608 | ||||||||||||||
Anesa T. Chaibi | 715,033 | 14,363,724 | 11,398 | 330,770 | ||||||||||||||||||||||
Jerry L. Webb | | 353,082 | | 6,178,588 | | 5,840 | | 169,477 | ||||||||||||||||||
William P. Stengel | | – | | – | | 23,229 | | 987,747 | ||||||||||||||||||
Stephen O. LeClair(1) | 69,128 | 946,695 | 10,521 | 446,537 | ||||||||||||||||||||||
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HDS NoticeAnnual Meetingits HD Supply Waterworks business, and 2016 Proxy Statement - Page 53
EXECUTIVE COMPENSATION (continued)
Pension Benefits and Nonqualified Deferred Compensation for Fiscal 20152017
We do not provide any defined benefit plans or nonqualified deferred compensation plans to our named executive officers.NEOs.
Potential Payments Upon Termination or Change in Control
Offer Letters
Pursuant to either their employment offer letters or the Company's current practice, in the event of involuntary termination without cause on January 31, 2016,28, 2018, the last day of fiscal 2015,2017, and contingent upon execution of a release, non-competition and non-solicitation agreement, each of our NEOs would receive up to 24 months of base pay continuation, as follows:
Name | Salary Continuation On Involuntary Termination ($) | |||
---|---|---|---|---|
| | | | |
Joseph J. DeAngelo | | 2,000,000 | ||
Evan J. Levitt | 1,045,002 | |||
Dan S. McDevitt | | |||
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John A. Stegeman | ||||
William P. Stengel | | 1,000,000 | ||
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The employment offer letters do not provide for any payout upon termination as a result of death, retirement, disability, or termination for cause.
In connection with Ms. Chaibi's separationChange in October 2015 and Mr. Webb's separationControl Agreements
Each of our NEOs is party to a change in November 2015, they will receive the following separation payments, which are reported in the "All Other Compensation" column of the Summary Compensation Table on page 49 and further explained by footnote to the table. In connection with their respective separations, both Ms. Chaibi and Mr. Webb executed a release, non-competition and non-solicitationcontrol agreement and all post-termination payments are subject to continued compliance with the terms of those agreements.Company. The agreement provides for an initial three-year term that will automatically renew on an annual basis following the
Name | Severance(1) | Employee Benefits(2) | Company Car(3) | Tax Gross-Ups(4) | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |
Anesa T. Chaibi | | 1,181,943 | | 18,955 | | 28,527 | | 59,547 | |||||
Jerry L. Webb | 588,194 | 18,455 | – | 17,001 | |||||||||
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HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 54
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 59 |
EXECUTIVE COMPENSATION (continued) |
initial term unless either party gives advance notice of termination in accordance with the agreement. In the event of a change in control (as defined in the Stock Plan), the agreement would generally expire no earlier than the second anniversary of such change in control. Contingent upon the executive's execution of a release of claims against the Company, the agreement provides for a lump sum cash payment to the executive equal to two times the executive's base salary and target bonus opportunity and $100,000 in lieu of continued healthcare and other benefits. Payout is triggered on an involuntary or constructive termination (as defined in the agreement) of the executive's employment within two years of a change in control, other than a termination for death, disability, or cause (as defined in the agreement). Payout is also triggered on termination of the executive's employment without cause before a change in control at the direction or request of a person or group contemplating a change in control and a change in control involving such person or group occurs within 12 months of such direction or request. In such event, the agreement also provides for a lump sum cash payment to the executive equal to the intrinsic value of any forfeited equity awards that would have vested had the executive's employment continued through the time immediately following the change in control (subject to certain limitations described in the agreement). The payments described in this paragraph are in lieu of any other severance or salary continuation obligation the Company may have to the executive, but generally do not impact benefits paid under other company plans. In consideration for the compensation provided by the agreement, the executive agrees to comply with customary non-competition and employee customer and vendor non-solicitation restrictive covenants for 24 months after termination, as well as certain customary confidentiality provisions. The Company is responsible for the executive's reasonable attorney fees and costs in defending or prosecuting certain disputes regarding the agreement.
Pursuant to their change in control agreements, assuming an involuntary or constructive termination on January 28, 2018, the last day of fiscal 2017, and contingent upon execution of a release, non-competition and non-solicitation agreement, each of our NEOs would have received the following compensation:
Involuntary or Constructive Termination in Connection With Change in Control | |||||||||||||
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Name | 2x Base Salary | 2x Target Bonus | Employee Benefits | TOTAL | |||||||||
($) | ($) | ($) | |||||||||||
| | | | | | | | | | | | | |
Joseph J. DeAngelo (CEO) | | 2,000,000 | | 3,000,000 | | 100,000 | | 5,100,000 | |||||
Evan J. Levitt (CFO) | 1,045,002 | 783,752 | 100,000 | 1,928,754 | |||||||||
Dan S. McDevitt | | 702,900 | | 351,450 | | 100,000 | | 1,154,350 | |||||
John A. Stegeman | 1,584,454 | 1,584,454 | 100,000 | 3,268,908 | |||||||||
William P. Stengel | | 1,000,000 | | 724,606 | | 100,000 | | 1,824,606 | |||||
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Stock Plan
Under the Stock Plan, an executive's unvested stock options are cancelled upon termination of his or her employment, except for terminations due to death or disability. Upon death or disability, unvested stock options vest and remain exercisable. In the case of a termination for cause (as defined in the Stock Plan), the executive's unvested and vested stock options are cancelled as of the effective date of the termination. Following a termination of employment other than for cause, vested options are cancelled unless the executive exercises them within 90 days (for options granted before November 19, 2015, 180 days if the termination was due to death, disability or retirement; for options granted on and after November 19, 2015, two years on termination due to death, disability or retirement and two years from vesting for options that continue to vest after retirement) or, if sooner, prior to the options' normal expiration date). Equity awards granted under the Omnibus Stock Plan
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 60 | | |
EXECUTIVE COMPENSATION (continued) |
may provide for continued vesting of the award in the event of retirement at or after age 62 with at least five years of continuous service with the Company, contingent upon the executive: (i) not competing with the Company and its subsidiaries for the one-year period after retirement; and (ii) not engaging in activities that would constitute cause had the executive continued employment with the Company. For options granted before November 19, 2015, the executive has 180 days to exercise options vested at the time of such retirement and 90 days to exercise options vesting after such retirement. For options granted on and after November 19, 2015, the executive has two years to exercise options vested at the time of such retirement and two years to exercise options vesting after such retirement. None of our NEOs satisfied the retirement criteria at the end of fiscal 2015.2017. Had a termination of employment without cause occurred at the end of fiscal 2015,2017, other than a termination due to death or disability, based on a closing stock price of $26.27$39.64 at the end of fiscal 2015,2017, our NEOs would have received a benefit, assuming the hypothetical exercise of vested stock options on the last day of fiscal 2015,2017, and forfeited unvested stock options and stock awards, in the following amounts:amounts. For a termination of employment due to death or disability, all outstanding options and stock awards would vest (resulting in a benefit equal to the sum total of the three columns presented below).
Name | Benefit Assuming Exercise of Vested Options at FYE ($) | Forfeiture of Unvested Options at FYE ($) | Forfeiture of Unvested Stock Awards at FYE ($) | Benefit Assuming Exercise of Vested Options at FYE ($) | Forfeiture of Unvested Options at FYE ($) | Forfeiture of Unvested Stock Awards at FYE ($) | ||||||||||||||
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Joseph DeAngelo | | 10,068,185 | | 1,230,576 | | 6,912,819 | ||||||||||||||
Joseph J. DeAngelo | | 883,247 | | 2,649,740 | | 6,509,007 | ||||||||||||||
Evan J. Levitt | 1,034,510 | – | 1,878,883 | 2,383,257 | 888,444 | 1,816,662 | ||||||||||||||
Stephen O. LeClair | | – | | 473,044 | | 844,292 | ||||||||||||||
Margaret M. Newman | 1,791,424 | 473,044 | 956,202 | |||||||||||||||||
Dan S. McDevitt | | 1,281,680 | | 102,876 | | 432,235 | ||||||||||||||
John A. Stegeman | | 338,303 | | 473,044 | | 1,614,108 | 2,074,775 | 740,892 | 1,568,713 | |||||||||||
Anesa T. Chaibi | – | 717,836 | – | |||||||||||||||||
Jerry L. Webb | | 473,044 | | – | | – | ||||||||||||||
William P. Stengel | | 2,242,387 | | 821,119 | | 1,700,397 | ||||||||||||||
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Under the Stock Plan, upon a change in control of the Company, all outstanding awards may be assumed and/or replaced with substitute awards having the same or better terms and conditions, provided that any substitute awards under the Omnibus Stock Plan must fully vest on a participant's involuntary termination of employment without "cause"cause or constructive termination of employment, in each case occurring within two years following the date of the change in control. In the event such awards are not assumed and/or replaced in connection with the change in control, the awards will vest and be cancelled for the same per share amount paid to the stockholders in the change in control (less, in the case of options and SARs,stock appreciation rights, the applicable exercise or base price). The administratorCompensation Committee has the ability to prescribe different treatment of awards in the award agreements. We believe this structure is fair to both our associates and to our stockholders, as the awards may represent compensation for the loss of an executive's job after a significant career with the Company and for the appreciation of stock
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 55
EXECUTIVE COMPENSATION (continued)
granted many years before. Had a change in control occurred at the end of fiscal 20152017 and the awards were not assumed or replaced with new rights with similar terms, based on a closing stock price of $26.27$39.64 at the end of fiscal 2015,2017, our NEOs would have received a benefit from the accelerated vesting of unvested equity in the following amounts:
Name | Accelerated Vesting of Equity on Change in Control ($) | |||
---|---|---|---|---|
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Joseph J. DeAngelo | | |||
Evan J. Levitt | ||||
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John A. Stegeman | ||||
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 61 |
EXECUTIVE COMPENSATION (continued) |
Under the Pre-IPO StockPrior Plan a "change in control" is defined as:
Under the Omnibus Stock Plan, a "change in control" also includes the following events:
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 56
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 62 | | |
COMPENSATION COMMITTEE REPORT |
Report of the Compensation Committee
The Compensation Committee has reviewed the foregoing Compensation Discussion and Analysis and discussed it with management. Based on such review and discussion, the Compensation Committee recommended to the board of directors that the Compensation Discussion and Analysis be included in this proxy statement and incorporated by reference in the Annual Reportannual report on Form 10-K for the fiscal year ended January 31, 201628, 2018 filed with the U.S. Securities and Exchange Commission.
The Compensation Committee: | ||
Kathleen J. Affeldt, Chair Patrick R. McNamee Scott D. Ostfeld |
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 57
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 63 |
AUDIT COMMITTEE REPORT |
The Audit Committee of our board of directors oversees our financial reporting process and internal control structure on behalf of the board of directors.board. Management is responsible for the preparation, presentation, and integrity of the financial statements and the effectiveness of our internal control over financial reporting. PricewaterhouseCoopers LLP, our independent registered public accounting firm, is responsible for expressing an opinion as to the conformity of our consolidated financial statements with U.S. generally accepted accounting principles and as to the effectiveness of our internal control over financial reporting. The Audit Committee has adopted a process for pre-approving services provided by PricewaterhouseCoopers LLP.
The Audit Committee is responsible for, among other things, reviewing with PricewaterhouseCoopers LLP the scope and results of their audit engagement. In connection with the fiscal 20152017 audit, the Audit Committee has:
Based on the review and the discussions described in the preceding bullet points, the Audit Committee recommended to the board of directors that the audited financial statements and management's report on internal control over financial reporting be included in our Annual Reportannual report on Form 10-K for the fiscal year ended January 31, 201628, 2018 for filing with the Securities and Exchange Commission.
The Audit Committee has adopted a charter, available on the corporate governance section of our investor relations website athttp://ir.hdsupply.com/governance.cfm. In accordance with its charter, the primary purposes of the Audit Committee are to: (a) assist the board in overseeing and monitoring matters relating to: (i) the Company's accounting and financial reporting policies, practices and processes, (ii) the quality and integrity of the Company's financial statements, (iii) the effectiveness of the Company's internal control over financial reporting, (iv) the Company's compliance with legal and regulatory requirements, (v) the qualifications, independence, and performance of the Company's independent auditor and (vi) the capabilities, resources, and performance of the Company's internal audit function; and (b) preparationprepare of the report of the Audit Committee required to be included in the Company's annual proxy statement. The Audit Committee is also responsible for reviewing and discussing the Company's risk management practices, including the effectiveness of the systems and policies for risk assessment and risk management, the Company's major financial risk exposures and the steps management has taken to monitor and control such exposures, any unusual material transactions and management, internal auditor and independent auditor reviews of the Company's Foreign Corrupt
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 58
AUDIT COMMITTEE REPORT (continued)
Practices Act policies, procedures and monitoring. The Audit Committee also oversees our procedures governing related partyperson transactions.
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 64 | | |
AUDIT COMMITTEE REPORT (continued) |
Our board has determined that each of the members of the Audit Committee is independent in accordance with the requirements of Section 5605(c) of the NASDAQ Stock Market listing standards and the requirements of Section 10A(m)(3) ofRule 10A-3(b)(1) under the Exchange Act, that each member is financially sophisticated, and that Charles W. Peffer is an audit committee financial expert, as defined in Regulation S-K under the Exchange Act. For additional information regarding the experience and qualifications of the members of the Audit Committee, see pages 16-18.17-21.
The Audit Committee: | ||
Charles W. Peffer, Chair Peter A. Lauren Taylor Wolfe |
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 59
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 65 |
AUDIT MATTERS |
Principal Accounting Firm Fees
Aggregate fees billed to us for the fiscal years ended February 1, 2015January 28, 2018 and February 2, 2014January 29, 2017 by our independent registered public accounting firm, PricewaterhouseCoopers LLP and its respective affiliates, were:
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| FYE2018 | FYE2017 | ||
---|---|---|---|---|
Fees Billed | (Fiscal 2017) | (Fiscal 2016) | ||
| | | | |
Audit Fees(1) | $ 3.1 million | $ 3.2 million | ||
Audit-Related Fees(2) | $ 1.8 million | $ 0.0 million | ||
Tax Fees(3) | $ 0.5 million | $ 0.5 million | ||
All Other Fees | – | – | ||
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TOTAL | $ 5.4 million | $ 3.7 million | ||
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The Audit Committee's policy is to pre-approve all audit and permissible non-audit services (including the fees and terms thereof) performed for us by the independent registered certified public accounting firm, subject to the de minimis exceptions for non-audit services described in the Exchange Act and the rules and regulations thereunder which are approved by the Audit Committee prior to the completion of the audit. The Audit Committee approved all services provided by PricewaterhouseCoopers LLP during fiscal 20152017 and 2014.2016.
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 66 | | |
PROPOSAL 1 — AMENDMENT TO THE CERTIFICATE OF INCORPORATION AND BYLAWS TO DECLASSIFY THE BOARD OF DIRECTORS |
The Certificate of Incorporation and the Bylaws currently divide the board into three classes of approximately equal size (Class I, Class II and Class III), each with a three year term. The terms of the classes are staggered, meaning that only one of the three classes stands for re-election for a three-year term at each annual meeting of stockholders. Class I currently has two directors, Class II has four directors, and Class III has three directors. The terms of directors in Classes I, II, and III end at the annual meetings in 2020, 2018, and 2019, respectively. For more information on the current structure and members of our board see, "Our Board of Directors" on pages 16-21.
The board evaluates our corporate governance policies on an ongoing basis. As a part of its ongoing review, the board carefully evaluated the current need for classified board structure. As a result of this evaluation and after carefully considering the advantages of both classified and declassified structures, the board determined, that it is advisable and in the best interests of the Company and its stockholders to amend the Certificate of Incorporation and the By-laws to declassify the board to allow the stockholders of the Company to vote on the election of the entire board on an annual basis, rather than on a staggered basis. Accordingly, the board has resolved to recommend that the stockholders of the Company approve the amendment to the Certificate of Incorporation set forth onAppendix A and Bylaws set forth onAppendix B attached hereto (the "Proposed Amendment").
Under the Proposed Amendment, directors standing for election at each annual meeting of stockholders, commencing with the Annual Meeting, will be elected for a term expiring at the next annual meeting following their election and until their respective successors are elected and qualified. The Proposed Amendment will not shorten the term of any existing director. If the Proposed Amendment is approved by the stockholders of the Company by the requisite vote at the Annual Meeting, then the Proposed Amendment will become effective immediately upon the filing of the Proposed Amendment with the office of the Secretary of State of the State of Delaware, which we intend to do during the course of the Annual Meeting, and 2016 Proxy Statement - Page 60will apply to the election of directors at the Annual Meeting.
If the Proposed Amendment is approved:
The Proposed Amendment also provides that any director elected to fill a vacancy will hold office for the term that remains for that director, and any director elected to fill a vacancy that resulted from an increase in the size of the board will be elected to serve until the next annual meeting. In addition
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 67 |
PROPOSAL 1 — AMENDMENT TO THE CERTIFICATE OF INCORPORATION AND BYLAWS TO DECLASSIFY THE BOARD OF DIRECTORS (continued) |
to modifying the provisions related to declassification, the Proposed Amendment removes certain provisions of the Certificate of Incorporation and Bylaws which are no longer applicable. These modifications do not modify the stockholders' rights with respect to the Company or impose any new obligations on the Company.
If the Proposed Amendment is not approved by the stockholders of the Company by the requisite vote at the Annual Meeting, the Company will continue to have a classified board as currently provided for in the Company's Certificate of Incorporation and Bylaws.
Under the terms of the Certificate of Incorporation and Bylaws, the Proposed Amendment must be adopted by the affirmative vote of at least 75% of the voting power of the outstanding shares as of the record date. The description of the Proposed Amendment above is only a summary and is qualified in its entirety by reference to the actual text of the Proposed Amendment included inAppendix A andAppendix B attached to this proxy statement.
THE BOARD RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE PROPOSAL TO AMEND OUR
CERTIFICATE OF INCORPORATION AND BYLAWS TO DECLASSIFY OUR BOARD.
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HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 68 | | |
PROPOSAL 1
PROPOSAL 2 — ELECTION OF DIRECTORS |
The board has nominated the threefour persons named below for election as directors at the Annual Meeting to serve until the 2019 annual meeting and until their respective successors are elected and qualify. Each of the nominees for director is currently serving on the board. If any nominee is unable to serve as a director, which we do not anticipate, the board by resolution may reduce the number of directors or choose a substitute nominee.
Name | Age | Director Since | Occupation | Board Committees | Other Public Company Boards | Independent | Age | Director Since | Occupation | Board Committees | Other Public Company Boards | Independent | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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Joseph J. DeAngelo | 54 | 2007 | Chairman/CEO HD Supply | None | 0 | No | ||||||||||||||||||
Patrick R. McNamee | 56 | 2013 | CEO, Health Insurance Innovations | Audit; Compensation | 0 | Yes | ||||||||||||||||||
Charles W. Peffer | 68 | 2013 | Retired Partner of KPMG LLP | Audit Chair | 3 | Yes | ||||||||||||||||||
Betsy S. Atkins | 64 | 2013 | CEO, Baja Corporation | Chair N&CG | 3 | Yes | ||||||||||||||||||
Scott D. Ostfeld | 41 | 2017 | Partner, JANA Partners | Compensation | 0 | Yes | ||||||||||||||||||
James A. Rubright | 71 | 2014 | Retired CEO, Rock-Tenn | Audit; N&CG | 0 | Yes | ||||||||||||||||||
Lauren Taylor Wolfe | 39 | 2017 | Founding Partner, Impactive Capital* | Audit; N&CG | 0 | Yes | ||||||||||||||||||
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For additional biographical information about the nominees for director, including information about their qualifications to serve as a director, see "Our Board of Directors" beginning on page 16.
If our stockholders approve the proposed amendment of our Certificate of Incorporation and Bylaws (see Proposal 1 on pages 67-68) by the requisite vote at the Annual Meeting, the proposed amendment will become effective immediately upon the filing of the proposed amendment with the office of the Secretary of State of the State of Delaware, which we intend to do during the course of the Annual Meeting, and will apply to the election of directors at the Annual Meeting. If the proposed amendment is approved:
If the proposed amendment is not approved by the stockholders of the Company by the requisite vote at the Annual Meeting, the Company will continue to have a classified board as currently provided for in the Company's Certificate of Incorporation and Bylaws, and, if elected, the nominees will serve for a three-year term and until their successors are elected and qualify.
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| | HDS Notice of Annual Meeting and 2018 Proxy Statement – Page 69 |
PROPOSAL 2 — ELECTION OF DIRECTORS (continued) |
There are no agreements or arrangements between third parties and any of the nominees that provide for compensation or other payment in connection with the director's candidacy or service as a director.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE ELECTION TO THE BOARD
OF EACH OF THE THREEFOUR NOMINEES FOR DIRECTOR.
HDS Notice of Annual Meeting and 2016 Proxy Statement - Page 61
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PROPOSAL 2
PROPOSAL 3 — RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
PricewaterhouseCoopers LLP audited our consolidated financial statements and internal control over financial reporting for the year ended January 31, 2016. Our28, 2018. Upon the recommendation of our Audit Committee, the board has appointed PricewaterhouseCoopers LLP, independent registered public accounting firm, to audit our consolidated financial statements and internal control over financial reporting for the year ending January 29, 2017February 3, 2019 and to prepare a report on this audit, subject to ratification by our stockholders. PricewaterhouseCoopers LLP has served as our independent registered public accounting firm since 2008.
This proposal asks you to ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm. Although we are not required to obtain such ratification from our stockholders, the board of directors believes that it is good practice to do so. If the appointment of PricewaterhouseCoopers LLP is not ratified, the Audit Committee and the board may reconsider the appointment.
A representative of PricewaterhouseCoopers LLP will be present at the Annual Meeting, will have the opportunity to make a statement, and will be available to respond to appropriate questions by stockholders.
THE BOARD OF DIRECTORS RECOMMENDS THAT
STOCKHOLDERS VOTE FOR THE RATIFICATION OF THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.
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PROPOSAL 3 — SHAREHOLDER PROPOSAL ON GREENHOUSE GAS EMISSIONS
Calvert Investment Management, Inc. ("Calvert") has given notice that a representative from Calvert intends to present for action at the Annual Meeting the following proposal. Calvert Global Water Fund owns 713,980 shares of the Company's Common Stock, having held 621,234 shares since November 25, 2014 and the remaining shares since December 7, 2015. Calvert U.S. Large Cap Core Responsible Index Fund owns 7,735 shares of the Company's Common Stock, having held such shares since December 7, 2015.
Resolved: Shareholders request that HD Supply Holdings adopt time-bound quantitative, company-wide goals, taking into consideration the most recent Intergovernmental Panel on Climate (IPCC) guidance for reducing total greenhouse gas (GHG) emissions, and issue a report by September 2016, at reasonable cost and omitting proprietary information, on its plans to achieve these goals.
Supporting Statement: In order to mitigate the worst impact of climate change, the IPCC estimates that a 55 percent reduction in GHG emissions globally is needed by 2050 (relative to 2010 levels) to stabilize global temperatures, entailing a U.S. target reduction of 80 percent.
The costs of failing to address climate change are significant and estimated to have an average value at risk of $4.2 trillion globally — representing 6% current market capitalization of all the world's stock markets (The Economist, Intelligence Unit, 2015).Risky Business: The Economic Risks of Climate Change in the United States (2014), an analysis of climate change impacts, found serious economic effects including property damage, shifting agricultural patterns, reduced labor productivity, and increased energy costs. These effects could substantially impact a company's business operations, revenue, or expenditure.
Setting GHG emission targets is widespread among U.S. companies and can have positive financial outcomes. Presently, 60 percent of Fortune 100 companies have GHG reduction commitments, renewable energy commitments, or both.
A report published by WWF, Carbon Disclosure Project (CDP), and McKinsey & company,The 3% Solution: Driving Profits Through Carbon Reduction (2013), found that companies with GHG targets achieved an average of 9% better return on investment than companies without targets. Additionally, the 79% of companies in the S&P 500 that report to CDP earned a higher return on their carbon reduction investments than on their overall corporate capital investments. Also, the 53 Fortune 100 companies reporting on climate and energy targets to CDP are saving $1.1 billion annually through their emission reductions and renewable energy initiatives. These goals enable companies to reduce costs, build resilient supply chains, and manage operational and reputational risk.
Investors with $95 trillion in assets have supported the CDP which seeks corporate reporting on climate change and received responses from 81% of companies in the Global 500 in 2013. HD Supply's response to date on how it is managing risks and opportunities related to climate change falls short. Specially, while HD Supply's products help its clients reduce energy usage and climate impacts, your company has not publicly set carbon emissions reductions or renewable energy targets for its own operations. We believe this may have negative consequences for HD Supply and long-term shareholder value.
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PROPOSAL 3 — SHAREHOLDER PROPOSAL ON GREENHOUSE GAS EMISSIONS (continued)
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE AGAINST THIS PROPOSAL FOR THE FOLLOWING REASONS:
The board believes that it is premature at this time, and would not be an efficient use of the Company's resources, to adopt quantitative goals for the reduction of greenhouse gas emissions ("GHG emissions") and publish a report to stockholders on the goals and plans to achieve such goals. The subject of GHG emissions, especially potential future legislation and regulation, is currently unsettled. We believe it would be prudent to have a better understanding of the details of future legislative and regulatory programs and technologies before establishing and committing to GHG reduction goals.
Notwithstanding the evolving regulatory environment, the Company is committed to reducing GHG emissions from its products and operations, and reducing our carbon footprint, by improving our internal efficiencies and providing environmentally preferred products.
In 2011, our largest business unit, HD Supply Facilities Maintenance, optimized the efficiency of its truck routing system which continues to provide approximately 8% fewer truck emissions per delivery. In addition, HD Supply Facilities Maintenance continues to engage in other environmentally sound practices. For example, in select markets throughout the country, delivery boxes are collected and reused under its Box Reuse Program. Since 2014, its more than 3,500 ideallygreenSM products have been increased by 8.5% to 3,800 products. Such products offer customers solutions to increase the efficiency of their facilities by reducing energy costs, lowering water consumption, improving indoor air quality, reducing waste or properly disposing of hazardous materials. HD Supply Facilities Maintenance helps customers decrease their environmental impact by offering comprehensive lighting and water audits, and by working with utilities throughout the country to maximize utility rebate dollars for the customer's project. It delivers a comprehensive solution for customers looking to take advantage of utility incentives from simple retrofits to major property renovations. It has performed more than 1,700 lighting audits for customers since June 2013 with approximately 73.5% of those audits being conducted since November 2014. Through December 2015, HD Supply Facilities Maintenance customers have received more than $3 million in utility rebates for converting to LED lighting and water conserving plumbing fixtures. Over the useful life of the ideallygreenSM products purchased by customers since 2012, there will be an estimated collective savings of $3.6 billion dollars in utility costs, a reduction of water consumption by an estimated 84 billion gallons, and a reduction of carbon emissions by an estimated 20 million metric tons.
The Company recognizes that GHG emissions are an important issue, and we are committed to reducing GHG emissions in our operations and products and to assisting our customers in decreasing their environmental impact. We will continue to take responsibility for assuring that the Company is a good steward of the environment and complies with the laws and regulations where it does business. However, establishing reduction goals and publishing a report at this time as environmental regulation and legislation remains uncertain would not be an efficient use of Company resources and would be contrary to the responsibilities of the Company to our stockholders and customers.
ACCORDINGLY, THE BOARD OF DIRECTORSRECOMMENDS THAT STOCKHOLDERSVOTE "AGAINST" THIS PROPOSAL.
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OTHER INFORMATION FOR STOCKHOLDERS |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our directors, executive officers, and persons who own beneficially more than 10% of our common stock to file reports of ownership and changes in ownership of such stock with the U.S. Securities and Exchange Commission.Commission (the "SEC"). These persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file with the SEC. To our knowledge, each of our directors and executive officers complied during fiscal 20152017 with all applicable Section 16(a) filing requirements.
We will pay our costs of soliciting proxies. Directors, officers and other employees, acting without special compensation, may solicit proxies by mail, email, in person or by telephone. We will reimburse brokers, fiduciaries, custodians and other nominees for out-of-pocket expenses incurred in sending our proxy materials to, and obtaining instructions relating to the proxy materials from, beneficial owners. In addition, weWe have retained D.F. King & Co. to assist in the solicitation of proxiesnot engaged an independent proxy solicitor for the Annual Meeting at a fee of $6,000, plus associated costs and expenses.Meeting.
Stockholder Proposals or Stockholder Nominations for Director at 20172019 Annual Meeting
To be considered for inclusion in next year's proxy statement and form of proxy, proposals by stockholders for business to be considered at the 20172019 annual meeting of stockholders must be submitted in writing so that they are received by the Company no later than December 1, 2016November 30, 2018 and must comply with the requirements of SEC Rule 14a-8. Proposals should be submitted to: Dan S. McDevitt, General Counsel and Corporate Secretary, HD Supply Holdings, Inc., 31003400 Cumberland Boulevard, Atlanta, Georgia 30339.
Stockholders who wish to propose business or nominate persons for election to the board of directors at the 20172019 annual meeting of stockholders, and the proposal or nomination is not intended to be included in our proxy statement, must provide advance notice to us of stockholder business or nomination in accordance with Section 1.12 of our Bylaws. In order to be properly brought before the 20162019 annual meeting of stockholders, Section 1.12 of our Bylaws requires that a notice of a matter the stockholder wishes to present (other than a matter brought pursuant to Rule 14a-8), or the person or persons the stockholder wishes to nominate as a director, must be received by our Corporate Secretary not less than 90 days nor more than 120 days before the first anniversary of the preceding year's annual stockholder meeting. Therefore, any notice intended to be given by a stockholder with respect to the 20172019 annual meeting of stockholders pursuant to our Bylaws must be received by Dan S. McDevitt, General Counsel and Corporate Secretary, HD Supply Holdings, Inc., 31003400 Cumberland Boulevard, Atlanta, Georgia 30339 no later than the close of business on February 17, 2017.16, 2019. However, if the date of our 20162019 annual meeting occurs more than 30 days before or 70 days after May 18, 2017,17, 2019, the anniversary of the Annual Meeting, a stockholder notice will be timely if it is received by our Corporate Secretary by the later of (a) the close of business on the 90th day before the date of the 20172019 annual meeting and (b) 10 days after public announcement of the date of meeting. Our Bylaws are available on the governance page of our investor relations website athttp://ir.hdsupply.com/index.cfm.
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OTHER INFORMATION FOR STOCKHOLDERS (continued)
20152017 Annual Report to Stockholders
A copy of our Annual Reportannual report on Form 10-K for the fiscal year ended January 31, 201628, 2018 is available free of charge athttp://www.astproxyportal.com/ast/18392/.
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OTHER INFORMATION FOR STOCKHOLDERS (continued) |
OurThe board of directors is not aware of any business to be conducted at the Annual Meeting other than the proposals described in this proxy statement. Should any other matter requiring a vote of the stockholders arise, Dan S. McDevitt and James F. Brumsey (with full power of substitution) are your appointed representatives at the Annual Meeting and will vote in accordance with their best judgment.
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SECONDTHIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
HD SUPPLY HOLDINGS, INC.
HD SUPPLY HOLDINGS, INC., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
1. The present name of the corporation is HD Supply Holdings, Inc. (the "Corporation").
2. The Corporation was originally formed as Pro Acquisition Corporation, a Delaware corporation, on June 18, 2007. An Amended and Restated Certificate of Incorporation, changing the name of the Corporation from Pro Acquisition Corporation to HDS Investment Holding, Inc. was filed with the Secretary of State of the State of Delaware (the "Secretary of State") on August 22, 2007. A Certificate of Amendment, changing the name of the Corporation from HDS Investment Holding, Inc. to HD Supply Holdings, Inc. was filed with the Secretary of State on April 11, 2013. A Certificate of Amendment changing the Corporation's authorized capital and affecting a 1 for 2 reverse stock split was filed with the Secretary of State on June 12, 2013.
3. The Corporation's Amended and Restated Certificate of Incorporation is hereby amended and restated pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware (as amended from time to time, the "DGCL"), so as to read in its entirety in the form attached hereto asExhibit A and incorporated herein by this reference (Exhibit A and this Certificate collectively constituting the Corporation's Second Amended and Restated Certificate of Incorporation).
4. The amendment and restatement of the Amended and Restated Certificate of Incorporation of the Corporation has been duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the DGCL, the Board of Directors of the Corporation having adopted resolutions setting forth such amendment and restatement, declaring its advisability, and directing that it be submitted to the stockholders of the Corporation for their approval; and the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted having consented in writing to the adoption of such amendment and restatement.
IN WITNESS WHEREOF, the undersigned officer of the Corporation has executed this Second Amended and Restated Certificate of Incorporation on the day of , 2013.
EXHIBIT A
SECOND AMENDED AND RESTATEDCERTIFICATE OF INCORPORATIONOFHD SUPPPLY HOLDINGS, INC.
FIRST: Name. The name of the corporation is HD Supply Holdings, Inc. (the "Corporation").
SECOND: Registered Office. The Corporation's registered office in the State of Delaware is at160 Greentree251 Little Falls Drive,Suite 101,in the City ofDoverWilmington, County ofKent, 19904.New Castle, 19808. The name of its registered agent at such address isNational Registered Agents, IncCorporation Service Company.
THIRD: Purpose. The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware (as amended from time to time, the "DGCL").
FOURTH: Capital Stock. The total number of shares of stock which the Corporation shall have authority to issue is 1,100,000,000, consisting of: (x) 1,000,000,000 shares of common stock, par value $0.01 per share (the "Common Stock"), and (y) 100,000,000 shares of preferred stock, par value $0.01 per share (the "Preferred Stock"), issuable in one or more series as hereinafter provided.
(a)Common Stock. Except as otherwise provided (i) by the DGCL, (ii) by Section (b) of this Article FOURTH, or (iii) by resolutions, if any, of the board of directors of the Corporation (the "Board of Directors") fixing the powers, designations, preferences and the relative, participating, optional or other rights of the Preferred Stock, or the qualifications, limitations or restrictions thereof, the entire voting power of the shares of the Corporation for the election of directors and for all other purposes shall be vested exclusively in the Common Stock. Each share of Common Stock shall have one vote upon all matters to be voted on by the holders of the Common Stock, and shall be entitled to participate equally in all dividends payable with respect to the Common Stock and to share equally, subject to any rights and preferences of the Preferred Stock (as fixed by resolutions, if any, of the Board of Directors), in all assets of the Corporation, in the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, or upon any distribution of the assets of the Corporation.
(b)Preferred Stock. Subject to the provisions of thisSecondThird Amended and Restated Certificate of Incorporation, the Board of Directors is authorized to fix from time to time by resolution or resolutions the number of shares of any class or series of Preferred Stock, and to determine the voting powers, designations, preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of any such class or series. Further, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any such class or series, the Board of Directors is authorized to increase or decrease (but not below the number of shares of such class or series then outstanding) the number of shares of any such class or series subsequent to the issue of shares of that class or series.
FIFTH: Management of Corporation. The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its directors and stockholders:
(a) The number of directors constituting the Board of Directors shall be not fewer than three and not more than twenty-one, each of whom shall be a natural person. Subject to any
special rights of any holders of any class or series of Preferred Stock to elect directors and for so long as the Second Amended and Restated Stockholders Agreement, among the Corporation and certain of its stockholders, dated as of September 21, 2007 (as amended from time to time, the "Stockholders Agreement") is in effect, the then-applicable terms, if any, of the Stockholders Agreement, the precise number of directors of the Corporation shall be fixed, and may be altered from time to time, only by resolution of the Board of Directors.
(b) The directors of the Corporation, subject to any rights of the holders of shares of any class or series of Preferred Stock to elect directors, shall be classifiedwith respect to the time for which they severally hold office into three classes, as nearly equal in number as possible. One class's initial term will expire at the first annual meeting of stockholders of the Corporation following the effectiveness of this Second Amended and Restated Certificate of Incorporation, another class's initial term will expire at the second annual meeting of stockholders following the effectiveness of this Second Amended and Restated Certificate of Incorporation and another class's initial term will expire at the third annual meeting of stockholders following the effectiveness of this Second Amended and Restated Certificate of Incorporation, with directors of each class to hold office until their successors are duly elected and qualified,providedthat the term of each director shall continue until the election and qualification of his or her successor or until such director's earlier death, resignation or removal. At each annual meeting of stockholders of the Corporation beginning with the first annual meeting of stockholders following the effectiveness of this Second Amended and Restated Certificate of Incorporation, subject to any rights of the holders of shares of any class or series of Preferred Stock and for so long as the Stockholders Agreement is in effect, the then-applicable terms, if any, of the Stockholders Agreement, the successors of the directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. In the case of any increase or decrease, from time to time, in the number of directors of the Corporation, the number of directors in each class shall be apportioned as nearly equal a possible.until the 2020 annual meeting of stockholders. Beginning at the 2018 annual meeting of stockholders, the directors whose terms expire at that meeting (or such directors' successors) shall be elected to hold office for a one-year term expiring at the 2019 annual meeting of stockholders; at the 2019 annual meeting of stockholders, the directors whose terms expire at that meeting (or such directors' successors) shall be elected to hold office for a one-year term expiring at the 2020 annual meeting of shareholders; and at the 2020 annual meeting of shareholders and each annual meeting of shareholders thereafter, all directors shall be elected to hold office for a one-year term expiring at the next annual meeting of stockholders and until such director's successor shall have been elected and qualified. No decrease in the number of directors shall shorten the term of any incumbent director.
(c) Subject to this Article FIFTH, the election of directors may be conducted in any manner approved by the person presiding at a meeting of the stockholders or the directors, as the case may be, at the time when the election is held and need not be by written ballot.
(d) Subject to any rights of the holders of shares of any class or series of Preferred Stock, if any, to elect additional directors under specified circumstances, andfor so longexcept asthe Stockholders Agreement is in effect, the then-applicable terms, if any, of the Stockholders Agreement, (i) following the effectiveness of this Second Amended and Restated Certificate of Incorporation and until the first date (the "Trigger Date") on which the Sponsors (as defined in Article EIGHTH) cease collectively to beneficially own (directly or indirectly) more than fifty percent (50%) of the outstanding shares of Common Stockotherwise provided by law, a director may be removed at any time, either for or without cause, upon affirmative vote of holders of at least a majority of the votes to which all the stockholders of the Corporation would be entitled to cast in any election of directors or class of directors and (ii) from and after the Trigger Date, a
director may be removed from office only for cause and only by the affirmative vote of holders of at least three- fourths (75%) of the votes to which all the stockholders of the Corporation would be entitled to cast in any election of directors or class of directors..
(e) Subject to any rights of the holders of shares of any class or series of Preferred Stock, if any, to elect additional directors under specified circumstances andfor so long as the Stockholders Agreement is in effect, the then-applicable terms, if any, of the Stockholders Agreement, andexcept as otherwise provided by law, any vacancy in the Board of Directors that results from an increase in the number of directors, from the death, disability, resignation, disqualification or removal of any director or from any other cause shall be filled solely by a majority of the total number of directors then in office, even if less than a quorum, or by a sole remaining director.
(f) All corporate powers and authority of the Corporation (except as at the time otherwise provided by law, by thisSecondThird Amended and Restated Certificate of Incorporation or by the by-laws of the Corporation) shall be vested in and exercised by the Board of Directors.
(g) To the fullest extent permitted by the DGCL, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended after the date of the filing of thisSecondThird Amended and Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended from time to time.
(h) To the fullest extent permitted by the DGCL, the Corporation shall indemnify and advance expenses to the directors of the Corporation,provided that, except as otherwise provided in the by-laws of the Corporation, the Corporation shall not be obligated to indemnify or advance expenses to a director of the Corporation in respect of an action, suit or proceeding (or part thereof) instituted by such director, unless such action, suit or proceeding (or part thereof) has been authorized by the Board of Directors. The rights provided by this Article FIFTH, Section (i) shall not limit or exclude any rights, indemnities or limitations of liability to which any director of the Corporation may be entitled, whether as a matter of law, under the by-laws of the Corporation, by agreement, vote of the stockholders, approval of the directors of the Corporation or otherwise.
SIXTH. Stockholder Action by Written Consent. Until the Trigger Date, any action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice and without a vote of stockholders, if a consent or consents in writing, setting forth the action so taken, are: (i) signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted (but not less than the minimum number of votes otherwise prescribed by law) and (ii) delivered within 60 days of the earliest dated consent so delivered to the Corporation, to the Corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the Corporation having custody of the books in which proceedings of meetings of the stockholders are recorded. From and after the Trigger Date, anyAny action required or permitted to be taken at any annual or special meeting of stockholders of the Corporation may be taken only upon the vote of the stockholders at an annual or special meeting duly called and may not be taken by written consent of the stockholders.
SEVENTH. Special Meetings. Subject to the special rights of any series of Preferred Stock, and to the requirements of applicable law, special meetings of the stockholders of the Corporation for any purpose or purposes may be called only by or at the direction of the Board of Directors pursuant to a resolution of the Board of Directors adopted by a majority of the total number of directors then in office;providedthat, until the Trigger Date, a special meeting of the stockholders may also be called by the Secretary of the Corporation at the request of the holders of record of a majority of the outstanding shares of Common Stock. From and after the Trigger Date, the. The stockholders of the Corporation do not have the power to call a special meeting of the stockholders. Except as otherwise required by law, the business conducted at a special meeting of stockholders of the Corporation shall be limited exclusively to the business set forth in the Corporation's notice of meeting, and the individual or group calling such meeting shall have exclusive authority to determine the business included in such notice. Any special meeting of the stockholders shall be held either within or without the State of Delaware, at such place, if any, and on such date and time, as shall be specified in the notice of such special meeting. The by-laws of the Corporation may establish procedures regulating the submission by stockholders of nominations and proposals for consideration at meetings of stockholders of the Corporation.
Eight:Business Opportunities.To the fullest extent permitted by Section 122(17) of the DGCL (or any successor provision) and except as may be otherwise expressly agreed in writing by the Corporation and any of Bain Capital Integral Investors 2006, LLC, Carlyle Partners V, L.P., Carlyle Partners V-A, L.P., CP V Coinvestment A, L.P., CP V Coinvestment B, L.P., Clayton, Dubilier & Rice Fund VII, L.P., CD&R Parallel Fund VII, L.P., Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P. and their respective affiliates (each, a "Sponsor" and together the "Sponsors") and The Home Depot, Inc. and its affiliates ("THD" and each of the Sponsors and THD an "Investor") with respect to such Investor, the Corporation, on behalf of itself and its subsidiaries, renounces and waives any interest or expectancy of the Corporation and its subsidiaries in, or in being offered an opportunity to participate in, directly or indirectly, any potential transactions, matters or business opportunities (including, without limitation, any business activities or lines of business that are the same as or similar to those pursued by, or competitive with, the Corporation or any of its subsidiaries or any dealings with customers or clients of the Corporation or any of its subsidiaries) that are from time to time presented to any of the Investors or any of their respective officers, directors, agents, stockholders, members, partners, affiliates and subsidiaries, even if the transaction, matter or opportunity is one that the Corporation or its subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so and no such person shall be liable to the Corporation or any of its subsidiaries or affiliates for breach of any fiduciary or other duty, as a director or officer or otherwise, by reason of the fact that such person pursues, acquires or participates in such business opportunity, directs such business opportunity to another person or fails to present such business opportunity, or information regarding such business opportunity, to the Corporation or its subsidiaries. Any person purchasing or otherwise acquiring any interest in any shares of stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Article EIGHTH. Neither the alteration, amendment or repeal of this Article EIGHTH, nor the adoption of any provision of this Second Amended and Restated Certificate of Incorporation inconsistent with this Article EIGHTH, nor, to the fullest extent permitted by Delaware law, any modification of law, shall eliminate or reduce the effect of this Article EIGHTH in respect of any business opportunity first identified or any other matter occurring, or any cause of action, suit or claim that, but for this Article EIGHTH, would accrue or arise, prior to such alteration, amendment, repeal, adoption or modification. If any provision or provisions of this Article EIGHTH shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Article EIGHTH (including, without limitation, each portion of any paragraph of this Article EIGHTH containing any such provision held to be invalid, illegal or unenforceable that is not
itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the provisions of this Article EIGHTH (including, without limitation, each such portion of any paragraph of this Article EIGHTH containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law. This Article EIGHTH shall not limit any protections or defenses available to, or indemnification or advancement rights of, any director or officer of the Corporation under this Second Amended and Restated Certificate of Incorporation, the by- laws of the Corporation or applicable law.
NinthEIGHTH: Section 203 of the General Corporation Law. The Corporation elects not to be governed by Section 203 of the DGCL, "Business Combinations With Interested Stockholders", as permitted under and pursuant to subsection (b)(3) of Section 203 of the DGCL.
TenthNINTH: Amendment of Certificate of Incorporation. The Corporation reserves the right to amend, alter or repeal any provision contained in thisSecondThird Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed by the DGCL, and all rights herein conferred upon stockholders or directors are granted subject to this reservation,provided, however, that any amendment, alteration or repeal of Article FIFTH, Section (g) or Section (h) shall not adversely affect any right or protection existing under thisSecondThird Amended and Restated Certificate of Incorporation immediately prior to such amendment, alteration or repeal, including any right or protection of a director thereunder in respect of any act or omission occurring prior to the time of such amendment, modification or repeal. Notwithstanding anything to the contrary contained in thisSecondThird Amended and Restated Certificate of Incorporation, and notwithstanding that a lesser percentage may be permitted from time to time by applicable law, no provision of Articles FIFTH, SIXTH, SEVENTH,EIGHTH,NINTH,this ArticleNINTH and ArticlesTENTH andArticlesELEVENTH and TWELFTH may be altered, amended or repealed in any respect, nor may any provision or by-law inconsistent therewith be adopted, unless in addition to any other vote required by thisSecondThird Amended andRestedRestated Certificate of Incorporation or otherwise required by law, (i) until the Trigger Date, such amendment, alteration, or repeal is approved by the affirmative vote of the holders of a majority of the voting power of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, and (ii) from and after the Trigger Date, such amendment, alteration or repeal is approved at a meeting of the stockholders called for that purpose by, in addition to any other vote otherwise required by law, the affirmative vote of the holders of at least three-fourths (75%) of the voting power of the outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.
EleventhTENTH: Amendment of By-Laws. In furtherance and not in limitation of the powers conferred by law, the Board of Directors is expressly authorized to amend, alter or repeal the by-laws of the Corporation subject to the power of the stockholders of the Corporation entitled to vote with respect thereto to amend, alter or repeal the by-laws. Any amendment, alteration or repeal of the by-laws of the Corporation by the Board of Directors shall require the approval of a majority of the Board of Directors then in office. In addition to any other vote otherwise required by law, the stockholders of the Corporation may amend, alter or repeal the by-laws of the Corporation,provided that any such action will require(i) until the Trigger Date, the affirmative vote of the holders of a majority of the voting power of the outstanding shares of capital stock entitled to vote with respect thereto, voting together as a single class and (ii) from and after the Trigger Date,the affirmative vote of the holders of at least three- fourths (75%) of the voting power of the outstanding shares of capital stock of the Corporation entitled to vote with respect thereto, voting together as a single class.
TwelfthELEVENTH: Exclusive Jurisdiction for Certain Actions. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the DGCL, thisSecondThird Amended and Restated Certificate of Incorporation or the by-laws of the Corporation, or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this ArticleTWELFTHELEVENTH.
HD SUPPLY HOLDINGS, INC.THIRDFOURTH AMENDED AND RESTATED BY-LAWS
Effective as ofJuly 2, 2013May 17, 2018
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ARTICLE I STOCKHOLDERS | 1 | |||||
Section 1.01. | Annual Meetings. | 1 | ||||
Section 1.02. | Special Meetings. | 1 | ||||
Section 1.03. | Participation in Meetings by Remote Communication. | 1 | ||||
Section 1.04. | Notice of Meetings; Waiver. | 1 | ||||
Section 1.05. | Quorum. | 2 | ||||
Section 1.06. | Voting. | 2 | ||||
Section 1.07. | Voting Lists. | 2 | ||||
Section 1.08. | Adjournment. | 3 | ||||
Section 1.09. | Proxies. | 3 | ||||
Section 1.10. | Organization; Procedure; Inspection of Elections. | 3 | ||||
Section 1.11. | Stockholder Action by Written Consent. | 4 | ||||
Section 1.12. | Notice of Stockholder Proposals and Nominations. | 4 | ||||
ARTICLE II BOARD OF DIRECTORS | 7 | |||||
Section 2.01. | General Powers. | 7 | ||||
Section 2.02. | Election of Directors. | 7 | ||||
Section 2.03. | Annual and Regular Meetings: Notice. | 8 | ||||
Section 2.04. | Special Meetings; Notice. | 8 | ||||
Section 2.05. | Quorum. | 8 | ||||
Section 2.06. | Voting. | 8 | ||||
Section 2.07. | Adjournment. | 8 | ||||
Section 2.08. | Action Without a Meeting. | 9 | ||||
Section 2.09. | Regulations; Manner of Acting. | 9 | ||||
Section 2.10. | Action by Telephonic Communications. | 9 | ||||
Section 2.11. | Removal; Resignation. | 9 | ||||
Section 2.12. | Director Fees and Expenses. | 9 | ||||
Section 2.13. | Reliance on Accounts and Reports, etc. | 9 | ||||
ARTICLE III COMMITTEES | 10 | |||||
Section 3.01. | How Constituted. | 10 | ||||
Section 3.02. | Powers. | 10 | ||||
Section 3.03. | Proceedings. | 10 | ||||
Section 3.04. | Quorum and Manner of Acting. | 11 | ||||
Section 3.05. | Action by Telephonic Communications. | 11 | ||||
Section 3.06. | Resignations. | 11 | ||||
Section 3.07. | Removal. | 11 | ||||
Section 3.08. | Vacancies. | 11 | ||||
ARTICLE IV OFFICERS | 11 | |||||
Section 4.01. | Number. | 11 | ||||
Section 4.02. | Election. | 12 | ||||
Section 4.03. | Salaries. | 12 | ||||
Section 4.04. | Removal and Resignation; Vacancies. | 12 | ||||
Section 4.05. | Authority and Duties of Officers. | 12 | ||||
Section 4.06. | Chairman of the Board. | 12 | ||||
Section 4.07. | Chief Executive Officer. | 12 | ||||
Section 4.08. | President. | 13 |
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Section 4.09. | Vice President. | 13 | ||||
Section 4.10. | Secretary and Assistant Secretaries. | 13 | ||||
Section 4.11. | Chief Financial Officer. | 13 | ||||
Section 4.12. | Security. | 14 | ||||
Section 4.13. | Action with Respect to Securities of Other Companies. | 14 | ||||
ARTICLE V CAPITAL STOCK | 14 | |||||
Section 5.01. | Certificates of Stock, Uncertificated Shares. | 14 | ||||
Section 5.02. | Signatures; Facsimile. | 14 | ||||
Section 5.03. | Lost, Stolen or Destroyed Certificates. | 14 | ||||
Section 5.04. | Transfer of Stock. | 14 | ||||
Section 5.05. | Registered Stockholders. | 15 | ||||
Section 5.06. | Transfer Agent and Registrar. | 15 | ||||
ARTICLE VI INDEMNIFICATION | 15 | |||||
Section 6.01. | Nature of Indemnity. | 15 | ||||
Section 6.02. | Successful Defense. | 16 | ||||
Section 6.03. | Determination That Indemnification Is Proper. | 16 | ||||
Section 6.04. | Advance of Expenses. | 16 | ||||
Section 6.05. | Procedure for Indemnification of Directors and Officers. | 16 | ||||
Section 6.06. | Contract Right; Non-Exclusivity; Indemnification Priority Survival. | 17 | ||||
Section 6.07. | Insurance. | 17 | ||||
Section 6.08. | Subrogation. | 17 | ||||
Section 6.09. | Employees and Agents. | 17 | ||||
Section 6.10. | Interpretation, Severability. | 18 | ||||
ARTICLE VII OFFICES | 18 | |||||
Section 7.01. | Registered Office. | 18 | ||||
Section 7.02. | Other Offices. | 18 | ||||
ARTICLE VIII GENERAL PROVISIONS | 18 | |||||
Section 8.01. | Dividends. | 18 | ||||
Section 8.02. | Reserves. | 18 | ||||
Section 8.03. | Execution of Instruments. | 18 | ||||
Section 8.04. | Voting as Stockholder. | 19 | ||||
Section 8.05. | Fiscal Year. | 19 | ||||
Section 8.06. | Seal. | 19 | ||||
Section 8.07. | Books and Records; Inspection. | 19 | ||||
Section 8.08. | Electronic Transmission. | 19 | ||||
ARTICLE IX AMENDMENT OF BY-LAWS | 19 | |||||
Section 9.01. | Amendment. | 19 | ||||
ARTICLE X CONSTRUCTION | 20 | |||||
Section 10.01. | Construction. | 20 |
ii
HD SUPPLY HOLDINGS, INC.THIRDFOURTH AMENDED AND RESTATED BY-LAWS
As amended and restated effectiveJuly 2, 2013May 17, 2018
ARTICLE I
STOCKHOLDERS
Section 1.01.Annual Meetings. The annual meeting of the stockholders of HD Supply Holdings, Inc. (the "Corporation") for the election of directors (each, a "Director") to succeed directors whose terms expire and for the transaction of such other business as properly may come before such meeting shall be held each year, either within or without the State of Delaware, at such place, if any, and on such date and at such time, as may be fixed from time to time by resolution of the Corporation's Board of Directors (the "Board of Directors") and set forth in the notice or waiver of notice of the meeting, unless, subject to the certificate of incorporation of the Corporation (the "Certificate of Incorporation") and Section 1.11 of these by-laws, the stockholders have acted by written consent to elect Directors as permitted by the General Corporation Law of the State of Delaware, as amended from time to time (the "DGCL"). The Board of Directors may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board of Directors.
Section 1.02.Special Meetings. Special meetings of the stockholders of the Corporation may be called only in the manner set forth in the Certificate of Incorporation. Notice of every special meeting of the stockholders of the Corporation shall state the purpose or purposes of such meeting. Except as otherwise required by law, the business conducted at a special meeting of stockholders of the Corporation shall be limited exclusively to the business set forth in the Corporation's notice of meeting, and the individual or group calling such meeting shall have exclusive authority to determine the business included in such notice. Any special meeting of the stockholders shall be held either within or without the State of Delaware, at such place, if any, and on such date and time, as shall be specified in the notice of such special meeting.
Section 1.03.Participation in Meetings by Remote Communication. The Board of Directors, acting in its sole discretion, may establish guidelines and procedures in accordance with applicable provisions of the DGCL and any other applicable law for the participation by stockholders and proxyholders in a meeting of stockholders by means of remote communications, and may determine that any meeting of stockholders will not be held at any place but will be held solely by means of remote communication. Stockholders and proxyholders complying with such procedures and guidelines and otherwise entitled to vote at a meeting of stockholders shall be deemed present in person and entitled to vote at a meeting of stockholders, whether such meeting is to be held at a designated place or solely by means of remote communication.
Section 1.04.Notice of Meetings; Waiver.
(a) The Secretary or any Assistant Secretary shall cause notice of each meeting of stockholders to be given in a manner permitted by the DGCL not less than ten nor more than 60 days prior to the meeting, to each stockholder of record entitled to vote at such meeting, subject to such exclusions as are then permitted by the DGCL. The notice shall specify (i) the record date for determining the stockholders entitled to vote at the meeting (if such date is different from the record date of stockholders entitled to notice of the meeting), (ii) the place, if any, date and time of such meeting of the stockholders, (iii) the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, (iv) in the case of a special meeting, the purpose or purposes
for which such meeting is called and (v) such other information as may be required by law or as may be deemed appropriate by the Board of Directors, the Chief Executive Officer or the Secretary of the Corporation. If the stockholder list referred to in Section 1.07 of these By-Laws is made accessible on an electronic network, the notice of meeting shall indicate how the stockholder list can be accessed. If a stockholder meeting is to be held solely by means of electronic communications, the notice of such meeting must provide the information required to access such stockholder list.
(b) A written waiver of notice of meeting signed by a stockholder, or a waiver by electronic transmission by a stockholder, whether given before or after the meeting, is deemed equivalent to notice. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in a waiver of notice. The attendance of any stockholder at a meeting of stockholders is a waiver of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business at the meeting on the ground that the meeting is not lawfully called or convened.
Section 1.05.Quorum. Except as otherwise required by law or by the Certificate of Incorporation, the presence in person or by proxy of the holders of record of a majority in voting power of the shares entitled to vote at a meeting of stockholders shall constitute a quorum for the transaction of business at such meeting,provided,however, that where a separate vote by a class or series is required, the holders of a majority in voting power of all issued and outstanding stock of such class or series entitled to vote on such matter, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to such matter. In the absence of a quorum, the stockholders so present may, by a majority in voting power thereof, adjourn the meeting from time to time in the manner provided in Section 1.08 of these By-laws until a quorum shall attend.
Section 1.06.Voting. Except as otherwise provided in the Certificate of Incorporation or by law, every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote for each such share outstanding in his or her name on the books of the Corporation at the close of business on the record date for such vote. If no record date has been fixed for a meeting of stockholders, then every holder of record of shares entitled to vote at a meeting of stockholders shall be entitled to one vote (unless otherwise provided by the Certificate of Incorporation or by applicable law) for each such share of stock outstanding in his or her name on the books of the Corporation at the close of business on the day next preceding the day on which notice of the meeting is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. Except as otherwise required by law, the Certificate of Incorporation, these By-Laws, the rules and regulations of any stock exchange applicable to the Corporation,for so long as the Second Amended and Restated Stockholders Agreement, among the Corporation and certain of its stockholders, dated as of September 21, 2007 (as amended from time to time, the "Stockholders Agreement") is in effect, the then-applicable terms, if any, of the Stockholders Agreement,or pursuant to any other rule or regulation applicable to the Corporation or its stockholders, the vote of a majority in voting power of the shares entitled to vote at a meeting of stockholders on the subject matter in question represented in person or by proxy at any meeting at which a quorum is present shall be sufficient for the transaction of any business at such meeting. The stockholders do not have the right to cumulate their votes for the election of Directors.
Section 1.07.Voting Lists. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare, at least 10 days before every meeting of the stockholders (and before any adjournment thereof for which a new record date has been set), a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order and showing the address of each stockholder and the number of shares registered in the name of each stockholder. This list, which may
be in any format including electronic format, shall be open to the examination of any stockholder prior to and during the meeting for any purpose germane to the meeting in the manner required by the DGCL and other applicable law. The stock ledger shall be the only evidence as to who are the stockholders entitled by this section to examine the list required by this section or to vote in person or by proxy at any meeting of stockholders.
Section 1.08.Adjournment. Any meeting of stockholders may be adjourned from time to time, by the chairperson of the meeting or by the vote of a majority in voting power of the shares of stock present in person or represented by proxy at the meeting, to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the place, if any, and date and time thereof (and the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting) are announced at the meeting at which the adjournment is taken unless the adjournment is for more than 30 days or a new record date is fixed for the adjourned meeting after the adjournment, in which case notice of the adjourned meeting in accordance with Section 1.04 of these By-Laws shall be given to each stockholder of record entitled to vote at the meeting. At the adjourned meeting, the Corporation may transact any business that might have been transacted at the original meeting.
Section 1.09.Proxies. Any stockholder entitled to vote at any meeting of the stockholders or to express consent to or dissent from corporate action in writing without a meeting may authorize another person or persons to act for such stockholder by proxy. A stockholder may authorize a valid proxy by executing a written instrument signed by such stockholder, or by causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature, or by transmitting or authorizing an electronic transmission setting forth an authorization to act as proxy to the person designated as the holder of the proxy, a proxy solicitation firm or a like authorized agent. No proxy may be voted or acted upon after the expiration of three years from the date of such proxy, unless such proxy provides for a longer period. Every proxy is revocable at the pleasure of the stockholder executing it unless the proxy states that it is irrevocable and applicable law makes it irrevocable. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or by filing another duly executed proxy bearing a later date with the Secretary. Proxies by electronic transmission must either set forth or be submitted with information from which it can be determined that the electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of a writing or transmission created pursuant to this section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used,provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
Section 1.10.Organization; Procedure; Inspection of Elections.
(a) At every meeting of stockholders the presiding person shall be the Chairman of the Board or, in the event of his or her absence or disability, the Chief Executive Officer or, in the event of his or her absence or disability, a presiding person chosen by resolution of the Board of Directors. The Secretary, or in the event of his or her absence or disability, the Assistant Secretary, if any, or if there be no Assistant Secretary, in the absence of the Secretary, an appointee of the presiding person, shall act as secretary of the meeting. The Board of Directors may make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to any such rules and regulations, the presiding person of any meeting shall have the right and authority to prescribe rules, regulations and procedures for such meeting and to take all such actions as in the judgment of the presiding person are appropriate for the proper conduct of such meetings. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the presiding person of
the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders or records of the Corporation, their duly authorized and constituted proxies or such other persons as the presiding person of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter of business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board of Directors or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.
(b) Preceding any meeting of the stockholders, the Board of Directors may, and when required by law shall, appoint one or more persons to act as inspectors of elections, and may designate one or more alternate inspectors. If no inspector or alternate so appointed by the Board of Directors is able to act, or if no inspector or alternate has been appointed and the appointment of an inspector is required by law, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. No Director or nominee for the office of Director shall be appointed as an inspector of elections. Each inspector, before entering upon the discharge of the duties of an inspector, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall discharge their duties in accordance with the requirements of applicable law.
Section 1.11.Stockholder Action by Written Consent. Except as otherwise provided in the Certificate of Incorporation, stockholders may not take any action by written consent in lieu of action at an annual or special meeting of stockholders.
Section 1.12.Notice of Stockholder Proposals and Nominations.
(a) Annual Meetings of Stockholders. (i) Nominations of persons for election to the Board of Directors and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders only (A) pursuant to the Corporation's notice of the meeting (or any supplement thereto), (B) by or at the direction of the Board of Directors or a Committee appointed by the Board for such purpose,or(C) by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in clauses (ii) and (iii) of this Section 1.12(a) and who is a stockholder of record at the time such notice is delivered and at the date of the meeting, or (D) by any Sponsor (as defined in the Certificate of Incorporation) pursuant to the Stockholders Agreement.
(ii) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to subclause (C) of Section 1.12(a)(i) of these By-Laws, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such proposed business other than nominations must constitute a proper matter for stockholder action. To be timely, a stockholder's notice shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not fewer than 90 days nor more than 120 days prior to the first anniversary of the preceding year's annual meeting (which anniversary date, in the case of the first annual meeting of stockholders following the closing of the Corporation's initial underwritten public offering of common stock, shall be deemed to be May 15, 2014);;
provided that if the date of the annual meeting is advanced by more than 30 days or delayed by more than 70 days from such anniversary date of the preceding year's annual meeting, notice by the stockholder to be timely must be so delivered not earlier than 120 days prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (A) as to each person whom the stockholder proposes to nominate for election or re-election as a Director all information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required, in each case pursuant to and in accordance with Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations promulgated thereunder, including such person's written consent to being named in the proxy statement as a nominee and to serving as a Director if elected; (B) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting (including the text of any resolution proposed for consideration and if such business includes proposed amendments to the Certificate of Incorporation or By-Laws, the text of the proposed amendments), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and of any beneficial owner on whose behalf the proposal is made; and (C) as to the stockholder giving the notice and any beneficial owner on whose behalf the nomination or proposal is made (1) the name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner, (2) the class or series and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (3) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, and (4) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (x) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation's outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (y) otherwise to solicit proxies from stockholders in support of such proposal or nomination. Notice of a stockholder nomination or proposal shall also set forth, as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (A) a description of any agreement, arrangement or understanding between or among such stockholder and any such beneficial owner, any of their respective affiliates or associates, and any other person or persons (including their names) in connection with the proposal of such nomination or other business; (B) a description of any agreement, arrangement or understanding (including, regardless of the form of settlement, any derivative, long or short positions, profit interests, forwards, futures, swaps, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions and borrowed or loaned shares) that has been entered into by or on behalf of, or any other agreement, arrangement or understanding that has been made, the effect or intent of which is to create or mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or any such beneficial owner or any such nominee with respect to the Corporation's securities (a "Derivative Instrument"); (C) to the extent not disclosed pursuant to the immediately preceding clause (B), the principal amount of any indebtedness of the Corporation or any of its subsidiaries beneficially owned by such stockholder or by any such beneficial owner, together with the title of the instrument under which such indebtedness was issued and a description of any Derivative Instrument entered into by or on behalf of such stockholder or such beneficial owner relating to the value or payment of any indebtedness of the Corporation or any such subsidiary; and (D) any other information relating to such stockholder and any such beneficial owner required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder. The foregoing notice requirements shall be deemed satisfied by a stockholder if the stockholder has notified the Corporation of his or her intention to present a proposal at an annual meeting in compliance with Rule 14a–8 (or any successor thereof) promulgated under the Exchange
Act, and such stockholder's proposal has been included in a proxy statement that has been prepared by the Corporation to solicit proxies for such annual meeting. The Corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a Director of the Corporation. In addition, a stockholder seeking to bring an item of business before the annual meeting shall promptly provide any other information reasonably requested by the Corporation.
(iii) Notwithstanding anything in the second sentence of Section 1.12(a)(ii) of these By-Laws to the contrary, in the event that the number of Directors to be elected to the Board of Directors is increased and there is no public announcement naming all of the nominees for Director or specifying the size of the increased Board of Directors made by the Corporation at least 70 days prior to the first anniversary of the preceding year's annual meeting, a stockholder's notice under this Section 1.12(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business as shall have been brought before the special meeting of the stockholders pursuant to the Corporation's notice of meeting shall be conducted at such meeting. Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which Directors are to be elected pursuant to the Corporation's notice of meeting (i) by or at the direction of the Board of Directors or a Committee appointed by the Board for such purpose or (ii) provided that the Board of Directors has determined that the Directors shall be elected at such meeting, by any stockholder of the Corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this Section 1.12(b) and who is a stockholder of record at the time such notice is delivered to the Secretary of the Corporation. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more Directors of the Corporation, any stockholder entitled to vote at such meeting may nominate a person or persons, as the case may be, for election to such position(s) as specified by the Corporation, if the stockholder's notice as required by Section 1.12(a)(ii) of these By-Laws shall be delivered to the Secretary of the Corporation at the principal executive offices of the Corporation not earlier than the 120 days prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.
(i) Except as otherwise provided by applicable law, the Certificate of Incorporation or these By-Laws, the presiding person of a meeting of stockholders shall have the power and duty (x) to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this Section 1.12 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made, solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies in support of such stockholder's nominee or proposal in compliance with such stockholder's representation as required by clause (a)(ii)(C)(4) of this Section 1.12), and (y) if any proposed nomination or business is not in compliance with this Section 1.12, to declare that such defective nomination shall be disregarded or that such proposed business shall not be transacted.
(ii) If the stockholder (or a qualified representative of the stockholder) making a nomination or proposal under this Section 1.12 does not appear at a meeting of stockholders to present such nomination or proposal, the nomination shall be disregarded and/or the proposed
business shall not be transacted, as the case may be, notwithstanding that proxies in favor thereof may have been received by the Corporation. For purposes of this Section 1.12, to be considered a qualified representative of the stockholder, a person must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.
(iii) For purposes of this Section 1.12, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(iv) Notwithstanding the foregoing provisions of this Section 1.12, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 1.12. Nothing in this Section 1.12 shall be deemed to affect any rights of (x) stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or (y) the holders of any series of preferred stock to elect Directors pursuant to any applicable provisions of the Certificate of Incorporation or of the relevant preferred stock certificate of designation.
(v) The announcement of an adjournment or postponement of an annual or special meeting does not commence a new time period (and does not extend any time period) for the giving of notice of a stockholder nomination or a stockholder proposal as described above.
Section 2.01.General Powers. Except as may otherwise be provided by law, by the Certificate of Incorporation or by these By-Laws, the property, affairs and business of the Corporation shall be managed by or under the direction of the Board of Directors and the Board of Directors may exercise all the powers and authority of the Corporation.
Section 2.02.Classification; Election of Directors. The Board of Directors shall be classified into three classes as provided by the Certificate of Incorporation. Except as otherwise provided in Section 2.14 of these By-Laws, at each annual meeting of the stockholders the successors of the Directors whose term expires at that meeting shall be elected. until the 2020 annual meeting of stockholders. At each annual meeting of stockholders beginning at the 2018 annual meeting of stockholders, Directors whose terms expire at that meeting (or such Directors' successors) shall be elected in accordance with the Certificate of Incorporation for a one-year term. Accordingly, at the 2018 annual meeting of stockholders, the Directors whose terms expire at that meeting (or such Directors' successors) shall be elected to hold office for a one-year term expiring at the 2019 annual meeting of stockholders; at the 2019 annual meeting of stockholders, the Directors whose terms expire at that meeting (or such Directors' successors) shall be elected to hold office for a one-year term expiring at the 2020 annual meeting of stockholders; and at the 2020 annual meeting of stockholders and each annual meeting of stockholders thereafter, all Directors shall be elected to hold office for a one-year term expiring at the next annual meeting of stockholders and until such Director's successor shall have been elected and qualified. At each meeting of the stockholders for the election of Directors,
provided a quorum is present, the Directors who are standing for election shall be elected by a plurality of the votes validly cast in such election,provided that for so long as the Stockholders Agreement is in effect, the election of any Director shall also be subject to the then-applicable terms, if any, of the Stockholders Agreement..
Section 2.03.Annual and Regular Meetings: Notice. The annual meeting of the Board of Directors for the purpose of electing officers and for the transaction of such other business as may come before the meeting shall be held as soon as possible following adjournment of the annual meeting of the stockholders either (i) at the place of such annual meeting of the stockholders, in which event notice of such annual meeting of the Board of Directors need not be given, or (ii) at such other time and place as shall have been specified in advance notice given to members of the Board of Directors of the date, place and time of such meeting. Any such notice shall be given at least 48 hours in advance if sent to each Director by facsimile or any form of electronic transmission previously approved by a Director, which approval has not been revoked ("Approved Electronic Transmission"), or delivered to him or her personally, or at least five days in advance, if notice is mailed to each Director, addressed to him or her at his or her usual place of business or other designated address. Any such notice need not be given to any Director who attends such meeting without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any Director who submits a signed waiver of notice (including by Approved Electronic Transmission), whether before or after such meeting.
The Board of Directors from time to time may by resolution provide for the holding of regular meetings. Regular meetings of the Board of Directors shall be held at the place (if any), on the date and at the time as shall have been established by the Board of Directors and publicized among all directors. A notice of a regular meeting, the date of which has been so publicized, shall not be required.
Section 2.04.Special Meetings; Notice. Special meetings of the Board of Directors shall be held whenever called by any member of the Board of Directors, at such place (within or without the State of Delaware), date and time as may be specified in the respective notices or waivers of notice of such meetings. Special meetings of the Board of Directors may be called on (i) 48 hours' notice, if such notice is sent by facsimile or Approved Electronic Transmission to each Director or delivered to him or her personally or (ii) five days' notice, if such notice is mailed to each Director, addressed to him or her at his or her usual place of business or other designated address. Notice of any special meeting need not be given to any Director who attends such meeting without protesting the lack of notice to him or her, prior to or at the commencement of such meeting, or to any Director who submits a signed waiver of notice (including by electronic transmission), whether before or after such meeting. Any business may be conducted at a special meeting of the Board of Directors.
Section 2.05.Quorum. A quorum for meetings of the Board of Directors shall consist of a majority of the total number of Directors then in office;provided that, so long as the applicable terms of the Stockholders Agreement are then in effect, such majority must include at least one Stockholder Designee (as defined in the Stockholders Agreement) of each of the Principal Investors (as defined in the Stockholders Agreement) entitled to designate a Stockholder Designee.
Section 2.06.Voting. Except as otherwise required by law, the Certificate of Incorporation or these By-Laws, the vote of a majority of the Directors present at any meeting at which a quorum is present shall be the act of the Board of Directors, subject, for so long as the Stockholders Agreement is in effect, to the then-applicable terms, if any, of the Stockholders Agreement.
Section 2.07.Adjournment. A majority of the Directors present, whether or not a quorum is present, may adjourn any meeting of the Board of Directors to another time or place,provided such adjourned meeting is no earlier than 48 hours after written notice (in accordance with these By-Laws)
of such adjournment has been given to the Directors (or such notice is waived in accordance with these By-Laws), and, at any such adjourned meeting, a quorum shall consist of a majority of the total number of Directors then in office;provided that, so long as the applicable terms of the Stockholders Agreement are then in effect, such majority must include at least one Stockholder Designee of each of the Principal Investors entitled to designate a Stockholder Designee.
Section 2.08.Action Without a Meeting. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting if all members of the Board of Directors consent thereto in writing or by Approved Electronic Transmission, and such writing or writings or Approved Electronic Transmissions are filed with the minutes of proceedings of the Board of Directors. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
Section 2.09.Regulations; Manner of Acting. To the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws, the Board of Directors may adopt such rules and regulations for the conduct of meetings of the Board of Directors and for the management of the property, affairs and business of the Corporation as the Board of Directors may deem appropriate. In addition to the election of the Chairman of the Board, the Board may elect one or more vice-chairpersons or lead Directors to perform such other duties as may be designated by the Board.
Section 2.10.Action by Telephonic Communications. Members of the Board of Directors may participate in a meeting of the Board of Directors by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.
Section 2.11.Removal; Resignation. Directors may only be removed as set forth in the Certificate of Incorporation. Any Director may resign at any time by submitting an electronic transmission or by delivering a written notice of resignation to the Chairman of the Board, the Chief Executive Officer or the Secretary. Such resignation shall take effect upon delivery unless the resignation specifies a later effective date or an effective date determined upon the happening of a specified event.
Section 2.12.Director Fees and Expenses. The amount, if any, which each Director shall be entitled to receive as compensation for his or her services shall be fixed from time to time by the Board of Directors, subject, for so long as the Stockholders Agreement is in effect, to the then-applicable terms, if any, of the Stockholders Agreement.. The non-employee directors of the Corporation shall be paid their reasonable expenses, if any, of attendance at each meeting of the Board of Directors and may be reimbursed a fixed sum for attendance at each meeting of the Board of Directors, paid an annual retainer or paid other compensation, including equity compensation, as the Board determines.
Section 2.13.Reliance on Accounts and Reports, etc. A Director, or a member of any Committee designated by the Board of Directors shall, in the performance of his or her duties, be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports or statements presented to the Corporation by any of the Corporation's officers or employees, or Committees designated by the Board of Directors, or by any other person as to the matters the member reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation.
Section 3.01.How Constituted. The Board of Directors shall have a Compensation Committee, an Audit Committee, a Nominating and Corporate Governance Committee and such other committees as the Board of Directors may determine (collectively, the "Committees"). Each Committee shall consist of such number of Directors as from time to time may be fixed by a majority of the total number of Directors then in office,provided that for so long as the Stockholders Agreement is in effect, the Composition of each Committee shall also be subject to the then-applicable terms, if any, of the Stockholders Agreement.. Any Committee may be abolished or re-designated from time to time by the Board of Directors. Each member of any such Committee (whether designated at an annual meeting of the Board of Directors or to fill a vacancy or otherwise) shall hold office until his or her successor shall have been designated or until he or she shall cease to be a Director, or until his or her earlier death, resignation or removal.
Section 3.02.Powers. Each Committee shall have such powers and responsibilities as the Board of Directors may from time to time authorize and, each Committee, except as otherwise provided in this Section 3.02, shall have and may exercise such powers of the Board of Directors as may be provided by resolution or resolutions of the Board of Directors. No Committee shall have the power or authority:
(a) to amend the Certificate of Incorporation (except that a Committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors as provided in Section 151(a) of the DGCL, fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series);
(b) to adopt an agreement of merger or consolidation or a certificate of ownership and merger;
(c) to recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets;
(d) to recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution; or
(e) to amend these By-Laws of the Corporation; or
(f)(e)for so long as the Stockholders Agreement is in effect, take any other action that pursuant to the then-applicable terms, if any, of the Stockholders Agreement would require any approval of the Principal Investors.
Any Committee may be granted by the Board of Directors, power to authorize the seal of the Corporation to be affixed to any or all papers which may require it.
Section 3.03.Proceedings. Each Committee may fix its own rules of procedure and may meet at such place (within or without the State of Delaware), at such time and upon such notice, if any, as it shall determine from time to time,provided that the Board of Directors may adopt other rules and
regulations for the governance of any Committee not inconsistent with the provisions of these By-Laws and for so long as the Stockholders Agreement is in effect, the then-applicable terms, if any, of the Stockholders Agreement.. Each such Committee shall keep minutes of its proceedings and shall report such proceedings to the Board of Directors at the meeting of the Board of Directors following any such proceedings.
Section 3.04.Quorum and Manner of Acting. Except as may be otherwise provided in the resolution creating a Committee, at all meetings of any Committee the presence of members constituting a majority of the total authorized membership of such Committee shall constitute a quorum for the transaction of business;provided, however, that if any members of such Committee are serving on such Committee pursuant to the then-applicable terms, if any, of the Stockholders Agreement, a quorum shall require such member.. The act of the majority of the members of a Committee present at any meeting at which a quorum is present shall be the act of such Committee, subject, for so long as the Stockholders Agreement is in effect, to the then-applicable terms, if any, of the Stockholders Agreement.,. Any action required or permitted to be taken at any meeting of any Committee may be taken without a meeting, if all members of such Committee shall consent to such action in writing or by electronic transmission, and such writing or writings or electronic transmission or transmissions are filed with the minutes of the proceedings of the Committee. Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form. The members of any Committee shall act only as a Committee, and the individual members of such Committee shall have no power as such.
Section 3.05.Action by Telephonic Communications. Members of any Committee designated by the Board of Directors may participate in a meeting of such Committee by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.
Section 3.06.Resignations. Any member of any Committee may resign from such Committee at any time by submitting an electronic transmission or by delivering a written notice of resignation to the Chairman of the Board, the Chief Executive Officer or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery.
Section 3.07.Removal. Any member of any Committee may be removed from his or her position as a member of such Committee at any time, either for or without cause, by resolution adopted by a majority of the number of Directors then in office,provided that for so long as the Stockholders Agreement is in effect, the removal of any member of a Committee shall be subject to the then-applicable terms, if any, of the Stockholders Agreement.
Section 3.08.Vacancies. If any vacancy shall occur in any Committee, by reason of disqualification, death, resignation, removal or otherwise, the remaining members shall continue to act, and any such vacancy may be filled by the Board of Directors subject to Section 3.01 of these By-Laws and for so long as the Stockholders Agreement is in effect, to the then-applicable terms, if any, of the Stockholders Agreement.
Section 4.01.Number. The officers of the Corporation shall be chosen by the Board of Directors and, subject to the last sentence of this Section 4.01, shall be a Chairman of the Board, a Chief Executive Officer, a Chief Financial Officer, one or more Vice Presidents and a Secretary,
provided that for so long as the Stockholders Agreement is in effect, the choosing of any such officer shall also be subject to the then-applicable terms, if any, of the Stockholders Agreement.. The Board of Directors may also designate as officers a President, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers and agents as it shall deem necessary. Each officer shall hold office until his or her successor is elected and qualified or until his or her earlier resignation or removal. Any number of offices may be held by the same person, except that one person may not concurrently hold both the office of Chief Executive Officer and Secretary.The Board may, subject to the then-applicable terms, if any, of the Stockholders Agreement (so long as the Stockholders Agreement is in effect),The Board may determine that the Chairman of the Board will not be an officer of the Corporation. The Chairman of the Board (whether or not an officer) shall be a Director, but no other officer need be a Director.
Section 4.02.Election. Unless otherwise determined by the Board of Directors and except as otherwise provided in these By-Laws, the officers of the Corporation shall be elected by the Board of Directors at the annual meeting of the Board of Directors, and shall be elected to hold office until the next succeeding annual meeting of the Board of Directors at which his or her successor has been elected and qualified. In the event of the failure to elect officers at such annual meeting, officers may be elected at any regular or special meeting of the Board of Directors. Each officer shall hold office until his or her successor has been elected and qualified, or until his or her earlier death, resignation or removal. For so long as the Stockholders Agreement is in effect, the election of the Chairman of the Board and the Chief Executive Officer shall be subject to the then-applicable terms, if any, of the Stockholders Agreement.
Section 4.03.Salaries. The salaries and other compensation of all officers and agents of the Corporation shall be fixed by the Board or in the manner established by the Board.
Section 4.04.Removal and Resignation; Vacancies. Any officer may be removed for or without cause at any time by the Board of Directors or by the Chief Executive Officer as permitted pursuant to Section 4.07. Any officer may resign at any time by delivering notice of resignation, either in writing signed by such officer or by electronic transmission, to the Chairman of the Board, the Chief Executive Officer or the Secretary. Unless otherwise specified therein, such resignation shall take effect upon delivery. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors, or, if the Chief Executive Officer has authority pursuant to Section 4.07 of these By-Laws to fill such office, then by the Chief Executive Officer subject to Section 4.07 of these By-Laws or by the Board of Directors. Notwithstanding the foregoing provisions of this Section 4.04, for so long as the Stockholders Agreement is in effect, the removal of the Chairman of the Board and the Chief Executive Officer, and the filling of vacancy in such positions, shall be subject to the then-applicable terms, if any, of the Stockholders Agreement.
Section 4.05.Authority and Duties of Officers. The officers of the Corporation shall have such authority and shall exercise such powers and perform such duties as may be specified in these By-Laws or in a resolution of the Board of Directors, except that in any event each officer shall exercise such powers and perform such duties as may be required by law. The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.
Section 4.06.Chairman of the Board. The Chairman of the Board shall preside at all meetings of the Board of Directors and stockholders at which he or she is present and shall have such other powers and duties as may from time to time be assigned by the Board of Directors.
Section 4.07.Chief Executive Officer. The Chief Executive Officer shall have, subject to the supervision, direction and control of the Board of Directors, the general powers and duties of
supervision, direction, and management of the business and affairs of the Corporation, including, without limitation, all powers necessary to direct and control the organizational and reporting relationships within the Corporation. The Chief Executive Officer shall see that all orders and resolutions of the Board of Directors are carried into effect. In addition, the Chief Executive Officer shall have such other powers and perform such other duties as may be delegated to him or her by the Board of Directors or as are set forth in the Certificate of Incorporation or these By-Laws. If the Board of Directors has not elected or appointed a President or the office of the President is otherwise vacant, and no officer otherwise functions with the powers and duties of the President, then, unless otherwise determined by the Board of Directors, the Chief Executive Officer shall also have all the powers and duties of the President.
Section 4.08.President. The President, if there is such an officer and the Board of Directors so directs, shall serve as chief operating officer and have the powers and duties customarily and usually associated with the office of chief operating officer unless the Board of Directors provides for another officer to serve as chief operating officer (or to have the powers and duties of chief operating officer). The President shall have such other powers and perform such other duties as may be delegated to him or her from time to time by the Board of Directors or the Chief Executive Officer. If the Board of Directors has not elected or appointed a Chief Executive Officer or the office of Chief Executive Officer is otherwise vacant, then, unless otherwise determined by the Board of Directors, the President shall also have all the powers and duties of the Chief Executive Officer.
Section 4.09.Vice President. Each Vice President shall have the powers and duties delegated to him or her by the Board of Directors or the President. One Vice President may be designated by the Board of Directors to perform the duties and exercise the powers of the President in the event of the President's absence or disability.
Section 4.10.Secretary and Assistant Secretaries. The Secretary shall issue all authorized notices for, and shall keep minutes of, all meetings of the stockholders and the Board of Directors. He or she shall have charge of the corporate books and shall perform other duties as the Board of Directors may from time to time prescribe.
Any Assistant Secretary, if there is such an officer, shall perform such duties and possess such powers as the Board of Directors, the Chief Executive Officer, President or the Secretary may from time to time prescribe. In the event of the absence, inability or refusal to act of the Secretary, the Assistant Secretary (or if there shall be more than one, the Assistant Secretaries in the order determined by the Board of Directors), shall perform the duties and exercise the powers of the Secretary.
Section 4.11.Chief Financial Officer, Treasurer and Assistant Treasurers. The Chief Financial Officer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board of Directors, the Chief Executive Officer or the President. The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the Corporation. The Chief Financial Officer shall perform other duties commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer or the President shall designate from time to time. The Chief Executive Officer or President may direct the Treasurer or any Assistant Treasurer, if there is such an officer, to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer shall perform other duties commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors, the Chief Executive Officer or the President shall designate from time to time.
Section 4.12.Security. The Board of Directors may require any officer, agent or employee of the Corporation to provide security for the faithful performance of his or her duties, in such amount and of such character as may be determined from time to time by the Board of Directors.
Section 4.13.Action with Respect to Securities of Other Companies. Unless otherwise directed by the Board of Directors, the Chief Executive Officer, the President, or any officer of the Corporation authorized thereby, shall have power to vote and otherwise act on behalf of the Corporation, in person or by proxy, at any meeting of stockholders or equityholders of, or with respect to any action of, stockholders or equityholders of any other entity in which the Corporation may hold securities and otherwise to exercise any and all rights and powers which the Corporation may possess by reason of its ownership of securities in such other entity.
Section 5.01.Certificates of Stock, Uncertificated Shares. The shares of the Corporation shall be represented by certificates, except to the extent that the Board of Directors has provided by resolution or resolutions that some or all of any or all classes or series of the stock of the Corporation shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock in the Corporation represented by certificates shall be entitled to have, and the Board of Directors may in its sole discretion permit a holder of uncertificated shares to receive upon request a certificate signed by the appropriate officers of the Corporation, representing the number of shares registered in certificate form. Such certificate shall be in such form as the Board of Directors may determine, to the extent consistent with applicable law, the Certificate of Incorporation and these By-Laws.
Section 5.02.Signatures; Facsimile. All signatures on the certificates referred to in Section 5.01 of these By-Laws may be in facsimile, engraved or printed form, to the extent permitted by law. In case any officer, transfer agent or registrar who has signed, or whose facsimile, engraved or printed signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
Section 5.03.Lost, Stolen or Destroyed Certificates. A new certificate may be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, only upon delivery to the Corporation of an affidavit of the owner or owners (or their legal representatives) of such certificate, setting forth such allegation and a bond or undertaking as may be satisfactory to a financial officer of the Corporation to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.
Section 5.04.Transfer of Stock. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate representing shares, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. Within a reasonable time after the transfer of uncertificated stock, the Corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) of the DGCL. Subject to the provisions of the Certificate of Incorporation and these By-Laws, the Board of Directors may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, transfer and registration of shares of the Corporation.
Section 5.05.Registered Stockholders. Prior to due surrender of a certificate for registration of transfer and to the fullest extent permitted by law, the Corporation may treat the registered owner as the person exclusively entitled to receive dividends and other distributions, to vote, to receive notice and otherwise to exercise all the rights and powers of the owner of the shares represented by such certificate, and the Corporation shall not be bound to recognize any equitable or legal claim to or interest in such shares on the part of any other person, whether or not the Corporation shall have notice of such claim or interests,provided that if a transfer of shares shall be made for collateral security, and not absolutely, this fact shall be so expressed in the entry of the transfer if, when the certificates are presented to the Corporation for transfer or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so.
Section 5.06.Transfer Agent and Registrar. The Board of Directors may appoint one or more transfer agents and one or more registrars, and may require all certificates representing shares to bear the signature of any such transfer agents or registrars.
Section 6.01.Nature of Indemnity. The Corporation shall indemnify, to the fullest extent permitted by the DGCL and other applicable law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (each, a "proceeding"), by reason of the fact that he or she is or was or has agreed to become a Director or officer of the Corporation, or while serving as a Director or officer of the Corporation, is or was serving or has agreed to serve at the request of the Corporation as a Director, officer, employee, manager or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her or on his or her behalf in connection with such proceeding and any appeal therefrom, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding had no reasonable cause to believe his or her conduct was unlawful;provided that in the case of an action or suit by or in the right of the Corporation to procure a judgment in its favor (i) such indemnification shall be limited to expenses (including attorneys' fees) actually and reasonably incurred by such person in the defense or settlement of such action or suit, and (ii) no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper. Notwithstanding the foregoing, but subject to Section 6.05 of these By-Laws, the Corporation shall not be obligated to indemnify a Director or officer of the Corporation in respect of a proceeding (or part thereof) instituted by such Director or officer, unless such proceeding (or part thereof) has been authorized in the specific case by the Board of Directors.
The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea ofnolocontendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal proceeding, had reasonable cause to believe that his or her conduct was unlawful.
Section 6.02.Successful Defense. To the extent that a present or former Director or officer of the Corporation has been successful on the merits or otherwise in defense of any proceeding referred to in Section 6.01 of these By-Laws or in defense of any claim, issue or matter therein, he or she shall be indemnified by the Corporation against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection therewith.
Section 6.03.Determination That Indemnification Is Proper. Any indemnification of a present or former Director or officer of the Corporation under Section 6.01 of these By-Laws (unless ordered by a court) shall be made by the Corporation only upon a determination that indemnification of such person is proper in the circumstances because such person has met the applicable standard of conduct set forth in Section 6.01 of these By-Laws. Any such determination shall be made, with respect to a person who is a Director or officer at the time of such determination (i) by a majority vote of the Directors who are not parties to such proceeding, even though less than a quorum, or (ii) by a committee of such Directors designated by majority vote of such Directors, even though less than a quorum, or (iii) if there are no such Directors, or if such Directors so direct, by independent legal counsel in a written opinion or (iv) by the stockholders.
Section 6.04.Advance of Expenses. Expenses (including attorneys' fees) incurred by a present or former Director or officer in defending any civil, criminal, administrative or investigative proceeding shall be paid by the Corporation prior to the final disposition of such proceeding upon written request by such person and delivery of an undertaking by such person to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the Corporation under this Article or applicable law;provided that the Board of Directors may not require such Director or officer to post any bond or otherwise provide any security for such undertaking. The Corporation or, in respect of a present Director or officer, the Board of Directors may authorize the Corporation's counsel to represent (subject to applicable conflict of interest considerations) such present or former Director or officer in any proceeding, whether or not the Corporation is a party to such proceeding.
Section 6.05.Procedure for Indemnification of Directors and Officers. Any indemnification of a Director or officer of the Corporation under Sections 6.01 and 6.02 of these By-Laws, or advance of expenses to such persons under Section 6.04 of these By-Laws, shall be made promptly, and in any event within 30 days, upon the written request by or on behalf of such person (together with supporting documentation). If a determination by the Corporation that such person is entitled to indemnification pursuant to this Article is required, and the Corporation fails to respond within 60 days to a written request for indemnity, the Corporation shall be deemed to have approved such request. If the Corporation denies a written request for indemnity or advancement of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article shall be enforceable by such person in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified, to the fullest extent permitted by law, by the Corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for the advance of costs, charges and expenses under Section 6.04 of these By-Laws where the required undertaking, if any, has been received by or tendered to the Corporation) that the claimant has not met the standard of conduct set forth in Section 6.01 of these By-Laws, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors or any Committee thereof, its independent legal counsel, and its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Section 6.01 of these By-Laws, nor the fact that there has been an actual determination by the Corporation (including its Board of Directors or any Committee thereof, its independent legal counsel, and its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.
Section 6.06.Contract Right; Non-Exclusivity; Indemnification Priority Survival.
(a) The rights to indemnification and advancement of expenses provided by this Article shall be deemed to be separate contract rights between the Corporation and each Director and officer who serves in any such capacity at any time while these provisions as well as the relevant provisions of the DGCL are in effect and any repeal or modification thereof shall not adversely affect any right or obligation then existing with respect to any state of facts then or previously existing or any proceeding previously or thereafter brought or threatened based in whole or in part upon any such state of facts. Such "contract rights" may not be modified retroactively as to any present or former Director or officer without the consent of such Director or officer.
(b) The rights to indemnification and advancement of expenses provided by this Article shall continue as to a person who has ceased to be a Director or officer and shall not be deemed exclusive of any other rights to which a present or former Director or officer of the Corporation seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of stockholders or disinterested Directors, or otherwiseprovided, that to the extent that that an indemnitee is entitled to be indemnified by the Corporation pursuant to this Article and by any stockholder of the Corporation or any affiliate of any such stockholder (other than the Corporation) under any other agreement or instrument, or by any insurer under a policy maintained by such stockholder or affiliate, the obligations of the Corporation pursuant to this Article shall be primary, and the obligations of such stockholder, affiliate or insurer secondary and the Corporation shall not be entitled to contribution or indemnification from or subrogation against such stockholder or affiliate.
(c) The rights to indemnification and advancement of expenses provided by this Article to any present or former Director or officer shall inure to the benefit of the heirs, executors and administrators of such a person.
Section 6.07.Insurance. The Corporation shall purchase and maintain insurance on behalf of any person who is or was or has agreed to become a Director or officer of the Corporation, or is or was serving at the request of the Corporation as a Director or officer of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her or on his or her behalf in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of this Article,provided that such insurance is available on commercially reasonable terms consistent with then prevailing rates in the insurance market.
Section 6.08.Subrogation. In the event of payment under this Article VI, the Corporation shall be subrogated to the extent of such payment to all of the rights of recovery of the indemnitee, who shall execute all documents, and do all acts, that as the Corporation may reasonably request to secure such rights, including the execution of such documents as the Corporation may reasonably request to enable the Corporation effectively to bring suit to enforce such rights.
Section 6.09.Employees and Agents. The Board of Directors, or any officer authorized by the Board of Directors generally or in the specific case to make indemnification decisions, may cause the Corporation to indemnify any present or former employee or agent of the Corporation in such manner and for such liabilities as the Board of Directors may determine, up to the fullest extent permitted by the DGCL and other applicable law.
Section 6.10.Interpretation, Severability. Terms defined in Sections 145(h) or (i) of the DGCL have the meanings set forth in such sections when used in this Article. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Director or officer as to costs, charges and expenses (including attorneys' fees), judgments, fines and amounts paid in settlement with respect to any proceeding, whether, civil, criminal, administrative, investigative or otherwise, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.
Section 7.01.Registered Office. The registered office of the Corporation in the State of Delaware shall be located at the location provided in the Certificate of Incorporation.
Section 7.02.Other Offices. The Corporation may maintain offices or places of business at such other locations within or without the State of Delaware as the Board of Directors may from time to time determine or as the business of the Corporation may require.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.01.Dividends. Subject to any applicable provisions of law and the Certificate of Incorporation and for so long as the Stockholders Agreement is in effect, the then-applicable terms, if any, of the Stockholders Agreement, dividends upon the shares of the Corporation may be declared by the Board of Directors at any regular or special meeting of the Board of Directors and any such dividend may be paid in cash, property, or shares of the Corporation's capital stock.
A member of the Board of Directors, or a member of any Committee designated by the Board of Directors shall be fully protected in relying in good faith upon the records of the Corporation and upon such information, opinions, reports or statements presented to the Corporation by any of its officers or employees, or Committees of the Board of Directors, or by any other person as to matters the Director reasonably believes are within such other person's professional or expert competence and who has been selected with reasonable care by or on behalf of the Corporation, as to the value and amount of the assets, liabilities and/or net profits of the Corporation, or any other facts pertinent to the existence and amount of surplus or other funds from which dividends might properly be declared and paid.
Section 8.02.Reserves. There may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, thinks proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall think conducive to the interest of the Corporation and the Corporation's stockholders, and the Board of Directors may similarly modify or abolish any such reserve.
Section 8.03.Execution of Instruments. Except as otherwise provided by law or the Certificate of Incorporation, the Board of Directors or the Chief Executive Officer may authorize the Chief Executive Officer or any other officer or agent to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation. Any such authorization may be general or limited to specific contracts or instruments.
Section 8.04.Voting as Stockholder. Unless otherwise determined by resolution of the Board of Directors, the Chairman of the Board or the Chief Executive Officer or any Vice President shall have full power and authority on behalf of the Corporation to attend any meeting of stockholders of any corporation in which the Corporation may hold stock, and to act, vote (or execute proxies to vote) and exercise in person or by proxy all other rights, powers and privileges incident to the ownership of such stock at any such meeting or through action without a meeting. The Board of Directors may by resolution from time to time confer such power and authority upon (in general or confined to specific instances) any other person or persons.
Section 8.05.Fiscal Year. The fiscal year of the Corporation shall be fixed from time to time by resolution of the Board of Directors.
Section 8.06.Seal. The seal of the Corporation shall be circular in form and shall contain the name of the Corporation, the year of its incorporation and the words "Corporate Seal" and "Delaware". The form of such seal shall be subject to alteration by the Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed, affixed or reproduced, or may be used in any other lawful manner.
Section 8.07.Books and Records; Inspection. Except to the extent otherwise required by law, the books and records of the Corporation shall be kept at such place or places within or without the State of Delaware as may be determined from time to time by the Board of Directors.
Section 8.08.Electronic Transmission. "Electronic transmission", as used in these By-Laws, means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.
ARTICLE IX
AMENDMENT OF BY-LAWS
Section 9.01.Amendment. Subject to the provisions of the Certificate of Incorporation, these By-Laws may be amended, altered or repealed:
(a) by resolution adopted by a majority of the Board of Directors if at any special or regular meeting of the Board of Directors if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting,provided that for so long as the Stockholders Agreement is in effect, any approvals required by the then-applicable terms, if any, of the Stockholders Agreement shall also have been obtained,or
(b)until the Trigger Date (as such term is defined in the Certificate of Incorporation), at any regular or special meeting of the stockholders upon the affirmative vote of at least a majority of the shares of the Corporation entitled to vote generally in the election of Directors if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting, or
(c)(b)from and after the Trigger Date,at any regular or special meeting of the stockholders upon the affirmative vote of at least three-fourths (75%) of the shares of the Corporation entitled to vote generally in the election of Directors if, in the case of such special meeting only, notice of such amendment, alteration or repeal is contained in the notice or waiver of notice of such meeting.So long as the Stockholders Agreement remains in effect, the Board of
Directors shall not approve any amendment, alteration or repeal of any provision of these By-Laws, or the adoption of any new by-law, that would be contrary to or inconsistent with the then-applicable terms, if any, of the Stockholders Agreement or this sentence.
Notwithstanding the foregoing, (x) no amendment to the Stockholders Agreement (whether or not such amendment modifies any provision of the Stockholders Agreement to which these By-Laws are subject) shall be deemed an amendment of these By-Laws for purposes of this Section 9.01 and (y) no amendment, alteration or repeal of Article VI shall adversely affect any right or protection existing under these By-Laws immediately prior to such amendment, alteration or repeal, including any right or protection of a present or former Director or officer thereunder in respect of any act or omission occurring prior to the time of such amendment.
Section 10.01.Construction. In the event of any conflict between the provisions of these By-Laws as in effect from time to time and the provisions of the Certificate of Incorporation as in effect from time to time, the provisions of such Certificate of Incorporation shall be controlling.
- 0 HD SUPPLY HOLDINGS, INC. Proxy for Annual Meeting of Stockholders to be held on May 17, 2018 Solicited on Behalf of the Board of Directors The undersigned hereby appoints Dan S. McDevitt and James F. Brumsey, and each of them, with full power of substitution and power to act alone, as proxies to vote all the shares of Common Stock which the undersigned would be entitled to vote if personally present and acting at the Annual Meeting of Stockholders of HD Supply Holdings, Inc., to be held at HD Supply Leadership Development Center, 3400 Cumberland Boulevard, Atlanta, Georgia 30339, on Thursday, May 17, 2018, at 11:00 a.m. (Eastern Daylight Time), and at any adjournments or postponements thereof, as follows: (Continued and to be signed on the reverse side.) 14475 1.1
ANNUAL MEETING OF STOCKHOLDERS OF HD SUPPLY HOLDINGS, INC. May 17, 2018 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy materials, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 17, 2018: The proxy statement and fiscal 2017 annual report on Form 10-K are available online at http://www.astproxyportal.com/ast/18392/ Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20430300000000000000 2 051718 1. To approve an amendment to our certificate of incorporation and election of directors; PricewaterhouseCoopers LLP as our independent registered made, this proxy will be voted FOR Proposals 1 and 3 and FOR ALL NOMINEES changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 2. To elect the four directors nominated by the board of directors; NOMINEES: FOR ALL NOMINEESO Betsy S. Atkins O Scott D. Ostfeld WITHHOLD AUTHORITYO James A. Rubright FOR ALL NOMINEESO Lauren Taylor Wolfe FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN bylaws to declassify our board and provide for the annual 3. To ratifythe board of directors’appointmentof public accounting firm for the fiscal year ending on February 3, 2019; 4. To transact any other business as may properly come before the meeting. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. This proxy when properly executed will be voted as directed herein by the undersigned stockholder. If no direction is in Proposal 2. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate:
ANNUAL MEETING OF STOCKHOLDERS OF HD SUPPLY HOLDINGS, May 17, 2018 INC. INTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. Vote online until 5:00 PM EDT the day before the meeting. MAIL - Sign, date and mail your completed proxy card in the envelope provided as soon as possible. IN PERSON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy materials, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.astfinancial.com to enjoy online access. Please detach along perforated line and mail in the envelope provided IF you are not voting via the Internet. 20430300000000000000 2 051718 1. To approve an amendment to our certificate of incorporation and election of directors; O Betsy S. Atkins FOR ALL NOMINEES PricewaterhouseCoopers LLP as our independent registered made, this proxy will be voted FOR Proposals 1 and 3 and FOR ALL NOMINEES changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSALS 1, 2 AND 3. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x 2. To elect the four directors nominated by the board of directors; NOMINEES: O Scott D. Ostfeld WITHHOLD AUTHORITYO James A. Rubright FOR ALL NOMINEESO Lauren Taylor Wolfe FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: FOR AGAINST ABSTAIN bylaws to declassify our board and provide for the annual 3. To ratifythe board of directors’appointmentof public accounting firm for the fiscal year ending on February 3, 2019; 4. To transact any other business as may properly come before the meeting. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. This proxy when properly executed will be voted as directed herein by the undersigned stockholder. If no direction is in Proposal 2. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to be Held on May 17, 2018: The proxy statement and fiscal 2017 annual report on Form 10-K are available online at http://www.astproxyportal.com/ast/18392/ COMPANY NUMBER ACCOUNT NUMBER PROXY VOTING INSTRUCTIONS
Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on: Wednesday,Thursday, May 18, 201617, 2018 - 11:00 a.m. (Eastern Daylight Time) 31003400 Cumberland Boulevard Atlanta, Georgia 30339 The HD Supply Holdings, Inc. 20162018 Annual Meeting of Stockholders will be held on May 18, 201617, 2018 at HD Supply’s headquarters located at Cumberland Center II, 31003400 Cumberland Boulevard, Atlanta, Georgia 30339, at 11:00 a.m. Eastern Daylight Time (“the Annual(the “Annual Meeting”). The proxy materials for the Annual Meeting are available on the Internet, by mail or by email. Follow the instructions below to view the proxy materials and vote online or request a paper or email copy. The items to be voted on and location of the meeting are provided below. Directions on attending the Annual Meeting to vote in person are on the reverse side. Your vote is important! This communication is not a form for voting and presents only an overview of the more complete proxy materials, which contain important information and are available to you on the Internet, by mail or by email. We encourage you to access and review all of the proxy materials before voting. If you want to receive a paper or email copy of the proxy materials, you must request one. There is no charge to you to receive a paper or email copy. To facilitate timely delivery, please make the request as instructed below on or before April 30, 2016.2018. To facilitate timely delivery, please Proposals to be voted on at the meeting are listed below along with the Board of Directors’ recommendations: The Board of Directors recommends that you vote FOR the following proposals: 1. To approve an amendment to our certificate of incorporation and bylaws to declassify our board and provide for the annual election of directors; The election to the Board of Directors of the threefour nominees: Joseph J. DeAngelo, Patrick R. McNameeBetsy S. Atkins; Scott D. Ostfeld; James A. Rubright; and Charles W. Peffer. 2.Lauren Taylor Wolfe; and Ratification of the appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm for our fiscal year ending January 29, 2017. The Board of Directors recommends that you vote AGAINST the following proposal:February 3, 2019. 2. 3. A stockholder proposal regarding greenhouse gas emissions. PLEASE NOTE – YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares, you must vote online or request a paper copy of the proxy materials to receive a proxy card. If you wish to attend and vote at the meeting, please bring this notice with you as your admittance ticket. TO VIEW PROXY MATERIALS ONLINE: When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. Please visit http://www.astproxyportal.com/ast/18392/ where the following materials are available for viewing: •Notice of Annual Meeting of Stockholders •Proxy Statement •Form of Proxy Card •2015•2017 Annual Report on Form 10-K •Directions for attending the Annual Meeting to vote in person TO REQUEST PAPER OR ELECTRONIC MATERIALS: Telephone: 888-proxy-NA (888-776-9962) or 718-921-8562 (for international callers) EMail: info@amstock.cominfo@astfinancial.com Website: http:https://www.amstock.com/proxyservices/requestmaterials.aspus.astfinancial.com/OnlineProxyVoting/ProxyVoting/RequestMaterials TO VOTE: Online: To view the proxy materials and to access your online proxy card, please visit www.voteproxy.com or scan the QR code with your smartphone and follow the on-screen instructions. You may enter your voting instructions at www.voteproxy.com until 5:00 p.m. Eastern Daylight Time the day before the meeting date. Mail: You may request a proxy card by following the instructions above under "TO REQUEST PAPER OR ELECTRONIC PROXY MATERIALS." In Person: You may vote your shares in person by attending the Annual Meeting. COMPANY NUMBER ACCOUNT NUMBER CONTROL NUMBER
- 0 HD SUPPLY HOLDINGS, INC. Proxy for annual meeting of stockholdersDirections to be held on may 18, 2016 solicited on Behalf of the Board of directors The undersigned hereby appoints Dan S. McDevitt and James F. Brumsey, and each of them, with full power of substitution and power to act alone, as proxies to vote all the shares of Common Stock which the undersigned would be entitled to vote if personally present and acting at the2018 Annual Meeting of Stockholders of HD Supply Holdings, Inc.Leadership Development Center, 3400 Cumberland Blvd., Atlanta, GA 30339 Visit Google Maps for more detailed directions. Traveling North on I-75, take Exit 258 to Cumberland Boulevard Turn left on Cumberland Boulevard Destination will be held at C u m b e r l a n d C e n t e r I I , 3 1 0 0 C u m b e r l a n d B o u l e v a r d , A t l a n ta , G e o r g i a 3 0 3 3 9 , o n Wednesday, May 18, 2016, at 11:00 a.m. (Eastern Daylight Time), and at any adjournments or postponements thereof, as follows: (continued and to be signed on the reverse side.) 14475 1.1left Traveling South on I-75, take Exit 258 to Cumberland Boulevard Turn right on Cumberland Boulevard Destination will be on the left Traveling West on I-285, take Exit 20 for I-75 South Exit toward Atlanta Follow signs for Cumberland Boulevard Turn right on Cumberland Boulevard Destination will be on the left Traveling East on I-285, take Exit 20 for I-75 South toward Atlanta Follow signs for Cumberland Boulevard Turn right on Cumberland Boulevard Destination will be on the left Parking: Complimentary visitor parking is available. Follow the visitor parking signs when you turn into the building driveway from Cumberland Boulevard.
aNNUal mEETiNG Of sTOcKhOldERs Of hd sUPPlY hOldiNGs, iNc. may 18, 2016 GO GREEN e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy materials, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. important Notice Regarding the availability of Proxy materials for the annual meeting to be held on may 18, 2016: The proxy statement and fiscal 2015 annual report on Form 10-K are available online at http://www.astproxyportal.com/ast/18392/. Please sign, date and mail your proxy card in the envelope provided as soon as possible. Please detach along perforated line and mail in the envelope provided. 20303003000000000000 6 051816 2. Toratifytheboardofdirectors’ appointment of public accounting firm for the fiscal year ending on January 29, made, this proxy will be voted fOR all NOmiNEEs in Proposal 1, fOR changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. ThE BOaRd Of diREcTORs REcOmmENds a vOTE "fOR" PROPOsal 1, "fOR" PROPOsal 2 aNd "aGaiNsT" PROPOsal 3. PlEasE siGN, daTE aNd RETURN PROmPTlY iN ThE ENclOsEd ENvElOPE. PlEasE maRK YOUR vOTE iN BlUE OR BlacK iNK as shOWN hERE x 1. To elect the three directors nominated by the board of directors to serve until our 2019 annual meeting of stockholders; NOmiNEEs: FOR ALL NOMINEESO Joseph J. DeAngelo O Patrick R. McNamee WITHHOLD AUTHORITYO Charles W. Peffer FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: ThE BOaRd Of diREcTORs REcOmmENds a vOTE "fOR" PROPOsal 2 FOR AGAINST ABSTAIN PricewaterhouseCoopers LLP as our independent registered 2017; ThE BOaRd Of diREcTORs REcOmmENds a vOTE "aGaiNsT" PROPOsal 3 FOR AGAINST ABSTAIN 3. Stockholder proposal regarding greenhouse gas emissions; 4. To transact any other business as may properly come before the meeting. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. This proxy when properly executed will be voted as directed herein by the undersigned stockholder. if no direction is Proposal 2 and "aGaiNsT" Proposal 3. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate:
aNNUal mEETiNG Of sTOcKhOldERs Of hd sUPPlY hOldiNGs, may 18, 2016 iNc. iNTERNET - Access “www.voteproxy.com” and follow the on-screen instructions or scan the QR code with your smartphone. Have your proxy card available when you access the web page. Vote online until 5:00 PMEDTthe day before the meeting. mail - Sign, date and mail your completed proxy card in the envelope provided as soon as possible. iNPERsON - You may vote your shares in person by attending the Annual Meeting. GO GREEN - e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy materials, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. Please detach along perforated line and mail in the envelope provided IF you are not voting via the Internet. 20303003000000000000 6 051816 2. Toratifytheboardofdirectors’appointment of public accounting firm for the fiscal year ending on January 29, made, this proxy will be voted fOR all NOmiNEEs in Proposal 1, fOR changes to the registered name(s) on the account may not be submitted via Note: Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. ThE BOaRd Of diREcTORs REcOmmENds a vOTE "fOR" PROPOsal 1, "fOR" PROPOsal 2 aNd "aGaiNsT" PROPOsal 3. PlEasE siGN, daTE aNd RETURN PROmPTlY iN ThE ENclOsEd ENvElOPE. PlEasE maRK YOUR vOTE iN BlUE OR BlacK iNK as shOWN hERE x 1. To elect the three directors nominated by the board of directors to serve until our 2019 annual meeting of stockholders; NOmiNEEs: FOR ALL NOMINEESO Joseph J. DeAngelo O Patrick R. McNamee WITHHOLD AUTHORITYO Charles W. Peffer FOR ALL NOMINEES FOR ALL EXCEPT (See instructions below) INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark “FOR ALL EXCEPT” and fill in the circle next to each nominee you wish to withhold, as shown here: ThE BOaRd Of diREcTORs REcOmmENds a vOTE "fOR" PROPOsal 2 FOR AGAINST ABSTAIN PricewaterhouseCoopers LLP as our independent registered 2017; ThE BOaRd Of diREcTORs REcOmmENds a vOTE "aGaiNsT" PROPOsal 3 FOR AGAINST ABSTAIN 3. Stockholder proposal regarding greenhouse gas emissions; 4. To transact any other business as may properly come before the meeting. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Annual Meeting. This proxy when properly executed will be voted as directed herein by the undersigned stockholder. if no direction is Proposal 2 and "aGaiNsT" Proposal 3. To change the address on your account, please check the box at right and indicate your new address in the address space above. Please note that this method. Signature of Stockholder Date: Signature of StockholderDate: important Notice Regarding the availability of Proxy materials for the annual meeting to be held on may 18, 2016: The proxy statement and fiscal 2015 annual report on Form 10-K are available online at http://www.astproxyportal.com/ast/18392/. cOmPaNY NUmBER accOUNT NUmBER PROXY vOTiNG iNsTRUcTiONs
*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Shareholder Meeting to Be Held on May 18, 201617, 2018 HD SUPPLY HOLDINGS, INC. Date: May 18, 201617, 2018 Time: 11:00 AM EDT You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice to vote these shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. Envelope # # of # Sequence # 1 OF 2 12 15 0000275233_1 R1.0.1.250000369349_1 R1.0.1.17 Broadridge Internal Use Only Job # Sequence # See the reverse side of this notice to obtain proxy materials and voting instructions. LOGO Return Address Line 1 Return Address Line 2 Return Address Line 3 51 MERCEDES WAY EDGEWOOD NY 11717 Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 1234567 1234567 1234567 1234567 1234567 1234567 BROKER HERE Meeting Information Meeting Type: Annual Meeting For holders as of: March 21, 20162018 Location: HD Supply Headquarters Located At CumberlandLeadership Development Center II 31003400 Cumberland Boulevard Atlanta, GAGeorgia 30339 B A R C O D E
Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: Have the information that is printed in the box marked by the arrow (located on the by the arrow (located on the following page) in the subject line. How To Vote Please Choose One of the Following Voting Methods Only Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a voting instruction form. 0000275233_2 R1.0.1.250000369349_2 R1.0.1.17 Vote In Person: If you choose to vote these shares in person at the meeting, you must request a "legal proxy." To do so, please follow the instructions at www.proxyvote.com or request a paper copy of the materials, which will contain the appropriate instructions. Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box marked by the arrow available and follow the instructions. Internal Use 1. Form 10-K2. Notice & Proxy StatementStatement2. Form 10-K3. Directions to Annual Meeting How to View Online: following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET:www.proxyvote.com 2) BY TELEPHONE:1-800-579-1639 3) BY E-MAIL*:sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked Requests, instructions and other inquiries sent to this e-mail address will NOT be forwarded to your investment advisor. Please make the request as instructed above on or before April 30, 2016May 03, 2018 to facilitate timely delivery.
The Board of Directors recommends that you vote FOR the following: 1. Election of Directors Nominees 01 Joseph J. DeAngelo 02 Patrick R. McNamee 03 Charles W. Peffer The Board of Directors recommends you vote FOR the following proposal(s): 2ToTo approve an amendment to our certificate of incorporation and bylaws to declassify our board and provide for the annual election of directors; 1 2 Election of Directors: 01 Betsy S. Atkins 02 Scott D. Ostfeld03 James A. Rubright 04 Lauren Taylor Wolfe 3 To ratify the board of directors appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending on January 29, 2017 The Board of Directors recommends you vote AGAINST the following proposal(s): 3Stockholder proposal on greenhouse gas emissionsFebruary 3,2019; NOTE: Such other business as may properly come before the meeting or any adjournment thereof. the Annual meeting are available at http://www.astproxyportal.com/ast/18392/ Directions to xxxxxxxxxx Cusip Envelope # # of # Sequence # 0000275233_3 R1.0.1.250000369349_3 R1.0.1.17 Broadridge Internal Use Only xxxxxxxxxx Job # Sequence # B A R C O D E 23456789012 2 2 2 2 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 Voting items
Enve1lo2pe # # 0000275233_4 R1.0.1.250000369349_4 R1.0.1.17 Broadridge Internal Use Only THIS SPACE RESERVED FOR SIGNATURES IF APPLICABLE P99999Jo-0b1#0 Sequ1e5nce # of # S#eqOueFnce ## THIS SPACE RESERVED FOR LANGUAGE PERTAINING TO BANKS AND BROKERS AS REQUIRED BY THE NEW YORK STOCK EXCHANGE Voting Instructions Reserved for Broadridge Internal Control Information
.. FOO ANDOETACHHERE i PORTANTSIGNATURE(S) DATE PSG 12-10 X X X X X HD SUPPLY HOLDINGS, INC. ANNUAL MEETING TO BE HELD ON 05/17/18 AT 11:00 A.M. EDT FOR HOLDERS AS OF 03/21/18 * ISSUER CONFIRMATION COPY - INFO ONLY * 3 1-0001 THIS FORM IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY. PLEASE DO NOT USE IT FOR VOTING PURPOSES. 40416M105 DIRECTORS DIRECTORS RECOMMEND: A VOTE FOR ELECTION OF THE FOLLOWING NOMINEES 0010100 2. -01-Betsy S. Atkins,02-Scott D. Ostfeld,03-James A. Rubright, 04-Lauren Taylor Wolfe DIRECTORS PROPOSAL(S) RECOMMEND 1. *- To approve an amendment to our certificate of incorporation and — FOR — bylaws to declassify our board and provide for the annual 0019900 election of directors. 3. *- To ratify the board of directors’ appointment of FOR — PricewaterhouseCoopers LLP as our independent registered 0010200 public accounting firm for the fiscal year ending on February 3, 2019. “NOTE* Such other business as may properly come before the meeting or any adjournment thereof. FOLD AND DETACH HERE “ IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER I I II I l l : MEETING TO BE HELD ON 05/18/1617/18 FOR HD SUPPLY HOLDINGS,INC. THE FOLLOWING MATERIAL IS AVAILABLE AT WWW.PROXYVOTE.COM i i ·PROXY** I ** - PROXY STATEMENT -10-K— 10-K REPORT HD SUPPLY HOLDINGS, INC. ANNUAL MEETING TO BE HELD ON 05/18/16AT 11:00 A.M.EDT FOR HOLDERS AS OF 03121/16 *ISSUER CONFIRMATIONCOPY -INFO ONLY • THIS FORM IS PROVIDED FORINFORMATIONAL PURPOSES ONLY. PLEASE 00 NOT USEIT FOR VOTING PURPOSES. 6 1-0001 z- OTHER 2 -I —S DIRECTORS -s !:::::. (MARK "X"“X” FOR ONLY ONE BOX) 40.416M105 FOR ALL NOMINEES -+. 1 . DIRECTORS DIRECTORSRECOMMEND:A VOTE FOR ELECTION OF THE FOLLOWING NOMINEES 1.-01-JOSEPH J.DEANGEL0,02-PATRICK R MCNAMEE,03-CHARLES W.PEFFER 0010100 WITHHOLD ALL NOMINEES WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE. WRITE NUMBER($} OF1\0MINEE{S)NUMBER(S) OF NOMINEE(S) BELOW. - 0 0 0o USE NUMBER O!'. Y - DIRECTORS RECOMMENDONLY FOR -->» 0010200 - PROPOSAL($) 2. ·-TO RATIFY THE BOARD OF DIRECTORS' APPOINTMENT OF-------------»> PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING ON JANUARY 29, 2017. FOR 0 AGN 0 ASS PLEASEINDICATEABS PLEASE INDICATE YOUR PROPOSAL SELECTION BY 0 FIRMLY PLACING AN 'X' N“X” IN THE APPROPRIATE NUMBERED BOX WITH BLUEOR BLACKINK - X - - 3BLUE OR BLACK INK SEE VOTINGINSTRUCTIONVOTING INSTRUCTION NO. ONN REVERSE - AIC: ... ,I -A/C: FOR AGN ABS 40416M105 AGN 0 fOR 0 ASS 0 3. •.STOCKHOLDER PROPOSAL REGARDING GREENHOUSE GAS EMISSIONS.-------»> 00 00 00 PLACE "X"“X” HERE IF YOU PLAN TO ATTEI\DATTEND AND VOTE YOUR SHARES AT 7HE MEET!NG N "a".. Broadridge 'NOTE• SUCHOTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF. i 51 MERCE DESMERCEDES WAY EDGEWOODEDGE WOOD NY 11711 ! I .11717 HOUSEHOLDS ELECTION (1) Mark “FOR” to enroll this account to receive certain future shareholder communications in a single package per household. Mark “AGAINST” if you do not want to participate. To change your election in the future, call 1-866-540-7095. See accompanying page for more information about this election. (HH) VIF11H FOR AGN PAGE 1 OF 2 FOLD AND DETACH HERE IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS (HH) HD SUPPLY HOLDINGS, INC. 31003400 CUMBERLAND BLVD,STE. 1480 ATLANTA, GA30339GA 30339 ATTN: RITA FADELL, LEGAL DEPT
SIGNATURE(S) DATE PSG 12-10 X X X X X FOLD AND DETACH HERE IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON 05/17/18 FOR HD SUPPLY HOLDINGS, INC. THE FOLLOWING MATERIAL IS AVAILABLE AT WWW.PROXYVOTE.COM - PROXY STATEMENT — 10-K REPORT - OTHER - 4 1-0001 P01871 DIRECTORS (MARK “X” FOR ONLY ONE BOX) DIRECTORS PLEASE RETAIN FOR YOUR RECORDS PROPOSAL(S) HOUSEHOLDING ELECTION This notice is appearing in this mailing on behalf of your Broker or Bank. In December 2000, the Securities and Exchange Commission enacted a new rule that allows multiple shareowners residing at the same address the convenience of receiving a single copy of proxy and information statements, annual reports and prospectuses if they consent to do so. This is known as “Householding.”‘ Please note that if you do not respond, Householding will start 60 days after the mailing of this notice. We will allow Householding only upon certain conditions. Some of those conditions are: • The Issuer agrees to have its documents Householded. • You agree to or do not object to the Householding of your materials. • You have the same last name and exact address as another shareowner(s), • Consistency with your Broker or Bank’s practices. If all of these conditions are met, and Securities and Exchange Commission regulations allow, your household will receive a single copy of proxy and information statements, annual reports and prospectuses. The HOUSEHOLDING ELECTION (HH), which appears on the accompanying voting form. is not an issuer proposal. If you wish to participate in Householding please indicate “FOR” on the enclosed Voting Instruction Form and Householding will begin immediately. If you do not wish to participate in the Householding of investor communications, please indicate “AGAINST”. Your affirmative or implied consent to Household will remain in effect until you revoke it by calling the telephone number listed in the HOUSEHOLDING ELECTION paragraph. If you revoke your Householding election, each primary account holder will begin receiving individual copies within 30 days of your revocation. DIRECTORS RECOMMEND USE NUMBER ONLY FOR AGAINST ABSTAIN DO NOT USE DO NOT USE DO NOT USE FOR AGAINST ABSTAIN DO NOT USE DO NOT USE DO NOT USE FOR AGAINST ABSTAIN DO NOT USE DO NOT USE DO NOT USE FOR AGAINST ABSTAIN DO NOT USE DO NOT USE DO NOT USE FOR AGAINST ABSTAIN DO NOT USE DO NOT USE DO NOT USE PAGE 2 OF 2 PLEASE INDICATE YOUR PROPOSAL SELECTION BY FIRMLY PLACING AN “X” IN THE APPROPRIATE NUMBERED BOX WITH BLUE OR BLACK INK X SEE VOTING INSTRUCTION NO. REVERSE A/C: 40416M105 51 MERCEDES WAY EDGE WOOD NY 11717 IMPORTANT NOTICE REGARDING DELIVERY OF SECURITY HOLDER DOCUMENTS (HH) HD SUPPLY HOLDINGS, INC. 3400 CUMBERLAND BLVD, ATLANTA, GA 30339 ATTN: RITA FADELL, LEGAL DEPT ! :: MATERIALS ELECTION . ->>> ! l f OR 0 As of July 1, 2007,SEC rules penni!companies to send you a Notice indicating that their proxy materials are available on the Internet and how you can request a mailed copy.Check the box to the right if you want to receive future proxy materials by mail at no cost to you.Even if you do not check the box, you will still have the right to request a free set of proxy materials upon receipt of a Notice, ; fOLDAN D OETACHHERE ----- ---- ---------I 1_ VIF11H "\H, "\ \1'I'RF1S1 I> \.1 EFOLD AND DETACH HERE SIGNATURE(S) DATE PSQ 12 K
VOTING INSTRUCTIONS AND ONE OR MORE OF THE MATTERS BEFORE THE MEETING MUST BE DEEMED “ROUTINE” IN NATURE ACCORDING TO 01 111NYSE GUIDELINES. IF THESE TWO REQUIREMENTS ARE MET AND YOU HAVE NOT COMMUNICATED TO US PRIOR TO THE FIRST VOTE BEING ISSUED, WE MAY VOTE YOUR SECURITIES AT OUR DISCRETION ON ANY MATTERS DEEMED TO BE ROUTINE. WE WILL NEVERTHELESS FOLLOW YOUR INSTRUCTIONS, EVEN IF OUR DISCRETIONARY VOTE HAS ALREADY BEEN GIVEN, PROVIDED YOUR INSTRUCTIONS ARE RECEIVED PRIOR TO THE MEETING DATE. TO OUR CLIENTS: WE HAVE REINBEEN REQUESTED TO FORWARD TO YOU THE ENCI.OSEI> Pitt NIATERIAL RELATIVE.ENCLOSED PROXY MATERIAL RELATIVE TO SECURITIES 1110.1)HELD BY ; SIN YOI K AC COI NT 111.1US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR N AVE ON: V UTNAME. ONLY WE AS THE HO: DERHOLDER OF RECORDCANRECORD CAN VOTE ii c 11 SECT RO ILS.SUCH SECURITIES. WE SHALL BE PLEAMCDPLEASED TO VITIE 01 K SECI:ILITIESVOTE YOUR SECURITIES IN ACCORDANCE wrniWITH YOUR WISHES.WISHES, IF Y1 ItYOU WILL ExFonEXECUTE THE FORM AND RETURN 17IT TO US PR1N1PTLYPROMPTLY IN THE ENCLOSED BUSINESS REPLY ENVELOPE. IT IS UNDERST( :111.ATUNDERSTOOD THAT IF YOU SIGN IVITIIIIUTWITHOUT OTHERWISE MARKING THE F(4) IRM Vol “itFORM YOUR SECURITIES WILL BE Vol IA)VOTED AS RECOMMENDED BY THE HOARDBOARD OF DIRECTORS ON ALL MATTERS TO BE It NSIDEREDCONSIDERED AT III: maTiNo. 1(111 N11:1:THE MEETING. THE FOLLOWING INSTRUCTIONS PROVIDE SPECIFICS REGARDING THE MEETING FOR WHICH THIS VOTING FORM APPLIES. INSTRUCTION 1 NG. nu,FOR THIS MEETING, THE EXTENT WOF OUR AUTHORITY TO Vol IiVOTE YOUR SECURITIES IN THE ABSENCE OF YOUR INSTRUCTIONS CAN BE DETERMINED BY REFERRING TO THE APPLICABLE VOTING INSTRUCTION NUMBER INDICATED ON THE FACE OF YOUR FORM. ALL PROPOSALS FOR THIS MEETING ARE CONSIDERED “ROUTINE”. WE WILL VOTE IN OUR DISCRETION ON ALL PROPOSALS, IF YOUR INSTRUCTIONS ARE NOT RECEIVED. IF YOUR SECURITIES ARE HELD BY A BANK, YOUR SECURITIES CANNOT BE VOTED WITHOUT YOUR SPECIFIC INSTRUCTIONS. FOR MARGIN ACCOUNTS, IN THE EVENT YOUR SECURITIES HAVE BEEN LOANED OVER RECORD DATE, THE NUMBER OF SECURITIES WE VOTE ON YOUR BEHALF HAS BEEN OR CAN BE ADJUSTED DOWNWARD. INSTRUCTION 2 IN ORDER FOR YOUR SECURITIES TO BE REPRESENTED AT THE MEETING ON ONE OR MORE MATTERS BEFORE THE MEETING, IT WILL BE NECESSARY FOR US TO HAVE YOUR SPECIFIC VOTING INSTRUCTIONS. PLEASE NOTE THAT UNDER A RULE AMENDMENT ADOPTED BY THE NEW YORK STOCK EXCHANGE FOR SHAREHOLDER MEETINGS HELD ON OR AFTER JANUARY 1, 2010, BROKERS ARE NO LONGER ALLOWED TO VOTE SECURITIES HELD IN THEIR CLIENTS’ ACCOUNTS ON UNCONTESTED ELECTIONS OF DIRECTORS UNLESS THE CLIENT HAS PROVIDED VOTING INSTRUCTIONS (IT WILL CONTINUE TO BE THE CASE THAT BROKERS CANNOT VOTE THEIR CLIENTS’ SECURITIES IN CONTESTED DIRECTOR ELECTIONS). CONSEQUENTLY, IF YOU WANT US TO VOTE YOUR SECURITIES ON YOUR BEHALF ON THE ELECTION OF DIRECTORS, YOU MUST PROVIDE VOTING INSTRUCTIONS TO US. VOTING ON MATTERS PRESENTED AT SHAREHOLDER MEETINGS, PARTICULARLY THE ELECTION OF DIRECTORS IS THE PRIMARY METHOD FOR SHAREHOLDERS TO INFLUENCE THE DIRECTION TAKEN BY A PUBLICLY-TRADED COMPANY. WE URGE YOU TO PARTICIPATE IN THE ELECTION BY RETURNING THE ENCLOSED VOTING INSTRUCTION FORM TO US WITH INSTRUCTIONS AS TO HOW TO VOTE YOUR SECURITIES IN THIS ELECTION. IF YOUR SECURITIES ARE HELD BY A BANK, YOUR SECURITIES CANNOT BE VOTED WITHOUT YOUR SPECIFIC INSTRUCTIONS. INSTRUCTION 3 IN ORDER FOR YOUR SECURITIES TO BE REPRESENTED AT THE MEETING, IT WILL BE NECESSARY FOR US TO HAVE YOUR SPECIFIC VOTING INSTRUCTIONS. INSTRUCTION 4 WE HAVE PREVIOUSLY SENT YOU PROXY SOLICITING MATERIAL PERTAINING TO THE MEETING OF SHAREHOLDERS OF THE COMPANY INDICATED. ACCORDING TO OUR LATEST RECORDS, WE HAVE NOT AS OF YET RECEIVED YOUR VOTING INSTRUCTION ON THE MATTERS(S) TO BE CONSIDERED AT THIS MEETING AND THE COMPANY HAS REQUESTED US TO COMMUNICATE WITH YOU IN AN ENDEAVOR TO HAVE YOUR SECURITIES VOTED. IF YOUR SECURITIES ARE HELD BY A BROKER WHO IS A MEMBER OF THE NEW YORK STOCK EXCHANGE (NYSE), THE RULES OF THE NYSE WILL GUIDE THE VOTING PROCEDURES. THESE RULES PROVIDE THAT IF INSTRUCTIONS ARE NOT RECEIVED FROM YOU PRIOR TO THE ISSUANCE OF THE FIRST VOTE, THE PROXY MAY BE GIVEN AT DISCRETION OF YOUR BROKER (ON THE TENTH DAY, IF THE MATERIAL WAS MAILED AT LEAST 15 DAYS PRIOR TO THE MEETING DATE OR ON THE FIFTEENTH DAY, IF THE PROXY MATERIAL WAS MAILED 25 DAYS OR MORE PRIOR TO THE MEETING DATE). IN ORDER FOR YOUR BROKER TO EXERCISE THIS DISCRETIONARY AUTHORITY, PROXY MATERIAL WOULD NEED TO HAVE BEEN MAILED AT LEAST 15 DAYS PRIOR TO THE MEETING DATE, **IF YOU HOLD YOUR SECURITIES THROUGH A CANADIAN BROKER OR BANK, PLEASE BE ADVISED THAT YOU ARE RECEIVING THE VOTING INSTRUCTION FORM AND MEETING MATERIALS, AT THE DIRECTION OF THE ISSUER. EVEN IF YOU HAVE DECLINED TO RECEIVE SECURITY-HOLDER MATERIALS, A REPORTING ISSUER IS REQUIRED TO DELIVER THESE MATERIALS TO YOU. IF YOU HAVE ADVISED YOUR INTERMEDIARY THAT YOU OBJECT TO THE DISCLOSURE OF YOUR BENEFICIAL OWNERSHIP INFORMATION TO THE REPORTING ISSUER, IT IS OUR RESPONSIBILITY TO DELIVER THESE MATERIALS TO YOU ON BEHALF OF THE REPORTING ISSUER. THESE MATERIALS ARE BEING SENT AT NO COST TO YOU. Please ensure you fold then detach and retain this portion of the Voting Instruction Form 011011.11plitilio.1 AVM ONOIIM YL/I’R SECI !TIES IN THE ABSENCE OF YOUR INSTRUCTIONS I .\N Ill (DETI:RmINED) BY (KEEERR1NG) TI) Applic .ARLI• VI: TING INSTRL:CTION NUMBER INDICATED ON 111E FACt ((F )RNI. O rit MARGIN ACCOUNTS. IN TI III EVENT YOl SEC:I:RI:NES 11.111: lO I N LOANED OVER RECORD DirrE. THE NI:MBI.R OF sFct.krrr,, WI. VOTE ON V( 11:R BEHALF HAS BEEN OR CAN RE ADJusTip AvNwARD. PI. EASE NOTE0 WT uNntiit A RULE ANIENIAIIINT ADOPTED 131”1:11F NIA\ }’(RN STOCK EXCHANGE FOR SIN.\ItIEI lc /EDI :c fri,rp:(,s I:El OON OR AFTER .71NILARY 20111, BROKERS RE N( (005-Il ALUM IcI) I() Vol E SECURITIES 11E1.1) IN RATs(-).Accot: N’rs ON ::NCONTESTIII) 10.1i(“TIONS OE DELI:CIL/RS L’NEESS I Ill: CLIEN L 11.\S PROVIDED \ CH’ING ;NsTR1 vuovs Itt Oil I. coN•nNt 1 O Brrnr. CASE TI AT imoKERs c, NN( yr vt,a1 TI II:IR sr.ruttrims IN CONTESTED DIRE(‘ TOR ELEC DONS/. CONSEQUENTLY. IF YOU WANT US To voTF YOUR SECURITIES ON YOUR BEHALF ON 11111 ELECTION OE DIRECTORS, YOU MUST PR(/VII/II VOTING :S:STRI.:CTIoNS TO US. VOTING ON mAi(-)rFits PRESE.NTED AT SHARI:TRH:DER MEETINGS. PARTR1 \ til.EL(-)rilr; 01, IHREC TORS IS 11 IF PRIM ARA AM !”1 /11 IL HL SI IAR 11101.DERS TO NI’Ll-ENCE ‘HIE :1:EEC:ION I AK EN \ 1.1:111.1CLY. TRADED \ WANY WE TILE: YOU TO pAinic.p.Nrr IN 1111, ELECTION BY 11 ANING THE !’.NT LOSE() vinlm; (‘7:4)N F )ini INstHecrioNs As To novcro vt.rn. YO: SUCUR I I:ES :N: ‘ABS El c, ‘DON IF Yolk SECURITIES ARE HELD BY A [LIMNER WIN I IS A VF\11!1112 (II- NE1A ..,(IRK 5701 K •HANGI...K.A.si, 1)11 ILULES 1.11E NYSE \ \ (WIDE THE \ TING PROCEDURES. THESE RI:LES PROVIDE THAT IF INSTRI Si IONS ARE NoT ITIKTIVED FRI INI V(l’ PRIOR 70’1’18• list:ANC). (ell) 1111. ILI/cL1. VOTE. THE PROXY MAY BE GIVEN AT DISt RL11t IN , vc ‘LIMNER ION 1 III. DAN’. IF V.A1(-)1 It IA \\ \S 11A11 At I FAST 15 DAYS PR loR To THE MELTING Dal !-OR ItNTHE :LI I) \l II 1111 PROXY \1:M’1 1(1A:1\’\S \ :2•I \Vs< )1; mom, 1’511(11 0(1111 mErDN,, , q/DI.F I .11-: YO1 It !BROKI F TO I NEIL(1SE 1:t1 1)::;i121 s. MO \ 1; 1 !lc PR( \ ‘rFRIA: ;.(, t.v% RI.1.N Si 11) AI I’ DAYS PRI, /4I G TIII: NET 1 AND ONE DR MORE OF mArtERs DEEGR r THE 111:EING MUST Bli DEEMED “ROUTINE” IN NATURE ACCORDING TO NYSE GUIDELINES. IF TI1ESE TWO REQIIIREMENTS ARE MET AND YOU HAVE NOT COMML NICATED TO US PRIOR TO THE FIRST VOTE BEING ISSUED. WE MAY VOTE YOUR SECT:RH:)WS AT OUR DISCRETION ON ANY MATTERS DEEMED TO BE ROUTINE. WE WILL NEVERTHELESS FOLLOW YOUR INSTRUCTIONS. EVEN IF OUR DISCRETIONARY VOTE HAS A LREADY BEEN GIVEN, PROVIDED YOUR INSTRUCTIONS ARE RECEIVED PRIOR TO TI 1E MEETING DATE. TIFF. FOLLOWING INSTRI/CrioNs PROVIDE. SPECIFICS REGARDING THE MEETING FOR WHICH T1 IIS VOTING FORM APPLIES. INSTRUCTION I ALL PROPOSALS FOR THIS NI E.1:11M, :15I: CONSIDERED “ROUTINE’. WE WILL VOTE IN I/1 ‘R DISCRETION ON ALL PROPOSALS. IF YOUR INSTILL I: NOT RECEIVED. IF YOUR SECURITIES ARE 11111.1)11}’A RANK. YOUR SECURITIES CANNOT BE VOTED WTI 1101’1 YOUR SPIN IEIL INSTRUCTIONS. INSTRUCTION 2 IN ORDER FOR YOUR SECURITIES TO 1W kEpREsp:rct) AT •rnsi MEETING ON ONE OR MORE MATTER S BEFORE THE MEETING. IT yolk itE • Essmo- FOR US To 31 YOUR srporic INSTRUCTIONS. IF YOUR SECURITIES ARE I 1ELD BY A BANK. YOUR SECURITIES CANNOT lift VOTED wrI11(11:1 YOUR SIIIECIER INSTRUCTIONS. iNsTRucnoN 3 IN ORDER FOR YOUR SECURITIES TO 1W REPRESENTED AT THE MEETING. IT WILL BE NI:CESSARY FOR I’S TO HAVE YOUR SPECIFIC VOTING INSTRUCTIONS. INSTRUCTION -I WE HAVE PREVIOUSLY SENT Vol’ PROXY SOL:CH:NC) MATERIAL PERTAINING TO THE MEETING OF SI 1AREHOLDERS OF Mil- 1,3 3 \ 333A.<3,.• An:010)1ml 01 1 A1 RECORDS. WE 1 [AVE NoT AS OF YET RECEIVED YOUR VOT:Nc) ;NsvitycnoN ON ‘nut MATTERS1S1 TO RECONSIDERED AT THIS MEETING AND THE COMPANY 11AS REQUESTED US TO COMMUNICATE %vim YOU IN AN ENDEAVOR TO HAVE YOUR SECURITIES VOTED. “IF YOU HOLD YOUR SE( 1 NCI; INS ):;(ill .1 CANADIAN BROKER OR BANK, PI EASE. BE 41W1517)1’IF AT YOU ARE RECEIVING ‘THE VOTING INSTRUCTION FORM AND MEETING MATERIALS. AT ‘13111 DIRECTION IIF 155(11K EVEN IF YO:’ if V. DECI.33333.:3) TO ICE,. \ I siv3:R31 HOLDER MATERIALS. A RKPORTINt3 13.3S1 I’R’S TO DELIVER THESE MATERIALS TO `) /: 1 1 O1. II \\ I ‘Mk 1•33!) 1 OUK IN’TI: RALF IN ART” THAT Vol • 01, YOUR BENEEICIAl OWNERS’ \ REPORTING ISSUER. 1715((1) I, 1LEsIs TIII:KE Aws ) )1’ , ill :I A.: ISSI :ER 1111/51 \I ATERIAI S ARE ISEINI• sENt I ; N.’“I 3 V3 R.Fold and Detach Here Fold and Detach Here WRONG WAY Proxy Services P.O. Box 9175 Farmingdale NY 11735-9852 P.O. Box 9175