Item 1.01 Entry into a Material Definitive Agreement.
On August 10, 2020, HD Supply, Inc. ("HDS"), an indirect wholly owned subsidiary
of HD Supply Holdings, Inc. ("HDS Holdings" and, together with HDS, the
"Company"), entered into a Transaction Agreement (the "Transaction Agreement")
with an affiliate of Clayton, Dubilier & Rice (the "Purchaser") to sell the
Company's Construction & Industrial business (the "Buiness") to Purchaser for a
purchase price of $2.9 billion in cash, subject to customary adjustments (the
"Transaction"). The Transaction is subject to customary closing conditions,
including the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Subject to the
satisfaction or waiver of certain conditions and the other terms and conditions
of the Transaction Agreement, the transaction is expected to close in October
2020.
The Transaction Agreement contains representations, warranties and covenants of
the parties that are customary for transactions like this. The Transaction
Agreement contains customary termination rights, including if the closing has
not occurred on or prior to December 15, 2020, and provides that upon
termination of the Transaction Agreement under specified circumstances,
Purchaser will pay to the Company a $240 million termination fee.
The foregoing description of the Transaction Agreement and the transactions
contemplated thereby does not purport to be complete and is subject to, and
qualified in its entirety by, the full text of the Transaction Agreement, a copy
of which is attached hereto as Exhibit 2.1 and is incorporated herein by
reference.
Item. 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Resignation of John Stegeman from HD Supply to Lead White Cap
In connection with the execution of the Transaction Agreement, John Stegeman,
Executive President, HD Supply and President, HD Supply Construction &
Industrial - White Cap, will resign from his positions with HD Supply effective
upon the closing of the Transaction. Mr. Stegeman will serve as Chief Executive
Officer of the Construction & Industrial business after the closing.
Transaction-Related Compensation Actions
The following actions with respect to fiscal 2020 compensation of our named
executive officers were taken by the compensation committee (the "Committee") of
the board of directors (the "Board") of HDS and HDS Holdings on August 7, 2020
in connection with the Transaction.
Transaction Bonus
The Committee approved a cash transaction bonus for Mr. Stegeman in the amount
of $1,065,000, payable in a lump sum cash payment as soon as administratively
practicable following the closing of the Transaction. In the event of his death
or involuntary termination without cause before the closing of the Transaction,
Mr. Stegeman will be entitled to full payout of the transaction bonus. If he
receives payments that are subject to excise tax on "parachute payments," the
bonus will be paid in full and he will pay the applicable excise tax or the
bonus will be reduced if the reduction results in an increase in net after-tax
benefit to him. Mr. Stegeman will be prohibited from competing with, or
soliciting the customers and employees of, the Company for a two-year period
following his termination of employment with the Company.
The foregoing description of the transaction bonus does not purport to be
complete and is subject to, and qualified in its entirety by, the full text of
the transaction bonus agreement, a form of which is attached hereto as Exhibit
10.1 and incorporated herein by reference.
- 2 -
Retention Grants
The Committee also approved retention grants of restricted stock for Evan J.
Levitt, Chief Financial Officer and Chief Administrative Officer, Dan S.
McDevitt, General Counsel and Corporate Secretary, Bradley S. Paulsen,
President, HD Supply Facilities Maintenance, and Anna Stevens, Chief People
Officer to increase retention strength for the executives following the
Transaction. The grant value of the awards is equal to a multiple of the annual
base salary for each named executive officer (3x for Messrs. Levitt ($1,677,227
total grant value) and Paulsen ($1,656,000 total grant value) and 2x for Mr.
McDevitt ($860,406 total grant value) and Ms. Stevens ($789,826 total grant
value)). The awards are subject to a four-year vesting schedule, with no vesting
the first year, 50% vesting on the second anniversary of the grant date and 25%
vesting each of the third and fourth anniversaries of the grant date. Vesting of
the awards is contingent on the executive's continued employment through the
vesting date. In the event of the executive's termination due to death,
disability, involuntary termination without cause or resignation for good
reason, as defined in the agreement, the award will fully vest on the date of
such termination. If the executive receives payments in connection with the
Transaction that are subject to excise tax under Code Section 4999, the award
will either vest as scheduled and the executive will pay the applicable excise
tax or the amount of the award will be reduced if the reduction results in an
increase in net after-tax benefit to the executive.
The foregoing description of the retention grants of restricted stock does not
purport to be complete and is subject to, and qualified in its entirety by, the
full text of the award agreement, a form of which is attached hereto as Exhibit
10.2 and incorporated herein by reference
Performance Awards
The Committee modified outstanding performance awards previously granted to our
named executive officers. When the Committee granted the awards, it reserved
discretion to make adjustments in measuring performance for restructurings,
reorganizations, acquisitions, dispositions, and similar changes. The Committee
exercised its reserved discretion to approve a modification of the performance
awards for each of the named executive officers other than Mr. Stegeman in
connection with the Transaction. As a result, due to the changing nature and
relevance of the performance goals after the divestiture of the White Cap
business, payout under these awards will be based on the cumulative adjusted
earnings per share and cumulative free cash flow actual results against targets
through the end of fiscal 2019. Consistent with the terms of the original grant
agreements, payout will continue to be made at end of the original three-year
performance period and grants will continue to be subject to the other terms of
the award agreement. Mr. Stegeman's performance awards will be forfeited and
cancelled upon his termination of employment with the Company in connection with
the Transaction.
Full details regarding the targets and actual results for the modified awards
will be included in the Company's proxy statement for its 2021 annual meeting of
stockholders.
Item 7.01. Regulation FD Disclosure.
On August 11, 2020, the Company published a press release announcing the
Transaction. A copy of the press release is filed as Exhibit 99.1 to this
Current Report on Form 8-K and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. Description of Exhibits
2.1 Transaction Agreement, dated as of August 10, 2020, by and between HD
Supply, Inc. and AppleCaramel Buyer, LLC*
10.1 Form of Transaction Bonus Agreement for John A. Stegeman
10.2 Form of Restricted Stock Award Agreement - Executive Officer Retention
Grant
99.1 Press Release of HD Supply Holdings, Inc., dated August 11, 2020
104 Cover Page Interactive Data File (embedded within the Inline XBRL
document)
* Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of
Regulation S-K. HD Supply Holdings, Inc. and HD Supply, Inc. will furnish the
omitted schedules and exhibits to the Securities and Exchange Commission upon
request.
- 3 -
© Edgar Online, source Glimpses
HD SUPPLY HOLDINGS, INC. 
