| Item 1.01. | Entry into a Material Definitive Agreement. |
On December 7, 2022, Walgreens Boots Alliance, Inc. (the “Company”), Village Practice Management Company, LLC (“VillageMD”), of which a majority of the outstanding equity interests on a fully diluted basis are beneficially owned by the Company, and a wholly-owned subsidiary of VillageMD entered into a Nomination Rights Agreement (the “Nomination Rights Agreement”).
Pursuant to the terms and subject to the conditions of the Nomination Rights Agreement, the Company has agreed to provide to certain founding members of VillageMD (the “VillageMD Founders”), including Tim Barry, VillageMD’s Chief Executive Officer, Clive Fields, VillageMD’s Chief Medical Officer, Paul Martino, VillageMD’s Chief Growth Officer, and Ross Levine, VillageMD’s Chief Strategy Officer, the right to designate the successor of Steven J. Shulman as a member of the Board of Directors of the Company (the “Board”) following the Company’s 2023 Annual Meeting of Stockholders. Mr. Shulman, who has resigned as a member of the Board as further described in Item 5.02 herein, had been appointed as a member of the Board after being designated by the VillageMD Founders pursuant to the Appointment and Waiver Agreement, dated as of November 24, 2021, by and among the Company, VillageMD and the other parties thereto as previously disclosed.
Following the appointment of the successor of Mr. Shulman as a member of the Board, pursuant to the terms and subject to the conditions of the Nomination Rights Agreement, the Company has agreed to provide the VillageMD Founders the right to nominate one person for election as a member of the Board at each meeting of the Board or committee thereof at which all of the directors of the Company are appointed or nominated to stand for election by the stockholders of the Company. In furtherance of such right, the Company has agreed to use its reasonable best efforts to ensure that (i) any such nominee is included in the Board’s slate of nominees to the stockholders of the Company for each election of directors, (ii) any such nominee is included in the Company’s proxy statement for any stockholder meeting at which all of the directors of the Company are to be elected and (iii) the Board recommends any such nominee, in each case pursuant to the terms and subject to the conditions of the Nomination Rights Agreement, among other things. In addition, the Board is required to take such actions as are necessary such that the Board is of a size that permits the appointment of each director or nominee designated by the VillageMD Founders as a director of the Company.
Each director or nominee designated by the VillageMD Founders must be independent for purposes of service as a director on the Board, including under the applicable rules and standards set forth in the Corporate Governance Guidelines of the Company and of the Securities and Exchange Commission and the Nasdaq Stock Market (“Nasdaq”). Further, each director or nominee designated by the VillageMD Founders must be reasonably acceptable to the Company, and is subject to the approval of the Nominating and Governance Committee of the Board. In the event a director or nominee designated by the VillageMD Founders is unable or otherwise ceases to serve on the Board, the Nomination Rights Agreement provides a mechanism for the VillageMD Founders to designate a substitute director or nominee subject to the same terms and requirements. The director of the Company designated by the VillageMD Founders will be subject to a due diligence review process reasonably consistent with the process undertaken for other director candidates and nominees of the Company, and will be eligible to receive compensation and benefits for service as a director of the Company in the same manner and on the same basis as the other directors of the Company.
In the event that the VillageMD Founders cease to own at least 50% of the outstanding equity interests of VillageMD on a fully diluted basis that they owned as of the date of the Nomination Rights Agreement, all rights and obligations of the VillageMD Founders under the VillageMD Nominating Agreement will instead become rights and obligations of the then current Chief Executive Officer of VillageMD acting in such capacity. The Nomination Rights Agreement, and the director designation and nomination rights provided therein, terminate upon the earlier of (a) the date upon which the Company ceases to consolidate VillageMD for purposes of the Company’s consolidated financial statements and (b) the date upon which the Company ceases to be entitled to designate a majority of the members of the governing body of VillageMD.
The foregoing description of the Nomination Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Nomination Rights Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.
