US Foods Holding (USFD) DEF 14ADefinitive proxy

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 (Amendment No. )

Filed by the Registrant

Filed by a Party other than the Registrant

Check the appropriate box:
	Preliminary Proxy Statement
	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
	Definitive Proxy Statement
	Definitive Additional Materials
	Soliciting Material under §240.14a-12

US Foods Holding Corp.

(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):
	No fee required.
	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
		(set forth the amount on which the filing fee is calculated and state how it was determined):
	(4)	Proposed maximum aggregate value of transaction:
	(5)	Total fee paid:
	Fee paid previously with preliminary materials.
	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:

April 2, 2021

DEAR FELLOW
STOCKHOLDER:

	9399 W. HIGGINS ROAD SUITE 100 ROSEMONT, IL 60018

April 2, 2021

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

THURSDAY, MAY 20, 2021

9:00 a.m. (Central Daylight Time)

REVIEW THE PROXY STATEMENT AND VOTE IN ONE OF FOUR WAYS:

INTERNET		TELEPHONE		MAIL		AT THE MEETING
Visit www.proxyvote.com		Call 1-800-690-6903 or the telephone number on your voting instruction card		Sign, date, and return your proxy or voting instruction card in the enclosed envelope		Attend the virtual Annual Meeting at www.virtualshareholdermeeting.com/USFD2021

Please refer to the Notice or the information forwarded by your bank, broker, or other nominee to see which voting methods are available to you.

PROXY SUMMARY

MATTERS TO BE VOTED UPON

At this meeting, our common stockholders and the holders of our Series A Preferred Stock, voting together as a single class, will be asked to vote upon the following matters:

In addition, the holders of our Series A Preferred Stock will be asked to vote as a separate class on a seventh director nominee designated by KKR under the Investment Agreement.

DIRECTOR HIGHLIGHTS

Our Board of Directors (the “Board”) currently has ten members. Seven directors are standing for election for one-year terms, expiring at the next annual meeting of stockholders and until their respective successors are duly elected and qualified or until their earlier death, resignation, retirement, disqualification, or removal. Six of the director nominees will be voted upon by our common stockholders and the holders of our Series A Preferred Stock, voting together as a single class. The seventh director nominee, who was designated by KKR under the terms of the Investment Agreement, will be voted upon only by the holders of the Series A Preferred Stock, voting as a separate class. The following table provides summary information about each of our current directors.

								Committee Membership
Name		Age		Director Since		Term Expiring		Audit		Compensation		Executive		Nominating and Corporate Governance
Cheryl A. Bachelder
Independent		64		October 2018		2021	*	—		—		—
Court D. Carruthers
Independent		48		July 2016		2021	*							—
Robert M. Dutkowsky
Lead Independent Director		66		January 2017		2022		—		—
Sunil Gupta
Independent		62		March 2018		2022				—		—		—
John A. Lederer
Independent		65		September 2010		2021	*	—		—		—		—
Carl Andrew Pforzheimer
Independent		59		January 2017		2021	*	—		—		—
Pietro Satriano
Chairman and Chief Executive Officer		58		July 2015		2022		—		—				—
David M. Tehle
Independent		64		July 2016		2021	*							—
Ann E. Ziegler
Independent		62		January 2018		2021	*					—		—
Nathaniel H. Taylor
Independent		44		May 2020		2021	*

*	Denotes standing for re-election at the 2021 Annual Meeting.
	Denotes Committee Chairperson

We believe the composition of the Board strikes a balanced approach to director tenure and allows the Board to benefit from fresh perspectives of newer directors while ensuring we retain the knowledge and experience from longer-serving directors. During 2017 and 2018, we refreshed five of our board positions with independent directors, adding three diverse directors. The average tenure of our directors is 4.4 years.

The Board is comprised of individuals with experience in key areas relevant to US Foods. Each director nominee was nominated based on the unique experience, qualifications and skills that he or she brings to the Board. This blend of diverse backgrounds provides the Board with the benefit of a broad array of perspectives. The table below highlights some of the experience and skills embodied by our directors as a whole.

	Food Industry		Experience in the food industry provides the Board with an enhanced understanding of the industry and is highly important to strategic planning and risk oversight of our business and operations		5
	CEO Leadership		CEO leadership experience brings different perspectives into the boardroom and is important for monitoring strategy and developing a high performing executive leadership team		6
	Public Company Governance		Knowledge of public company governance issues and policies to enhance board practices is important to understanding and protecting stockholders’ interests		8
	Sustainability and Corporate Responsibility		Brings understanding and experience regarding environmental and social responsibility issues that are relevant to our company and the sustainability of the communities in which we operate		1
	Accounting/ Finance		Accounting and finance experience is important in overseeing our financial reporting and internal controls		9
	Risk Management		Experience in risk management is critical in overseeing the risks we face today and anticipating emerging risks that could impact us in the future		7
	Technology		Experience in technology is important to assess the tools we utilize to support our business infrastructure, supply chain and customer service, and also to oversee cyber and information security risks		2
	Marketing & Strategy		Marketing and strategy experience is important in understanding our growth strategy and customer-centric focus		5
	Human Capital Management		Human capital management experience is important to assess compensation practices, diversity mix, talent, training programs and corporate culture, which we depend upon to attract and retain key personnel and motivate our associates to perform and create long-term stockholder value		7

GOVERNANCE HIGHLIGHTS

	Nine of ten directors are independent			Stock ownership guidelines for directors and executives
	Fully independent Audit, Compensation, and Nominating and Corporate Governance Committees			No stock hedging or pledging permitted by directors and executives
	Lead Independent Director			Annual Board and committee self-evaluations
	Strong commitment to diversity			Proactive stockholder engagement
	Comprehensive and strategic approach to enterprise risk management			Majority vote standard in uncontested director elections
	No stockholder rights plan or poison pill			Stockholder can amend bylaws and no supermajority is required
	Annual say on pay vote			Declassification of the Board to be completed at the 2022 annual meeting of stockholders

EXECUTIVE COMPENSATION HIGHLIGHTS

COVID-19 IMPACT (PAGE 27)

As a result of the immediate and significant financial impact of the COVID-19 pandemic on our business in early March, we moved quickly to conserve cash, including temporarily reducing our executives’ salaries. Net sales, total case volumes and Adjusted EBITDA for fiscal 2020 were negatively impacted by decreased customer demand as a result of the COVID-19 pandemic and measures implemented to mitigate its spread. As a result of the impact of actions taken in response to the COVID-19 pandemic, as well as our lower-than-anticipated fiscal 2020 financial results, the cash compensation paid to our Chief Executive Officer for fiscal 2020 was 62% lower than what he earned for fiscal 2019.

Actions taken by the Compensation Committee that specifically affected our named executive officers during fiscal 2020 included the following:

-50%		The Compensation Committee reduced the base salary of our Chief Executive Officer by 50% and reduced the base salaries of our other NEOs by 30%. These salary reductions were in effect for the second fiscal quarter of 2020.
0%		The Compensation Committee determined that no make-whole cash bonus payments should be made to our executive officers as a replacement for the awards under our fiscal 2020 Annual Incentive Plan when the performance goals established prior to the COVID-19 pandemic were not met.
-26%		CEO compensation, as reported in the summary compensation table, decreased by over 26% from 2019 to 2020.
28%		The Compensation Committee also determined that the performance goals established for our performance-based equity awards prior to the COVID-19 pandemic should not be modified, and, therefore the performance-based restricted stock awards, which had a three-year performance period ended January 2, 2021, vested on March 26, 2021 at only 28% of target.

PHILOSOPHY (PAGE 31)

Our executive compensation program is designed to attract, motivate, develop, and retain the right talent, in the right places, at the right time. The following guiding principles form the basis of our executive compensation philosophy:

IMPORTANT DATES FOR 2022 ANNUAL MEETING

Deadline to include stockholder proposals in our proxy statement		On or before December 3, 2021
Period to submit stockholder proposals not included in our proxy statement		Between January 20, 2022 and February 19, 2022
Period for stockholders to nominate director candidates for election		Between January 20, 2022 and February 19, 2022

PROPOSAL 1: ELECTION OF DIRECTORS

Our business and affairs are managed under the direction of the Board. The Board is currently comprised of ten directors, nine of whom are independent under the corporate governance standards of the New York Stock Exchange (the “NYSE”). The terms of seven of our directors expire on the date of the Annual Meeting, subject to the election and qualification of their respective successors. At our 2019 annual meeting of stockholders, our stockholders adopted an amendment and restatement of our Certificate of Incorporation to, among other things, eliminate the classification of the Board over time. As a result, all of our directors standing for election after our 2019 annual meeting (including the seven individuals standing for election at this Annual Meeting) will be elected for one-year terms. Beginning at our 2022 annual meeting, the declassification of the Board will be complete, and all of our directors will be subject to annual election.

Based upon the recommendation of the Nominating and Corporate Governance Committee, the Board has nominated seven individuals to be re-elected for one-year terms, expiring at the 2022 annual meeting of stockholders and until their respective successors are duly elected and qualified (or their earlier death, resignation, retirement, disqualification, or removal).

Six of the seven director nominees will be voted upon by our common stockholders and the holders of our Series A Preferred Stock, voting together as a single class. Proxies solicited by the Board will be exercised for the election of each of the following six nominees: Cheryl A. Bachelder, Court D. Carruthers, John A. Lederer, Carl Andrew Pforzheimer, David M. Tehle and Ann E. Ziegler, unless you vote “against” one or more of the nominees or elect to abstain your vote on your proxy card.

One of the seven director nominees, Nathaniel H. Taylor, has been designated by KKR pursuant to the Investment Agreement (the “KKR Designee”). The holders of Series A Preferred Stock will vote separately, as a class, on the election of Mr. Taylor to hold office until the 2022 annual meeting of stockholders and until his successor is duly elected and qualified (or until his earlier death, resignation, retirement, disqualification, or removal). Only the holders of Series A Preferred Stock have the right to vote on the election of Mr. Taylor and proxies solicited by the Board from holders of our Series A Preferred Stock will be exercised for the election of Mr. Taylor. In the event KKR or its affiliates no longer beneficially own at least 50% of the shares of our Series A Preferred Stock purchased under the Investment Agreement or an equivalent amount of our common stock, on an as-converted basis, Mr. Taylor (or his successor) will resign, and KKR and its affiliates will no longer have the ability to designate a nominee to the Board.

DIRECTOR NOMINATING PROCESS

The Nominating and Corporate Governance Committee recommends candidates to the Board it believes are qualified and suitable to become members of the Board. The Nominating and Corporate Governance Committee also considers the performance of incumbent directors in determining whether to recommend them for re-election. Recommendations may be received by the Nominating and Corporate Governance Committee from various sources, including current and former directors, a search firm retained by the Nominating and Corporate Governance Committee, stockholders, Company executives, and candidates themselves. Pursuant to the Investment Agreement, the Board has agreed to nominate, and recommend, the KKR Designee for election to the Board at the Annual Meeting.

In the case of a vacancy in the office of a director, including a vacancy created by an increase in the size of the Board, the Nominating and Corporate Governance Committee will recommend to the Board an individual to fill the vacancy (except for a vacancy created by the death, resignation or removal of the KKR Designee).

Stockholders who wish to identify director candidates for consideration by the Nominating and Corporate Governance Committee should write to the address provided in the section entitled “Board Policy Regarding Communications” on page 56. Stockholders may also nominate directors for election to the Board as described in the section entitled “How can I propose someone to be a nominee for election to the Board?” on page 56. All submissions should comply with the requirements set forth in our Bylaws.

SKILLS, EXPERIENCE, AND COMMITMENT TO DIVERSITY

The Board seeks members with varying professional backgrounds and other differentiating personal characteristics who combine a broad spectrum of experience and expertise with a reputation for integrity. The Board believes that maintaining a diverse membership enhances the Board’s discussions and enables the Board to better represent all of the Company’s constituents. The Board is currently comprised of three sitting chief executive officers, three former chief executive officers, two former chief financial officers, a private equity investor and a tenured business school professor. During 2017 and 2018, we refreshed five of our board positions with independent directors, adding three diverse directors such that the Board reflects a more diverse composition, with two of our directors being women and one of our directors being ethnically diverse.

Our Corporate Governance Guidelines provide that individuals will be considered for nomination to the Board based on their business and professional experience, judgment, gender, race and ethnicity, skills, background, and other unique characteristics as the Board deems appropriate. Accordingly, the Board is committed to actively seeking out highly qualified women and individuals from minority groups as well as candidates with diverse or non-traditional backgrounds, skills, and experiences as part of the director search process.

Director candidates should demonstrate a reputation for integrity, strong values, and discipline, high ethical standards, a commitment to full participation on the Board and its committees, and relevant career experience, along with other skills and characteristics that meet the current needs of the Board. The Nominating and Corporate Governance Committee and the Board will also consider whether candidates meet applicable independence standards where appropriate and evaluate any potential conflicts of interest with respect to each candidate.

The seven nominees named below have been recommended to the Board by the Nominating and Corporate Governance Committee and nominated by the Board to serve as directors until our 2022 annual meeting and until their successors are duly elected and qualified (or until their earlier death, resignation, retirement, disqualification or removal). Each nominee has consented to stand for election, and the Board does not anticipate that any nominee will be unavailable to serve. If a director nominee, other than the KKR Designee, should become unavailable to serve at the time of the Annual Meeting, shares represented by proxy may be voted for the election of a substitute nominee to be designated by the Board. Alternatively, in lieu of designating a substitute, the Board may reduce the size of the Board.

BACKGROUND AND EXPERIENCE OF DIRECTORS

The professional background and experience of each member of the Board is provided below. We believe that our directors collectively provide an appropriate mix of experience and skills relevant to the size and nature of our business.

SIX NOMINEES FOR ELECTION AS DIRECTORS WITH A TERM EXPIRING AT THE 2022 ANNUAL MEETING, TO BE ELECTED BY OUR COMMON STOCKHOLDERS AND HOLDERS OF SERIES A PREFERRED STOCK, VOTING TOGETHER AS A SINGLE CLASS

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE FOLLOWING SIX DIRECTOR NOMINEES.

NOMINEE FOR ELECTION AS A DIRECTOR WITH A TERM EXPIRING AT THE 2022 ANNUAL MEETING, TO BE ELECTED SEPARATELY BY THE HOLDERS OF OUR SERIES A PREFERRED STOCK

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE FOLLOWING DIRECTOR NOMINEE.

DIRECTORS NOT UP FOR ELECTION WITH A TERM EXPIRING AT THE 2022 ANNUAL MEETING

CORPORATE GOVERNANCE

STOCKHOLDER ENGAGEMENT

We recognize the value of listening to, and considering the perspectives of, our stockholders on our business, including related to matters of corporate governance, executive compensation, human capital and sustainability. Developing relationships with our stockholders is an integral part of that process.

HIGHLIGHTS OF FISCAL 2020 ENGAGEMENT

During fiscal 2020, we engaged in discussions with our stockholders on a variety of topics:

We are continuing to actively engage with current and prospective stockholders during fiscal 2021, including through participation at industry and investment community conferences, analyst meetings, and select one-on-one meetings with stockholders.

In addition to direct engagement, we have instituted a number of complementary mechanisms that allow stockholders to effectively communicate with the Board and management, including our policy regarding direct correspondence with individual directors and the Board as a whole described in the section entitled “Board Policy Regarding Communications” on page 56, our commitment

to thoughtfully consider stockholder proposals submitted to the Company, an annual advisory vote to approve executive compensation, and director attendance at our annual stockholder meetings. Our investor relations website (at https://ir.usfoods.com) features substantive information and materials for the reference of our stockholders, including earnings and investor conference presentations and webcast replays, corporate governance documents, public filings, and news releases.

BOARD LEADERSHIP STRUCTURE

The Board has no policy regarding the separation of the offices of Chairman of the Board and Chief Executive Officer. The Board believes it is important to retain its flexibility to allocate the responsibilities of the Chairman of the Board and the Chief Executive Officer in any way that it deems to be in the best interests of the Company at a given point in time. Because the roles of Chief Executive Officer and Chairman of the Board are currently combined, Mr. Dutkowsky has been appointed Lead Independent Director.

The Board believes this allocation of responsibilities provides a clear and efficient leadership structure for the Company.

RISK OVERSIGHT

Our approach to enterprise risk management is designed to effectively identify, assess, prioritize, mitigate, and monitor the Company’s principal risks. Management is responsible for the Company’s day-to-day risk management activities. The Board’s role is to exercise informed risk oversight, which is done both directly and indirectly through its committees. In addition, for each of the Company’s top risks, the Board and/or its applicable committee receives periodic updates from a senior member of management. The Board’s effectiveness in risk oversight is bolstered through open dialogue with management, established monitoring and reporting processes and the collective knowledge and experience of its members.

There are several ways the Board and its committees undertake their risk oversight responsibilities, including:

ANNUAL BOARD AND COMMITTEE SELF-EVALUATIONS

The Nominating and Corporate Governance Committee oversees the annual self-evaluation process for the Board and each of its committees. These self-evaluations are designed to assess whether the Board or the respective committee is functioning effectively and to provide a mechanism for the Board or the respective committee to identify potential areas for improvement. For example, in furtherance of the Board’s commitment to maintaining a diverse Board membership, the Board self-evaluation specifically asks directors to assess the Board’s progress against that commitment. Once completed, the results of the self-evaluations and any appropriate recommendations or action plans are discussed among the members of the Board and each of its committees.

MEETINGS OF THE BOARD AND ITS COMMITTEES

COMMITTEES

		Audit		Compensation		Executive		Nominating and Corporate Governance
Total number of committee meetings during 2020		6		5		0		4
Cheryl A. Bachelder		—		—		—
Court D. Carruthers								—
Robert M. Dutkowsky		—		—
Sunil Gupta				—		—		—
Carl Andrew Pforzheimer		—		—		—
Pietro Satriano		—		—				—
Nathaniel H. Taylor		—		—		—		—
David M. Tehle								—
Ann E. Ziegler						—		—

AUDIT COMMITTEE

COMPENSATION COMMITTEE

NOMINATING AND CORPORATE GOVERNANCE COMMITTEE

EXECUTIVE COMMITTEE

BOARD ATTENDANCE AT THE ANNUAL MEETING

Although the Company does not have a written policy concerning Board attendance at annual meetings of the Company’s stockholders, it is our expectation that all directors attend the annual meetings of our stockholders. All of our directors attended the 2020 virtual annual meeting.

ANTI-HEDGING AND ANTI-PLEDGING POLICY

Under the terms of the Company’s insider trading policy, our directors and executive officers are prohibited from engaging in transactions that involve short-term trades, short sales, exchange-traded options, hedging, margin loans, or pledging of or relating to our Common Stock. The Company’s insider trading policy does not currently prevent employees, other than executive officers, from engaging in hedging, pledging or other speculative transactions, but it allows management to consider whether to prohibit employees from engaging in these transactions.

RELATED PARTY TRANSACTIONS

The Board has adopted a written policy related to the review and approval of related party transactions. Under the policy, the Audit Committee evaluates, and if appropriate, approves any proposed transactions involving the Company and in which any of our directors, nominees for director, executive officers or significant stockholders (or persons related to any of them) has a direct or indirect interest. Under the policy, certain related party transactions are deemed to be pre-approved, for example, those transactions where the aggregate amount will not exceed $120,000 or where the rates or charges involved are determined by competitive bids. In determining whether to approve a proposed related party transaction, the Audit Committee considers, among other things, whether: the terms of the transaction are fair to the Company and would apply if the transaction did not involve a related party; there are compelling business reasons for the Company to enter into the related party transaction and the nature of any available alternative transactions; the transaction would impair the independence of an otherwise independent director; or the transaction would create an improper conflict of interest for any director or executive officer of the Company, taking into account the size of the transaction, the overall financial position of the related party, the direct or indirect nature of the related party’s interest in the transaction and the ongoing nature of any proposed relationship.

KKR INVESTMENT

On May 6, 2020 (the “Issuance Date”), the Company issued 500,000 shares of its Series A Preferred Stock to KKR for an aggregate purchase price of $500 million, or $1,000 per share, pursuant to the Investment Agreement. In connection with the investment, under a registration rights agreement, dated May 6, 2020, the Company agreed to provide KKR with certain customary registration rights with respect to shares of the Company’s common stock issued in connection with any future conversion of the Series A Preferred Stock.

The Series A Preferred Stock ranks senior to the shares of common stock, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company. The Series A Preferred Stock has a liquidation preference of $1,000 per share. Holders of the Series A Convertible Stock are entitled to a cumulative dividend at the rate of 7.0% per annum, payable quarterly in arrears. If the Company does not declare and pay a dividend on the Series A

Preferred Stock, the dividend rate will increase by 3.0% to 10.0% per annum until all accrued but unpaid dividends have been paid in full. Dividends are payable in kind, through the issuance of additional shares of Series A Preferred Stock, for the first four dividend payment dates, after which dividends are payable in cash or in kind (or a combination of both) at the option of the Company.

Through the Record Date, the Company paid dividends in-kind to KKR of 23,127 shares of Series A Preferred Stock, and as of the Record Date, KKR held 523,127 shares of Series A Preferred Stock, which represented approximately 10% of the Company’s common stock on an as-converted basis.

The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock at an initial conversion price of $21.50 per share and an initial conversion rate of 46.5116 shares of common stock per share of Series A Preferred Stock, subject to certain anti-dilution adjustments. At any time after the third anniversary of the Issuance Date, if the volume weighted average price of common stock exceeds the mandatory conversion price of $43.00 per share, as may be adjusted, for at least twenty trading days in any period of thirty consecutive trading days, the Company has the option to convert all of the outstanding shares of Series A Preferred Stock into common stock.

At any time following the fifth anniversary of the Issuance Date, the Company may redeem some or all of the Series A Preferred Stock for a per share amount in cash equal to: (i) the sum of 100% of the liquidation preference thereof, plus all accrued and unpaid dividends, multiplied by (ii) (A) 105% if the redemption occurs at any time after the fifth anniversary of the Issuance Date and prior to the sixth anniversary of the Issuance Date, (B) 103% if the redemption occurs at any time after the sixth anniversary of the Issuance Date and prior to the seventh anniversary of the Issuance Date, and (C) 100% if the redemption occurs at any time after the seventh anniversary of the Issuance Date.

Upon certain change of control events involving the Company, on or before the fifth business day prior to the effective date of such change of control event, the holders of the Series A Preferred Stock must either (i) convert their shares of Series A Preferred Stock into common stock at the then-current conversion price or (ii) cause the Company to redeem their shares of Series A Preferred Stock for an amount in cash equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends. In the case of either clause (i) or (ii) above, if such change of control occurs on or before the fifth anniversary of the Issuance Date, the Company will also be required to pay the holders of the Series A Preferred Stock a “make-whole” premium.

The holders of our Series A Preferred Stock are entitled to vote with our common stockholders on an as-converted basis, voting together as a single class. Holders of the Series A Preferred Stock are also entitled to a separate class vote with respect to, among other things, amendments to the Company’s organizational documents that have an adverse effect on the Series A Preferred Stock, authorizations or issuances by the Company of securities that are senior to, or equal in priority with, the Series A Preferred Stock, increases or decreases in the number of authorized shares of Series A Preferred Stock and issuances of shares of Series A Preferred Stock after the Issuance Date, other than shares issued as in kind dividends with respect to shares of Series A Preferred Stock issued on the Issuance Date. So long as KKR or its affiliates beneficially own shares of Series A Preferred Stock and/or shares of common stock that represent, in the aggregate and on an as-converted basis, at least 50% of the shares of common stock beneficially owned by KKR, on an as converted basis, as of the Issuance Date, KKR has the right to designate one director to be nominated by the Board for election to the Board.

Until KKR no longer has the right to designate a director for election to the Board, it and its affiliates have committed to vote all of their shares of Series A Preferred Stock and/or common stock (i) in favor of each director nominated and recommended for election by the Board, (ii) against any stockholder nominations for director which are not approved and recommended for election by the Board, (iii) in favor of the Company’s proposal for ratification of the appointment of the Company’s independent registered public accounting firm and (iv) for any proposal approved by the KKR-designated director. With regard to all other matters submitted to the vote of stockholders, KKR and its affiliates are under no obligation to vote in the same manner as recommended by the Board or otherwise.

Prior to the closing of KKR’s investment in the Series A Preferred Stock, KKR Capital Markets, LLC (“KCM”), an affiliate of KKR, provided debt advisory services to the Company in connection with the Company’s financing of its acquisition of Smart Foodservice in April 2020, for which the Company paid KCM $6 million. In addition, as of January 2, 2021, investment funds managed by an affiliate of KKR held approximately $65 million in aggregate principal amount of our senior secured term loan due 2023 and our incremental senior secured term loan due 2026, as reported by the administrative agent. Most recently, in February 2021, KCM acted as a joint bookrunning manager in the private offering by our direct, wholly-owned subsidiary, US Foods, Inc., of $900 million aggregate principal amount of its 4.750% Senior Notes due 2029 and realized $1,113,750 in fees in the form of a discount to the purchase price which was equivalent to the fees realized by the other lead joint bookrunning manager for the offering.

CORPORATE GOVERNANCE MATERIALS

The Board has adopted Corporate Governance Guidelines in furtherance of its commitment to the principles of good corporate governance. The Board and the Nominating and Corporate Governance Committee review the Corporate Governance Guidelines annually and make amendments, as they deem necessary or appropriate, based on stockholder feedback, changes in the rules of the SEC or the corporate governance standards of the NYSE, or best practices.

The Board has also adopted a Code of Conduct that applies to all of our directors, officers, and employees, including our principal executive officer, principal financial officer, and principal accounting officer. We intend to make available any legally required disclosures regarding amendments to, or waivers of, provisions of our Code of Conduct on our investor relations website.

Copies of our Corporate Governance Guidelines; the charters of each of the Audit Committee, the Compensation Committee, and the Nominating and Corporate Governance Committee; and our Code of Conduct are publicly available and may be found by visiting the “Corporate Governance—Governance Documents” page of our investor relations website at https://ir.usfoods.com/investors/corporate-governance/governance-documents.

CORPORATE SOCIAL RESPONSIBILITY

Our Nominating and Corporate Governance Committee oversees the Company’s corporate social responsibility initiatives and strategy, receiving CSR updates multiple times each year. Our Executive Vice President, General Counsel and Chief Compliance Officer leads our cross-functional CSR working group that includes senior leaders and subject matter experts with responsibility for areas such as supply chain, real estate, merchandising, food safety, human resources, communications, and investor relations.

OUR KEY INITIATIVES

In 2020, we drove progress against our Corporate Social Responsibility (CSR) strategy through key initiatives within each of our three pillars of focus: People, Planet, and Products. Our most recent Corporate Social Responsibility Report and additional information regarding our efforts, initiatives, and accomplishments can be found at www.usfoods.com/csr.

PEOPLE

At US Foods, we strive to make a positive difference in the lives of our associates and in the communities we serve.

IN OUR WORKPLACE

Through training, mentoring, and on-the-job development, we help associates at all levels of our organization learn and grow. In 2020 we reimagined many of our programs to help associates continue to thrive in virtual settings. Our new Associate Resource Hub features an online library of tools and content for navigating the remote work environment, including communication guides for virtual teams, technology training, virtual leadership webinars and more.

6,000+

associates accessed online training resources in 2020

IN OUR COMMUNITIES

As a national foodservice distributor, we strive to make a meaningful difference by donating our time and resources. Over the last year, US Foods has acted urgently to support food banks and other nonprofits helping to nourish communities devastated by the pandemic.

Launched in 2017, our US Foods Scholars program addresses two pressing needs: providing economic opportunity to underserved students and helping tackle the talent shortage facing the restaurant industry. The program provides individual awards of up to $20,000 in financial support and professional development to outstanding students seeking to achieve their dreams in the culinary arts.

PLANET

We are continually improving the efficiency of our facilities and fleet, reducing our environmental footprint.

IN OUR FACILITIES

Our distribution centers require significant amounts of energy to store, refrigerate and manage our vast portfolio of products. We work diligently to reduce the energy intensity of our business.

US Foods currently operates three Leadership in Energy and Environmental Design (LEED) Silver-certified facilities, with two additional locations in Marrero, LA and Sacramento, CA in progress. LEED-certified buildings have been shown to lower environmental impact and operating costs, while providing a healthier working environment for associates.

Solar arrays have been installed on six of our distribution centers, including an 8.4-megawatt solar installation in Perth Amboy, New Jersey – one of the largest rooftop solar installations in the state.

13M+

kilowatt hours (kWh) of electricity generated annually from our solar installations

Across our facilities, we work to monitor and reduce waste generated in our direct operations through both recycling and product donation initiatives. These initiatives include material recycling efforts that span multiple categories, including cardboard, paper, plastic, and electronics, as well as the donation of surplus or unsaleable product to community organizations and nonprofits.

14,000+TONS

of waste diverted from landfills in 2020

IN OUR FLEET

We’re optimizing our routing to reduce miles driven and rightsizing our vehicles by route type to improve transportation efficiency.

As we update and add to our fleet, we’re choosing new vehicle models with features designed to reduce fuel consumption and testing alternative-fuel technology like our 54 compressed natural gas (CNG) vehicles across Texas and Oklahoma. CNG trucks emit 22-29% fewer greenhouse gas emissions than comparable gas or diesel fuel vehicles.

PRODUCTS

We are committed to providing a portfolio of responsibly and sustainably sourced products. Through a third-party sustainable product materiality assessment that included feedback from internal and external stakeholders, US Foods has prioritized key initiatives we believe will have the most impact.

HUNGRY FOR BETTER STRATEGY

At US Foods, we understand that our customers want authentic, simple ingredients from sources they know and trust, along with clear information to help them choose the best products for their establishments. Our Hungry for Better strategy was developed to help meet this need and deliver on our commitment to working with our partners and suppliers to offer products that are local, sustainable or support well-being.

SERVE GOOD^®

Our Serve Good program features a growing portfolio of products that are developed in collaboration with our suppliers. The products adhere to responsible practices and many come with a third-party certification. Every Serve Good product must come with a claim of responsible sourcing or contribution to waste reduction.

PROGRESS CHECK^®

Our Progress Check program recognizes seafood products and vendors that have made significant progress toward meeting our Serve Good program standards and serves as a gateway for inclusion in Serve Good. In 2018, we published a Responsibly Sourced Seafood Policy that outlines our forward-looking commitments and goals for sustainable seafood products.

OUR COMMITMENTS

We achieved our 2020 Responsibly Sourced Seafood commitment.

100%

of the products in our Harbor Banks seafood portfolio now meet either Progress Check^® or Serve Good^® standards

BUILDING A CULTURE OF SAFETY, INCLUSION & ENGAGEMENT

US Foods is committed to creating a safe, inclusive, and dynamic workplace where our associates can grow and thrive.

SUPPORTING OUR ASSOCIATES DURING COVID-19

As we address the ever-evolving needs of our business due to the pandemic, the health and safety of our associates, customers and communities have remained our top priorities. To support this commitment, we have instituted a variety of policies and procedures to help prevent the spread of COVID-19. These include illness prevention guidelines that require an associate to stay home if they are sick or have symptoms associated with COVID-19, wellness checks with temperature screenings before entering any US Foods facility, requiring associates to wear masks, and enhanced hygiene and cleaning procedures in all facilities. We have also enhanced our work from home policies and leverage social distancing and new, essential employee protocols designed to limit close contact, and to provide personal protective equipment (PPE) as well as cleaning and sanitizing products. In addition, we have protocols in place for managing COVID-19 cases, including isolating impacted associates from our facilities, conducting a traceback interview with associates who have tested positive, notifying associates and customers with whom they came into contact, and conducting enhanced cleaning procedures.

To support our associates during COVID-19, we offer additional benefits such as enhanced leave policies for an associate who is ill with COVID-19, or taking care of a loved one with COVID-19 at home. In addition, we offer free COVID-19 testing for associates in qualified situations to facilitate a safe return to work.

DIVERSITY & INCLUSION

At US Foods, we believe that success and innovation are only achieved when all voices and perspectives are heard and valued. We perform at our best by connecting with associates, customers and communities in ways that embrace diversity of all kinds, including diversity of race, ethnicity, culture, gender identity, age, sex, disability and experience. Our commitment to diversity and inclusion is defined by our D&I strategy, which is focused on working toward a more equitable environment in our workplace and communities. As of January 2021, 51% percent of our associates are women or people of color and 32% of our director-level and above leaders are women or people of color.

Over the past several years, we have been working to increase the diversity of our director-level and above leadership roles through accelerated development programs for diverse associates and expanded external recruiting partnerships to reach more diverse candidates. We have also enhanced our hiring process to require diverse candidate slates for leadership roles and introduced unconscious bias training for leaders. Moving forward, our goal is to fill 40% of our new or open leadership roles with diverse candidates.

Specifically, in 2020, we implemented the following key initiatives to execute against our strategy:  

ASSOCIATE ENGAGEMENT

Through our associate engagement survey and pulse survey programs, we invite our associates to provide important feedback that allows us to implement positive changes across our company. These surveys, along with regular associate roundtables, help us continually improve how we demonstrate our Cultural Beliefs and support other focus areas such as safety, manager effectiveness and customer service.

In 2020, we increased the frequency of our pulse surveys and implemented monthly “open mic” meetings with Executive Leaders to keep associates fully informed of COVID-19 developments and provide regular opportunities for associates to share feedback, ask questions, and make suggestions for the business. Throughout 2020, we received a total of 30,000 associate survey responses.

DIRECTOR COMPENSATION

Non-employee directors serving on the Board each receive an annual cash retainer of $100,000. Our Lead Independent Director and the Chair of the Audit Committee each receives an additional annual cash retainer of $25,000, and the Chair of the Compensation Committee and the Chair of the Nominating and Corporate Governance Committee each receives an additional annual cash retainer of $20,000. All cash retainers are paid quarterly, in arrears. In addition, each non-employee director receives an annual equity grant consisting of $150,000 in restricted stock units (“RSUs”), which generally vest on the earlier of the first anniversary of the grant date and our first annual meeting of stockholders that occurs after the grant date. Mr. Satriano, who is also an employee, does not receive additional compensation for serving on the Board. Mr. Taylor has elected to waive his right to receive compensation for serving on the Board, including any annual cash retainer or RSU grant.

The Nominating and Corporate Governance Committee is responsible for reviewing and making recommendations to the Board regarding our director compensation. In completing its review, the Nominating and Corporate Governance Committee receives assistance from an independent compensation consultant, Meridian Compensation Partners, LLC (“Meridian”).

The Board reviews the recommendations of the Nominating and Corporate Governance Committee and determines the form and amount of director compensation. In July 2019, the Nominating and Corporate Governance Committee recommended, and the Board approved, (i) an increase in the value of the annual equity grant for our non-employee directors from $100,000 to $150,000 to more closely align with peer group director compensation levels and (ii) a change in the RSUs’ vesting period from three years to one year to coincide with the de-classification of the Board and our directors’ new one-year terms.

Effective as of January 1, 2020, we updated the stock ownership guidelines that apply to each of our non-employee directors to provide that each non-employee director is expected to own and retain shares of our Common Stock with a value of at least five times the annual cash retainer, or $500,000 (up from four times the annual cash retainer, or $400,000), within five years of the date the director joins the Board. Our stock ownership guidelines do not apply to Mr. Taylor since he has waived his right to receive compensation for serving on the Board. All applicable non-employee directors were in compliance with the guidelines at the end of fiscal 2020.

The following table reflects the fees earned by our non-employee directors who were compensated for their service in fiscal 2020:

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS, AND OFFICERS

The following table sets forth information as of March 22, 2021 with respect to the beneficial ownership of our common stock by: (1) each individual or entity known to us to own beneficially more than 5% of our capital stock, (2) each of our directors, (3) each of our named executive officers, and (4) all of our directors and executive officers as a group. For each applicable beneficial owner, percent ownership has been computed based on a total of 245,913,511 shares, consisting of 221,198,816 shares of our common stock outstanding as of March 22, 2021 and 24,714,695 shares of common stock which would be received by KKR upon conversion of their Series A Preferred Stock as of such date.

The amounts and percentages of shares of our common stock beneficially owned are reported on the basis of SEC rules governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed 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 the security. A person is also deemed a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be acquired this way are deemed to be outstanding for purposes of computing a person’s ownership percentage, but not for purposes of computing any other person’s ownership percentage. Under these rules, more than one person may be deemed a beneficial owner of the same securities, and a person may be deemed a beneficial owner of securities to which that person has no economic interest.

Except as otherwise indicated in the footnotes to the following table, each of the beneficial owners listed below has, to our knowledge, sole voting and investment power for the indicated shares of our capital stock. Unless otherwise noted, the address of each beneficial owner listed below is c/o US Foods Holding Corp., 9399 W. Higgins Road, Suite 100, Rosemont, IL 60018.

COMPENSATION DISCUSSION AND ANALYSIS

The Compensation Committee determines and approves the compensation of our named executive officers (“NEOs”). Our NEOs for fiscal 2020 and their current positions are as follows:

EXECUTIVE SUMMARY

COMPENSATION PHILOSOPHY

Our executive compensation program is designed to attract, motivate, develop, and retain the right talent, in the right places, at the right time. The following guiding principles form the basis of our executive compensation philosophy:

FISCAL 2020 HIGHLIGHTS AND FISCAL 2021 OUTLOOK

FISCAL 2020 HIGHLIGHTS

2020 was a challenging year for our industry, our customers and our company. Net sales, total case volumes and Adjusted EBITDA for fiscal 2020 declined due to decreased customer demand as a result of the COVID-19 pandemic and measures implemented to mitigate its spread. Although our fiscal 2020 financial results were not what we anticipated, we learned to be more agile and operate more effectively as an organization. We took care of our associates, gained new customer relationships and expanded market share as the year progressed. Notable achievements during fiscal 2020 included:

FISCAL 2021 OUTLOOK

We do not expect a full recovery for our business and the U.S. foodservice industry until there has been widespread vaccination of the American public, and consumers are once again willing and able to resume consumption of food away from home, and to travel and attend sporting, entertainment and other events. Although the timetable for returning to normalcy is unknown, we believe that our case volumes will increase over time as the effects of the COVID-19 pandemic slowly dissipate, consumer demand for food prepared away from home increases, educational institutions resume in-person learning, and the hospitality industry recovers.

COVID-19 IMPACT AND COMPANY RESPONSE

As a result of the immediate and significant financial impact of the COVID-19 pandemic on our business in early March, we moved quickly to conserve cash, manage working capital and preserve the long-term viability of the Company, including reducing our selling and administrative expenses, all of which corresponded to the decrease we saw in our customer demand. These actions included:

COVID-19 IMPACT ON 2020 EXECUTIVE COMPENSATION

In addition to the general cost-savings actions described above, our Board of Directors decided to forgo 50% of its cash compensation for a quarter, and the Compensation Committee took the following actions that specifically affected our NEOs:

-50%		The Compensation Committee reduced the base salary of our Chief Executive Officer (“CEO”) by 50% and reduced the base salaries of our other NEOs by 30%. These salary reductions were in effect for the second fiscal quarter of 2020.
0%		The Compensation Committee determined that the performance goals established under our fiscal 2020 Annual Incentive Plan (“AIP”) prior to the COVID-19 pandemic should not be modified for our executive officers, and that no other make-whole cash payments should be made as a replacement for the AIP. Instead, the Compensation Committee, after reviewing the Company’s performance during the second half of fiscal 2020, including Adjusted EBITDA performance and progress against several near-term and long-term strategic initiatives, approved a special, one-time grant of RSUs to our NEOs in March 2021 to promote continued focus and progress on strategic initiatives in the wake of a continued challenging environment. This grant ranged in value from $650,000 (for our CEO) and $215,000 for our other NEOs and vests one-year from the grant date, subject to the NEO’s continued employment with the Company through the vesting date.
-26%		As a result of the actions above, CEO compensation, as reported in the summary compensation table, decreased by over 26% from 2019 to 2020. CEO cash compensation, consisting of salary and AIP, decreased by over 60% from 2019 to 2020.
28%		The Compensation Committee also determined that the performance goals established for our performance-based equity awards prior to the COVID-19 pandemic should not be modified, including the performance-based restricted stock awards (“RSAs”) which have a three-year performance period ended January 2, 2021 and vested on March 26, 2021. As a result of the below-threshold performance by the Company during fiscal 2020, which was the third year of the three-year peformance period, these performance-based RSAs vested at only 28% of target, resulting in significantly reduced compensation received by our NEOs, as described in further detail below.

COVID-19 IMPACT ON LONG-TERM INCENTIVE PLAN DESIGN IN 2020 & 2021

awards vest ratably on an annual basis over a three-year period. We expect the 2022 LTIP awards to return to our pre-pandemic practice of issuing a combination of performance-based RSUs, time-based RSUs and time-based stock options.

2020 COMPENSATION COMPONENTS AND PAY-FOR-PERFORMANCE ALIGNMENT

The following graphs show the components of the target compensation opportunities for our CEO and our other NEOs for fiscal 2020 and the portion of those compensation opportunities that are tied directly to the Company’s financial performance:

2020 CASH COMPENSATION

Base Salary – As noted above, in response to the impact of the COVID-19 pandemic on the Company, the Compensation Committee reduced the base salary of our CEO by 50% and our other NEOs by 30%. These salary reductions were effective for the 13-week period ended June 27, 2020. In addition, the Compensation Committee deferred the effective date of our annual merit-based salary increases to November 8, 2020.

Annual Cash Incentive – The Company did not achieve the threshold level of performance for either of the two fiscal 2020 AIP financial performance goals (Adjusted EBITDA and Days Inventory on Hand (“DIOH”)). The Compensation Committee determined not to make any adjustments to reflect the impact of the COVID-19 pandemic. As a result, none of our NEOs received a payout of their cash bonus awards under our fiscal 2020 AIP.

The below table illustrates the combined impact of these actions on CEO cash compensation for fiscal 2020 compared to fiscal 2019, which resulted in a year-over-year cash compensation reduction of over 62%:

FISCAL 2020 EQUITY AWARDS

Recognizing the significant impact of the COVID-19 pandemic on the Company’s business, as well as the uncertainty of the ongoing nature and duration of that impact, the Compensation Committee determined that it was not possible to determine meaningful performance goals for a three-year period. Therefore, for each of our NEOs, one-third of the aggregate grant date value of the 2020 LTIP awards consisted of stock options, and the remaining two-thirds consisted of time-based RSUs, each of which vest ratably on an annual basis over a three-year period.

VESTING OF PERFORMANCE-BASED AWARDS GRANTED IN FISCAL 2018

In fiscal 2018, we granted performance-based RSAs under the US Foods Holding Corp. 2019 Long-Term Incentive Plan (the “2019 Plan”) to our NEOs that vested in March 2021 based on the average of our financial performance during the three-year performance period ended January 2, 2021. 70% of the awards vest based on our average annual Adjusted EBITDA growth rate for the three fiscal years in the performance period, and 30% of the awards vest based on our average annual Adjusted Return on Invested Capital (“ROIC”) growth rate for the three fiscal years in the performance period. As described above, despite the significant impact of the COVID-19 pandemic on our business in 2020, the Compensation Committee determined that the performance-based RSAs awards held by our NEOs and executive team should continue to be subject to the performance goals established prior to the COVID-19 pandemic. Based on the actual average annual Adjusted EBITDA and Adjusted ROIC growth rates for the three fiscal years in the performance period, the fiscal 2018 performance-based awards vested at 28% of target. For additional information regarding the calculation of this vesting percentage, see the section entitled “Vesting of Prior Performance-Based Awards” beginning on page 37.

EXECUTIVE COMPENSATION PRACTICES

The Compensation Committee evaluates whether our executive compensation program is consistent with both our pay-for-performance philosophy and best practices among our peer group and the overall market. The following table reflects the features of our executive compensation program that the Compensation Committee believes reinforce our pay-for-performance philosophy and best practices.

WHAT WE DO…
	Pay-for-Performance Philosophy. A substantial portion of our executives’ compensation opportunities for fiscal 2020 was linked directly to our financial performance. Our CEO’s Summary Compensation Table compensation for fiscal 2020 was 26% lower compared to fiscal 2019, reflecting the challenges faced due to the COVID-19 pandemic.
	Benchmarking. The Compensation Committee reviews external market data when making compensation decisions and generally targets compensation opportunities at the median of our peer group.
	Independent Compensation Consultant. The Compensation Committee selects and engages its own independent consultant, Meridian.
	Stock Ownership Guidelines. Our stock ownership guidelines require holdings equal to 6x base salary for our CEO and 3x base salary for our other executives.
	“Double-trigger” Change in Control (“CIC”) Severance Benefits. Our executives are entitled to enhanced CIC severance benefits only if their employment is terminated by the Company without cause or by the executive for good reason within 18 months following a CIC.
	Clawback Policy. Our Executive Compensation Recoupment Policy provides for recovery of certain incentive-based compensation paid to our executives in the event of a restatement of our financial results due to material noncompliance with any financial reporting requirement under federal securities laws.
	Long-Term Performance Targets. Our outstanding performance-based awards have three-year performance goals.
	Pre-Established Targets. Our AIP and performance-based equity goals are set by the Compensation Committee at the beginning of the applicable performance periods.
	Annual Say on Pay Vote. We provide stockholders with the opportunity to cast an advisory vote on our executive compensation on an annual basis.

WHAT WE DON’T DO…
	No Excise Tax Reimbursements or Gross-Ups. Our executives are not reimbursed for CIC excise taxes. We do not reimburse our executives for taxes related to their annual executive allowance or any other compensation or benefits.
	No Uncapped Incentive Compensation Opportunities. Our AIP and annual LTIP performance-based equity awards have maximum payouts of 150% and 200% of their target levels, respectively.
	No Accelerated Vesting of Equity Awards upon CIC. We do not accelerate the vesting of long-term incentive awards upon a CIC, except where awards are not assumed or there is a qualifying termination within 18 months following the CIC.
	No Employment Agreements for Defined Terms. We do not have employment agreements with any of our executives, including our CEO.
	No Repricing of Underwater Stock Options. We do not allow repricing of outstanding stock options without stockholder approval.
	No Excessive Perquisites. We do not provide excessive perquisites to our executives.
	No Supplemental Retirement Benefits. We do not offer supplemental retirement benefit plans to any of our executives.
	No Stock Hedging or Pledging. Our executive officers are prohibited from hedging or pledging our stock.

PHILOSOPHY OF OUR EXECUTIVE COMPENSATION PROGRAM

Our executive compensation program is designed to attract, motivate, develop, and retain the right talent, in the right places, at the right time. We strive to provide a total compensation package to our executives that is competitive with employers who compete with us for talent and is equitable among our internal workforce, balancing pay-for-performance alignment with retention considerations. This means that even during temporary downturns in either the foodservice distribution industry or the general economy, our program is designed to appropriately incentivize our executives to stay committed to executing our long-range plan and increasing long-term stockholder value. The guiding principles described in the section entitled “Executive Summary” above form the basis of our executive compensation philosophy.

COMPONENTS AND OBJECTIVES OF OUR EXECUTIVE COMPENSATION PROGRAM

Our executive compensation program for fiscal 2020 was built upon the following framework:

HOW WE MAKE COMPENSATION DECISIONS

The Compensation Committee, in consultation with management and its independent compensation consultant, regularly evaluates whether our executive compensation program reinforces our pay-for-performance philosophy and enhances long-term stockholder value creation.

COMPENSATION COMMITTEE OVERSIGHT

The Compensation Committee is responsible for overseeing our executive compensation program. The Compensation Committee determines and approves all compensation for our NEOs, including the framework and components of our executive compensation program. When setting compensation levels, the Compensation Committee is assisted by our CEO, who evaluates the performance of and presents an annual compensation recommendation for each of our other executives. While our Lead Independent Director (who is also the Chair of the Nominating and Corporate Governance Committee) evaluates our CEO’s performance and sets his goals each fiscal year, the Compensation Committee approves all compensation awards and payout levels for our CEO. For fiscal 2020, our CEO set his goals in consultation with our Lead Independent Director and then provided a self-assessment of his performance at year-end to our Lead Independent Director. Feedback was also solicited from the full Board in executive session, and this feedback was shared with the Compensation Committee to support its decisions regarding CEO compensation.

The Compensation Committee also consults with members of our human resources, legal, and finance organizations annually to assess whether our compensation plans, policies, and practices encourage excessive or inappropriate risk taking by our employees. As a result of the assessment, the Compensation Committee has concluded that our compensation plans, policies, and practices do not encourage excessive or inappropriate risk taking and are not reasonably likely to have a material adverse effect on the Company.

The Compensation Committee uses several resources and analytical tools when making decisions related to executive compensation. These resources and tools are described below.

INDEPENDENT COMPENSATION CONSULTANT

Meridian provides independent advice to the Compensation Committee in connection with matters pertaining to executive compensation. The scope of services Meridian provides includes:

Meridian is engaged directly by the Compensation Committee to provide these services. In fiscal 2020, Meridian did not provide any services to management that were unrelated to executive compensation. In addition, as described in the section entitled “Director Compensation” on page 23, Meridian assists the Nominating and Corporate Governance Committee in the review of our non-employee director compensation program.

After evaluating information presented in accordance with the independence rules of the NYSE, the Compensation Committee concluded that Meridian was independent.

HUMAN RESOURCES DEPARTMENT

Our Human Resources Department provides benchmarking data (consisting of peer group analysis and supplemental external compensation survey data analysis) and recommendations with respect to annual base salary, AIP, and LTIP compensation decisions to the Compensation Committee. As requested by the Compensation Committee, our Human Resources Department works with Meridian to gather and analyze relevant competitive market data and to identify and evaluate various alternatives for features of our executive compensation program.

ROLE OF CEO IN DETERMINING EXECUTIVE COMPENSATION

Our CEO assists the Compensation Committee by evaluating the performance of our other NEOs and recommending compensation levels. Our CEO also consults with management with respect to recommendations for the Company’s performance goals used in the AIP and LTIP. In preparing recommendations to the Compensation Committee, our CEO consults benchmarking data and other market surveys from Meridian and our Human Resources Department. Our CEO structures his recommendations to adhere to the principles and objectives described in the section entitled “Philosophy of Our Executive Compensation Program” above.

Our CEO is not involved in, or present during, discussions related to his own compensation.

USE OF COMPETITIVE MARKET DATA

We believe our executive compensation program should be competitive with the external market for executive talent. For our NEOs, we generally construct external market comparisons by examining peer group proxy statement data and compensation market survey data, and we generally target the median of base salary, annual cash incentive target, and long-term equity incentive opportunity ranges for similar executive positions in our peer group. Although the elements of our compensation packages are benchmarked against the market, the Compensation Committee believes in the importance of retaining flexibility in structuring our compensation programs and adjusting awards for the evolving business environment.

Periodically, the Compensation Committee and Meridian review our peer group to evaluate whether it continues to reflect companies that are similar to us in business, size, and complexity and with which we compete for top executive talent. In selecting our peer group:

The Compensation Committee approved the following peer group of companies for executive pay and program benchmarking for fiscal 2020. This is the same peer group as was used for fiscal 2019, except that Dean Foods and SpartanNash were removed due to bankruptcy and market capitalization, respectively. CDW Corporation was added since it is a size-appropriate distributor with similar margins and a similar geographic location.

INTERNAL ANALYSIS IN SETTING COMPENSATION ELEMENTS

With respect to annual base salary, AIP awards, and LTIP awards, the Compensation Committee also considers the internal equity of the compensation awarded by using comparisons within the Company based on, among other factors, role, title, and relative responsibilities.

CONSIDERATION OF 2020 SAY ON PAY VOTE

At our 2020 annual meeting, stockholders showed strong support for our executive compensation program, with 90% of the votes cast approving, on an advisory basis, the compensation paid to our NEOs. The Compensation Committee considered this result and, consequently, did not make significant changes to our executive compensation program in response. Similar to the prior year, our executive compensation program for fiscal 2020 continued to emphasize performance and retention-based compensation opportunities designed to incentivize our executives to execute our long-range plan and increase long-term stockholder value, with adjustments to reflect the impact of the COVID-19 pandemic.

We value the perspectives of our stockholders, and the Compensation Committee will continue to consider the outcomes of say on pay votes when making future executive compensation decisions.

OVERVIEW OF FISCAL 2020 ANNUAL INCENTIVE PLAN

Our AIP is designed to offer cash compensation opportunities for eligible associates, including our NEOs and other executives, based upon the Company’s annual financial performance. Payments under our AIP are generally made in the first quarter of the fiscal year following the plan year. Our NEOs are not eligible to receive an AIP award unless they were employed by the Company at the end of the plan year.

In February 2020, the Compensation Committee approved the AIP design framework for fiscal 2020, including Company performance goals, and target awards for our NEOs. The framework for the fiscal 2020 AIP for our NEOs was based on the following:

A brief description of each of the performance goals and their relative weightings is set out in the table below:

Prior to application of the relative weightings, the threshold payout percentage for each goal was 25%, and the maximum payout percentage was 150%. As a result, potential cash bonus awards under the fiscal 2020 AIP award ranged from 0% to 150% of the NEO’s target award. The Compensation Committee believes that our executives’ annual cash bonuses should be based on the Company’s achievement of its performance goals. For this reason, the fiscal 2020 AIP did not include any potential for upward modification based on extraordinary individual performance. The Compensation Committee retained the ability, however, to use negative discretion to reduce or eliminate an AIP award based on individual performance.

OVERVIEW OF FISCAL 2020 LONG-TERM EQUITY INCENTIVE PLAN

Our LTIP is designed to align our NEOs’ interests with our long-term performance, and provide the Company with an important means to recruit, retain, and motivate key personnel. LTIP awards are designed to compensate our NEOs for their long-term commitment to the Company, while motivating sustained increases in our financial performance and stockholder value. Moreover, the LTIP creates long-term incentive opportunities that are competitive with the opportunities offered by the companies with which we compete for talent.

As discussed above, due to the uncertain impact of the COVID-19 pandemic on our business, awards granted to our NEOs under our 2020 LTIP consisted of time-based RSUs (66-2/3%) and stock options (33-1/3%). Our equity awards are granted with a per share price or exercise price, as applicable, equal to the “fair market value” of one share of our common stock on the date of grant. Individual LTIP aggregate grant date values for each NEO were determined based on competitive market data. Both the time-based RSUs and the stock options vest ratably on an annual basis over three years, subject to the NEO’s continued employment through the applicable vesting date. The stock options expire 10 years from the grant date, subject to certain exceptions.

SUMMARY OF FISCAL 2020 EXECUTIVE COMPENSATION PROGRAM

For fiscal 2020, except as otherwise noted below, our NEOs’ compensation primarily consisted of a base salary and LTIP awards. Although each of our NEOs was eligible for a fiscal 2020 AIP award, the Compensation Committee did not modify our pre-pandemic financial goals and, therefore, none of them received an annual cash bonus award as a result of the Company failing to meet the threshold level of performance for either the Adjusted EBITDA or DIOH performance goal.

BASE SALARY

The following table shows the annual base salary rates that were in effect for the time periods indicated throughout fiscal 2020, as approved by the Compensation Committee:

In addition, during fiscal 2020, Messrs. Iacobucci and Kvasnicka continued to receive a bi-weekly stipend in the amount of $5,000, which had been previously approved by the Compensation Committee as additional compensation for their interim leadership of local sales and our supply chain organization, respectively.

FISCAL 2020 ANNUAL INCENTIVE PLAN AWARDS

Eligible Earnings, the AIP Target Percentages, and AIP Target Awards for our NEOs under our fiscal 2020 AIP were as follows:

BUSINESS PERFORMANCE FACTORS AND POTENTIAL PAYOUTS

The threshold, target, and maximum Adjusted EBITDA and DIOH performance goals and unweighted payout percentages for the fiscal 2020 AIP are set forth in the following table. The Compensation Committee believes the threshold and target levels of performance, which were based on the Company’s Board-approved annual operating plan, represented, when they were approved by the Compensation Committee in February 2020, challenging but attainable performance, while the maximum level represented extremely challenging and exemplary performance. Notwithstanding the fact that the impact of the COVID-19 pandemic on the Company’s performance made these performance goals virtually impossible to achieve as of the end of the second fiscal quarter of 2020, the Compensation Committee chose not to modify the performance goals under the fiscal 2020 AIP for any of our executives, including our NEOs.

FISCAL 2020 AIP ACTUAL AWARDS

None of our NEOs, including our CEO, received a cash bonus award under the fiscal 2020 AIP, nor did any of our NEOs receive any other make-whole cash payments as a replacement for the AIP during or in respect of fiscal 2020.

FISCAL 2020 LONG-TERM INCENTIVE PLAN AWARDS

Due to the uncertain impact of the COVID-19 pandemic on our business, awards granted to our NEOs under our 2020 LTIP consisted of time-based RSUs (66-2/3%) and stock options (33-1/3%). Our equity awards are granted with a per share price or exercise price, as applicable, equal to the “fair market value” of one share of our common stock on the date of grant. Individual LTIP aggregate grant date values for each NEO were determined based on competitive market data.

The Compensation Committee maintained the same grant date value for each NEO under the 2020 LTIP as under the 2019 LTIP, except that Mr. Satriano’s grant date value increased approximately 7% to more closely align his total compensation with those of other Chief Executive Officers’ in our peer group, and Mr. Guberman’s RSU grant date value increased by $200,000 (resulting in a mix of 72% RSUs and 28% options) in recognition of his additional responsibilities in leading the integration of the Food Group acquisition. The aggregate grant date value and the number of RSUs and stock options that were awarded to our NEOs under the 2020 LTIP, and the vesting conditions attributable to each of the awards, are as follows:

ADDITIONAL AWARDS

In addition to the fiscal 2020 LTIP award discussed above, the Compensation Committee granted to Mr. Iacobucci a one-time, retention-based equity incentive award with a grant date value of $1 million, which equaled 75,245 RSUs. These RSUs vest 50% on the eighteen (18) month anniversary of the date of grant and 50% on the thirty-six (36) month anniversary of the date of grant, subject to Mr. Iacobucci’s continued employment through the applicable vesting dates.

VESTING OF PRIOR PERFORMANCE-BASED AWARDS

FISCAL 2018 PERFORMANCE-BASED AWARDS

The performance-based RSAs that were granted to our NEOs under our 2018 LTIP vested in March 2021 at 28.2% based on our achievement of Adjusted EBITDA and Adjusted ROIC growth goals set by the Compensation Committee at the beginning of 2018 for the three-year performance period ended January 2, 2021.

Based on the Company’s actual annual Adjusted EBITDA growth rate for each fiscal year in the three-year performance period, the vesting percentage for the corresponding tranches of these performance-based RSAs was determined as follows:

Based on the Company’s actual annual Adjusted ROIC growth rate for each fiscal year in the three-year performance period, the vesting percentage for the corresponding tranche of these performance-based RSAs was determined as follows:

Accordingly, based on the Company’s actual Adjusted EBITDA and Adjusted ROIC growth rates during the three-year performance period ended January 2, 2021, the vesting percentage of the performance-based RSAs granted in fiscal 2018 to our NEOs, and which vested on March 26, 2021, was 28.2% of the target shares underlying those awards.

EXECUTIVE SEVERANCE AGREEMENTS

All of our NEOs are employed “at will” and have no defined term of employment with us. Each of our NEOs has an executive severance agreement with the Company. These agreements outline additional compensation considerations in the event of (1) termination of the executive’s employment by the Company other than for “cause” or (2) termination of the executive’s employment by the executive with “good reason.” The executive severance agreements are designed to provide standard protections to both the executive and the Company and help us to ensure continuity and aid in recruitment and retention. We believe that the severance benefits are reasonable and appropriate to protect our NEOs against circumstances over which they do not have control. The executive severance agreements also provide us with commitments of non-disclosure, non-competition, non-solicitation, and non-interference.

The key terms of our executive severance agreements include:

RETIREMENT BENEFITS AND OTHER COMPENSATION

The only retirement benefits currently provided to our NEOs are (1) those under our tax-qualified 401(k) savings plan, which is offered to all eligible employees (not just to our executives), and (2) the continued vesting of any annual LTIP awards granted beginning in 2020, provided that the executive has attained age 60 with at least five years of service and the awards have been outstanding for over a year prior to retirement. Messrs. Guberman and Kvasnicka previously accrued benefits under the US Foods, Inc. Defined Benefit Pension Plan and the Alliant Foodservice, Inc. Pension Plan, which have since been consolidated into the US Foods Consolidated Defined Benefit Retirement Plan and are now frozen for all exempt employees.

Each of our NEOs receives an annual executive allowance, which is intended to defray expenses such as those for financial and legal planning, professional organization membership, and executive physicals, and a monthly cellular phone allowance. We do not reimburse our NEOs for taxes related to their annual executive allowance or any other compensation or benefits.

EXECUTIVE COMPENSATION RECOUPMENT POLICY

Our Executive Compensation Recoupment Policy provides that in the event of a restatement of our financial results due to material noncompliance with any financial reporting requirement under the federal securities laws, we will use reasonable efforts to recover the amount of any excess incentive-based compensation paid to any current or former executive officer during the previous three fiscal years, including compensation received under the AIP and LTIP. The Compensation Committee has the sole discretion, subject to applicable law, to determine the form and timing of the recoupment. This may include repayment from the executive or an adjustment to the payout of a future incentive award.

EXECUTIVE STOCK OWNERSHIP PROGRAM

Each of our executives and senior leaders is required to satisfy certain stock ownership guidelines. These guidelines have been designed to closely align our executives’ and senior leaders’ financial interests with those of our stockholders. The guidelines require equity holdings with a value of six times base salary for our CEO and three times base salary for our other executives.

Executives have five years from the later of the date the stock ownership guidelines were effective (June 1, 2017) and the executive’s hire or promotion date to reach the applicable guideline. All of our executives were in compliance with the guidelines at the end of fiscal 2020.

COMPENSATION COMMITTEE REPORT

The Compensation Committee reviewed and discussed the Compensation Discussion and Analysis contained in this proxy statement with management of the Company. Based on the review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this proxy statement and the Company’s Annual Report on Form 10-K for the fiscal year ended January 2, 2021.

EXECUTIVE COMPENSATION

FISCAL 2020 SUMMARY COMPENSATION TABLE

The following table provides information regarding the compensation of the NEOs, listed by name and current position below, for fiscal 2020, as well as fiscal 2019 and fiscal 2018 where applicable:

FISCAL 2020 GRANTS OF PLAN-BASED AWARDS

The following table provides information regarding plan-based awards granted to the NEOs during fiscal 2020:

OUTSTANDING EQUITY AWARDS AT FISCAL 2020 YEAR-END

The following table provides information regarding each NEO’s outstanding stock options, RSAs, and RSUs as of January 2, 2021: